Audi
BMW
BMW Motorrad
CUPRA
Ford
Ford Vans
Honda
Hyundai
Jaguar
Kia
Land Rover
LEVC
Maserati
Mercedes-Benz
Mercedes-Benz Commercials
MINI
Nissan
Peugeot
Seat
ŠKODA
Smart
Vauxhall
Volkswagen
Volkswagen Commercials
Volvo
Paint & Body Repair Centres
Trade Parts Specialists
Used Car Centres
24 BRAND PARTNERS
132 OPERATING UNITS
28 COUNTIES NATIONWIDE
www.mmhplc.com
Marshall Motor Holdings plc
Airport House, The Airport, Cambridge, CB5 8RY
© 2020 Marshall Motor Holdings plc
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9
Annual Repor t
& Accounts 2019
P U T T I N G O U R C U S T O M E R S A B O V E A L L E L S E S I N C E 1 9 0 9
PUTTING OUR CUSTOMERS
ABOVE ALL ELSE SINCE 1909
24 BRAND PARTNERS
132 OPERATING UNITS
28 COUNTIES NATIONWIDE
Pictured: Volkswagen Milton Keynes Dealership
2
257837 MMH AR 2019 pp003.qxp 20/03/2020 12:34 Page 3
Marshall Motor Holdings plc | Annual Report & Accounts 2019
Contents
STRATEGIC REPORT
Chairman’s Statement 8
Operating Review 10
Financial Review 32
Principal Risks and Uncertainties 38
GOVERNANCE
Board of Directors 42
Directors’ Report 44
Corporate and Social Responsibility 48
Corporate Governance Report 56
Audit Committee Report 62
Remuneration Committee Report 67
Directors’ Remuneration Report 69
Statement of Directors’ Responsibilities 76
FINANCIAL STATEMENTS
Independent Auditor’s Report 77
Consolidated Financial Statements
Consolidated Statement of Comprehensive Income 86
Consolidated Balance Sheet 87
Consolidated Statement of Changes in Equity 88
Consolidated Cash Flow Statement 89
Net Debt Reconciliation 90
Notes to the Consolidated Financial Statements 91
Parent Company Financial Statements
Parent Company Balance Sheet 146
Parent Company Statement of Changes in Equity 147
Notes to the Parent Company Financial Statements 148
COMPANY INFORMATION 158
3
257837 MMH AR 2019 pp004-pp005.qxp 20/03/2020 12:37 Page 1
STRATEGIC REPORT
Historical Financial Trends
Revenue £m
excluding discontinued leasing segment
Gross Profit £m
excluding discontinued leasing segment
£2,232.0m
£2,186.9m
£2,276.1m
£258.3m
£253.2m
£260.8m
£1,860.1m
£212.1m
£1,195.7m
£136.4m
2015 2016
2017
2018
2019
2015 2016 2017
2018
2019
CAGR 17.5%
CAGR 17.6%
Underlying Profit Before Tax*/** £m
Net Assets £m
£191.2m
£194.0m
£202.3m
£25.4m
£24.7m
£20.5m
£22.1m
£145.7m
£129.9m
£11.0m
2015
2016 2017
2018
2019
2015
2016 2017
2018
2019
* underlying profit before tax is presented
excluding non-underlying items (see Note 7)
** 2018 has been restated following the adoption of
IFRS 16 “Leases” (see Note 3)
4
257837 MMH AR 2019 pp004-pp005.qxp 20/03/2020 12:37 Page 2
Marshall Motor Holdings plc | Annual Report & Accounts 2019
2019 Quick Overview
Revenue
£2.3bn
£22.1m
94,277
Underlying Profit Before Tax
New and Used Units Sold
£202.3m
Net Assets
Underlying Operating Profit
£32.0m
132
4,228
Operating Units
Colleagues
at 31 December 2019
No.1
AUTOMOTIVE
RETAIL EMPLOYER
Ranked 5 years running by our
colleagues in the best UK workplaces
5
Mercedes-Benz GLS
257837 MMH AR 2019 pp006-pp007.qxp 20/03/2020 12:41 Page 6
7th
Largest Automotive Retailer
24
Brand Partners
132
Operating Units
28
Counties Nationwide
South Lakes
Scarborough
Blackpool
Harrogate
York
Preston
Blackburn
Leeds
Bolton
Hull
Scunthorpe
Motorrad
Grimsby
Lincoln
Derby
Nottingham
Grantham
Melton Mowbray
King’s Lynn
Leicester
Northampton
Peterborough
Vans
Trade Parts
Specialist
Bury St.
Edmunds
St. Neots
Cambridge
Bedford
Milton Keynes
Trade Parts
Specialist
Oxford
Letchworth
Knebworth
Bishop’s
Stortford
Welwyn
Harlow
Braintree
Ipswich
Barnstaple
DAS WELT
Bridgwater
Trade Parts
Specialist
Swindon
Newbury
Commercial
Vehicles
Andover
Salisbury
St. Albans
Reading
Approved
Centre
Old Kent Rd
Hook
Wimbledon
Sydenham
Bexley
Trade Parts
Specialist
Loughton
Trade Parts
Specialist
Mitcham
Coulsdon
Croydon
Beckenham
& Bromley
Trade Parts
Specialist
Exeter
Taunton
Winchester
Southampton
Bournemouth
Poole
Commercial
Vehicles
Fareham Commercial
Vehicles
Portsmouth
Chichester
Plymouth
Commercial
Vehicles
Honda e
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Retail Franchised Dealerships
Motorrad
Commercial Vehicle Dealerships
Vans
Commercial
Vehicles
Commercial
Vehicles
Commercial
Vehicles
Commercial
Vehicles
Other Stand-Alone Operating Units
Trade Parts
Specialist
Trade Parts
Specialist
Trade Parts
Specialist
Trade Parts
Specialist
Trade Parts
Specialist
Trade Parts
Specialist
Paint &
Body Repair
Centre
Paint &
Body Repair
Centre
Paint &
Body Repair
Centre
Paint &
Body Repair
Centre
Paint &
Body Repair
Centre
Paint &
Body Repair
Centre
Approved
Centre
Used Car
Centre
Commercial
Vehicles
LEVC
Parts
Plus
7
Beckenham & Bromley, Bexley,
Coulsdon, Exeter, Newbury, Oxford,
Plymouth, Taunton and Wimbledon
Bournemouth, Grimsby (with Motorrad),
Hook, Salisbury and Scunthorpe
Bury St Edmunds, Cambridge
and Kings Lynn
Harrogate, Hull, South Leicester,
Newbury, Peterborough, Reading,
Scarborough and York
Cambridge
Cambridge, Ipswich, Lincoln,
Newbury, Oxford and Peterborough
Ipswich, Scunthorpe
Bedford, Cambridge, Ipswich,
Lincoln, Melton Mowbray, Newbury
Oxford and Peterborough
Peterborough
Blackburn, Blackpool, Bolton, Chichester,
Portsmouth, Preston, Southampton,
South Lakes and Winchester
Bournemouth, Grimsby,
Hook and Salisbury
Grantham and Lincoln
Cambridge, Peterborough
and St. Neots
Braintree, Cambridge
and Leicester
Barnstaple, Bedford, Croydon, Harlow,
Leicester, Letchworth, Milton Keynes, Newbury,
Northampton, Nottingham and Oxford
Bolton and Portsmouth
Ipswich, Knebworth
and Peterborough
Barnstaple, Grimsby, Harlow, Letchworth, Loughton, Milton
Keynes, Newbury, North Oxford, South Oxford, St. Albans,
Reading, Scunthorpe and Taunton
Bishops Stortford, Cambridge, Derby,
Grantham, Leeds, Milton Keynes, Nottingham,
Peterborough and Welwyn Garden City
Cambridge
Andover, Fareham, Poole
and Southampton
Bridgwater, Lincoln, Loughton, Oxford,
Reading and Scunthorpe
Cambridge, Exeter, Mitcham, Old Kent
Road / Dartford, Oxford and Swindon
Cambridge, Greenham Prep Centre, Grimsby,
Loughton, New Forest and Peterborough
Audi Sydenham and
Cambridge Used Cars
Croydon Service Centre
Nottingham
Cambridge
257837 MMH AR 2019 pp008-pp009.qxp 20/03/2020 12:45 Page 8
CHAIRMAN’S STATEMENT
Chairman’s Statement
“We are now the largest retail
partner for Volkswagen
Group in the UK.”
Professor
Richard Parry-Jones CBE
Chairman
Introduction
I am delighted to present our annual results for the year
ended 31 December 2019 (the “Year”).
Whilst market conditions in 2019 continued to be
challenging with further declines in the new car market,
the Group continued its track record of market out-
performance in new and used car sales and further growth
in aftersales revenues.
Strategy
The Group’s strategy of close partnership with major global
automotive brands has served it well over many years. We
are delighted to have extended and strengthened those
partnerships during the Year with the acquisition of an
additional 20 business. These included the addition of
seven ŠKODA, six Volkswagen passenger car, two
Volkswagen commercial vehicles, two Honda and a Volvo
business. As a result, in the UK we are now the largest
partner for Volkswagen Group, the largest partner for Volvo
and the second largest partner for Honda.
The automotive sector is undergoing a period of evolution,
driven by a combination of environmental, technological
and social change factors. The progression towards battery
electric vehicles over the coming years, for example,
presents both challenges and opportunities for automotive
retailers. Along with our manufacturer partners, we continue
to believe that a strong retail franchise network will be a
crucial component of that development. We also believe
that those automotive retailers with both scale and a
diverse portfolio will be best placed to succeed in a
changing market.
Results
The Group has delivered a strong financial performance in
what was a very challenging year for the sector. The Group
achieved record reported revenue of £2.3 billion with a fifth
consecutive year of like-for-like** revenue growth since
IPO, up 2.2% to £2.2 billion. This revenue growth helped
to mitigate the impact of significant margin pressure across
all main revenue streams (new, used and aftersales) and
the impact of loss-making businesses acquired during the
I am also pleased to welcome Nicky Dulieu to the Board.
Nicky joined the Board in January 2020 as a Non-
Executive Director and Chair of the Remuneration
Committee following Sarah Dickins’ retirement from the
Board in June 2019. I would like to once again thank Sarah
for her contribution to the Group since its IPO in 2015.
Year. Given these factors, the Board considers underlying
PBT* during the Year of £22.1m (2018 restated: 24.7m) to
be a strong result.
The Group’s balance sheet also remains strong,
underpinned by £124.9m of freehold, land and buildings.
Dividend
The Group’s revised dividend policy adopted last year is
that, subject to the Group’s trading prospects being
satisfactory and taking into account potential investments,
dividends will be covered by between 2.5 to 3.5 times
underlying earnings and paid in an approximate one-third
(interim dividend) and two-thirds (final dividend) split. The
Board believes this policy is appropriate and sustainable,
balancing the Group’s strong financial position and cash
generation with its stated strategy of further investment and
growth in its business.
The Board is therefore recommending a final dividend for
2019 of 5.69p per share which, if approved by shareholders
at our AGM on 21 May 2020, will be paid on 22 May 2020
to shareholders who are on the Company’s register at close
of business on 24 April 2020. If approved, this will result in
a full year dividend of 8.54p per share (2018: 8.54p) and
dividend cover of 2.7x (2018: 3.2x).
AGM
Our annual general meeting will be held on 21 May 2020
and I look forward to meeting all shareholders who are able
to attend.
* underlying profit before tax is presented excluding non-underlying
items (see Note 7 to the financial statements)
** See Note 2 to the financial statements
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
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I would also like to thank all of our customers throughout
the UK who choose Marshall for their mobility products and
services. We continue to put our customers at the heart of
everything we do and recognise that our success as a
business is dependent on meeting and exceeding their
expectations.
Professor Richard Parry-Jones CBE
Chairman
9 March 2020
Outlook
The Board notes the latest forecast by the Society of Motor
Manufacturers and Traders (‘SMMT’) for a further decline
in the UK new car market in 2020 of 2.6%. It is also
cognisant of the potential impact that uncertainty over the
outcome of future trade agreement negotiations between
the UK and the European Union may have on the
automotive sector. Although we have not seen an impact
to date, the Board is monitoring the potential impact of
COVID-19 and is considering contingency plans in the
event it starts to impact our dealerships. The Board
therefore remains cautious but our order book for the
important March plate-change period is encouraging and
our outlook for the full year is unchanged.
The UK motor retail landscape may change over the years
and decades ahead. The Group’s long standing strategy of
partnering with the right brands in the right locations has
positioned it well to remain a relevant and important part of
that future landscape.
I would like to thank the leadership team, our brand
partners, business suppliers, shareholders and colleagues
throughout the Group for their continued support during
another successful year.
Honda Reading Dealership
9
257837 MMH AR 2019 pp010-pp013 new.qxp 20/03/2020 12:47 Page 10
OPERATING REVIEW
Operating Review
“I am pleased to announce a strong
performance against the backdrop of
another challenging year for the UK
automotive retail sector.”
Daksh Gupta
Chief Executive
Officer
Overview
I am pleased to announce a strong performance against
the backdrop of another challenging year for the UK
automotive sector, with a third year of both new and used
car market decline.
The Society of Motor Manufacturers and Traders
(“SMMT”) reported a total market of 2.31m registrations
in 2019, a decline of 2.4% versus 2018. This included a
3.2% decline in registrations to new retail customers and
a 1.7% decline in registrations to fleet customers. The
used car market also declined by 0.1%.
Despite these continued challenging market conditions,
the Group continued to grow its market share both
organically and by acquisition. The Group’s like-for-like
vehicle unit sales outperformed the market in all of its key
vehicle segments: total new unit sales, new retail sales,
new fleet sales and used vehicle sales. Aftersales
revenue also continued to grow on a like-for-like basis,
despite the further reduction in the UK vehicle parc as a
result of falling new vehicle sales since 2016.
Reflecting the difficult market, underlying profit before tax
(“PBT”) of £22.1m (which included the impact of loss-
making acquisitions and the first time adoption of IFRS16)
was down by 10.8% (2018 restated: £24.7m). The Board
considers this to be a strong result in the context of the
challenging market conditions described above.
through 8
I am also pleased that the Group completed a number of
strategic acquisitions in the Year, adding 20 new
businesses
transactions or start-ups,
demonstrating the Group’s commitment to grow scale
with our existing brand partners in new geographical
territories. Whilst these acquisitions will be earnings
dilutive in the short-term, we are confident in their medium
to long-term potential as we work to improve their
operational performance. The Group has a track-record
of acquiring underperforming business and creating long
term value for its shareholders through its well-
established business model and scalable platform. We
therefore believe these acquisitions will be excellent
additions to the Group.
Like-for-like revenue
£2.2bn
(2018: £2.2bn)
Underlying PBT
£22.1m
(2018: £24.7m)
Full year dividend
8.54p
(2018: 8.54p)
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Financial highlights of the year
Strategic and operational highlights of the year
• Record reported revenue of £2.3bn (2018: £2.2bn) with a
fifth consecutive year of like-for-like revenue growth since
IPO of 2.2% to £2.2bn;
• Despite market challenges, like-for-like operating profit of
£33.1m, down only 4.1% against last year’s record result;
• Total new vehicle sales up 2.4% with like-for-like total new
vehicle unit sales up 0.3%, a strong outperformance
against a UK market registration decline of -2.4%
(including the impact of dealer self-registrations);
▪ Total new vehicle sales to retail customers up 1.3% with
like-for-like down 2.2%, an outperformance against retail
market registration decline of 3.2% (including the impact
of dealer self-registrations);
▪ Total new vehicle sales to fleet customers up 4.1% with
like-for-like up 4.5%, an outperformance against fleet
market registration decline of -1.7% (including the impact
of dealer self-registrations);
• Excellent used car performance against strong prior year
comparisons: total unit sales up by 8.5% with like-for-like
volumes up 6.1%, significantly outperforming the wider UK
market which saw volumes decline by -0.1%;
• Further growth in aftersales like-for-like revenue, up 3.2%;
• Continued disciplined cost management, like-for-like
operating expense increase contained to 1.5%;
• Continued investment in the Group’s property portfolio,
£15.2m, invested in upgrading facilities and acquiring
freehold sites, (excluding freehold property purchased in
connection with acquisitions);
• Property portfolio revaluation as at 31 December 2019
confirmed a c£15m surplus to net book value (not
recognised in the accounts);
• Adjusted net debt at 31 December 2019 of £30.6m up
£25.5m from 31 December 2018 as a result of acquisitions
made through the Year and strong fleet volumes in
December 2019;
• Recommended final dividend of 5.69p giving a full year
dividend of 8.54p per share, in line with the prior Year.
• The Group became the largest partner for Volkswagen
Group in the UK, adding six Volkswagen passenger car
franchises, two Volkswagen commercial franchises and
seven ŠKODA franchises. The Group is also now the
largest partner for each of these brands by number of
locations;
• The acquisition of two Honda franchises in Reading and
Newbury, taking our representation to eight locations and
reinforcing our No. 2 position with the Honda brand in the
UK;
• Extending our relationship with Volvo by adding our ninth
Volvo franchise, confirming our No. 1 position with the
Volvo brand in the UK;
• Tenth consecutive year of Great Place to Work status and
fifth consecutive year ranked in the best UK work places,
recognised with a laureate award;
• Further technological advancements in the Group’s
bespoke management information system, ‘Phoenix 2’,
including unique third party data integration of vehicle
market pricing; and
• First national TV marketing promoting the Marshall brand.
England vs Kosovo football match sponsorship
11
Land Rover Defender
257837 MMH AR 2019 pp010-pp013 new.qxp 20/03/2020 12:47 Page 12
Celebrating Loyalty
Apprentice Awards
Celebrating Success
Recognising and thanking colleagues
is a fundamental element of our
commitment to provide a great
environment for colleagues to work
in. It also supports our desire to
continue to be recognised as a Best
Super Large UK Workplace.
Whether it’s for loyalty, outstanding
achievement or delivery of our
values, we hold several annual
events and award ceremonies to
celebrate our incredible colleagues.
Details and photos of each event are
featured in our quarterly colleague
magazine so we can share our
colleagues’ success with everyone
and reinforce how important these
programmes are.
MAVTA Awards
Recognising Achievement
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Our vision
To be the UK’s premier automotive retail group
Class leading
returns
Customer
first
Retailing
excellence
People
centric
Strategic
growth
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The Group
aims to deliver
benchmarked
class leading
returns for its
shareholders.
Customer
service is at the
core of the
Group as it
drives repeat
car sales and
the purchase of
higher margin
aftersales
products.
The Group
maintains its
competitive
edge by
investing in the
best people
supported by
cutting-edge
technology in
the sector.
The Group is
committed to
recruiting,
training, and
retaining the
best talent in
the industry.
The Group
aims to grow
both organically
and through
acquisitions,
building scale
with its existing
brand partners
and extending
its geographic
footprint.
Underpinned by five strategic pillars
Strategy
The Group’s strategic vision to be the UK’s premier automotive group, remains central to everything we do. The five strategic
pillars, of equal importance, which underpin that vision are: class leading returns; putting our customers first; delivering
retailing excellence for the benefit of our customers; being people-centric by focusing on employee engagement; and
pursuing strategic growth both organically and through targeted acquisitions in line with the Group’s strategy.
This strategy has enabled a transformation of the Group since its IPO in 2015. Selective, value enhancing acquisitions,
combined with strategic portfolio management and organic growth, have led to annual revenues more than doubling to £2.3bn
with continuing underlying profit before tax growing at a faster rate to £22.1m. Since IPO, we have invested more than £100m
in our property portfolio and, with the final dividend for 2019 announced today, will have returned nearly £25m to shareholders
through dividends. This has been achieved with a constant focus on our customers, excellent relationships with our business
partners and, as demonstrated by our consistent ranking as one of the UK’s Best Workplaces, our colleagues.
The Group’s strong track record of delivery against its strategy since IPO has provided a solid platform for further
future growth.
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257837 MMH AR 2019 pp014-pp023.qxp 20/03/2020 12:51 Page 14
OPERATING REVIEW
Class leading returns
The Group continues to focus on organic growth through market
outperformance, demonstrated by our strong volume performance in
the Year. In addition, the Group continues to drive sales of used
vehicles and aftersales, thereby mitigating the effects of a decline in
the new vehicle market. This resulted in a 6.1% like-for-like increase
in used unit sales and a 3.2% like-for-like increase in aftersales
revenue whilst also containing like-for-like expense increase to 1.5%
despite continued cost headwinds. In recognition of our market
leading performance in the first half of the Year, the Group was
awarded the Outstanding Achievement Award by Car Dealer
Magazine. In addition, the Group was runner up for the Best Dealer
Group Award at the 2020 Automotive Management Awards.
The Group’s strategy of building a balanced brand portfolio with the
right brand partners in attractive geographic locations, allows for the
cyclical nature of individual brands as well as regional variations in
performance resulting from local economic issues.
Continued growth with our brand partners will enable the Group to
access additional benefits of scale across a number of areas of the
business, supported by the use of the Marshall brand across the
entire portfolio. The Group has a robust platform which is scalable for
further future growth and is well placed to take advantage of a
consolidating market. The Board anticipates further rationalisation of
manufacturer dealer networks over the coming years and given the
Group’s strong balance sheet and manufacturer relationships, is
confident of continued future acquisitive growth.
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
The Group aims to
deliver benchmarked
class leading returns
for its shareholders.
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OPERATING REVIEW
Customer first
Customer satisfaction is an important element of the Group’s strategy, driving
repeat business and loyalty to the Marshall brand.
In 2019, 45.2% (2018: 45.6%) of the 72,530 customers surveyed who visited our
showrooms indicated that they were either previous customers or were
recommended to us. We believe this to be strong for the sector.
Our in-house developed management information system (Phoenix 2) provides
daily customer satisfaction information by dealership which allows management
to proactively respond to customer needs.
The Group centrally monitors customer satisfaction for both sales and aftersales
across all locations and brand partners on a weekly basis. This ensures we
remain focused on delivering on our brand partners’ key measures whilst ensuring
consistency of internal performance monitoring.
The Group’s continued expansion and scale provides customers with a wider
choice of location, stock and products, increasing both customer satisfaction and
sales.
Compliance
The Group operates in a regulated environment and takes its commitment to
compliance, and the benefit it brings our customers, seriously. The Group recognises
that compliance is an ongoing process and adopts a culture of continual
improvement focused on training and awareness, system and process development,
compliance monitoring and internal audit. Key compliance areas for the Group
include environmental, health and safety, data protection and financial services. The
Group has established compliance committees attended by cross functional
colleagues from both compliance and internal audit and from operations and
members of the senior management team.
In April 2019, the Financial Conduct Authority (‘FCA’) published the findings of its
thematic review of general insurance distributions chains and in October 2019 it
published its final findings following its review of the motor finance sector. As part of
its findings, the FCA has proposed a number of changes, including to commission
arrangements between finance and insurance providers and credit brokers and
insurance intermediaries such as the Group. The Group is supportive of the changes
proposed by the FCA and the benefits they will bring to our customers and is working
with its finance and insurance provider partners to implement them.
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Customer service is at
the core of the Group
as it drives repeat car
sales and the purchase
of higher margin
aftersales products.
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45%
of customers
surveyed are
repeat
customers or
had the Group
recommended to
them
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OPERATING REVIEW
Retailing excellence
The Group’s use of the ‘Marshall’ brand consistently across all of its franchises is unique
amongst the large UK multi-brand motor retail groups. As the Group grows and
leverages its existing platform, new businesses are re-branded and quickly benefit from
wider recognition of the Marshall brand.
The Group believes there are a number of benefits of this consistent brand:
• The Marshall brand is synonymous with good customer service;
• The Group’s website, marshall.co.uk accommodates all of the Group’s brand partners
and stock, allowing for much wider customer choice in one place;
• One Marshall brand gives the ability to market nationwide in single campaigns, for
example, recent marketing campaigns on Sky Sports during the cricket world cup in
December 2019 and ITV1 during the England v Kosovo football match in November
2019. These two campaigns reached a combined audience of c20 million viewers and
were the first time the Group has carried out any form of national TV marketing.
As the Group grows, we intend to continue national marketing, where economic, in
order to leverage the reputation and recognition of the Marshall brand on a national
scale as part of our omni-channel marketing strategy.
Another key differentiator for the Group in achieving retailing excellence is a focus on
technology and data to drive performance. Phoenix 2, the Group’s bespoke MI system
supports local decision making combined with central oversight to ensure consistency
of performance and a focus on what makes a difference. One of the key benefits of
Phoenix 2 is the integration of third party external used car pricing and transaction data.
This enables visibility of pricing comparison to the market, including regional and market
desirability variations, all of which leads to greater customer transparency and optimal
pricing. The Group continues to see Phoenix 2 as one of the key drivers behind its
market outperformance.
Targeted use of online channels and social media continue to be utilised to increase
lead conversion, Marshall is viewed as an industry leader in this area as evidenced by
two further awards in the Year; “Best Use of Social Media”, Automotive Management
Awards and winner of the Social Media category at the Motor Trader Awards.
During 2019, the Group began development work on a new website which will contain
a number of new customer-centric features including being fully transactional. The new
website will go live in the first half of 2020. The Group believes it is well-placed to grow
market share further given its unique investment in its online platform, unique use of
data through Phoenix 2 and ability to leverage the Marshall brand through its national
marketing and social media channels.
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
The Group maintains its
competitive edge by
investing in the best
people supported by
cutting-edge technology
in the sector.
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Management
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OPERATING REVIEW
People centric
For the tenth consecutive year, the Group has been recognised by the Great Place to Work Institute as a
‘great place to work’ based on colleagues surveyed during 2019. We are particularly pleased that the
proportion of colleagues stating that Marshall is a ‘great place to work’ has increased for the tenth
consecutive year. At 80%, this is significantly ahead of the UK average score of 52% and well ahead of the
65% score required to be considered a Great Place to Work. We also enjoyed an exceptionally high
participation rate of 84%, which compares to 70% nationally, and demonstrates the high degree of trust
and engagement in the organisation. This result is also particularly pleasing given the number of new
businesses the Group has integrated over recent years.
Based on the results of the 2019 survey, the Group was ranked 11th in the super large category in the UK
which included employers such as Admiral, Cisco, Deloitte, EY, Hilton, and Mars. 2019 was the fifth year
running that the Group was ranked amongst the best employers in the UK, as a result of which the Group
received a Laureate award which has only been awarded to a handful of companies in the history of the
Great Place to Work Institute.
The Group continues to be committed to diversity both in Marshall and the wider industry. The Group is a
member of the Automotive 30% Club, the aim of which is to work towards having women in at least 30%
of management positions in the sector by 2030. The Group has made great strides towards this target with
over 24% of our management positions in our like-for-like businesses filled by females. This is up from 15%
in 2015. In recognition of this commitment, I am proud to have been asked to become a patron of the
Automotive 30% Club.
The Group announced a number of new strategic people initiatives during the Year and we are pleased to
report we have seen significant progress in these areas;
• Future leaders programme: This programme is for high potential colleagues to prepare for their first line
management position. The Group is now in the third year of the programme with 25 colleagues currently
participating in the programme.
• In-house recruitment team: Our new in-house recruitment team gives us more control over recruitment
quality and cost. Since its inception in September 2019 the team, has recruited over 300 colleagues
saving both significant cost and time in the recruitment process and also providing recruiting managers
far more control over the process leading to better and quicker recruitment decisions.
• Learning management system; over 4,000 employees have been through on-line training since the
release of the system in October 2019.
The Group is proud of its longstanding commitment to offering apprenticeship programmes. In 2020, the
Group celebrates 100 years of offering apprenticeship programmes and we currently employ 115
apprentices in the Group. The Group also partners with Drive My Career, a platform which connects
prospective apprentices with career opportunities. During the Year, the Group took part in the Drive My
Career Apprentice Takeover which was run throughout National Apprentice Week. Drive My Career
members were encouraged to promote across their social media channels the most successful stories
about their apprentices or hand over their social media accounts directly to their apprentices. We were
delighted that one of our second year apprentice technicians was the overall winner of the event.
In keeping with our social agenda and aim to support local communities, we have also implemented a new
work experience programme to attract new talent for the future alongside our current apprentice
programme.
Finally, the Group is pleased that during the year it also announced the appointed of Jo Moxon as Human
Resources Director. Jo has extensive experience across a diverse range of industries including, financial
services, property, online and retail. More latterly, Jo was Group Human Resources Director for Pendragon
PLC. Her experience in these sectors will be invaluable to the Group as we continue with our current
growth strategy. I would also like to take this opportunity to thank Helen Burrows for her contribution to the
success of the Group since 2013. We wish her well for the future.
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
The Group is committed
to recruiting, training,
and retaining the best
talent in the industry.
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10
Consecutive years as
a ‘great place to work’
Work Experience
Programme
Promoting our fantastic
industry and attracting young
talent in to our business whilst
building relationships with
local schools and colleges in
the communities we serve
300+
Employees recruited by
recruitment team since
September 2019
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OPERATING REVIEW
132
Operating Units
(120 in 2018)
24
Brand Partners
(23 in 2018)
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
The Group aims to grow
both organically and
through acquisitions,
building scale with its
existing brand partners
and extending its
geographic footprint.
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Strategic growth
As demonstrated since IPO, the Group’s strategy is to grow scale with
existing brand partners in new geographical territories. There
continues to be considerable consolidation in the UK motor retail
market, and the Group, with its scalable platform, is very well
positioned to take advantage of the opportunities arising given its
strong balance sheet and excellent manufacturer relationships. The
Group continually seeks to maximise return on capital employed and
closely monitors and reviews its portfolio to ensure optimal returns.
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OPERATING REVIEW
SKODA Northampton Dealership
Audi City Wimbledon, the UK’s first Audi ‘City’ store
Volkswagen Loughton Dealership
Volkswagen Commercial Vehicles Loughton Dealership
Acquisitions and disposals
During the Year, 20 new business units were added to our
portfolio through eight acquisitions or start-ups. We are
pleased that, in line with our historical practice, all of these
transactions were off-market and completed with the full
support of our brand partners.
The Group completed five trade and asset acquisitions
during the Year as follows:
• In March 2019 the Group announced two transactions
which further extended its relationship with ŠKODA from
5 locations to 11, making it the largest retailer in the UK
for the brand. The Group acquired Leicester and
Nottingham ŠKODA
from Sandicliffe Limited and
subsequently acquired the Bedford, Harlow, Letchworth
and Northampton ŠKODA businesses from Progress
Bedford Limited. We are very pleased with the progress
of integrating these businesses which are already
showing strong signs of improvement and are benefiting
from the Group’s scale and operating model.
• In September 2019, the Group acquired two Honda
businesses in Reading and Newbury from Jardine Motor
Group UK Limited, reinforcing the Group’s position as the
second largest Honda partner in the UK. The acquisitions
were completed with the full support of Honda UK and the
Group now represents the Honda brand in eight excellent
locations in the UK. Again, the early signs are encouraging
in terms of the integration of these businesses.
• In December 2019, the Group was delighted to announce
the acquisition of the business and assets of a portfolio of
Volkswagen and ŠKODA passenger and commercial
vehicle franchises from Jardine Motor Group UK Limited.
The businesses acquired comprise six Volkswagen
in Aylesbury, Harlow,
passenger car
Letchworth, Loughton, Milton Keynes and St Albans,
making the Group Volkswagen Passenger Car’s biggest
partner in the UK, together with a Volkswagen commercial
vehicle franchise and bodyshop in Loughton and a
ŠKODA passenger car franchise in Milton Keynes.
franchises
Aggregate revenue for these businesses was £196.1m in
the year ended 31 December 2017 and £212.8m for the
year ended 31 December 2018 with a loss before tax in
these years of £3.3m and £2.8m respectively. As a result,
the acquisition is expected to be earnings dilutive in 2020
and 2021 while the Group improves the operational
performance of the businesses. We expect the acquisition
to be earnings enhancing from 2022 onwards. Completion
of Aylesbury Volkswagen has been deferred pending
completion of the legal process to sub-divide the site. It is
expected that this process and the transfer of the
Aylesbury Volkswagen business will be completed in
2020.
• We are proud of the development of our relationship with
Volkswagen Group, from acquiring our first Volkswagen
Group franchise in 2012 to now becoming its largest
partner in the UK with 53 operations. The Volkswagen
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is one of
Group
leading automobile
the world’s
manufacturers and the largest carmaker in Europe. The
Group partners with all of the Volkswagen Group’s core
brands: Volkswagen Passenger Cars, Audi, SEAT, ŠKODA
and Volkswagen Commercial Vehicles. Volkswagen
Group’s core passenger car brands account for around 20%
of all new vehicles sold in the UK and 11.5% for commercial
vehicles. It is also investing €60bn in e-mobility, hybridisation
and digitisation between 2020 and 2024, with the much
anticipated Volkswagen ID.3 model scheduled for release
in the UK in 2020.
• Finally, in December 2019, the Group completed the
acquisition of Volvo Derby from Vertu Motors plc. The
franchise was relocated to a new freehold facility in Derby
which was also acquired during December 2019. This
addition takes the Group’s Volvo representation to nine
sites, the largest representation in the UK for the brand.
During 2019 the Group also announced the following portfolio
additions:
• Volkswagen Commercial Vehicles in Lincoln. The Group
was awarded an open point and commenced trading in
October 2019, occupying one of the Group’s existing
freehold facilities. This addition, along with the operation in
Loughton, made the Group Volkswagen Commercial
vehicle’s largest partner in the UK;
• Commencement of a new partnership with LEVC, the
manufacturer of electric London taxis owned by Geely
Automotive Holdings, which also owns the Volvo brand. The
Group now represents the LEVC brand in Nottingham,
sharing facilities with the Group’s Volvo franchise;
• The Group now also represents Ford in the Cambridge
region for the supply of genuine Ford parts to third party
repairers through its Ford Parts Plus franchise.
Following a review of the Group’s portfolio, the Board took the
decision to close its Halesworth Land Rover used car centre.
During 2016 the Group relocated the Halesworth Land Rover
franchise to a state of the art ‘dual arch’ site in Ipswich. The
Board has also, with the agreement of the brand partner,
taken the decision to exit the Maserati franchise in
Peterborough. The business will continue trading until June
2020 to ensure a smooth transition.
The Group now consists of 117 franchises representing
24 brand partners trading in 28 counties nationwide.
In addition, the Group operates six trade parts specialists,
two used car centres, six standalone body shops and a
pre-delivery inspection (PDI) centre. The Group operates a
balanced portfolio of volume, premium and alternate premium
brands including all of the top five premium brands.
The Group’s scale and diversified spread of representation
helps mitigate the effect of the cyclical nature of individual
brand performance. The Group’s strategy is to develop strong
relationships with our brand partners, targeting a 5% share or
more of UK sales for each brand partner. We now exceed that
threshold with nine of our key brand partners and our strategy
is to grow that scale further.
Investment in new retail locations and
major developments
The Group continues to invest in its retail sites and has
invested a total of £19.4m into its asset base during the Year.
Investment in relocations and major rebuilds included:
• Nursling Mercedes Benz Commercial Vehicles –
Substantial new build of aftersales and used vehicle facility;
• Wimbledon Audi – major refurbishment of leasehold Audi
site in-line with new manufacturer “city concept”, first of its
type in the UK;
• Completion of the relocation of Lincoln Jaguar Land
Rover, historically two separate leasehold sites into one
purpose built freehold site;
• Relocation of Lincoln Nissan to larger premises (utilising
ex-Lincoln Land Rover leasehold facility) compliant with
Nissan brand standards;
• Purchase of freehold land to extend Grimsby BMW used
vehicle display space.
• Acquire the freehold land of Northampton ŠKODA;
• Purchase of freehold land and buildings to accommodate
recently acquired Derby Volvo franchise;
In addition to large scale redevelopments, the Group
continues to invest in upgrading existing businesses to
enhance
the customer experience, satisfy brand
requirements, electrification and increase sales and aftersales
capacities.
Since IPO in 2015, the Group has invested over £100m in to
its estate including corporate identity upgrades, freehold and
long-leasehold acquisitions and ongoing maintenance capital
expenditure. Following this unprecedented level of investment
the Group expects to see its free cashflow benefit from 2021.
Volkswagen Commercial Vehicles Lincoln Dealership
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OPERATING REVIEW
Market and business update
New vehicles
Growth
2019 2018 Total LFL
29,249 28,871 1.3% (2.2%)
18,054 17,342 4.1% 4.5%
Retail units
Fleet units
Total units
47,303 46,213 2.4% 0.3%
2019 proved to be a challenging year for new vehicle
sales in the UK. The SMMT reported a third year of
decline in 2019 with the market down 14.2% from its
peak in 2016.
Total new vehicle registrations of 2.31m in the Year
represented a decline of 2.4% versus 2018.
Registrations of new vehicles to retail customers
continued to be impacted by general economic
uncertainty, weaker sterling and the negative impact of
Brexit and were down 3.2%. Fleet registrations were
more encouraging with the decline contained to 1.7%.
Purchasing decisions continue to be influenced by the
lack of clarity on the future tax implications of diesel
vehicles. Fleet registrations also benefitted from a pull
forward of demand towards the end of 2019 as OEMs
incentivised the sales of higher Co2 emitting vehicles as
a result of the introduction of the new Clean Air For
Europe programme (“CAFE”) which came into effect on
the 1 of January 2020.
Against this challenging market backdrop, during the
Year, the Group sold a total of 47,303 new vehicles, an
increase of 2.4% versus 2018. Despite the market
decline, the Group’s like-for-like new unit sales
increased by 0.3%.
Total sales of new vehicles to retail customers increased
by 1.3% in the Year with like-for-like sales outperforming
the market with a decline of 2.2%.
Total sales of new vehicles to fleet customers increased
by 4.1% in the Year with like-for-like sales also
outperforming the market with an increase of 4.5%.
Overall new vehicle margins improved versus 2018, up
32bps to 7.4%. Margins declined in the second half of
reduced
reflecting a combination of
the year
manufacturer support for vehicles affected by changes
introduced by the Worldwide Light Vehicle Test
Procedure (‘WLTP’) in 2018 and an increased proportion
of lower margin fleet sales.
Ford Mustang MACH E
Volvo XC40 Recharge
Vauxhall Combo
smart EQ fortwo
SEAT Tarraco
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Used vehicles
Growth
2019 2018 Total LFL
46,974 43,302 8.5% 6.1%
Total units
The SMMT reported further used vehicle market decline
of 0.1% in 2019. The Group is therefore pleased that
with its continued focus on sales of used vehicles, we
are able to report an increase in used unit sales of 8.5%,
with like-for-like sales increasing by 6.1%.
The Group’s strategy on used car sales is to utilise
capacity within the current Group portfolio to maximise
throughput on its existing footprint, therefore mitigating
the associated investment in additional sites and
resource. We believe this approach reinforces the
resilience of the franchise model. As the Group
continues to grow, the combination of increased used
vehicle stock availability, the ability to market that stock
on our unified Marshall.co.uk website and the overall
awareness of the Marshall brand, assists all franchises
to leverage the benefits of our group scale.
The Group continually looks for opportunities to increase
the number of used vehicles sold including through:
• increased on-site space, as demonstrated by the
purchase of freehold land adjacent to our Grimsby
BMW site;
• operational controls, for example our strict 56-day
stocking policy which encourages accelerated stock
turn;
• the use of technology, including further enhancements
to Phoenix 2, our in-house management information
system, which integrates third party information on
sales volumes and pricing
• increased brand recognition, including the first time
utilisation of national television advertising.
There was further growth in the number of used cars
purchased from the Group using PCP products which
have now become a key feature of the 3-6 year old used
car market in which the Group primarily operates. 63%
of the Group’s used vehicles which were purchased on
finance were purchased using a PCP (2018: 63%). As
in the new car market, PCPs create a defined point of
renewal/purchase/replacement and we actively manage
the renewal process to ensure, where possible,
customers are retained by the Group.
We believe the recent popularity of used car PCPs
presents the Group with future opportunities for the sale
of older used cars given the event-driven nature of a PCP.
Ford Transit
Hyundai Kona Electric
Nissan JUKE
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OPERATING REVIEW
Aftersales
Growth
2019 2018 Total LFL
258.2 246.1 4.9% 3.2%
Revenue (£m)
Aftersales remains a key strategic focus of the Group,
providing future revenue and profit assurance during
periods of a more challenging economic environment.
In addition to our retail centre based aftersales
the Group operates six standalone
facilities,
bodyshops, six trade parts centres and one PDI centre.
Aftersales contributed 43.9% of total retail gross profit
during the Year and therefore makes a significant
financial contribution to the Group which is important in
the context of a more cyclical new car market.
Our strong aftersales performance in recent years
continued during the Year, with total revenue growth of
4.9% (3.2% like-for-like) partially offsetting margin
pressure (down 127bps) due to an increased proportion
of parts sales compared to servicing revenue. Overall
like-for-like gross profit from aftersales during the Year
increased by £0.4m.
In order to drive customer retention, we offer service
plans to customers of both new and used vehicles
which allow customers to plan and budget for service
costs. These plans are often included in the monthly
payment of a vehicle and are therefore very convenient
for customers.
As most new and used cars purchased with PCPs also
come with service plans, this has helped to increase
our segment 2 and segment 3 penetration, an area of
the market that’s historically been dominated by the
independent sector.
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As a result, all major vehicle manufacturers are
investing heavily in the development and launch of
hybrids and BEVs. The substantial
investment
requirements of these developments has already led to
significant collaboration and consolidation between
vehicle manufacturers, including the acquisition of
Vauxhall Opel by Groupe PSA, the merger of Fiat
Chrysler Automobiles and Groupe PSA and the alliance
between Renault, Nissan and Mitsubishi.
Other technological developments will also have an
increasing influence on the automotive sector in the
future. Connected car capabilities have existed for a
number of years and have facilitated a variety of new
sharing and subscription models of vehicle use. In
addition, autonomous technologies, whilst still many
years away in terms of the potential for fully
autonomous vehicles, have introduced a range of
comfort and safety features to modern motor vehicles.
Industry strategic landscape
The automotive sector is undergoing an exciting period
of evolution, driven by a combination of technology,
environmental and social change factors. The Group’s
strategy anticipates the impact that these macro factors
will have for automotive retailers in the future.
Macro change factors
Climate change and the response of international
governments to these issues, in combination with
technological developments by vehicle manufacturers,
will have a significant impact on the automotive sector
over the coming years.
The global response to the issue of climate change,
including the Paris Agreement target for carbon
neutrality by 2050, has instigated a shift from traditional
internal combustion engines (‘ICE’) to battery electric
vehicles (‘BEVs’). That process is already well
underway, driven by regulatory interventions such as
the Clean Air for Europe programme (‘CAFE’). Under
the CAFE regulations, punitive financial penalties will
be imposed from 2020 on vehicles manufacturers
which do not achieve significantly reduced average
Co2 emissions. In addition, national governments,
including the UK, are setting their own targets for the
cessation of sales of new ICE vehicles (including
hybrids) over the next 15-20 years.
Audi e-tron 50 quattro S line
CUPRA Formentor concept
Mini electric
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OPERATING REVIEW
Impact and opportunities automotive retailers
The macro change factors outlined above present a
number of potential challenges and opportunities for
motor retailers in the future.
The increasing proportion of BEVs in the vehicle parc
is likely to impact traditional aftersales activities,
including the sale of parts and oil products. However,
these new technologies, and the associated expertise
and facilities required to service them, can also offer
opportunities for certain franchised dealers. Close
partnerships with vehicle manufacturers and the ability
to invest in infrastructure required to service BEVs,
differentiates their franchised dealers’ expertise and
service capabilities from those of the independent
aftersales sector.
Marshall strategy
The Board believes that the Group’s long standing
strategy of partnering with the rights brands in the right
locations has positioned it well to benefit from the
changes ahead.
The Group’s key manufacturer partners are strong and
are taking leading positions in the development of
future mobility technologies and the Group will benefit
from the continued success of their brands.
The Board also believes that the Group’s portfolio of
dealerships are in the right locations and markets to
benefit
rationalisation and
consolidation of dealer networks in the UK.
the expected
from
technology will provide
further
Connected car
opportunities
their
for manufacturers,
franchised dealer networks, to improve retention rates
for older vehicles within their aftersales networks.
through
Finally, and importantly, the Group’s growing scale and
depth of relationships with its manufacturer partners
will help to ensure it remains a relevant and important
part of their future retail strategies.
Ancillary revenue streams including digital services,
the sale of charging points and tyres (given increased
replacement cycles for BEVs) are also areas of
opportunity for certain retailers able and willing to
invest.
Finally, further consolidation of vehicle manufacturers
and the anticipated reduction of retail networks by up to
c25% over the coming years should assist in higher
throughput and profitability per retail location.
LEVC TX electric taxi
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Market outlook
Summary
As reported above, 2019 was a challenging year for the
new vehicle market with registrations down 2.4% from
2018 and down 14.2% from the market peak of 2.69m
registrations in 2016.
The current SMMT forecast for 2020 predicts a further
new car market decline of 2.6% to 2.25m. Further
declines are expected in diesel market share, with
growth in registrations of alternative fuel vehicle
registrations expected to continue.
The Board is also cognisant of the potential impact that
uncertainty over the outcome of future trade agreement
negotiations between the UK and the European Union
may have on the automotive sector. We are, however,
confident in our brand partners’ commitment to the UK
automotive retail market (the second largest in Europe).
Although we have not seen an impact to date, we are
also monitoring the potential impact of COVID-19 and
are considering contingency plans in the event that it
starts to impact our dealerships.
The Group continues to perform well despite a sustained
period of market decline. Despite a declining market, the
Group has grown market share by outperforming in all
of its key segments and carefully managing both
margins and costs.
We are particularly pleased with our used vehicle
performance and growth in aftersales revenues. These
revenue streams provide resilience to the business
during more challenging periods of the cyclical new
car market.
The Group has demonstrated the benefits of its strong
balance sheet and has taken advantage of continued
market consolidation in the Year. We are pleased to
welcome 20 new business and over 400 new colleagues
to the Marshall family, demonstrating our confidence and
belief in both the industry and our brand partners.
Finally, on behalf of the Board I would like to thank our
colleagues, and our brand and business partners for
their hard work and support during 2019. I look forward
to continuing to work together in 2020.
Daksh Gupta
Chief Executive Officer
9 March 2020
Vauxhall Corsa
Kia Niro
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FINANCIAL REVIEW
Financial Review
“Strong asset base
provides a platform
for further growth”
Richard Blumberger
Chief Financial
Officer
Overview
I am pleased to present the Group’s 2019 annual results.
2019 has been a year of exciting growth. Despite the
ongoing economic uncertainty, we continued to outperform
the new and used car markets with continued growth of like-
for-like unit sales of both new and used vehicles, with a
particularly strong performance from our fleet business. In
line with our strategy of partnering with the right brands and
in
the right markets, we acquired a number of
underperforming businesses in the Year. Whilst these
acquisitions were earnings dilutive in 2019 and are expected
to be earnings dilutive in 2020 and 2021, we are confident
in their medium and long term potential. Losses from the
acquired businesses are reflected in our 2019 results which
are presented below.
As I stated last year, we were in a strong position to
capitalise on acquisition opportunities as they arose.
Including freehold property associated with acquired
businesses, we invested over £30m in the Year on
acquisition activity which included 6 Volkswagen, 7 SKODA,
2 Honda, 1 Volvo and 1 LEVC franchise. As a result of this
exciting year of acquisitive growth, we have seen our
number of sites increase by almost 20%. We also continued
to invest in the business and spent £15.2m on capital
expenditure, excluding freehold property acquired as part
of business acquisitions. This also included the exciting
upgrade of Audi Wimbledon, the first virtual reality
showroom of its kind in the UK and which opened in
February 2020. We also completed the development of our
new multi-million-pound Mercedes-Benz Commercial
Vehicles site in Nursling, Southampton.
We continued to delight our customers and grow market
share and, with the benefit of our industry leading software,
we are able to continue to go from strength to strength. This
is in a large part thanks to our dedicated team of people who
go about their day to day activities, challenging everything
they can and delivering strong customer outcomes. All this
is done whilst controlling our cost base, demonstrated by
the fact that our like-for-like expenses were up only 1.5%
despite ongoing cost headwinds, or 1.8% excluding the
impact of a lease disposal.
The Group achieved revenue growth during the Year on
both reported and like-for-like basis. We did experience
margin pressure as a result of the market decline and we
saw strong headwinds in our cost base, both of which were
highlighted in our annual report last year. When combined
with the impact of loss making acquisitions referred to
above, these have led to an overall decline in the Group’s
underlying continuing PBT.
Despite the continued investment in our existing portfolio
and the number of acquisitions we made, along with the
working capital increase from a growing business,
especially around fleet, I am pleased to report that we
continue to optimise our working capital and Adjusted Net
Debt (pre IFRS16) at the end of the Year was £30.6m
(2018: £5.1m), giving a healthy leverage of less than 1x
EBITDA. Our balance sheet continues to strengthen with
Net Assets of £202.3m (2018 restated: £194.0m) and is
underpinned by our strong freehold and long leasehold
property portfolio.
Notwithstanding the SMMT forecast for further new car
market decline in 2020, our platform leaves us in an
excellent position to continue our outperformance.
The all-new BMW M8 Competition Coupe
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Reported Financial Performance
The Group adopted IFRS 16 Leases effective 1 January
2019, using the full retrospective approach. Further details
of this can be found in note 3 to the financial statements.
2019 2018 Var %
Revenue 2,276.1 2,186.9 4.1%
Gross profit 260.8 253.2 3.0%
Operating expenses (228.8) (218.9) (4.5%)
Operating Profit 32.0 34.3 (6.7%)
Net finance costs (9.9) (9.6) (3.9%)
PBT underlying 22.1 24.7 (10.8%)
Non-underlying items (2.4) (6.7) 63.6%
PBT reported 19.6 18.0 8.9%
Tax (4.1) (4.7) 12.9%
PAT reported 15.6 13.4 16.5%
Discontinued operations - 0.6 -
Profit for the year 15.6 14.0 11.6%
Despite the site closures effected in November 2018,
reported revenue increased by 4.1% during the Year to
£2,276.1m. This strong performance was achieved as a
result of both organic growth and acquisitions made
during 2019.
The Group’s operating profit, on a continuing underlying
basis was £32.0m compared to £34.3m in 2018.
Continuing underlying PBT in the Year was £22.1m
compared to £24.7m in 2018. This decline was driven by
a combination of anticipated margin pressure, cost
headwinds and the impact of loss-making acquisitions
made during the Year.
Our reported PBT of £19.6m (2018: £18.0m) included
one-off non-underlying items of £2.4m (2018: £6.7m) as
set out in note 7 to the financial statements.
Segmental mix analysis
overview FY 2019 >
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Analysis of Reported Revenue and Gross Profit
The segmental mix on a reported basis is shown in the
table below, with like-for-like analysis covered later in
this report. The table below shows a broadly similar mix
versus 2018.
Twelve months ended 31 December 2019
Revenue Gross Profit
£m mix £m mix
New Vehicles 1,079.5 46.4% 80.1 30.8%
Used Vehicles 986.7 42.5% 65.5 25.2%
Aftersales 258.1 11.1% 114.6 44.0%
Internal/Other (48.2) - 0.6 -
Total 2,276.1 100.0% 260.8 100.0%
Twelve months ended 31 December 2018
Revenue Gross Profit
£m mix £m mix
New Vehicles 1,064.8 47.7% 75.7 29.9%
Used Vehicles 920.2 41.2% 65.4 25.9%
Aftersales 246.1 11.0% 111.9 44.2%
Internal/Other (44.3) - 0.2 -
Total 2,186.9 100.0% 253.2 100.0%
* mix calculation excludes Internal/Other Sales
Finance Costs
Net finance costs increased by £0.3m in the Year to £9.9m
(2018 restated: £9.6m) reflecting the costs of financing
higher average stock levels as a result of the growth in the
business during the Year.
Generating Sustainable Shareholder Value
Profit from continuing operations before tax and non-
underlying items was £22.1m (2018 restated: £24.7m),
£19.6m after non underlying (2018 restated: £18.0m). The
total reported effective tax rate was 20.7% (18.9% on a
continuing underlying basis). Profit from continuing
operations after tax was £15.6m (2018 restated: £13.4m),
resulting in a reported basic continuing earnings per share
of 19.9p, an increase of 15.7% on the prior year.
The Group’s strategy of organic growth incorporating cost
control and sound working capital management,
combined with strategic acquisitions, provides a platform
for improving shareholder returns.
Revenue £m
n New Vehicles
n Used Vehicles
n Aftersales
/Other
Gross Profit £m
n New Vehicles
n Used Vehicles
n Aftersales
/Other
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FINANCIAL REVIEW
Non-Underlying Items
Like-for-Like Financial Performance
The Income Statement includes a separate presentation of
non-underlying items to assist a consistent understanding
of the performance of the Group year on year.
Non-underlying items in the Year comprise the following:
£m 2019 2018
Acquisition costs 0.8 -
Restructuring costs – recognition / (release) 2.1 (3.5)
Gain on revaluation of investment properties (0.6) -
Loss on disposal of investment property - 1.2
Goodwill impairment - 9.3
Other 0.1 (0.3)
Total – Continuing operations 2.4 6.7
Profit on disposal of subsidiary - (0.6)
Basis of Comparatives
To enable effective comparison of the Group’s year-on-
year performance, underlying operating profit is shown
on a like-for-like basis. The full definition of an Alternative
Performance Measure can be found in Note 2 to the
financial statements and the appendix at the end of the
Annual Report and Accounts.
Like-for-like 2019 2018 Var%
Revenue 2,209.6 2,161.5 2.2%
Gross Profit 252.3 250.4 0.8%
GP% 11.4% 11.6% (17 bps)
Expenses (219.3) (215.9) 1.5%
Total 2.4 6.1
Operating Profit 33.1 34.5 (4.1%)
Like-for-Like Segmental Analysis
Twelve months ended 31 December 2019
Revenue Gross Profit
£m mix* £m mix
New Vehicles 1,056.7 46.8% 78.0 31.0%
Used Vehicles 951.0 42.1% 63.3 25.2%
Aftersales 250.1 11.1% 110.8 43.8%
Internal/Other (48.2) – 0.3 –
Total 2,209.6 100.0% 252.3 100.0%
Twelve months ended 31 December 2018
Revenue Gross Profit
£m mix* £m mix
New Vehicles 1,060.2 48.1% 75.4 30.1%
Used Vehicles 903.4 40.9% 64.4 25.8%
Aftersales 242.3 11.0% 110.4 44.1%
Internal/Other (44.3) – 0.3 –
Total 2,161.5 100.0% 250.4 100.0%
* mix calculation excludes Internal Other Sales
Acquisition costs include professional advisory costs and
initial integration costs for the new dealerships added to
the Group during the Year.
Following a review of the Group’s dealerships, a decision
was made to close one site, with a further site scheduled
for closure during the year ended 31 December 2020.
The costs,
in
in
non-underlying items, represent redundancy costs,
asset impairment, and unavoidable costs associated
with contracts which relate to these sites.
restructuring costs
included
An independent valuation of the Group’s properties was
obtained during the Year, which indicated an increase in
value of the investment properties held of £0.6m, the
benefit of which is taken through non underlying items.
Whilst non-investment properties also had a substantial
gain, no accounting adjustment is made for these.
Jaguar I-PACE
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
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New vehicle margins at 7.4% were up versus 2018 by
27bps (2018: 7.1%), a recovery following the well
documented challenges experienced in 2018 relating to
Worldwide Harmonised Light Vehicle Test Procedure
(“WLTP”) and the availability of petrol vehicle alternatives.
Our used vehicle margin at 6.7% was down by 47bps
versus 2018 (2018: 7.1%), a trend which was highlighted
at the half year caused by market residual value declines
experienced in Q2 2019. These pressures eased in the
second half of the Year, but not to an extent to offset the
declines experienced in the first half of the Year.
Like-for-like aftersales margin was 44.0% compared to
45.6% last year. This was as a result of an increased
proportion of lower margin parts sales referred to above,
combined with an increase in aftersales operating costs.
Like-for-like Operating Expenses
£219.3m (up 1.5%)
(2018: £215.9m)
Although cost pressures continue to impact the overall
sector, our like-for-like expenses, at £219.3m, were
contained to 1.5%, or 1.8% excluding the benefit of a
lease disposal. This was an excellent performance given
the significant cost headwinds experienced, in particular
employee and property related costs. The Group
continued to place focus on all discretionary costs,
particularly in relation to marketing effectiveness, use of
to vehicle
temporary
stockholding.
labour and costs
relating
Like-for-like Operating Profit
£33.1m (down 4.1%)
(2018: £34.5m)
Given the factors referred to above in relation to margin
pressures and cost headwinds, our like-for-like operating
profit declined by £1.4m to £33.1m a solid result given
the challenges the sector is facing. Overall operating
margin, at 1.5%, was down 10bps versus last Year (2018:
1.6%).
Like-for-like Revenue
£2,209.6m (up 2.2%)
(2018: £2,161.5m)
Like-for-like revenue in the Year was £2,209.6m (2018:
£2,161.5m), an increase of 2.2% and a continuation of
our track record of like-for-like revenue growth since IPO.
This result is particularly pleasing in a year which saw the
new car market decline by 2.4% and the used car market
decline by 0.1%.
This year-on-year improvement was driven by a strong
used vehicle performance with unit sales up by 6.1% and
associated revenues, at £951.0m (2018: £903.4m), up
by 5.3%. This increase was against the backdrop of a
total used car market which declined by 0.1%.
Aftersales revenue increased by 3.2% to £250.1m
(2018: £242.3m) with both service and parts revenue
increasing in the year and parts mix of aftersales
increasing to 51.6% (2018: 50.7%).
Revenue relating to the sales of new vehicles was
marginally down (0.3%) in the Year at £1,056.7m
(2018: £1,060.2m), on a unit sales increase of 0.3%,
reflecting a decline in the turnover per unit largely due to
an increased mix of fleet sales. This performance is
particularly pleasing when compared to an overall market
decline of 2.4% in unit sales.
During periods of cyclical market decline, a strong used
and aftersales revenue growth demonstrates the
resilience of the business model. It is, therefore, pleasing
that our focus on these areas has allowed the business
to continue to drive revenue growth in the Year.
Like-for-like Gross Profit
£252.3m (up 0.8%)
(2018: £250.4m)
As anticipated, the Group was impacted by margin
pressure during the Year. At 11.4%, gross margin
percentage was slightly down (17bps) from the prior Year
(2018: 11.6%). Despite this margin decline, absolute like-
for-like gross profit increased 0.8% to £252.3m (2018:
£250.4m) as a result of the strong revenue growth
referred to above.
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FINANCIAL REVIEW
Shareholder Returns
Full year dividend per share
8.54p (maintained)
(2018: 8.54p)
In March 2019, the Group announced a revised dividend
policy whereby dividends would be covered between 2.5x
to 3.5x underlying earnings per share. The Board believes
this policy is appropriate and sustainable, balancing the
Group’s strong financial position and cash generation with
its stated strategy of further investment and growth in its
business. The Board is recommending a final dividend for
2019 of 5.69p which would give a full year dividend of
8.54p, flat versus last year (2018: 8.54p) and cover of 2.7x.
During the Year, total dividends of £7.2m were paid to
shareholders, an increase of £2.2m versus last year
(2018: 5.0m).
ROCE
Return on capital employed (ROCE) for the Year was
10.9% (2018: 12.8%). ROCE is calculated as underlying
profit before tax divided by total equity.
This movement is a reflection of the decline in continuing
underlying PBT which was, in part, impacted by loss
making acquisitions which management expect to show
significant improvement in the medium term.
Reported Balance Sheet
£m 2019 2018
Restated
Goodwill and intangibles 119.3 112.2
Freehold land and buildings 124.9 117.7
Right-of-use assets 108.0 85.4
Other 39.5 34.5
Fixed assets 391.6 349.8
Inventory 470.7 384.0
Trade / other receivables 87.5 79.0
Cash & equivalents 0.1 1.2
Assets held for sale 0.8 0.8
Current assets 559.1 464.9
Vehicle funding (443.7) (370.8)
Trade / other payables (140.6) (127.2)
Lease liabilities (108.1) (87.6)
Bank / other debt (30.7) (6.3)
Other liabilities (25.2) (28.7)
Total liabilities (748.4) (620.6)
Net assets 202.3 194.0
Adjusted net debt (£m) (30.6) (5.1)
Goodwill and other intangible assets
Following the completion of a number of acquisitions during
the Year, additions to goodwill and other intangible assets
total £7.5m; of this, £5.0m represents the assessment of the
value of the acquired dealership franchise agreement with
the vehicle manufacturer. These franchise agreement
intangible assets are deemed to have an indefinite life and
so no amortisation is charged to the income statement.
Consistent with the requirements of accounting standards,
the Group has carried out an assessment of the carrying
value of goodwill and other intangible assets. This
assessment, which is based upon the Group’s annual
budget and medium-term plan, has not indicated any
impairment of these assets see note 14.
Acquisitions
Including the purchase of freehold property relating to
Northampton ŠKODA and Derby Volvo, the Group invested
£31.6m (2018: Nil) acquiring businesses during the Year.
Although the majority of these businesses were loss making
at the point of acquisition, the Group views them as having
strong potential for the future, further growing representation
with a number of our key brand partners.
As a result of these acquisitions, the Group has added £6.6m
of intangible assets, £5.0m relating to franchise agreements
and £1.5m for goodwill. The remaining £25m related to
property plant and equipment, right of use assets and the
associated lease liabilities along with inventory and other
working capital related items.
These acquisitions were funded through existing resources,
utilising our unsecured £120m revolving credit facility with all
relevant inventory placed onto our current stock funding lines.
Freehold Land & Buildings
The Group invested a total of £15.2m (excluding the freehold
property acquired in relation to business acquisitions) in
capital expenditure during the Year. This amount included
major
in Nursling Mercedes Benz
Commercial Vehicles, Wimbledon Audi, Lincoln Jaguar Land
Rover, Lincoln Nissan and Grimsby BMW.
redevelopments
This investment brings the net book value of the Group’s
property, plant and equipment at 31 December 2019 to
£159.3m (2018 restated: £148.2m), of which £123.2m related
to freehold land and buildings (2018 restated: £108.2m).
Since IPO in 2015, the Group has invested over £100m in to
its estate including corporate identity upgrades, freehold and
long-leasehold acquisition and ongoing maintenance capital
expenditure. Following this unprecedented level of investment,
the Group expects to see its free cashflow benefit from 2021.
During the Year, the Group instructed external property
advisors, BNP Paribas, to conduct a revaluation exercise of
its freehold properties. I am pleased to report that this showed
our freehold estate (excluding investment properties) has
been market valued at c£15m above book value. This
difference, in-line with our accounting policies, has not been
recognised in our balance sheet.
Strong Working Capital Management
A disciplined approach to working capital remains a key focus
for the Group. In the Year, excluding the settlement of the
defined benefit pension scheme, the Group generated a cash
inflow of £7.5m from working capital. Of this amount c£15m
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
related to stock funding on vehicles acquired as part of the
acquisitions referred to above. The remaining increase in
working capital related to increased levels of fleet debt at
the year end following strong fleet deliveries at the end of
the Year.
Inventory, net of provisions, at £470.7m increased by
22.6% versus 2018, largely due to acquisitions with the
like-for-like inventory increasing 9.3%. £443.7m (94.2%)
of this inventory was covered by vehicle financing
arrangements which is a marginal decline from 2018
(96.6%) mainly due to timings of year end deliveries and
increased fleet orders.
An increase in trade and other receivables reflected the
increased scale of the Group following acquisitions and
start-ups as well as the increased level of fleet debt
referred to above.
Overall, the Group’s reported net assets at 31 December
2019 were £202.3m (2018 restated: £194.0m), which
equates to £2.59 per share (2018 restated: £2.50).
Good Cash Conversion
The Group remains cash generative with cash flow from
operations during the Year of £53.3m. This enabled us to
maintain our investment programme supporting both
organic growth and facilitate the acquisition of new
dealerships when appropriate opportunities arose.
Operating cash flow conversion (being total cash flow
generated by operations divided by operating profit from
continuing operations before interest, tax, depreciation,
amortisation and depreciation on right-of-use assets) is a
key metric for managing operational performance.
During the Year, total cash inflows from operations of
£53.3m (2018 restated: £47.3m) represented a cash
conversion of 108% (2018 restated: 86%).
The Group’s cash conversion remains strong and is
supported by a focus on the management of working
capital, appropriate stock holding policies and the
utilisation of stock funding facilities.
The interest rate on this facility is LIBOR plus 120bps to
200bps dependent upon the ratio of Net Debt (excluding
IFRS16) to EBITDA. The Group is at an advanced stage of
discussions with its lenders to enter into a new RCF.
Net debt including IFRS 16 lease liabilities at 31 December
2019 was £138.6m (2018 restated: £92.8m).
Tax
The Group manages all taxes in line with its published Tax
Strategy. This focuses on ensuring that tax compliance risks
are managed and therefore the Group pays the appropriate
amount of tax. The Group’s Tax Strategy is reviewed at least
annually and is approved by the Board.
The Group’s tax charge before non-underlying items for the
Year was £4.2m (2018 restated: £4.3m), an effective tax rate
of 18.9% (2018 restated: 17.3%). The effective tax rate for
2018 was reduced by the benefit of retrospective capital
allowance claims, excluding the impact of these would result
in an effective tax rate for 2018 of 21.6%.
The Group’s effective tax rate including non-underlying items
was 20.7% (2018 restated: 25.9%).
IFRS16
The Group adopted IFRS 16 Leases effective 1 January 2019
using the full retrospective approach under which the standard
is applied as though it had been in place at the start date of
the Group’s current lease portfolio. The comparative results
for the year ended 31 December 2018 are therefore restated.
Further details can be found in note 3 to the Consolidated
Financial Statements.
The Group balance sheet at 31 December 2019 includes
additional assets of £98.6m (being principally right of use
assets) and additional liabilities of £105.6m (being principally
lease liabilities). Further detail can be found in note 3 to the
financial statements
Due to the profile of the Group’s lease portfolio, the adoption
of the standard is marginally earnings diluting in the early
years.
Net Debt and Facilities (excluding
IFRS16)
At 31 December 2019, the Group’s adjusted net debt was
£30.6m (2018: £5.1m).
While this standard is a substantial change for the
presentation of the balance sheet and the income statement,
it has no impact on the underlying cash flows and therefore
economic performance of the Group.
The Group’s current finance facilities include a £120m
revolving credit facility which is committed until May 2021.
Pensions
As previously reported, during the year ended 31 December
2018, the Group ceased to be a participating employer in the
Marshall Group Executive Plan (a defined benefit pension
scheme). A provision for the Group’s residual liability of £5.6m
as at 31 December 2018 and was paid to the scheme in
February 2019.
The Group has no further commitments to defined benefit
pension schemes, with all remaining Group pension plans
being on a defined contribution basis.
Richard Blumberger
Chief Financial Officer
9 March 2020
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PRINCIPAL RISKS AND UNCERTAINTIES
Principal Risks and Uncertainties
The Group faces a range of risks and uncertainties which variously arise from the Group’s operations, are specific
to the sector, or are due to wider macro-economic circumstances. The processes that the Board has established
to monitor business risks and put in place mitigating actions in order to safeguard both shareholder value and the
assets of the Group are described in the Corporate Governance report.
The principal risks and uncertainties the Directors believe could have the most significant adverse impact on the
Group’s business, together with the principal controls in place to mitigate those risks are set out below. The risk
trend column indicates the Board’s view on whether, from a Group perspective taking into account mitigating
actions, the potential for each risk to have a material impact upon the Group has increased, remained relatively
stable or decreased over the past 12 months. The risks and uncertainties described below are not intended to be
an exhaustive list and is likely to evolve over time due to the dynamic nature of the Group’s business, the sector,
and the political and economic circumstances of the UK.
Strategy
and Business
Relationships
People
Economic
and Political
IT and
Cyber Security
Principal Risks
and Uncertainties
Finance
and Treasury
Environmental
and
Health & Safety
Legal and
Regulatory
Compliance
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Risk Area Potential Impact Mitigation/Controls Risk Trend
Marshall Motor Holdings plc | Annual Report & Accounts 2019
Strategy and Business Relationships
Failure to adopt
the right business
strategy and/or
failure to
implement
strategy
successfully
The Group misses its financial
targets or is unable to invest in
its businesses
Reduction in confidence of key
stakeholders (shareholders,
brand partners, lenders, and
employees)
Poor investment decisions/
failure to achieve targeted
investment returns
Annual strategy review by the Board to guide business
planning and investment decisions
Monthly reporting and monitoring of key financial information
and performance with prompt investigation of significant variances
Detailed business planning and due diligence prior to potential
acquisitions
Review of capital expenditure plans to ensure that the Group’s
return on capital objectives are achievable
Capital investment appraisal process with Board review of major
investments
Diversity of franchises mitigates the cyclical nature of, and an over
reliance on individual vehicle brands
Focus on efficient use of working capital supported by bank credit
lines and stock financing facilities
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Manufacturer
Relationships
Failure, or downturn in
performance, of manufacturer
partners impacting vehicle sales
and profitability of those franchises
Failure to maintain good relations
with manufacturers impacting
revenue and profitability
Loss of a franchise leading to a
reduction in revenue and profitability
and the risk of vacant properties
and/or onerous leases
Poor manufacturer relationships
impacting acquisition and/or growth
opportunities
Ongoing portfolio management focused on strengthening
key franchise relationships/divestment of non-core
businesses
Diverse franchise representation avoids over reliance on
any single manufacturer
Close contact and regular review with manufacturers
(through CEO, Operations, Commercial and Franchise
Directors) to ensure our respective goals are
communicated, understood and aligned
Continued track record of achieving brand targets, being a
partner whom the brands can trust
Failure to
integrate
acquisitions
successfully
Loss of key personnel/customers
Brand partner relationship
damage
Reduced financial performance
of acquired businesses
Failure to achieve targeted
synergies
Damage to manufacturer and/or
customer relationships
Detailed business planning and due diligence
on potential acquisitions
Integration plan developed prior to acquisition and
implemented in a timely manner thereafter
Group-wide single dealer management platform and Phoenix
management system implemented immediately after
acquisition
Prompt implementation of Group policies and procedures.
Internal Audit verification of successful implementation of
Group processes post-acquisition
Disruption to
franchise
business model
Alternative business models
impacting franchised dealer
model
Direct sales channels
circumventing franchised dealers
Revenues and profits may fall
due to competitor action
‘Mobility as a service’ leading to
reduced private vehicle
ownership
Electric and alternative fuel
vehicles leading to a decline in
sales for traditional vehicle
manufacturers and/or reduced
demand for aftersales services
Ongoing development of customer experience to ensure the
Group maintains a competitive advantage
IT developments to maintain competitive advantage (e.g.
development of website/Phoenix management system)
Maintaining close relationships with manufacturer partners to
ensure each party’s mutual aims are achieved
Close working relationship and partnership with brands who
are responding effectively to the cleaner technology,
automation and ‘mobility as a service’ potential disruptive
factors
Connected car technology reinforces link between customers
and manufacturers through franchised dealers
Annual strategy review by the Board considers market and
technology trends and applies this information to guide
business planning and investment decisions
The Group scale and financial position leaves it in a good
position to benefit from market changes as technology and
customer requirements evolve
The Group strategy of partnering with key brands ensures we
have a strategic relationship with those brands
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PRINCIPAL RISKS AND UNCERTAINTIES
Risk Area Potential Impact Mitigation/Controls Risk Trend
Economic and Political
Deterioration in
economic conditions/
consumer confidence
UK’s withdrawal from
the European Union
(‘Brexit’)
Increased inflation and falling consumer
confidence leading to lower vehicle
sales/margins and a reduction in revenue
and profitability
Reduction in used vehicle values impacting
stock values
Weakening Sterling impacting new vehicle
prices and sales
Board monitoring of economic conditions and forecasts with
appropriate actions being developed and implemented to reduce
adverse impact upon the Group as whole
Detailed stock management & reporting provided through the
Group’s bespoke Phoenix information system. Stock level
information is used to enforce the Group’s prudent stock polices
(including a maximum stock holding period of 56 days for used
vehicles)
Manufacturers’ focus on the UK automotive
retail market may decline leading to
reduced output and sales
Maintaining close relationships with manufacturers enables the
Group to assess the level of commitment to the UK market and
seek to support and reinforce this commitment
Interest rate rises impacting availability and
affordability of vehicle finance
Increased costs of servicing the Group’s
borrowings
Economic disruption, including changes in
UK consumer behaviours and/or disruption
to supply chains, caused a pandemic, such
as COVID-19, or other environment
impacts
Managing the day to day working capital of the Group and the
acquisition strategy to maintain, on average, a low level of net
debt with substantial facility headroom
Monitoring of UK government and World Health Organisation
information regarding epidemics and pandemics and following
guidance and best practice for responding to any such events,
including providing clear guidance and support to colleagues.
Close communication with manufacturers to understand and
respond to any identified supply chain impacts
Negative impact on UK economy:
increased inflation and falling consumer
confidence leading to lower vehicle
sales/margins and a reduction in revenue
and profitability
Reduction in used vehicle values impacting
stock values
Weakening Sterling impacting new vehicle
prices and sales
Manufacturers’ focus on the UK automotive
retail market may decline leading to
reduced output and sales
Potential regulatory changes may impact
franchising model in the UK (including
potential changes to EU Block Exemptions)
A ‘No Trade Deal’ Brexit or a trade deal
which imposes tariffs or other barriers to
free trade would be significantly more
negative for automotive retail sector than a
managed exit with a UK-EU tariff free trade
deal
Board monitoring of economic conditions and forecasts with
appropriate actions being developed and implemented to
reduce adverse impact upon the Group as whole
Impact of a deterioration in consumer confidence mitigated by
PCP renewal cycle (primarily in the new car market)
Stock management and monitoring with appropriately prudent
policies, including a maximum stock holding period of 56
days for used vehicles, to mitigate impact of falling vehicle
values
Maintaining close relationship with manufacturers and
monitoring of manufacturers’ Brexit preparations
The Group is not a direct importer of vehicles and parts from
the EU; Extent of supply disruptions to the Group and its
customers in a ‘No Trade Deal’ Brexit scenario will depend on
manufacturers’ ability to manage import challenges
Diversity of the Group’s portfolio of brand partners which
includes UK, EU and non-European manufacturers
Increased Operating
Costs
Increased operating and non-controllable
costs (e.g. employment costs, Apprentice
Levy, business rate changes, IT and
marketing costs) impacting profitability
Operating and non-controllable costs are monitored through
monthly management reporting and the weekly operational
forecasts against expectations set in the annual budget
Cost reduction and efficiency initiatives to offset structural
cost increases
Finance and Treasury
Liquidity & credit
Credit availability/withdrawal of financing
facilities impacting trading ability
The Group has committed RCF and vehicle stocking facilities
and maintains strong relationships with funders
Breach of covenants or inability to meet
debt obligations
Increased stock funding costs
Managing the day to day working capital of the Group and
the acquisition strategy to maintain, on average, a low level of
net debt with substantial facility headroom
The Group’s track record and current financial position leave
it well placed to secure funding; however, market factors and
the macro-economic situation are leading to increased
funding costs.
Vehicle residual values
volatility
Fluctuations in used vehicle values
adversely impacting the value of the
Group’s vehicle inventory
Stock management & monitoring (including a maximum
stock holding period of 56 days for used vehicles,
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Risk Area Potential Impact Mitigation/Controls Risk Trend
Legal and Regulatory
Legal & Regulatory
Changes and
Compliance
Non-compliance with key legal and
regulatory codes (Financial Conduct
Authority (“FCA”), Driver & Vehicle
Standards Agency, Information
Commissioner's Office, etc.) leading
to fines, litigation, authorisation
suspension and/or reputational
damage
Regulatory intervention into the
market (for example the FCA motor
finance review and the FCA
Thematic Review of General
Insurance Distribution Chains) may
impact operations
Monitoring of regulatory announcements/market studies to identify
potential changes in regulatory requirements and implementation of
any changes necessary to meet new requirements
Group compliance team tasked with developing policies /
procedures, training, and monitoring compliance
Internal Audit team, deliver an annual programme of reviews to a
scope approved by the Audit Committee
On-going programme of systems and software development to
support the sale process providing consistency and enhanced
monitoring capability
A programme of training has been delivered across the Group to
meet the requirements of the FCA’s Senior Managers & Certification
Regime. This training has also been incorporated into the induction
procedures for new employees
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Environmental and Health & Safety
Environmental and
Health & Safety
Failure to ensure colleagues and
customers safe places of work
leading to accidents, litigation, fines
and regulatory intervention
Non-compliance with environmental
laws & regulations leading to fines,
penalties and compensation and
clean-up costs and disruption to
operations
The Group Environment, Health & Safety team develop
and support sites in implementing policies and procedures
to promote safe places of work. These procedures include:
• A programme of audits across Group
• Regular inspection of plant and equipment
• Waste management procedures and employee training
The Group Environment, Health & Safety team monitors compliance and
promotes a health and safety helps culture
Compliance with policies and incident response is a standing agenda item
for the Board and the operational management meetings
Environmental due diligence is carried out for new site acquisitions with
appropriate environmental and remediation works being carried and
insurance being put in place for higher risk sites
IT and Cyber Security
Failure of key IT
systems
Loss of key information systems,
downtime and business interruption
The Group IT strategy is set by the Board with delivery being
monitored by an IT steering committee
Cyber Security
Potential to corrupt, affect or destroy
key systems and data (email, DMS &
customer records), denial of service
attacks and business interruption
leading to lost revenue
People
Failure to attract,
develop, motivate
and retain key
employees
Loss of key personnel and skilled
workers (e.g. technicians) impacting
operational performance, and
relationships with key brand partners
and suppliers
The Group IT team monitors systems and implements upgrade
programmes as required following approval by the IT steering
committee
IT system contingency and disaster recovery plans are in place
The Group has clear protocols/policies in place regarding use
and access to the Group’s IT systems
Cyber security defences are in place and include:
• Network unified threat management / Firewall
• Anti-virus software
• Inbound and outbound email scanning and filtering
Appropriate remuneration packages which reward performance and
include long-term incentive plans for senior employees which are
aligned with the interests of shareholders
Guaranteed earnings scheme for new sales staff to assist
recruitment and retention
Promotion of “Great Place to Work” culture
Training and career development programmes in place to provide
opportunities for promotion within the Group
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BOARD OF DIRECTORS
Board of Directors
1
2
3
4
1. Professor Richard Parry-Jones CBE
Non-Executive Chairman
and Chair of the Nominations Committee
Richard has had a long and distinguished career in the
automotive industry. He spent over 30 years in senior
executive positions at Ford Motor Company, including
Group Vice President of Global Product Development
and served as its Chief Technical Officer for 10 years.
Richard’s non-executive career has included positions
working with the Government as Co-Chair of the UK
Automotive Council and in infrastructure sectors as
Chairman of Network Rail and Chairman of Kelda Group
Holdings and Yorkshire Water. He also served for 10
years as a non-executive director of GKN plc, a global
leader in automotive and aerospace systems, including
the role of senior independent director. Richard’s other
current roles include Visiting Professor at Loughborough
University and Chairman of the Faraday Challenge
Advisory Board.
Richard joined the Board as Non-Executive Chairman in
January 2019.
2. Daksh Gupta
Chief Executive Officer
Daksh has over 27 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 president of the UK
automotive industry charity, BEN.
3. Richard Blumberger FCMA
Chief Financial Officer
Richard has a wealth of experience gained from senior
finance roles with major UK public companies. Before
joining Marshall, Richard was Director of Group Finance
at Mitie Group plc and previously held senior finance
roles at Engie (formerly GDF Suez) and Balfour Beatty
plc. He has a strong understanding of multi-site
businesses and a track record of strategic planning, profit
enhancement and extensive M&A experience.
Richard was appointed to the Board as Chief Financial
Officer in January 2019.
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 AngloGold Ashanti Limited.
He chairs the audit committees and is the senior
independent director of both Johnson Matthey Plc and
Croda International plc. 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 in March 2015.
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5. Nicky Dulieu
Non-Executive Director
and Chair of the Remuneration Committee
Nicky is an experienced Non-Executive Director with a
wealth of retail industry experience. She trained as an
accountant with Marks & Spencer Plc and undertook
numerous strategic and financial roles in the company
over a 23 year period, including as Finance Director of the
Food Division. Nicky joined Hobbs Limited as its Finance
Director in 2006 before becoming its Chief Operating
Officer and subsequently Chief Executive between 2008
and 2014.
Nicky is currently a Non-Executive Director at Huntsworth
Plc, Adnams Plc and Redrow Plc.
Nicky was appointed to the Board on 1 January 2020.
6. Kathy Jenkins
Non-Executive Director
Kathy joined Marshall of Cambridge (Holdings) Limited in
April 2017 as Group HR Director. Kathy was appointed as
Chief Operating Officer in October 2019. Before joining
Marshall, Kathy spent 14 years at Thales plc where she
held a number of senior executive positions. She has also
worked with Marconi plc.
Kathy was appointed to the Board in May 2018 as a
nominated director of Marshall of Cambridge (Holdings)
Limited.
Christopher is Chairman of the Regional Employers
Engagement Group for the East Anglian Reserve Forces’
and Cadets’ Association, Chairman of No. 104 (City of
Cambridge) Squadron Air Cadets, a Trustee of the
Addenbrooke’s Charitable Trust and a Member of Anglian
Learning.
Christopher was appointed to the Board in July 2016 as a
nominated director of Marshall of Cambridge (Holdings)
Limited.
8. Francesca Ecsery
Non-Executive Director
Francesca has over 20 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 currently a non-executive director of listed
companies F&C Investment Trust plc and Share plc and
was appointed as a non-executive director of Air France in
May 2018. She was previously a non-executive director of
Good Energy Group plc until December 2017. Her
previous executive experience includes McKinsey, Pepsi
Co, ThornEMI, Thomas Cook, STA Travel and many other
consumer brands.
Francesca was appointed to the Board in March 2015.
7. Christopher Walkinshaw
Non-Executive Director
Christopher joined Marshall of Cambridge (Holdings)
Limited in 1983 and 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.
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 in March 2015.
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DIRECTORS’ REPORT
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 2019 (the “Year”).
Principal Activities
The principal activity of the Company is that of a holding company. The principal activity of its subsidiary undertakings is
the sale and servicing of passenger cars and commercial vehicle 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 5.69p per ordinary share to be paid on 22 May 2020 to shareholders who are on the
Company’s register at close of business on 24 April 2020.
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, disposals 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 42 to 43. The Directors who served during the Year and subsequently
are detailed below.
Current Directors
Non-Executive Directors
Richard Parry-Jones (Appointed 1 January 2019)
Alan Ferguson
Francesca Ecsery
Nicky Dulieu (1 January 2020)
Kathy Jenkins
Christopher Walkinshaw
Executive Directors
Daksh Gupta
Richard Blumberger (Appointed 2 January 2019)
Other Directors who held office during the Year
Sarah Dickins (Resigned 30 June 2019)
Mark Raban (Resigned 2 January 2019)
In accordance with the Articles of Association of the Company adopted on 12 March 2015 (the “Articles”), having been
appointed since the date of the last annual general meeting of the Company, Nicky Dulieu will retire by rotation and offer
herself for reappointment at the annual general meeting to be held on 21 May 2020 (the “AGM”). In addition, Christopher
Walkinshaw, having last been elected at the 2017 annual general meeting, will retire by rotation in accordance with the
Articles of Association of the Company and offer 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 69 to 75.
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 28 to the financial statements. The issued share capital of the Company at 31 December 2019 was
78,232,237 ordinary shares of 64p each.
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Substantial Shareholdings
As at 9 March 2020, the Company had been notified of interests in excess of 3 per cent in the Company’s share capital
by the following shareholders:
Percentage of Existing
Name Number of Ordinary Shares Ordinary Shares Held
Marshall of Cambridge (Holdings) Limited 50,390,625 64.41
Union Investments & Development Limited 7,105,839 9.08
Janus Henderson Investors 3,749,271 4.79
Schroder Investment Management 3,037,402 3.88
Polar Capital Limited 2,516,420 3.22
Share Option Schemes
Details of employee share option schemes are set out in the Remuneration Committee Report and in Note 29 to the
consolidated financial statements.
Charitable and Political Donations
During the Year, the Group made the following charitable donations during the year: £44,803 (2018: £8,000).
No political contributions were made during the Year (2018: £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 Group has continued to provide employees with information about the Group through the newsletters
‘Marshall Matters’ and ‘Compliance Matters’, team briefings and through the Group wide email distribution. Regular
meetings are held between local management and employees to allow a free flow of information and ideas. We also
participate in the Great Place to Work Institute’s employee engagement programme. For the 2019 survey the participation
rate remained high at 84% and the Group was included in the “Best UK Super Large Workplace” rankings for the fifth year
in succession. Further details are set out in the Corporate Social Responsibility Section of this Annual Report.
Board decision making (s172 statement)
When making decisions, the Directors consider what is most likely to lead to the success of the Group and to be of benefit
to the members as a whole over the long term. When making such decisions, the Directors also consider the interests of
other key stakeholder groups and seek to arrive at conclusions which do not adversely impact those groups as a whole.
For the purposes of decision making, the Directors have identified key stakeholder groups, have evaluated their interests,
and describe in the table overleaf how they have engaged with and responded to the interests of those stakeholders during
the Year.
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DIRECTORS’ REPORT
How does the
Stakeholder Group engage
Group Interests and respond
Customers
Employees
• Dealing with a
organisation.
trusted and
transparent
• Maintaining a relationship over the long term.
• Receiving balanced advice when purchasing a
vehicle or having a vehicle serviced or repaired.
• Having clarity as to the pricing of vehicles as
well as the additional products and services.
• Achieving good value for money.
• Seeing an alignment between personal and
corporate values.
• Knowing that the organisation has a strong
to ethical practices and
commitment
compliance.
• Being part of a successful and secure
organisation.
• A safe working environment.
• Knowing that their views are heard and acted
upon.
• A “Sales Orientation Programme”, which all
new Sales Executives attend, to ensure that
they deliver a consistent and high-quality
customer experience.
• A customer focused culture, supported by
clearly defined sales processes.
• Effective governance supported by an
independent compliance team, a detailed
understanding of the regulatory environment,
coupled with monitoring and training to drive
continuous improvement.
• The Group’s scale of operations, strong
manufacturer and other supplier relationships
support the delivery of value-for-money for the
customer.
• Frequent customer satisfaction surveys.
• Monitoring of customer complaints to identify
any themes with appropriate actions taken to
address identified issues.
• Regular CEO communications, weekly
bulletins, the Colleague magazine, intranet,
regular team meetings and engaging social
media channels.
• Annual employee survey, through Great Place
to Work, followed by line manager briefings
and the development of action plans to drive
improvement.
• Group “whistle blowing” hotline provided by a
third party to allow employees to raise
concerns in confidence.
• Recognising colleagues who demonstrate
outstanding achievements
the
MAVTA programme (Marshall Achievement,
Values and Teamwork Awards).
through
• Promoting diversity in the workplace; for
the
through membership of
example
Automotive 30% Club.
• Group values and policies on work place
conduct to develop a supportive, respectful,
and friendly working environment.
Investment in learning & development to
ensure that staff are equipped with the skills
they need to do their roles.
•
• Group Health, Safety and Environment Team
who work with all sites to promote safe
working practices as well as monitoring trends
and making changes to procedures in
response to those trends.
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
How does the
Stakeholder Group engage
Group Interests and respond
Suppliers
• A collaborative, open and supportive
relationship.
• Prompt, clear, and responsive communications.
• Strong
relationships
vehicle
manufacturers, developed through regular
meetings with
senior
management.
the Group’s
with
• Long term partnership agreements with key
strategic suppliers which deliver value for
money for the Group and certainty of business
for the supplier.
Communities
• Responsible investment, development, and
•
operations.
• Delivery of employment opportunities.
• Support for local communities and national
causes.
Investing in the Dealership portfolio to ensure
that all the sites are well maintained, optimise
energy use & environmental impact, as well
as being an asset to the local area.
• Providing direct employment to over 4,000
people.
• Supporting and raising awareness for the
Motor and Allied Trades Benevolent Fund.
• Supporting local and national charities, as well
as encouraging employees
to become
involved in the communities in which they
work.
Funders
• Open and honest relationship with clarity as to
• Clear and transparent annual and interim
business performance.
reporting.
• Financial discipline backed by strong internal
of
enables
delivery
controls which
commitments.
• Relationships with all funders at a senior level
within the Group.
• Strong day to day working relationships
between Group and funder operational staff.
Shareholders
• A business with a clear strategy which is well
• Clear and transparent annual and interim
executed.
reporting.
• Financial discipline backed by strong internal
controls.
• Strong return on investment throughout the
economic cycle.
• Access to senior management through results
presentations, and the Annual General
Meeting.
• The Chairman meet regularly with key
shareholders and the Senior Independent
Director is available to meet with shareholders
if requested.
• Track record of successful growth through
acquisitions which have been appropriately
integrated into the Group.
Anti-Bribery and Corruption
The Group has in place an anti-bribery and corruption policy, the aim of which is to ensure that colleagues understand their
obligations under anti-bribery legislation and includes authorisation and disclosure procedures around the provision and receipt
of corporate hospitality and gifts.
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.
AGM
Notice of the AGM to be held on 21 May 2020 will be sent to shareholders in due course and will be made available on the Group’s
website at www.mmhplc.com.
By order of the Board
Stephen Jones
Company Secretary
9 March 2020
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CORPORATE AND SOCIAL RESPONSIBILITY
Corporate and Social Responsibility
Community
Marshall Making a Difference
Our values underpin what we stand for as a business and give clear definition on how we
should all behave. We encourage colleagues to help us make a difference to each other
and our customers which we believe is what makes Marshall special. Whilst our focus is
creating an environment where colleagues enjoy coming to work and help us to meet our
business objectives, we also believe it is important to give back to our communities and
the environment in which we live.
Group Giving
We have been actively involved in supporting and raising awareness for the Motor and
Allied Trades Benevolent Fund (‘Ben’) – since 1984. Ben is the UK’s dedicated charity
for those who work, or have worked, in the automotive and related industries, as well as
their dependents. In that time, we have raised over £900,000 which includes the
generous donations our colleagues make via payroll giving. In 2018 we raised £96,392
for this very important charity. CEO, Daksh Gupta, became a trustee and Vice Chairman
in October 2012 and remains committed to these roles.
For the fourth year running we have run ‘Ben Week’ which involves each business getting
involved with fundraising activities to raise money and awareness for Ben. Colleagues
dress up, take part in sporting challenges and other fun activities. This remains a
tremendous teambuilding opportunity and generates great camaraderie among colleagues
and customers. Whilst supporting Ben remains close to our hearts, giving colleagues the
opportunity to get involved with other good causes is equally important to us.
We have supported the Macmillan Coffee Mornings for 22 years enabling our businesses
to get involved at a local level, again bringing colleagues and customers together. We
have raised over £121,000 for Macmillan during this period.
We also support national initiatives such as Red Nose Day, Children in Need, Wear it Pink
for Breast Cancer and Christmas Jumper Day for Save the Children. Each dealership
determines how they are going to support these events. This always involves having a lot
of fun and getting customers involved. All of these events give rich and inspirational content
for our social media channels to showcase our people and the personality of the business.
Local Giving
Colleagues are encouraged to get involved with local causes which support the
communities in which they work. We have so many examples of the incredible efforts
made by colleagues here are just a small sample:
• Supporting a local school by holding open events for students to give them a taster for
careers in automotive.
• Recycling AdBlue containers and donating to a local zoo to use as elephant feed buckets.
• Providing a chauffeur driven car for a customer’s daughter to take her to her school prom
following open heart surgery.
• Going into local schools and running mock interview sessions for students.
• Sleeping rough to raise money for Centrepoint – this has now taken place for the past
three years.
• Collecting food, clothing, pet goods and toys for local charities at Christmas.
• Numerous sporting challenges from running to skydiving to cycling to wing walking and
even an Ironman!
‘Services in the Community’ is one of the categories recognised as part of our Marshall
Achievement, Values and Teamwork Awards (MAVTAs) and also supports our Great Place
to Work ® ethos.
48
Pictured: Marshall Colleagues sleep
rough for the night to raise money
for the homeless charity Centrepoint
Photo by: Richard Marsham /
Cambridge Independent
Marshall Motor Holdings plc | Annual Report & Accounts 2019
Striving to have a
positive impact on the
communities in which
we serve
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Our values
People
Recognising that
people are at the
heart of our success
Innovation
Maintaining competitive
edge through innovation
and creativity
Customers
Putting our customers
above all else
Integrity
Upholding the
highest standards of
integrity and fairness
49
£21,200
Raised since 2018 for
the homeless charity
Centrepoint
£121,000
We have supported the
Macmillan Coffee Mornings
for 22 years
£900,000
Raised since 1984 for the
Motor and Allied Trades
Benevolent Fund (‘BEN’)
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CORPORATE AND SOCIAL RESPONSIBILITY
Committed to
attracting, developing
and retaining the best
talent to help drive our
business forward in
line with our values
11th
Best UK Super
Large Workplace
3800+
Training days
delivered
800+
Different Marshall
colleagues trained
Pictured: Marshall Apprentice
of the Year Award Winner -
Nathan Crook
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Marshall People
Our Values
We seek to ensure our values are at the forefront of
everything we do. We encourage colleagues to uphold these
values and behave in a way that brings them to life and
supports our culture of being a great place to work, delivering
first class customer service.
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.
Our dedicated team 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 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.
Communicating with our people
We believe communication is the key to maintaining
colleague engagement and our employment brand. We
have an ethos of transparency and sharing news on a
regular basis including CEO communications, weekly
bulletins, our Colleague magazine, intranet, regular team
meetings and engaging social media channels.
Diversity and our people
We are committed to encouraging diversity and ensuring 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.
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.
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.
Engaging our people
Our employment policies and practices are consistent with
our values and culture, helping us to achieve our business
objectives through engaged people.
In addition, all new Sales Executives attend our residential
Sales Orientation Programme before starting in their
dealership. This is a rounded programme which not only
includes the technicalities of the role but culturally what our
customers should experience when they interact with us.
This programme has significantly reduced our sales
executive turnover since launching in June 2016.
Recognising our people
Our recognition programmes are designed to support our
colleague engagement agenda. These programmes include
long service recognition, awards for demonstrating our
values and creative local recognition to thank and celebrate
achievement.
Since 2008 we have worked with the Great Place to Work ®
UK’s Best Workplaces programme. This has given us the
opportunity to seek feedback from our colleagues each year
to measure levels of engagement and drive continuous
improvement.
Since 2010 we have achieved survey scores ahead of the
70% UK benchmark which determines a great place to work.
In 2019 we were ranked as the eleventh Best UK Super
Large Workplace. As this was the fifth year running of being
ranked we were the proud recipients of the prestigious
Laureate Award. We believe the success of this programme
is down to high participation levels driven by our ability to
listen, take action and care.
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CORPORATE AND SOCIAL RESPONSIBILITY
Making Health & Safety
an integral part of
Marshall’s day to day
operation
11.30 AFR
MMH Accident Frequency Rate.
(Motor Industry AFR average is
currently set at 14.2)
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Marshall Embracing Safety
Health & Safety is led from the top and is the number one item on any Board Agenda. 2019,
has seen continued investment into the Heath, Safety and Environment Team with
additional resource in order to provide greater on-site presence, support and guidance.
Our regular communications enable us to continue to adopt a consistent approach to
health and safety for all activities across our business. This has also seen an increase in
engagement across the business.
Whilst our Advisors are providing on-site guidance and assistance, our support team in
Cambridge also provide support and direction to all sites by continually reviewing and
improving our policies and procedures in line with our activities, as well as supporting and
advising managers to assist them in fulfilling their H&S responsibilities.
We continue to support the business by reviewing and making available training courses
for first aiders, fire wardens and risk assessors. Following a suggestion from the business
all of this training, with the exception of First Aid, can be completed on-line.
All of the first aiders and fire wardens are volunteers who undertake these roles in addition
to their usual duties. Monthly checks of first aid boxes, firefighting equipment and
emergency lighting, as well as weekly fire alarm tests are just some of the additional tasks
these colleagues undertake on our behalf.
In addition, each of our sites has a trained risk assessor who is responsible for ensuring
that actions from various risk assessments (fire and legionella for example) are completed
effectively and within the time period specified and that the site specific risk assessments
remain relevant and up to date for their site.
Planned preventive maintenance is organised by the HSE team working with our approved
contractors to ensure all relevant inspections and any identified remedial work is
undertaken on time and certificated evidence is available.
The HSE team also monitor, report and investigate all incidents and where trends are
identified an HSE Alert is created and shared with all colleagues.
We track our Accident Frequency Rate (AFR) on a monthly and annual basis. The AFR is
the measure of the number of accidents per 1m hours worked. The Motor Industry AFR
average is currently set at 14.2 (taken from HSE document ‘Injury frequency rates’).
Our AFR for 2019 was 11.30.
Health and safety statistics 2019
2018 2019
Total number of incidents 180 221
Of which RIDDOR* reportable incidents 20 13
• Fatalities 0 0
• Specified Injuries 3 6
• Over 7 day absence 10 3
• Non workers (contractors, visitors, third parties) 2 1
• Occupational Disease 1 0
• Dangerous occurrences reported under RIDDOR* 1 3
Number of enforcement notices issued by HSE 0 0
Number of prohibition notices issued by HSE 1 0
*Reporting of Injuries, Dangerous Occurrences Regulations 2013
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CORPORATE AND SOCIAL RESPONSIBILITY
Embracing our
environmental
responsibilities
1.3mkg
Of waste diverted
from landfill
ESOS
Phase 2 of the Energy
Savings Opportunity
Scheme complete
SUBSTANCES
Control of Substances
Hazardous to
Health (COSHH)
ENERGY
Reducing
energy
consumption
RECYCLING
Waste
and
recycling
Continually minimising the impact of our
operational activities on the environment
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Marshall Going Green
In 2019, our environmental focus has continued to develop and we have continued to
work on increasing awareness across the business.
Last year, we engaged with our colleagues to reinvigorate Marshall LEAF (Lowering
Energy to Aid the Future) which aims to lower the impact we have on the environment,
by holding a competition for children related to our colleagues to create posters on saving
energy and designing a new logo or slogan.
As a result of this, we have used the winning designs in a number of our communications
and will continue to use them as we move forward in our environmental agenda.
5th December 2019 was the deadline for Phase 2 of the Energy Savings Opportunity
Scheme (ESOS) which is designed to lead to greater energy efficiency, cost savings and
carbon reduction.
In order to ensure compliance to these regulations, we engaged with a consultant, who
conducted a number of energy audits to identify and make recommendations which we
will continue to use when developing our new dealerships as well as refurbishments of
existing sites.
All of our new-build dealerships have been built to BREEAM "Very Good” rating.
BREEAM is the world’s leading environmental assessment method for buildings and
sets the standard for best practice in sustainable building design, construction and
operation and has become one of the most comprehensive and widely recognised
measures of a building’s environmental performance.
At Marshall we take our duty of care responsibilities very seriously and as such work
closely with our approved waste contractor to provide a comprehensive collection and
processing service of our hazardous and non-hazardous recyclable materials.
In 2019 98% of our hazardous waste materials, such as engine oil, lead acid batteries,
rags and absorbents were recycled and recovered which is a 1.8% increase in hazardous
waste materials recycled. This equates to over 1.3m kg of waste which didn’t go to landfill.
Also in 2019, 64.5% of our dry mixed recycling waste materials, such as paper, plastics,
metals and cardboard, were recycled and recovered. This equates to over 1.4m kg of
waste which didn’t go to landfill.
We work with our Brand partners to ensure compliance with The Producer Responsibility
Obligations (Packaging Waste) Regulations the aim of which is to reduce the amount of
packaging waste that ends up in landfill.
Additionally, we work closely with water retailers and local water authorities to ensure
that where our operations involve the discharge of waste water (e.g. valeting), we have
obtained the correct level of consent and that our actions do not cause pollution via
surface water drainage and other water courses.
Finally, we work with the Environmental Protection Teams at various councils across
England to ensure we have the relevant permits in place, under the Environmental
Permitting (England & Wales Regulations 2007) at those of our dealerships which have
a Bodyshop, or where we have independent Bodyshop operations. This includes
undertaking regular monitoring to ensure we remain compliant with the limits set within
the permits.
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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 in meeting the needs
and protecting the interests of all stakeholder groups. The Group has, since its admission to AIM in April 2015, adopted the QCA
Corporate Governance Code for Small and Mid-Size Quoted Companies.
An explanation of how these principles are applied by the Group are set out in the table below and the remainder of this corporate
governance report.
APPLICATION OF THE QCA CORPORATE GOVERNANCE CODE
QCA Principle Application by the Group
1. Establish a strategy and
business model which
promote long-term value
for shareholders
2. Seek to understand and
meet shareholder needs
and expectations
The Group’s vision is to be the UK’s premier automotive retail group. This vision is
underpinned by five strategic pillars set by the Board: class leading returns; customer first;
retailing excellence; people-centric; and strategic growth.
The Group’s business model and strategy are set out both in its AIM Admission document
(which can be found on the Group’s website at www.mmhplc.com) and the Strategic Report
section of this Annual Report.
In addition, the principal risks and uncertainties identified by the Board to the successful
delivery of the Group's strategy, together with the principal controls in place to mitigate
those risks, are set out on pages 38 to 41 of this Annual Report. The Board reviews the
Group’s risk register at least twice a year as part of the annual and interim accounts
processes.
The Group is committed to maintaining good relations with all its shareholders through the
provision of interim and annual reports, other trading statements and its AGM.
The Chief Executive Officer and Chief Financial Officer also meet with the Group’s
institutional shareholders regularly to discuss the Group’s performance and business model
and strategy and feedback from these meetings is reported to the Board. The Chairman
also meets with key shareholders and the Senior Independent Director is also available to
meet with shareholders if requested.
Each Board member attends the AGM where investors are invited to formally and informally
field questions and discuss their views with the Board.
In light of Marshall of Cambridge (Holdings) Limited’s (“MCHL”) aggregate shareholding in
the Group, on Admission the Group entered into a Relationship Agreement (“Relationship
Agreement”) with MCHL in order to regulate the relationship between MCHL and the Group
and enable the Group 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 on page 13 of the Group’s AIM
Admission Document.
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QCA Principle Application by the Group
3. Take into account wider
stakeholder and social
responsibilities and their
implications for long-term
success
The Group recognises that its long-term success relies on maintaining and building strong
relationships with its various stakeholders, including in particular, its customers,
shareholders, brand partners, suppliers and employees.
In making decisions which are for the benefit of the members as a whole over the long term
the Board also consider the interests of key stakeholder groups and seek to arrive at
conclusions, which do not adversely impact those groups.
As a franchise partner to global automotive manufacturers, the Group is focused on building
and maintaining excellent brand partner relationships. The Group’s recent success and
growth has been based on strong and growing relationships with its brand partners. The
Group has also invested in long-term strategic partnerships with other key suppliers, many
of whom have worked with the Group over many years.
The Group is committed to maintaining good employee relationships and employs a range
of recruitment, communication and employee engagement initiatives designed to attract,
recruit and retain employees. Further details of the Group’s employee engagement
programme are set out in the Corporate and Social Responsibility section of this Annual
Report.
The Group’s participation in the Great Place to Work Institute’s Best Workplaces programme
provides an effective means to seek feedback from colleagues each year and to measure
levels of engagement and drive continuous improvement.
The Group also recognises the potential impact of its operations on the environment and
examples of how the Group seeks to minimise that impact are set out under Corporate and
Social Responsibility on pages 48 to 55.
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4. Embed effective risk
The principal elements of the Group’s system of internal control are set out on page 61.
management considering
both opportunities and
threats, throughout the
organisation
In addition, the principal risks and uncertainties the Board believes could have the most
significant adverse impact on the Group’s business, together with the principal controls in
place to mitigate those risks, are set out on pages 38 to 41.
5. Maintain a well-functioning,
The Chair is responsible for leading the Board and its governance arrangements.
balanced team led by
the Chair
6. Ensure that between them
the Directors have the
necessary up-to-date
experience, skills and
capabilities
The Group currently has eight directors, of which four are independent non-executives (being
Richard Parry-Jones, Alan Ferguson, Nicky Dulieu and Francesca Ecsery). Details of the
directors, including their roles, committee memberships, skills and experience and are set
out on pages 42 to 43 and their attendance record in the last financial year is set out on
page 59.
Details of the Group’s Board Committees, being the Audit Committee, Remuneration
Committee and Nominations Committee, are set out below.
As stated above, under the terms of the Relationship Agreement, 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. Christopher Walkinshaw and Kathy Jenkins are the two nominated
directors of MCHL.
The Board is satisfied that it has a suitable balance between independence and knowledge
of the Group to enable it to discharge its duties and responsibilities effectively. The
Nomination Committee is responsible for reviewing the Board’s balance and membership.
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GOVERNANCE
QCA Principle Application by the Group
7. Evaluation of Board
performance
Details of each Board member’s experience, skills and qualifications are set out on pages
42 and 43 of this Annual Report.
All Directors are able to take independent professional advice, if necessary, at the
Company’s expense. In addition, the Directors have direct access to the advice and services
of the Company Secretary, a qualified solicitor.
The Non-Executive Directors meet each financial year without the presence of the Executive
Directors, during which the performance of Executive Directors is assessed and without the
presence of the Chairman (to assess the performance of the Chairman).
The Board commenced a Board evaluation process in 2019 which will include a review of
development and mentoring needs of the Group’s management team.
8. Promote a culture based
on ethical values and
behaviours
The Group has clear and defined values based on people, innovation, integrity and
customers.
These values are embedded in the Group’s internal systems and controls (including its
whistleblowing, anti-corruption and modern slavery policies) and in its HR policies.
9. Maintain governance
structures and processes
that are fit for purpose and
support good decision-
making by the Board
10. Communicate how the
Group is governed and is
performing by maintaining
a dialogue with
shareholders and other
relevant stakeholders
Further details of our approach to embedding these values are set out in the Corporate and
Social Responsibility section of this Annual Report.
Details of the Group’s principal governance structures, including the Board and its
committees are set out below. In addition, pages 62 to 68 contain reports from the Audit and
Remuneration Committees which set out their key areas of responsibility and activities.
The Board considers that the Group’s governance structures and processes are fit for
purpose and support good decision making by the Board.
The Group communicates with shareholders through its Annual Report and Accounts,
annual and interim announcements, the AGM and individual meetings with shareholders.
Key corporate information (including all Group announcements and presentations) is
available on the Group’s website at www.mmhplc.com.
The Board receives regular updates on shareholders’ views through briefings from the Chief
Executive Officer, Chief Financial Officer and the Group’s brokers. In addition, both the
Chairman and the Senior Independent Director are available to meet on an ad hoc basis
with the Group’s principal shareholders.
The Group communicates with its institutional investors through briefings with management
at least twice a year, coinciding with the Group’s annual and interim results and at other
times during the year. In addition, analysts’ notes and brokers’ briefings are reviewed to
provide insight into investors’ views of the Group, its strategy and performance.
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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 held during the Year. There are separate attendance
statements in respect of the Audit and Remuneration Committees on pages 63 and 69.
Director
Date appointed
Role
Committees
(C = current chair)
2019 Board
attendance
Richard Parry-Jones 1 January 2019
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
Walkinshaw***
12 July 2016
Non-Executive
Kathy Jenkins***
23 May 2018
Non-Executive
Audit Committee (C)
Remuneration Committee
Nomination Committee
Audit Committee
Remuneration Committee
Nomination Committee
Audit Committee
Remuneration Committee**
Nomination Committee
Audit Committee
Nomination Committee
Remuneration Committee
Nomination Committee
Daksh Gupta
1 October 2008
Chief Executive Officer
Richard Blumberger 2 January 2019
Chief Financial Officer
Mark Raban****
2 April 2015
Chief Financial Officer
n/a
n/a
n/a
10/10
10/10
10/10
4/4*
10/10
10/10
10/10
10/10
–****
* Resigned from the Board on 30 June 2019.
** Chair of the Remuneration Committee until her resignation from the Board on 30 June 2019.
*** Christopher Walkinshaw and Kathy Jenkins are nominated directors of Marshall of Cambridge (Holdings) Limited.
**** Mark Raban resigned from the Board on 2 January 2019.
Richard Parry-Jones was appointed to the Board as Chairman on 1 January 2019. Mark Raban resigned from the Board on
2 January 2019. Richard Blumberger was appointed to the Board on 2 January 2019.
Sarah Dickins resigned from the Board on 30 June 2019. Subsequent to the year end, Nicky Dulieu was appointed to the Board
as a Non-Executive Director and Chair of the Remuneration Committee on 1 January 2020.
Board decisions are generally on matters of strategy (including acquisitions and disposals), policy, people, performance, budgets
and significant capital expenditure. Each director receives information on matters to be discussed (including Board reports from
the Chief Executive Officer, 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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GOVERNANCE
Chairman, Chief Executive Officer and Senior Independent Director
Richard Parry-Jones 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 four 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. The current MCHL-nominated directors are Christopher Walkinshaw and Kathy Jenkins.
Performance Evaluation
The Non-Executive Directors have met without the presence of the Executive Directors, during which the performance of executive
directors was assessed. The Board commenced a formal evaluation of its performance during the Year with this process expected
to conclude during 2020.
Re-appointment of Directors
In accordance with the Articles, having been appointed since the date of the last annual general meeting of the Company, Nicky
Dulieu will retire by rotation and offer herself for reappointment at the AGM to be held on 21 May 2020. In addition, Christopher
Walkinshaw, having last been elected at the 2017 annual general meeting, will retire by rotation in accordance with the Articles
of Association of the Company and offer himself for reappointment at the AGM.
BOARD COMMITTEES
Nomination Committee
The Company has established a Nomination Committee which comprises Richard Parry-Jones (Chair of the Committee), Alan
Ferguson, Nicky Dulieu, Francesca Ecsery, Christopher Walkinshaw and Kathy Jenkins.
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 on a number of occasions during the Year to discuss the appointment
of the new Chair of the Remuneration Committee following the announcement Sarah Dickins planned to step down from the
Board.
Audit Committee
The Company has established an Audit Committee, which comprises Alan Ferguson (Chair of the Committee), Nicky Dulieu,
Francesca Ecsery and Christopher Walkinshaw. Sarah Dickins was a member of the Audit Committee until her resignation from
the Board on 30 June 2019. Further information on the Audit Committee is set out on pages 62 to 65.
Remuneration Committee
The Company has established a Remuneration Committee which comprises Nicky Dulieu (member and Chair of the
Committee from 1 January 2020), Alan Ferguson, Francesca Ecsery and Kathy Jenkins. Sarah Dickins was Chair of the
Remuneration Committee until her resignation from the Board on 30 June 2019. Further information on the Remuneration
Committee is set out on pages 67 to 75.
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 Group also meets with its institutional shareholders regularly.
In light of MCHL’s aggregate shareholding in the Group, on Admission the Group entered into the Relationship Agreement with
MCHL in order to regulate the relationship between MCHL and the Group and enable the Group 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 Group’s AIM Admission Document which is available on the
Group’s website at www.mmhplc.com.
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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
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information system, Phoenix 2;
an organisational structure with defined levels of responsibility;
a forecasting process at each quarter end;
an annual budgeting process which is approved by the Board;
detailed weekly and monthly reporting of performance against budget and the prior year;
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;
an Internal Audit department which monitors compliance of Group processes and procedures and whose programme of
work is overseen by the Audit Committee;
a Compliance team to assess and monitor the Group’s compliance with its regulatory responsibilities with a particular focus
on compliance with FCA and data protection requirements.
•
•
•
•
•
•
•
•
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 38 to 41.
By order of the Board
Stephen Jones
Company Secretary
9 March 2020
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GOVERNANCE
Audit Committee Report
Alan Ferguson
Senior Independent Director and
Chair of the Audit Committee
I am pleased to present my annual report to shareholders as
Chair of the Audit Committee.
Key purpose of the Audit Committee
The Audit Committee provides effective governance of the
appropriateness of the Group’s financial reporting and the
performance of both the internal audit function and the
external auditor. The Audit Committee also supports the Board
in meeting its responsibilities in respect of overseeing the
Group’s internal control systems, business risk management,
and related compliance activities.
Audit Committee Responsibilities
The main responsibilities of the Audit Committee are:
• Monitoring the integrity of the financial statements of the
Group, including the Interim Report & Accounts and the
formal
Annual Report & Accounts, and other
financial
announcements relating
performance;
the Group’s
to
•
•
•
Considering whether the Annual Report & Accounts,
taken as a whole, is fair, balanced and understandable,
and provides the information necessary for shareholders
to assess the Group’s financial position and performance,
business model and strategy.
Reviewing and reporting to the Board on significant
financial reporting issues, estimates, and judgements,
having regard to matters communicated to it by
management and by the external auditor. Details of the
significant accounting
judgements, estimates and
assumptions are set out below and in note 4 to the
consolidated finance statements;
Reviewing the adequacy and effectiveness of the Group’s
internal financial controls and risk management systems;
• Monitoring and reviewing the effectiveness of the internal
audit function and approving the annual plan of work to
be conducted by internal audit function;
•
•
Reviewing the external auditor’s audit plan, nature and
scope of work and overall summary of key issues and
judgements;
Assessing the effectiveness of the external auditor
including the appropriateness and skills of its audit team
and the quality of its services;
62
• Making recommendations to the Board in relation to the
appointment of the external auditor, including verifying the
independence of the external auditor, putting the audit out
to tender and approving any non-audit services to be
provided by the external auditor;
•
Reviewing arrangements
to raise
concerns, in confidence, about possible wrongdoing in
financial reporting or other matters.
for employees
Audit Committee Members and Meetings
The Audit Committee comprises myself, Francesca Ecsery,
Christopher Walkinshaw and Nicky Dulieu (from 1 January
2020). Nicky brings a wealth of knowledge of the retail sector
from her previous executive and current non-executive roles.
With the exception of Christopher Walkinshaw, due to his
position as a nominated director of Marshall of Cambridge
(Holdings) Limited, all members of the Audit Committee are
considered to be independent. Sarah Dickens was a member
of the Audit Committee until 30 June 2019 when she stepped
down from the Board; I would like to thank Sarah very much
for her contribution to the work of the Audit Committee.
The members of the Audit Committee, through their other
business activities, have a gained a wide range of
commercial, financial, and internal control expertise. The
biographies of each member of the Audit Committee is set
out on pages 42 to 43. In particular, I am a Chartered
Accountant with many years’ experience working in finance.
I was the Group Finance Director at Inchcape plc for 12 years,
and have served on the boards of a number of other large
companies throughout my career. I am currently the chair of
the Audit Committees of Johnson Matthey Plc and Croda
International Plc.
It is therefore considered that the Audit Committee has the
necessary skills and experience to effectively fulfil its
responsibilities.
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 the circumstances require. The
scheduled meetings coincide with the key events in the
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During the year ended 31 December 2019 the Audit
Committee met 4 times. Each member’s attendance at those
meetings is set out below:
Committee
Member
Role
Attendance
record
Alan Ferguson
Chair of the Audit Committee
Sarah Dickins*
Non-Executive Director
Francesca Ecsery Non-Executive Director
Christopher
Walkinshaw
Non-Executive Director
4/4
2/2
4/4
4/4
* Sarah Dickins resigned from the Committee on 30 June 2019.
Following the year end and up to the date of this report there
has been one meeting of the Audit Committee which was
attended by all members of the Audit Committee.
Audit Committee meetings are also attended, at the discretion
and invitation of the chair of the Audit Committee, by the
Chairman, a Non-Executive Director (not on the Committee),
Executive Directors, the Head of Internal Audit, Head of Group
Finance, and
the Company’s
representatives of
external auditor.
Activities During the Period
During the period between the last Annual Report & Accounts
and the date of this report, the Audit Committee has:
•
•
•
•
•
reviewed the key accounting judgements and estimates
and going concern assessment in connection with the
Annual Report & Accounts and the Interim Report &
Accounts;
reviewed the adoption of IFRS 16 ‘Leases’ and the impact
upon and disclosures made in the Annual Report &
Accounts and the Interim Report & Accounts;
reviewed and, approved the external auditor’s audit plan,
including
fee and statement of
independence;
the proposed
reviewed non-audit fees paid to the external auditor in the
year ended 31 December 2019;
reviewed and approved the proposal that certain of the
Group subsidiary companies be exempt from audit under
the provisions of S479A of the Companies Act 2006;
•
•
•
•
•
approved the programme of work for internal audit and
considered the findings and recommendations arising
from the internal audits conducted during the year ended
31 December 2019 and up to the date of this report;
considered the Group’s risk management process and its
effectiveness;
reviewed the Company’s arrangements to enable
employees to raise confidentially concerns about possible
improprieties. These include the use of an independent
organisation
‘whistle-
blowers’ hotline.
to provide a confidential
Reviewed the published Payment and Practices Report
and discussed some action plans identified to improve
some of the statistics
Reviewed and agreed the Tax Strategy, which can be
found at https://www.mmhplc.com/investors/corporate-
governance
In addition to receiving written reports from the auditor and
from management, the Audit Committee has also had private
meetings with the external auditor. These meetings provide
the opportunity for open discussion and feedback on the audit
process, the responsiveness of management, and the
effectiveness of both internal and external audit teams.
In addition, as chair of the Audit Committee, I also meet with
the external and internal auditors separately to the formal
meetings.
Significant issues considered by the Audit Committee
during the year
The Audit Committee considered the significant matters set
out below during the course of the financial year and as part
of the finalisation of the Annual Report & Accounts. In all
cases, papers were presented to the Audit Committee by
management, setting out the relevant facts, material
accounting estimates, and the judgements associated with
each item. The external auditor also provided a paper setting
out its analysis and conclusions on each area of judgement
amongst other matters.
The Audit Committee discussed the papers with management
and sought the views of the external auditor on each matter.
For each area of judgement, the Audit Committee concurred
with the treatment adopted and any relevant disclosure
presented in the Annual Report & Accounts.
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Issue Considered Audit Committee’s Review and Conclusions
Assessment of the carrying value of goodwill
and intangible assets and the carrying value of
investments
As disclosed in Note 14 ‘Goodwill and Other
Intangible Assets’ to the financial statements, the
Group has goodwill and indefinite-life intangible
assets arising from acquisitions of businesses
totalling £118.0m.
These assets are assessed for impairment at least
annually or more frequently where there are
indicators of impairment.
The valuation and impairment review of goodwill and
acquisition intangible assets is assessed for each
individual cash-generating unit (CGU) and involves
comparing the carrying value of the asset with its
recoverable amount (the higher of value-in-use and
fair value less costs to sell).
Value-in-use is determined with reference to
projected future cash flows, discounted at an
appropriate rate.
Both the cash flows and the discount rate involve a
significant degree of estimation, uncertainty, as well
as judgemental assessments of the future brand
performance of individual vehicle manufacturers.
Valuation of inventory
As disclosed in Note 18 the Group holds inventory
totalling £470.7m.
At each reporting period the Group assesses the
value of the inventory. This assessment requires the
application of judgement and experience to assess
and make reasonable assumptions to determine the
net realisable value of the inventory held by
the Group.
Estimates and judgement related to business
combinations
During the year, as set out in Note 14, the Group has
completed
the acquisition of a number of
Dealerships.
the
As required by IFRS 3 ‘Business Combinations’, the
Group has assessed
the
consideration paid and the assets and liabilities
the
acquired. Such an assessment
evaluation of intangible assets which were not
previously recognised by the acquired entities.
fair value of
includes
The Audit Committee has considered papers prepared by management
detailing the assumptions and methodology applied to assess the carrying
value of goodwill.
The assumptions underpinning the review of the carrying value of goodwill
were considered by the Audit Committee, in particular those relating to the
BMW franchise where there were indicators of impairment.
The cash flow forecasts used in the review were derived from the most
recent budgets which have been reviewed and approved by the Board
and the long-term business plans of the Group.
The Audit Committee concurs with the assessment made by management
in respect of this matter and with the associated additional disclosures
around the BMW franchise.
Furthermore the Audit Committee concurs with the assessment made by
management in respect of the carrying value of investments in subsidiaries
within the company accounts of Marshall Motor Holdings plc.
The Audit Committee has considered papers prepared by management
detailing the basis of valuation of the Group inventory, in the context of
external industry data, the age and composition of the inventory, the
Group’s experience of the realisable value of such inventory, and the
consistency of the assumptions applied.
The Audit Committee concurs with the assessment made by management
in respect of this matter.
The Audit Committee has considered papers prepared by management
detailing the process, assumptions, and methodology applied to assess
the fair value of the assets acquired. It also reviewed these matters with
the auditors.
The Audit Committee concurs with the assessment made by management
in respect of these matters.
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Issue Considered Audit Committee’s Review and Conclusions
The Audit Committee has considered presentation of these additional
measures in the context of the guidance issued by the FRC in relation to
the use of APMs, challenge from the external auditor, and the requirement
that such measures provide meaningful insight for shareholders into the
results and financial position of the Group.
The Audit Committee concurs with the judgements made by management
in respect of the presentation of the APMs.
Furthermore, the Audit Committee is comfortable that clear and
meaningful descriptions have been provided for the APMs used, that the
relationship between these measures and the IFRS measures is clearly
explained, that the IFRS measures are afforded equal prominence to the
APMs, and that the APMs support a user’s understanding of the financial
statements.
The Audit Committee has considered the work of the external and internal
auditors in this area, with particular regard to sales cut-off and the value
of volume rebates.
The Audit Committee concurs with the assessment made by management
that the Group’s revenue as presented is materially correct.
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Presentation of Alternative Performance
Measures (“APMs”)
The Company’s performance measures include
some measures which are not defined or specified
under IFRS, but which management consider are
necessary for a user of the financial statements to
obtain a full understanding of the performance of the
Group.
A reconciliation of the APMs to the IFRS measures
is provided
the Appendix – Alternative
Performance Measures, on pages 156 to 157.
in
Revenue recognition
The Group’s core revenue streams are new and used
car sales, parts sales and servicing. The Group also
derives income from volume incentive arrangements
with suppliers. An analysis of the Group’s revenue is
presented in Note 5 ‘Segmental Information’.
Given the business focus on sales targets and
incentives and the complexity and varied nature of
the supplier incentive schemes, together with the
materiality of these revenues for the Group, revenue
recognition represents an area of focus for the Audit
Committee.
Recognition and valuation of provisions
As disclosed in Note 24 ‘Provisions’ to the financial
statements, the Group has provisions totalling £3.4m.
The Audit Committee has considered papers prepared by management
setting out the basis of the provisions included in the Annual Report
& Accounts.
Provisions are, by their nature, judgemental and
involve estimates of likely outcome and timing of
future events.
Having regard to these reports and the findings of the external auditor the
Audit Committee concurs with the judgements and estimates made by
management in arriving at the provision amounts included in the Annual
Report & Accounts.
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External audit
Each year the Audit Committee reviews the performance of
the external auditor in respect of audit related services and
non-audit services and is committed to ensuring the
independence, effectiveness and objectivity of the external
auditor.
The fees paid to the external auditor for non-audit services
during the year ended 31 December 2019 totalled £36,000
and related solely to the review of the Group’s Interim Report
and Accounts.
The Audit Committee has monitored the conduct and
effectiveness of the external auditor through its assessment of:
•
•
•
The experience, expertise, and perceptiveness of the
auditor;
The planning and execution of the agreed audit plan and
the quality of audit reports presented; and
the auditor
The conduct of
Committee’s experience of interaction with the auditor.
including
the Audit
Nigel Meredith is the lead partner on the audit for the year
ended 31 December 2019 and was the lead partner in the
previous year.
Following this review the Committee concluded that the audit
was effective.
External audit tender
EY have been the Group’s auditor for over 30 years, and whilst
MMH is not subject to mandatory rotation rules, the Committee
felt that there were benefits to putting the audit out to tender.
As a result, the Group has commenced a competitive tender
process for the provision of external audit services to the
Group. The tender process is being led by myself, supported
by the Committee and management. After discussion,
three firms have been asked to tender and the Audit
Committee expect to be in a position to recommend a
preferred firm to the Board during April 2020, for ratification by
shareholders at the May Annual General Meeting.
Internal audit
At each meeting the Committee receives a report from the
Head of Internal Audit covering the work carried out during the
period detailing the audit scores and noting the actions being
taken to rectify weaknesses identified. The report also covers
other work carried out such as investigations, reviews of new
software programmes implemented and any deep dives into
areas such as warranty work.
During the year it was recognised that given the increased size
and complexity of the business that a new role be created and
as a result a Head of Internal Audit and Risk was recruited and
she starts in March. This will allow for my focus on risk areas
across the business. The Committee was pleased that the
current Head of Internal Audit has agreed to stay in role.
I will be available at the Annual General Meeting to respond
to any questions shareholders may raise on the Committee’s
activities in the year.
Alan Ferguson
Chair of the Audit Committee
9 March 2020
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Remuneration Committee Report
Nicky Dulieu
Non-Executive Director and
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 Year and an overview of our remuneration policy.
I joined the Board and was appointed as Chair of the
Committee on 1 January 2020. I would like to thank Sarah
Dickins and, following her retirement from the Board on
30 June 2019, Richard Parry-Jones, for their stewardship of
the Committee during the Year.
Remuneration policy
The remuneration policy and the Company’s Performance
Share Plan (“PSP”) has been in place since the Company’s
Admission in 2015. Accordingly, we have not included the
current remuneration policy in this Directors’ Remuneration
Report, however, a copy is available in our 2018 Directors’
Remuneration Report on our website.
During the course of 2020, the Committee intends to
undertake a comprehensive review of the remuneration policy
to ensure it supports the achievement of the Company’s short-
term financial goals and longer-term strategic objectives,
including transformational corporate activity. The aim of this
review is to ensure our remuneration policy and incentive
arrangements:
•
•
•
are competitive and as such helps us to recruit, motivate
and retain senior leaders of the high calibre required to
run the business successfully;
align the interests of the Executive Directors, senior
management and employees with those of shareholders
and wider stakeholders, and to ensure appropriate
alignment with the Company’s values and strategic goals;
and
adhere to the principles of good corporate governance,
support good risk management practice and promote
long term sustainable Company performance.
As an interim step, ahead of a full policy review, the Committee
has reviewed and simplified the operation of the PSP for
awards granted in 2019. A consistent approach is being
adopted for the 2017 and 2018 PSP awards as well as the
PSP awards to be granted in 2020. Further details are set out
below.
and
this, and whilst
In determining remuneration packages and arrangements the
Committee adopts the principles set out in the QCA Corporate
Governance Code
practice.
Notwithstanding
the UK Corporate
Governance Code (the “UK Code”) does not apply to the
Company, the Committee recognise the changes to the UK
Code and during 2020 will reflect on how these changes may
be applied to the Company approach to remuneration.
evolving
best
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Key Committee decisions and remuneration outcomes
for the period to 31 December 2019
As outlined in the Operating Review, the Company has
continued its excellent track record of performance in 2019.
Financial highlights include a fifth consecutive year of like-for-
like revenue growth since IPO of 2.2% to £2.2 billion and
continued out-performance of the market in new and used
cars sales. Given the challenging market conditions, the Board
considers underlying PBT of £22.1m for the Year (2018
(restated): £24.7m) to be a strong result.
Annual bonus opportunity for the Executive Directors during
2019 was based on the achievement of underlying PBT
targets with bonuses of 71.17% of maximum awarded to both
the Chief Executive and Chief Financial Officer in respect of
performance in the year ended 31 December 2019.
During the Year, the Committee determined the vesting level
for PSP awards granted in 2016 (“2016 Awards”) taking into
account a range of factors including:
•
•
•
the impact of the Ridgeway acquisition in 2016 and the
disposal of Marshall Leasing in 2017 which fundamentally
changed the size and shape of the business and required
the Committee to make difficult judgments in order to
adjust the performance conditions attached to the 2016
Awards;
the Company’s strong financial performance over the
performance period compared to that of its competitors,
many of which had issued profit warnings and/or
performance downgrades in that period, it being also
noted that the SMMT forecasts set in 2016 for the new
car market in 2017 and 2018 were missed by the industry
as the market declined faster than expected; and
the effectiveness of
that
the Company’s overall
remuneration policy to attract, retain and motivate high
calibre senior management focused on the delivery of the
Company’s strategic and business objectives was, in
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GOVERNANCE
any market deterioration, the Committee’s current intention is
to recommend further additional discretionary awards for the
2017 and 2018 PSP awards on the same basis as that made
for the 2016 Awards, such that the overall vesting levels are
at least 50% of maximum award.
Key remuneration decisions for the year to 31
December 2020
Having reviewed the base salary for the Chief Executive
Officer and the Chief Financial Officer in the context of
increases for the wider workforce, the Committee has
approved an increase of 2% with effect from 1 January 2020.
The maximum annual bonus potential for 2020 will be 125%
of salary for the CEO and 100% of salary for the CFO based
on PBT in line with the stretching business plan.
The Committee intends to make awards in 2020 under the
PSP. In line with the approach adopted in 2019, the 2020 PSP
awards will vest dependent upon continued employment and
subject to the Committee being satisfied that there has been
no material deterioration in the Company's performance which
significantly departs from any market deterioration. For 2020,
the maximum PSP award will be 75% of salary for the Chief
Executive Officer and 56.25% of salary for the Chief Financial
Officer. This equates to 50% of 150% of salary for the Chief
Executive Officer and 50% of 112.5% of salary for the Chief
Financial Officer and reflects the fact that these awards are
not subject to specific financial performance conditions. Any
shares awarded to Executive Directors that vest under the
2020 PSP Award must be retained for a further year before
they can be sold.
Conclusion
We remain committed to a responsible approach to executive
pay. Overall, given the Company’s performance over the Year
and over the three-year period ended 31 December 2019 we
believe that the remuneration of the executive directors and
wider workforce in respect of 2019 continues to reflect our
success in the delivery of our strategy and the drive for
profitable and sustainable
for our
shareholders.
long-term growth
Nicky Dulieu
Chair of Remuneration Committee
9 March 2020
large part, dependent on the successful operation on the
PSP and the ultimate vesting levels in light of the financial
performance of the Company.
Accordingly, the Committee recommended an overall vesting
level of 85.5% of the maximum award. This comprised a
31.09% vesting of the maximum 2016 Award and an
additional discretionary award equal to 54.41% of the
maximum 2016 Award. The discretionary award was satisfied
by the transfer of market-purchased shares by the Company’s
Employee Benefit Trust with those further shares being subject
to the same 12 month holding period as the shares vesting
under the 2016 Awards.
As reported last year, Mark Raban, who stepped down as
Chief Financial Officer in January 2019, received a pro rata
entitlement of the 2016 Awards. He did not participate in the
discretionary award. Mark’s 2016 Awards were exercised in
December 2019 and were subsequently cash-settled based
on the Company’s share price on 31 December 2019.
As outlined above, the Committee has reviewed and simplified
the operation of the PSP for awards granted in 2019
recognising the challenge of setting robust long term targets
against the backdrop of a cyclical new car market and the
need to ensure that awards under the PSP are motivational
and support the retention of key members of the management
team. The Committee also
into account best
remuneration practice with regard to the award of restricted
stock and that long term incentives should reward positive
Company performance and be aligned to long term share
price growth and shareholder value creation.
took
In November 2019, the Executive Directors received awards
(“2019 Awards”) under the PSP. The vesting date of the 2019
Awards will be 28 November 2022, being the third anniversary
of the award date. Shares acquired will then be subject to a
holding period until the announcement by the Company of its
2022 annual results.
in
The 2019 Awards are subject to the rules of the PSP and will
vest dependent upon continued employment and subject to
the Committee being satisfied that there has been no material
deterioration
the Company's performance which
significantly departs from any market deterioration. The level
of awards granted in 2019 reflect the fact that they are not
subject to specific financial performance conditions. Awards
were granted at levels equal to 50% of 150% of salary for the
Chief Executive Officer and 50% of 112.5% of salary for the
Chief Financial Officer.
A consistent approach is being adopted for the 2017 and 2018
PSP awards as well as the PSP awards to be granted in 2020.
Therefore, subject to there being no material deterioration in
the Company's performance which significantly departs from
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Directors’ Remuneration Report
•
ensuring the Committee has access to independent
remuneration advice
for
appointing a suitably qualified adviser.
responsibility
including
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
appointed Deloitte LLP (“Deloitte”) to provide independent
remuneration advice to the Committee in place of Willis
Towers Watson. Deloitte is a founder member of the
Remuneration Consultants’ Code of Conduct, and, as such,
voluntarily operates under its Code of Conduct in relation to
executive remuneration matters in the UK.
The Committee is satisfied that the advice that it receives is
objective and independent.
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REMUNERATION POLICY
Our remuneration policy has been in place since the
Company’s Admission in 2015 and is set out in full on pages
54 to 57 of the 2018 Annual Report and Accounts which are
available
at
the
www.mmhplc.com/investors/results-centre.
Company’s
website
on
REMUNERATION GOVERNANCE
Throughout the Year, the Committee comprised three
independent Non-Executive Directors, alongside Kathy
Jenkins who is an appointed representative of MCHL. Sarah
Dickins chaired the Committee until her retirement from the
Board on 30 June 2019. Thereafter, Richard Parry-Jones
chaired the Committee until 31 December 2019 on an interim
basis pending the appointment of Nicky Dulieu on 1 January
2020.
The table below sets out each member’s attendance record
at Committee meetings during the Year:
Committee
Member
Sarah Dickins
Role
Attendance
record
Chair of the Committee
(resigned on 30 June 2019)
Richard Parry Jones Chair of the Committee
(from 30 June 2019)
Alan Ferguson
Non-Executive Director
Francesca Ecsery
Non-Executive Director
Kathy Jenkins
Non-Executive Director
3/3
2/2
5/5
5/5
5/5
The Chair 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 and each of the Executive
Directors including pension rights and any compensation
payments;
oversight of the remuneration packages for certain senior
management in the Group;
reviewing wider workforce remuneration and related
policies;
recommending and overseeing the implementation of
share related schemes, including scheme grants; and
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REMUNERATION POLICY (continued)
We have set out below those parts of the remuneration policy which we believe shareholders will find most helpful together with
a summary of how the remuneration policy will be implemented in 2020.
Element
Basic Salary.
Annual Bonus
Operation
Maximum opportunity
Performance metrics
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 maximum bonus is 125%
of base salary in respect of the
Chief Executive Officer and
100% in respect of the Chief
Financial Officer.
Having reviewed the base
salary for the Chief Executive
Officer and the Chief Financial
the context of
Officer
in
increases
the wider
for
workforce, the Committee has
approved an increase of 2%
with effect from 1 January
2020.
2019 2020
salary salary
(£k) (£k)
D Gupta 425.3 433.8
R Blumberger 260.6 265.8
The maximum annual bonus
potential for 2020 will be
125% of salary for the Chief
Executive Officer and 100% of
salary for the Chief Financial
Officer based on PBT in line
with the stretching business
plan.
Normally 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 similar
companies. When selecting
comparators, the Committee
has regard to, inter alia, the
Group’s revenue, profitability,
market worth and business
sector.
Performance
is normally
measured over one year,
based on financial targets.
The Committee sets threshold
and maximum targets on an
annual basis. No bonus is
payable where performance is
below the threshold.
Paid in cash after the end of
the financial year to which it
relates.
Payment of any bonus is
subject
the overriding
discretion of the Committee.
to
Recovery and withholding
provisions apply.
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REMUNERATION POLICY (continued)
Future Policy Table (continued)
Element
Operation
Maximum opportunity
Performance metrics
Long term incentives
Grant of £nil cost options
under
the PSP. Options
normally vest 3 years from
grant
the
achievement of performance
conditions and continued
employment.
subject
to
A 12 months post-vesting
holding period applies for
awards made from 2016.
A dividend equivalent applies.
Recovery and withholding
provisions apply.
150% of base salary (up to
200% of base salary
in
exceptional circumstances) in
any financial year.
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The 2020 PSP awards will
vest
upon
dependent
continued employment and
subject to the Remuneration
Committee being satisfied that
there has been no material
the
deterioration
Company's
performance
which significantly departs
from any market deterioration.
in
The level of awards to be
granted in 2020 reflect the fact
that they are not subject to
specific financial performance
conditions.
For 2020, the maximum PSP
award will be 75% of salary for
the Chief Executive Officer
and 56.25% of salary for the
Chief Financial Officer. This
equates to 50% of 150% of
salary for the Chief Executive
Officer and 50% of 112.5% of
salary for the Chief Financial
Officer.
Share ownership guidelines
are
Executive Directors
expected to retain 50% of the
net of tax vested PSP shares
until the guideline level is met.
At least 100% of base salary
for Executive Directors.
No changes proposed for
2020.
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REMUNERATION POLICY (continued)
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
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 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.
Outside appointments
Other directorships have been permitted with prior agreement:
– Daksh Gupta is a director of BEN – Motor and Allied Trades Benevolent Fund.
Non-executive directors
All Non-Executives are subject to re-election every three years. No compensation
payable if 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 Date of appointment Date of resignation as a director
D Gupta 1 January 2009 –
M Raban 2 April 2015 2 January 2019
A Ferguson 11 March 2015 –
S Dickins 11 March 2015 30 June 2019
F Ecsery 25 March 2015 –
C Walkinshaw 12 July 2016 –
K Jenkins 23 May 2018 –
R Parry-Jones 1 January 2019 –
R Blumberger 2 January 2019 –
N Dulieu 1 January 2020 –
Copies of Directors’ service contracts and letters of appointment are available for inspection at the Company’s registered office.
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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 2019.
Basic Annual Long term
salary Fees Benefits Pension bonuses incentives3 Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000
Executive Directors
D Gupta 425.3 - 18.7 68.0 378.4 983.9 1,874.3
R Blumberger 260.6 - 4.4 39.2 185.5 - 489.7
Total 685.9 - 23.1 107.2 563.9 983.9 2,364.0
Non-Executive Directors
R Parry-Jones - 135.5 - - - - 135.5
A Ferguson - 60.3 - - - - 60.3
S Dickins1 - 25.2 - - - - 25.2
F Ecsery - 42.8 - - - - 42.8
C Walkinshaw2 - 40.0 - - - - 40.0
K Jenkins2 - 40.0 - - - - 40.0
Total - 343.8 - - - - 343.8
Aggregate directors
emoluments 685.9 343.8 23.1 107.2 563.9 983.9 2,707.8
The benefits above include items such as medical cover, life assurance premiums and income protection insurance.
1. Sarah Dickins resigned from the Board on 30 June 2019.
2. Christopher Walkinshaw and Kathy Jenkins are nominated directors of Marshall of Cambridge (Holdings) Ltd with the fee
payable in respect of their undertakings as a Non-Executive Director payable to Marshall of Cambridge (Holdings) Ltd.
3. Market value of share options exercised during the Year (based on the Company’s share price on the date of exercise) plus
the value of dividend equivalents on those options (which were settled in cash).
Payments to past directors
Mark Raban resigned as a Director on 2 January 2019 but remained employed by the Company until 2 July 2019 whilst serving
his notice period. Salary (£134k), pension (£11k) and benefits (£1.7k) were paid in the ordinary manner during this notice period.
As reported last year, taking into account Mark’s contribution during his tenure, the Committee exercised its discretion to permit
the final tranche’ of his 2015 IPO Performance Awards to vest on 2 April 2019. In addition, and subject to pro-rating for time, his
2016 PSP award vested at 31.09% of maximum, was exercised on 31 December 2019 and was cash-settled by the Company
based on the Company’s share price on the date of exercise. The value at exercise was £307.5k. All other PSP awards made to
Mark have lapsed.
LTIP awards
Details of LTIP awards granted during the year are as follows:
Market
value
Earliest on date Number of
Date of exercise Exercise of grant options
Scheme grant date price (pence) grants
D Gupta 2019 LTIP Award 28 Nov 19 28 Nov 22 £Nil 142.5p 223,842
R Blumberger 2019 LTIP Award 28 Nov 19 28 Nov 22 £Nil 142.5p 102,632
Awards vest dependent upon continued employment and subject to the Remuneration Committee being satisfied that there
has been no material deterioration in the Company's performance which significantly departs from any market deterioration.
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GOVERNANCE
The movement in directors’ LTIP Awards during the year are as follows:
Number Number Number
Number at granted exercised lapsed Number at
1 January during during during 31 December
2019 the year the year the year 2019
D Gupta 1,212,522 223,842 411,031 167,257 858,076
R Blumberger – 102,632 – – 102,632
M Raban1 237,633 – 166,376 71,257 –
1 Mark Raban resigned as a director on 2 January 2019.
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 2019 and their connected persons had interests in the issued share capital of the
Company as at 31 December 2019 as follows:
LTIP Interests1
Number of Number of
Number of ordinary ordinary
ordinary shares Market shares Shareholding
shares held acquired on Purchases Disposals beneficially Total as a
beneficially exercise during during held Vested but Interest percentage of Guideline
as at 31/12/18 of options the year the year at 31/12/19 Unvested unexercised in shares base salary2 met?
R Parry-Jones - - - - - - - - n/a n/a
D. Gupta 1,163,272 287,839 - - 1,451,111 858,076 - 2,309,187 534% Yes
R Blumberger - - - - - 102,632 102,632 0% in progress
A Ferguson 58,557 - - - 58,557 - - 58,557 n/a n/a
F Ecsery 2,013 - - - 2,013 - - 2,013 n/a n/a
K Jenkins - - - - - - - - n/a n/a
C Walkinshaw - - - - - - - - n/a n/a
1
These include the 2017, 2018 and 2019 LTIP Awards.
The 2017 and 2018 LTIP Awards vest subject to growth in the Company’s underlying basic Earnings Per Share (EPS). 25%
of the award vests for achieving growth in underlying basic EPS of, in the case of the 2017 LTIP Awards, CPI plus 1.0% per
annum and in the case of the 2018 LTIP Awards, 1.3% per annum, increasing to 100% vesting for achieving growth of CPI
plus 5.0% and 6.0% per annum respectively over a three year performance period. As set out in the annual statement from
the Remuneration Committee Chair, subject to there being no material deterioration in the Company's performance which
significantly departs from any market deterioration, the Committee’s current intention is to recommend discretionary awards
for the 2017 and 2018 PSP awards on the same basis as that made for the 2016 Awards, such that the overall vesting levels
are at least 50% of maximum award.
The 2019 LTIP Awards vest dependent upon continued employment and subject to the Remuneration Committee being
satisfied that there has been no material deterioration in the Company's performance over the 3 year vesting period which
significantly departs from any market deterioration.
A holding period applies to each of the 2017, 2018 and 2019 LTIP Awards.
2 Shareholding as a percentage of salary is calculated using the number of shares beneficially held, base salary and the
Company’s share price, all as at 31 December 2019.
The middle market price of the shares as at 31 December 2019 was 156.5p and the range in respect of the 12 month period
ending 31 December 2019 was 135.0p to 176.0p.
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Implementation of remuneration policy for the year ending 31 December 2020
The annual salaries and fees to be paid to directors in the year ending 31 December 2020 are set out below, together with any
increase expressed as a percentage.
31 December 2020 31 December 2019 Increase
Executive Directors £'000 £'000 %
D Gupta 433.8 425.3 2.0
R Blumberger 265.8 260.6 2.0
Non-executive Directors £'000 £'000 %
R Parry-Jones 138.2 135.5 2.0
A Ferguson 63.7 60.3 5.6
N Dulieu1 53.7 - -
F Ecsery 43.7 42.8 2.0
C Walkinshaw2 40.0 40.0 -
K Jenkins2 40.0 40.0 -
1 Nicky Dulieu was appointed on 1 January 2020.
2 Christopher Walkinshaw and Kathryn Jenkins are nominated directors of Marshall of Cambridge (Holdings) Ltd with the fee
payable in respect of their undertakings as a Non-Executive Director payable to Marshall of Cambridge (Holdings) Ltd.
The maximum potential annual bonus for the year ending 31 December 2020 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 2020. In line with the approach adopted in 2019, the 2020 PSP awards
will vest dependent upon continued employment and subject to the Committee being satisfied that there has been no material
deterioration in the Company's performance which significantly departs from any market deterioration. For 2020, the maximum
PSP award will be 75% of salary for the Chief Executive Officer and 56.25% of salary for the Chief Financial Officer. This equates
to 50% of 150% of salary for the Chief Executive Officer and 50% of 112.5% of salary for the Chief Financial Officer and reflects
the fact that these awards are not subject to specific financial performance conditions. Any shares awarded to Executive Directors
that vest under the 2020 PSP Award must be retained for a further year before they can be sold.
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By order of the Board
Nicky Dulieu
Chair of Remuneration Committee
9 March 2020
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GOVERNANCE
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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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Independent Auditor’s 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 2019 which comprise:
Group Parent company
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Equity Parent Company Statement of Changes in Equity
Consolidated Statement of Financial Position Parent Company Statement of Financial Position
Consolidated Cash Flow Statement
Related notes 1 to 33 to the consolidated financial Related notes 1 to 15 to the Company financial statements
statements, including a summary of significant including a summary of significant accounting policies
accounting policies
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, including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”
(United Kingdom Generally Accepted Accounting Practice).
Opinion
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 2019 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; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are described further in the Auditor’s responsibilities for the audit of the financial statements
section of our report below. We are independent of the group and parent company in accordance with the ethical requirements
that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed
entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
•
•
the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant
doubt about the group’s or the parent company’s ability to continue to adopt the going concern basis of accounting for a
period of at least twelve months from the date when the financial statements are authorised for issue.
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FINANCIAL STATEMENTS
Overview of our audit approach
Materiality • Overall group materiality of £1.10m (2018: £1.28m) which represents approximately 5% (2018: 5%)
of Underlying Profit before Tax.
• Any audit differences in excess of £55k (2018: £64k) are reported to the audit committee.
Audit scope • We performed an audit of the complete financial information of the Group utilising consolidated
records which include all component transactions and balances with no scoping required.
Key audit matters • Valuation of inventory
• Assessment of the carrying value of goodwill and other intangible assets
• Revenue recognition, including manufacturer’s rebates and bonuses
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on
the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence
the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent
of our audit procedures.
We determined materiality for the Group to be £1.1 million (2018: £1.28 million), which is approximately 5% (2018: 5%) of
Underlying Profit before Tax. The rationale for using Underlying Profit before Tax as our basis for materiality is that it provides a
consistent year on year approach, excluding gains and losses from transactions which are considered one off in nature by
management and that are unlikely to reoccur, which can be significant compared to underlying trading. We review the assessment
of these items before inclusion in our materiality calculation. There were no changes in the approach year on year.
We determined materiality for the Parent Company to be £1.1 million. This is capped at group materiality.
See breakdown below for details of adjustments made.
• Profit before tax - £19.7m (2018 as restated: £18.6m)
Starting
basis
• Non - Underlying Items - (£2.4m) (2018 as restated: (£6.1m))
• Revaluation and disposal of investment property - £0.5m
• Acquisition costs - (£0.8m)
• Net recognition of restructuring provisions - (£2.1m)
Adjustments
• Underlying Profit before Tax - £22.1m (2018 as restated: £24.7m)
• Materiality of £1.1m (2018: £1.28m)
Materiality
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
As part of our audit planning, we reported to the audit committee on 25 November 2019, an initial materiality calculation of £1.1m.
This amount was based on the estimated annualised profit before tax.
There was no change to our initial assessment during the course of the audit.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low
level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement
was that performance materiality should be set at 50% (2018: 50%) of our planning materiality, namely £550k (2018: £641k).
In the prior year audit work at component locations for the purpose of obtaining audit coverage over significant financial statement
accounts was undertaken based on a percentage of total performance materiality. The performance materiality set for each
component was based on the relative scale and risk of the component to the Group as a whole and our assessment of the risk
of misstatement at that component. In the current year, all component transactions and balances were included in consolidated
records for each significant account. Therefore, there was no need to allocate performance materiality to components in 2019 as
all transactions and balances for all components were subject to testing using consolidated Group records. In 2018 the range
allocated to components was 30% to 100% of total performance materiality or £192k to £641k.
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £55k (2018: £64k),
which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on
qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light
of other relevant qualitative considerations in forming our opinion.
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determines our audit
scope for each component within the Group. Taken together, this enables us to form an opinion on the consolidated financial
statements. We take into account size, risk profile, the organisation of the Group, the effectiveness of Group-wide controls and
changes in the business environment when assessing the level of work to be performed at each component.
In assessing the risk of material misstatement to the Group financial statements, we performed an audit of the complete financial
information of the Group, using consolidated accounting records that incorporated all the transactions and balances of all
components for the purposes of our audit sampling. In 2018 we performed scoping of entities due to the requirement for statutory
audits of the trading subsidiaries. A parental guarantee has been applied over most of these statutory entities in the current year,
and as such the Group has been audited to Group materiality using the consolidated accounting records with no scoping required.
In 2019 the Group had 35 components at the year-end whose transactions and balances were included in the consolidated
accounting records. Each component’s financial information could be selected for the purpose of representative sampling and
key item testing.
In 2018 the group had 35 components. Of these 14 components, which contributed 94% of the Underlying Profit before Tax,
92% of External Revenue and 97% of Total Net Assets, were subject to full scope audits. The remaining 21 components that
together represented 6% of the Group’s Underlying Profit before Tax, none individually greater than 2% of Underlying Profit before
tax were identified as review scope components. For these components, we performed analytical review and testing of
consolidation journals and intercompany eliminations to respond to any potential risks of material misstatement to the Group
financial statements.
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FINANCIAL STATEMENTS
Changes from the prior year
All significant account reconciliations are performed at a consolidated level, this allows for audit testing to be performed on
complete records incorporating the transactions of all Group components. We have utilised these listings in 2019 and no scoping
was required for the purpose of the audit of the consolidated financial statements.
Involvement with component teams
All audit work performed for the purposes of the audit was undertaken by the Group audit team.
Our assessment of the risks of material misstatement
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant risks of material misstatement (whether or not due to fraud) that
we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources
in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the
financial statements as a whole, and in expressing our opinion thereon. We do not provide a separate opinion on these matters.
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Key observations
communicated to the
Risk Our response to the risk Audit Committee
Our audit procedures indicate
that the provision is consistent
with prior years and that it is
reasonable
based
assumptions
the
underlying exposures in the UK
used car market.
regarding
on
We consider the provision to be
within an appropriate range.
Valuation of inventory:
Gross inventory – £480.1 million,
(2018: £393.7 million);
Inventory provision – £9.4 million,
(2018: £9.7 million)
The group has a significant value of new and
used vehicle inventory.
Vehicles have the potential to experience
significant value declines in short time
periods.
Value volatility is a response to market
conditions impacting demand and is deemed
a higher risk in relation to used, demonstration
and pre-reg vehicle inventory.
The valuation of vehicle inventory is subject
to significant judgement. Therefore, there is a
risk that inventory is misstated.
Refer to Accounting policies (page 91);
Significant accounting
judgements and
estimates (page 109) and Note 18 of the
Consolidated
Statements
Financial
(page 126).
We understood the method applied by
management in performing its inventory
provisioning calculation and walked through
the controls over the process.
We recalculated management’s provision
and agreed vehicle prices included through
to third party independent market values
(CAP). This provides a base value for all
vehicles at the year end date. This is
compared to the current carrying value of the
vehicles in order to calculate an estimated
provision figure for used vehicles. Higher
provisions are made against demonstration
and pre-reg vehicles using historic
experience adjusted for current market
conditions.
We performed Analytical Review of the level
of provision held to identify any significant
provisions on a particular vehicle type or
brand in the portfolio. A particular focus was
given in this area to used, demonstration and
pre-reg vehicles.
We evaluated the accuracy of the provision
in prior periods to assess management’s long
term forecasting ability and compared the
post year end utilisation of the provision in the
current year to the comparable period in the
prior year.
We performed audit procedures over this risk
area in all accounts, which covered 100% of
the risk amount.
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FINANCIAL STATEMENTS
Key observations
communicated to the
Risk Our response to the risk Audit Committee
Assessment of the carrying value of
goodwill and other intangible assets:
£119.3 million, (2018: £112.2 million)
The group has a significant value of goodwill
that has arisen from acquisitions as well as
other intangible assets in the form of franchise
agreements.
Goodwill is allocated to cash generating units
(‘CGUs’) grouped by manufacturer brand.
A number of brands have experienced
challenging trading conditions driving poor
financial performance.
There is a risk that these CGUs may not
achieve the anticipated financial performance
to support their carrying value, leading to an
that has not been
impairment charge
recognised by management.
is
required
judgement
Significant
in
forecasting the future cash flows of each CGU
the
the current conditions
due
automotive market, together with the rate at
which they are discounted.
to
in
Refer to Accounting policies (page 91);
judgements and
Significant accounting
estimates (page 109) and Note 14 of the
Consolidated
Statements
Financial
(page 117).
We are satisfied that group
goodwill and intangible assets
have been correctly assessed
for impairment, based on an
appropriate allocation to CGU’s.
The projected cash
flows
appear reasonable and no
impairment charge has been
recorded.
Management has performed
their own sensitivities which are
described appropriately in the
goodwill and intangibles note to
the group financial statements,
in accordance with IAS 36.
We note specific reference in
Note 14 to the headroom on the
franchise
and
goodwill
agreements balance of £9.8m
associated with the BMW/Mini
brand. The value in use of these
intangibles is heavily dependent
on the future actions of the
manufacturer
ensure
improved market conditions in
terms of supply, as well as
delivery
performance
objectives by the MMH BMW
franchise team.
on
to
We have performed sensitivities
over these future projections
and note that if the profit
contribution at the end of the
forecast period was to be 6.5%
this
lower
headroom
be
extinguished.
forecast,
would
than
We understood the method applied by
management in performing its impairment
test for each of the relevant CGUs and
walked through the controls over the process.
We have reviewed the rationale in respect of
the allocation of goodwill to identified CGU’s.
For all CGUs we calculated the degree to
which the key inputs and assumptions would
need to change before an impairment was
triggered or where the currently calculated
impairment would be materially adjusted, and
considered the likelihood of this occurring. We
performed our own sensitivities on the
group’s forecasts and determined whether
adequate headroom remained.
For CGUs where there was evidence of
indicators of impairment or low levels of
headroom exist we performed detailed testing
to critically assess and corroborate the key
inputs to the valuations, including:
•
•
•
•
Analysing the historical accuracy of
budgets to actual results to determine
whether forecast cash flows are reliable
based on past experience;
Corroborating the discount rate by
obtaining the underlying data used in the
calculation and benchmarking it against
market
comparable
data
organisations;
and
Validating the growth rates assumed by
comparing them to either economic and
industry
detailed
management action plans; and
forecasts
or
Applying sensitivities to assumptions and
recalculating headroom.
the
requirements of
We assessed the disclosures in Note 14
IAS 36
against
Impairment of Assets, in particular in respect
of the requirement to disclose further
sensitivities for CGUs where a reasonably
possible change in a key assumption would
cause an impairment.
We have performed procedures over this risk
area in all relevant accounts, covering 100%
of the risk amount. We have performed
specified procedures to identify any indicators
of potential impairment of intangible assets,
and determined the impact of these indicators
where such circumstances arose.
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Key observations
communicated to the
Risk Our response to the risk Audit Committee
Based on
the procedures
performed, including those in
respect of manufacturer rebates
and bonuses, we are satisfied
that
was
appropriately recognised during
the year.
revenue
the
Revenue recognition: £2,276 million,
(2018: £2,187 million), including
manufacturer’s rebates and bonuses:
£139.8 million (2018: £122.9 million)
The majority of the group’s sales arrangements
are generally straightforward, being on a point
of sale basis where vehicles are handed over to
customers or servicing takes place at an agreed
point in time, requiring little judgement to be
exercised.
There is a natural pressure on the group to meet
expectations and targets. Employee reward and
incentive schemes based on achieving revenue
targets may also create pressure to manipulate
revenue transactions.
to
There is a risk that management may override
controls
intentionally misstate revenue
transactions and bonuses within cost of sales.
This could be either through the judgements
made in estimating manufacturer rebates and
bonuses or by recording fictitious revenue
transactions across the business.
Refer to Accounting policies (page 85) and Note
5 of the Consolidated Financial Statements
(page 98)
the business’s
We understood
revenue
recognition policy and how this was applied
including the relevant controls operating in
respect of the recognition of revenue and the
allocation of manufacturer bonuses and rebates.
As part of our overall revenue recognition testing
we used data analysis tools on £2.26 billion
(99.3%) of revenue from continuing operations
in the year to test the correlation of revenue to
cash receipts to verify the occurrence of revenue.
We reviewed revenue by dealership and
considered margins in comparison to prior year
and similar dealerships in order to identify
unusual changes in performance, material
increases in revenue recognised or increased
margins which may indicate an overstatement
of manufacturer rebates or bonuses.
We performed cut-off testing for a sample of
revenue transactions around the period end
date, to check that they were recognised in the
appropriate period. We also performed
reconciliations of manufacturer consignment
inventory statements to the inventory ledger and
to the associated payable balances to provide
additional assurance over new vehicle sales
year end cut-off.
Other audit procedures designed to address the
risk of management override of controls
included journal entry testing, applying particular
focus to the manual entries associated to
revenue accounts.
We discussed key contractual arrangements
with management and obtained relevant
documentation,
respect of
including
manufacturer rebate and bonus arrangements
to ensure the accuracy of accrued rebates and
bonuses at the year end.
Where rebate arrangements existed we
reviewed contracts, recalculated rebates and
agreed values to post year end credit notes and
cash receipts. We performed analysis over
changes to prior period rebate estimates to
challenge assumptions made,
including
assessing estimates
for evidence of
management bias.
We performed audit procedures over revenue for
100% of revenue within the Group.
in
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FINANCIAL STATEMENTS
In the prior year, our auditor’s report included a key audit matter in relation to misstatement of provisions and head office accruals.
In the current year, we no longer consider this to represent a key audit matter. This is as a result of a significant reduction in
restructuring activity and the settlement of a £5.6m pension liability in the year. We consider the level of management judgement
required relating to provisions is now lower than in prior years.
Our 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
ISAs (UK and
Ireland) reporting
We are required to report to you if we identify material misstatements in the Strategic
Report or Directors’ Report in light of the knowledge and understanding of the group
and parent company and its environment obtained in the course of the audit.
We
no
have
exceptions to report.
Companies Act
2006 reporting
We are required 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
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
We
no
have
exceptions to report.
Other Information
The other information comprises the information included in the annual report set out on pages 4 to 76, other than the financial
statements and our auditor’s report thereon. The directors are responsible for the other information.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated
in this report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements,
we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of
the other information. If, based on the work we have performed, we conclude that there is a material misstatement of the other
information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of directors
As explained more fully in the statement of directors’ responsibilities set out on page 76, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as
the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group and parent company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no
realistic alternative but to do so.
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the 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 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.
Nigel Meredith (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Birmingham
10 March 2020
Notes:
1.
The maintenance and integrity of the Marshall Motor Holdings PLC web site is the responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditor accept no responsibility for any changes that may have occurred to the financial statements
since they were initially presented on the web site.
2.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
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FINANCIAL STATEMENTS
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2019
Non-
Underlying underlying Underlying
items items Total items
2019 2019 2019 2018
Restated
Note £’000 £’000 £’000 £’000
Non-
underlying
items
2018
Restated
£’000
Total
2018
Restated
£’000
Continuing operations
Revenue 5 2,276,129 - 2,276,129 2,186,887
Cost of sales (2,015,328) - (2,015,328) (1,933,640)
Gross profit 260,801 - 260,801 253,247
Net operating expenses (228,772) (2,443) (231,215) (218,931)
Operating profit 32,029 (2,443) 29,586 34,316
-
-
-
2,186,887
(1,933,640)
253,247
(6,714)
(6,714)
(225,645)
27,602
Net finance costs 10 (9,943) - (9,943) (9,568)
-
Profit before taxation 6 22,086 (2,443) 19,643 24,748
(6,714)
(9,568)
18,034
Taxation 11 (4,177) 112 (4,065) (4,286)
(380)
(4,666)
Profit from continuing
operations after tax 17,909 (2,331) 15,578 20,462
(7,094)
13,368
Discontinued operations
Profit from discontinued
operations after tax 7 - - - -
Profit for the year 17,909 (2,331) 15,578 20,462
589
(6,505)
589
13,957
Total comprehensive
income for the year
net of tax 17,909 (2,331) 15,578 20,462
(6,505)
13,957
Earnings per share (EPS)
attributable to equity
shareholders of the parent
(pence per share)
From continuing operations:
Basic 12 22.9 - 19.9 26.3
Diluted 12 22.6 - 19.7 25.5
From continuing and
discontinued operations:
Basic 12 22.9 - 19.9 26.3
Diluted 12 22.6 - 19.7 25.5
-
-
-
-
17.2
16.6
18.0
17.4
The comparative figures have been restated on adoption of IFRS 16 Leases. Full details of the impact of adoption are included
in Note 3 ‘Changes in Accounting Policies and Disclosures’.
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Consolidated Balance Sheet
At 31 December 2019
Non-current assets
Goodwill and other intangible assets
Property, plant and equipment
Right-of-use assets
Investment property
Non-current financial assets
Deferred tax asset
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Assets classified as held for sale
Total current assets
Total assets
Non-current liabilities
Loans and borrowings
Lease liabilities
Trade and other payables
Provisions
Deferred tax liabilities
Total non-current liabilities
Current liabilities
Loans and borrowings
Lease liabilities
Trade and other payables
Provisions
Current tax liabilities
Total current liabilities
Total liabilities
Net assets
Shareholders’ equity
Share capital
Share premium
Share-based payments reserve
Own shares reserve
Retained earnings
Total equity
Marshall Motor Holdings plc | Annual Report & Accounts 2019
2019
Note £’000
2018
Restated
£’000
As at
1 January
2018
Restated
£’000
14 119,260
15 159,293
16 107,967
17 3,638
16 1,442
-
391,600
18 470,700
19 87,462
20 110
21 797
559,069
950,669
23 5,024
16 97,396
22 6,371
24 299
25 20,134
129,224
23 25,641
16 10,689
22 578,010
24 3,085
1,704
619,129
748,353
202,316
28 50,068
28 19,672
29 1,025
29 (12)
131,563
202,316
112,177
148,159
85,427
2,590
1,405
-
349,758
384,005
78,950
1,174
797
464,926
814,684
5,665
80,228
5,596
-
19,574
111,063
641
7,414
492,387
7,795
1,346
509,583
620,646
194,038
49,834
19,672
1,570
-
122,962
194,038
121,514
135,023
91,969
2,590
1,684
39
352,819
401,260
91,324
4,867
750
498,201
851,020
6,466
91,642
4,281
3,258
19,343
124,990
642
6,078
525,987
5,798
2,180
540,685
665,675
185,345
49,531
19,672
2,608
-
113,534
185,345
The consolidated financial statements of Marshall Motor Holdings plc were approved for issue by the Board of Directors on
9 March 2020.
Daksh Gupta
Chief Executive Officer
Richard Blumberger
Chief Financial Officer
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FINANCIAL STATEMENTS
Consolidated Statement of Changes in Equity
For the year ended 31 December 2019
Share-
based Own
Share Share payments shares
capital premium reserve reserve
Note £’000 £’000 £’000 £’000
Balance at 31 December 2017
as originally presented 49,531 19,672 2,608 -
Retained
earnings
£’000
Total
equity
£’000
119,323
191,134
Impact of change in accounting policies 3 - - - -
(5,789)
(5,789)
Restated balance at 1 January 2018 49,531 19,672 2,608 -
113,534
185,345
Profit for the year - - - -
Total comprehensive income - - - -
13,957
13,957
13,957
13,957
Transactions with owners
Dividends paid 13 - - - -
(4,983)
(4,983)
Issue of share capital 28 303 - - (303)
Exercise of share options 29 - - (1,567) 303
Share-based payments charge 29 - - 529 -
Acquisition of non-controlling
interest in subsidiaries 14 - - - -
-
504
-
-
(760)
529
(50)
(50)
Balance at 31 December 2018 49,834 19,672 1,570 -
122,962
194,038
Profit for the year - - - -
Total comprehensive income - - - -
15,578
15,578
15,578
15,578
Transactions with owners
Dividends paid 13 - - - -
(7,223)
(7,223)
Issue of share capital 28 234 - - (234)
Exercise of share options 29 - - (1,675) 385
Acquisition of own shares 29 - - - (163)
Share-based payments charge 29 - - 1,130 -
-
246
-
-
-
(1,044)
(163)
1,130
Balance at 31 December 2019 50,068 19,672 1,025 (12)
131,563
202,316
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Consolidated Cash Flow Statement
For the year ended 31 December 2019
Operating profit
– continuing operations
– discontinued operations
Adjustments for:
Depreciation and amortisation
Share-based payments charge
Profit on disposal of assets classified as held for sale
Loss on disposal of property plant and equipment
Profit on disposal and remeasurement of right-of-use
assets and lease liabilities
Loss on impairment of goodwill and other intangible assets
Loss on impairment of right-of use assets
Loss on impairment of property, plant and equipment
Loss on disposal of investment property
Loss on disposal of finance lease receivable
Increase in fair value of investment properties
Profit on disposal of subsidiary
Cash flows from operating activities before working capital
(Increase)/decrease in inventories
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Increase/(decrease) in provisions
Settlement of defined benefit pension scheme
Total cash flows generated by operations
Tax paid
Interest paid on lease liabilities
Other net finance costs
Net cash inflow from operating activities
Investing activities
Purchase of property, plant, equipment and software
Net purchase of investment property
Acquisition of businesses, net of cash acquired
Acquisition of non-controlling interest in subsidiaries
Lease payments received under finance lease
Interest received under finance leases
Net cash flow from sale of discontinued operation
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of assets classified as held for sale
Net cash outflow from investing activities
Financing activities
Proceeds from borrowings
Repayment of borrowings
Repayment of lease liabilities
Dividends paid
Purchase of own shares
Settlement of exercised share awards
Net cash inflow/(outflow) from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at year end
89
Note
6
6
6
6/7
6
6
6
6
6
7/17
7
14/15
14
14
7
13
29
29
30
30
2019
£’000
29,586
-
19,995
1,282
-
411
(403)
-
1,081
708
72
-
(610)
-
52,122
(69,893)
(7,677)
83,946
379
(5,567)
53,310
(4,698)
(3,068)
(6,875)
38,669
(19,433)
(72)
(27,397)
-
201
63
-
420
-
(46,218)
70,000
(45,641)
(9,780)
(7,223)
(163)
(708)
6,485
(1,064)
1,174
110
2018
Restated
£’000
27,602
589
17,960
732
(268)
67
(3,460)
9,302
132
87
1,146
183
-
(589)
53,483
17,255
12,269
(33,543)
(2,157)
-
47,307
(5,231)
(3,273)
(6,362)
32,441
(22,242)
(1,146)
-
(50)
268
67
589
274
1,018
(21,222)
30,000
(30,802)
(8,159)
(4,983)
-
(968)
(14,912)
(3,693)
4,867
1,174
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FINANCIAL STATEMENTS
Net Debt Reconciliation
For the year ended 31 December 2019
Reconciliation of cash flow to movement in net debt
Net decrease in net cash and cash equivalents
Proceeds from drawdown of RCF
Repayment of drawdown of RCF
Repayment of other borrowings
Change in lease liability commitments
Repayment of lease liabilities
(Increase)/decrease in net debt
Opening net debt
Net debt at year end
Lease liabilities
Adjusted net debt at year end (non GAAP measure)
Net debt at year end consists of:
Cash and cash equivalents
Loans and borrowings
Lease liabilities
Closing net debt
Note
2019
£’000
2018
Restated
£’000
23
23
23
30
30
30
30
16
20
23
16
30
(1,064)
(70,000)
45,000
641
(33,228)
12,785
(45,866)
(92,774)
(138,640)
(108,085)
(30,555)
110
(30,665)
(108,085)
(138,640)
(3,693)
(30,000)
30,000
802
(1,354)
11,432
7,187
(99,961)
(92,774)
(87,642)
(5,132)
1,174
(6,306)
(87,642)
(92,774)
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Notes to the Consolidated Financial Statements
1. Presentation of the financial statements
General information
Marshall Motor Holdings plc (the Company) is incorporated and resident in the United Kingdom. The Company is a public limited
company, limited by shares, whose shares are listed on the Alternative Investment Market (AIM) of the London Stock Exchange.
The Company is registered in England under the Companies Act 2006 (registration number 02051461) with the address of the
registered office being; Airport House, The Airport, Cambridge, CB5 8RY, United Kingdom.
The financial statements of Marshall Motor Holdings plc were authorised for issue by the Board of Directors on 9 March 2020.
Basis of preparation
The consolidated financial statements of the Company are prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union and in accordance with the requirements of the Companies Act 2006
applicable to entities reporting under IFRS.
The consolidated financial statements include the results of the Company and its subsidiaries (together “the Group”); a schedule
of all subsidiaries is contained in Note 6 ‘Investments in Subsidiaries’ of the Company financial statements (page 153). The
consolidated financial statements have been prepared under the historical cost convention as modified by the revaluation of
investment properties and assets held for sale.
During the year the Group has adopted the amendments to IFRS 3 Business Combinations, IAS 12 Income Taxes and IAS 23
Borrowing Costs as well as IFRIC Interpretation 23 Uncertainty over Income Tax Treatment. The Group has also adopted the
following new standard, IFRS 16 Leases. Full details of the impact of adoption are set out in Note 3 ‘Changes in Accounting
Policies and Disclosures’.
The consolidated financial statements are prepared in Sterling which is both the functional currency of the Group’s subsidiaries
and presentational currency of the Group. All values are rounded to the nearest thousand pounds (£’000) except where otherwise
indicated.
Going concern
The consolidated financial statements are prepared on the going concern basis. 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 consolidated financial statements are signed. For these reasons they
continue to adopt the going concern basis in preparing the consolidated financial statements.
The Directors have considered the future prospects and performance of the Group including: business plans, impact of
acquisitions, future cash flows and availability of core and auxiliary financing facilities.
2. Accounting policies
Basis of consolidation
Subsidiaries are entities controlled by the Company. Control is achieved when the Group is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
Specifically, the Group controls an investee if, and only if, the Group has: a) power over the investee (i.e., existing rights that give
it the current ability to direct the relevant activities of the investee); b) exposure, or rights, to variable returns from its involvement
with the investee; and c) the ability to use its power over the investee to affect its returns.
In assessing control potential voting rights that presently are exercisable or convertible are taken into account. Generally, there
is a presumption that a majority of voting rights results in control. The Group re-assesses whether or not it controls an investee
if facts and circumstances indicate that there are changes to one or more of the elements of control detailed above.
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
2. Accounting policies (continued)
Basis of consolidation (continued)
The financial information of subsidiaries is included in the consolidated financial information from the date that control commences
until the date that control ceases. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year
are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to
control the subsidiary.
When the Group losses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling
interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. Any investment retained
is recognised at fair value.
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.
Subsidiary audit exemption
The consolidated financial statements include the results of all subsidiary undertakings owned by the Company as listed in Note 6
‘Investments in Subsidiaries’ on page 153 of the Annual Report.
Certain of the Group’s subsidiaries, listed below, have taken the exemption from an audit for the year ended 31 December 2019
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 2019 of the
subsidiaries listed below.
The subsidiaries which have taken an exemption from audit for the year ended 31 December 2019 by virtue of s479A of the
Companies Act 2006 are:
Astle Limited (reg no. 01114983) Ridgeway Bavarian Limited (reg no. 07930214)
Crystal Motor Group Limited (reg no. 04813767) Ridgeway TPS Limited (reg no. 06112651)
Exeter Trade Parts Specialists LLP (reg no. OC329331) S.G. Smith Automotive Limited (reg no. 00622112)
Marshall North West Limited (reg no. 00322817) S.G. Smith Holdings Limited (reg no. 09416021)
Marshall of Cambridge (Garage Properties) Limited S.G. Smith (Motors) Beckenham Limited (reg no. 00648395)
(reg no. 02051459) S.G. Smith (Motors) Crown Point Limited (reg no. 00581711)
Marshall of Ipswich Limited (reg no. 04447940) S.G. Smith (Motors) Forest Hill Limited (reg no. 00581710)
Marshall of Peterborough Limited (reg no. 04861074) S.G. Smith Trade Parts Limited (reg no. 01794317)
Marshall of Scunthorpe Limited (reg no. 01174004) Silver Street Automotive Limited (reg no. 00716748)
Marshall of Stevenage Limited (reg no. 06450140) Tim Brinton Cars Limited (reg no. 01041301)
Pentagon Limited (reg no. 01862751)
Prep-Point Limited (reg no. 00660067)
Business combinations
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.
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 IFRS 9 Financial Instruments in the Consolidated Statement of Comprehensive Income. Contingent consideration that is
classified as equity is not re-measured and its subsequent settlement is accounted for within equity.
Acquisition related costs are expensed as incurred and are excluded from underlying profit before tax.
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Notes to the Consolidated Financial Statements
2. Accounting policies (continued)
Business combinations (continued)
On the acquisition of a business, fair values are attributed to the identifiable assets and liabilities and contingent liabilities unless
the fair value cannot be reliably measured, in which case the value is subsumed into goodwill. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business combination that meet the recognition criteria under IFRS 3 Business
Combinations are measured initially at their fair values at the acquisition date.
Non-controlling interests
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 the acquiree’s identifiable net assets.
Measurement period adjustments
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 Business Combinations. This includes an exercise to evaluate other material
separately identifiable intangible assets such as franchise agreements and order backlogs.
The finalisation of purchase price allocations may result in a change in the fair value of assets acquired. In accordance with IFRS
3 Business Combinations measurement period adjustments are reflected in the financial statements as if the final purchase
price allocation had been completed at the acquisition date.
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.
Where the fair value of the consideration received is less than the fair value of the acquired net assets, the deficit is recognised
immediately in the Consolidated Statement of Comprehensive Income as a bargain purchase. Goodwill is capitalised and subject
to an impairment review at least annually and is carried at cost less accumulated impairment losses. Impairment losses on
goodwill are not reversed in subsequent periods.
Intangible assets
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.
Intangible assets acquired as part of a business combination include franchise agreements. These items are capitalised separately
from goodwill if the asset is separable or if the benefit of the intangible asset is obtained through contractual or other legal rights
and if its fair value can be measured reliably on initial recognition. Such assets are stated at fair value. Franchise agreements
have an indefinite useful life, therefore are not amortised.
Intangible assets with an indefinite useful economic life are tested annually for impairment. Amortisation is included within net
operating expenses in the Consolidated Statement of Comprehensive Income.
Property, plant and equipment
Items of property, plant and equipment are stated at cost less accumulated depreciation and less any recognised impairment
loss. 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. 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.
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
2. Accounting policies (continued)
Property, plant and equipment (continued)
Depreciation is charged to write assets down to their residual values over their estimated useful economic lives. Depreciation is
charged on a straight-line basis over the following periods:
•
•
•
•
•
•
Leasehold improvements – shorter of the lease term or 10 years
Fixtures and fittings – 5 years
Computer equipment – 2-5 years
Freehold buildings – 50 years
Land – indefinite life, not depreciated
Assets under construction – not depreciated.
The residual values and useful economic lives of assets are reviewed, and adjusted if appropriate, at each balance sheet date.
The gains and losses on disposal of assets are determined by comparing sales proceeds with the carrying amount of the asset
and are recognised in the Consolidated Statement of Comprehensive Income.
Investment property
Initial recognition
Investment properties are measured initially at cost, including transaction costs. Investment properties include properties that
are held as right-of-use assets, as well as properties that are owned by the Group.
Subsequent measurement
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 the Consolidated Statement of Comprehensive Income and is not
included within underlying profit before tax.
Derecognition
Investment properties are derecognised either when they have been disposed of (i.e. at the date the recipient obtains control) or
when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference
between the net disposal proceeds and the carrying amount of the asset is recognised in the Consolidated Statement of
Comprehensive Income in the period of derecognition. The amount of consideration to be included in the gain or loss arising
from the derecognition of investment property is determined in accordance with the requirements for determining the transaction
price under IFRS 15 Revenue from Contracts with Customers.
Impairment of non-financial assets
Assets not subject to amortisation are tested annually for impairment, or more frequently if events or changes in circumstances
indicate a potential 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 inflows (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 franchise agreements acquired in a business combination are allocated to each of the cash generating units. 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 and franchise agreements are allocated (being groups of dealerships connected by manufacturer brand) represents
the lowest level within the entity at which the goodwill and franchise agreements are monitored for internal management purposes.
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Notes to the Consolidated Financial Statements
2. Accounting policies (continued)
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 in the Consolidated Balance Sheet (excluding value added taxes), with a
corresponding liability (including value added taxes) 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 (stock financing charges,
responsibility for safekeeping and some risk of obsolescence) rest with the Group. Stock financing charges from manufacturers
and other vehicle funding facilities are presented within finance costs. These charges are expensed over the 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 stock holding interest.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and cash in hand.
Assets held for sale
Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction
rather than through continuing use. This classification is used where a sale is considered highly probable. Assets held for sale
are measured at the lower of their carrying amount and their fair value less costs to sell.
An impairment loss is recognised for any initial or subsequent write-down of the asset to fair value less costs to sell. Any
subsequent increase in the fair value less costs to sell of an asset is recognised where it is not in excess of any cumulative
impairment loss which has been previously recognised. Non-current assets are not depreciated while they are classified as held
for sale. Assets classified as held for sale are presented separately from other asset classes in the current assets section of the
Consolidated Balance Sheet.
Financial instruments
Financial assets
Recognition and initial measurement
Trade receivables are initially recognised when they originated. Trade receivables are amounts due from customers for goods
sold or for services performed by the Group in the ordinary course of business. Credit terms are less than one year, as such they
are recognised as current assets.
All other financial assets are initially recognised when the Group becomes a party to the contractual provisions of the instrument.
On initial recognition, a financial asset (unless it is a trade receivable without a significant financing component) is initially measured
at fair value plus, for a financial asset not at fair value reported in profit or loss, transaction costs that are directly attributable to
its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
2. Accounting policies (continued)
Financial instruments (continued)
Financial assets (continued)
Classification and subsequent measurement
A financial asset is classified either as being; measured subsequently at fair value (either through other comprehensive income
or through profit or loss), or measured at amortised cost. The classification depends on the Group’s business model for managing
the financial assets and the contractual terms of the cash flows.
All financial assets of the Group are classified as measured at amortised cost.
Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for
managing financial assets in which case all affected financial assets are reclassified on the first day of the first reporting period
following the change in the business model.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at fair value
reported in profit or loss:
•
•
it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding.
Financial assets at amortised cost are subsequently measured at amortised cost using the effective interest method. The
amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairments are
recognised in profit or loss. Any gain or loss on de-recognition is recognised in profit or loss.
Derecognition
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it
transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of
ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks
and rewards of ownership and it does not retain control of the financial asset.
Impairment of financial assets
At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit-impaired. A financial
asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the
financial asset have occurred.
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect
of recovery. This is generally the case when the Group determines that the debtor does not have assets or sources of income
that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written
off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due.
The Group recognises loss allowances for expected credit losses (ECLs) on financial assets measured at amortised cost. ECLs
are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e.
the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects
to receive). ECLs are discounted at the effective interest rate of the financial asset. Loss allowances for financial assets measured
at amortised cost are deducted from the gross carrying amount of the assets.
Loss allowances for finance lease receivables are measured by reference to default events that are possible within 12 months
of the reporting date on the basis that the credit risk since initial recognition has not been subject to significant increase.
Loss allowances for trade receivables are measured using a simplified approach based on the lifetime ECLs at each reporting
date. An assessment of the lifetime ECLs is calculated using a provision matrix model to estimate the loss rates to be applied to
each trade receivable category.
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Notes to the Consolidated Financial Statements
2. Accounting policies (continued)
Financial instruments (continued)
Financial liabilities
The Group classifies its financial liabilities as measured at amortised cost. The classification of financial instruments is determined
at initial recognition in accordance with the substance of the contractual arrangement into which the Group has entered.
Financial liabilities measured at amortised cost include non-derivative financial liabilities which are held at original cost, less
amortisation. Financial liabilities measured at amortised cost comprise mainly trade and other payables and borrowings (see
below for the separate accounting policies for each specific financial liability).
Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount presented in the Consolidated Balance Sheet when, and
only when, the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net
basis or to realise the asset and settle the liability simultaneously.
Fair value measurement
The Group measures non-financial assets such as investment properties, at fair value at each balance sheet date. Fair value is
the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or
transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in
the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by
the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial
asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best
use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to
measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets
and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy,
described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
•
•
•
Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or
indirectly observable
Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is
unobservable.
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group determines
whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input
that is significant to the fair value measurement as a whole) at the end of each reporting period.
External valuers are involved for valuation of investment properties and assets held for sale. At each reporting date, the Directors
consider movements in the values of assets and liabilities which are required to be remeasured or re-assessed as per the Group’s
accounting policies. For this analysis, the Directors consider the major inputs applied in the latest valuation by reviewing the
information in the valuation computation to valuation reports and other relevant documents.
The Directors, in conjunction with the Group’s external valuers, also compare the change in the fair value of each asset and
liability with relevant external sources to determine whether the change is reasonable.
For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature,
characteristics and risks of the asset or liability and the level of the fair value hierarchy, as explained above.
Fair-value related disclosures for financial instruments and non-financial assets that are measured at fair value or where fair
values are disclosed, are summarised in Note 27 ‘Fair Value Measurement’.
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
2. Accounting policies (continued)
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.
Dividend distribution
Final dividends to the Group’s shareholders are recognised as a liability in the Group’s financial statements in the period in which
the dividends are approved by the Group’s shareholders. Interim dividends are recognised when they are paid.
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 (inclusive of value added taxes) held on consignment with the corresponding
asset included within inventories (exclusive of value added taxes).
Borrowings
Borrowings comprise asset backed finance, mortgages and bank borrowings; they 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 Consolidated Statement of Comprehensive Income over the
period of the borrowings using the effective interest method.
Bank overdrafts, which form an integral part of the Group’s cash management, are included as a component of loans and
borrowings for the purpose of presentation in the Consolidated Statement of Cash Flows. Bank overdrafts are presented within
borrowings in current liabilities in the Consolidated Balance Sheet.
Provisions
A provision is recognised in the Consolidated Balance Sheet when the Group has; a present legal or constructive obligation as
a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable
estimate can be made of 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.
Dilapidation provision
The Group operates from a number of leasehold premises and is typically required by the terms of the lease to restore leased
premises to their original condition on vacation of the premises at the end of the lease term. Estimates of dilapidation costs are
calculated in accordance with the specific remediation requirements stipulated in each lease contract. At the point at which these
remediation costs can be reliably estimated, a provision is recognised.
Restructuring (closed sites) provision
Provisions for restructuring costs are recognised at the point when a detailed restructuring plan is in place and the Group has
either started to implement the plan or has announced the main features of the plan to those affected. Restructuring provisions
include only direct expenditures necessarily entailed by the restructuring.
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Notes to the Consolidated Financial Statements
2. Accounting policies (continued)
Revenue recognition
Revenue is measured based on the consideration received or receivable as specified in a contract with a customer and represents
amounts receivable for goods supplied, stated net of discounts, returns and value added taxes. Revenue excludes amounts
collected on behalf of third parties. Revenue comprises sales and charges for vehicles sold and services rendered during the
period, including sales to other Marshall of Cambridge (Holdings) Limited group companies but excluding inter-company sales
within the Group.
The Group recognises revenue when it transfers control over a product or service to a customer, as described below.
Sale of motor vehicles, parts and aftersales services
services in the form of vehicle servicing, maintenance and repairs. The Group recognises revenue from the sale of new and used
motor vehicles when a customer takes possession of the vehicle, at which point they have an obligation to pay in full and as such
control is considered to transfer at this point. The Group typically receives cash equal to the invoice amount for most direct retail
sales to consumers at the time the consumer takes possession of the vehicle. When the consumer has taken out a finance
(PCP) agreement to purchase the vehicle, the Group receives payment from the finance company at the time the consumer
takes possession of the vehicle. Payment terms on sales to corporate customers typically range from 7 to 60 days. The Group
recognises revenue from the provision of aftersales services when the service has been completed, at which point customers
have an obligation to pay in full. The Group typically receives cash equal to the invoice amount for most direct retail sales to
consumers at the time the service has been completed. Payment terms on sales to corporate customers typically range from
30 to 60 days.
Sale of warranty products
Income received in respect of warranty policies sold and administered by the Group is recognised over the period during which
a customer can exercise their rights under the warranty; as such, revenue is recognised over the period of the policy on a straight
line basis. This is not a material revenue stream for the Group.
Commission income
The Group receives commissions when it arranges vehicle financing and related insurance products for its customers to purchase
its products and services, acting as agent on behalf of various finance and insurance companies. Commissions are based on
agreed rates.
Where the Group acts as an agent on behalf of a principal, the associated income is recognised within revenue on completion
of the arranging of the various products (i.e. at the point at which control passes to the customer).
Certain commissions are received in advance of the customer buying the associated finance or insurance products from the
Group as agent. The advance commissions are paid upfront and typically relate to periods of two to three years, depending on
the arrangement. The advance commissions are recognised in revenue when sales of finance or insurance products are made.
This can be over a year after the receipt of the advance.
There is not deemed to be a financing component because, being an agency arrangement, the timing of the recognition of the
commission income varies on the basis of the occurrence of future events that are not substantially within the control of the
customer or the Group. As a consequence, the Group does not adjust any of the transaction prices for the time value of money.
Rental income
Rental income arising from operating leases on investment properties is recognised in revenue on a straight line basis over the
period of the lease. Rental income is not disclosed separately from revenue from contracts with customers in the Consolidated
Statement of Comprehensive Income due to the immateriality of this income stream.
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
2. Accounting policies (continued)
Revenue recognition (continued)
Contract liabilities
Where the Group receives an amount of consideration in advance of completion of performance obligations under a contract
with a customer, the value of the advance consideration is initially recognised as a contact liability in liabilities. Revenue is
subsequently recognised as the performance obligations are completed over the period of the contract (i.e. as control is passed
to the customer). Contract liabilities are presented within trade and other payables in the Consolidated Balance Sheet and
disclosed in Note 22 ‘Trade and Other Payables’.
Contract costs
The Group applies the practical expedient in paragraph 94 of IFRS 15 and recognises the incremental costs of obtaining contracts
as an expense when incurred if the amortisation period of the assets that the Group otherwise would have recognised is one
year or less.
Transaction price allocation to remaining performance obligations
The Group applies the practical expedient in paragraph 121 of IFRS 15 and does not disclose information about remaining
performance obligations that have original expected durations of one year or less.
Disaggregation of revenue
Revenue recognised from contracts with customers has been disaggregated into categories that depict how the nature, amount,
timing and uncertainty of revenue and cash flows are affected by economic factors. This disclosure, as well as the reconciliation
between the disaggregated revenue disclosures and the revenue figures disclosed for each of the Group’s reportable segments,
is made in Note 5 ‘Segmental Information’.
Supplier income
The Group receives income from brand partners and other suppliers. The Group receives income from its suppliers based on
specific agreements in place. These are generally based on achieving certain objectives such as specific sales volumes and
maintaining agreed operational standards. This supplier income received is recognised as a deduction from cost of sales at the
point when it is reasonably certain that the targets have been achieved for the relevant period and when income can be measured
reliably based on the terms of each relevant supplier agreement.
Supplier income that has been earned but not invoiced at the balance sheet date is recognised in other receivables and primarily
relates to volume-based incentives that run up to the period end.
Discontinued operations
A discontinued operation is a component of the Group that has been disposed of and that either represents a separate major line
of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business or
geographical area of operations or is a subsidiary which was acquired exclusively with a view to resale. The results of discontinued
operations are presented separately in the Consolidated Statement of Comprehensive Income.
Leases
Group as lessee
The Group recognises a right-of-use asset and a lease liability at the lease commencement date.
Right-of-use asset
The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle
and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives
received.
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Notes to the Consolidated Financial Statements
2. Accounting policies (continued)
Leases (continued)
Right-of-use asset (continued)
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of
the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically
reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
Lease liability
The lease liability is initially measured at the present value of the lease payments to be made over the lease term that have not
been paid at the lease commencement date. When calculating the present value, the lease liability is discounted using the Group’s
incremental borrowing rate as the interest rate implicit in the lease cannot be readily determined.
Lease payments included in the measurement of the lease liability comprise:
–
–
–
fixed payments, including in-substance fixed payments, less any lease incentives receivable;
variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the lease
commencement date; and
lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in
future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount
expected to be payable under a residual value guarantee or if the Group changes its assessment of whether it will exercise a
purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use
asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases and leases of low-value
assets. Short-term leases are those that do not contain a purchase option and have a lease term of 12 months or less. Low value
assets are those with a value below £5,000. The Group recognises on a straight-line basis over the lease term the lease payments
associated with these leases in net operating expenses in the Consolidated Statement of Comprehensive Income.
Group as lessor
The Group only acts as a lessor in the context of sub-lease arrangements. When the Group is an intermediate lessor, it accounts
for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease as being either
a finance lease or an operating lease with reference to the right-of-use asset arising from the head lease, not with reference to
the underlying asset. To classify each sub-lease, an overall assessment is made as to whether the lease transfers to the lessee
substantially all of the risks and rewards of ownership incidental to ownership of the right-of-use asset. If this is the case, then the
lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Group considers certain indicators
such as whether the lease is for the major part of the economic life of the asset. If a head lease is a short-term lease to which the
Group applies the short-term lease exemption described above, then it classifies the sub-lease as an operating lease.
If an arrangement contains lease and non-lease components, the Group applies IFRS 15 Revenue from Contracts with Customers
to allocate the consideration in the contract.
The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term
as part of revenue in the Consolidated Statement of Comprehensive Income.
Share-based payments
The Group operates a number of equity-settled, share-based compensation plans through which the Group allows employees
to receive shares in the Company.
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
2. Accounting policies (continued)
Share-based payments (continued)
Equity-settled share-based payments are measured at fair value (calculated excluding the effect of service and non-market based
performance vesting conditions) at the date of grant. The share-based payment charge to be expensed is determined by reference
to the fair value of share options granted and is recognised as an employee expense within underlying earnings, with a
corresponding increase in equity.
The share-based payment charge is recognised on a straight-line basis over the vesting period (being the period over which all
vesting conditions are to be satisfied). An award subject to graded vesting is accounted for as though it were multiple, separate
awards, the number of awards being determined in direct correlation to the number of instalments in which the options vest.
The share-based payment charge is based on the Group’s estimate of the number of options that are expected to vest. At each
balance sheet date, the Group revises its estimates of the number of options that are expected to vest based on the non-market
performance vesting conditions and service conditions. The Group’s remuneration policy gives the Remuneration Committee
discretion to revise performance conditions to adjust for the impact of Group restructurings and reorganisations on incentive
outcomes. The impact of any revisions to original vesting estimates or performance conditions is recognised in the Consolidated
Statement of Comprehensive Income with a corresponding adjustment to equity.
Social security contributions payable in connection with share options granted are considered to be an integral part of the grant
and are, therefore, treated as cash-settled transactions. For cash settled share-based payments, the Group recognises a liability
for the services acquired, measured initially at the fair value of the liability. This liability is re-measured at each balance sheet date
and at the date of settlement, with any changes in fair value recognised in the Consolidated Statement of Comprehensive Income.
When options are exercised, the Company issues new shares. These shares are gifted to the Employee Benefit Trust by the
Company at nominal value. The cost of these shares is recognised as a reduction to equity in the own shares reserve. When the
options are exercised and the shares transferred to the employees, the cost on the own shares reserve is transferred to equity.
When options issued by the Employee Benefit Trust are exercised the own shares reserve is reduced and a gain or loss is
recognised in reserves based on proceeds less weighted-average cost of shares initially purchased now exercised.
Where shares options are forfeited, effective from the date of the forfeiture, any share-based payment charge previously
recognised in both the current and prior periods in relation to these options is reversed though the Consolidated Statement of
Comprehensive Income with a corresponding adjustment through the Consolidated Statement of Changes in Equity.
Net finance costs
The Group has no borrowing costs with respect to the acquisition or construction of qualifying assets, therefore, no borrowing
costs are capitalised. Qualifying items of property, plant and equipment are considered to be those which take a substantial
period of time to get ready for their intended use. These would include assets which are under construction for periods in excess
of a year; the Group’s dealership development programmes are not considered to qualify.
Finance costs
Finance costs comprise interest payable on borrowings, lease liabilities, stock financing charges and other interest.
Finance income
Finance income comprises interest receivable on funds invested and finance lease receivables. Interest income is recognised in
the Consolidated Statement of Comprehensive Income as it accrues using the effective interest method.
Taxation
The taxation charge comprises corporation tax payable, deferred tax and any adjustments to tax payable in respect of previous
years.
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Notes to the Consolidated Financial Statements
2. Accounting policies (continued)
Taxation (continued)
Current taxation
The current tax payable is based on the Group’s taxable profit for the year. Taxable profit differs from net profit as reported in the
Consolidated Statement of Comprehensive Income because it excludes items of income or expenditure that are taxable or
deductible in other years and items of income or expenditure that are never taxable income or tax deductible expenditure. The
Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet
date.
Deferred taxation
Deferred taxation is the tax expected to be payable or recoverable on differences between the carrying amount of assets and
liabilities in the consolidated financial statements and their tax bases used in the computation of taxable profit. Deferred taxation
is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to
the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the
initial recognition of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax is provided on temporary differences arising on investments in subsidiaries, 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.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the
deductible temporary differences can be utilised. The carrying amount of deferred tax assets are reviewed at each balance sheet
date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
The Group’s deferred tax balances are calculated using tax rates that have been enacted or substantively enacted by the balance
sheet date and that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged
or credited in the income statement, except where it relates to items charged or credited directly to other comprehensive income
or equity, in which case the deferred tax is also dealt with in other comprehensive income or equity respectively.
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.
Pensions
Defined contribution pension plans
A defined contribution plan is a pension plan under which the employer/employee pays contributions into a separate fund managed
and administered by a third party. The employer has no legal or constructive obligation to pay further contributions if the fund
does not hold sufficient assets to pay employees the benefits relating to their service and contributions in current and prior periods.
The Group operates the Marshall Motor Holdings Defined Contribution Pension Scheme.
Where the Group makes employer pension contributions, the Group’s contributions to both sections of the Plan are charged to
the Consolidated Statement of Comprehensive Income as they become payable.
Defined benefit pension plans
Until 31 December 2018, the Group also participated in the defined contribution section of the Marshall Group Executive Pension
Plan (“the Plan”) which is operated by Marshall of Cambridge (Holdings) Limited acting as principal employer. The Plan also had
a defined benefit section.
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
2. Accounting policies (continued)
Alternative performance measures
Non-underlying items
Certain items recognised in reported profit or loss before tax can vary significantly from year to year, therefore, these 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 under IFRS,
therefore, it may not be directly comparable with the ‘adjusted’ profit measures of other companies.
Non-underlying items are defined as follows:
Profits/losses arising on closure or disposal of businesses;
– Acquisition costs;
–
– 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 items and pension charges; and
– Asset impairments.
Like-for-like
Similarly, the Directors believe that the impact of acquisitions and disposals distorts the value of comparative information provided.
Therefore, the measure of ‘like-for-like’ financial performance is used to present consistent, comparative information. Results on
a ‘like-for-like; basis include only the Group’s businesses that have been active and trading for a period of 12 consecutive months.
Businesses that are excluded from the definition of ‘like-for-like’ are those sites that have recently commenced operation, therefore
do not have a 12-month trading history, as well as any businesses that were closed and market segments or activities that were
ceased during the current or previous year. See the Appendix on page 156 for full details.
Adjusted net debt
The Directors believe that the impact of the adoption of IFRS 16 Leases distorts the value of reported net debt. Therefore, the
measure of ‘adjusted net debt’ is presented.
3. Changes in accounting policies and disclosures
Except where disclosed otherwise in this note, the accounting policies adopted in the preparation of the consolidated financial
statements are consistent with those applied when preparing the consolidated financial statements for the year ended
31 December 2018.
New standards, amendments and interpretations adopted by the Group
The following new standards and amendments to existing standards became effective on 1 January 2019 and have been adopted
in the consolidated financial statements for the first time during the year ended 31 December 2019. These have been assessed
as having no financial or disclosure impact on the numbers presented.
•
•
•
•
IFRIC Interpretation 23 Uncertainty over Income Tax Treatment
IFRS 3 Business Combinations
IAS 12 Income Taxes
IAS 23 Borrowing Costs
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Notes to the Consolidated Financial Statements
3. Changes in accounting policies and disclosures (continued)
New standards, amendments and interpretations adopted by the Group (continued)
The following new standard became effective on 1 January 2019 for the current reporting period. The Group had to change its
accounting policies and make adjustments as a result of adopting the following new standard:
•
IFRS 16 Leases
The impact of the adoption of this standard is disclosed below. The accounting policies above have been updated to include the
new accounting policies.
Three other standards, amendments and interpretations apply for the first time with effect from 1 January 2019; however, they
do not have an impact on the consolidated financial statements of the Group.
Impact on current period of the adoption of new standards, amendments and interpretations
IFRS 16 Leases
The Group has applied IFRS 16 issued in January 2016 with a date of initial application of 1 January 2019. IFRS 16 supersedes
IAS 17 Leases, IFRIC 4 Determining whether an Arrangement Contains a Lease, SIC-15 Operating Lease Incentives and
SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.
The Group has applied IFRS 16 using the full retrospective approach, therefore, the Group applied IFRS 16 at the date of initial
application as if the standard had already been effective at the commencement date of the Group’s existing lease contracts. As
a result, the comparative information in these consolidated financial statements has been restated. The nature and effects of the
key changes to the Group’s accounting policies resulting from the adoption of IFRS 16 are summarised below.
Definition of a lease
Previously the Group determined at contract inception whether an arrangement is or contains a lease under IFRIC 4. Under
IFRS 16, the Group assesses whether a contract is or contains a lease based on the definition of a lease.
On transition to IFRS 16, the Group elected to apply the practical expedient to grandfather the assessment of which transactions
are leases. The Group has applied the definition of a lease under IFRS 16 to contracts that have been entered into, or changed,
on or after 1 January 2019.
Group as lessee
As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease
transferred significantly all the risks and rewards incidental to ownership of the underlying asset to the Group. Under IFRS 16,
the Group recognises in the Consolidated Balance Sheet right-of-use assets and lease liabilities for most leases.
The Group has elected to apply the recognition exemptions for lease contracts that do not contain a purchase option and have
a lease term of 12 months or less and/or are for underlying assets with a low value.
For leases not covered by these recognition exemptions, the Group recognised right-of-use assets and lease liabilities on adoption
of IFRS 16. The Group also tested these right-of-use assets for impairment and recognised an impairment loss against some
right-of-use assets on transition and when restating the comparative 2018 period.
Group as lessor
Under IFRS 16, lessor accounting continues to require lessors to classify leases as either operating leases or finance leases
using similar principles as were used under IAS 17. As a result, with the exception of sub-lease arrangements, the Group is not
required to make any adjustments on transition to IFRS 16 for leases in which it acts as a lessor.
Under IFRS 16, the Group is required to assess the classification of a sub-lease with reference to the right-of-use asset, not the
underlying asset. On transition, the Group reassessed the classification of sub-lease contracts previously classified as an operating
lease under IAS 17. The Group concluded that two sub-leases are finance leases under IFRS 16, and accounted for these
subleases as new finance leases entered into at the date of initial application.
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
3. Changes in accounting policies and disclosures (continued)
Impact on current period of the adoption of new standards, amendments and interpretations (continued)
IFRS 16 Leases (continued)
Impacts on financial statements
As described above, December 2018 comparatives have been restated following the adoption of IFRS 16. The following tables
on pages 104 to 106 summarise the restatements arising on adoption of IFRS 16 in the Group’s consolidated financial statements.
Taxation
A deferred tax liability arises on the right-of-use asset and a deferred tax asset arises on the corresponding lease liabilities. These
meet the conditions for offsetting and are presented net on the Consolidated Balance Sheet. The net effect is a deferred tax
asset which has been recognised as it is probable that future taxable profits will be available against which the deferred tax asset
can be offset.
Consolidated statement of comprehensive income
The adoption of IFRS 16 results in an increased depreciation charge, the elimination of operating lease rental charges and
increased finance costs. Depreciation is recognised on right-of-use assets and interest is recognised on lease liabilities. These
charges are recognised instead of operating lease rental payments and income.
31 December
2019
31 December
2019
IFRS 16
Pre IFRS 16 Transition As presented
£’000
£’000
£’000
31 December
2018 As
originally
IFRS 16
presented Transition
£’000
£’000
31 December
2018
Restated
£’000
Revenue
Cost of sales
Gross profit
Net operating expenses
Operating profit
Net finance costs
Profit before taxation
Taxation
Profit from continuing
operations after tax
Profit from discontinued
operations after tax
Profit for the year
Continuing underlying profit
Non-underlying profit
Profit for the year
2,276,129
(2,015,328)
260,801
(233,528)
27,273
(6,938)
20,335
(4,134)
-
-
-
2,313
2,313
(3,005)
(692)
69
2,276,129
2,186,887
(2,015,328)
(1,933,640)
260,801
253,247
(231,215)
(228,181)
29,586
(9,943)
19,643
(4,065)
25,066
(6,362)
18,704
(4,775)
-
-
-
2,536
2,536
(3,206)
(670)
109
2,186,887
(1,933,640)
253,247
(225,645)
27,602
(9,568)
18,034
(4,666)
16,201
(623)
15,578
13,929
(561)
13,368
-
16,201
18,485
(2,284)
16,201
-
(623)
(576)
(47)
(623)
-
15,578
17,909
(2,331)
15,578
589
14,518
21,272
(6,754)
14,518
-
(561)
(810)
249
(561)
589
13,957
20,462
(6,505)
13,957
There is no material impact on other comprehensive income or on basic and diluted earnings per share.
106
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Notes to the Consolidated Financial Statements
3. Changes in accounting policies and disclosures (continued)
Impact on current period of the adoption of new standards, amendments and interpretations (continued)
IFRS 16 Leases (continued)
Consolidated balance sheet
Right-of-use assets and corresponding lease liabilities have been recognised and presented separately in the Consolidated
Balance Sheet. Long leasehold assets previously included under property, plant and equipment have been derecognised as well
as any rent prepayments and accruals relating to leases previously classified as operating leases. In addition, the portion of
vacant property provisions relating to operating lease rents has been derecognised and replaced with impairments of right-of-
use assets in respect of leases of vacant premises.
Dilapidation provisions recognised against goodwill at acquisition have been reclassified to right-of-use assets. Favourable lease
intangible assets have been derecognised on adoption of IFRS 16. Finance lease receivables in respect of sub-leases have
been recognised in non-current finance assets. The net effect of all these adjustments has been recognised in retained earnings.
Consolidated balance sheet (extract)
Goodwill and other intangible assets
Property, plant and equipment
Right-of-use assets
Investment property
Financial assets
Other current assets
Total assets
Loans and borrowings
Lease liabilities
Provisions
Trade and other payables
Deferred tax liabilities
Current tax liabilities
Total liabilities
Net assets
Retained earnings
Other reserves
Total equity
IFRS 16
31 December
2019
Transition As presented
£'000
£'000
31 December
2019
Pre IFRS 16
£'000
119,191
169,144
-
3,638
-
560,115
852,088
30,665
69
(9,851)
107,967
-
1,544
(1,148)
98,581
-
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N
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M
E
T
A
T
S
L
A
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N
A
N
F
I
I
119,260
159,293
107,967
3,638
1,544
558,967
950,669
30,665
108,085
3,384
584,381
20,134
1,704
748,353
202,316
131,563
70,753
202,316
-
108,085
3,484
586,451
20,495
1,704
642,799
209,289
138,536
70,753
209,289
(100)
(2,070)
(361)
-
105,554
(6,973)
(6,973)
-
(6,973)
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
3. Changes in accounting policies and disclosures (continued)
Impact on current period of the adoption of new standards, amendments and interpretations (continued)
IFRS 16 Leases (continued)
Consolidated balance sheet (extract)
31 December
1 January
2018
2018 As originally
IFRS 16
presented Transition
£’000
£’000
31 December
2018
As originally
IFRS 16
presented Transition
£’000
£’000
Goodwill and other
intangible assets
Property, plant and equipment
Right-of-use assets
Investment property
Financial assets
Other current assets
Total assets
Loans and borrowings
Lease liabilities
Provisions
Trade and other payables
Deferred tax liabilities
Current tax liabilities
Total liabilities
Net assets
Retained earnings
Other reserves
Total equity
112,202
155,758
-
2,590
(25)
(7,599)
85,427
-
-
1,500
465,658
(827)
736,208
78,476
6,306
-
-
87,642
7,926
499,455
20,787
1,346
(131)
(1,472)
(1,213)
-
535,820
84,826
200,388
(6,350)
129,312
(6,350)
71,076
-
200,388
(6,350)
Restated
£’000
112,177
148,159
85,427
2,590
1,500
464,831
814,684
6,306
87,642
7,795
497,983
19,574
1,346
620,646
194,038
122,962
71,076
194,038
1 January
2018
Restated
£’000
121,514
135,023
91,969
2,590
1,884
498,040
851,020
7,108
97,720
9,056
530,268
19,343
2,180
665,675
185,345
121,596
(82)
142,428
(7,405)
-
91,969
2,590
-
-
1,884
498,981
(941)
765,595
85,425
7,108
-
-
97,720
12,830
531,895
20,448
2,180
(3,774)
(1,627)
(1,105)
-
574,461
91,214
191,134
(5,789)
119,323
(5,789)
113,534
71,811
-
71,811
191,134
(5,789)
185,345
Consolidated cash flow statement
The adoption of IFRS 16 changes neither the timing nor amount of the Group’s cash flows. The only changes are presentational.
The classification of lease payments changes from being shown exclusively as an operating cash flow. Lease payments become
a combination of operating cash flows (reflecting the interest portion of lease payments) and financing cash flows (reflecting the
principal portion of the lease liability). The following table shows the reclassification between categories of cash flows.
Increase in net cash inflows from operating activities
Decrease in net cash outflows from investing activities
Increase in net cash outflows from financing activities
Net impact on decrease in cash and cash equivalent
2019
£’000
9,516
264
2018
£’000
7,540
619
(9,780)
(8,159)
-
-
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Notes to the Consolidated Financial Statements
4. Significant accounting judgements, estimates and assumptions
The Directors are required to make judgements, estimates and assumptions about the future when applying the Group’s
accounting policies (as detailed in Note 2 ‘Accounting Policies’) to determine the amounts of assets, liabilities, revenue and
expenses reported in the consolidated financial statements. Actual amounts may differ from these estimates.
The Directors regularly review these judgements, estimates and assumptions and any resulting revisions to accounting estimates
are recognised in the period in which the estimate is revised. If the change in estimation impacts future accounting periods, the
revision is recognised in the current and future periods.
Critical accounting judgements
The accounting judgements and assumptions (excluding those which also involve estimates which are covered in the key sources
of estimation uncertainty section below) included in the consolidated financial statements which have a material impact on amounts
reported are as detailed below.
Determination of indefinite useful economic life
Goodwill and franchise agreements are intangible assets acquired through business combinations. An asset is considered to
have an indefinite useful economic life if there is no foreseeable limit to the period over which the asset is expected to generate
net cash inflows for the Group. The useful economic life of goodwill and franchise agreements is determined at the point of initial
recognition. Each franchise agreement is different; each contract being for varying durations, with varying renewal or termination
options. Previous franchise agreements acquired have historically either been renewed without substantial cost or not had
termination options exercised by the Group. This past experience, coupled with the strength of the Group’s relationships with
brand partners, determines that these assets have indefinite useful economic lives.
Key sources of estimation uncertainty
The accounting estimates included in the consolidated financial statements which have a material impact on amounts reported
are as detailed below.
Goodwill and other intangible asset impairment
Goodwill is deemed to have an indefinite useful economic life and is, therefore, not amortised. As a result, the Group reviews
goodwill for impairment on at least an annual basis and more frequently where there are indicators of potential impairment. The
impairment review requires the value-in-use of each CGU to be estimated; these calculations are based on a number of
assumptions. Areas of significant judgement include:
–
–
–
–
the estimation of future cash flows
the selection of risk and the estimation of risk adjustment factors to be applied to cash flows
the selection of an appropriate discount rate to calculate present value
the selection of an appropriate terminal growth rate.
The assumptions used in the impairment test are detailed in Note 14(b) ‘Goodwill and Other Intangible Assets’. The assumptions
relating to future cash flows, estimated useful economic lives and discount rates are based on forecasts and are, therefore,
inherently judgemental. Future events could result in the assumptions used needing to be revised, changing the outcome of the
impairment test and resulting in impairment charges being recognised.
Inventory valuation
Inventories are stated at the lower of their cost and their net realisable value (being the fair value of the motor vehicles 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 the current value of vehicles held in inventory it is possible that the price at which
the vehicles are actually sold will differ from the vehicles’ industry valuations. Where this is the case, adjustments arise in the
Consolidated Statement of Comprehensive Income on the sale of vehicles held in inventory.
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
4. Significant accounting judgements, estimates and assumptions (continued)
Key sources of estimation uncertainty (continued)
Inventory valuation (continued)
Industry valuations are sensitive to rapid changes in regulatory and market conditions which are difficult to anticipate. In light of
the materiality of the inventory balance in the Consolidated Balance Sheet, this uncertainty is considered to represent a key
source of estimation uncertainty. The inventory provision as at 31 December 2019 represents 1.9% of the gross inventory balance
(2018: 2.5%). A 100bps change in this ratio in 2019 would change the provision in the Consolidated Balance Sheet by
approximately £4.5 million (2018: £3.9 million).
5. Segmental information
IFRS 8 Operating Segments requires operating segments to be consistent with the internal management reporting provided to
the Chief Operating Decision Makers who are responsible for allocating resources and assessing the performance of the operating
segments. The Group considers the Chief Executive Officer to be the Chief Operating Decision Maker.
The Group has identified its key product and service lines as being its operating segments because both performance and
strategic decisions are analysed at this level. The IFRS 8 aggregation criteria have been met as a result of the Group’s key
product and service lines sharing common characteristics such as; similar types of customer for the products and services, similar
nature of the product and service offerings, similar methods used to distribute the products and provide the services and similar
regulatory and economic environment. As a result of these criteria being satisfied, the Group’s operating segments constitute
one reportable segment (retail) and all segmental information has been disclosed as such. The retail segment includes sales of
new and used vehicles, together with the associated ancillary aftersales services of; servicing, body shop repairs and parts sales.
The Group has concluded that rental income arising from investment properties does not meet the quantitative thresholds required
to constitute a reportable segment as defined in IFRS 8. Due to the non-material nature of these amounts, they are combined
with the retail segment rather than being disclosed separately. As a result, all of the Group’s activities are disclosed within the
one reportable segment – the retail segment.
Geographical information
Revenue earned from sales is disclosed by origin and is not materially different from revenue by destination. All of the Group’s
revenue is generated in the United Kingdom.
Information about reportable segment
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, vehicle service and other related services.
The following tables show the disaggregation of revenue by major product/service lines for continuing operations:
Revenue Gross Profit
For the year ended 31 December 2019
£’000
£’000
mix
mix
New Vehicles
Used Vehicles
Aftersales
Internal / Other
Total
1,079,474
986,718
258,087
(48,150)
46.4%
42.5%
11.1%
-
80,148
65,456
114,572
625
2,276,129
100%
260,801
30.8%
25.2%
44.0%
-
100%
Revenue Gross Profit
For the year ended 31 December 2018
£’000
£’000
mix
mix
New Vehicles
Used Vehicles
Aftersales
Internal / Other
Total
1,064,830
920,237
246,116
(44,296)
47.7%
41.2%
11.1%
-
75,669
65,441
111,862
275
2,186,887
100%
253,247
29.9%
25.9%
44.2%
-
100%
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Notes to the Consolidated Financial Statements
6. Profit before taxation
Profit before taxation is arrived at after charging / (crediting):
Depreciation of property, plant and equipment (note 15)
Amortisation of other intangibles (note 14)
Profit on disposal of assets classified as held for sale (note 7)
Loss on disposal of property plant and equipment
Impairment of property, plant and equipment (note 15)
Loss on disposal of investment property (note 7)
Intangible assets impairment (note 14)
Depreciation of right-of-use assets (note 16)
Profit on disposal and remeasurement of right-of-use assets and lease liabilities (note 7/16)
Impairment loss on right-of-use assets (note 16)
Loss on disposal of finance lease receivable (note 16)
Income received from subleasing right-of-use assets (note 16)
7. Non-underlying items
Continuing operations
Post-retirement benefits charge
Acquisition costs
(Recognition) / net release of restructuring costs
Profit on disposal of assets classified as held for sale
Loss on disposal of investment property
Loss on impairment of goodwill and other intangible assets
Gain on revaluation of investment properties
Discontinued operations
Profit on disposal of subsidiary
Non-underlying items
Post-retirement benefits charge
2019
£’000
10,217
421
-
411
708
72
-
9,357
(403)
1,081
-
(201)
2019
£’000
(23)
(835)
(2,123)
-
(72)
-
610
2018
Restated
£’000
8,885
295
(268)
67
87
1,146
9,302
8,780
(3,460)
132
183
(268)
2018
Restated
£’000
-
-
3,466
268
(1,146)
(9,302)
-
(2,443)
(6,714)
-
(2,443)
589
(6,125)
See Note 32 ‘Pensions’ for further details of the transaction giving rise to the post-retirement benefits charge.
Acquisition costs
See Note 14(a) ‘Goodwill and Other Intangible Assets’ for further details of transactions giving rise to the acquisition costs.
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
7. Non-underlying items (continued)
(Recognition) / net release of restructuring costs
Restructuring costs during the current year include costs incurred as a result of the closure of two of the Group’s franchised
dealerships. Restructuring costs include closed site related costs of £323,000 (2018: profit of £1,128,000), redundancy costs of
£303,000 (2018: £280,000), tangible asset impairments of £708,000 (2018: £252,000), right-of-use asset impairments and
remeasurements of £268,000 (2018: profit of £3,127,000 – see Note 6 ‘Profit before taxation’ and Note 16 ‘Leases’). Restructuring
costs also include other redundancy costs in the year of £521,000 (2018: £257,000).
Profit on disposal of assets classified as held for sale
In May 2018 the Group sold the freehold property classified as held for sale for a profit of £268,000.
Loss on disposal of investment property
In December 2018 the Group disposed of the investment property acquired in the year for proceeds of £4,654,000; resulting in
a loss on disposal of £1,146,000. The acquisition and the immediate disposal of the investment property provided the Group with
a better than expected exit from the lease commitment. During the current year additional legal fees of £72,000 were incurred in
relation to this disposal.
Loss on impairment of goodwill and other intangible assets
See Note 14(b) ‘Goodwill and Other Intangible Assets’ for further details of the transaction giving rise to the loss on impairment
of goodwill and other intangible assets.
Gain on revaluation of investment properties
See Note 17 ‘Investment property’ for further details of the transaction giving rise to the gain on revaluation of investment
properties.
Profit on disposal of subsidiary
In November 2017 the Group disposed of Marshall Leasing Limited and its subsidiary (Gates Contract Hire Limited). A retention
of £1,500,000 was withheld in respect of anticipated settlement of legacy defined benefit pension obligations triggered by the
change in ownership of Marshall Leasing Limited. In April 2018, the surplus retention withheld was calculated and returned to the
Group, generating an additional £589,000 profit on disposal of Marshall Leasing Limited and its subsidiary.
8. Auditor’s remuneration
During the year the Group obtained the following services from the Group’s auditor:
Audit services:
– fees payable to the Company’s auditor for the audit of the parent
Company and consolidated financial statements
– audit of Group’s subsidiaries
Fees payable to the Company’s auditor for other services:
– review of interim condensed consolidated financial statements
Total auditor’s remuneration
2019
£’000
2018
£’000
314
48
36
398
200
78
36
314
112
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Notes to the Consolidated Financial Statements
9. Employees and directors
a)
Employee costs for the Group during the year
The aggregate remuneration of employees and directors was:
Wages and salaries
Social security costs
Other pension costs
Share based payments
Employee costs are included in:
Cost of sales
Net operating expenses
The average number of employees (including Executive Directors) was:
Retail
2019
£’000
118,653
13,956
2,732
1,282
2018
£’000
114,367
13,383
1,999
732
136,623
130,481
2019
£’000
13,802
122,821
136,623
2019
3,887
3,887
2018
£’000
13,505
116,976
130,481
2018
3,749
3,749
The average number of Group employees excludes temporary and contract staff. As at 31 December 2019 the Group had 4,228
employees (2018: 3,745).
b) Directors’ emoluments
Details of the remuneration of the Directors, their share incentives and pension entitlements are set out in the Directors’
Remuneration Report on pages 69 to 75.
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 enlarged 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 29 ‘Share-Based Payments’.
113
2019
£’000
5,325
222
87
1,282
6,916
2018
£’000
5,249
179
-
732
6,160
S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
F
I
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
10. Net finance costs
Interest income on short term bank deposits
Finance lease interest receivable
Stock financing charges and other interest
Interest payable on lease liabilities
Interest payable on bank borrowings
Net finance costs
11. Taxation
a)
Taxation charge
Current tax
Current tax on profits for the year
Adjustments in respect of prior years
Total current tax charge
Deferred tax
Origination and reversal of temporary differences
Adjustments in respect of prior years
Total deferred tax (credit)/charge (note 25)
Total taxation charge
2019
£’000
-
(63)
5,944
3,068
994
9,943
2019
£’000
4,201
31
4,232
23
(190)
(167)
4,065
2018
Restated
£’000
(13)
(67)
5,395
3,273
980
9,568
2018
Restated
£’000
5,106
(724)
4,382
541
(257)
284
4,666
The income tax charge in both the current and prior year is attributable to profit from continuing operations.
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Notes to the Consolidated Financial Statements
11. Taxation (continued)
b) Reconciliation of tax charge
The tax charge for the year differs from the standard rate of corporation tax in the UK of 19%. The differences are explained below:
Profit before taxation
Notional taxation charge at corporation tax rate
of 19.00% (2018: 19.00%)
Effects of:
Tax effect of items not deductible for tax purposes1
Non-taxable gain on sale of subsidiary
Loss on disposal of non-qualifying assets
Recognition of deferred tax previously unrecognised
Adjustments in respect of prior years
Derecognition of brought forward losses previously
recognised
Utilisation of brought forward losses previously
unrecognised
Effect of difference between closing deferred tax
rate and current tax rate
Taxation charge and effective tax rate
2019
£’000
19,643
2019
%
2018
Restated
£’000
18,034
2018
Restated
%
3,732
19.00%
3,426
19.00%
519
-
39
(3)
(159)
-
(38)
(25)
4,065
2.64%
-
0.20%
(0.02%)
(0.81%)
-
(0.19%)
(0.13%)
20.69%
2,320
(111)
100
-
(981)
43
-
(131)
4,666
1 Expenses not deductible predominantly consist of depreciation charges on non-qualifying assets and the creation of capital losses.
The analysis of the Group’s effective tax rate between underlying and non-underlying activities is as follows:
2019
2019
Non-
Underlying underlying
£’000
2018
2019
2018
Non-
Total Underlying underlying
Restated
£’000
Restated
£’000
£’000
£’000
22,086
4,177
(2,443)
19,643
(112)
4,065
24,748
4,286
(6,714)
18,034
380
4,666
18.91%
4.58%
20.69%
17.32%
(5.66%)
25.87%
S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
F
I
I
12.86%
(0.62%)
0.55%
-
(5.44%)
0.24%
-
(0.72%)
25.87%
2018
Total
Restated
£’000
Profit before taxation
Taxation
Effective tax rate
Non-recurring items
The Group’s total effective tax rate for 2019 of 20.69% was influenced by non-deductible acquisition costs and the impact of
adjustments in respect of prior years in relation to assets held for sale in 2018. Excluding the impact of these, the total effective
tax rate for 2019 would have been 18.75%. This is consistent with the Group’s underlying effective tax rate of 18.91%.
The prior year total effective tax rate of 25.87% was influenced by the impairment of goodwill as well as by the non-taxable gain
on disposal of Marshall Leasing Limited in the prior year and profit on disposal of freehold properties shielded from chargeable
gains. The underlying effective tax rate of 17.32% is lower than the Group’s expected underlying effective tax rate due to the
impact of substantial credits in respect of adjustments in respect of prior years resulting from the filing in the prior year of
retrospective capital allowance claims on the Group’s historic capital expenditure. Excluding the impact of these, the underlying
effective tax rate would have been 21.60%.
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
11. Taxation (continued)
c)
Factors affecting the taxation charge of future years
Future tax charges, and therefore the Group’s effective tax rate, may be affected by factors such as acquisitions, disposals,
restructuring and tax regime reforms.
There have been no changes to the standard rate of corporation tax announced during either 2019 or 2018.
In the budget of 16 March 2016, the Chancellor of the Exchequer announced a further 1.00% reduction to the standard rate of
corporation tax which will be applicable in the financial year beginning 1 April 2020. The Finance Act 2016, which was substantively
enacted when it received Royal Assent on 15 September 2016, reduced the corporation tax rate to 19.00% with effect from 1 April
2017 decreasing to 17.00% with effect from 1 April 2020. These changes to the rate of corporation tax will impact the amount of
future cash tax payments for which the Group will be responsible.
12. 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 dilutive impact of shares under option of 2,002,304 at 31 December 2019 (2018: 2,423,249).
Underlying earnings per share are based on basic earnings per share adjusted for the impact of non-underlying items.
From continuing operations
Underlying net profit attributable to equity holders of the parent
Non-underlying items after tax
Net profit attributable to equity holders of the parent
From continuing and discontinued operations
Underlying net profit attributable to equity holders of the parent
Non-underlying items after tax
Net profit attributable to equity holders of the parent
Number of shares
Weighted average number of ordinary shares for the purpose of basic EPS
Effect of dilutive potential ordinary shares: share options
Weighted average number of ordinary shares for the purpose of diluted EPS
From continuing operations
Basic underlying earnings per share
Basic earnings per share
Diluted underlying earnings per share
Diluted earnings per share
From continuing and discontinued operations
Basic underlying earnings per share
Basic earnings per share
Diluted underlying earnings per share
Diluted earnings per share
116
2019
£’000
17,909
(2,331)
15,578
2019
£’000
17,909
(2,331)
15,578
2018
Restated
£’000
20,462
(7,094)
13,368
2018
Restated
£’000
20,462
(6,505)
13,957
2019
Thousands
2018
Thousands
78,097
1,178
79,275
2019
pence
22.9
19.9
22.6
19.7
22.9
19.9
22.6
19.7
77,736
2,584
80,320
2018
pence
26.3
17.2
25.5
16.6
26.3
18.0
25.5
17.4
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Notes to the Consolidated Financial Statements
13. Dividends
A final dividend of £4,995,000 for the year ended 31 December 2018 was paid in May 2019. This represented a payment of
6.39p per ordinary share in issue at that time.
An interim dividend in respect of the year ended 31 December 2019 of £2,228,000 (2018: £1,674,000), representing a payment
of 2.85p per ordinary share in issue at that time, was paid in September 2019.
A final dividend of 5.69p per share in respect of the year ended 31 December 2019 is to be proposed at the Annual General
Meeting on 21 May 2020. The ex-dividend date will be 23 April 2020 and the associated record date will be 24 April 2020. This
dividend will be paid subject to shareholder approval on 22 May 2020 and these financial statements do not reflect this final
dividend payable.
14. Goodwill and other intangible assets
Cost
Balance at 1 January 2018
Additions
At 31 December 2018
Additions
Additions on acquisition
Disposals
At 31 December 2019
Accumulated amortisation
Balance at 1 January 2018
Charge for the year
Impairment
At 31 December 2018
Charge for the year
Disposals
At 31 December 2019
Net book value
At 31 December 2018
At 31 December 2019
Goodwill
£’000
48,629
-
48,629
-
1,525
-
50,154
-
-
9,302
9,302
-
-
9,302
39,327
40,852
Franchise
agreements
£’000
72,137
-
72,137
-
5,036
-
77,173
-
-
-
-
-
-
-
72,137
77,173
Software
£’000
Total
Restated*
£’000
1,371
260
1,631
982
-
(82)
2,531
623
295
-
918
421
(43)
1,296
713
1,235
122,137
260
122,397
982
6,561
(82)
129,858
623
295
9,302
10,220
421
(43)
10,598
112,177
119,260
* Favourable leases with a net book value at 31 December 2018 of £25,000 (2017: £82,000) have been de-recognised on adoption of IFRS 16 Leases.
a) Acquisitions – current period
On 31 January 2019 the Group acquired the trade and assets of two ŠKODA dealerships located in Leicester and Nottingham.
On 28 February 2019 the Group acquired the trade and assets of four ŠKODA dealerships in Northampton, Bedford, Letchworth
and Harlow. These acquisitions are part of the Group’s stated strategy to grow with existing brand partners in new geographic
territories by adding further sites in excellent locations that are contiguous to the Group’s existing ŠKODA sites.
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
14. Goodwill and other intangible assets (continued)
a) Acquisitions – current period (continued)
On 2 September 2019, the Group acquired the trade and assets of two Honda dealerships in Reading and Newbury. This
acquisition is part of the Group’s stated strategy to grow with existing brand partners in new geographic territories by reinforcing
the Group’s position as the second largest Honda partner in the UK.
On 20 December 2019, the Group acquired the trade and assets of a Volvo dealership in Derby. This acquisition is part of the
Group’s stated strategy to grow with existing brand partners in new geographic territories.
The estimated combined identifiable assets and liabilities at the dates of these acquisitions are stated at their provisional fair
value as set out below. The goodwill arising on acquisition is attributed to the expected synergies and benefits associated with
the increased brand representation which has resulted in the Group becoming the UK’s largest ŠKODA retailer.
Intangible assets
Property, plant and equipment
Right-of-use assets
Inventories
Trade and other receivables
Trade and other payables
Lease liabilities
Provisions
Deferred tax liabilities
Net assets acquired
Goodwill
Total cash consideration
Fair value
of net assets
acquired
£’000
1,985
907
6,020
3,886
12
(460)
(5,870)
(552)
(7)
5,921
1,244
7,165
The results of the acquired ŠKODA, Honda and Volvo dealerships were consolidated into the Group’s results from the relevant
date of acquisition. For the period from acquisition to 31 December 2019, the revenues and the loss before tax generated by
these dealerships were immaterial in the context of the Group’s revenues and profit before tax.
If the acquisitions had taken effect at the beginning of the reporting period in which the acquisition occurred (1 January 2019), on
a pro forma basis, revenue of the combined Group for the year ended 31 December 2019 would have been increased by
£40,857,000 and profit before tax would have been reduced by £266,000.
On 17 December 2019, the Group acquired the trade and assets of five Volkswagen dealerships, a Volkswagen commercial
vehicle franchise and body shop and one ŠKODA dealership. This acquisition is part of the Group’s stated strategy to grow with
existing brand partners in new geographic territories by adding further sites in excellent locations. The estimated identifiable
assets and liabilities at the date of acquisition are stated at their provisional fair value as set out below. The goodwill arising on
acquisition is attributed to the expected synergies and benefits associated with the increased brand representation which has
resulted in the Group becoming Volkswagen Group UK’s largest partner by number of locations.
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Notes to the Consolidated Financial Statements
14. Goodwill and other intangible assets (continued)
a) Acquisitions – current period (continued)
Intangible assets
Property, plant and equipment
Right-of-use assets
Inventories
Cash and cash equivalents
Trade and other payables
Lease liabilities
Provisions
Deferred tax liabilities
Net assets acquired
Goodwill
Total cash consideration
Fair value
of net assets
acquired
£’000
3,051
3,681
20,388
12,916
2
(655)
(18,487)
(225)
(720)
19,951
281
20,232
The results of the acquired dealerships were consolidated into the Group’s results from 18 December 2019. For the period from
acquisition to 31 December 2019, the revenues and the loss before tax generated by these dealerships were immaterial in the
context of the Group’s revenues and profit before tax.
If the acquisition had taken effect at the beginning of the reporting period in which the acquisition occurred (1 January 2019), on
a pro forma basis, revenue of the combined Group for the year ended 31 December 2019 would have been increased by
£167,749,000 and profit before tax would have been reduced by £1,657,000.
Transaction costs arising on acquisitions in 2019 totalled £835,000. These costs have been recognised in net operating expenses
in the Consolidated Statement of Comprehensive Income and are part of operating cash flows in the Consolidated Cash
Flow Statement.
Acquisitions – prior period purchase of non-controlling interests
On 22 February 2018, the Group acquired the remaining 1% of the share capital of the following subsidiary undertakings; Marshall
of Peterborough limited, Marshall of Ipswich Limited and Marshall of Stevenage Limited, taking the Group’s shareholdings in
these entities up to 100%. Total consideration for these shares amounted to £50,000; the value of consideration in excess of the
carrying value of the non-controlling interests acquired has been recognised in retained earnings.
b)
Impairment testing
For the purpose of impairment testing, goodwill and franchise agreements are allocated to a cash generating unit (“CGU”), or to
the smallest group of CGUs where it is not possible to apportion the goodwill or intangible assets at the individual CGU level.
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. Goodwill and intangible assets arising on business combinations are allocated to CGUs
by determining which CGU is expected to benefit from the synergies of the business combination.
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
14. Goodwill and other intangible assets (continued)
b)
Impairment testing (continued)
The Group’s CGUs are groups of dealerships connected by manufacturer brand. The allocation of goodwill and indefinite lived
intangible assets to the CGU groups is as follows:
Volkswagen Group*
BMW/MINI
Jaguar/Land Rover
Mercedes-Benz/Smart
Other
Total
Franchise
Goodwill
Agreements
£’000
17,042
1,461
8,003
11,182
3,164
40,852
£’000
35,247
8,345
14,358
19,201
22
77,173
*Volkswagen Group includes Volkswagen, Audi, Skoda and Seat brands
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate that the
carrying amount may not be recoverable and a potential impairment may be required. Impairment reviews have been performed
for all groups of CGUs for the years ended 31 December 2019 and 2018.
Valuation basis
The recoverable amount of the Group’s CGUs is determined by reference to their value-in-use to perpetuity calculated using a
discounted cash flow approach, with a pre-tax discount rate applied to the projected, risk-adjusted pre-tax cash flows and terminal
value. Where higher, the fair value of groups of CGUs, less costs of disposal, is taken as the recoverable amount.
Period of specific projected cash flows
The value-in-use of each CGU is calculated using cash flow projections for a five-year period; from 1 January 2020 to
31 December 2024. These projections are based on the Board approved budget for the year ending 31 December 2020 forming
the basis for the Group’s five year strategic plan. The key assumptions in the most recent annual budget on which the cash flow
projections are based relate to expectations of sales volumes and margins and expectations around changes in the operating
cost base. The assumptions made are based on past experience, adjusted for expected changes, and external sources of
information. The cash flows include ongoing capital expenditure required to maintain the Group’s dealership network, but exclude
any growth capital expenditure projects to which the Group was not committed at the reporting date.
Discount rate
The cash flow projections have been discounted using a rate derived from the Group’s pre-tax weighted average cost of capital
adjusted for industry and market risk. The discount rate used is 8.0% (2018: 10.5%). The prior year discount rate has not been
restated as transition to IFRS 16 Leases does not trigger a revised impairment outcome.
The discount rate is lower than in previous years due to the adoption of IFRS 16 Leases.
Headroom
The Group's CGUs all have significant headroom in respect of the carrying value of goodwill and intangible assets with the
exception of the BMW/MINI CGU, to which goodwill of £1,461,000 and indefinite life franchise agreement intangible assets of
£8,345,000 are assigned.
The Group's BMW/MINI franchises have faced a number of challenges in the last two years brought about largely due to brand
challenges around oversupply of vehicles and vehicle recalls. As a result, BMW was impaired by £8,388,000 during the year
ended 31 December 2018.
During 2019 the business did not show the improvement forecast and as a result the assumptions relating to future profitability
and growth rates have been revised. The Board has approved this revised forecast which supports the carrying value of the
BMW/MINI goodwill as at 31 December 2019. Inherent in this are a number of assumptions related to the successful delivery of
actions already started by the manufacturer within the network to support profitable trading by each franchised dealership. In
addition to these market assumptions the forecast assumes delivery of a number of local management initiatives. The result of
which will lead to a significant performance improvement on the 2019 trading.
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Notes to the Consolidated Financial Statements
14. Goodwill and other intangible assets (continued)
b)
Impairment testing (continued)
Headroom (continued)
The approved forecast and therefore the value-in-use of the CGU is sensitive to changes in the delivery of the actions and
initiatives. Any delay in achieving these improvements during 2020 will put pressure on the carrying value of the associated
goodwill and intangible assets and consequently an impairment trigger event is likely to be realised.
An underperformance resulting in the EBITDA generated by the CGU being £0.5m below the forecast would lead to a non-cash
impairment of £4.5m. An underperformance of c6% would not result in an impairment, being the approximate breakeven point.
An overperformance to the forecast of 5% would increase the headroom by £3.7m.
Terminal growth rate
The cash flows after the forecast period are extrapolated into the future over the useful economic life of the group of CGUs using
a steady or declining growth rate that is consistent with that of the product and industry. These cash flows form the basis of what
is referred to as the terminal value. The growth rate to perpetuity beyond the initial budgeted cash flows applied in the value-in-use
calculations to arrive at a terminal value is 2% (2018: 2%). Terminal growth rates are based on management’s estimate of future
long-term average growth rates.
Conclusion
At 31 December 2019 the Group recorded impairment charges of £nil (2018: £9,302,000 of which £8,388,000 was in respect of
BMW/MINI and £914,000 in respect of other brands). The impairments recorded in the prior year were as a consequence of the
deterioration in market conditions resulting in revised assumptions around future profitability and growth rates. The impairment charge
was recorded within net operating expenses in non-underlying items in the Consolidated Statement of Comprehensive Income.
Sensitivity to changes in key assumptions
Impairment testing is dependent on estimates and judgements, particularly as they relate to the forecasting of future cash flows,
the discount rates selected and expected long-term growth rates.
The Group has performed a sensitivity analysis on the impairment tests using two scenarios; firstly, where the discount rate
increases by 100 basis points, secondly, where cash flows in 2020 are based on a 100 basis point decline in current year
performance. The first scenario would result in an impairment of £1,100,000 of the BMW/MINI CGU. The second scenario would
result in no recognition of an impairment against any CGU.
In order to assess the possibility of future impairments, the Group has performed additional sensitivity analysis (in addition to
those outlined above) based on any ‘worse case’ estimate. Firstly, where the discount rate increases by a further 100 basis points,
an additional impairment of £4,100,000 would be recognised against the BMW/MINI CGU. Impairments of £3,100,000 and
£200,000 would be recognised against the Volkswagen Group and the Other CGUs respectively. Secondly, where cash flows in
2020 are based on a further 200 basis points decline in current year performance, no impairment would be recognised.
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
15. Property, plant and equipment
Freehold Assets
land and Leasehold Plant and under
buildings improvement equipment construction Total
Restated Restated Restated
£’000 £’000 £’000 £’000 £’000
Cost
Balance at 1 January 2018 112,953 17,684 38,544 5,123 174,304
Additions at cost 1,687 523 3,410 17,626 23,246
Disposals (205) (1,040) (5,277) - (6,522)
Transfers 5,143 4,873 3,232 (13,248) -
Transfers to assets held for sale (797) - - - (797)
At 31 December 2018 118,781 22,040 39,909 9,501 190,231
Additions at cost 4,937 418 4,519 8,827 18,701
Additions on acquisition 1,991 734 1,863 - 4,588
Disposals - (595) (3,042) - (3,637)
Transfers to investment property (441) - - - (441)
Transfers 10,353 4,372 1,918 (16,643) -
At 31 December 2019 135,621 26,969 45,167 1,685 209,442
Accumulated depreciation and impairment
Balance at 1 January 2018 9,173 5,116 24,992 - 39,281
Charge for the year 1,628 1,802 5,455 - 8,885
Disposals (205) (1,076) (4,900) - (6,181)
Impairment - - 87 - 87
Transfers - 324 (324) - -
At 31 December 2018 10,596 6,166 25,310 - 42,072
Charge for the year 1,850 2,137 6,230 - 10,217
Disposals - (184) (2,661) - (2,845)
Impairment - 502 206 - 708
Transfers to investment property (3) - - - (3)
At 31 December 2019 12,443 8,621 29,085 - 50,149
Net book value
At 31 December 2018 108,185 15,874 14,599 9,501 148,159
At 31 December 2019 123,178 18,348 16,082 1,685 159,293
As at 31 December 2019, the Group had capital commitments totalling £6.9m (2018: £20.8m) relating to ongoing construction
projects.
2019
Impairments
The impairment loss of £708,000 represents the impairment of leasehold improvements and plant and equipment in the franchised
dealership which closed in October 2019 and the franchised dealership due to close in 2020. On closure of these dealerships
these assets ceased to have any value. This loss was recognised in the Consolidated Statement of Comprehensive Income in
net operating expenses.
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Notes to the Consolidated Financial Statements
15. Property, plant and equipment (continued)
2018
Transfers to assets held for sale
In October 2018, the Group ceased commercial activities at one if its freehold properties. As the property was no longer used for
the commercial activity of the business and is actively being marketed for sale, the asset has been transferred to assets classified
as held for sale (see Note 21 ‘Assets Classified as Held for Sale’).
Impairments
The impairment loss of £87,000 represents the net of £101,000 impairment of plant and equipment in the franchised dealership
that closed in October 2018 and £14,000 impairment reversal of plant and equipment in a franchised dealership that closed in
December 2017. These assets all had no residual value. This loss was recognised in the Consolidated Statement of
Comprehensive Income in net operating expenses.
16. Leases
a) Group as lessee
The Group has lease contracts for land and buildings and vehicles. Leases of land and buildings have an average term of between
20 and 25 years. Leases of vehicles have an average term of 3 years.
The following are amounts recognised in the Consolidated Statement of Comprehensive Income:
Depreciation of right-of-use assets
Profit on disposal and remeasurement of right-of-use assets and lease liabilities
Impairment loss on right-of-use assets
Expenses relating to short-term leases
Expenses relating to leases of low-value assets
Interest payable on lease liabilities
Total amount recognised in profit or loss
2019
£’000
9,357
(403)
1,081
209
847
3,068
14,159
2018
Restated
£’000
8,780
(3,460)
132
109
1,164
3,273
9,998
The Group had total cash outflows in respect of leases in the year of £12,785,000 (2018: £11,432,000). The Group also had non-
cash additions to right-of-use assets and lease liabilities of £28,778,000 (2018: £1,773,000).
123
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
16. Leases (continued)
a) Group as lessee (continued)
Set out below are the carrying amounts of the right-of-use assets recognised and the movements in the year:
Cost
At 1 January 2018
Additions
Disposals
Remeasurement
At 31 December 2018
Additions
Additions on acquisition
Disposals
Remeasurement
At 31 December 2019
Accumulated depreciation and impairment
At 1 January 2018
Charge for the year
Disposals
Impairment
At 31 December 2018
Charge for the year
Disposals
Impairment
At 31 December 2019
Net book value
At 31 December 2018
At 31 December 2019
2019
Impairments
Land and
buildings
Restated
£’000
Vehicles
Restated
£’000
Total
Restated
£’000
131,870
1,292
(7,687)
597
126,072
2,248
26,408
(1,206)
5,324
158,846
40,289
8,367
(7,687)
132
41,101
8,991
(82)
1,081
51,091
84,971
107,755
608
481
(233)
-
856
122
-
(234)
-
744
220
413
(233)
-
400
366
(234)
-
532
456
212
132,478
1,773
(7,920)
597
126,928
2,370
26,408
(1,440)
5,324
159,590
40,509
8,780
(7,920)
132
41,501
9,357
(316)
1,081
51,623
85,427
107,967
The premises used by the franchised dealership closed in October 2019 became vacant on cessation of trade. The right-of-use
asset has therefore been fully impaired. This impairment loss of £1,081,000 was recognised in the Consolidated Statement of
Comprehensive Income in net operating expenses.
2018
Impairments
The premises used by a franchised dealership were temporarily vacant due to the relocation of the franchise. The right-of-use
asset has therefore been partially impaired. This impairment loss of £132,000 was recognised in the Consolidated Statement of
Comprehensive Income in net operating expenses.
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Notes to the Consolidated Financial Statements
16. Leases (continued)
a) Group as lessee (continued)
Within 1 year
Between 1 and 5 years
After 5 years
Total lease liabilities
b) Group as lessor – finance leases
2019
£’000
10,689
40,215
57,181
108,085
2018
Restated
£’000
7,414
29,532
50,696
87,642
The Group has non-cancellable leases, as intermediate lessor, of leases for properties. The terms of these leases vary. The
following are amounts recognised in the Consolidated Statement of Comprehensive Income:
Loss on disposal of finance lease receivable
Income received from subleasing right-of-use assets
Finance income on net investment in leases
Total amount recognised in profit or loss
2019
£’000
-
(201)
(63)
(264)
Future minimum lease payments receivable for property under non-cancellable finance leases are set out below:
2019
£’000
185
185
185
185
185
1,154
2,079
(535)
1,544
2019
£’000
102
1,442
1,544
Within 1 year
Between 1 and 2 years
Between 2 and 3 years
Between 3 and 4 years
Between 4 and 5 years
After 5 years
Total undiscounted lease payments receivable
Unearned finance income
Net investment in the lease
Current (note 19)
Non-current
Total finance lease receivable
125
2018
Restated
£’000
183
(268)
(67)
(152)
2018
Restated
£’000
155
155
155
155
155
1,141
1,916
(416)
1,500
2018
Restated
£’000
95
1,405
1,500
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
16. Leases (continued)
c) Group as lessor – operating leases
The Group has entered into non-cancellable operating leases, as lessor on property included in investment property and as an
intermediate lessor on head leases of property assets. The terms of these leases vary. Future minimum lease payments receivable
for property under non-cancellable operating leases are as set out below.
Within 1 year
Between 1 and 2 years
Between 2 and 3 years
Between 3 and 4 years
Between 4 and 5 years
After 5 years
17. Investment property
Restated fair value at 1 January
Additions
Disposals
Fair value at 31 December 2018
Transfer from freehold land and buildings
Change in fair value
Fair value at 31 December 2019
2019
£’000
326
246
208
154
154
602
2018
Restated
£’000
223
200
200
169
125
615
1,690
1,532
Freehold
land and
buildings
£’000
Right-of-use
asset
£’000
2,000
5,800
(5,800)
2,000
438
140
2,578
590
-
-
590
-
470
1,060
Total
£’000
2,590
5,800
(5,800)
2,590
438
610
3,638
Investment properties are stated at fair value; a formal valuation is carried out at least every three years by a Chartered Surveyor
on an open market value basis. A full valuation of investment properties was carried out as at 31 December 2019 by BNP Paribas
Real Estate. A revaluation surplus of £610,000 was taken to the Consolidated Statement of Comprehensive Income in 2019.
The properties are rented out to third parties. Rental income of £383,000 was recognised in 2019 (2018: £266,000). There are
no restrictions on the Group’s ability to dispose of the investment properties or use any funds arising on disposal. There are no
contractual commitments for further development of the investment properties.
18. Inventories
Inventories held for resale
Less: provisions
Inventories
2019
£’000
480,087
(9,387)
470,700
2018
£’000
393,667
(9,662)
384,005
Inventories held for resale include new and used vehicles held for resale, vehicle parts and other inventory. As at 31 December
2019 £443,749,000 (2018: £370,823,000) of inventories held for resale are held under vehicle financing arrangements (see
Note 22 ‘Trade and Other Payables’).
Inventory recognised in cost of sales during the year as an expense was £1,979 million (2018: £1,895 million).
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Notes to the Consolidated Financial Statements
19. Trade and other receivables
Amounts falling due within one year:
Trade receivables
Other receivables
Amounts due from related undertakings (note 31)
Prepayments
Finance lease receivable (note 16)
Trade and other receivables
2019
£’000
50,269
28,879
3
8,209
102
87,462
2018
Restated
£’000
42,644
29,235
26
6,950
95
78,950
Other receivables include accrued supplier income of £17,385,000 (2018: £11,940,000). More information in respect of principal
risk management is provided in Note 26 ‘Financial Instruments – Risk Management’.
All financial assets included within trade and other receivables are held at amortised cost. The carrying amount of trade and
other receivables approximates fair value.
20. Cash and cash equivalents
Cash at bank and in hand
2019
£’000
110
2018
£’000
1,174
Cash and cash equivalents are held at amortised cost. Fair value approximates carrying value.
Cash at bank earns interest at floating interest rates determined by reference to short-term benchmark rates.
21. Assets classified as held for sale
Non-current assets held for sale
Freehold land and buildings
At 1 January
Transfers from property, plant and equipment
Disposals
At 31 December
2019
£’000
2018
£’000
797
-
-
797
750
797
(750)
797
Following the closure of one of the Group’s dealerships in October 2018, the decision was taken to sell the freehold property
owned by the Group and used by the dealership. Due to commercial property market conditions, the property remains available
for sale. The property continues to be actively marketed and, in light of revised macro economic conditions, sale is expected to
be completed within one year from the balance sheet date and there has been no change in the valuation.
The freehold property was reclassified as held for sale and transferred from property, plant and equipment into current assets.
On reclassification, the freehold property was measured at its carrying value, which was the lower of its carrying value and fair
value less costs to sell at the date of reclassification (fair value as determined by a desktop valuation from Chartered Surveyors).
No impairment was required as fair value less costs to sell exceed the asset’s carrying value.
Profits on disposal of assets classified as held for sale are included in Note 7 ‘Non-Underlying Items’.
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
22. Trade and other payables
Current - trade and other payables
Trade payables:
- vehicle financing arrangements
- other trade payables
Contract liabilities
Amounts owed to related undertakings (note 31)
Other tax and social security payable
Other payables
Accruals
Total current trade and other payables
Non-current – other payables
Contract liabilities
Total non-current other payables
2019
£’000
2018
Restated
£’000
443,749
102,170
10,502
42
4,803
1,893
14,851
578,010
370,823
81,749
18,755
37
4,443
1,658
14,922
492,387
6,371
6,371
5,596
5,596
All financial liabilities included within current trade and other payables are held at amortised cost; carrying value is a reasonable
approximation of fair value.
Vehicle financing arrangements
The Group finances the purchases 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 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 agreements
is included within finance costs and classified as stock holding interest.
Contract liabilities
OEM contributions
Commission income
Service packages
2019
£’000
949
10,238
5,686
16,873
2018
£’000
590
18,165
5,596
24,351
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Notes to the Consolidated Financial Statements
22. Trade and other payables (continued)
Contract liabilities (continued)
Contract liabilities include OEM contributions received in advance from manufacturer’s for which the Group acts as principal.
At 1 January
Deferred during the year
Recognised as revenue during the year
At 31 December
2019
£’000
590
517
(158)
949
2018
£’000
561
161
(132)
590
Contract liabilities include commission income received in advance from the various finance and insurance companies for which
the Group acts as agent.
At 1 January
Deferred during the year
Recognised as revenue during the year
At 31 December
2019
£’000
18,165
4,408
(12,335)
10,238
2018
£’000
21,478
8,215
(11,528)
18,165
Contract liabilities include service packages received in advance from customers for which the Group acts as principal.
At 1 January
Deferred during the year
Recognised as revenue during the year
At 31 December
23. Loans and borrowings
Current loans and borrowings
Mortgages
Bank loan
Non-current loans and borrowings
Mortgages
Total loans and borrowings
2019
£’000
5,596
21,001
(20,911)
5,686
2018
£’000
4,281
20,907
(19,592)
5,596
2019
Nominal and
book value
£’000
2018
Nominal and
book value
£’000
641
25,000
25,641
5,024
5,024
30,665
641
-
641
5,665
5,665
6,306
Mortgages comprise amounts borrowed from commercial financial institutions and are secured by fixed charges over specified
property assets of certain subsidiaries of the Group.
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
23. Loans and borrowings (continued)
Committed facilities
The Group has a revolving credit facility of £120,000,000 of which £25,000,000 was drawn at 31 December 2019 (2018: £nil).
This facility includes access to an overdraft facility of £25,000,000. This facility is available for general corporate purposes including
acquisitions or working capital requirements. The facility is held in a cash pooling arrangement and balances have been offset in
the Consolidated Balance Sheet.
The facility is secured by cross guarantees granted by the certain members of the Group. The facility is available until May 2021.
More information in respect of principal risk management is provided in Note 26 ‘Financial Instruments – Risk Management’.
The carrying amount of current loans and borrowings approximate fair value.
The carrying amounts and fair value of the non-current loans and borrowings are as below. The fair values are based on cash
flows discounted using the prevailing rates.
Mortgages
Carrying
amount
£’000
5,024
2019
Fair
value
£’000
3,951
Carrying
amount
£’000
5,665
2018
Fair
value
£’000
4,478
a)
Interest rate profile of borrowings
Mortgages
Bank loan
2019
Debt
£’000
5,665
25,000
Weighted average cost of drawn borrowings 30,665
2019
Average
effective
interest rate
£’000
2.40
1.92
2.01
2018
Debt
£’000
6,306
-
6,306
2018
Average
effective
interest rate
£’000
2.40
-
2.40
All loans and borrowings are subject to floating rates of interest which are determined by reference to official market rates such
as LIBOR or the Finance House Base Rate.
b) Maturity profile of borrowings
The Group’s borrowings have the following maturity profile:
Within 1 year
Between 1 and 5 years
After 5 years
Total loans and borrowings
2019
£’000
25,641
2,565
2,459
30,665
2018
£’000
641
2,565
3,100
6,306
All loans and borrowings are subject to floating rates of interest which are determined by reference to official market rates such
as LIBOR.
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Notes to the Consolidated Financial Statements
24. Provisions
Dilapidations Closed sites Pension Other Total
Restated Restated
£’000 £’000 £’000 £’000 £’000
At 1 January 2019 643 204 5,580 1,368 7,795
On acquisition 687 - - 90 777
Charged to income statement in the year 290 357 23 313 983
Reversed and credited to income statement
in the year (368) (9) - - (377)
Utilised during the year (54) (137) (5,603) - (5,794)
As at 31 December 2019 1,198 415 - 1,771 3,384
Current
Non-current
Total provisions
Dilapidations and closed sites
2019
£’000
3,085
299
3,384
2018
£’000
7,795
-
7,795
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.
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.
Pension
See Note 32 ‘Pensions’ for full details of the circumstances giving rise to the recognition of this provision. The provision has been
fully utilised within the year.
Other
Other provisions include a total amount of £1,167,000 (2018: £1,115,000) in respect of the Group’s estimated financial exposure
under open insurance claims and for potential output VAT payable arising from uncertain VAT treatment of specific vehicle
purchases. Conclusion of these open positions is expected in the forthcoming year.
25. Deferred tax assets and liabilities
The analysis of deferred tax assets and deferred tax liabilities is as below.
Deferred tax liabilities:
– Deferred tax liability to be recovered after more than 12 months (note 25a)
– Deferred tax assets to be offset against liabilities (note 25b)
Net deferred tax liabilities
The movement on deferred tax balances is as follows:
At 1 January
Transitional adjustment on adoption of IFRS 9 and IFRS 16
Deferred tax acquired
Income statement credit / (charge) (note 11)
Net deferred tax liabilities
131
2019
£’000
2018
Restated
£’000
(39,227)
19,093
(20,134)
(35,504)
15,930
(19,574)
2019
£’000
2018
Restated
£’000
(19,574)
(20,409)
-
(727)
167
1,119
-
(284)
(20,134)
(19,574)
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
25. Deferred tax assets and liabilities (continued)
a) Deferred tax liabilities
The movement in deferred tax liabilities during the year, without taking into consideration the offsetting of balances within the
same tax jurisdiction, is as follows:
Fixed
assets
acquired
on a
business
depreciation combination
£’000
Accelerated
tax
£’000
Assets
Roll previously
over
relief
£’000
Intangible
qualifying Investment assets and
goodwill
£’000
for IBAs properties
£’000
£’000
Right-of-
use asset
Restated
£’000
Total
Restated
£’000
Balance at 31 December
2017 as originally presented
Impact of change in accounting policies
Restated balance at 1 January 2018
Charged/(credited) to the income statement
805
-
805
6,325
(533)
5,792
1,203
-
1,203
222
-
222
- current year
609
(179)
-
(26)
Charged/(credited) to the income statement
- prior year
At 31 December 2018
Acquisitions
(172)
1,242
(482)
5,131
51
1,254
-
328
-
196
-
Charged/(credited) to the income statement
- current year
(148)
(177)
Charged/(credited) to the income statement
- prior year
At 31 December 2019
(317)
777
b) Deferred tax assets
3
5,285
1,254
-
-
-
28
-
28
-
-
13,651
-
13,651
-
14,977
14,977
22,234
14,444
36,678
166
(1,152)
(582)
11
(592)
28
13,828
13,825
35,504
-
-
4,489
4,817
(25)
80
172
(682)
(780)
-
171
-
-
-
108
14,000
17,632
(314)
39,227
The movement in deferred tax assets during the year, without taking into consideration the offsetting of balances within the same
tax jurisdiction, is as follows:
Tax
losses
£’000
Disposals
on a
Capital
losses sale basis
£’000
£’000
Lease
Other
liabilities temporary
Restated differences
£’000
£’000
Total
Restated
£’000
Balance at 31 December 2017
as originally presented
Impact of change in accounting policies
Restated balance at 1 January 2018
(Charged)/credited to the income
39
39
163
163
42
42
-
1,581
15,548
15,548
15
1,596
1,825
15,563
17,388
statement - current year
(43)
207
167
(1,033)
(421)
(1,123)
(Charged)/credited to the income
statement - prior year
At 31 December 2018
Acquisitions
(Charged)/credited to the income statement
- current year
(Charged)/credited to the income statement
- prior year
At 31 December 2019
-
209
-
-
-
14,515
4,090
(337)
838
-
(335)
15,930
4,090
(603)
(212)
(803)
(209)
-
-
18,002
55
681
(124)
19,093
(2)
368
-
12
30
410
4
-
-
-
-
-
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Notes to the Consolidated Financial Statements
25. Deferred tax assets and liabilities (continued)
b) Deferred tax assets (continued)
Deferred tax assets are recognised for tax loss carry forwards to the extent that the realisation of the related tax benefit through
future taxable profits is probable.
Trading losses
Available indefinitely
At 31 December
2019
Tax
losses
£’000
211
211
2019
Unrecognised
deferred tax
asset
£’000
36
36
2018
Tax
losses
£’000
1,387
1,387
2018
Unrecognised
deferred tax
asset
£’000
236
236
26. Financial instruments – risk management
a)
Financial instruments by category
The Group’s principal financial instruments consist of cash and cash equivalents, bank overdrafts and loans and borrowings.
The main purpose of these financial instruments is to manage the Group’s funding and liquidity requirements. The Group has
other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.
The table below analyses financial instruments by assets type. All financial liabilities are carried at amortised cost in both 2019 and
2018. For all financial assets and liabilities, fair value equals carrying value except for long-term borrowings as disclosed in Note 23.
Assets as per the Consolidated Balance Sheet
Finance lease receivables
Trade and other receivables excluding prepayments (note 19)
Cash and cash equivalents (note 20)
Total financial assets
Liabilities as per the Consolidated Balance Sheet
Loans and borrowings (note 23)
Lease liabilities (note 16)
Trade and other payables excluding non-financial liabilities (note 22)
Total financial liabilities
b) Risk management
The Group’s activities expose it to the following financial risks:
• Market risk;
•
•
Credit risk; and
Liquidity risk.
2019
£’000
1,544
79,253
110
80,907
30,665
108,085
579,578
718,328
2018
Restated
£’000
1,500
72,000
1,174
74,674
6,306
87,642
493,540
587,488
Each of these risks are managed in accordance with Board-approved policies. Risk management policies and systems have
been established and are reviewed regularly to reflect changes in market conditions and the Group’s activities. These policies
are set out below.
The Group’s financial risk management processes seek to enable the early identification, evaluation and effective management
of the significant risks facing the business.
The Group does not use financial derivatives and does not enter into trade financial instruments, including derivative financial
instruments, for speculative purposes.
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
26. Financial instruments – risk management (continued)
b) Risk management (continued)
Market risk
Market risk is the risk of movements in the fair value of future cash flows of a financial instrument or forecast transaction as
underlying market prices change. The only market risk to which the Group is exposed is changes in interest rates. The Group’s
business activities neither expose it to commodity price risk nor foreign currency risk.
Interest rate risk is the risk that a change in interest rates adversely effects the Group’s performance or ability to settle financial
obligations and comprises two elements.
Interest price risk
This risk results from financial instruments bearing fixed interest rates; changes in floating interest rates therefore affect the fair
value of these fixed rate financial instruments.
The Group has no debt subject to fixed interest rates and is, therefore, not exposed to interest price risk.
Interest cash flow risk
This risk results from financial instruments bearing floating interest rates. Changes in floating interest rates affect cash flows on
interest receivable or payable.
The Group is exposed to interest rate risk on its floating rate debt, namely all loans and borrowings. 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. Due
to the low value of the Group’s loans and borrowings as at 31 December 2019, the Group does not have significant sensitivities
to the impact of future changes in interest rates on floating rate debt.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group.
The Group is exposed to credit risk on its financial assets which consist of cash balances with banks and trade and other
receivables to the extent that settlement is cash-related. The Group does not have a significant exposure to this type of financial
risk due to the nature of its customer base and the types of transaction that are undertaken.
The maximum exposure to credit risk on the Group’s financial assets is represented by the assets’ carrying amount.
Finance lease receivables
The Group has one finance lease receivable which is a sub-leased property. There have been no instances of rent default by the
lessee in the past, and none are expected in the future, hence the credit risk is deemed to be low. No impairment loss allowance
has been recognised in the current or prior year.
Trade receivables
The Group has a high volume of transactions spread across a large customer base, therefore, does not have a significant
exposure to the credit worthiness of any single counterparty.
The Group has an established credit policy applied by each business under which the credit status of each new customer is
reviewed (by reference to external credit evaluations, where possible) before credit is advanced. Credit limits are established for
all significant or high-risk customers, which represent the maximum amount permitted to be outstanding without requiring additional
approval from the appropriate level of management. These limits are based on external credit reference agency ratings and the
utilisation of approved credit limits is regularly monitored. Outstanding debts are continually monitored by each business unit.
Trade receivables are considered to be past due once they have passed their contractual due date. At each reporting date, the
Group uses a provision matrix to measure expected credit losses on trade receivables. When the debt is deemed irrecoverable,
the allowance account is written off against the underlying receivable.
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Notes to the Consolidated Financial Statements
26. Financial instruments – risk management (continued)
b) Risk management (continued)
Credit risk (continued)
Credit quality of trade receivables
The Group uses a provision matrix to measure the expected credit losses on trade receivables. Loss rates are calculated using
a ‘roll rate’ method based on the probability of a receivable progressing through successive stages of delinquency to write-off.
Loss rates are based on actual credit loss experience over the past two years.
The movement in the allowance for impairment in respect of trade and other receivables during the year was as follows:
Balance at 1 January per IFRS 9 (2018) / IAS 39 (2017)
Adjustment on initial application of IFRS 9
Balance at 1 January per IFRS 9
Amounts written off
Net remeasurement of loss allowances
Balance at 31 December per IFRS 9
Cash and cash equivalents
2019
£’000
677
-
677
-
(217)
460
2018
£’000
1,542
91
1,633
(736)
(220)
677
Banking relationships are generally limited to those banks that are members of the core relationship group. These banks are
selected for their credit status and their ability to meet the businesses’ day-to-day banking requirements. The credit ratings of
these institutions are monitored on a continuing basis.
The Group has not recorded impairments against cash or cash equivalents, nor have any recoverability issues been identified
with such balances. Such items are typically recoverable on demand or in line with normal banking arrangements.
Exposure to credit risk
A summary of the Group’s exposure to credit risk for trade receivables and cash and cash equivalents is as follows:
Counterparties without external credit rating:
Group 1
Total gross carrying amount
Loss allowance
Net carrying amount of trade receivables
Gross carrying amount
Loss allowance
Finance lease receivable
Counterparties with external credit rating:
A \ AA- (stable)*
Loss allowance
Cash at bank
2019
£’000
Not credit-
impaired
2019
£’000
Credit-
impaired
2018
£’000
Not credit-
impaired
2018
£’000
Credit-
impaired
1,893
48,836
50,729
(460)
50,269
1,544
-
1,544
110
-
110
-
-
-
-
-
-
-
-
-
-
-
1,338
41,983
43,321
(677)
42,644
1,500
-
1,500
1,174
-
1,174
-
-
-
-
-
-
-
-
-
-
-
Group 1 – new customers/related parties (less than 6 months)
Group 2 – existing customers/related parties (more than 6 months) and no defaults in the past.
* Standard & Poor’s rating (long term)
135
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A
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
26. Financial instruments – risk management (continued)
b) Risk management (continued)
Liquidity risk
Liquidity risk is the risk that the group will encounter difficulty in meeting its obligations associated with its financial liabilities as
they fall due.
Ultimate responsibility for liquidity risk management rests with the Board, 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.
Liquidity risk is managed by maintaining adequate levels of easily accessible cash reserves and committed banking facilities. To
assess the adequacy of resources, available headroom is continuously monitored through review of forecast and actual cash
flows and through matching the maturity profiles of financial assets and liabilities. The Group has access to undrawn banking
facilities in order to further reduce liquidity risk. The Group does not anticipate any issues drawing on the committed, undrawn
banking facilities should this be necessary. Full details of the Group’s borrowing facilities are given in Note 23 ‘Loans and
Borrowings’.
The table below analyses the contractual undiscounted cash flows relating to the Group’s financial liabilities at the balance sheet
date. The cash flows are grouped based on the remaining period to the contractual maturity date. The Group holds sufficient
funds to meet these commitments as they fall due.
Due
between
6 months
and
1 year
£’000
382
-
Due
between
1 and 2
years
£’000
752
-
Due
between
2 and
5 years
£’000
2,164
-
Due
after 5
years
£’000
3,367
Total
£’000
7,051
-
25,000
7,313
14,536
40,381
113,005
182,316
-
6,371
-
-
579,578
7,695
21,659
42,545
116,372
793,945
Due within 6
months
£’000
386
25,000
7,081
573,207
605,674
Due
between
6 months
and
1 year
£’000
Due within 6
months
£’000
379
5,583
376
5,659
Due
between
1 and 2
years
£’000
741
11,561
Due
between
2 and
5 years
£’000
2,150
33,247
Due
after 5
years
£’000
3,396
Total
£’000
7,042
73,078
129,128
487,944
493,906
-
5,596
-
-
493,540
6,035
17,898
35,397
76,474
629,710
Mortgages
Bank loan*
Lease liabilities
Trade and other payables
(excluding other taxes and social security)
At 31 December 2019
Mortgages
Lease liabilities
Trade and other payables
(excluding other taxes and social security)
At 31 December 2018
*Bank loans include short-term borrowings under the revolving credit facility, which in accordance with the terms and conditions
of the committed facility are due for repayment within 30 days.
The above tables do not include forecast data for liabilities which may be incurred in the future but which were not contracted as
at the balance sheet date.
136
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Notes to the Consolidated Financial Statements
26. Financial instruments – risk management (continued)
c) Capital risk management
The capital structure of the Group consists of cash and cash equivalents, loans and borrowings and shareholders’ equity. The
Consolidated Statement of Changes in Equity provides details on equity, Note 20 provides details of cash and cash equivalents
and Note 23 provides details of loans and borrowings.
The Group manages its capital structure with the following objectives:
•
•
•
•
to safeguard the Group’s ability to continue as a going concern and maintain sufficient available resources as protection for
unforeseen events;
to ensure that sufficient capital resources are available for working capital requirements and meeting principal and interest
payment obligations as they fall due;
to provide flexibility of resource for strategic growth and investment where opportunities arise; and
to provide reasonable returns to shareholders and benefits for other stakeholders whilst maintaining a limited level of risk.
There were no changes to the Group’s approach to capital management during the year.
By virtue of the Group’s retail mediation activities, the Group is subject to the capital requirements imposed by the Financial
Conduct Authority on all non-investment insurance intermediaries. The Group’s capital adequacy is monitored on a quarterly
basis and its capital resources have been consistently in excess of the requirements.
The Directors monitor the Group’s capital structure and determine the level of dividends payable to shareholders at least twice
a year prior to the announcement of results, taking into account the Group’s ability to continue as a going concern and the capital
requirements of its strategic business plans. Consistent with others in the industry, the Directors monitor levels of leverage by
reference to the ratio of net debt to total shareholders’ equity. Net debt is calculated as total borrowings (including both current
and non-current borrowings) less cash and cash equivalents. As disclosed in the Net Debt Reconciliation on page 88, the Group
had net debt of £138,640,000 as at 31 December 2019 (2018: £92,774,000).
27. Fair value measurement
The following table provides the fair value measurement hierarchy of the Group’s assets and liabilities.
Fair value measurement using:
Quoted
prices in
active
markets
(Level 1)
£’000
Significant
Significant
observable unobservable
inputs
(Level 2)
£’000
inputs
(Level 2)
£’000
Date of
valuation
Total
£’000
Assets measured at fair value:
Investment properties (note 17)
31 December 2019
3,638
Liabilities for which fair values are disclosed:
Mortgages (note 23)
31 December 2019
3,951
Assets measured at fair value:
Investment properties (note 17)
31 December 2018
2,590
Liabilities for which fair values are disclosed:
Mortgages (note 23)
31 December 2018
4,478
There were no transfers between Level 1 and 2 during 2019 or 2018.
-
-
-
-
3,638
3,951
2,590
4,478
-
-
-
-
137
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A
T
S
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
28. Share capital and reserves
Share capital and share premium
At 1 January 2018
Issued 11 April 2018
At 31 December 2018
Issued 2 April 2019
Issued 23 December 2019
At 31 December 2019
Number
of shares
77,392,862
472,791
77,865,653
306,795
59,789
78,232,237
Ordinary
shares
£’000
49,531
303
49,834
196
38
50,068
Share
premium
£’000
19,672
-
19,672
-
-
19,672
Total
£’000
69,203
303
69,506
196
38
69,740
On 2 April 2019 306,795 ordinary shares of 64p each were issued as part of the exercise of share options awarded under the
IPO Performance share option scheme.
On 23 December 2019 59,789 ordinary shares of 64p each were issued as part of the exercise of share options awarded under
the 2016 Performance share option scheme.
On 11 April 2018 472,791 ordinary shares of 64p each were issued as part of the exercise of share options awarded under the
IPO Restricted and IPO Performance share option schemes.
All shares issued are fully paid. Details of Directors’ interests in shares are shown in the Directors’ Remuneration Report on
pages 69 to 75.
Share repurchases
In April 2019 the Employee Benefit Trust (controlled by the Company) subscribed to 306,795 ordinary shares of the Company as
part of the exercise of the IPO Performance share option scheme. The Trust subscribed to the shares at nominal value.
In December 2019 the Employee Benefit Trust (controlled by the Company) subscribed to 164,427 ordinary shares of the
Company as part of the exercise of the 2016 Performance share option scheme. 104,638 of these ordinary shares were acquired
from the market at market value, while the Trust subscribed to the remaining 59,789 ordinary shares at nominal value.
In April 2018 the Employee Benefit Trust (controlled by the Company) subscribed to 472,791 ordinary shares of the Company as
part of the exercise of the IPO Restricted and IPO Performance share option scheme. The Trust subscribed to the shares at
nominal value.
Shares held by subsidiaries
No shares in the Company were held by subsidiaries in 2019 (2018: nil).
Share-based payments reserve
The share-based payments reserve is used to recognise the value of equity-settled share-based payments granted to employees,
including key management personnel, and Directors of the Group as part of their remuneration. Refer to Note 29 ‘Share-Based
Payments’ for further details of these plans.
Own shares reserve
Represents shares in the Company held by the Marshall Motor Holdings Employee Benefit Trust. These shares are held in order
to satisfy options exercised under the Group’s Performance Share Plan. Further details of which are set out in Note 29 ‘Share-
Based Payments’.
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Notes to the Consolidated Financial Statements
29. Share-based payments
The Group operates an equity-settled share option scheme for certain senior managers and executive directors of the Group (“the
Performance Share Plan”). As at 31 December 2019, five share grants have been awarded under the scheme being (a) IPO
Performance Awards (vesting in two tranches), (b) 2016 Performance Awards,(c) 2017 Performance Awards,(d) 2018 Performance
Awards and (e) 2019 Awards. Awards are made annually to eligible employees at the discretion of the Remuneration Committee;
employees receive shares at the end of the performance period, subject to the achievement of the specified underlying basic
earnings per share (“EPS”) performance conditions. Performance conditions are designed to incentivise senior managers and
executive directors to maximise long-term shareholder returns. Each option grant under the scheme is disclosed separately below.
The total share-based payment charge recognised during the year ended 31 December 2019 was £1,282,000 (2018: £732,000).
This is split as £152,000 in accruals (2018: £203,000) and £1,130,000 (2018: £529,000) in the share-based payments reserve.
If an option remains unexercised after a period of ten years from the date of grant, the option expires. The weighted average
remaining contractual life of options outstanding as at 31 December 2019 is 8.7 years (2018: 8.1 years).
The fair value of share options is determined by reference to the market value of the Group’s shares at the date of grant. No
valuation model is required to calculate the fair value of awards on the basis that the employees receiving the awards are entitled
to receive the full value of the shares and there are no market-based performance conditions attached to the awards. The weighted
average fair value of options outstanding as at 31 December 2019 is £1.56 (2018: £1.68). The fair value of options granted during
the year was £1.43 (2018: £1.59). The fair value of equity settled share options granted was based on market value on
28 November 2019 when the share options were granted.
Options are ordinarily forfeited if the employee leaves the Group before the options vest. All options issued are nil cost options
and all awards have an exercise price of £nil.
The share option scheme is in place to encourage option holders to take appropriate and timely action to maximise the long-term
financial performance and success of the Group. As a result, in accordance with the discretion afforded to them under the Group’s
remuneration policy, the Remuneration Committee regularly reviews any impact of Group restructurings and reorganisations on
incentive outcomes to ensure that performance conditions are not distorted by action taken to optimise business performance
for the long-term benefit of the Group.
The Remuneration Committee exercised this discretion during 2019. See the Directors’ Remuneration Report on pages 69 to 75
for further details.
In June 2019, the 2016 Performance Awards became exercisable. On 23 and 31 December 2019, all option holders exercised
these options. As such 164,427 ordinary shares of 64p were issued to satisfy the exercise of options. On exercise, the
Remuneration Committee exercised its discretion to settle a proportion of the share options equal to the option holders’ tax liability
arising on exercise in cash rather than being cash settled. The total value of cash-settled transactions to be paid in 2020 is
£517,000.
In April 2019, the second tranche of the IPO Performance Awards became exercisable. On 2 April 2019, all option holders
exercised these options. As such 306,795 ordinary shares of 64p were issued to satisfy the exercise of options. On exercise,
the Remuneration Committee exercised its discretion to settle a proportion of the share options equal to the option holders’ tax
liability arising on exercise in cash rather than being cash settled. The total value of cash-settled transactions was £708,000.
As at 31 December 2019 outstanding share options were as follows:
Award
Award date
2017 Performance Awards
29 September 2017
2018 Performance Awards
11 April 2018
2019 Awards
28 November 2019
No of shares
over which
options are Exercise
price
outstanding
Date
from which
exercisable
Expiry
date
611,373
680,249
710,682
Nil
Nil
Nil
29 September 2020
29 September 2027
11 April 2021
11 April 2028
28 November 2022
28 November 2029
139
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A
T
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
29. Share-based payments (continued)
a)
IPO Performance Awards
The IPO Performance Awards are subject to non-market performance conditions as detailed below as well as the service condition
of continuous employment.
The options vest for achieving growth in EPS from 2014 to 2017; 25% vest for achieving growth of CPI plus 4% per annum
increasing to 100% vesting for achieving growth of CPI plus 10% per annum.
These options vest in two equal tranches and 50% become exercisable on the third anniversary of the date on which the
Company’s shares were admitted to trading on the Alternative Investment Market of the London Stock Exchange and the
remaining 50% become exercisable on the fourth anniversary.
2019
No.
2019
WAEP
2018
No.
2018
WAEP
IPO Performance Awards
Outstanding as at 1 January
578,856
Granted during the year
Forfeited during the year
Exercised
Expired during the year
Outstanding as at 31 December
Exercisable as at 31 December
b)
2016 Performance Awards
-
-
(578,856)
-
-
-
-
-
-
-
-
-
-
1,208,056
-
(50,341)
(578,859)
-
578,856
-
-
-
-
-
-
-
-
The 2016 Performance Awards are subject to non-market performance conditions as detailed below as well as the service
condition of continuous employment.
The options vest for achieving growth in EPS from 2015 to 2018; 25% vest for achieving growth of CPI plus 3% per annum
increasing to 100% vesting for achieving growth of CPI plus 8% per annum.
These options all become exercisable on the third anniversary of the grant date.
The 2016 Performance Awards are subject to a holding period which starts on the grant date and ends on the fourth anniversary
of the grant date.
2016 Performance Awards
Outstanding as at 1 January
Granted during the year
Forfeited during the year*
Exercised during the year
Expired during the year
Outstanding as at 31 December
Exercisable as at 31 December
2019
No.
493,575
-
(340,126)
(153,449)
-
-
-
2019
WAEP
-
-
-
-
-
-
-
2018
No.
538,835
-
(45,260)
-
-
493,575
-
2018
WAEP
-
-
-
-
-
-
-
*Of the 340,126 options that lapsed during the year, 212,288 relate to options that were then ended on a discretionary basis.
140
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Notes to the Consolidated Financial Statements
29. Share-based payments (continued)
c)
2017 Performance Awards
The 2017 Performance Awards are subject to non-market performance conditions as detailed below as well as the service
condition of continuous employment.
The options vest for achieving growth in underlying, basic EPS from 2018 to 2019; 25% vest for achieving growth of CPI plus 1%
per annum and the percentage of options which vests increases on a straight line basis up to 100% vesting for achieving growth
of CPI plus 5% per annum.
These options all become exercisable on the third anniversary of the grant date.
The 2017 Performance Awards are subject to a holding period which starts on the grant date and ends on the fourth anniversary
of the grant date.
2017 Performance Awards
Outstanding as at 1 January
Granted during the year
Forfeited during the year
Exercised
Expired during the year
2019
No.
619,763
-
(8,390)
-
-
Outstanding as at 31 December
611,373
Exercisable as at 31 December
-
d)
2018 Performance Awards
2019
WAEP
-
-
-
-
-
-
-
2018
No.
806,141
(186,378)
-
-
619,763
-
2018
WAEP
-
-
-
-
-
-
-
The 2018 Performance Awards are subject to non-market performance conditions as detailed below as well as the service
condition of continuous employment.
The options vest for achieving growth in underlying, basic EPS from 2017 to 2020; 25% vest for achieving growth of 1.3% per
annum and the percentage of options which vests increases on a straight line basis up to 100% vesting for achieving growth of
6% or more per annum.
These options all become exercisable on the third anniversary of the grant date.
The 2018 Performance Awards are subject to a holding period which starts on the grant date and ends on the fourth anniversary
of the grant date.
2018 Performance Awards
Outstanding as at 1 January
Granted during the year
Forfeited during the year
Exercised
Expired during the year
2019
No.
731,054
-
(50,805)
-
-
Outstanding as at 31 December
680,249
Exercisable as at 31 December
-
141
2019
WAEP
-
-
-
-
-
-
-
2018
No.
-
930,966
(199,912)
-
-
731,054
-
2018
WAEP
-
-
-
-
-
-
-
S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
F
I
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
29. Share-based payments (continued)
e)
2019 Awards
The 2019 Awards are subject to the service condition of continuous employment.
These options all become exercisable on the third anniversary of the grant date.
The 2019 Awards are subject to a holding period which starts on the grant date and ends on the fourth anniversary of the grant date.
2019 Awards
Outstanding as at 1 January
Granted during the year
Forfeited during the year
Exercised
Expired during the year
2019
No.
-
710,682
-
-
-
Outstanding as at 31 December
710,682
Exercisable as at 31 December
-
2019
WAEP
2018
No.
2018
WAEP
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
30. Analysis of net debt
At 31
At 1 January Cash New Non-cash December
2019 flows leases items* 2019
Restated
£’000 £’000 £’000 £’000 £’000
Cash and cash equivalents 1,174 (1,064) - - 110
Liabilities arising from financing activities
Loans and borrowings (6,306) (24,359) - - (30,665)
Lease liabilities (87,642) 12,785 (25,238) (7,990) (108,085)
(93,948) (11,574) (25,238) (7,990) (138,750)
Net debt (92,774) (12,638) (25,238) (7,990) (138,640)
Lease liabilities 87,642 (12,785) 25,238 7,990 108,085
Adjusted net debt at year end (non
GAAP measure) (5,132) (25,423) - - (30,555)
*Non-cash items include remeasurements to existing lease liabilities as well as the unwinding of the discount on lease liabilities.
142
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Notes to the Consolidated Financial Statements
30. Analysis of net debt (continued)
At 1 January Cash New Non-cash At 31
2018 flows leases items* December 2018
Restated Restated Restated Restated Restated
£’000 £’000 £’000 £’000 £’000
Cash and cash equivalents 4,867 (3,693) - - 1,174
Liabilities arising from financing activities
Loans and borrowings (7,108) 802 - - (6,306)
Lease liabilities (97,720) 11,432 (1,773) 419 (87,642)
(104,828) 12,234 (1,773) 419 (93,948)
Net debt (99,961) 8,541 (1,773) 419 (92,774)
Lease liabilities 97,720 (11,432) 1,773 (419) 87,642
Adjusted net debt at year end (non
GAAP measure) (2,241) (2,891) - - (5,132)
*Non-cash items include remeasurements to existing lease liabilities as well as the unwinding of the discount on lease liabilities.
31. Related party transactions
Key management compensation is given in Note 9 ‘Employees and Directors’.
During 2019 and 2018 the Directors were members of an employee car ownership scheme under which the following transactions
were made in the year. The Directors purchased 24 cars in 2019 (2018:19) at a price of £1,725,000 (2018: £1,338,000) and sold
back 23 (2018:22) at a price of £1,577,000 (2018: £1,532,000). The Directors did not make a profit on these transactions.
All companies within Marshall of Cambridge (Holdings) Limited other than those which are subsidiaries of Marshall Motor Holdings
plc are related parties.
2019
Ultimate parent undertaking
Marshall of Cambridge (Holdings) Limited
Other group entities
Marshall of Cambridge Aerospace Limited
Marshall Fleet Solutions Limited
Other related parties
RPJ Consulting Services Limited*
Sales
£’000
Purchases
£’000
Year-end
balance
£’000
2
-
-
-
2
-
91
1
10
102
3
(39)
-
(3)
(39)
* The Group purchases administrative support services from RPJ Consultancy Services Limited, a company whose sole director is also Marshall Motor Holdings
plc’s Non-Executive Chairman.
143
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E
M
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A
T
S
L
A
C
N
A
N
F
I
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
31. Related party transactions (continued)
2018
Ultimate parent undertaking
Marshall of Cambridge (Holdings) Limited
Other group entities
Marshall of Cambridge Aerospace Limited
Marshall Thermo King Limited
Marshall Group Properties Limited
Sales
£’000
Purchases
£’000
Year-end
balance
£’000
52
16
296
(89)
275
606
254
3
1,112
1,975
1
(39)
27
-
(11)
Outstanding balances with group entities are unsecured, interest free and are expected to be settled in cash.
During the year ended 31 December 2019, the Group has not made any provision for doubtful debts relating to amounts owed
by related parties (2018: £nil).
32. Pensions
a) Defined contribution pension schemes
The Group makes contributions to defined contribution pension schemes; contributions paid are calculated by reference to a
percentage of each employee’s salary. All defined contribution schemes into which the Group makes contributions are managed
by third party providers. The only obligation of the Group with respect to these schemes is to make the specified contributions.
The total income statement charge for contributions for the year ended 31 December 2019 was £2,732,000 (2018: £1,999,000).
The total unpaid pension contributions outstanding at the year end were £526,000 (2018: £313,000).
b) Defined benefit pension schemes
Cessation of Participation in the Plan and Provision for Section 75 Employer Debt
Following the sale of Marshall Leasing Limited in 2017, the Group no longer had any current employees who were members of
the defined benefit section of the Plan. As a result of the Group’s strategic review of its existing pension arrangements on
31 December 2018, the Group ceased to be a participating employer in the Plan as a result of it no longer employing any active
members of the defined contribution section of the Plan. Accordingly, on 31 December 2018, a debt was triggered under Section
75 of the Pension Act 1995 on the Group (“Employer Debt”).
On 7 February 2019 the Plan’s actuary issued a certificate for the purposes of Regulation 5(18) and Regulation 6(8) of the
Occupational Pension Schemes (Employer Debt) Regulations 2005 confirming that the Employer Debt at 31 December 2018
was £5,541,000.
On 25 February 2019 the Group paid the Employer Debt (together with Trustee expenses of £25,000) to the Trustees of the Plan
and entered in to a Deed of De-Adherence with the Trustees and Marshall of Cambridge (Holdings) Limited confirming the discharge
of the Group from the trusts of the Plan and from any further obligations in relation to the Plan with effect from that date. Accordingly,
with effect from that date, the Group has no further commitments or participation in any defined benefit pension plans.
Principal Employer’s IAS 19 Disclosures
Details of the full scheme are included in the Annual Report and Accounts of Marshall of Cambridge (Holdings) Limited which
can be obtained from: Airport House, The Airport, Cambridge CB5 8RY.
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Notes to the Consolidated Financial Statements
33. Ultimate parent company
The parent undertaking of the largest group of undertakings for which consolidated 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 consolidated 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
Balance Sheet
At 31 December 2019
Fixed assets
Investments
Current assets
Debtors
Cash at bank and in hand
Creditors: Amounts falling due within one year
Net current liabilities
Net assets
Capital and reserves
Called-up share capital
Share premium
Share-based payments reserve
Own shares reserve
Profit and loss account
Shareholders’ funds
Note
2019
£’000
2018
£’000
6
7
9
10
156,622
161,886
5,060
5,465
10,525
(54,343)
(43,818)
112,804
50,068
19,672
1,025
(12)
42,051
112,804
6,317
-
6,317
(38,880)
(32,563)
129,323
49,834
19,672
1,570
-
58,247
129,323
The total comprehensive loss of the Company for the year ended 31 December 2019 was £9,219,000 (2018: £4,757,000)
The Company financial statements were approved for issue by the Board of Directors and authorised for issue on 9 March 2020.
Richard Blumberger
Chief Financial Officer
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Company Financial Statements
Statement of Changes in Equity
For the year ended 31 December 2019
Share-
Called-up based Own Profit and
share Share payments shares loss
Capital Premium reserve reserve account Total
Note £’000 £’000 £’000 £’000 £’000 £’000
At 1 January 2018 49,531 19,672 2,608 - 67,483 139,294
Loss for the financial year - - - - (4,757) (4,757)
Total comprehensive loss
for the year - - - - (4,757) (4,757)
Equity dividends paid 12 - - - - (4,983) (4,983)
New shares issued 10 303 - - (303) - -
Exercise of share options 10 - - (1,567) 303 504 (760)
Share-based payments charge 11 - - 529 - - 529
At 31 December 2018 49,834 19,672 1,570 - 58,247 129,323
Loss for the financial year - - - - (9,219) (9,219)
Total comprehensive loss
for the year - - - - (9,219) (9,219)
Equity dividends paid 12 - - - - (7,223) (7,223)
New shares issued 10 234 - - (234) - -
Exercise of share options 10 - - (1,675) 385 246 (1,044)
Acquisition of own shares - - - (163) - (163)
Share-based payments charge 11 - - 1,130 - - 1,130
At 31 December 2019 50,068 19,672 1,025 (12) 42,051 112,804
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FINANCIAL STATEMENTS
Notes to the Company Financial Statements
1. Statement of compliance
Marshall Motor Holdings plc (the Company) is incorporated and resident in the United Kingdom. The Company is a public limited
company, limited by shares, whose shares are listed on the Alternative Investment Market (AIM) of the London Stock Exchange.
The Company is registered in England under the Companies Act 2006 (registration number 02051461) with the address of the
registered office being; Airport House, The Airport, Cambridge, CB5 8RY, United Kingdom.
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 and in accordance with the Companies Act 2006.
2. Basis of preparation
The financial statements are prepared in Sterling which is both the functional and presentational currency of the Company and all
values are rounded to the nearest thousand pounds (£’000) except where otherwise indicated. The financial information has been
prepared on the going concern and historical cost basis.
The Company is part of the consolidated financial statements of Marshall Motor Holdings plc.
Exemptions adopted
The following disclosure exemptions have been adopted as permitted by FRS 102:
Financial instrument-related disclosures
– Presentation of a cash-flow statement and related notes
–
– Key management personnel compensation disclosures
– Share-based payments disclosures
Company profit
As permitted under section 408 of the Companies Act 2006, the Company has elected to neither present a Company Income
Statement nor Company Statement of Comprehensive Income.
3. Accounting policies
Except where disclosed otherwise in this note, the accounting policies adopted in the preparation of the Company financial
statements are consistent with those applied when preparing the Company financial statements for the year ended 31 December
2018.
Investments in subsidiaries
Investments in subsidiaries are recognised at cost less any impairment. Impairments are recognised directly through the Income
Statement.
Taxation
Current 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 taxation
Deferred tax is recognised in respect of all timing differences which are differences between taxable profits and total comprehensive
income that arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are
recognised in the financial statements. There are the following exceptions.
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Notes to the Company Financial Statements
3. Accounting policies (continued)
Taxation (continued)
Deferred taxation (continued)
Where, in a business combination, there are differences between amounts that can be deducted for tax for assets (other than
goodwill) and liabilities compared with the amounts that are recognised in the financial statements for those assets and liabilities,
a deferred tax liability or asset is recognised. The amount attributed to goodwill is adjusted by the amount of the deferred tax
recognised.
Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is considered probable that they will
be recovered against the reversal of deferred tax liabilities or other future taxable profits. Deferred tax is measured on an
undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax
rates and laws enacted or substantively enacted at the balance sheet date.
With the exception of changes arising on the initial recognition of a business combination, the taxation charge or credit is presented
either in the income statement or the statement of other comprehensive income depending on the transaction that resulted in the
taxation charge or credit.
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.
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.
The Company has no financial instruments measured at fair value.
Cash and cash equivalents
Cash and cash equivalents comprise cash at banks and in hand.
Short-term debtors and creditors
Debtors and creditors with no stated interest rate and which are receivable or payable within one year are recorded at transaction
price. Any losses arising from impairment are recognised in the Income Statement.
Interest-bearing loans and borrowings
All interest-bearing loans and borrowings are initially recognised at the present value of cash payable to the bank (including interest).
After initial recognition they are measured at amortised cost using the effective interest rate method, less impairment. The effective
interest rate amortisation is included in the Income Statement.
Share-based payments
The Company operates a number of equity-settled, share-based compensation plans through which the Company allows
employees to receive shares in the Company.
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FINANCIAL STATEMENTS
Notes to the Company Financial Statements
3. Accounting policies (continued)
Share-based payments (continued)
Equity-settled share-based payments are measured at fair value (calculated excluding the effect of service and non-market based
performance vesting conditions) at the date of grant. The share-based payment charge to be expensed is determined by reference
to the fair value of share options granted and is recognised as an employee expense within underlying earnings, with a
corresponding increase in equity.
The share-based payment charge is recognised on a straight-line basis over the vesting period (being the period over which all
vesting conditions are to be satisfied). An award subject to graded vesting is accounted for as though it were multiple, separate
awards, the number of awards being determined in direct correlation to the number of instalments in which the options vest.
The share-based payment charge is based on the Company’s estimate of the number of options that are expected to vest. At
each balance sheet date, the Company revises its estimates of the number of options that are expected to vest based on the non-
market performance vesting conditions and service conditions. The Company’s remuneration policy gives the Remuneration
Committee discretion to revise performance conditions to adjust for the impact of group restructurings and reorganisations on
incentive outcomes. The impact of any revisions to original vesting estimates or performance conditions is recognised in the Income
Statement with a corresponding adjustment to equity.
Social security contributions payable in connection with share options granted are considered to be an integral part of the grant
and are, therefore, treated as cash-settled transactions. Cash-settled share-based payments transactions are measured at fair
value at the settlement date, with changes in fair value recognised directly in equity in retained earnings.
When options are exercised, the Company issues new shares. These shares are gifted to the Employee Benefit Trust by the
Company at nominal value. The cost of these shares is recognised as a reduction to equity in the own shares reserve. When the
options are exercised and the shares transferred to the employees, the cost on the own shares reserve is transferred to equity.
When options issued by the Employee Benefit Trust are exercised the own shares reserve is reduced and a gain or loss is
recognised in the reserves based on proceeds less weighted-average cost of shares initially purchased now exercised.
Where shares options are forfeited, effective from the date of the forfeiture, any share-based payment charge previously recognised
in both the current and prior periods in relation to these options is reversed though the Income Statement with a corresponding
adjustment to equity.
The cost of awards granted to employees of the Company’s subsidiaries is recognised as an addition to the cost of its investment
in the employing subsidiary, with a corresponding increase in the Share-Based Payments Reserve in the Statement of Changes
in Equity.
Pensions
The Company participates in a defined contribution scheme for its employees. Contributions are charged to the Income Statement
as they become payable in accordance with the rules of the scheme.
Dividend distribution
Final dividends to the Company’s shareholders are recognised as a liability in the financial statements in the period in which the
dividends are approved by the Company’s shareholders. Interim dividends are recognised when they are paid.
Dividend income
Income is recognised when the Company’s right to receive the payment is established, which is generally when shareholders
approve the dividend. All of the Company’s income is generated in the UK.
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Marshall Motor Holdings plc | Annual Report & Accounts 2019
Notes to the Company Financial Statements
4. Auditor’s remuneration
The auditor’s remuneration for audit and other services was £3,000 (2018: £3,000).
5. Employees and directors
Employee costs for the Company during the year:
Wages and salaries
Social security costs
Other pension costs
Share based payments
Management
2019
£’000
1,944
293
113
756
2018
£’000
1,337
412
101
583
3,106
2,433
2019
No.
3
3
2018
No.
3
3
Details of the remuneration of the Directors, their share incentives and pension entitlements are set out in the Directors’
Remuneration Report on pages 69 to 75.
6.
Investments in subsidiaries
Cost
At 1 January 2019
Share-based payment awards to employees of subsidiaries
Impairment
At 31 December 2019
2019
£’000
161,886
452
(5,716)
156,622
Management has recognised an impairment charge of £5,716,000 (2018: £1,776,000) against investments in subsidiaries with a
carrying amount of £19,786,000 as at 31 December 2019 (2018: £12,946,000). The impairment charge is recorded within
administrative expenses in the Income Statement. The impairments recorded are a consequence of an improvement in process
to allocate central income and expense to relevant statutory entities, consistent with the allocation to CGUs in the Group accounts.
The Company owns directly or indirectly the whole of the issued and fully paid ordinary share capital of the following subsidiary
undertakings. All subsidiaries are incorporated in England and Wales and are 100% owned except where referenced.
The registered office for all subsidiary companies listed above is Airport House, The Airport, Cambridge, CB5 8RY, United Kingdom.
All subsidiaries listed below are included within the consolidated financial statements on pages 86 to 145.
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FINANCIAL STATEMENTS
Notes to the Company Financial Statements
6.
Investments in subsidiaries (continued)
Name of Undertaking
Marshall Motor Group Limited
Marshall of Cambridge (Garage Properties) Limited* (reg no. 02051459)
Tim Brinton Cars Limited* (reg no. 01041301)
Marshall of Ipswich Limited* (reg no. 04447940)
Marshall of Peterborough Limited* (reg no. 04861074)
S.G. Smith Holdings Limited* (reg no. 09416021)
S.G. Smith Automotive Limited* (reg no. 00622112)
S.G. Smith (Motors) Limited
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
S.G. Smith (Motors) Croydon Limited
S.G. Smith Trade Parts Limited* (reg no. 01794317)
Prep-Point Limited* (reg no. 00660067)
Marshall of Stevenage Limited* (reg no. 06450140)
Marshall Commercial Vehicles Limited
Marshall North West Limited* (reg no. 00322817)
Marshall of Scunthorpe Limited* (reg no. 01174004)
Silver Street Automotive Limited* (reg no. 00716748)
Exeter Trade Parts Specialists LLP* (reg no. OC329331)
Audi South West Limited
Hanjo Russell Limited
CMG 2007 Limited
Astle Limited* (reg no. 01114983)
Crystal Motor Group Limited* (reg no. 04813767)
Ridgeway Garages (Newbury) Limited
Pentagon Limited* (reg no. 01862751)
Pentagon South West Limited
Ridgeway TPS Limited* (reg no. 06112651)
Ridgeway Bavarian Limited* (reg no. 07930214)
Wood in Hampshire Limited
Wood of Salisbury Limited
Principal activity
at year end
Franchised motor dealership
Property holding
Property holding
Franchised motor dealership
Franchised motor dealership
Holding company
Holding company
Dormant
Franchised motor dealership
Franchised motor dealership
Franchised motor dealership
Dormant
Dormant
Motor parts sales
Maintenance and repair of motor vehicles
Franchised motor dealership
Dormant
Franchised motor dealership
Franchised motor dealership
Franchised motor dealership
Motor parts sales
Dormant
Dormant
Dormant
Franchised motor dealership
Franchised motor dealership
Franchised motor dealership
Franchised motor dealership
Dormant
Motor parts sales
Franchised motor dealership
Dormant
Dormant
* subsidiaries for which exemption from audit by virtue of s479A of the Companies Act 2006 has been taken for the year ended
31 December 2019.
7. Debtors
Amounts owed by Group undertakings
Other debtors
VAT
Prepayments
Deferred tax asset (note 8)
2019
£’000
5,025
28
-
-
7
2018
£’000
5,567
603
21
113
13
5,060
6,317
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 2019
Notes to the Company Financial Statements
8. Deferred tax assets
The analysis and movements in deferred tax assets during the year are as follows:
At 1 January 2018
Charged to the income statement - current year
Charged to the income statement - prior year
At 31 December 2018
Charged to the income statement - current year
At 31 December 2019
Temporary
differences
£’000
100
(82)
(5)
13
(6)
7
The Directors believe that all dividends paid by the Company’s subsidiaries will meet the exemption conditions set out in tax
legislation and are, therefore, non-taxable income.
9. Creditors: amounts falling due within one year
Bank loans
Bank overdraft
Trade creditors
Amounts owed to Group undertakings
Corporation tax
Other taxes and social security
Other creditors
Accruals and deferred income
2019
£’000
25,000
-
743
24,792
1,848
63
42
1,855
54,343
Amounts owed to group undertakings are unsecured, bear no interest and have no fixed repayment date.
10. Called-up share capital and other reserves
Share capital and share premium
78,232,237 (2018: 77,865,653) ordinary shares of 64p each
Ordinary shares
At 1 January
Issued on 11 April 2018
Issued on 2 April 2019
Issued on 23 December 2019
2019
£’000
50,068
2019
£’000
49,834
-
196
38
2018
£’000
-
4,274
735
30,775
1,490
63
354
1,189
38,880
2018
£’000
49,834
2018
£’000
49,531
303
-
-
On 2 April 2019 306,795 ordinary shares of 64p each were issued as part of the exercise of share options awarded under the IPO
Performance share option scheme.
50,068
49,834
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
10. Called-up share capital and other reserves (continued)
On 23 December 2019 59,789 ordinary shares of 64p each were issued as part of the exercise of share options awarded under
the 2016 Performance share option scheme.
On 11 April 2018 472,791 ordinary shares of 64p each were issued as part of the exercise of share options awarded under the
IPO Restricted and IPO Performance share option scheme.
All shares issued are fully paid. Details of Directors’ interests in shares are shown in the Directors’ Remuneration Report on
pages 69 to 75.
Share repurchases
In April 2019 the Employee Benefit Trust (controlled by the Company) subscribed to 306,795 ordinary shares of the Company as
part of the exercise of the IPO Performance share option scheme. The Trust subscribed to the shares at nominal value.
In December 2019 the Employee Benefit Trust (controlled by the Company) subscribed to 164,427 ordinary shares of the
Company as part of the exercise of the 2016 Performance share option scheme. 104,638 of these ordinary shares were acquired
from the market at market value, while the Trust subscribed to the remaining 59,789 ordinary shares at nominal value.
In April 2018 the Employee Benefit Trust (controlled by the Company) subscribed to 472,791 ordinary shares of the Company as
part of the exercise of the IPO Restricted and IPO Performance share option scheme. The Trust subscribed to the shares at
nominal value.
Shares held by subsidiaries
No shares in the Company were held by subsidiaries in 2019 (2018: nil).
Share-based payments reserve
The share-based payments reserve is used to recognise the value of equity-settled share-based payments granted to employees,
including key management personnel, and Directors of the Group as part of their remuneration. Refer to Note 29 ‘Share-Based
Payments’ for further details of these plans.
Own shares reserve
Represents shares in the Company held by the Marshall Motor Holdings Employee Benefit Trust. These shares are held in order
to satisfy options exercised under the Group’s Performance Share Plan. Further details of which are set out in Note 29 ‘Share-
Based Payments’.
11. Share-based payments
The Company operates a share-based payment scheme; having adopted the disclosure exemptions permitted by FRS 102, full
details of the scheme are included in Note 29 ‘Share-Based Payments’ of the consolidated financial statements and are not
duplicated here.
The share-based payment expense recognised by the Company is calculated by reference to the number of options awarded to
the employees of the Company.
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Notes to the Consolidated Financial Statements
12. Dividends
Paid during the year
Final dividend for 2017
Interim dividend for 2018
Final dividend for 2018
Interim dividend for 2019
2019
£’000
-
-
4,995
2,228
7,223
2018
£’000
3,309
1,674
-
-
4,983
A final dividend of £4,995,000 for the year ended 31 December 2018 was paid in May 2019. This represented a payment of 6.39p
per ordinary share in issue at that time.
An interim dividend in respect of the year ended 31 December 2019 of £2,228,000 (2018: £1,674,000), representing a payment
of 2.85p per ordinary share in issue at that time, was paid in September 2019.
A final dividend of 5.69p per share in respect of the year ended 31 December 2019 is to be proposed at the annual general meeting
on 21 May 2020. The ex-dividend date will be 23 April 2020 and the associated record date will be 24 April 2020. This dividend will
be paid subject to shareholder approval on 22 May 2020 and these financial statements do not reflect this final dividend payable.
13. Pensions
As described in Note 3 ‘Accounting Policies’, the Company participates in a pension scheme for the benefits of its employees
which is a defined contribution scheme. The scheme is funded by the payment of contributions to a trustee administered fund
which is kept independently from the assets of the participating employers.
The total pension cost for the year was £113,000 (2018: £101,000).
The total unpaid pension contributions outstanding at the year ended were £7,000 (2018: £3,000).
14. Related party transactions
Company transactions with subsidiaries
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.
Transactions with Directors
Details of transactions with Directors are included in Note 31 ‘Related Party Transactions’ of the consolidated financial statements.
15. 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, 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
Appendix – Alternative Performance Measures (APMs)
The Group presents various APMs as the Directors believe that these are useful for users of the financial statements in helping to
provide a balanced view of, and relevant information on, the Group’s financial performance. The APMs are measures which disclose
the adjusted performance of the Group excluding specific items which are regarded as non-recurring. See Note 7 ‘Non-Underlying
Items’ for full details of the nature of items excluded from non-underlying performance measures.
The following tables show the reconciliation between the Group’s performance as reported in accordance with International Financial
Reporting Standards (IFRS) and the Group’s underlying performance and like-for-like results.
Continuing operating profit
2019
£’000
2018
Restated
£’000
Total continuing operating profit as reported
29,586
27,602
Impact of non-underlying items
Post-retirement benefits charge
Acquisition costs
Net release / (recognition) of restructuring costs and provisions
Profit on disposal of assets classified as held for sale
Loss on disposal of investment property
Loss on impairment of goodwill and other intangible assets
Gain on revaluation of investment properties
Continuing underlying operating profit
Continuing revenue
Total continuing revenue as reported
Impact of non like-for-like activities
New dealerships acquired or opened in the year
Dealerships closed in the year
Continuing like-for-like revenue
Continuing gross profit
Total continuing gross profit as reported
Impact of non like-for-like activities
New dealerships acquired or opened in the year
Dealerships closed in the year
Continuing like-for-like gross profit
156156
23
835
2,123
-
72
-
(610)
2,443
32,029
2019
£’000
-
-
(3,466)
(268)
1,146
9,302
-
6,714
34,316
2018
£’000
2,276,129
2,186,887
(59,281)
(7,201)
(66,482)
-
(25,339)
(25,339)
2,209,647
2,161,548
2019
£’000
2018
£’000
260,801
253,247
(7,671)
(806)
(8,477)
-
(2,825)
(2,825)
252,324
250,422
257837 MMH AR 2019 pp156-imp.qxp 20/03/2020 14:14 Page 157
Marshall Motor Holdings plc | Annual Report & Accounts 2019
Appendix – Alternative Performance Measures (APMs) (continued)
Net debt consists of:
Cash and cash equivalents
Loans and borrowings
Lease liabilities
Closing net debt
Lease liabilities
Adjusted net debt
2019
£’000
2018
Restated
£’000
110
(30,665)
(108,085)
(138,640)
(108,085)
(30,555)
1,174
(6,306)
(87,642)
(92,774)
(87,642)
(5,132)
157
157
S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
F
I
I
257837 MMH AR 2019 pp156-imp.qxp 20/03/2020 14:14 Page 158
SHAREHOLDERS INFORMATION
Company Information
Registered Office:
Company websites:
Nominated Adviser and Broker:
Auditor:
Joint Bankers:
Legal Advisers to the Company:
Registrar:
Airport House
The Airport
Cambridge
CB5 8RY
www.mmhplc.com
www.marshall.co.uk
Investec Bank plc
30 Gresham Street
London
EC2V 7QP
Ernst & Young LLP
One Cambridge Business Park
Cambridge
CB4 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
Link Market Services Limited
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
158
158
Perivan 257837
PUTTING OUR CUSTOMERS
ABOVE ALL ELSE SINCE 1909
24 BRAND PARTNERS
132 OPERATING UNITS
28 COUNTIES NATIONWIDE
Pictured: Volkswagen Milton Keynes Dealership
2
Audi
BMW
BMW Motorrad
CUPRA
Ford
Ford Vans
Honda
Hyundai
Jaguar
Kia
Land Rover
LEVC
Maserati
Mercedes-Benz
Mercedes-Benz Commercials
MINI
Nissan
Peugeot
Seat
ŠKODA
Smart
Vauxhall
Volkswagen
Volkswagen Commercials
Volvo
Paint & Body Repair Centres
Trade Parts Specialists
Used Car Centres
24 BRAND PARTNERS
132 OPERATING UNITS
28 COUNTIES NATIONWIDE
www.mmhplc.com
Marshall Motor Holdings plc
Airport House, The Airport, Cambridge, CB5 8RY
© 2020 Marshall Motor Holdings plc
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Annual Repor t
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