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22 BRAND PARTNERS
128 OPERATING UNITS
28 COUNTIES NATIONWIDE
www.mmhplc.com
Marshall Motor Holdings plc
Airport House, The Airport, Cambridge, CB5 8RY
© 2021 Marshall Motor Holdings plc
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Annual Repor t
& Accounts 2020
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
Marshall Motor Holdings plc | Annual Report & Accounts 2020
22 BRAND PARTNERS
128 OPERATING UNITS
28 COUNTIES NATIONWIDE
Volkswagen ID.4
2
Marshall Motor Holdings plc | Annual Report & Accounts 2020
Contents
STRATEGIC REPORT
Chairman’s Statement 8
Operating Review 10
Financial Review 34
Principal Risks and Uncertainties 40
Board Decision Making (s.172 Statement) 46
GOVERNANCE
Board of Directors 50
Directors’ Report 52
Corporate and Social Responsibility 56
Corporate Governance Report 66
Audit Committee Report 72
Remuneration Committee Report 78
Directors’ Remuneration Policy 82
Directors’ Remuneration Report 86
Statement of Directors’ Responsibilities 90
FINANCIAL STATEMENTS
Independent Auditor’s Report 91
Consolidated Financial Statements
Consolidated Statement of Comprehensive Income 99
Consolidated Balance Sheet 100
Consolidated Statement of Changes in Equity 101
Consolidated Cash Flow Statement 102
Net Debt Reconciliation 103
Notes to the Consolidated Financial Statements 104
Parent Company Financial Statements
Parent Company Balance Sheet 160
Parent Company Statement of Changes in Equity 161
Notes to the Parent Company Financial Statements 162
COMPANY INFORMATION 171
3
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
£2,154.4m
£258.3m
£253.2m
£260.8m
£238.2m
£1,860.1m
£212.1m
£1,195.7m
£136.4m
2015 2016 2017
2018 2019
2020
2015 2016 2017
2018
2019
2020
CAGR 12.5%
CAGR 11.8%
Underlying Profit Before Tax*/** £m
Net Assets £m
£215.9m
£202.3m
£191.2m
£194.0m
£25.4m
£24.7m
£20.5m
£22.1m
£145.7m
£20.9m
£129.9m
£11.0m
2015 2016 2017
2018
2019
2020
2015 2016 2017
2018
2019
2020
* 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
Marshall Motor Holdings plc | Annual Report & Accounts 2020
2020 Quick Overview
Revenue
£2.2bn
£20.9m
87,439
Underlying Profit Before Tax
New and Used Units Sold
£215.9m
Net Assets
£31.1m
Underlying Operating Profit
Operating Units
128
3,691
Colleagues
at 31 December 2020
No.1
Automotive
Retail Employer
Ranked 6 years running by our
colleagues in the best UK workplaces
Employer of the Year
& Social Media Awards
5
Jaguar F-TYPE
South Lakes
Scarborough
Blackpool
Harrogate
York
Preston
Blackburn
Leeds
7th
Largest Automotive Retailer
Bolton
Approved
Used
Hull
Scunthorpe
Motorrad
Grimsby
22
Brand Partners
128
Operating Units
28
Counties Nationwide
Lincoln
Derby
Nottingham
Grantham
Melton Mowbray
Leicester
Northampton
Vans
King’s Lynn
Peterborough
Vans
Trade Parts
Specialist
St. Neots
Cambridge
Bedford
Milton Keynes
Trade Parts
Specialist
Oxford
Aylesbury
Letchworth
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
Taunton
Winchester
Southampton
Bournemouth
Commercial
Vehicles
Fareham Commercial
Vehicles
Portsmouth
Chichester
Trade Parts
Specialist
Exeter
Plymouth
Volvo XC40 T5
6
Retail Franchised Dealerships
Motorrad
Commercial Vehicle Dealerships
Vans
Vans
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
Approved
Used
Used Car
Centre
Commercial
Vehicles
Parts
Plus
7
Beckenham & Bromley, Bexley,
Coulsdon, Exeter, Newbury, Oxford,
Plymouth, Taunton and Wimbledon
Bournemouth, Grimsby (with Motorrad),
Hook and Salisbury
Cambridge
and King’s Lynn
Harrogate, Hull, South Leicester,
Newbury, Peterborough, Reading,
Scarborough and York
Cambridge, Ipswich, Lincoln,
Newbury, Oxford and Peterborough
Ipswich, Scunthorpe
Bedford, Cambridge, Ipswich,
Lincoln, Melton Mowbray, Newbury
Oxford and 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,
Leicester and Oxford
Barnstaple, Bedford, Croydon, Harlow,
Leicester, Letchworth, Milton Keynes, Newbury,
Northampton, Nottingham, Oxford and Reading
Bolton and Portsmouth
Ipswich and Peterborough
Aylesbury, Barnstaple, Bridgwater, 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 and King’s Lynn
Andover, Fareham
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, BMW Scunthorpe
and Cambridge Used Cars
Croydon Service Centre
Nottingham
Cambridge
CHAIRMAN’S STATEMENT
Chairman’s Statement
“Our priority in responding to the COVID-19
pandemic has been the safety and wellbeing
of our colleagues and customers and doing
our duty to the broader society to which
we belong.”
Introduction
I am pleased to present our annual results for the year
ended 31 December 2020 (the “Year”).
The Year was, inevitably, dominated by the impact of
COVID-19 and the measures put in place to control the
spread of the virus. As a result, there were prolonged
periods of the Year during which all, or some elements, of
our physical retail business were required to close. Whilst
this clearly affected trading during those periods, we
recognise and are grateful for, the fact that our sector was
not as negatively impacted as others.
As a sector, we benefited from a number of tailwinds
following the reopening of our businesses after the initial
national lockdown: we were permitted to open our retail
businesses earlier than other retailers on 1 June 2020 and
we benefited from the release of pent-up demand in both
sales and aftersales, an increased preference for private
mobility and robust used car valuations as a result of
supply constraints for new cars.
We also benefitted significantly from Government support
measures; including business rates relief, retail grants and
the Coronavirus Job Retention Scheme (CJRS). We are
grateful that these measures enabled us to protect the vast
majority of jobs within the Group as well as our liquidity.
Professor
Richard Parry-Jones CBE
Chairman
Our brand partners and suppliers have been extremely
supportive during this challenging period and we are
thankful for this support. In challenging times such as
those experienced during the Year, the importance of the
symbiotic relationship with each of our strong, global
franchise partners was clearly demonstrated.
I am incredibly proud of how our management team and
colleagues across the Group responded to the challenges
with which we were presented during the Year. Our priority
in responding to the COVID-19 pandemic has been the
safety and wellbeing of our colleagues and customers and
doing our duty to the broader society to which we belong.
As well as ensuring our businesses were safe
environments in line with COVID-19 secure guidelines,
we worked hard to support colleagues, both financially
and through wider wellbeing initiatives.
a
our
trading
perspective,
From
continued
outperformance of the wider market was significant and
(in combination with the support measures and sector
tailwinds referred to above) enabled us to achieve a
strong financial result for the Year despite the challenges
we faced.
Strategy
The Group’s strategy of close partnership with major global
automotive brands has served us well over many years,
none more so than in 2020 when the strength and depth of
our partnerships was clearly demonstrated. Whilst
completed corporate activity during the Year was more
limited as a result of COVID-19, our clear strategy, strong
financial position and support of our key brand partners will
enable us to take further growth opportunities as they arise.
We also believe that those automotive retailers with both
scale and a diverse portfolio will be best placed to succeed
in a changing market and continue to explore ways to
increase our scale with high quality, financially attractive
acquisitions.
The automotive sector was already undergoing a period of
evolution, driven by a combination of environmental,
technological and social change factors. COVID-19 has
accelerated a number of these developments, in particular,
the progression towards a more flexible, consumer-centric
retail model incorporating remote sales utilising technology
such as video consultations, online purchases with vehicle
delivery and ‘click and collect’ services. We have embraced
these developments and the operational efficiencies and
improved customer choice of experience they offer.
Nevertheless, COVID-19 has also demonstrated the
importance of our physical presence. Despite widespread
use of remote sales channels throughout the pandemic,
vehicle sales during the Year were significantly impacted by
the closure of showrooms for prolonged periods with
research consistently showing that the majority of
consumers continue to opt for a showroom experience as
part of the car buying process.
Along with our manufacturer partners, we continue to
believe that a strong retail franchise network will be a crucial
component of the future automotive sector. This perfectly
complements our increasingly strong online presence and
is positioning us to provide the ‘best of both worlds’ to our
customers, offering a bespoke customer experience with
warm human relationships at its heart.
8
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Marshall Motor Holdings plc | Annual Report & Accounts 2020
Results
The Group delivered a strong financial performance in what
was a very challenging year.
have collectively agreed that no executive management
bonuses should be paid until to the Group can restore
dividends.
The Group achieved reported revenue (including 2019
acquisitions) of £2.2 billion (2019: £2.3 billion). Underlying
profit before tax* (‘PBT’) for Year was £20.9m (2019:
£22.1m). The Board considers this to be a strong result
given the circumstances and, as stated above, was
achieved as a result of a combination of continued market
outperformance, sector
tailwinds and significant
Government support.
The Group’s balance sheet is also strong, with adjusted net
cash** of £28.8m at 31 December 2020 (2019: adjusted
net debt of £30.6m). Net assets rose to £215.9m,
underpinned by £125.8m of freehold land and buildings.
Dividend
The Board has considered the position in relation to
dividends extremely carefully. The Board is cognisant of the
fact that, in light of the uncertainty caused by COVID-19, it
suspended and subsequently cancelled the previously
announced final dividend for 2019 and did not declare an
interim dividend for 2020. The Board continues to believe
this was the right action to take to maximise the Group's
financial resilience in the face of an extremely unpredictable
trading environment.
In relation to 2020, whilst the Group has performed well and
its financial position is strong, the Board is mindful of the
significant support the Group has received both from
Government measures such as business rates relief and
CJRS and from other stakeholders.
As a result, the Board feels it would be inappropriate to
recommend the payment of a final dividend for 2020. The
Board understands the importance of dividends to
shareholders and intends to resume the payment of
dividends as soon as conditions allow and will consider the
position next at the time of release of its interim results in
August 2021. Our approach to management bonuses
supports this position: while we value management’s efforts
and commitment enormously, the Board and management
* Underlying profit before tax is presented excluding non-underlying items
(see Note 7 to the financial statements).
** Adjusted net cash/(debt) is presented excluding the impact of IFRS16
Leases.
AGM
Our annual general meeting will be held on 20 May 2021.
The Board would prefer to hold a physical meeting at which
shareholders are able to attend in person, but that may not
be possible.
Summary
The impact of COVID-19 continues to dominate the social
and economic environment in 2021. Our experience of
meeting these challenges during the Year, coupled with the
demonstrable resilience and flexibility of our business
model, leads to our belief in being able to navigate through
the headwinds that may arise in the short term.
Our strategic focus and tried and tested business model,
together with our exceptionally strong relationships with our
brand partners, gives us confidence in the Group’s future
prospects and success. The Group’s balance sheet
remains strong and we continue to be well positioned to
take advantage of further growth and consolidation
opportunities as they arise.
I would like to thank the leadership team, our brand
partners, business suppliers, shareholders and colleagues
throughout the Group for their wholehearted support during
a very challenging year.
Finally, I would also like to thank all of our customers
throughout the UK who continue to choose Marshall for
their mobility products and services. We believe in putting
our customers at the heart of everything we do and we
never lose sight of the fact that our sustained success as a
business is dependent on meeting and exceeding their
expectations.
Professor Richard Parry-Jones CBE
Chairman
8 March 2021
9
LEVC VN5 van
OPERATING REVIEW
Operating Review
“The response of colleagues across our
businesses during the Year was outstanding.
Despite significant uncertainty, our colleagues
went above and beyond, rising to the
challenges we collectively faced.”
Daksh Gupta
Chief Executive
Officer
Overview
2020 was dominated by COVID-19 and the impact of
measures put in place to control the spread of the virus,
both in the UK and globally. In common with many other
businesses, there were prolonged periods during the
Year when our physical retail businesses were required
to close, in full or in part, which clearly had a significant
impact on trading.
Nevertheless,
through a combination of support
received from both the Government and our business
partners, a number of one-off sector tailwinds and our
continued and significant outperformance of the wider
market, we are pleased to report an underlying profit
before tax for the Year of £20.9m (2019: £22.1m). Our
financial position also remains strong, with adjusted net
cash at 31 December 2020 of £28.8m (2019: adjusted
net debt of £30.6m).
Our priority in responding to the COVID-19 pandemic was
and remains the safety and wellbeing of our colleagues
and customers. As well as ensuring our businesses were
COVID-19 secure in line with Government guidelines, we
worked hard to support colleagues, both financially and
through wider wellbeing initiatives, further details of which
are set out later in this report.
In recognition of the vital role our aftersales operations
play in supporting essential vehicle mobility, we
continued to provide essential vehicle aftersales
services during periods of national and local lockdown
to support the emergency services, commercial vehicle
operators, vulnerable customers and key workers. The
Board believed it was appropriate for the Company to
continue to offer these services, notwithstanding they
operated at a small loss, to support the country,
particularly in light of the various Government support
schemes provided to businesses through this period.
The response of colleagues across our businesses
during the Year was outstanding. Despite significant
uncertainty, our colleagues went above and beyond,
rising to the challenges we collectively faced. Their
contribution
result cannot be
financial
underestimated and we thank them all for their
dedication and commitment.
to our
Whilst the impact of COVID-19 will continue to dominate
the social and economic environment in 2021, our
success in meeting these challenges to date, coupled
with the demonstrable resilience and flexibility of our
business model, gives us confidence in our ability to
successfully navigate the coming months.
Like-for-like revenue
£1.9bn
(2019: £2.2bn)
Underlying PBT
£20.9m
(2019: £22.1m)
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Financial Highlights:
Strategic and Operational Highlights:
Marshall Motor Holdings plc | Annual Report & Accounts 2020
• Reported revenue of £2.2 billion, down 5.3% (2019:
£2.3bn), with like-for-like revenue of £1.9 billion, down
13.5% (2019: £2.2bn), despite significant market decline
as a result of national lockdowns;
• Underlying profit before tax of £20.9m (2019: £22.1m),
reported profit before tax of £20.4m (2019: £19.6m);
• Total new vehicle unit sales down 9.2%, with like-for-like
total new vehicle unit sales down 19.4%, heavily
impacted by COVID-19 but a strong double-digit
outperformance against a UK market registration decline
of 29.4%;
? Total new vehicle unit sales to retail customers down
4.6% with like-for-like down 16.9%, an outperformance
against a UK retail market registration decline of 26.6%;
? Total new vehicle unit sales to fleet customers down
16.8% with
an
outperformance against a UK fleet market registration
decline of 31.7%;
like-for-like
23.2%,
down
• The Group added three further locations with the
acquisition of Aylesbury Volkswagen and start-ups of
Oxford Seat and King’s Lynn Ford Commercial Vehicles;
• Eleventh consecutive year of Great Place to Work status
and sixth consecutive year of being ranked as one of the
UK’s best workplaces;
• Further development of the Group’s digital strategy,
including the introduction of ‘click and collect’ and online
reservation services;
• Continued promotion of the ‘Marshall’ brand with a
number of national TV marketing campaigns and
continuation of our award-winning social media activities;
• Ongoing portfolio management with the closure of four
sub-scale, loss making businesses.
• Total used vehicle unit sales down 5.3% with like-for-like unit
sales down 14.6%, compared with used vehicle transactions
down 14.9%, a pleasing result given showroom closures;
• Reduced impact in aftersales with total revenue down
6.7% and like-for-like revenue down 13.5%;
• Total overheads of £207.1m, down by 9.5% (2019:
£228.8m), reflecting Government and partner support
combined with strong management actions;
• Adjusted net cash at 31 December 2020 of £28.8m, an
increase of £59.4m from 31 December 2019 as a result
of a combination of Government COVID-19 support
measures, working capital control and management
cash preservation actions taken during 2020;
• Positive cash position enabled voluntary repayment,
18 months early, of £10.9m being all amounts due under
the VAT Payment Deferral Scheme;
• £120m revolving credit facility extended in July until
2023; COVID-19-related covenant amendments agreed;
• No final dividend for Full Year 2020 proposed
11
Land Rover Defender
OPERATING REVIEW
COVID-19: impact and timeline
As stated above, 2020 was dominated by the impact of COVID-19 and the Year was
characterised by four distinct trading periods:
1) Pre-COVID-19: strong trading
(Jan to late March 2020)
In our 2019 results announcement on
10 March 2020, we reported that our order-
book for the important March 2020 plate-
change month had been encouraging. As
the month progressed, the Group continued
to perform strongly and was confident of
achieving an excellent operational and
financial performance in the first quarter of
the Year.
Notwithstanding the temporary closure of
our physical sites in what is traditionally
the busiest week of the year, we were able
to significantly outperform the wider UK
new car market in the first quarter:
• Like-for-like new unit sales for the three
months to 31 March 2020 were down
10.6% compared to the 31.0% decline in
new vehicle registrations reported by the
Society of Motor Manufacturers and
Traders (SMMT) over that period. This
outperformance reflected both strong
order-take throughout the first quarter of
the Year and a focus on completing
customer handovers in anticipation of the
potential closure of our operations given
the emerging situation with COVID-19;
• Like-for-like used unit sales were down
9.7%, a pleasing result given the fact
that our showrooms were closed in the
busiest week of the year;
• Like-for-like aftersales revenues were
down just 3.1% despite the loss of
seven trading days at the end of March;
they operated at a small loss, to support
the country, particularly in light of the
various COVID-19 Government support
schemes provided to businesses through
this period.
• Total like-for-like revenue was down
6.9% in the first quarter of the Year.
2) Safeguarding our business
through the closure period
(Late March to June 2020)
Our priority in responding to the COVID-19
pandemic was the safety and wellbeing of
our colleagues and customers and we
announced the temporary closure of our
dealerships on 23 March 2020, prior to
Government restrictions requiring car
showrooms and all non-essential
businesses to close, impacting the busiest
week of the year.
In recognition of the vital role our services
play in supporting essential vehicle
mobility, the Group kept 62 of its
aftersales operations open across the
country to support the emergency
services, commercial vehicle operators,
vulnerable customers and key workers
throughout the COVID-19 national
emergency. The Board believed it was
appropriate for the Company to continue
to offer these services, notwithstanding
We continued to operate online and on the
telephone to manage customer enquiries
for sales. During the closure period from
late March to June 2020, the Group took
orders for over 3,700 new and used
vehicles. This was, inevitably, significantly
down on the comparable prior year period
during which c.19,000 new and used
vehicle orders were taken.
During this period, the Group furloughed
around 90% of its 4,300 colleagues. The
Group acknowledges the support provided
by Government through the Coronavirus
Jobs Retention Scheme (CJRS) which
enabled the Group to support colleagues
and protect their employment.
Further details of how the Group
supported colleagues during their period of
furlough are set out in the ‘People Centric’
section below. These included the
additional financial support we provided to
supplement CJRS, through regular video
communications and a focus on supporting
colleagues’ mental wellbeing.
COVID-19 timeline – H1
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March
April
May
June
20th
23rd
11th
26th
Furlough scheme
announced
Government
imposed lockdown
Click and collect
Government announcement
ref re-opening of showrooms
10th
22nd
FY19 results
- March
orderbook
encouraging
MMH decision
to temporarily
close
showrooms
62 aftersales operations kept open during lockdown to support emergency
services, CV operators, vulnerable customers and key workers
3,700 new and used vehicle orders taken during lockdown. Maintained our retail
presence and supported our customers (online & telephone services)
1st
MMH showrooms
reopen under revised,
COVID-secure,
operating procedures
26th
90% of 4,300
colleagues
furloughed
Mar
Significant YTD LFL
outperformance
New: -10.6%
Mar
YTD: -31.0%
May
18th
1st
MMH recognised with
GPTW award
10th year running
Dealership
management
team returns
50% of
colleagues
returned to work
Ongoing bi-weekly management video briefings to all colleagues
Jun
Jun
Trading strong due to pent-up
demand & delivery of outstanding
vehicles ordered prior to lockdown
Significant YTD LFL
outperformance
New: -37.7%
Apr
May
Jun
Month: -97.3%
Month: -89.0%
YTD: -48.5%
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Marshall Motor Holdings plc | Annual Report & Accounts 2020
3) Re-opening under COVID-19
secure operating procedures
(June to October 2020)
The Group reopened all its showrooms
and other operating units from the 1 June
2020. Detailed preparations were made to
ensure our business reopened under
revised, COVID-19 secure, operating
procedures to safeguard our colleagues,
customers and all other visitors to our
businesses.
Through its close connections with the
National Franchised Dealers Association
(NFDA) and working alongside the SMMT,
the Group was pleased to contribute to
the COVID-19 safety guidelines issued by
the Government for motor retailers. The
Group carried out detailed risk
assessments, mandatory colleague
training ahead of return to the business
(with a required pass mark of 100%) and
implemented robust auditing by our
Health & Safety team to provide
assurance that our COVID-19 secure
procedures were being implemented and
followed.
Trading from June to October was strong,
benefitting from a number of sector
tailwinds including a release of pent-up
demand (including the delivery of
outstanding vehicle orders not completed
prior to the closure period and those
taken during that period), extended
vehicle financing agreements coming to
an end and a shift from use of public
transport towards vehicle ownership with
an increase in first-time car purchasers.
Resilient consumer demand was
augmented by strong margin retention
and robust used car valuations as a result
of supply constraints in new cars following
the prolonged closure of many
manufacturers’ factories during the first
lockdown period.
4) Second National Lockdown and
Geographical Tiers
(November to December 2020)
The second national lockdown in
November 2020 and the subsequent
introduction of Tier 4 restrictions during
December 2020 and the closure of all
non-essential retail (including vehicle
showrooms), again impacted trading
during the last two months of the Year.
In addition to these sector tailwinds, the
Group’s outperformance of the wider
market during this period was
significant. As announced in October
2020, the Group’s outperformance of
the market in the important plate-
change month of September was
particularly strong. Against the SMMT-
reported decline in total new vehicle
registrations in September 2020 of
4.4%, the Group’s like-for-like total new
vehicle sales were up 18.4%. Across the
third quarter of the Year as a whole, the
Group’s total new unit sales were up
11.8% on a like-for-like basis compared
with SMMT-reported new vehicle
registrations down 0.5%.
This strong period of trading enabled the
Group to eliminate losses from the first
lockdown period and gave the Board the
confidence to target a significant upgrade
to our adjusted profit before tax for the
Year.
With the Group’s strong presence in the
south and east of the country which were
first to be impacted by the tier system
during December 2020, around 90% of
our dealerships were required to close
during the last month of the Year. The
Group was, however, able to continue to
operate ‘click and collect’ retailing of new
and used vehicles during this period.
The work and investment made in
ensuring we could operate effectively on a
‘click and collect’ basis mitigated the
impact of the closure of our physical
showrooms to customers. We were
encouraged by the level of order-take and
deliveries utilising telephone, online and
‘click and collect’ services.
This trading environment has continued
into 2021 and whilst it has resulted in
reduced order-take, the impact has been
markedly less than that experienced
during the first lockdown period.
COVID-19 timeline – H2
July
August
September
October
November
December
12th
31st
2nd
3-tier system
introduced
4-week lockdown
imposed
4th tier introduced, c.90% of MMH
operations impacted given footprint
18th
H1’20 results –
Key September
order bank
building well
Continued to trade strongly
throughout remainder of
August and during key plate-
change month of September
Showrooms in
tier 3 close
All showrooms closed. Aftersales
open and ‘click and collect’
services continue. Continued
investment in online proposition
16th
Launch date of
£99 online
reservations
Sep
Recognised as Great
Place To Work for
11th year running
Nov
MMH awarded
‘Employer of the
Year’ **
Ongoing management video briefings to all colleagues – 44 in 2020
18th
Targeting
break-even
Sep
13th
MMH LFL vs market
Significant LFL
outperformance
vs market
New retail +19.1%
+20.2%
Fleet
Used
+17.1%
+24.5%
+15.7%
-
Targeting £15m
underlying PBT
£10.9m VAT repaid early
Trading negatively
impacted by
November closure;
however continued
outperformance
9th
Targeting not
less than £19m
underlying PBT
Sector tailwinds: pent-up demand, “revenge
buying”, loss of confidence towards public
transport, increase in first-time vehicle users
and new vehicle supply shortages
Sep
New retail (month): -1.1%
Fleet (month): -7.4%
Dec
New retail (YTD): -26.6%
Fleet (YTD): -31.7%
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*Source: SMMT; **Motor Trader Magazine
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People are at the
heart of our success
Despite the uncertain and difficult times
we have experienced since March, all
the things that make our business so
special have carried on regardless.
We couldn’t be prouder of our colleagues
for continuing to keep spirits high, look
out for each other, support our business
and the community. Never have our
values been more evident.
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Marshall Motor Holdings plc | Annual Report & Accounts 2020
Our vision
To be the UK’s premier automotive retail group
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Class leading
returns
Customer
first
Retailing
excellence
People
centric
Strategic
growth
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, which underpin our 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.
15
OPERATING REVIEW
The Group aims to
deliver benchmarked
class leading returns
for its shareholders.
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Marshall Motor Holdings plc | Annual Report & Accounts 2020
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Class leading returns
Although the past Year has been challenging, the Group has
delivered a resilient performance by continuing to focus on the
basics of customer service combined with margin, stock and cost
control. The Group continues to focus on market outperformance. 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.
The Group’s strategy of building a balanced brand portfolio with the
right brand partners in the right geographic locations, helps allow for
the cyclical nature of individual brands as well as regional variations
in performance resulting from local economic issues.
In the medium to longer-term, 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 has been
most recently demonstrated by the successful integration of the
twenty new business units acquired in 2019. 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.
Putting our
customers above
all else since
1909
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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.
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.
The Group’s ability to adapt effectively to changing consumer preferences was demonstrated
during the Year as we responded to the various restrictions imposed as a result of COVID-19. By
utilising existing customer interaction capabilities (including through our website, our award-
winning social media channels, online chat and use of video) we were able to respond effectively
to the challenges presented by the closure of our physical showrooms.
We also accelerated plans already in place to further improve our website enabling online vehicle
reservations and aftersales bookings. Further development of our online capabilities are
underway, including the functionality to enable customers to complete the entire vehicle purchase
and part exchange process online. Whilst fully online sales remain low across the sector as a
whole, we recognise it is a growing area of interest for certain consumer groups and we are
investing significantly in further improving our digital capabilities to enhance customer experience,
improve our operational efficiencies and ensure consistent compliance.
Compliance
The Group operates in a regulated environment and takes its commitment to compliance seriously
as well as recognising the benefit it can bring our customers. 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.
Supported by the Group’s experienced team of compliance professionals, the Group made
detailed preparations for the introduction of the Financial Conduct Authority’s ‘Senior Managers
and Certification Regime’ (SMCR). These include clear statements of responsibility for the Group’s
Approved Persons, the identification and certification of the Group’s ‘Certification Employees’ and
group-wide training on SMCR and related conduct rules.
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Marshall Motor Holdings plc | Annual Report & Accounts 2020
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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Retailing excellence
The Marshall brand is synonymous with good customer service and the Group continues to leverage the
use of the ‘Marshall’ brand consistently across all of its franchises. This brand consistency is unique
amongst the large multi-brand motor retail groups in the UK.
A single brand approach allows the Group to have a single online point of entry for users with an instantly
recognisable brand name. The Group’s recently relaunched website, marshall.co.uk accommodates all
of the Group’s brand partners and stock, allowing for much wider customer choice in one place.
The Group has continued to leverage the Marshall brand during 2020 in a number nationwide marketing
campaigns, including advertising at televised premier league and EFL football matches, England’s Six
Nations rugby matches and England cricket matches. These campaigns have reached a combined live
audience of over 100 million and enjoyed over 330 million page impressions online. In addition, the
Group has recently announced the sponsorship of a trio of leading professional darts players for the 2021
season. The sponsorship includes shirt branding and the Group will be running competitions, personal
appearances and online game challenges over the next 12 months.
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.
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Marshall Motor Holdings plc | Annual Report & Accounts 2020
The Group maintains its
competitive edge by
investing in the best
people supported by
cutting-edge technology
in the sector.
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Industry digital marketing
accolades since 2015
Social media winner
at the Motor Trader
awards
100m+
Marshall adverts at UEFA
Nations League, Premiership,
Championship and FA cup
football, cricket, darts and
rugby viewed live by over
100m+ people
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OPERATING REVIEW
People centric
The Group is proud of its people-centric culture and this has been reflected in the level of
support provided to our colleagues during these challenging times. One of our main priorities
during the COVID-19 pandemic has been the safety and wellbeing of our colleagues. During
the first lockdown period the Group furloughed around 90% of our 4,300 colleagues.
Throughout this furlough period, the Group supplemented the support provided by the
CJRS, enhancing colleague pay during the closure period to 100% for March, 90% for April
and 85% for May and not imposing the CJRS cap of £2,500 per month. Whilst they
continued to work throughout, the Board and other senior members of the management
team voluntarily reduced their pay in line with the reductions for furloughed colleagues in
April and May, and also forfeited holiday accrued. The Group has also provided additional
financial support, including salary advances through our ‘Pay it Forward’ initiative.
In addition to providing financial support to colleagues and recognising the importance of
ongoing communication, regular management briefings have been issued to all colleagues
via video message from members of the Executive Committee and other members of the
senior management team. This enabled the Company to stay in touch with everyone and
provide updates on the actions the Company has been taking during the closure period.
Furloughed colleagues were encouraged to complete modules of the Company's bespoke
training programme via its online learning platform. As well as 'business as usual' training
programmes relating to financial services and data protection compliance, all colleagues
completed a mandatory formal training and assessment programme on our revised
operating procedures and social distancing guidelines before returning to the workplace.
Feedback from colleagues throughout the Year has been extremely positive, demonstrating
why, for the eleventh consecutive year, the Group has been recognised by Great Place to
Work UK as a ‘great place to work’ based on colleagues surveyed during 2020. At 79%, this
continues to be significantly ahead of the 65% threshold 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 and an extensive audit of people policies,
procedures and programmes, the Group was ranked 12th in the super large category of the
2020 Best UK Workplaces programme, which included employers such as Admiral, CISCO,
MARS UK, Deloitte and EY. 2020 was the sixth year running that the Group was ranked
amongst the best employers in the UK.
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Marshall Motor Holdings plc | Annual Report & Accounts 2020
The Group is committed
to recruiting, training,
and retaining the best
talent in the industry.
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6
Years in a row ranked in the
Best UK Work Places
Award
‘Employer of the Year’
at the Motor Trader
awards
12
Consecutive years as a
‘Great Place to Work’
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OPERATING REVIEW
The Group aims to grow
both organically and
through acquisitions,
building scale with its
existing brand partners
and extending its
geographic footprint.
167
Business
acquisitions
and disposals
since 2008
Strategic growth
As set out at the time of the Group’s IPO and demonstrated
since then, the Group’s strategy is to grow scale with existing
brand partners in new geographical territories. As evidenced
recently, there continues to be considerable consolidation in
the UK motor retail market with both Ford and Vauxhall
rationalising their network and Mitsubishi announcing its exit
from the European market. 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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Marshall Motor Holdings plc | Annual Report & Accounts 2020
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Acquisitions and Disposals
During 2019, 20 new business units were added to our
portfolio through eight acquisitions or start-ups. These
additions significantly expanded our representation with a
number of our key brand partners including ŠKODA,
Honda, Volkswagen and Volvo and were in line with our
strategy to grow with key brand partners. Although trading
in these businesses during the year was impacted by
COVID-19 related lockdowns, we have been very
encouraged with the progress made and anticipate that
these businesses will make positive contributions to the
Group’s future profitability.
On 10 July 2020, the Group completed the acquisition of
Aylesbury Volkswagen. The Aylesbury business formed part
of the strategic acquisition announced in December 2019
with its completion being deferred pending resolution of
certain property issues. All deferred consideration has now
been paid to the seller, Jardine Motor Group UK Limited.
The Group announced in October 2020 that it had secured
the opportunity to represent Ford Commercial Vehicles in
King’s Lynn, which will operate from our existing Ford
freehold site. We also agreed to represent SEAT at an open
point in Oxford, which will operate from a leasehold site
adjacent to the Group’s existing Jaguar Land Rover and
Volkswagen businesses. These new businesses
commenced trading in early 2021 following completion of
associated corporate identity upgrades.
The Group has continued to focus on driving operational
efficiencies and responding to a number of its brand
partners’ network rationalisation strategies and the ongoing
impact of COVID-19. As a result of a review of its portfolio,
and with the full support and approval of its brand partners,
during the Year the Group announced the closure of four
sub-scale franchised dealerships: Cambridge Hyundai,
Bury St Edmunds Ford, Knebworth Vauxhall and Poole
Mercedes-Benz Commercial Vehicles. In the year ended
31 December 2019, these dealerships made a combined
revenue contribution of £47.3m and a loss of £0.1m.
The Group now consists of 113 franchises representing
22 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 its 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 increase that scale further.
Audi Newbury - Corporate Identity redevelopment
BMW & MINI Grimsby - Refurbishment project to commence
Ford Commercial Vehicles King’s Lynn
Audi Wimbledon - Audi City Concept
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Marshall Motor Holdings plc | Annual Report & Accounts 2020
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TPS Deptford - Relocated
Volvo Derby - Refurbishment
Volvo Derby - Refurbishment
• King’s Lynn Ford CV – preparation for opening of new
franchise opportunity on current freehold site;
• South London TPS – Relocation from Old Kent Road to
new premises in Deptford in-line with Volkswagen TPS hub
and spoke strategy; and
• Newbury ŠKODA – Relocation of aftersales business to
new premises.
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 £110m in its
property estate, including corporate identity upgrades,
freehold and long-leasehold acquisitions and ongoing
maintenance capital expenditure.
Investment in New Retail Locations and
Major Developments
As part of our cash preservation actions, the Group’s capital
expenditure programme was reviewed and, in collaboration
with our brand partners where necessary, a number of
planned projects have been deferred.
As a result, capital expenditure in the Period was £11.7m,
a reduction of £7.7m versus 2019.
The Group will continue to review investment requirements
closely and will reinstate the investment programme at the
appropriate time.
Projects undertaken or commenced in the Year include:
• Newbury Audi – showroom corporate identity and building
refurbishment;
• Wimbledon Audi – completion of Audi’s “city concept”, the
first of its type in the UK;
• Derby Volvo – site refurbishment to Volvo VRE standards
following purchase in 2019;
• Welwyn Volvo – purchase of freehold;
• Oxford Seat – preparation for opening of new franchise
opportunity;
27
OPERATING REVIEW
Honda Civic
BMW M 1000 RR
smart EQ forfour
Nissan Micra
Market and business update
New vehicles
Growth
2020 2019 Total LFL
27,913 29,249 (4.6%) (16.9%)
15,021 18,054 (16.8%) (23.2%)
Retail units
Fleet units
Total units
42,934 47,303 (9.2%) (19.4%)
As reported by the SMMT, sales of new vehicles during
2020 were significantly impacted by COVID-19. During
the Year, new car registrations to retail and fleet customers
declined by 26.6% and 31.7% respectively, with total
registrations of new vehicles in the UK (including the
impact of dealer self-registration activity) declining by
29.4%. These declines were predominantly experienced
during April and May 2020 when total UK new
registrations were down 97.3% and 89.0% respectively.
The key registration month of March 2020 was also
heavily impacted by the timing of the first national
lockdown with the market registering c200k fewer units
year on year. Some pent-up demand was evident as we
exited the first lockdown but further restrictions including
a second national lockdown in November 2020 and tiered
restrictions in December 2020 meant that new vehicle
registrations in most months of the Year were below the
comparative months in 2019.
Against this challenging market backdrop, the Group sold
a total of 42,934 new vehicles during the Year, a decrease
of 9.2% versus 2019. The Group’s like-for-like new unit
sales decreased by 19.4%, a significant outperformance
compared to the wider market.
The Group’s total sales of new vehicles to retail customers
decreased by 4.6% in the Year, with like-for-like sales
down by 16.9% an outperformance of 9.7% versus the
market.
The Group’s total sales of new vehicles to fleet customers
decreased by 16.8% in the Year, with like-for-like sales
down by 23.2% an outperformance of 8.5% versus the
market.
The Group is increasing its focus on the growing
commercial vehicle segment and appointed a Head of
Commercial Vehicle Sales during the Year. We now have
18 sites which sell commercial vehicles.
Overall, new vehicle margins declined by 84bps in the
Year versus 2019. This margin reduction was driven by
the lower volumes which in turn impacted the Group’s
ability to achieve manufacturer overperformance bonus
targets, in particular in the peak trading month of
March 2020. The Group experienced improving margins
in the second half of the Year towards more normalised
levels.
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Mercedes-Benz eSprinter
Ford E-Transit
Kia Picanto
SEAT Ateca
Used vehicles
Growth
2020 2019 Total LFL
44,505 46,974 (5.3%) (14.6%)
Total units
The sale of used vehicles is a much larger market than
new vehicles and there are a larger number of market
participants, including franchised dealers, independent
traders and private sellers. The SMMT reported at total
market of 6,752,959 units in 2020, representing a decline
of 14.9% versus 2019.
Aftersales
Growth
2020 2019 Total LFL
240.6 258.1 (6.7%) (13.5%)
Revenue (£m)
Aftersales is a key strategic focus for the Group, providing
future revenue and profit assurance during periods of a
the
more challenging economic environment and
associated impact on vehicle sales. In addition to our retail
centre-based aftersales facilities, the Group operates six
standalone bodyshops, six trade parts centres and one
PDI centre. 65 of our aftersales businesses remained open
during the first national lockdown to support critical
services and key workers. These businesses operated at
a small loss during that period.
Aftersales contributed 45.8% of total gross profit during the
Year and,
financial
contribution to the Group which was important in the
context of the sharp decline in vehicle sales in the Year.
therefore, made a significant
29
Peugeot e-208
The Group is pleased that, against this challenging
backdrop, its used sales decline was contained at 5.3%
on a total basis and 14.6% on a like-for-like basis. This
was a pleasing result given the franchised sector was
more adversely affected by showroom closures.
Residual values remained strong throughout the Year due
to increased demand. Following a strong second half,
margin performance
flat
versus 2019.
full year margins were
Our aftersales performance was impacted by the lockdown
periods due to the closure of a number of our sites, the
deferral of MOT and servicing work in some cases and
also fewer miles being travelled by customers during the
lockdown periods.
We were, however, encouraged by the rate at which
aftersales activity levels picked up post-lockdown.
The reduction in aftersales revenue was partially offset by
productivity and efficiency improvements and a greater
focus on higher margin maintenance work with overall
aftersales margins improving by 74bps versus 2019.
Service plans continue to play an important part of our
aftersales retention strategy and also have the benefit of
allowing 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.
OPERATING REVIEW
Industry strategic landscape
As previously reported, 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.
The COVID-19 pandemic has materially disrupted
businesses globally, including those in the automotive
sector. Automotive retailers have responded to these
challenges by adapting their business models, changing
the way they interact with customers (which, by necessity,
has moved increasingly online) and introducing more
efficient ways of operating. The COVID-19 pandemic has
therefore accelerated many of the industry changes which
the Group’s strategy had anticipated occurring over a
number of years.
Macro change factors
Climate change and BEVs
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 now well underway, driven by
regulatory interventions such as the Clean Air for Europe
programme (‘CAFE’). 2020 saw the introduction of
punitive
vehicle
manufacturers which did not achieve significantly reduced
fleet average Co2 emissions.
financial penalties
those
for
Vehicle manufacturers have responded to these changes
with the launch, active promotion and attractive consumer
offers on a wide range of new BEV and hybrid vehicles in
2020. In particular, the Jaguar iPace, Mercedes’ EQ
range, BMW’s ‘i’ range and the much-anticipated
Volkswagen ID.3 were extremely popular choices in
2020. 2021 will see the launch of a host of further new
electric and hybrid vehicles, including the Volkswagen
ID.4, the Audi e-tron GT and Q4 e-tron, the BMW iX3 and
the ŠKODA Enyaq.
BEV registrations accounted for 6.6% of registrations in
the UK in 2020, up from 1.6% in 2019 and this proportion
of sales will continue to grow, driven by a combination of
both consumer demand and manufacturer ‘push’ given
the severe financial implications of not meeting CAFE
targets. 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.
All major vehicle manufacturers have, and continue to
invest 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 Volkswagen
Group and Ford in relation to the development of future
commercial vehicles.
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Connected Cars
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.
Digital Consumers
The COVID-19 pandemic has accelerated progress
towards a more integrated digital and physical approach
to retailing in the automotive sector. Many of these
developments were already well underway at the start of
the pandemic but during lockdown periods, automotive
retailers were reliant on their ability to interact effectively
with their customers, utilising and developing their online
presence, using video to showcase products and moving
the buying process, including vehicle financing, online.
Consumers are increasingly comfortable undertaking
elements of the vehicle purchasing process remotely,
particularly in terms of research, advice, price comparison
and negotiation and the completion of associated
paperwork. Nevertheless, experience from the COVID-19
pandemic has also demonstrated a strong preference
amongst many consumers for making final purchasing
decisions after the opportunity to physically view and test
drive vehicles, particularly used vehicles.
in
This consumer preference for an omni-channel approach
to retailing
the automotive sector has been
demonstrated by recent moves of supposedly ‘online-
only’ used vehicle retailers investing significantly in
physical retail and aftersales support infrastructure to
31
augment their online sales channels. A recent YouGov
survey commissioned by The Motor Ombudsman
showed that nearly two thirds of UK drivers would prefer
to visit a retailer in person to buy a new or used car, rather
than completing the entire vehicle ordering and purchase
process on online.
As such, the distinction between these new entrants and
traditional retailers has become far less marked:
traditional retailers have embraced the efficiencies and
consumer preferences for a digital sales experience and
new entrants have recognised the requirement and
consumer demand for a physical presence.
Regulatory Change
As previously reported, in the past two years the FCA has
introduced a number of changes which have impacted
motor retailers. First, changes introduced following the
FCA’s thematic review of general insurance distribution
impacted commission arrangements
chains have
insurance
between
intermediaries such as the Group in relation to the sale of
vehicle-related insurance products (including GAP).
Secondly, changes have been recently introduced which
affect, inter alia, commission arrangements between
credit brokers such as the Group and the providers of
motor vehicle finance.
insurance
providers
and
The combined impact of these changes has been to
reduce the proportion of profitability for new and used
vehicle sales which are attributable to the sale of finance
and insurance products. In each of these reviews, the
FCA has acknowledged that retailers are not making
excessive profits overall but expected the balance
between the profitability of the vehicle sale itself and the
sale of ancillary financial and insurance products, to be
realigned.
OPERATING REVIEW
Peugeot 5008
ŠKODA Octavia
Mini electric
Vauxhall Mokka
Impact and opportunities for 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, training and expertise required to service
BEVs, differentiates their franchised dealers from much
of the independent aftersales sector.
• Connected car
technology will provide
further
opportunities for manufacturers, through their franchised
dealer networks, to improve retention rates for older
vehicles within their aftersales networks.
• 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 retailers able and willing to invest.
• The impact of regulatory changes following the FCA’s
review of motor finance is yet to been seen but, as
stated above, the FCA expects the balance between the
profitability of vehicle sales itself and the sale of ancillary
financial and insurance products, to be realigned and
the sector as whole will be working through these
changes in 2021.
• A number of vehicle manufacturers have announced
plans to move towards an agency model for new vehicle
sales, either across their entire ranges or for certain
models. Whilst this would impact dealers’ reported
revenues, there are potentially significant benefits for
dealers of an agency model for new vehicle sales,
including a material reduction in vehicle stocking costs.
• The
franchised sector’s close partnerships and
symbiotic relationships with vehicle manufacturers, the
ability to sell new vehicles supported by manufacturer
sales and financing incentives and the opportunity to
fulfil vehicle manufacturers’ sales and aftersales
the opportunities
retention strategies
presented by connected car capabilities) are important
differentiators from the independent sector.
(including
• 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.
Marshall Strategy
The Board believes that the Group’s long-standing
strategy of partnering with the right 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. With its strong investment in both
technology and colleague training 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
The Group is supportive of the changes introduced by the
FCA, both in terms of the extension of SMCR to solo-
regulated firms such as the Group and the changes made
in connection with the sale of finance and insurance
products. The Group believes these changes will be
embraced by well-established retailers such as the Group
which have the scale to invest in effective, professional
internal compliance expertise and recognises the benefits
and confidence it will bring to our customers.
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 and aftersales strategies.
32
BMW R 1250
Peugeot e-208
Marshall Motor Holdings plc | Annual Report & Accounts 2020
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Vauxhall Vivaro-e Life
Cupra E-Racer
Ford S-MAX
Volkswagen I.D. BUZZ
Summary and Outlook
The unprecedented political, economic and social impact of
the COVID-19 pandemic in 2020 challenged governments,
businesses and individuals across the world. Whilst this
resulted in a record fourth consecutive year of decline in the
new vehicle market in the UK, the automotive retail sector
also benefited from a number of unforeseen tailwinds and
demonstrated great resilience in comparison to many other
sectors, including some other areas of retail.
to
the Group’s strong
The Board recognises the impact of these sector tailwinds,
one-off market distortions and significant Government
financial
support measures
performance in 2020. It also recognises the contribution
made by the Group’s response to the challenges of 2020:
its strengthening market outperformance; its operational
and financial discipline; and its flexibility to adapt to a new
trading environment, including the highly effective adoption
of ‘click and collect’ retailing for new and used cars.
The SMMT’s latest forecast for the new car market in 2021
is an increase of 15.7% on 2020 to 1.887m registrations but
it is important to note this remains down 18.3% on 2019.
The national lockdown from the beginning of 2021 has
impacted the market in the build up to the important March
plate-change month.
As a result, the Board anticipates the first half of 2021 to
once again be dominated by the immediate impact of
COVID-19 and is also mindful of the likely longer-term
economic impact of the pandemic. The Board also notes
the potential impact of the changes introduced by the FCA
in relation to motor finance commissions and the possibility
of some continued new vehicle supply constraints. The
Board welcomes the positive resolution of negotiations
regarding the UK’s future trading relationship with the
European Union which had created uncertainty for the
sector over the past five years.
In relation to current trading, whilst both vehicle sales and
aftersales have inevitably been impacted by the current
national lockdown, the Board has been encouraged by
demand for remote and ‘click and collect’ vehicle sales and
the Group continued to outperform the wider new car
in both January and February 2021.
market
Understandably, the current national lockdown has
impacted our order bank for the important plate-change
month of March 2021. Based on experience from 2020, the
Board anticipates an element of pent-up demand release
once physical car showrooms are able to reopen (currently
expected to be 12 April 2021) with the outlook for the
remainder of the year correlating to the nationwide easing
of COVID-19 restrictions.
The Group’s balance sheet remains strong and we
continue to be well positioned to take advantage of further
growth and consolidation opportunities as they arise. Our
resilient business model, ability to adapt to changing
consumer behaviours, such as those enforced by
showroom closures, together with our exceptionally strong
relationships with our brand partners, gives us confidence
in the Group’s future prospects and success.
On behalf of the Board, I would like to thank our brand and
business partners for their exceptional support throughout
2020. I would also like to give special thanks to our team of
outstanding colleagues across the Group who, throughout
this extremely challenging period, once again
demonstrated their dedication and commitment both to our
business and our customers.
Daksh Gupta
Chief Executive Officer
8 March 2021
33
Volkswagen T-Cross
FINANCIAL REVIEW
Financial Review
“In the face of a difficult and turbulent year
due to the impact of COVID-19, we have
delivered a creditable result and further
strengthened our asset base.”
Richard Blumberger
Chief Financial
Officer
Overview
I am pleased to present the Group’s 2020 annual results.
Due to the impact of COVID, 2020 has been a difficult and
turbulent year, but a year where once again our colleagues
have risen to the challenges, helping deliver a very creditable
financial performance. Key for us during the Year was to
ensure we contributed towards containing the pandemic but
also to keep the country moving. This has seen us invest
significantly in making our businesses COVID-19 secure for
our colleagues and our customers, but also to keep our
essential aftersales businesses open to support the massive
effort of the nation in response to COVID-19.
Despite the tumultuous environment, I am pleased to confirm
that we successfully renegotiated our revolving credit facility
(“RCF”) in July 2020, securing our facility for a further 2.5
years through to January 2023. This is testament to the
strength of the Group and gives us significant firepower to
continue capitalising on opportunities as they arise.
During the Year, given the uncertainties, we focused on
conserving capital and therefore our investment in acquisitive
growth and capital expenditure in 2020 was lower than in
previous years. Nevertheless, where we could and deemed
it appropriate, we continued to invest in our business, with
the acquisition of Aylesbury Volkswagen in July 2020 which
completed the Volkswagen acquisitions from 2019.
Despite the difficult trading environment, the contribution from
the acquisitions made in 2019 was very encouraging. These
investments will deliver long term shareholder value.
We have also invested in two business start-ups for key
brand partners at open points. We now represent SEAT in
Oxford which will operate from a leasehold site adjacent to
the Group’s existing Jaguar Land Rover and Volkswagen
businesses and Ford Commercial Vehicles in King’s Lynn,
which will operate from our existing King’s Lynn Ford freehold
site. We also finalised our capital expenditure programmes
at our Audi businesses in Newbury and Wimbledon,
commenced our investment at Derby Volvo, which we
acquired in 2019, and took the opportunity to acquire the
freehold of our Volvo Welwyn site.
We continuously review our portfolio, and due to a lack of
overall scale with the brand, we decided to exit our Hyundai
business in Cambridge in September, as well as closing
some sub scale, loss-making dealerships during the Year. It
is imperative for us in ensuring we best utilise our capital,
that we continue to review our portfolio on an ongoing basis.
Reported revenue for the Year was down 5.3% versus 2019,
with like-for-like revenue down 13.5% as a consequence of
COVID-19. Overall like-for-like unit sales were down 17.1%
which was a very strong market outperformance. New retail
unit sales were down 16.9% on a like-for-like basis, which
was up 9.7% versus the market and used unit sales were
down 14.6%, marginally ahead of the market.
We experienced a strong bounce-back after the first national
lockdown fuelled by pent-up demand, in-part driven by
previously extended vehicle finance agreements coming to
an end and first-time buyers who have lost confidence in
public transport. New car margins were impacted in the first
six months of 2020 due to site closures in the critical March
plate change month affecting our ability to overachieve
targets which in turn affected manufacturer bonuses. Overall
margins experienced a recovery in the second half, in part
due to overachieving of targets but also as a result of factory
closures in the early part of 2020 which led to supply
shortages, positively impacting demand for used cars.
Overall, the Group delivered an underlying profit before tax
of £20.9m which was only marginally down on 2019, but was
significantly supported by COVID-19 support measures
provided both from Central and Local Governments of
£27.6m. Without this support, the Group may have had to
consider taking more significant structural mitigating actions.
The Group remains grateful
the Government’s
intervention with the furlough scheme and the many jobs this
has protected, as well as the support from our brand and
other business partners. Reported PBT of £20.4m was
£0.8m up on 2019.
for
Cash was also impacted by the unique and unprecedented
trading environment we faced in 2020. A working capital
inflow of £43.2m, combined with reduced capital expenditure,
disposal of non-operating properties, proactive cash
management and no dividends declared, resulted in a strong
Adjusted Net Cash position of £28.8m at 31 December 2020.
During the Year, the Group utilised the VAT deferment
scheme available for Q1 2020 but given our strong trading
following the first national lockdown, we voluntarily paid these
deferred amounts back early in September 2020, up to
18 months before we were required to.
Despite the further national lockdown at the start of 2021, the
Group remains in an excellent position to capitalise on
growth opportunities.
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COVID-19 Impact on Results
There have been a significant number of external and
internal COVID related factors impacting our financial
performance in the Year, both from a profit and loss and
cash perspective as summarised below.
• The national lockdowns and tier system, which required
our showrooms to close for prolonged periods, reduced
our revenue significantly. Like-for-like units were down
by 17.1% in the Year having previously delivered like-
for-like growth every year since being listed;
• the Group claimed £20.4m under the Government Job
Retention Scheme against salary costs of furloughed
leaving a net £2.0m
employees of £22.4m,
enhancement funded by the Company;
• the Group benefited from the Government’s business
rates holiday scheme with net savings of £7.2m during
the Period;
• £1.2m of expenditure relating to personal protective
equipment ensuring that are businesses were COVID
secure;
• working capital benefits of revised vehicle stocking
payment periods implemented by our brand partners
and other funding providers to support dealer networks;
• replanning of capital expenditure programme;
• cancellation of the 2019 final dividend and non-
declaration of the 2020 interim dividend.
As a result of the COVID pandemic, reported revenue
(including 2019 acquisitions) decreased by 5.3% to
£2,154.4m. This was a pleasing performance given a
29.4% decline in the new vehicle market.
The Group’s operating profit, on an underlying basis, was
£31.1m compared to £32.0m in 2019. Underlying PBT in
the Year was £20.9m compared to £22.1m in 2019. This
decline was driven by a combination of reduced trading
as a result of sustained periods of lockdown and margin
pressures. These declines were partially offset by
Government and business partner support, together with
other decisive cost control actions.
Our reported PBT of £20.4m (2019: £19.6m) included
one-off non-underlying items of £0.6m (2019: £2.4m) as
set out in Note 7 to the financial statements.
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.
Twelve months ended 31 December 2020
Revenue Gross Profit
£m mix* £m mix
New Vehicles 988.1 44.9% 65.1 27.9%
Used Vehicles 971.1 44.1% 63.7 24.8%
Aftersales 240.6 11.0% 108.6 47.3%
Internal/Other (45.4) - 0.8 -
Total 2,154.4 100.0% 238.2 100.0%
Reported Financial Performance
Twelve months ended 31 December 2019
2020 2019 Var %
Revenue 2,154.4 2,276.1 (5.3%)
Gross profit 238.2 260.8 (8.7%)
Operating expenses* (207.1) (228.8) 9.5%
Operating profit* 31.1 32.0 (2.8%)
Net finance costs (10.2) (9.9) (2.3%)
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 -
PBT underlying* 20.9 22.1 (5.2%)
Total 2,276.1 100.0% 260.8 100.0%
Non-underlying items (0.6) (2.4) 75.8%
* mix calculation excludes Internal/Other Sales
PBT reported 20.4 19.6 3.6%
Tax (6.4) (4.1) (58.3%)
PAT reported 13.9 15.6 (10.6%)
* Excludes Non-Underlying Items.
35
Audi e-tron GT
FINANCIAL REVIEW
Finance Costs
Net finance costs increased by £0.3m in the Year to £10.2m
(2019: £9.9m). Increases in bank financing costs have
been partially offset by savings in stock financing charges
due to reduced inventory levels.
Shareholder Returns
Profit before tax and non-underlying items was £20.9m
(2019: £22.1m), £20.4m after non underlying items (2019:
£19.6m). The total reported effective tax rate was 31.6%
(21.1% on an underlying basis), further details are included
in tax section below. Profit from continuing operations after
tax was £13.9m (2019: £15.6m), resulting in reported basic
continuing earnings per share of 17.8p, a decrease of
10.6% on the prior year. Basic underlying earnings per
share was 21.1p (2019: 22.9p).
The Group’s strategy of organic growth incorporating cost
control and sound working capital management, combined
with strategic acquisitions, provides a platform for further
improving shareholder returns.
Non-Underlying Items
The Income Statement includes a separate presentation of
non-underlying items to provide a consistent understanding
of the performance of the Group year on year.
Non-underlying items in the Year comprise the following:
£m 2020 2019
Acquisition costs - 0.8
Restructuring costs 2.1 2.1
Gain on revaluation of investment properties - (0.6)
(Profit)/loss on disposal of investment
property/assets held for resale (1.7) 0.1
Goodwill impairment 0.2 -
Total 0.6 2.4
During the Year, following a review of current profitability
and prospects, we decided to close four of the Group’s
sites. The costs associated with these closures are
included in restructuring costs in non-underlying items
and represent redundancy costs, asset impairment, and
unavoidable costs associated with contracts which
related to these sites. In addition to these costs, the
goodwill held in respect of our Vauxhall businesses has
been impaired in full.
Consistent with our property strategy, the Group sold two
freehold properties (including one investment property)
during the Year, realising a gain on disposal net of costs
of £1.7m which has been included in non-underlying
items.
Classification of COVID-19 Related Costs
At the time of reporting our interim results, it was
anticipated that the impact of COVID-19 and the
associated costs of providing a COVID secure
environment for our colleagues and customers would be
relatively short-term. Since then the country experienced
a tiering system and further lockdowns both of which
have materially impacted our business. It is now
considered likely that COVID-19 and the impact on
businesses and ways of working are not one off in nature
but more medium term. As a consequence of this we
have
into our
underlying trading result.
reclassified COVID-related costs
BMW M3 Competition
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Marshall Motor Holdings plc | Annual Report & Accounts 2020
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Like-for-Like Performance
Like-for-like Revenue
Basis of Comparatives
Due to the unprecedented impact of COVID-19 on the
Group’s results described above, comparatives are
significantly distorted. To enable some degree of
meaningful comparison of the Group’s year-on-year
performance, units and revenue are shown on a like-
for-like basis, excluding the impact of acquisitions and
closures during 2019 and 2020. However, given the
distortions in the gross and operating profit measures
for the 2020 annual report there will be no Alternative
Performance Measures other than units and revenue
as it would not give the users of the accounts any more
insight or interpretation. The full definition of an
Alternative Performance Measure can be found in
Note 2 to the financial statements.
Like-for-Like Unit Analysis
2020 2019 Growth
New Retail Units 22,428 27,003 (16.9%)
New Fleet Units 13,545 17,642 (23.2%)
Total New Units 35,973 44,645 (19.4%)
Used Units 36,709 43,003 (14.6%)
The market for new car registrations to retail and fleet
customers declined by 26.6% and 31.7% respectively,
with total registrations of new vehicles in the UK
(including the impact of dealer self-registration activity)
declining by 29.4% in the Year. The Group’s like-for-like
new unit sales volumes outperformed the overall market,
by 9.7% in new retail units and 8.5% in fleet unit sales.
Like-for-like used unit sales declined by 14.6% versus an
overall market decline of 14.9%. It should be noted that
the overall market includes all used vehicle sales
including private sales which continued during the first
national lockdown period at a time when commercial
operators were required to close.
2020 2019
£m Mix* £m Mix* Var %
New Vehicles 869.0 45.4% 1,035.7 47.0% (16.1%)
Used Vehicles 834.9 43.7% 928.8 42.1% (10.1%)
Aftersales 208.3 10.9% 240.9 10.9% (13.5%)
Internal/Other (45.8) - (48.3) - -
Total 1,866.4 100% 2,157.1 100% (13.5%)
* mix calculation excludes Internal/Other sales
Like-for-like revenue in the Year was £1,866.4m (2019:
£2,157.2m), a decline of 13.5% and heavily impacted by
the COVID-19 pandemic. Faced with significant market
declines in both the new and used markets, this was a
pleasing result.
As expected, new vehicle revenues suffered the sharpest
declines, falling by 16.1% to £869.0m (2019: £1,035.7m).
This decline was significantly lower than the overall new
car market decline of 26.6%.
Revenue relating to the sale of used vehicles, whilst faring
better than new revenues, was still down 10.1% at
£834.9m (2019: £928.8m), a strong performance against
a used vehicle market which experienced a unit declined
of 14.9%. We believe that the franchise dealership model,
with its strong links to the vehicle manufacturers, provides
customers with a degree of assurance when purchasing a
used vehicle. This has been particularly evident during a
year in which first-time vehicle owners moved away from
public transport and purchased their first cars.
Like-for-like aftersales revenue decreased by 13.5% to
£208.3m (2019: £240.9m). Our aftersales businesses were
heavily impacted during the first lockdown where a high
proportion were closed. Those remaining open focused on
supporting emergency services, transport companies and
key workers. Deferrals of MOTs, servicing and routine
maintenance work as a result of reduced vehicle usage
during lockdown periods also had an impact, however we
have been encouraged by the rate at which activity levels
improved once out of lockdown.
37
FINANCIAL REVIEW
Shareholder Returns
For the reasons described in the Chairman’s statement,
the Board is not recommending the payment of a final
dividend
the
importance of dividends to shareholders and intends to
resume the payment of dividends as soon as conditions
allow and will consider the position next at the time of
release of its interim results in August 2021.
for 2020. The Board understands
ROCE
Return on capital employed, defined as Underlying
Operating Profit Before Tax divided by average capital
employed, was 14.9% (2019: 16.2%).
Reported Balance Sheet
£m 2020 2019
Goodwill and intangibles 119.5 119.3
Freehold land and buildings 125.8 124.9
Right-of-use assets 98.8 108.0
Other 35.4 39.5
Fixed assets 379.5 391.6
Inventory 362.9 470.7
Trade/other receivables 65.8 87.5
Cash & equivalents 33.8 0.1
Assets held for sale 0.7 0.8
Current tax assets 0.3 -
Current assets 463.5 559.1
Vehicle funding (364.9) (443.7)
Trade/other payables (132.4) (140.6)
Lease liabilities (99.3) (108.1)
Bank/other debt (5.0) (30.7)
Other liabilities (25.5) (25.2)
Total liabilities (627.1) (748.4)
Net assets 215.9 202.3
Adjusted net cash/(debt) (£m) 28.8 (30.6)
Goodwill and other intangible assets
Consistent with
requirements of accounting
the
standards, the Group has carried out an impairment
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,
indicated an impairment of the goodwill of £0.2m held in
respect of the Group’s Vauxhall businesses as a result of
the decision made during the Year to close one of the
Group’s three remaining Vauxhall dealerships.
Following the completion of the acquisition of Aylesbury
Volkswagen in July 2020, goodwill and other intangible
assets increased by £1.1m, being £0.4m associated with
the Aylesbury business and £0.7m which was related to
the seven other Volkswagen and ŠKODA businesses
acquired as part of the same acquisition in 2019, payment
of which was contingent on the completion of the
acquisition of the Aylesbury business.
the year. A number of
During 2020 the BMW business has shown substantial
improvement despite the trading uncertainty experienced
during
the performance
improvement initiatives have been successfully delivered
and the cash flow projections for the CGU indicate a
continued improvement over the plan period as other
management and manufacturer initiatives are delivered.
Acquisitions
The Group acquired Aylesbury Volkswagen during the
Year after resolution of certain property matters. This
transaction was part of the larger Volkswagen acquisition
completed during December 2019.
Trading in the businesses acquired during 2019 has been
impacted by COVID-19 related lockdowns. However, we
have been very encouraged with the progress made and
anticipate that these businesses will make significant future
contributions to the Group’s profitability.
Freehold Land & Buildings
The Group incurred a total of £10.3m capital expenditure
during the Year, including £2.6m in respect of the pur-
chase of the freehold of our Volvo Welwyn business (pre-
viously leasehold site).
The net book value of the Group’s property, plant and
equipment at 31 December 2020 was £158.3m (2019:
£159.3m), of which £123.7m related to freehold land and
buildings (2019: £123.2m).
Our property strategy continues to be a key component
of the Group’s success, with targeted freehold purchases
reducing ongoing operating costs, together with the dis-
posal of surplus properties delivering significant profits,
including £1.6m during the Year.
Strong Working Capital Management
Given the significant challenges we faced in the Year,
disciplined capital allocation and cash management was
an even greater focus area for management. During the
Year, the Group benefited from a working capital inflow of
£43.2m, supported by extended stock facilities and strong
working capital management.
Inventory, net of provisions, at £362.9m reduced by 22.9%
(£107.8m) versus 2019. This significant reduction was
largely due to automotive factory closures during 2020. At
31 December 2020, inventory was funded by £364.9m of
vehicle finance, a level of 100.6%, in part caused by a
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changing sales profile due to lockdown, versus 94.3% at
the end of 2019. This high level of funding is expected to
reduce during 2021 as stock levels returns to more
normalised levels.
A decline in trade and other receivables of £21.7m in the
Year was driven by a combination of a lower level of fleet
debtors at the end of Year, combined with a greater focus
on debt collection.
Trade and other payables remained stable across the Year.
The Group voluntarily repaid all amounts from which it
benefitted under the Government’s VAT Payment Deferral
Scheme which were not due to be fully paid until March
2022. All other suppliers have been paid in the normal
course of business.
Cash Conversion
Despite the turbulent year, the Group was able to deliver a
strong cash generation performance with cash flow from
operations during the Year of £96.0m (2019: £53.3m). This
performance was driven by a strong second half EBITDA,
the deferral of non-critical capital expenditure, reductions
in stock holding, and tightened controls over the collection
of receivables and the provision of credit to trade
customers.
The Group continues to use 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) as a key metric for
managing operational performance.
During the Year, total cash inflows from operations
represented an operating cash conversion ratio of 183%
(2019: 108%).
Net Debt and Facilities
At 31 December 2020, the Group’s adjusted net cash was
£28.8m (2019: adjusted net debt of £30.6m).
The Group’s current finance facilities include a £120m
revolving credit facility, which was extended in July 2020
and is committed until January 2023 with a mutual option
to step down by up to £20m at the first anniversary.
Net debt (including
31 December 2020 was £70.5m (2019: £138.6m).
IFRS 16
lease
liabilities) at
Tax
Consistent with its published Tax Strategy, the Group
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 £4.4m (2019: £4.2m), an effective tax rate of
21.1% (2019: 18.9%). The effective tax rate for the year
end 31 December 2019 was lower due to the one-off
benefit of certain tax losses to offset in year profits.
The Group’s effective tax rate including non-underlying
items was 31.6% (2019: 20.7%). The effective tax rate for
2020 increased due to the revaluation of the Group’s
deferred tax liabilities following a change in the rate of
corporation tax from 17% to 19% which was enacted in the
Finance Bill 2020 in July 2020.
Pensions
The Group has no current commitments to defined benefit
pension schemes, with all Group pension plans being on
a defined contribution basis.
During the previous financial year, the Group settled the
residual liability of £5.6m to the Marshall Group Executive
Plan, a defined benefit pension scheme in which the
Group ceased to be a participating employer during the
year ended 31 December 2018.
Richard Blumberger
Chief Financial Officer
8 March 2021
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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.
COVID-19
The Directors draw specific attention to the pervasive impacts of
the ongoing COVID-19 pandemic. This represents a risk
influenced by circumstances and events that have evolved
during the past 12 months. The ongoing COVID-19 pandemic
has caused major disruption to businesses across the world,
including the Group. As health and other government authorities’
responses to the pandemic continue to evolve and the full
macro-economic impacts of the pandemic continue to unfold, the
duration and extent of the disruption are in part unknown at this
time. The Group continues to follow all government guidance to
ensure a COVID-19 secure operating environment for all
customers and colleagues. A regular assessment of the personal
and commercial impacts and mitigating actions required
continues to be carried out at both a Group and local
geographical level by the Directors and Board. Communications
and guidance on revised policies and procedures implemented
in response to the impacts of COVID-19 are being regularly
issued internally to support colleagues and customers.
Furthermore, the Directors have taken appropriate cost
mitigation actions and the Group is benefiting from the support
provided by the UK Government, by vehicle manufacturers, by
supply chain partners and by the Group’s funding facility
providers.
Further details of the impact of COVID-19 to the relevant Risk
Areas and the mitigating actions taken are included below.
Although the outlook appears positive with the rollout of the
vaccination programme, these risks and uncertainties are
expected to remain in existence for the foreseeable future and
could continue to have as material an impact on the Group’s
performance as they have in the past 12 months.
*Note the trend direction relates to the underlying inherent risk
and does not take into consideration any increased level of risk
due to the current pandemic
Business
Interruption
People
Strategy
and Business
Relationships
IT and
Cyber Security
Principal
Risks and
Uncertainties
Economic
and Political
Environmental
and
Health & Safety
Finance
and Treasury
Legal and
Regulatory
Compliance
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Marshall Motor Holdings plc | Annual Report & Accounts 2020
Risk Impact Mitigations Risk Trend*
Business Interruption
Failure to recover,
in an acceptable
time frame and/or
to an acceptable
level, from an
unplanned event
or series of
events and
circumstances
that have
impacted the
company’s ability
to continue
operating at
planned levels
• The Group misses its financial
• Crisis Management Team in place at the executive level supported
targets
by senior management in all areas of the business
NEW
• Reduction in confidence of key
stakeholders
• Reputational damage impacting
employees and customers
• Tried and tested communication channels in place for all
stakeholders
• Internal communications from the CEO to all employees as and
when required enabling changes to be implemented promptly
Impacts of Pandemic
• Uncertainty regarding the duration
and extent of disruption are
unknown impacting the ability to
effectively plan for reopening of
sites
• Business is open and requires
personnel, but sales are not
sufficient to cover costs
Additional Pandemic Mitigations
• A regular assessment of the personal and commercial impacts and
mitigating actions required continues to be carried out at both a
Group and local geographical level by the Directors and Board
• The Directors take appropriate cost mitigation actions, accessing
support, as required provided by the UK Government, by vehicle
manufacturers, by supply chain partners and by the Group’s funding
facility providers
• Increased focus on omni-channel with a seamless customer
experience from selecting a new vehicle, reserving online, arranging
part exchanges and financing. Supported by video calls, live
messaging on website, telephone appointments, click and collect or
home deliveries
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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
Impacts of Pandemic
• 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
• Uncertainty regarding the duration
reliance on individual vehicle brands
and extent of disruption are
unknown impacting the ability to
accurately determine financial
targets
• Missing or overachieving financial
targets impacting confidence of key
stakeholders
• Not being in a position to pay
dividends impacting confidence of
shareholders and potential investors
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
• Focus on efficient use of working capital supported by bank credit
lines and stock financing facilities
Additional Pandemic Mitigations
• A regular assessment of the personal and commercial impacts and
mitigating actions required continues to be carried out at both a
Group and local geographical level by the Directors and Board
• The Directors take appropriate cost mitigation actions access
support, as required, provided by the UK Government, by vehicle
manufacturers, by supply chain partners and by the Group’s funding
facility providers
• Increased focus on omni-channel with a seamless customer
experience from selecting a new vehicle, reserving online, arranging
part exchanges and financing. Supported by video calls, live
messaging on website, telephone appointments, click and collect or
home deliveries
• 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, investing in brand
CSI requirements and facilities, being a partner whom the brands
can trust
41
PRINCIPAL RISKS AND UNCERTAINTIES
Risk Impact Mitigations Risk Trend*
Strategy and Business Relationships (Continued)
Failure to
integrate
acquisitions
successfully
• Loss of key
personnel/customers
• Detailed business planning and due diligence on potential
acquisitions
• Brand partner relationship
• Integration plan developed prior to acquisition and
damage
implemented in a timely manner thereafter
• Reduced financial performance
• Group-wide single dealer management platform and
of acquired businesses
• Failure to achieve targeted
synergies
Phoenix management system implemented immediately
after acquisition
• Prompt implementation of Group policies and procedures.
• Damage to manufacturer and/or
• Group target for Internal Audit to verify successful
customer relationships
implementation of Group processes within 12 months of
acquisition
Disruption to
franchise
business model
• Alternative business models
impacting franchised dealer
model
• Direct sales channels
circumventing franchised
dealers
• Adoption of agency model for
new vehicle sales
• 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
• Increased focus on omni-channel with a seamless customer
experience from selecting a new vehicle, reserving online,
arranging part exchanges and financing. Supported by
video calls, live messaging on website, telephone
appointments, click and collect or home deliveries.
• 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
• Agency model for new vehicle sales has a number of
financial and operational advantages for dealers
• 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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Risk Impact Mitigations Risk Trend*
Economic and Political
Deterioration in
economic
conditions/
consumer
confidence
UK’s withdrawal
from the
European Union
(‘Brexit’)
• Increased inflation and falling
• Board monitoring of economic conditions and forecasts with
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
• Interest rate rises impacting
availability and affordability of vehicle
finance Increased costs of servicing
the Group’s borrowings
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 standard stock holding period of 56 days for
used vehicles)
• 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
• 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
Impacts of Pandemics
Additional Pandemic Mitigations
• Economic disruption impacting
consumer confidence and demand
for new vehicles
• Government guidance to ‘Stay at
Home’ and some customer
reluctance to purchase new car
without visiting showroom
• Disruption to supply chains resulting
in limited supply of new vehicles
which has also had a consequential
impact on the used car market
(including a positive impact on used
vehicle prices)
• Continual monitoring of UK government rules and responding
accordingly
• Increasing focus to obtain and sell used vehicles
• Increased focus on omni-channel with a seamless customer
experience from selecting a new vehicle, reserving online, arranging
part exchanges and financing. Supported by video calls, live
messaging on website, telephone appointments, click and collect or
home deliveries
• Close communication with manufacturers to understand and respond
to any identified supply chain impacts
• Negative impact on UK economy:
• 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 any 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 standard stock holding period of 56 days for
used vehicles, to mitigate impact of any falling vehicle values
• Maintaining close relationship with manufacturers The Group is not a
direct importer of vehicles and parts from the EU Diversity of the
Group’s portfolio of brand partners which includes UK, EU and non-
European manufacturers
• The Group is not directly reliant upon labour from EU countries and
overall mitigations, detailed below, address the risk of attracting and
retaining staff
• Sales to Northern Ireland are flagged and reviewed to ensure
vehicles are not sold onto the Republic of Ireland or other EU
countries without relevant taxes being paid
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)
• The change to Freedom of Movement
impacts the UK labour market and
potentially impacts the ability of the
Group to attract and retain staff
• VAT on used cars sold from England to
the Republic of Ireland resulting in VAT
fraud on purchases in Northern Ireland
being sold onto the Republic of Ireland
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
Impacts of Pandemics
• Increased operating costs including:
purchase of Personal Protective
Equipment, communication to
employees and customers, increased
IT costs for remote working
Additional Pandemic Mitigations
• Cost mitigations depending on level of Lock Down, including deferral
of capital expenditure, reduction in marketing and use of the
Coronavirus Job Retention Scheme (CJRS)
• Additional financial support provided by the UK Government, by
vehicle manufacturers, supply chain partners and the Group’s
funding facility providers
43
PRINCIPAL RISKS AND UNCERTAINTIES
Risk Impact Mitigations Risk Trend*
Finance and Treasury
Liquidity & credit
• Credit availability/withdrawal of
• In July 2020, the Group renewed its £120m revolving credit facility
financing facilities impacting trading
ability
• Breach of covenants or inability to
meet debt obligations
until 2023
• 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
• Increased stock funding costs
• 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
• Stock management & monitoring (including a standard stock holding
adversely impacting the value of the
Group’s vehicle inventory
period of 56 days for used vehicles
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
• Compliance team deliver an annual programme of reviews to a
scope approved by the Compliance Oversight 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
Environmental and Health & Safety
Environmental
and Health &
Safety
• Failure to ensure colleagues and
customers safe environments
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
Impacts of Pandemics
• Failure to implement COVID-19
specific rules leading to closure of
sites, fines and reputational damage
• 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
Additional Pandemic Mitigations
• Risk Assessment conducted on all sites versus government
guidelines, standards set and implemented
• Requirement for all colleagues to complete mandatory formal training
and assessment on revised operating procedures and social
distancing guidelines
• Ongoing programme of audits to ensure standards are being
adhered to
• Monitoring and adherence to evolving Government guidelines and
risks we see in our business
Climate Change
• The Group have identified Climate
• The direct risk of extreme weather events is mitigated as sites are
Change as an emerging risk and will
closely monitor its impact on the
business both directly and indirectly
through the changes in regulations
and consumer demand towards
greener technologies
spread geographically across the country
• Our brand partners are driving the change towards greener
technologies
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Risk Impact Mitigations Risk Trend*
IT and Cyber Security
Failure of key IT
systems
• Loss of key information systems,
• The Group IT strategy is set by the Board with delivery being
downtime and business interruption
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
Impacts of Pandemics
• The increase in remote working has
led to an increase in the risk of
malware and phishing attacks across
all organisations
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
Impacts of Pandemics
opportunities for promotion within the Group
• Loss of key personnel due to
sickness, requirement to self-isolate
and/or childcare issues.
• Colleague engagement deteriorates
due to difficulties experienced
directly or indirectly by the pandemic
Additional Pandemic Mitigations
• During the furlough period, the Group supplemented the support
provided by the CJRS enhancing colleague pay and not imposing
the CJRS cap of £2,500 per month
• The Group has provided additional financial support to colleagues
including salary advances
• The Board and other senior members of the management team
voluntarily reduced their pay in line with reductions for furloughed
employees
• Video messages from the CEO and other members of the executive
committee and senior management team, to all colleagues enabled
the Group to stay in touch and provide updates to reassure
colleagues on actions being taken to address the risks facing the
business and also to direct colleagues to support available to them
• ‘Stay Marshall Colleague Hub’ designed for two-way communication,
regularly updated with internal initiatives and details of where
colleagues can obtain support such as our Colleague Assistance
Programmes with Ben and Aviva
45
BOARD DECISION MAKING (S.172 STATEMENT)
Board Decision Making (s.172 Statement)
The Board is accountable to shareholders for the management, performance and long-term success of the Company. The
Directors have regard to their duty under Section 172 of the Companies Act 2006 to act in the way which they consider, in good
faith, would be most likely to promote the success of the Company for the benefit of its members as a whole and, in doing so,
have regard (amongst other matters) to:
(i)
the likely consequences of any decision in the long term;
(ii)
the interests of the Company’s employees;
(iii) the need to foster the Company’s business relationships with suppliers, customers and others;
(iv) the impact of the Company’s operations on the community and the environment;
(v)
the desirability of the Company maintaining a reputation for high standards of business conduct; and
(vi) the need to act fairly as between members of the Company.
Section 172 therefore requires the Board to consider wider stakeholder interests when discharging their duty to promote the
success of the Company
For the purposes of decision making, the Directors have identified key stakeholder groups, have evaluated their interests, and
describe below how they have engaged with and responded to the interests of those stakeholders during the Year.
How does the
Stakeholder Group Engage
Group Interests and Respond
Customers
• 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.
• Responding promptly and appropriately to any
customer complaints or concerns.
• 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.
•
Independent complaint handling by the Group’s
internal Compliance Team in relation to regulated
activities. Monitoring of customer complaints to
identify any themes, with appropriate actions
taken to address identified issues
• During the Year, many of the Group’s decisions
relating to the operation of its retail businesses
during the COVID-19 pandemic were centred
around our customers’ health and safety and
providing them services in a manner which met
their needs. As described in more detail in the
Operating Review, the Group implemented a
range of measures, including the adoption of
robust COVID-19 secure operating procedures at
our dealerships, introducing ‘click and collect’ and
‘reserve online’ facilities and frequent customer
communications via telephone, email and video.
In addition, given the importance of our
aftersales services to the emergency services,
vehicle transport companies and key workers,
the Group ensured that strategically located
aftersales facilities remained open throughout
periods of national lockdown to provide
continuity of service to these critically important
customers.
•
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How does the
Stakeholder Group Engage
Group Interests and Respond
Employees
• 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
• 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 develop a supportive, respectful and
friendly working environment.
Investment in learning and 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.
• As set out in more detail in the Operating
Review and the Corporate and Social
Responsibility section of this Annual Report,
the Group took numerous decisions and
actions during the Year to support its
employees, including enhancing financial
support for furloughed colleagues, a variety of
wellbeing initiatives and regular employee
communication throughout the Year.
In addition, whilst a number of roles in the
Group were affected by business closures
and there were a limited number of other
redundancies as a result of the impact of
COVID-19, through a range of measures, the
vast majority of jobs within the Group have
been protected.
•
47
BOARD DECISION MAKING (S.172 STATEMENT)
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.
• During the Year, the Group extended its
commercial relationships with a number of its
key suppliers,
including both vehicle
manufacturer and other commercial partners.
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 and 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.
• As referred to above, during the Year the
Group made the decision to keep strategically
located aftersales facilities open throughout
national lockdown periods to support local and
regional emergency services,
transport
companies and key workers.
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
the Annual General
presentations and
Meeting.
• The Chairman meets 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.
• During the Year, the Group communicated
with shareholders frequently providing clear
details of the Group’s trading, operational and
financial position, both
formal
announcements and meetings with key
shareholders and institutional investors.
through
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How does the
Stakeholder Group Engage
Group Interests and Respond
Funders
• Open and honest relationship with clarity as to
• Clear and transparent annual and interim
business performance
reporting.
• Financial discipline backed by strong internal
controls which enables delivery of commitments
• Relationships with all funders at a senior level
within the Group.
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• Strong day to day working relationships
between Group and funder operational staff.
• During the Year, the Group maintained its
funders,
relationships with key
strong
financial
the Group’s
communicating
performance and position on a regular basis
and working with them to amend financial
covenants where necessary. During the Year,
the Group also extended its revolving credit
facility with Barclays and HSBC and agreed
extended facilities with its key vehicle funding
providers.
Directors’ Approval of the Strategic Report
The Group’s Strategic Report, from pages 8 through to 49, has been reviewed and approved by the Board of Directors.
By order of the Board
Daksh Gupta
Chief Executive Officer
8 March 2021
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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 was appointed as a
Non-Executive Director of Aston Martin Lagonda plc in
February 2021.
Richard joined the Board as Non-Executive Chairman in
January 2019.
2. Daksh Gupta
Chief Executive Officer
Daksh has over 28 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 plc 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 Company,
was Group Managing Director for Ridgeway Group.
Daksh was a Director of Marshall of Cambridge
(Holdings) Limited until 2 April 2015.
Daksh is currently Vice Chairman of the UK automotive
industry charity, BEN and a Patron of The UK Automotive
30% Club, whose purpose is to achieve a better gender
balance within the automotive industry.
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 the Company, 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 AngloGold Ashanti
Limited where he chairs the Audit Committee. Until July
2020 and April 2020 respectively, he was Senior
Independent Director of Johnson Matthey plc and Croda
International plc and chaired the Audit Committees of
each of these companies. Alan was Chief Financial Officer
and a director of Lonmin plc until December 2010.
Prior to this, Alan was Group Finance Director of BOC
Group plc until it was acquired by the Linde Group in
2006. Before then, 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, sits on the Business Policy Panel of the
Institute of Chartered Accountants of Scotland and works
with the Audit Committee Chairs’ Independent Forum.
Alan was appointed to the Board in March 2015.
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5
6
7
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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 and Chair of
the Remuneration Committees at Adnams plc and Redrow
plc and is a Non-Executive Director and Chair of the Audit
Committee at WH Smith 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.
Trustee of Addenbrooke’s Charitable Trust and a Member of
Anglian Learning (multi-academy trust). He is also a
Member of the Joint Assembly of the Greater Cambridge
Partnership and a Vice-President of the Air League Trust
and a Vice-President of Automotive Fellowship International.
He is Chairman of No. 104 (City of Cambridge) Squadron of
the RAF Air Cadets. Christopher is a Fellow of the Royal
Aeronautical Society, a Fellow of the Institute of the Motor
Industry and a Freeman of the City of London.
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 also a Non-Executive Director of FTSE listed
companies F&C Investment Trust plc, Air France and the
AIC (Association of Investment Companies). Her previous
executive experience includes McKinsey, PepsiCo, Thorn
EMI, 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 has worked for Marshall of Cambridge
(Holdings) Limited since 1983 and is currently Group
Director of External Relations & Communications. He is a
Board Member of Cambridge Ahead and of the Reserve
Forces and Cadets Association in East Anglia. He is a
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.
51
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 2020 (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 Dividend
The results for the Year are set out in the Consolidated Statement of Comprehensive Income. The Directors are not
recommending the payment of a final dividend for the Year for the reasons set out in the Strategic Report.
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. Further details are set out in Note 1 to the consolidated financial statements.
Directors
Details of the current directors are set out on pages 50 to 51. The directors who served during the Year and subsequently
are detailed below.
Non-Executive Directors
Richard Parry-Jones
Alan Ferguson
Francesca Ecsery
Nicky Dulieu (Appointed 1 January 2020)
Kathy Jenkins
Christopher Walkinshaw
Executive Directors
Daksh Gupta
Richard Blumberger
No other Directors held office during the Year or have been appointed subsequently.
In accordance with the Articles of Association of the Company adopted on 12 March 2015 (the “Articles”), having been
last elected at the 2018 annual general meeting, Daksh Gupta will retire by rotation and will offer himself for reappointment
at the annual general meeting to be held on 20 May 2021 (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 86 to 89.
Directors’ insurance and indemnities
The Directors have the benefit of the indemnity provisions contained in the Company’s Articles and the Company has
maintained, throughout the Year, Directors’ and Officers’ liability insurance for the benefit of the Company, the Directors
and its officers. The Company has entered into qualifying third party indemnity arrangements for the benefit of all its
Directors in a form and scope which comply with the requirements of the Companies Act 2006 and which were in force
throughout the Year and remain in force.
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 consolidated financial statements. The issued share capital of the Company as at 31 December
2020 was 78,232,237 ordinary shares of 64p each.
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Substantial Shareholdings
As at 8 March 2021, 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 and Development Limited 7,105,839 9.08%
Janus Henderson Investors 4,185,400 5.35%
Schroder Investment Management 3,037,402 3.88%
Tellworth Investments 2,732,913 3.49%
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: £30,000 (2019: £44,803).
No political contributions were made during the Year (2019: £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 of 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 2020 survey, the participation
rate remained high at 84% and the Group was once again included in the “Best UK Super Large Workplace” rankings for
the sixth year in succession. Further details are set out in the Corporate Social Responsibility Section of this Annual Report.
Financial Risk Management
Details of the Company’s principal financial instruments, its exposure to price, credit, liquidity and cash flow risks, together
with details of the its financial risk management policies, processes and systems, are set out in Note 26 to the consolidated
financial statements.
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.
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DIRECTORS’ REPORT
Annual General Meeting
Notice of the AGM to be held on 20 May 2021 will be sent to shareholders in due course and will be made available on
the Company’s website at www.mmhplc.com.
Streamlined Energy and Carbon Reporting (SECR)
Under the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018
(“the Regulations”), the Group is mandated to disclose its UK energy use and the associated greenhouse gas emissions
relating to natural gas, electricity and transport fuel. In addition, publication of an intensity ratio as well the calculation
methodology applied is required.
Calculation Methodology
Scope 1 and Scope 2 energy consumption and greenhouse gas emissions data has been calculated in line with the 2019
UK Government environmental reporting guidance. There were a number of instances, equating to 15.6% of the total
reported consumption figures, where it was necessary to calculate some estimated consumption to achieve 100% data
coverage. Emission Factor Databases consistent with the 2019 UK Government environmental reporting guidance have
been used, utilising the current published kWh gross calorific value (CV) and tCO2e emissions factors relevant for reporting
year.
Results
The table below shows the energy consumption and associated greenhouse gas emissions of the Group’s operations
during the reporting year from 1 January 2020 to 31 December 2020. The calculations are for the following scope:
•
•
Scope 1 consumption and emissions relate to the direct combustion of natural gas and fuels utilised for transportation
operations, such as company vehicle fleets and grey fleet (i.e. vehicles owned and driven by employees for business
purposes); and
Scope 2 consumption and emissions relate to indirect emissions resulting from the consumption of purchased
electricity in day-to-day business operations.
Being the first year that the Group has been required to assess and report this information, the following figures constitute
the baseline reporting for future assessments, though it is recognised that given the impact of the COVID-19 pandemic,
2020 was not wholly representative of a typical year.
2020
Consumption Greenhouse Gas
(kWh) Emissions (tCO2e)
Grid supplied electricity
(Scope 2) 16,389,269 3,821
Gas and other fuels
(Scope 1) 18,303,801 3,366
Transport fuel
(Scope 1) 19,644,059 4,726
Total 54,337,129 11,913
Intensity Metric:
tCO2e per £’m Revenue 5.53
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Marshall Motor Holdings plc | Annual Report & Accounts 2020
Energy Efficiency Improvements
The Group is committed to year-on-year improvements in operational energy efficiency.
All property construction and refurbishment programmes are developed to ensure improvements in energy efficiency and
a reduction in consumption by using sustainable energy solutions where appropriate.
Along with our brand partners the Group is investing in the installation of electrical vehicle (EV) charging points across the
property estate. While this will not reduce the overall emissions of the Group, it demonstrates the Group’s support of the
required decarbonisation of the transport sector. Through the planned installation of EV charging points, the Group will
contribute to the growing infrastructure for electric vehicles through the UK.
Measures Prioritised for Implementation in 2021
1. Ongoing Compliance with Energy Reporting Legislation
The Group is mandated to comply with the Energy Savings Opportunity Scheme (ESOS) and, as such, produces a
summary of all available energy efficiency improvements on a four-year cycle. This will be completed again in line with the
2023 Phase 3 compliance deadline. Recommendations found within the Phase 2 reporting are being reviewed and will be
acted on where practical.
Upon normalisation of operations following the COVID-19 pandemic, the implementation of ongoing training in energy
conservation and sustainability awareness is being considered for all employees across the Group.
2. Energy and Environment Strategy
The Group are working towards implementing an Energy and Environment strategy that ensures ongoing energy and
carbon reductions over the coming years in line with the UK’s 2050 net zero targets.
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By order of the Board
Stephen Jones
Company Secretary
8 March 2021
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Striving to have a
positive impact on the
communities in which
we serve.
Our people
are our heroes
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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 behave. We encourage
colleagues to 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 achieving our business
objectives, we also believe it is important to give back to our
communities and the environment in which we live.
Group Giving
There are certain good causes which we consistently
support across our business each year. Despite the
pandemic we continued our fundraising activities, mindful
that more than ever these causes needed our support.
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. During this
time, we have raised over £1 million, which includes the
generous donations our colleagues make via payroll giving
and various fundraising activities. CEO, Daksh Gupta,
became a Trustee and Vice Chairman in October 2012 and
remains committed to these roles and the purpose of the
charity.
One of the key Ben campaigns during 2020 was Hats on
4 Ben which, in addition to fundraising, raises awareness
for mental health – an important subject which became
even more so in 2020. The other was the Xmas Do-nation
where automotive companies had the opportunity to
donate some or all of the funds they would have ordinarily
spent on Christmas parties. We got behind both of these
campaigns and contributed to their success.
We have supported the Macmillan Coffee Mornings for
24 years enabling our businesses to get involved at a local
level, bringing colleagues and customers together. We
have raised over £100,000 for Macmillan during this
period, which is a wonderful effort. Despite the pandemic
we hosted a virtual 2020 coffee morning raising over
£4,000.
During 2020 we also supported Sport Relief, Wear it Pink
for Breast Cancer, Christmas Jumper Day for Save the
Children as well as supporting World Mental Health Day.
These events are always a lot of fun and, as well as the
fundraising, gives 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 good
causes which support the communities in which they work.
In 2020 our colleagues, many whilst furloughed, did
amazing things to help people affected by the pandemic
as well as other good causes. We call them our Marshall
Heroes and have so many examples of their incredible
efforts, here are just a small sample:
• Volunteering for the NHS, Age Concern and local
hospices.
• Doing shopping and exercise classes for neighbours.
• Collecting Easter Eggs from local supermarkets and
donating to children’s hospital.
• Teams donating food for local food banks.
• Designing and selling T-shirts for the NHS.
• Keeping key workers mobile and on the road.
• Sending food parcels into dealerships for colleagues still
working.
• Call of Duty gaming marathon for Macmillan Cancer
Support.
• Numerous virtual charity sporting challenges from
running to swimming to triathlons.
Note: ‘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.
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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.
Living our values since 1909
Recognising that
people are at the
heart of our success
Maintaining competitive
edge through innovation
and creativity
Putting our
customers
above all else
Upholding the
highest standards of
integrity and fairness
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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 keeps them present and
supports our culture of being a great place to work whilst
delivering first class customer service. Our people are what
make our business special.
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 not only
deliver their objectives in line with our values and business
strategy but contribute to our values-based culture and great
place to work ethos.
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 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. During the COVID-19 pandemic, we
have continued to invest in the development of our colleagues
by adapting our content to enable us to deliver training
virtually. This has also meant we have been able to train our
colleagues even when furloughed so that their skills are
maintained and their engagement levels have remained high.
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.
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
Communication is our 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. With the challenges 2020
brought, our CEO and senior team did twice weekly
colleague update videos, during lockdown 1, to ensure
everyone received regular communications to keep them
informed, entertained and connected. As well as sharing
how we were navigating the business through the
unprecedented circumstances we ran competitions, did
shout outs and even colleagues made music videos
In addition to the videos, we created an online Colleague
Hub, again to keep colleagues informed, entertained and
connected. As well as lots of information about COVID-19,
furlough and the job retention scheme, there was a section
dedicated to Health & Wellbeing along with lots of fun
sections from quizzes and competitions to stuff to keep the
children busy and showcasing our Marshall Heroes.
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CORPORATE AND SOCIAL RESPONSIBILITY
the
Wellbeing and our People
The pandemic magnified
importance of
wellbeing both mental, physical and financial. Our
first priority was the safety of our colleagues and
customers. We developed a COVID-19 training
programme which every colleague completed,
requiring a 100% pass mark, ahead of returning to
work after the first lockdown and remains in place to
all new colleagues who join us. We have invested
large sums of money ensuring our sites are
COVID-19 secure, making a safe environment for
our colleagues. Examples of which are every
business has the appropriate signage and PPE and
we have
reconfigured our dealerships and
workshops to ensure colleague and customer safety.
Our Health, Safety & Environment (“HSE”) Team
conduct regular virtual audits to ensure our COVID-19
Secure Protocols are maintained at all times.
Mental health has been a particular focus area. We
have run various awareness campaigns, along with
our senior team doing several videos reinforcing our
‘it’s okay not to be okay’ message and reminding
everyone that we have two colleague assistance
programmes in place to support them should they
need it.
To support physical health we shared tips and
information on keeping active on our Colleague Hub
along with launching a Cycle to Work scheme to
encourage getting active whilst helping
the
environment.
Finally, to help with financial wellbeing, we launched
our Pay it Forward Scheme giving colleagues the
opportunity to take an interest free loan. Plus our
CFO shared money saving tips.
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 their 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 CEO is a patron of the Automotive 30% Club and
we continue to support their campaigns and
initiatives to drive a gender-balanced business.
Marshall volunteers got involved with the Inspiring
Automotive Women Day which raises awareness of
our industry and the career paths available and is
aimed at female students. We also did a webinar for
female students with tips on getting ready for new life
experiences and thinking ahead for their future.
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.
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
levels of
engagement and drive continuous improvement.
to measure
In 2020, despite the pandemic, we completed the
survey achieving an amazing 84% response rate and
a score above the UK benchmark for the eleventh
year running. We received particularly strong
feedback on our leadership through the coronavirus
crisis. We were also ranked as the twelfth Best UK
Super Large Workplace and have now been ranked
for six consecutive years. We believe the success of
this programme is down to high engagement levels
driven by our ability to listen, take action and care.
In recognition of our colleague engagement
programmes and the way in which we led the
business through the pandemic we were the proud
recipients of the Motor Trader Employer of the Year
Award. The crisis has brought about a strong sense
of us ‘all being in it together’ and our colleagues have
never been so involved and willing to help. Our CEO
has received hundreds of emails from colleagues
offering support, sharing ideas and commending the
business on how
it has dealt with such
unprecedented circumstances.
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Marshall Embracing Safety
Health and safety has always been led from the top and 2020 has been no exception. Following the
outbreak of the COVID-19 virus in early February 2020, the HSE Team has worked alongside the Senior
Leadership Team in order to ensure an industry leading, consistent and conscientious approach was
taken in response to the rapidly changing global pandemic.
In response to the pandemic, the health and safety of our colleagues has been our number one priority.
Our approach has been rigorous, consistent and without compromise as we rapidly established HSE
alerts across the business with direction and information on all aspects of safety including hygiene
standards, social distancing and symptom checking. A confidential email address was set up to enable
colleagues to contact the senior team directly with any concerns or suggestions. COVID-19 Standards
and Protocols, which documents the control measures to be followed by all colleagues, formed the basis
of our virtual training that went to every colleague with a 100-question assessment requiring a 100%
pass mark to illustrate their understanding of the standards required to keep our colleagues safe.
Since reopening the businesses in June 2020 after the initial national lockdown, the HSE Team have
conducted regular virtual audits, accompanied by the Senior Leadership Team, to ensure the on-going
implementation and maintenance of our COVID-19 standards and protocols. As always our business
have risen to the challenge.
In 2020, we continued to grow and develop our HSE Team with additional resource in line with the
growth of the business. We have embraced technology to enable the team to continue remote audits to
compliment physical site audits. Our support team in Cambridge are also on hand to 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 HSE
responsibilities. As a result of this continued support, engagement across the business remains high.
Throughout the Year, we have continued to support those colleagues in our business who have
volunteered to fulfill the role of First Aiders and Fire Wardens. As our fire warden training is conducted
on-line, we have been able to continue to support those colleagues whose training has expired. For
those first aider colleagues we have worked closely with the third-party supplier to ensure that training
courses are safe and COVID-19-secure for our colleagues to attend. Our HR Team have also completed
mental health first aid training and is supporting colleagues throughout the business signposting
professional support where required.
As a team we have continued to monitor, investigate and report 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 million
hours worked. The Motor Industry AFR average is currently set at 14.2 (taken from HSE document
‘Injury frequency rates’). Our AFR for 2020 was 6.8.
We continue to look for ways to improve our incident reporting and have projects set for 2021 to focus
on further improving hazard spot and near miss reporting, which we know to be key to in the overall
reduction of incidents.
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Making Health & Safety
an integral part of
Marshall’s day to day
operation.
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Health and Safety Statistics 2020
2019 2020
Total number of incidents 221 168
Of which RIDDOR* reportable incidents 13 10
• Fatalities - -
• Specified Injuries 6 4
• Over 7 day absence 3 3
• Non workers (contractors, visitors, third parties) 1 -
• Occupational disease - -
• Dangerous occurrences reported under RIDDOR* 3 4
Number of enforcement notices issued by HSE - -
Number of prohibition notices issued by HSE - -
*Reporting of Injuries, Dangerous Occurrences Regulations 2013
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CORPORATE AND SOCIAL RESPONSIBILITY
Embracing our
environmental
responsibilities.
1,300 tonnes
Of waste diverted
from landfill
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
We have continued throughout 2020 to build on our improvements from 2019,
to develop and increase environmental awareness across the business.
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 2020, 98.08% of our hazardous waste materials, such as engine oil, lead
acid batteries, rags and absorbents, were recycled and recovered which is a
0.08% increase in hazardous waste materials recycled. This equates to over
1,300 tons of waste that did not go to landfill.
During 2020, 64.3% of our dry mixed recycling waste materials, such as paper,
plastics, metals and cardboard, were recycled and recovered. This equates to
over 1,500 tons of waste that did not go to landfill.
We work with our Brand Partners on an annual basis 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,
and we work closely with water retailers and local water authorities to ensure
that where our operations involve the discharge of waste water (for example,
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, in conjunction with the Environmental Protection Teams at various
Local Councils across England, we ensure that we have the relevant permits
in place under the Environmental Permitting (England and 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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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
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 40 to 45 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.
2. Seek to understand and
meet shareholder needs and
expectations
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 Annual General
Meeting (“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 considers the interests of other key stakeholder groups as set out in the
Section 172 Statement on pages 46 to 49.
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 and in the ‘People
Centric’ section of the Operating Review 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.
Examples of how the Group seeks to minimise that impact are set out in the Corporate and
Social Responsibility section of this Annual Report on pages 56 to 65.
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4. Embed effective risk
The principal elements of the Group’s system of internal control are set out on page 71.
management considering
both opportunities and
threats, throughout the
organisation
5. Maintain a well-functioning,
balanced team led by the
Chair
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 40 to 45.
The Chair is responsible for leading the Board and its governance arrangements.
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 are set out on
pages 50 to 51 and their attendance record in the last financial year is set out on page 69.
Details of the Group’s Board Committees, being the Audit Committee, Remuneration
Committee and Nomination 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
6. Ensure that between them
the Directors have the
necessary up-to-date
experience, skills and
capabilities
Details of each Board member’s experience, skills and qualifications are set out on pages 50
and 51 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.
7. Evaluation of Board
performance
The Non-Executive Directors meet more than once each financial year without the presence
of the Executive Directors, during which the performance of Executive Directors is assessed,
and once without the presence of the Chairman (to assess the performance of the Chairman).
8. Promote a culture based on
ethical values and
behaviours
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
The Board concluded a formal Board evaluation process in 2020 during which the
effectiveness of the Board was reviewed and discussed and the development and mentoring
needs of the Group’s management team was considered. The Board identified areas to
improve the effectiveness of the Board including the identification of Non-Executive Directors
to act as ‘stakeholder champions’ to ensure the Board was considering all stakeholder groups
(including customers, colleagues, business suppliers and partners, investors and society).
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.
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 72 to 81 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.
Whilst social distancing measures impacted the Group’s ability to attend physical meetings
with shareholders, institutional investors and other relevant stakeholders during the Year,
the successful and efficient use of technology, such as video conferencing, has enabled the
Group to maintain, and even increase, the frequency of its engagement with such
stakeholders. The Group is hoping to be in a position to hold its 2021 Annual General
Meeting with shareholders attending in person.
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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 73 and 86.
Director
Date appointed
Role
Committees
(C = current chair)
2020 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
Nicky Dulieu
1 January 2020
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
Remuneration Committee (C)
Audit 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
n/a
n/a
10/10
10/10
10/10
10/10
10/10
10/10
10/10
10/10
* Christopher Walkinshaw and Kathy Jenkins are nominated directors of Marshall of Cambridge (Holdings) Limited.
In light of national social distancing requirements during the Year, Board and Committee meetings from April 2020 were held via
video conference. This did not impact the effectiveness of Board or Committee meetings or the ability of Directors to contribute
to such meetings and, given the time efficiency of such meetings, it is envisaged that the use of video conference for some
meetings will be continued.
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 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.
Re-appointment of Directors
Daksh Gupta, having last been elected at the 2018 Annual General Meeting, will retire by rotation in accordance with the Articles
of Association of the Company and will offer himself for reappointment at the 2021 Annual General Meeting.
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.
Audit Committee
The Company has established an Audit Committee, which comprises Alan Ferguson (Chair of the Committee), Nicky Dulieu,
Francesca Ecsery and Christopher Walkinshaw. Further information on the Audit Committee is set out on pages 72 to 77.
Remuneration Committee
The Company has established a Remuneration Committee which comprises Nicky Dulieu (Chair of the Committee from 1 January
2020), Alan Ferguson, Francesca Ecsery and Kathy Jenkins. Further information on the Remuneration Committee is set out on
pages 78 to 81.
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.
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.
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INTERNAL CONTROL
The Board has ultimate responsibility for the Group’s system of internal control and for reviewing its effectiveness. However, any
such system of internal control can provide only reasonable, but not absolute, assurance against material misstatement or loss.
The Board considers that the internal controls in place are appropriate for the size, complexity and risk profile of the Group.
The principal elements of the Group’s internal control system include:
• management of the day-to-day activities of the Group by the Executive Directors; aided by the Group’s bespoke management
information system, Phoenix 2;
an organisational structure with defined levels of responsibility;
a forecasting process at each quarter end;
an annual budgeting process which is approved by the Board;
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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; and
a Compliance Department 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 40 to 45.
By order of the Board
Stephen Jones
Company Secretary
8 March 2021
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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.
When I was preparing my report at this time last year few
would have predicted the circumstances that we all faced
during 2020. This financial year has provided unique
operational issues for the Group against a backdrop of an
unstable and deteriorating economic environment. This
situation, coupled with the uncertainty arising from the
elongated trade negotiations with the European Union, has
presented management with challenges in respect of risk
management, the internal control environment and the
accounting judgements upon which the Annual Report and
Accounts are based.
The Committee has provided support in managing those risks,
and an oversight of the accounting judgements, through its
review of the work of the Internal Audit and Risk Function and
the External Auditor, and the consideration of the papers
presented by management covering key accounting matters.
Further details of this work and the conclusions reached are
set out in the remainder of this report.
Key Purpose of the Audit Committee
The Audit Committee provides effective governance over 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 and Accounts and the
formal
Annual Report and Accounts, and other
announcements relating
financial
performance;
the Group’s
to
•
•
Considering whether the Annual Report and 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
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having regard to matters communicated to it by
management and the External Auditor. Details of the
significant accounting
judgements, estimates and
assumptions are set out below and in Note 4 to the
consolidated financial 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 the Internal Audit Function;
•
•
Reviewing the External Auditor’s audit plan, nature and
scope of work, and the overall summary of key issues and
judgements;
Assessing the effectiveness of the External Auditor,
including the appropriateness and skills of the audit team
and the quality of the services provided;
• 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; and
•
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. 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.
The members of the Audit Committee, through their other
business activities have a wide range of commercial, financial
and internal control expertise. The biographies of each
member of the Audit Committee are set out on pages 50 to
51. In particular I am a Chartered Accountant with many years’
experience working in finance, I was the Group Finance
Director at Inchcape plc for 6 years and have served on the
boards of a number of other large companies throughout my
career both as a Finance Director and as an Audit Committee
Chair. I am currently the Chair of the Audit Committee of
AngloGoldAshanti, listed in Johannesburg and New York.
Marshall Motor Holdings plc | Annual Report & Accounts 2020
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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
Group’s financial reporting calendar.
During the year ended 31 December 2020 the Audit
Committee met three times. Each member’s attendance at
those meetings is set out below:
Committee
Member
Role
Attendance
Record
Alan Ferguson
Chair of the Audit Committee
Nicky Dulieu
Non-Executive Director
Francesca Ecsery Non-Executive Director
Christopher
Walkinshaw
Non-Executive Director
3/3
3/3
3/3
3/3
Following the year end and up to the date of this report there
have been two meetings of the Audit Committee which were
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 Audit and Risk, the Head of
Group Finance and representatives of the Group’s External
Auditor.
Activities during the Period
During the period since the last Annual Report and Accounts
and the date of this report, the Audit Committee has:
•
•
•
•
reviewed the key accounting judgements and estimates
and the going concern assessment in connection with the
Annual Report and Accounts and the Interim Report
and Accounts;
completed a tender process for the Group’s external audit
services, further details of which are set out below;
reviewed and approved the External Auditor’s audit plan
including
fee and statement of
independence;
the proposed
reviewed the Audit Quality Review (AQR) report prepared
by the Financial Reporting Council (“FRC”) on the 2019
audit and discussed this both with EY, the Auditor at the
time, and BDO, our current Auditor;
•
•
•
•
•
•
reviewed non-audit fees paid to the External Auditor in the
year ended 31 December 2020;
reviewed and approved the proposal that certain of the
Group’s subsidiary companies be exempt from audit under
the provisions of S479A of the Companies Act 2006;
and
approved the programme of work for the Internal Audit
Function
and
recommendations arising from the internal audits
conducted during the year ended 31 December 2020 and
up to the date of this report;
considered
findings
the
reviewed the Group’s arrangement to enable employees to
confidentially raise concerns about possible improprieties.
These include the use of an independent organisation to
provide a confidential ‘whistle-blowers’ hotline;
reviewed
the published Payment Practices and
Performance Report and discussed the action plans
identified to improve some areas of performance; and
reviewed and agreed the Group Tax Strategy which can
be found at https://www.mmhplc.com/investors/corporate-
governance.
In addition to receiving written reports from the External Auditor
and from management, the Audit Committee has also had
private meetings with the External Auditor and the Head of
Audit and Risk. 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 End
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 and 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 analysis and conclusions on each area of judgement,
amongst other matters.
The Audit Committee discussed the papers with management
and the External Auditor. For each area of judgement, the
Audit Committee concurred with the treatment adopted and
any relevant disclosure presented in the Annual Report
and 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 in subsidiaries
As disclosed in Note 14 ‘Goodwill and Other
Intangible Assets’ to the consolidated financial
statements, the Group has goodwill and indefinite-
life intangible assets arising from acquisitions of
businesses totalling £118.9m.
Within the company accounts for Marshall Motor
Holdings plc there are investments in subsidiaries
totalling £154.7m.
These assets and investments 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 of disposal).
The valuation and impairment review of investments
in subsidiaries is assessed for each legal entity or
group of legal entities to which an investment relates
and involves comparing the carrying value of the
investment 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 ‘Inventories’ the Group holds
inventory totalling £362.9m.
At each reporting period the Group assess 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.
The Audit Committee notes that as a consequence of the COVID-19
pandemic assessing the medium-term performance of the Group’s CGUs
presents a more substantial judgement than in prior reporting periods.
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.
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 longer-term business plans of the Group. In developing the cash
flow forecasts management prepared and presented a number of
alternative scenarios related to the depth of the current economic
downturn as a result of the pandemic and the speed and sustainability of
any subsequent recovery.
The Audit Committee concurs with the assessment made by management
in respect of this matter, the £0.2m impairment charge recorded in respect
of the goodwill for the Vauxhall CGU, and the disclosures provided in
Note 14.
In addition, the Audit Committee concurs with the assessment made by
management and the £2.3m impairment charge in respect of the carrying
value of investments in subsidiaries within the company accounts of
Marshall Motor Holdings plc.
The Audit Committee notes that, due to the various lockdown measures
taken to address the COVID-19 pandemic and the wider economic
situation, assessing the realisable value of the inventory held by the Group
is, due to the increased risk and uncertainty regarding the eventual sales
prices of the inventory, a more substantial judgement than in prior reporting
periods. This is particularly influenced by the fact that lockdown measures
are continuing through a registration plate change month which can affect
prices more than usual.
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.
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Issue Considered Audit Committee’s Review and Conclusions
Presentation of Alternative Performance
Measures (“APMs”)
The Group’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 page 170.
in
As described in the Financial Review on page 37 a
reduced set of APMs has been presented in 2020.
Revenue recognition and manufacturer bonus
recognition
The Group’s core revenue streams are new and used
vehicle sales, parts sales and servicing. The Group
incentive
also derives
arrangements with suppliers. An analysis of the
Group’s revenue is presented in Note 5 ‘Segmental
Information’.
from volume
income
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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 generally and, in particular, in respect of disclosing the
impact of measures taken to address COVID-19, 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 Committee spent some considerable time discussing the decision to
leave all costs associated with the COVID-19 pandemic in underlying profit
before tax. This was different to the treatment at the half year where some
directly attributable costs were taken into non-underlying. The factors
influencing this decision included a better understanding of the likely length
of the pandemic, updated guidance from the FRC and a review of market
practice.
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.
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 of amounts received under the
Coronavirus Job Retention Scheme (“CJRS”)
As set out in in the Financial Review on pages 34 to
39, the Group has received payments from the UK
Government to cover part of the salary costs of
colleagues who have been furloughed as a result of
the various national and local restrictions put in place
to reduce the spread of COVID-19.
The Audit Committee has considered papers prepared by management
setting out the process used to prepare and validate the amounts claimed
and recognised in the Annual Report and Accounts in respect of the CJRS.
The Audit Committee concurs with the assessment made by management
that the amounts are appropriately recognised and disclosed in the
financial statements.
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External Audit – Audit Quality Review
The audit work conducted by EY for the year ended
31 December 2019 has been the subject of a review by the
Audit Quality Review team of the FRC with a final report being
issued in January 2021. I had a call with the FRC before the
work commenced when we discussed, in particular, the scope
of their work. In due course I plan to discuss with the FRC their
findings and conclusions.
The key finding from the review was that there was insufficient
challenge of management and scepticism, or evidence
thereof, around the performance improvement assumptions
in the BMW/MINI CGU impairment models. The report was
discussed with our EY Audit Partner for the 2019 audit,
covering the points raised and the actions EY would have
taken in response if they had remained our Auditor. The main
action identified was around better evidencing and explaining
in the audit file the basis of some conclusions and the
justification for elements of the work done. It was pleasing that
none of the points raised implied that there were issues with
the opening balances for the 2020 year. These matters were
then discussed with our current Audit Partner from BDO.
These reviews do give helpful insight to the Committee about
the inner workings of the audit. Whilst any key finding is
disappointing it is important to note that the Committee did
spend quite some time discussing with management, and the
Auditor, the possible impairment of the BMW/MINI CGU. In
this discussion there was good challenge and debate, with the
result that enhanced disclosures were made in the Annual
Report and Accounts for the year ended 31 December 2019.
External Audit Tender
It was reported in the Annual Report and Accounts for the year
ended 31 December 2019 that the Committee had decided to
commence a formal tender for a new External Auditor to be in
place for the year ended 31 December 2020.
EY had been the Group’s Auditor for over 30 years and, whilst
Marshall Motor Holdings plc is not subject to the mandatory
rotation rules, the Committee felt that there were benefits to
putting the audit out to tender.
The tender process was led by myself supported by the
Committee and management. Three firms were invited to put
forward their proposals and initially we went through a process
to select the signing partners. Then each firm was provided
with access to information on the Group and given the
opportunity to meet with the Chairman, myself and
management to gain a detailed understanding of the
commercial, operating and financial reporting environment.
While most meetings were carried out in person, towards the
end of the process these had to be done virtually. Each firm
provided a detailed tender response and presented their
proposal to all members of the Audit Committee, supported
76
by senior management. The Board unanimously
recommended the appointment of BDO following the
recommendation of the Audit Committee.
BDO LLP were appointed as the Group’s Auditor following
ratification by shareholders at the July Annual General
Meeting.
External Audit
Following the conclusion of the audit tender, the Committee
has supported the onboarding of the new audit firm.
The fees paid to the External Auditor for non-audit services
during the year ended 31 December 2020 totalled £39,000
and related solely to the review of the Group’s Interim Report
and Accounts.
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.
In order to judge audit quality, 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 and their ability to be sceptical and to challenge
appropriately;
The planning and execution of the agreed audit plan and
the quality of reports presented to the Committee; and
The conduct of the Auditor, including the Audit
Committee’s experience of interaction with the Auditor.
Stephen Le Bas is the Lead Partner on the audit for the year
ended 31 December 2020.
Following this review the Committee concluded that the audit
was effective.
Assessing audit quality, a critically important function of the
Committee, has been for Marshall Motor Holdings plc and
many other businesses predominantly a qualitative process.
In order to enhance our processes around this area, with the
introduction of some quantitative measures, we will join a pilot
study being run by the FRC on Audit Quality Indicators for the
2021 year end. We will report back on the learnings from this
work next year.
Marshall Motor Holdings plc | Annual Report & Accounts 2020
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Internal Audit
At each meeting the Committee receives a report from the
Head of Audit and Risk for the period detailing the internal
audit findings and the actions required to rectify any
weaknesses identified. The reports also include a summary
of any
investment post
implementation reviews carried out, as well as any specific
process or subject area reviews.
investigations, projects or
During 2019 it was recognised that, given the increased size
and complexity of the business, the structure of the function
should be changed. As a result, a Head of Internal Audit and
Risk started in March 2020.
As a result of the COVID-19 pandemic there has been
substantial disruption to the business and, therefore, to the
internal audit programme during 2020 with the various
closures and restrictions making the conduct of on-site audit
work more difficult and time consuming. The need for
increased remote working, as well as changes to business
processes, has changed the risk profile requiring a different
focus for the function. Notwithstanding these challenges
progress has been made. The Group’s internal audit approach
has been reviewed and redeveloped to more closely address
current and emerging business risks and the Committee looks
forward to this approach being fully implemented during 2021.
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
8 March 2021
77
GOVERNANCE
Statement from the Chair
of the Remuneration Committee
Nicky Dulieu
Non-Executive Director and
Chair of the Remuneration Committee
On behalf of the Board, I am pleased to present our Directors’
Remuneration Report for 2020. Although not subject to the
reporting regulations of fully listed companies in the UK, the
Remuneration Committee has taken account of these
regulations in the preparation of our Remuneration Report as
a matter of best practice.
•
•
The Remuneration Report is divided into three sections: this
Chair’s introduction; a revised Directors’ Remuneration Policy;
and the Annual Remuneration Report, which outlines how we
implemented our current policy in 2020 and how we intend to
apply the new Directors’ Remuneration Policy in 2021.
Remuneration Policy review
Our current Directors’ Remuneration Policy and the Group’s
Performance Share Plan (“PSP”) have been in place since the
Group’s Admission in 2015. Over this period, the Group has
delivered results that have been well in excess of the
equivalent performance of other companies in our sector. We
have significantly expanded our operations by increasing our
operating units, nearly doubling our employee base and more
than doubling both revenue and PBT. We have also disposed
of a number of sub-scale, non-core and loss-making
businesses, further enhancing shareholder value and
ensuring our growth is sustainable. We have increased our
market share through both organic growth and strategic
acquisitions. Throughout this period of exceptional growth, our
management team has also been able to deliver year-on-year
increases in our trust scores with customers and employee
engagement. In 2020, we achieved a ranking of 12th in the
‘Great Place to Work’ index for best UK workplaces. This was
the eleventh consecutive year of Great Place to Work status
and the sixth consecutive year of being ranked as one of the
UK’s best work places. Under the leadership of our Chief
Executive Officer, Daksh Gupta, the team has delivered this
exceptional performance in what has been a particularly
challenging time for the sector.
During the course of 2020, the Remuneration Committee has
the Group’s
undertaken a comprehensive review of
remuneration
to ensure our
Remuneration Policy
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 Group’s values and strategic goals; and
adhere to the principles of good corporate governance,
support good risk management practice and promote
long term sustainable Group performance. Whilst the UK
Corporate Governance Code (the “UK Code”) does not
apply to the Company, the Remuneration Committee has
decided to apply a number of the principles set out in the
UK Code which are over and above the requirements of
the QCA Corporate Governance Code.
Current remuneration positioning at the lower end of
the market compared to our listed peers
Our Chief Executive Officer, Daksh Gupta, has over 28 years’
experience in the automotive retail sector and joined the
Group in 2008. On Admission in 2015, his base salary was
set at £400,000. Notwithstanding the significant growth in the
Group since that date as noted above and Daksh’s
contribution to our consistent outperformance of the market,
increases to his base salary over this period have not reflected
this and have been inflationary only. The current annual bonus
and long-term incentive opportunities have also not been
reviewed since IPO.
As a result, Daksh’s current base salary of £433,800 and his
total compensation package are at the lower end of the market
compared to the Group’s listed peers. In a competitive market
for talent, we believe this presents a real risk to the business
and does not appropriately reflect the growth and performance
of the business and increase in the scope of his role and
responsibilities.
Summary of proposed Remuneration Policy changes
and rationale
Overall, we consider proposed changes to our Remuneration
Policy will support the strategic ambition of the Group and are
aligned to shareholders’ interests. I have set out below
information on the key proposed changes to the Policy.
For the avoidance of doubt, increases in base salary for the
Executive Directors which are above the general rises for
employees and increases in the maximum variable pay
opportunity under the revised Remuneration Policy, will not be
implemented until such time as the Remuneration Committee
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Marshall Motor Holdings plc | Annual Report & Accounts 2020
considers appropriate, which will not be whilst the Company
is claiming any Government support linked to COVID-19, nor
before it has announced a resumption of dividend payments.
Furthermore, increases in the maximum variable pay
opportunity will require additional stretch in the performance
delivered so that more pay is delivered only for the
achievement of more stretching performance targets.
•
•
in
the continued success of
Base salary increases: We intend to increase the Chief
Executive Officer’s base salary to £525,000. This
increase will bring his base salary more in line with our
listed peers and reflects Daksh’s outstanding contribution
to the growth and success of the Group and his critical
role
the business.
Recognising the Chief Financial Officer’s performance
since appointment in January 2019 (including the
successful execution and subsequent integration of a
number of acquisitions, the successful extension of the
Group’s banking facilities and the effective management
of
the
COVID-crisis), together with the fact that his base salary
on appointment was set at the lower end of the market
competitive range, we are also proposing an increase for
our Chief Financial Officer from £265,800 to £290,000.
financial position
the Group’s
through
Pension: In line with best practice under the UK Code,
the pension contribution (or cash in lieu) for any new
Executive Directors will be aligned to the wider workforce.
For
incumbent Executive Directors, pension
contributions will be frozen at existing contribution levels
(pre the proposed base salary increases) until they align
to the wider workforce rate.
the
• Maximum annual bonus: Reflecting the growth and
performance of the Group since IPO, we are proposing to
increase the overall maximum annual bonus opportunity
to 150% of salary for the Chief Executive Officer and to
125% of salary for the Chief Financial Officer. This increase
will bring the maximum bonus opportunity in line with our
listed peers. The increase in the annual bonus would be
combined with a reduction in the maximum on-target
bonus to 50% of the maximum bonus potential (currently
70% of maximum). As noted above, the increase in the
maximum annual bonus potential will be considered
alongside the level of stretch inherent in the targets set to
ensure we only pay for more incremental performance.
•
Proportion of annual bonus to be deferred into
shares: To provide further alignment with shareholders,
50% of any bonus earned above target will be deferred
into shares and will be subject to a two-year deferral
period. This will apply once the annual bonus opportunity
is increased until such time as the shareholding
guidelines have been met.
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•
•
•
•
•
•
•
Annual bonus measures: We will include flexibility under
the revised Remuneration Policy to set measures and
targets reflecting the Group’s strategy and aligned with key
financial, operational, strategic and/or individual objectives.
Performance share plan (PSP) quantum: Reflecting
the growth and performance of the Group since IPO and
the ambitious strategic goals of the Group, we are
proposing to increase the overall maximum PSP
opportunity to 200% of salary for the Chief Executive
Officer and 150% of salary for the Chief Financial Officer.
This will require a change to the current PSP rules which
will be subject to shareholder approval at the 2021 AGM.
The increased opportunity would only be available for
transformational performance and the satisfaction of
extremely stretching performance targets.
PSP performance and holding period: PSP awards will
usually be subject to a three-year performance period and
in line with best practice under the UK Code the holding
period will be extended from one year following the end
of the vesting period to two years following the end of the
vesting period.
PSP measures: We will include flexibility under the
revised Remuneration Policy to set measures and targets
reflecting the Group’s strategy. We will retain discretion to
award restricted stock awards at 50% of normal award
levels instead of PSP awards. However, restricted stock
would only be awarded as a fallback position in the event
that the Remuneration Committee considers that it would
not be feasible to set robust and meaningful PSP targets.
In-employment shareholding guidelines: In line with
best practice, the shareholding requirement will be
increased from 100% of salary to 200% of salary. Until
the shareholding requirement is met, Executive Directors
will be required to retain any vested deferred bonus
shares and 50% of any vested PSP shares (net of tax).
Post-employment shareholding guidelines: We will
introduce a post-employment requirement requiring the
lower of actual shares held or 100% of the shareholding
guideline to be held for the first year post cessation,
reducing to 50% of the shareholding requirement to be
held for the second year post cessation.
Best practice governance changes over and above
the requirements of the QCA Corporate Governance
Code: The increase to the in-employment shareholding
guidelines, the introduction of a post-employment
shareholding guideline, together with the two year holding
period for PSP awards and the introduction of bonus
deferral, is a balanced way of ensuring alignment with
longer term shareholder interests.
GOVERNANCE
Key Remuneration Committee decisions and
remuneration outcomes for the period to 31 December
2020
As outlined in the Operating Review and the Financial Review,
in response to COVID-19, the Group took a range of actions
to manage and mitigate costs and protect its cash position.
Whilst the Board recognises the absolute importance of
dividend income for shareholders, given the focus on
preserving cash, and recognising the financial support
received from Government in relation to COVID-19, we
suspended the final 2019 dividend and interim and final 2020
dividends. However, we intend to re-instate our dividend policy
as soon as it is appropriate.
The Group has also worked hard to support its colleagues
during this period of uncertainty. During the first lockdown
period from March to June 2020, the Group supplemented the
Government furlough support received, enhancing colleague
pay to 100% for March, 90% for April and 85% for May. In
addition, whilst they continued to work throughout, the Board
and other senior members of the management team
voluntarily reduced their pay in line with the reductions for
furloughed colleagues in April and May, and also forfeited
holiday accrued.
Despite the material impact that COVID-19 has had on our
operations during 2020, including an extended period of
closure of all our dealerships both from March to June and
again in November, our operational performance during the
second half of the year was exceptionally strong across all key
like-for-like metrics and we traded significantly ahead of the
market. Our strong trading performance in the second half of
the year resulted in underlying profit before tax for the year of
£20.9m, ahead of the Group’s upgraded expectations.
The Group’s cash position remained strong. As such, we were
able to voluntarily repay early all amounts we benefited from
under the Government’s VAT deferral scheme. As at
31 December 2020, after repayment of the VAT benefit, our
adjusted net cash position was £28.8m (31 December 2019:
adjusted net debt £30.6m). In recognition of the ongoing
impact of COVID-19 on our operations, the Group identified
several operational changes and efficiencies which resulted
in a very limited number of redundancies; however, we have
preserved the vast majority of colleagues’ jobs across our
business.
Annual bonus opportunity for the Executive Directors during
2020 was based on the achievement of underlying PBT
targets. Whilst the Group significantly outperformed the wider
market and met those targets, it also benefited from a number
of sector tailwinds and significant financial support from the
Government in relation to COVID-19. As a result, and in
recognition of the experience of our shareholders and other
stakeholders the Remuneration Committee has agreed, in
consultation with the Executive Directors, that no bonuses will
be paid in respect of FY2020.
As outlined in our 2019 Remuneration Report, taking into
account best remuneration practice with regard to the award
of restricted stock and recognising the challenge of setting
robust long term targets against the backdrop of a cyclical new
car market, the Remuneration Committee reviewed and
simplified the operation of the PSP for awards granted in 2019
and 2020.
to
In August 2020, the Executive Directors received awards
(“2020 Awards”) under the PSP. In line with the approach
adopted in 2019, the 2020 PSP awards will vest dependent
upon continued employment and subject
the
Remuneration 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 awards were 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. The vesting date of the 2020 Awards will be
11 March 2023, being the announcement of results following
the end of the third year of the performance period to
31 December 2022. Shares acquired will then be subject to
a holding period until 11 March 2024.
As previously reported, a consistent approach was adopted
for the 2017 and 2018 PSP awards, taking into account the
impact of corporate activity, the Company’s financial
performance compared to that of its competitors over the
relevant performance periods, and the effectiveness of 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.
As a result, subject to there being no material deterioration in
the Company’s performance which significantly departs from
any market deterioration, the Remuneration Committee’s
intention was and remains, to recommend discretionary
awards for the 2017 and 2018 PSP awards, such that the
overall vesting levels are at 50% of the maximum award. In
light of the impact of the COVID-19 pandemic during the Year,
the Remuneration Committee determined that it was
appropriate to defer final determination on such discretionary
awards which would otherwise have been determined on the
normal vesting dates for such awards, being 29 September
2020 and 17 April 2021 respectively.
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Shareholder engagement
We undertook a consultation exercise on the updates to the
revised Remuneration Policy with shareholders representing
more than 90% of the shares in the Company. I am grateful
for the support that we received for our proposals. Full details
of the revised Remuneration Policy can be found on pages 82
to 85.
I would also like to thank shareholders and investor bodies for
their constructive input and engagement in relation to the
revised Remuneration Policy. We remain committed to a
responsible approach to executive pay, as I trust this Directors’
Remuneration Report demonstrates. As always, I am happy
to meet or speak with shareholders if there are any questions
or feedback on our approach to executive remuneration.
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Nicky Dulieu
Chair of Remuneration Committee
8 March 2021
to
for
the year
remuneration decisions
Key
31 December 2021
The outlook for 2021 remains uncertain given the ongoing
impact of COVID-19 and the current national lockdown.
Nevertheless, we believe that our strong culture, brand
partnerships with scale, in-house technology platform and
online presence, coupled with our exceptional colleagues,
provides a robust platform for the Group to continue to
outperform the wider automotive retail market in 2021 and
capitalise on strategic growth opportunities when they arise.
As outlined above, increases in base salary for the Executive
Directors, which are above the general rises for employees
and increases in the maximum variable pay opportunity under
the revised Remuneration Policy, will not be implemented until
such time as the Remuneration Committee considers
appropriate, which will not be whilst the Company is claiming
any Government support linked to COVID-19, nor before it
has announced a resumption of dividend payments.
Until such time as the revised annual bonus arrangements
under the revised Remuneration Policy are implemented, the
maximum potential annual bonus for the year ending
31 December 2021 will be 125% of salary for the Chief
Executive Officer and 100% of salary for the Chief Financial
Officer. For FY2021, it is intended that the bonus will be based
on PBT achievement and will be subject to performance
underpins on Health & Safety and FCA compliance. Given the
on-going level of uncertainty for FY2021, we retain discretion
to set a PBT target for the first half of the year and a PBT target
for the second half of the year. No bonus would be paid until
after the end of the full financial year and the bonus for each
half year would be subject to the Remuneration Committee’s
assessment of the Group’s holistic financial performance
across the full year.
The Remuneration Committee intends to grant options under
the PSP in 2021 at an appropriate time and no earlier than
August 2021. At the point that the Remuneration Committee
consider it appropriate to implement the revised Remuneration
Policy, it is intended that 50% of the PSP will be based on a
matrix of revenue and net margin performance, 30% on the
achievement of stretching Return on Capital targets, 10% on
the achievement of strategic goals (most likely ESG
measures) and 10% on employee engagement. In the event
it is deemed unfeasible to set meaningful PSP financial
targets, the fallback position will be to award Restricted Shares
in line with those granted in 2019 and 2020.
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Directors’ Remuneration Policy
REMUNERATION POLICY
As set out in the annual statement from the Remuneration Committee Chair, following consultation with shareholders representing
more than 90% of the shares in the Company, the Company has adopted a revised remuneration policy for 2021 (‘Revised
Remuneration Policy’). The Revised Remuneration Policy replaces the previous policy which had been in place since the
Company’s admission to trading on AIM in 2015.
As also stated in the annual statement from the Remuneration Committee Chair, certain elements of the Revised Remuneration
Policy will not be implemented until such time as the Remuneration Committee considers appropriate, which will not be whilst
the Company is claiming any Government support linked to COVID-19, nor before it has announced a resumption of dividend
payments.
The table below sets out the elements of Executive Directors’ compensation and how each element operates, as well as the
maximum opportunity for each element and any applicable performance measures
Purpose and
link to strategy
BASIC SALARY
To provide a competitive base
salary for the market in which
the Group operates to attract
and retain Executive Directors
of a suitable calibre.
BENEFITS
To provide market competitive
benefits as part of the total
remuneration package.
Operation
Maximum opportunity
Performance metrics
None.
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 Remuneration Committee
has regard to, inter alia, the
Group’s revenue, profitability,
market worth and business
sector.
is no prescribed
There
maximum increase. Annual
rates are set out in the annual
report on remuneration for the
current year and the following
year.
For FY2021:
Implementation of salary
increases deferred until such
time as the Remuneration
Committee
considers
appropriate.
insurance,
Executive Directors currently
receive holiday entitlement,
life
health
assurance premiums and
income protection insurance.
The
Remuneration
Committee reviews the level
of benefit provision from time
to time and has the flexibility
to add or remove benefits to
reflect changes in market
practices or the operational
needs of the Group.
None.
Whilst
the Remuneration
Committee has not set a
maximum level of benefits that
Executive Directors may
receive, the value of benefits
is set at a level which the
Remuneration Committee
considers
appropriate,
considering market practice
and individual circumstances.
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Operation
Maximum opportunity
Performance metrics
Purpose and
link to strategy
PENSION
To provide an appropriate
level of retirement benefit (or
cash allowance equivalent).
All Executive Directors are
entitled to participate in the
Company’s
defined
contribution pension scheme
or to receive a cash allowance
pension
of
in
contributions.
lieu
Only
base
pensionable.
salary
is
ANNUAL BONUS
Rewards performance against
targets which support the
the
strategic direction of
Group.
Awards are based on
performance against targets
the
determined
Remuneration Committee.
by
Deferral provides a retention
element
share
direct
ownership
alignment to shareholders’
interests.
through
and
the
Pay-out levels are determined
by
Remuneration
Committee after the year end.
The Remuneration Committee
has discretion to amend pay-
outs should any formulaic
their
output not
assessment of performance.
reflect
When the maximum bonus is
increased above 125% of
base salary in respect of the
Chief Executive Officer and
100% in respect of the Chief
Financial Officer, 50% of any
bonus earned above target
performance to be paid in
shares, subject to a two year
deferral period until such time
shareholding
as
guidelines have been met.
the
Deferred share awards may
include dividend equivalents
earned between the grant and
vesting date.
Recovery and withholding
provisions apply.
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For any new Executive
Director, pension provision will
be aligned at
level
available for the majority of the
group’s workforce.
the
The pension provision for the
incumbent Chief Executive
Officer and Chief Financial
Officer will be based on the
higher of:
•
the existing GBP amount
based on the current
salaries (Chief Executive
Officer £69,408 and Chief
Financial
Officer
£21,264); and
•
the wider workforce rate.
Maximum opportunity of
150% of salary for the Chief
Executive Officer and 125% of
salary for the Chief Financial
Officer
to more
stretching performance for
maximum pay-out)
(subject
When the maximum bonus is
increased above 125% of
base salary in respect of the
Chief Executive Officer and
100% in respect of the Chief
Financial Officer, maximum
paid
on-target
performance reduced from
70% of maximum to 50% of
the maximum.
for
None.
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Targets are set annually and
aligned with key financial,
individual
strategic and/or
targets with the weightings
these measures
between
determined
the
Remuneration Committee
each year considering the
Group’s priorities at the time.
by
Given the on-going level of
uncertainty for FY2021, we
retain discretion to set a PBT
target for the first half of the
year and a PBT target for the
second half of the year. No
bonus would be paid until after
the end of the full financial
year and the bonus for each
half year would be subject to
the
Remuneration
Committee’s assessment of
the Group’s holistic financial
performance across the full
year.
GOVERNANCE
Purpose and
link to strategy
Operation
Maximum opportunity
Performance metrics
LONG-TERM INCENTIVES – MMH PERFORMANCE SHARE PLAN
To create alignment between
the interests of Executive
Directors and shareholders
through
the delivery of
performance-based awards in
Group shares.
Grant of nil cost options under
the PSP.
Vesting is subject to the
achievement of specified
performance
conditions
and/or continued employment
normally over three years.
Awards may include dividend
equivalents.
A 24 month post-vesting
holding period applies for
awards made from 2021.
Recovery and withholding
the
provisions apply at
discretion
the
Remuneration Committee
within three years of vesting
of
be
Maximum award increased to
up to 200% of salary. The
increased opportunity would
only
for
transformational performance
the satisfaction of
and
extremely
stretching
performance targets.
available
This will require a change to
the PSP rules which will be
subject
shareholder
to
approval at the 2021 AGM
Set to reflect longer term
business
and
strategy
performance.
Performance measures and
their weighting are reviewed
maintain
to
annually
appropriateness
and
relevance.
For
threshold
levels of
the
performance, 25% of
award will vest rising to 100%
for maximum performance.
Below
the
award will not vest
threshold,
the
IN-EMPLOYMENT: SHARE OWNERSHIP GUIDELINES
Increase alignment between
the Executive Directors and
shareholders.
the
Until
shareholding
requirement is met, Executive
Directors will be required to
retain any vested deferred
bonus shares and 50% of any
vested PSP shares (net of
tax).
In line with best practice,
requirement
shareholding
increased
from 100% of
salary to 200% of salary.
None.
POST EMPLOYMENT: SHARE OWNERSHIP GUIDELINES
Increase alignment between
the Executive Directors and
shareholders.
post-employment
The
shareholding requirement will
only apply to shares acquired
under the deferred bonus or
PSP post implementation of
the revised Remuneration
Policy
Lower of actual shares held or
100% of the shareholding
guideline to be held for the first
year post cessation reducing
to 50% of the shareholding
requirement to be held for the
second year post cessation.
None.
NON-EXECUTIVE DIRECTOR FEES (“NED”)
To attract NEDs who have a
broad range of experience
and skills to oversee the
implementation of our strategy
strong
provide
and
performance stewardship
NED fees are determined by
the Board (excluding NEDs)
within the limits set out in the
Articles of Association and are
paid in 12 equal monthly
instalments during the year.
None.
Annual rate set out in the
annual report on remuneration
for the current year and the
following year.
No prescribed maximum
annual increase.
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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 Remuneration 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
is 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
Remuneration 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 Remuneration 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 –
A Ferguson 11 March 2015 –
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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GOVERNANCE
Directors’ Remuneration Report
The Board remains responsible for the approval and
implementation of any recommendations made by the
Remuneration Committee. The remuneration of Non-
Executive Directors other than the Chairman is determined by
the Chairman of the Board and the Executive Directors.
independent
remuneration advice
The Remuneration Committee’s Advisers
The Remuneration Committee engages external advisers to
assist it in meeting its responsibilities. Deloitte LLP (“Deloitte”)
the
provides
Remuneration Committee. 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
Remuneration Committee is satisfied that the advice that it
receives is objective and independent.
to
REMUNERATION GOVERNANCE
Throughout the Year, the Remuneration Committee comprised
three independent Non-Executive Directors, Nicky Dulieu
(Chair of the Committee), Alan Ferguson and Francesca
Ecsery, alongside Kathy Jenkins who is an appointed
representative of MCHL. Nicky Dulieu was appointed Chair of
the Committee on 1 January 2020.
The table below sets out each member’s attendance record
at Remuneration Committee meetings during the year:
Committee
Member
Role
Attendance
record
Nicky Dulieu
Chair of the Committee
Alan Ferguson
Non-Executive Director
Francesca Ecsery
Non-Executive Director
Kathy Jenkins
Non-Executive Director
4/4
4/4
4/4
4/4
The Chair of the Board, members of the management team,
as well as the Remuneration 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 Remuneration Committee cover
such issues as: committee membership; frequency of
meetings; quorum requirements; and the right to attend
meetings. In addition, the Remuneration 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
ensuring the Remuneration Committee has access to
independent remuneration advice including responsibility
for appointing a suitably qualified adviser.
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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 2020.
Basic Annual Long term
salary Fees Benefits Pension bonuses incentives Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000
Executive Directors
D Gupta 424.8 - 16.8 68.0 - - 509.6
R Blumberger 260.3 - 4.4 22.0 - - 286.7
Total 685.1 - 21.2 90.0 - - 796.3
Non-Executive Directors
R Parry-Jones - 135.3 - - - - 135.3
A Ferguson - 62.3 - - - - 62.3
F Ecsery - 42.8 - - - - 42.8
N Dulieu - 52.5 - - - - 52.5
C Walkinshaw1 - 39.2 - - - - 39.2
K Jenkins1 - 39.2 - - - - 39.2
Total 371.3 - - - - 371.3
Aggregate directors’
emoluments 685.1 371.3 21.2 90.0 - - 1167.6
1. 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.
As set out in the statement from the Remuneration Committee Chair, the Board and other senior members of the management
team voluntarily reduced their pay to 90% for April and 85% for May (in line with the reductions for furloughed colleagues during
this period) and forfeited holiday accrued. The amounts detailed in the table above are shown after these reductions.
The benefits above include items such as medical cover, life assurance premiums and income protection insurance.
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 2020 LTIP Award 20-Aug-20 11-Mar-23 £Nil 125.0p 260,292
R Blumberger 2020 LTIP Award 20-Aug-20 11-Mar-23 £Nil 125.0p 119,340
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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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 858,076 260,292 - - 1,118,368
R Blumberger 102,632 119,340 - - 221,972
Statement of Directors’ Shareholding
Under the Company’s revised remuneration policy, in line with best practice, the shareholding requirement for our Executive
Directors will be increased from 100% of salary to 200% of salary. Until the shareholding requirement is met, Executive Directors
will be required to retain any vested deferred bonus shares and 50% of any vested PSP shares (net of tax).
We have also introduced a post-employment requirement requiring 100% of the shareholding requirement (or actual shareholding
at the date of cessation if lower) to be held for 12 months and 50% of the shareholding requirement (or actual shareholding at
the date of cessation if lower) to be held for two years post cessation. The post-employment shareholding requirement will only
apply to shares acquired under the deferred bonus or PSP post implementation of the revised Remuneration Policy
The Directors who held office at 31 December 2020 and their connected persons had interests in the issued share capital of the
Company as at 31 December 2020 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 31/12/19 of options the year the year at 31/12/20 Unvested unexercised in shares base salary2 met?
R Parry-Jones - - - - - - - - n/a n/a
D. Gupta 1,451,111 - - - 1,451,111 1,118,368 - 2,569,479 470% Yes
R Blumberger - - - - - 221,972 221,972 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
N Dulieu - - - - - - - - n/a n/a
K Jenkins - - - - - - - - n/a n/a
C Walkinshaw - - - - - - - - n/a n/a
1
These include the 2017, 2018, 2019 and 2020 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 Remuneration Committee’s
intention is to recommend discretionary awards for the 2017 and 2018 PSP awards, such that the overall vesting levels are
at 50% of maximum award. In light of the impact of the COVID-19 pandemic during the year, the Remuneration Committee
determined that it was appropriate to defer final determination on such discretionary awards which would have otherwise
have been determined on the normal vesting dates for such awards, being 29 September 2020 and 17 April 2021 respectively.
The Remuneration Committee will reconsider the determination of these discretionary awards no earlier than August 2021.
The 2019 and 2020 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 respective three year
vesting periods which significantly departs from any market deterioration.
A holding period of 12 months applies to each of the 2017, 2018, 2019 and 2020 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 2020.
The middle market price of the shares as at 31 December 2020 was 140.5p and the range in respect of the 12 month period
ending 31 December 2020 was 85.0p to 158.0p.
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Implementation of remuneration policy for the year ending 31 December 2021
As set out above, certain elements of the Revised Remuneration Policy (including changes to salary and variable pay
opportunities) will not be implemented until such time as the Remuneration Committee considers it appropriate to do so. Until
such time, the annual salaries and fees to be paid to directors in the year ending 31 December 2021 will be as set out below.
31 December 2021 31 December 20202 Increase
Executive Directors £’000 £’000 %
D Gupta 433.8 433.8 -
R Blumberger 265.8 265.8 -
Non-executive Directors £’000 £’000 %
R Parry-Jones 138.2 138.2 -
A Ferguson 63.7 63.7 -
N Dulieu 53.7 53.7 -
F Ecsery 43.7 43.7 -
C Walkinshaw1 40.0 40.0 -
K Jenkins1 40.0 40.0 -
1 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.
2
2020 salaries and fees are stated before the voluntary salary and fee reductions. The amounts actually paid in 2020 are set
out in the single total figure of remuneration table above.
Until such time as the revised annual bonus arrangements under the Revised Remuneration Policy are implemented, the
maximum potential annual bonus for the year ending 31 December 2021 will be 125% of salary for the Chief Executive Officer
and 100% of salary for the Chief Financial Officer. For FY2021, it is intended that the bonus will be based on PBT achievement
and will be subject to performance underpins on Health & Safety and FCA compliance. Given the on-going level of uncertainty
for FY2021, we retain discretion to set a PBT target for the first half of the year and a PBT target for the second half of the year.
No bonus would be paid until after the end of the full financial year and the bonus for each half year would be subject to the
Remuneration Committee’s assessment of the Group’s holistic financial performance across the full year.
The Remuneration Committee intends to grant options under the PSP in 2021 at an appropriate time which will be no earlier
than August 2021. At the point that the Remuneration Committee consider it appropriate to implement the revised Policy, it is
intended that 50% of the PSP will be based on a matrix of revenue and net margin performance, 30% on the achievement of
stretching Return on Capital targets, 10% on the achievement of strategic goals – most likely ESG measures and 10% on
employee engagement. In the event it is deemed unfeasible to set meaningful financial targets, the fallback position will be to
award Restricted Shares in line with those granted in 2019 and 2020.
By order of the Board
Nicky Dulieu
Chair of Remuneration Committee
8 March 2021
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Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have
elected to prepare the group financial statements in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006 and the 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 state of affairs of the
Group and Company and of the profit or loss of the Group for that period. The Directors are also required to prepare financial
statements in accordance with the rules of the London Stock Exchange for companies trading securities on AIM.
In preparing these financial statements, the Directors are required to:
•
select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
•
•
state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material
departures disclosed and explained in the financial statements;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and
Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and 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 requirements of the Companies Act 2006. 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.
Website publication
The Directors are responsible for ensuring the Annual Report and the financial statements are made available on a website.
Financial statements are published on the Group’s and Company’s website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The
maintenance and integrity of the Group’s and Company’s website is the responsibility of the Directors. The Directors’ responsibility
also extends to the ongoing integrity of the financial statements contained therein.
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Independent Auditor’s Report to the Members of
Marshall Motor Holdings plc
Opinion on the financial statements
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at
31 December 2020 and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006;
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.
We have audited the financial statements of Marshall Motor Holdings plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’)
for the year ended 31 December 2020 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated
and Company Balance Sheet, the Consolidated and Company Statement of Changes in Equity, the Consolidated Cash Flow
Statement, and notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law
and international accounting standards in conformity with the requirements of the Companies Act 2006. 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 Financial Reporting Standard 102 The Financial Reporting Standard in the United
Kingdom and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
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 further described in the Auditor’s responsibilities for the audit of the financial statements
section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We remain independent of the Group and the 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.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and the Parent
Company’s ability to continue to adopt the going concern basis of accounting included building on our understanding of the
business model, objectives, strategies and related business risk, the measurement and review of the entity’s financial performance
including forecasting and budgeting processes and the entity’s risk assessment process.
In light of the COVID-19 pandemic and the resultant economic uncertainty, as described in the going concern accounting policy
in note 1, we considered the ability of the Group to operate within its facilities and continue as a going concern in this environment
to be a Key Audit Matter.
Management has forecast a number of scenarios. This is described further in the going concern accounting policy in Note 1 to
these accounts.
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Our procedures included the following:
•
•
Reviewing management’s assessment of going concern through analysis of the Group’s cash flow forecast through to
31 December 2022, including assessing and challenging the assumptions underlying the forecasts by reference to our own
knowledge of the industry and also commentary made by industry experts (e.g. SMMT, CAP). We looked at the relevance
and reliability of underlying data used to make the assessment via consideration of the underlying assumptions and
agreement to underlying forecasts, appropriately sensitised where required by various scenarios.
As part of this process we have considered the impact of the COVID-19 pandemic and the impact on the forecasts, within
which management have built four potential scenarios dependent on the severity of the impact. We have considered these
scenarios in the context of what would be considered a reasonable worst-case scenario and also considered the underlying
assumptions of the forecasts to industry commentary.
• We also obtained an understanding of the financing facilities, including the nature of these facilities, repayment terms and
covenants. We then assessed the facility headroom calculations on both a base case scenario, and management’s downside
scenarios as a result of the ongoing COVID-19 pandemic.
• We considered the likelihood of each scenario happening and considered what actions the group has available should there
be a potential covenant breach.
•
The adequacy and appropriateness of disclosures in the financial statements regarding the going concern assessment.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections
of this report.
Overview
Coverage 100% of Group profit before tax
100% of Group revenue
100% of Group total assets
2020
Key Audit Matters Valuation of inventory provisions 3
Assessment of the carrying value of goodwill and other intangible assets 3
Going concern 3
Materiality Group financial statements as a whole
£967,000 based on 5% of profit before tax over the last 3 years.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of
internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of
management override of internal controls, including assessing whether there was evidence of bias by the Directors that may
have represented a risk of material misstatement.
At 31 December 2020 the Group had 34 components whose transactions and balances are included in the consolidated
accounting records. Three components, including the parent company, were considered to be significant components and were
subject to a full scope audit.
Each component’s financial information could be selected for the purpose of representative sampling and key item testing. Of
these 34 components, 20 have been audited to group materiality. For these components, the group audit team, carried out
targeted procedures in respect of revenue, profit, assets and liabilities, and in doing so the group audit team tested 100% of
group revenue applicable to other components. Eleven components are dormant.
All work was carried out by the group audit team.
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Key Audit Matters
Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified, including 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 forming our opinion thereon, and we do not provide a separate opinion on these matters.
In addition to the matter set out in the ‘Conclusions Relating to Going Concern’ section above, we determined the following to be
Key Audit Matters:
How the scope of our audit
Key Audit Matter addressed the Key Audit Matter
Vehicle inventory provisions
Please refer to Note 18, accounting
policies in Note 2, and key sources
of estimation uncertainty in Note 4.
The Group has a significant holding of
new and used vehicle inventory.
Vehicles held as inventory have the
potential to depreciate and decline in
value over the period of ownership by
the Group and as a result management
have included a provision against these
inventories of £7.8m. Value volatility is
in response to market conditions and is
deemed a higher risk in relation to used,
demonstrator and pre-registered vehicle
inventory.
The valuation of vehicle inventory
provisions is subject to significant
judgement. Therefore there is a risk that
inventory could be misstated.
We gained an understanding of the method
applied by management in performing its
inventory provisioning calculation and tested
the methodology was being applied in line
with the Group’s policy.
We recalculated management’s provision and
agreed the valuation of inventory to post
year-end sales (if the vehicle was sold) or to
independent third party market values (CAP
Clean) to check that inventory is valued at the
lower of cost and net realisable value.
We have further considered management
judgements around the expected movement
in used vehicle values in the context of the
anticipated realisation of the inventories. This
involved consideration of the sales rate for
vehicles and the expected future changes in
vehicle value by reference to industry expert
forecasts. These considerations included an
analysis of
latest
Government lockdown on the Group’s trading
performance since the year end. In addition
we have valued all unsold vehicles to
independent valuation data
to
corroborate management judgements over
the fall in vehicle values.
impact of
(CAP)
the
the
We evaluated the accuracy of the provision in
the prior period 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.
Key observations:
Based on
the procedures performed,
inventory provisions are supported by
reasonable assumptions.
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How the scope of our audit
Key audit matter addressed the key audit matter
Assessment of the carrying
value of goodwill and other
intangible assets
Please refer to Note 14, accounting
policies in Note 2, and key sources
of estimation uncertainty in Note 4.
We performed a review of the Group’s
goodwill and intangible assets and examined
for indicators of impairment.
We also reviewed
impairment reviews
prepared by management, specifically
reviewing the integrity of management’s
value-in-use model and, with the assistance
of our valuation experts, we challenged the
key inputs, being forecast growth rates,
operating cash flows and the discount rate.
Our audit procedures for the review of
operating cash flows and forecast growth
rates included, amongst others, comparing
the forecast to recent financial performance
and budgets approved by the Board; using
market data to independently calculate a
discount rate for comparison. We also
performed our own sensitivity analysis on the
key valuation inputs.
We have also considered the basis for the use
of the franchise basis for determining CGUs
when compared with our understanding of the
Group’s reporting and management structure.
We have considered the adequacy of the
disclosures made in the financial statements
against the requirements of the accounting
standards.
Key observations:
Based on the procedures performed, we
concur with
the
in
disclosures made by management
assessing the carrying value of goodwill and
other intangible assets.
judgements and
the
that has arisen
The Group has a significant value of
goodwill
from
acquisitions as well as other intangible
assets
franchise
agreements.
form of
the
in
Goodwill is allocated to cash generating
by
units
manufacturer brand.
(“CGU’S)
grouped
There is a risk that these CGU’s may
not achieve the anticipated financial
performance to support their carrying
value, leading to an impairment charge
that should be
recognised by
management.
Significant judgement is required in
forecasting the future cash flows of each
CGU due to the current conditions in the
automotive market and
the wider
economy, together with the rate at which
they are discounted.
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Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We
consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions
of reasonable users that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality
level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not
necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular
circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance
materiality as follows:
Parent Company
Group Financial Statements Financial Statements
2020
Materiality
£967,000
2020
£600,000
Basis for determining
materiality
Rationale for the
benchmark applied
5% of profit before tax over the last 3 years
62% of group materiality
We considered 5% of profit before tax to be a
key performance benchmark for the Group
and the users of the financial statements in
assessing financial performance.
We considered net assets to be the most
appropriate measure as the Parent Company is
primarily an investment holding company. However
materiality was calculated as a percentage of group
materiality due to aggregated consideration of
significant component materiality levels.
Performance materiality
£580,000
£360,000
Basis for determining
performance materiality
On the basis of our risk assessment, together
with our assessment of the Group’s control
that
environment, our
performance materiality for the financial
statements should be 60%.
judgement
is
On the basis of our risk assessment, together with
our assessment of
the Company’s control
environment, our judgement is that performance
materiality for the financial statements should
be 60%.
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Component materiality
We set materiality for each significant component of the Group based on a percentage of between 34% and 92% of group
materiality dependent on the size and our assessment of the risk of material misstatement of that component. Component
materiality in respect of these significant components ranged from £300,000 to £800,000. In the audit of each component, we
further applied performance materiality levels of 60% of the component materiality to our testing to ensure that the risk of errors
exceeding component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £19,340. We also
agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
Other information
The Directors are responsible for the other information. The other information comprises the information included in the Report
and Financial Statements other than the financial statements and our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not
express any form of assurance conclusion thereon. 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 course of
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 this gives rise to a material misstatement in the financial statements
themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact.
We have nothing to report in this regard.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the
Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic Report
and Directors’
Report
Matters on which
we are required to
report by
exception
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.
In the light of the knowledge and understanding of the Group and Parent Company and its environment
obtained in the course of the audit, we have not identified material misstatements in the Strategic Report
or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
•
•
•
•
adequate accounting records have not been kept by the Parent Company, or returns adequate for our
audit have not been received from branches not visited by us; or
the Parent Company financial statements are not in agreement with the accounting records and
returns; or
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.
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Responsibilities of Directors
As explained more fully in the Statement of Directors’ Responsibilities, 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’s and the 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.
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.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud.
Procedures performed by the group audit team included:
•
Discussions with management regarding known or suspected instances of non-compliance with laws and regulations,
including discussions with the Group’s Internal Audit and Compliance teams;
• Obtaining an understanding of controls designed to prevent and detect irregularities, including specific consideration of
controls and group accounting policies relating to significant accounting estimates such as vehicle inventory provisions (as
noted in key audit matters above);
• Obtaining an understanding of the significant laws and regulations impacting the group and the motor retail industry, including
data protection laws and regulations around FCA compliance;
•
•
Assessing journals entries as part of our planned audit approach, with a particular focus on journal entries to key financial
statement areas such as revenue and inventories; and
Consideration of significant management judgements, particularly in respect of the underlying assumptions in impairment
assessments (as detailed within key audit matters above).
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that
the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as
fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent
limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the
events and transactions reflected in the financial statements, the less likely we are to become aware of it.
further description of our
A
www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditor’s Report.
is available on
responsibilities
the Financial Reporting Council’s website at:
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Use of our report
This Report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Parent Company’s members those
matters we are required to state to them in an Auditor’s Report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the Parent Company and the Parent Company’s members as a
body, for our audit work, for this report, or for the opinions we have formed.
Stephen Le Bas (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Southampton, UK
8 March 2021
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
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Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
Non-
Underlying underlying Underlying
items items Total items
2020 2020 2020 2019
Note £’000 £’000 £’000 £’000
Non-
underlying
items
2019
£’000
Total
2019
£’000
Revenue 5 2,154,415 - 2,154,415 2,276,129
Cost of sales (1,916,225) - (1,916,225) (2,015,328)
Gross profit 238,190 - 238,190 260,801
Net operating expenses (207,068) (590) (207,658) (228,772)
Operating profit 31,122 (590) 30,532 32,029
-
-
-
2,276,129
(2,015,328)
260,801
(2,443)
(2,443)
(231,215)
29,586
Net finance costs 10 (10,176) - (10,176) (9,943)
-
Profit before taxation 6 20,946 (590) 20,356 22,086
(2,443)
(9,943)
19,643
Taxation 11 (4,425) (2,011) (6,436) (4,177)
112
(4,065)
Profit from continuing
operations after tax 16,521 (2,601) 13,920 17,909
(2,331)
15,578
Total comprehensive
income for the year
net of tax 16,521 (2,601) 13,920 17,909
(2,331)
15,578
Earnings per share (EPS)
attributable to equity
shareholders of the parent
(pence per share)
Basic 12 21.1 17.8 22.9
Diluted 12 20.6 17.4 22.6
All activities of the Group in both the current and prior period are continuing.
19.9
19.7
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FINANCIAL STATEMENTS
Consolidated Balance Sheet
At 31 December 2020
Non-current assets
Goodwill and other intangible assets
Property, plant and equipment
Right-of-use assets
Investment property
Non-current financial assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Assets classified as held for sale
Current tax assets
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
2020
Note £'000
14 119,533
15 158,303
16 98,832
17 1,498
16 1,334
379,500
18 362,879
19 65,780
20 33,844
21 703
295
463,501
843,001
23 4,383
16 88,383
22 6,008
24 540
25 22,715
122,029
23 641
16 10,961
22 491,248
24 2,190
-
505,040
627,069
215,932
28 50,068
28 19,672
29 1,586
29 (12)
144,618
215,932
2019
£'000
119,260
159,293
107,967
3,638
1,442
391,600
470,700
87,462
110
797
-
559,069
950,669
5,024
97,396
6,371
299
20,134
129,224
25,641
10,689
578,010
3,085
1,704
619,129
748,353
202,316
50,068
19,672
1,025
(12)
131,563
202,316
The consolidated financial statements of Marshall Motor Holdings plc were approved for issue by the Board of Directors on
8 March 2021.
Daksh Gupta
Chief Executive Officer
Richard Blumberger
Chief Financial Officer
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Consolidated Statement of Changes in Equity
For the year ended 31 December 2020
Share-
based Own
Share Share payments shares
capital premium reserve reserve
Note £’000 £’000 £’000 £’000
Balance at 1 January 2019 49,834 19,672 1,570 -
Profit for the year - - - -
Total comprehensive income - - - -
Retained
earnings
£’000
122,962
Total
equity
£’000
194,038
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
Change in accounting policy 3 - - - -
(865)
(865)
Balance at 1 January 2020 50,068 19,672 1,025 (12)
130,698
201,451
Profit for the year - - - -
13,920
13,920
Total comprehensive income - - - -
13,920
13,920
Transactions with owners
Share-based payments charge 29 - - 561 -
-
561
Balance at 31 December 2020 50,068 19,672 1,586 (12)
144,618
215,932
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Consolidated Cash Flow Statement
For the year ended 31 December 2020
Operating profit
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
(Profit) / loss on disposal of investment property
Gain on revaluation of investment properties
Cash flows from operating activities before working capital
Decrease / (increase) in inventories
Decrease / (increase) in trade and other receivables
(Decrease) / increase in trade and other payables
(Decrease) / increase 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
Acquisition of businesses, net of cash acquired
Lease payments received under finance lease
Interest received under finance leases
Net proceeds from disposal / (purchase) of investment property
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 (outflow) / inflow from financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at year end
Note
6
6
6
6
6
6
6
6
17
14/15
14
13
29
29
30
30
102
102
2020
£’000
30,532
22,515
668
(1,563)
402
(318)
193
527
25
(148)
-
52,833
109,154
20,640
(85,978)
(654)
-
95,995
(5,700)
(3,103)
(7,073)
80,119
(11,722)
(2,944)
185
83
2,288
329
2,360
(9,421)
40,000
(65,641)
(11,323)
-
-
-
(36,964)
33,734
110
33,844
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)
(27,397)
201
63
(72)
420
-
(46,218)
70,000
(45,641)
(9,780)
(7,223)
(163)
(708)
6,485
(1,064)
1,174
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Marshall Motor Holdings plc | Annual Report & Accounts 2020
Net Debt Reconciliation
For the year ended 31 December 2020
Reconciliation of net cash flow to movement in net debt
Net increase / (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
Decrease / (increase) in net debt
Opening net debt
Net debt at year end
Lease liabilities
Adjusted net cash / (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
2020
£’000
2019
£’000
23
23
23
30
30
30
30
16
20
23
16
30
33,734
(40,000)
65,000
641
(2,582)
11,323
68,116
(138,640)
(1,064)
(70,000)
45,000
641
(30,223)
9,780
(45,866)
(92,774)
(70,524)
(138,640)
(99,344)
28,820
(108,085)
(30,555)
33,844
(5,024)
(99,344)
(70,524)
110
(30,665)
(108,085)
(138,640)
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Notes to the Consolidated Financial Statements
1. Presentation of the financial statements
General information
Marshall Motor Holdings plc (the Company) is incorporated and domiciled 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 8 March 2021.
Basis of preparation
The consolidated financial statements of the Company are prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006.
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 166). 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 IAS 1 Presentation of Financial statements, IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors, IFRS 3 Business Combinations which has had no impact on the
financial statements. The Group has also adopted the amendment to IFRS 16 Leases which has not had a material impact on
the financial statements. 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 a 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. Accordingly, these financial
statements do not include any adjustments to the carrying amount or classification of assets and liabilities that would result if the
Group were unable to continue as a going concern.
The Directors have considered the future prospects and performance of the Group including the potential for further disruption
arising from the restrictions put in place by the UK Government to control the spread of COVID-19 and the potential for longer
lasting economic impacts both from COVID-19 and from any consequences of the EU trade deal. In preparing this assessment
the Directors have considered the overall economic context, the principle risks as described on page 40, the Group’s business
plans, the impact of any acquisitions, future cash flows and availability of core and auxiliary financing facilities. Details of the
assessment conducted by the Directors is set out below.
At the date of approval of the consolidated financial statements, the UK is coming to the end of a national lock down under which
the Group’s on-site trading activities are restricted, but have to a large extent been able to continue through the use of “click &
collect” for sales of new and used vehicles. During the period of restrictions the Group has been able to successfully match the
sales activity levels with staffing levels by continuing to utilise the Coronavirus Job Retention Scheme.
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Notes to the Consolidated Financial Statements
1. Presentation of the financial statements (continued)
Going concern (continued)
As set out in the Operating Review on page 10 and the Financial Review on page 34, the response to the COVID-19 pandemic
has had an impact on the Group’s trading and cash flows, both positive and negative, for the year ended 31 December 2020.
The Group has taken (and is continuing to take) actions to conserve cash and mitigate losses where these arise as well as
drawing on the applicable support measures introduced by the UK Government, including the Coronavirus Job Retention Scheme,
the Expanded Retail Discount 2020/21 for business rates, and the deferral of VAT payments. While this support has been
beneficial, the better-than-expected performance in the second half of 2020 permitted the Group to repay all deferred VAT amounts
in full during September 2020, ahead of the due date.
Banking facilities and funding position
At 31 December 2020 the Group had £120m of committed but undrawn banking facilities made available under a facility
agreement due to expire in January 2023. The Group’s banking facilities were renegotiated during the Year, with a new agreement
being successfully concluded on 29 July 2020. In recognition of the potential for trading volatility at the time the new agreement
was entered into, an amended covenant package was agreed for the period up to and including 30 June 2021. This amended
covenant package included a suspension of testing of the core leverage and interest cover ratios.
The profitability and cash generation of the Group since the new funding agreement was signed has permitted a mutually agreed
return to normal covenant testing from 31 March 2021, three months earlier than originally envisaged.
The Group has not made use of any borrowing under the COVID-19 Corporate Financing Facility or the Coronavirus Large
Business Interruption Loan Scheme.
In addition to its core banking facilities, the Group has access to vehicle inventory funding arrangements of which £364.9m was
utilised at 31 December 2020.
Assessment of the Group’s financial position
During the 12 months covered by these consolidated financial statements, the Group has, in common with most businesses,
experienced substantial disruption arising as a result of the measures taken in respect of the COVID-19 pandemic. Further details
of the impacts are set out in the Operating Review on page 10 and the Financial Review on page 34.
The Directors have assessed the potential on-going impact of the measures intended to counter the COVID-19 pandemic. In
addition, consideration has been given to longer-term risks arising from the economic impact of the pandemic restrictions, as
well as the now concluded trade deal with the EU.
The Directors acknowledge that there remains uncertainty regarding the timing of a full resumption of normal economic activity
globally, the lifting of restrictions in the UK and the potential for some further disruption to the UK economy as individuals and
businesses adapt to the trade deal with the EU.
The Group has demonstrated significant resilience to issues faced during 2020. The ability to adapt and accelerate the business
model to carry out more distance selling, the strength of the balance sheet, and the renegotiation of the core funding facilities
have all contributed to enhancing the business during 2020 and into 2021. In addition, the support received from OEM partners,
the UK Government and other key partners has all helped to strengthen the financial position, leaving the Group in a strong
position to cope with any further disruption.
The Group does not expect ongoing material disruption to its supply chains, either as a result of further factory shutdowns or
issues with the importation of vehicles and parts. The Group’s access to labour and skills is not expected to be materially adversely
impacted by the end of the free movement of labour between the UK and the EU.
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Notes to the Consolidated Financial Statements
1. Presentation of the financial statements (continued)
Going concern (continued)
Assessment of the Group’s financial position (continued)
To support the assessment of the Group’s ability to continue as a going concern, the following scenarios have been modelled:
•
•
•
•
An upside scenario where there is a rapid economic recovery. Under this scenario, performance in 2021 returns to the level
anticipated in the original Board approved budget which was prepared prior to the announcement of additional lockdown
measures during the final quarter of 2020.
A short-term downside scenario, where the lockdown continues for the whole of the first quarter of 2021. This results in 25%
loss of sales in January and February and 45% loss of sales in March, this is partially offset by a 10% saving in overhead
costs during the lockdown period, supported by the Coronavirus Job Retention Scheme. There is then a return to normal
trading performance for the remainder of 2021 and into 2022.
A medium-term downside scenario, in which there is a lockdown for the first quarter of 2021 with the impact described above,
followed by further lockdown for the whole of the last quarter of 2021. The lockdown in the last quarter results in a 25% loss
of sales. These losses are offset by a 10% saving in overhead costs during both lockdown periods. There is then a return to
normal trading performance in 2022.
A longer-term downside scenario, in which there are further lockdowns. The associated trading impacts are as set out under
the “medium-term downside” scenario described above and in addition, earnings for the whole of 2022 are 50% lower due
to the macro-economic conditions arising from the disruption experienced during 2020 and forecast for 2021. Normal trading
performance then returns in 2023.
Under the upside scenario and short-term downside scenario, the Group is forecast to be able to continue to operate within the
bank facility limits and to comply with the banking covenants set out in the funding agreements.
Under the medium-term downside scenario and longer-term downside scenario, which the Directors consider to be remote
possibilities, the Group would have sufficient finance facilities available to continue to trade but would breach the banking
covenants set out in the funding agreements. Based upon the significant resilience the business has demonstrated both
operationally and financially, as well as the level of support shown by funders to date, including a previous amendment to covenant
requirements and reduction in the covenant package under the new funding agreement for the period up to 30 June 2021, the
Directors believe that in either of these scenarios, appropriate amendments to covenant requirements would be provided by the
Group’s funders.
The Directors have therefore concluded that Company is able to continue as a going concern through to March 2022.
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.
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.
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Notes to the Consolidated Financial Statements
2. Accounting policies (continued)
Basis of consolidation (continued)
When the Group loses 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 166 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 2020
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 2020 of the
subsidiaries listed below.
The subsidiaries which have taken an exemption from audit for the year ended 31 December 2020 by virtue of s479A of the
Companies Act 2006 are:
Astle Limited (reg no. 01114983) Prep-Point Limited (reg no. 00660067)
Crystal Motor Group Limited (reg no. 04813767) Ridgeway Bavarian Limited (reg no. 07930214)
Exeter Trade Parts Specialists LLP (reg no. OC329331) Ridgeway TPS Limited (reg no. 06112651)
Marshall North West Limited (reg no. 00322817) S.G. Smith Automotive Limited (reg no. 00622112)
Marshall of Cambridge (Garage Properties) S.G. Smith (Motors) Beckenham Limited (reg no. 00648395)
Limited (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)
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.
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. With the exception of lease liabilities
and right-of-use assets, in a business combination all identifiable assets acquired and liabilities assumed, including any contingent
liabilities, that meet the recognition criteria under IFRS 3 Business Combinations are measured initially at their fair values at the
acquisition date.
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Notes to the Consolidated Financial Statements
2. Accounting policies (continued)
Business combinations (continued)
Lease liabilities are measured at the present value of lease payments under the lease term remaining as at the date of acquisition.
When calculating the present value, the lease liability is discounted using the Group’s incremental borrowing rate as at the date
of acquisition. The Group’s incremental borrowing rate is used as a proxy for the lessee’s rate on the basis that the interest rate
implicit in the lease cannot be readily determined. The associated right-of-use assets acquired are recognised at the same value
as the lease liability plus any dilapidation provisions. Where there are either favourable or unfavourable lease terms acquired,
adjustment is made to increase or decrease the right-of-use asset balances respectively.
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, favourable leases and order backlog.
The finalisation of purchase price allocations may result in a change in the fair value of assets acquired. In accordance with
IFRS 3 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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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:
•
•
•
•
•
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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 (net of 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, however during the year ended 31 December 2020 in response to the COVID-19 restrictions most funders
have offered extensions to the funding period of up to 90 days in addition to the original funding period, 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 finance house base rate (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.
On completion of the sale transaction, the difference between the net disposal proceeds and the carrying amount of the asset is
recognised within Net Operating Expenses in the Consolidated Statement of Comprehensive Income in the period of
de-recognition.
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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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 at 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:
•
•
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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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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 cash and cash
equivalents for the purpose of presentation in the Consolidated Statement of Cash Flows. Bank overdrafts are presented within
cash and cash equivalents in current assets 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, excluding intercompany 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
The Group generates revenue through the sale of new and used motor vehicles and through the provision of aftersales services
in the form of vehicle servicing, maintenance, parts 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
agreement to purchase the vehicle, in most instances 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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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.
Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions
will be complied with. All such grants relate to expense items. The grant is recognised as income on a systematic basis over the
periods that the related costs, for which it is intended to compensate, are expensed.
The grant income is disclosed in Net Operating Expenses 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 because the interest rate implicit in the lease cannot be readily determined. The incremental borrowing
rate for the Group is used as a proxy for the lessee’s incremental borrowing rate on the basis that treasury functions are managed
centrally and subsidiary entities’ access to facilities is via pooled, group-wide arrangements.
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 revenue in the Consolidated Statement of Comprehensive Income.
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Notes to the Consolidated Financial Statements
2. Accounting policies (continued)
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.
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.
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Notes to the Consolidated Financial Statements
2. Accounting policies (continued)
Taxation
The taxation charge comprises corporation tax payable, deferred tax and any adjustments to tax payable in respect of previous
years.
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
The Group participates in a number of defined contribution schemes for its employees. A defined contribution pension scheme
is a pension plan under which the employer and employee pay 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.
Where the Group makes employer pension contributions, such contributions are charged to the Consolidated Statement of
Comprehensive Income as they become payable in accordance with the rules of each scheme.
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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
‘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 170 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 used to present consistent, comparative information.
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 2019.
New standards, amendments and interpretations adopted by the Group
The following amendments to existing standards became effective on 1 January 2020 and have been adopted in the consolidated
financial statements for the first time during the year ended 31 December 2020. These have been assessed as having no financial
or disclosure impact on the numbers presented.
•
•
•
IAS 1 Presentation of Financial Statements
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
IFRS 3 Business Combinations
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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 amendment to an existing standard was issued on 28 May 2020. The amendment applies to annual reporting
periods beginning on or after 1 June 2020. Earlier application is permitted; the Group has applied this amendment to its annual
reporting period that commenced on 1 January 2020. The impact of the adoption of this amended standard is disclosed below.
•
Amendments to IFRS 16 Leases – COVID-19-Related Rent Concessions
Three other amendments to existing standards apply for the first time with effect from 1 January 2020; however, they are not
applicable to the consolidated financial statements of the Group.
Impact on current period of the adoption of new standards, amendments and interpretations
IFRS 16 Leases transition adjustment
The Group applied IFRS 16 for the first time during the year ended 31 December 2019 using the full retrospective approach. As
a result, the comparative period was restated with a cumulative transition adjustment being recognised through the opening
comparative retained earnings balance as at 1 January 2018. During the year ended 31 December 2020 it was identified that
this transition adjustment to retained earnings was understated by £865,000 (being the impact of the derecognition of certain
rent prepayments and accruals relating to leases previously classified as operating leases, net of the associated £203,000
deferred tax credit).
Due to the nature of this adjustment, prior year balances have not been restated. This adjustment has been recognised directly
in retained earnings in the Consolidated Statement of Changes in Equity for the year ended 31 December 2020.
Amendments to IFRS 16 Leases - COVID-19-Related Rent Concessions
In response to the ongoing COVID-19 pandemic, on 28 May 2020 the IASB issued an amendment to IFRS 16 Leases – COVID-
19-Related Rent Concessions. These were formally adopted by the European Union on 12 October 2020. These amendments
add a practical expedient to provide lessees with relief from lease modification accounting requirements where the lessee has
received rent concessions granted as a result of COVID-19. The practical expedient applies to all rent concessions that provide
relief for payments that were originally due on or before 30 June 2021. These amendments are applicable for all accounting
periods beginning on or after 1 June 2020. The Group has adopted these amendments for the first time in the consolidated
financial statements for the year ended 31 December 2020 in accordance with the early application permitted for all financial
statements not authorised for issue as at the date the amendments were issued.
The Group has applied this practical expedient to all leases in its property portfolio under which either deferred rent payments or
forgiven rent payments have been successfully negotiated during the period from March 2020 to December 2020. Accounting
for the rent concessions as lease modifications would have resulted in the Group remeasuring the lease liability to reflect the
revised consideration using a revised discount rate, with the effect of the change in the lease liability being recorded against the
right-of-use asset. As a result of applying this practical expedient, the Group is not required to determine a revised discount rate
and the effect of the change in the lease liability is recognised as a profit of £109,000 in net operating expenses in the Consolidated
Statement of Comprehensive Income.
New standards, amendments and interpretations not yet adopted by the Group
The following standards, amendments and interpretations were in issue, but were not yet effective at the balance sheet date.
These standards have not been applied when preparing the consolidated financial statements for the year ended 31 December
2020. These have been assessed as having no financial or disclosure impact on the numbers presented.
Effective for accounting periods
Date issued beginning on or after
IFRS 17 Insurance contracts 18 May 2017 1 January 2021
Amendments to IAS 1 Presentation of financial statements,
on classification of liabilities 23 January 2020 1 January 2022
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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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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 2020 represents 3.1% of the gross inventory balance
(2019: 1.9%), this increase is largely due to the unusual market conditions during the year ended 31 December 2020 under
which used vehicle prices appreciated as well as an expectation of lower pricing during the first quarter of 2021 as economic
conditions decline and demand reduces. A 100bps (2019: 100bps) additional change in this ratio in 2020 would change the
provision in the Consolidated Balance Sheet by approximately £3.8 million (2019: £4.5 million). A 100bps movement represents
a reasonably positive change to the provision ratio based on average movements observed over the previous three years.
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 2020
£’000
£’000
mix*
mix*
New Vehicles
Used Vehicles
Aftersales
Internal / Other
Total
* mix calculation excludes Internal/Other sales.
988,093
971,135
240,589
(45,402)
44.9%
44.1%
11.0%
-
65,086
63,712
108,573
819
2,154,415
100%
238,190
27.4%
26.8%
45.8%
-
100%
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Notes to the Consolidated Financial Statements
5. Segmental information (continued)
Information about reportable segment (continued)
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%
* mix calculation excludes Internal/Other sales.
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)
(Profit) / 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 16)
Impairment loss on right-of-use assets (note 16)
Income received from subleasing right-of-use assets (note 16)
7. Non-underlying items
Continuing operations
Post-retirement benefits charge
Acquisition costs
Net recognition of restructuring costs
Profit on disposal of assets classified as held for sale
Profit / (loss) on disposal of investment property
Loss on impairment of goodwill and other tangible assets
Gain on revaluation of investment properties
2020
£’000
10,719
448
(1,563)
402
25
(148)
193
11,348
(318)
527
(185)
2020
£’000
-
(13)
(2,070)
1,563
148
(218)
-
(590)
2019
£’000
10,217
421
-
411
708
72
-
9,357
(403)
1,081
(201)
2019
£’000
(23)
(835)
(2,123)
-
(72)
-
610
(2,443)
Details of current and deferred tax arising in relation to all income and expenditure classified as Non-Underlying Items are disclosed
in Note 11(b) ‘Taxation’.
Post-retirement benefits charge
See Note 32 ‘Pensions’ for further details of the transaction giving rise to the post-retirement benefits charge.
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Notes to the Consolidated Financial Statements
7. Non-underlying items (continued)
Acquisition costs
See Note 14(a) ’Goodwill and Other Intangible Assets’ for further details of transactions giving rise to the acquisition costs.
Net recognition of restructuring costs
Restructuring costs are a continuation of items disclosed in previous periods and relate to the closure of four of the Group’s
franchised dealerships in 2020. Restructuring costs include closed site related costs of £1,127,000 (2019: £323,000), redundancy
costs of £631,000 (2019: £303,000), tangible asset impairment reversals of £275,000 (2019: charge of £708,000), tangible asset
loss on disposal of £134,000 (2019: £nil), right-of-use asset impairments and remeasurements of £406,000 (2019: £268,000)
and other redundancy costs in the year totalled £47,000 (2019: £521,000).
Profit on disposal of assets classified as held for sale
In June 2020 the Group sold the freehold property classified as held for sale for a profit of £1,563,000 (2019: £nil).
Profit / (loss) on disposal of investment property
In November 2020 the Group sold a freehold investment property for a profit of £148,000 (2019: £nil). During 2019 additional
legal fees of £72,000 were incurred in relation to the disposal of an investment property in 2018.
Loss on impairment of goodwill and other tangible 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.
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
2020
£’000
2019
£’000
242
60
39
341
314
48
36
398
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Marshall Motor Holdings plc | Annual Report & Accounts 2020
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 contributions and similar taxes
Other pension costs
Share based payments
2020
£’000
134,917
15,198
2,993
561
2019
£’000
128,370
14,114
2,732
1,124
153,669
146,340
Employee costs stated above exclude £20,366,000 of grant income received under the Coronavirus Job Retention Scheme.
Employee costs are included in:
Cost of sales
Net operating expenses
The average number of employees (including Executive Directors) was:
Retail
2020
£’000
24,654
129,015
153,669
2020
4,191
4,191
2019
£’000
26,655
119,685
146,340
2019
3,887
3,887
The average number of Group employees excludes temporary and contract staff. As at 31 December 2020 the Group had
3,691 employees (2019: 4,228).
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 86 to 89.
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
Social security contributions and similar taxes
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’.
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£’000
3,577
1,055
128
96
561
5,417
2019
£’000
5,325
786
222
87
1,124
7,544
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Notes to the Consolidated Financial Statements
10. Net finance costs
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
Impact of change in tax rates
Adjustments in respect of prior years
Total deferred tax charge / (credit) (note 25)
Total taxation charge
2020
£’000
(83)
5,417
3,103
1,739
10,176
2020
£’000
3,855
(154)
3,701
256
2,380
99
2,735
6,436
2019
£’000
(63)
5,944
3,068
994
9,943
2019
£’000
4,201
31
4,232
23
-
(190)
(167)
4,065
The income tax charge in both the current and prior year is attributable to profit from continuing operations.
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Notes to the Consolidated Financial Statements
11. Taxation (continued)
b) Reconciliation of taxation 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% (2019: 19.00%)
Effects of:
Tax effect of items not deductible for tax purposes
(Profit) / loss on disposal of non-qualifying assets
Recognition of deferred tax previously unrecognised
Adjustments in respect of prior years
Utilisation of brought forward losses previously unrecognised
Deferred tax charge relating to increase in tax rates
Effect of difference between closing deferred tax
rate and current tax rate
Taxation charge and effective tax rate
2020
£'000
20,356
2020
%
2019
£'000
19,643
2019
%
3,868
19.00%
3,732
19.00%
536
(284)
-
(55)
(9)
2,380
-
6,436
2.63%
(1.40%)
-
(0.27%)
(0.04%)
11.69%
-
31.62%
519
39
(3)
(159)
(38)
-
2.64%
0.20%
(0.02%)
(0.81%)
(0.19%)
-
(25)
4,065
(0.13%)
20.69%
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:
2020
2020
Non-
Underlying underlying
£’000
£’000
2020
2019
2019
Non-
Total Underlying underlying
£’000
£’000
£’000
2019
Total
£’000
Profit before taxation
Taxation
Effective tax rate
Non-recurring items
20,946
4,425
(590)
20,356
2,011
6,436
22,086
4,177
(2,443)
19,643
(112)
4,065
21.13% (340.85%)
31.62%
18.91%
4.58%
20.69%
The Group’s total effective tax rate for 2020 of 31.62% was influenced by the deferred taxation charge arising due to the
remeasurement of the Group’s deferred taxation balances, required following the legislative change substantively enacted during
the year. The total effective tax rate was also impacted by the non-deductible goodwill impairment charge and profits on disposal
of freehold property. Excluding the impact of these items, the total effective tax rate for 2020 would have been 21.18%. This is
consistent with the Group’s underlying effective tax rate of 21.13%.
The Finance Act 2016 announced a reduction to the corporation tax rate to 17% with effect from 1 April 2020. In the Budget of
11 March 2020, the Chancellor of the Exchequer announced that this planned rate reduction to 17% would no longer be taking
effect. The changes announced during the Budget of 11 March 2020 were substantively enacted as at the balance sheet date,
therefore, all opening deferred taxation balances have been remeasured at 19%. The deferred taxation charge of £2,380,000
arising due to this remeasurement is presented in Non-Underlying Items on the basis that this charge is a consequence of a
one-off, legislative change.
The prior year total effective tax rate of 20.69% was influenced by non-deductible acquisition costs and the impact of a return to
provision true-up 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%.
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Notes to the Consolidated Financial Statements
11. Taxation (continued)
c)
Factors affecting the taxation charge of future years
Future corporation tax charges, therefore, the Group’s effective tax rate, may be affected by factors such as acquisitions, disposals,
restructuring and tax regime reforms.
In the Budget of 3 March 2021, the Chancellor of the Exchequer announced a 6% increase in the standard rate of corporation
tax, which will be applicable in the financial year beginning 1 April 2023. This change in the rate of corporation tax to 25% will
affect the amount of future tax payments for which the Group will be responsible. Once substantively enacted, this rate change
will also influence the measurement of the Group’s deferred tax assets and liabilities.
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 2,926,659 at 31 December 2020 (2019: 2,002,304).
Underlying earnings per share are based on basic earnings per share adjusted for the impact of non-underlying items.
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
Basic underlying earnings per share
Basic earnings per share
Diluted underlying earnings per share
Diluted earnings per share
13. Dividends
2020
£’000
16,521
(2,601)
13,920
2019
£’000
17,909
(2,331)
15,578
2020
Thousands
2019
Thousands
78,232
1,882
80,114
2020
Pence
21.1
17.8
20.6
17.4
78,097
1,178
79,275
2019
Pence
22.9
19.9
22.6
19.7
In light of the circumstances resulting from the ongoing COVID-19 pandemic, the previously proposed final dividend of 5.69p per
share for the year ended 31 December 2019 was cancelled.
The Group similarly suspended the payment of an interim dividend in respect of the year ended 31 December 2020. (2019:
An interim dividend of £2,228,000, representing a payment of 2.85p per ordinary share in issue at that time, was paid in
September 2019.)
The Board is mindful of the importance of dividends to its shareholders and intends to resume the payment of dividends as soon
as conditions allow.
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Notes to the Consolidated Financial Statements
14. Goodwill and other intangible assets
Goodwill
£’000
Franchise
agreements
£’000
Software
£’000
Cost
Balance at 1 January 2019
Additions
Additions on acquisition
Disposals
At 31 December 2019
Additions
Additions on acquisition
Disposals
48,629
-
1,525
-
50,154
-
724
-
72,137
-
5,036
-
77,173
-
350
-
At 31 December 2020
50,878
77,523
Accumulated amortisation and impairment
Balance at 1 January 2019
Charge for the year
Impairment
At 31 December 2019
Charge for the year
Disposals
Impairment
At 31 December 2020
Net book value
At 1 January 2019
At 31 December 2019
At 31 December 2020
9,302
-
-
9,302
-
-
193
9,495
39,327
40,852
41,383
-
-
-
-
-
-
-
-
72,137
77,173
77,523
1,631
982
-
(82)
2,531
108
-
(632)
2,007
918
421
(43)
1,296
448
(364)
-
1,380
713
1,235
627
Total
£’000
122,397
982
6,561
(82)
129,858
108
1,074
(632)
130,408
10,220
421
(43)
10,598
448
(364)
193
10,875
112,177
119,260
119,533
a) Acquisitions – current period
On 10 July 2020, the Group acquired the trade and assets of a Volkswagen dealership in Aylesbury. Acquisition of this dealership
brought to a successful conclusion the strategic acquisition of eight Volkswagen Group UK franchises announced in
December 2019. 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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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
Trade and other receivables
Cash and cash equivalents
Deferred tax liabilities
Trade and other payables
Lease liabilities
Net assets acquired
Goodwill
Total cash consideration
Fair value
of net assets
acquired
£’000
350
569
670
1,333
26
1
(49)
(9)
(670)
2,221
81
2,302
The completion payment for the Aylesbury VW business included the consideration of £2,302,000 as set out above, and a further
payment of £643,000 held back from the acquisitions completed in December 2019 as an incentive to the vendor to complete
the Aylesbury sale. Had the Aylesbury sale not been completed this further payment would not have been due.
The results of the acquired dealership were consolidated into the Group’s results from 10 July 2020. For the period from acquisition
to 31 December 2020, the revenues and the loss before tax generated by these dealership 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 2020), on
a pro forma basis, the change in revenue and profit before tax of the combined Group for the year ended 31 December 2020
would have been immaterial in the context of the Group.
Transaction costs arising on acquisitions in 2020 totalled £13,000. 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.
a) Acquisitions – prior period
The following 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 sites.
The Group acquired the trade and assets of the following dealerships:
•
•
•
•
ŠKODA Leicester and Nottingham on 31 January 2019;
ŠKODA Northampton, Bedford, Letchworth and Harlow on 28 February 2019;
Honda Reading and Newbury on 2 September 2019; and
Volvo Derby on 20 December 2019.
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Notes to the Consolidated Financial Statements
14. Goodwill and other intangible assets (continued)
a) Acquisitions – prior period (continued)
The fair value of the net assets at the date of the acquisition are as set out below.
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.
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
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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
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Notes to the Consolidated Financial Statements
14. Goodwill and other intangible assets (continued)
a) Acquisitions – prior period (continued)
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 for 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.
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.
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
17,766
1,461
8,003
11,182
2,971
41,383
£’000
35,597
8,345
14,358
19,201
22
77,523
*Volkswagen Group includes Volkswagen, Audi, ŠKODA 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 2020 and 2019 and for the six months ended 30 June 2020.
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.
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Notes to the Consolidated Financial Statements
14. Goodwill and other intangible assets (continued)
b)
Impairment testing (continued)
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 2021 to
31 December 2025.
These projections (the “Base Case”) are developed from the Board approved budget for the year ending 31 December 2021
which, as described under “Going Concern” in Note 1, has been updated to reflect the expected impact of the additional trading
restrictions in response to the COVID-19 pandemic which were announced during December 2020.
The key assumptions in the forecast 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 the management’s
current understanding the extent and duration of the COVID-19 related trading restrictions imposed by the UK Government, the
current macro-economic context and outlook, 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 7.8% (2019: 8.0%).
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% (2019: 2%). Terminal growth rates are based on management’s estimate of future
long-term average growth rates.
Conclusion
Under the Base Case the Group's CGUs all have significant headroom in respect of the carrying value of goodwill and intangible
assets with the exception of the Vauxhall CGU which is included with the “Other” CGU Group. Goodwill of £193,000 is assigned
to the Vauxhall CGU.
Vauxhall
Following the closure of the Group’s Knebworth Vauxhall site and a further deterioration in the performance of the two remaining
sites the projected cash flows are no longer sufficient to support the carrying value of the assigned goodwill and intangible assets.
Therefore at 31 December 2020 the Group recorded a non-cash impairment charge of £218,000 (2019: £nil). This impairment
charge is split as £193,000 of Goodwill and £25,000 of Plant & Equipment assigned to the Vauxhall CGU and is recorded within
net operating expenses in non-underlying items in the Consolidated Statement of Comprehensive Income.
Update on BMW/MINI
The Group's BMW/MINI franchises have faced several challenges in recent years brought about largely due to an oversupply of
vehicles and the disruption caused by vehicle recalls.
During 2020 the business has shown substantial improvement despite the trading uncertainty experienced during the year. A
number of the performance improvement initiatives have been successfully delivered and the cash flow projections for the CGU
indicate a continued improvement over the plan period as other management and manufacturer initiatives are delivered.
Following the improvement delivered in 2020 the Board has approved the forecast which supports the carrying value of the
BMW/MINI goodwill as at 31 December 2020. Inherent in this assessment are a number of assumptions related to the timing of
the lifting of the COVID-19 related trading restrictions, the severity and duration of the resulting economic down-turn, the speed
and sustainability of the subsequent recovery, and the continued successful delivery of the local management and manufacturer
initiatives.
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Notes to the Consolidated Financial Statements
14. Goodwill and other intangible assets (continued)
b)
Impairment testing (continued)
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 under the Base Case using four scenarios:
•
•
•
•
where the discount rate decreases by 100 basis points.
where the discount rate increases by 100 basis points.
where the terminal value growth rate decreases by 50 basis points.
where the terminal value growth rate increases by 50 basis points.
In order to assess the possibility of future impairments, the Group has performed additional scenarios analysis, using the forecasts
prepared to support the Directors’ consideration of the going concern basis of preparation. The scenario cases are as follows:
•
•
•
•
An upside case where performance in 2021 returns to the level anticipated in the original Board approved budget.
A short-term downside case, where the lockdown continues for the whole of the first quarter of 2020, resulting in 25% loss
of sales in January and February and 45% loss of sales in March offset by a 10% saving in overhead costs during the
lockdown period. There is a return to normal trading performance in 2022.
A medium-term downside case, in which there is a lockdown for the first quarter with the impact described above, followed
by further lockdown for the whole of the last quarter of 2021. The lockdown in the last quarter results in a 25% loss of sales.
These losses are offset by a 10% saving in overhead costs during both lockdown periods. There is a return to normal trading
performance in 2022.
A long-term downside case, in which there are lockdowns, and the associated trading impacts as set out under the “medium-
term downside” case described above, in earnings in 2022 are 50% lower due to the macro-economic conditions arising
from the disruption seen during 2020 and forecast for 2021. There is then a return to normal trading performance in 2023.
Of all of the above sensitivity and scenario cases, the only one which would result in the recognition of an impairment charge is
an increase in the discount rate by 100 basis points. Under this sensitivity, a minimal impairment of £143,000 would be indicated
against the BMW/MINI CGU. The Directors consider the increase in risk expressed by such a significant increase in the discount
rate to be a remote possibility.
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Notes to the Consolidated Financial Statements
15. Property, plant and equipment
Freehold Assets
land and Leasehold Plant and under
buildings improvements equipment construction Total
£’000 £’000 £’000 £’000 £’000
Cost
Balance at 1 January 2019 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
Additions at cost 3,247 312 2,613 4,179 10,351
Additions on acquisition - 439 130 - 569
Disposals - (2,628) (8,832) - (11,460)
Transfers to asset held for sale (1,325) - - - (1,325)
Transfers 25 2,274 1,506 (3,805) -
At 31 December 2020 137,568 27,366 40,584 2,059 207,577
Accumulated depreciation and impairment
Balance at 1 January 2019 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
Charge for the year 2,002 2,488 6,229 - 10,719
Disposals - (2,474) (8,523) - (10,997)
Impairment - - 25 - 25
Transfers to asset held for resale (622) - - - (622)
At 31 December 2020 13,823 8,635 26,816 - 49,274
Net book value
At 1 January 2019 108,185 15,874 14,599 9,501 148,159
At 31 December 2019 123,178 18,348 16,082 1,685 159,293
At 31 December 2020 123,745 18,731 13,768 2,059 158,303
As at 31 December 2020, the Group had capital commitments totalling £4.5m (2019: £6.9m) relating to ongoing construction
projects.
2020
Transfers to assets held for sale
In October 2020, the Group ceased commercial activities at two of its freehold properties. As the properties were no longer being
used for the commercial activity of the business and are actively being marketed for sale, the assets have been transferred to
assets classified as held for sale (see Note 21 ‘Assets Classified as Held for Sale’).
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Notes to the Consolidated Financial Statements
15. Property, plant and equipment (continued)
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.
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
2020
£’000
11,348
(318)
527
295
744
3,103
15,699
2019
£’000
9,357
(403)
1,081
209
847
3,068
14,159
The Group had total cash outflows in respect of leases in the year of £11,323,000 (2019: £9,780,000). The Group also had
non-cash additions to right-of-use assets and lease liabilities of £3,627,000 (2019: £28,778,000).
136
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Marshall Motor Holdings plc | Annual Report & Accounts 2020
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 during the year:
Cost
At 1 January 2019
Additions
Additions on acquisition
Disposals
Remeasurement
At 31 December 2019
Additions
Additions on acquisition
Disposals
Remeasurement
At 31 December 2020
Accumulated depreciation and impairment
At 1 January 2019
Charge for the year
Disposals
Impairment
At 31 December 2019
Charge for the year
Disposals
Impairment
At 31 December 2020
Net book value
At 31 December 2019
At 31 December 2020
2020
Impairments
Land and
buildings
£’000
Vehicles
£’000
Total
£’000
126,072
2,248
26,408
(1,206)
5,324
158,846
2,662
670
(6,655)
(867)
154,656
41,101
8,991
(82)
1,081
51,091
11,059
(6,635)
527
56,042
107,755
98,614
856
122
-
(234)
-
744
295
-
(367)
-
672
400
366
(234)
-
532
289
(367)
-
454
212
218
126,928
2,370
26,408
(1,440)
5,324
159,590
2,957
670
(7,022)
(867)
155,328
41,501
9,357
(316)
1,081
51,623
11,348
(7,002)
527
56,496
107,967
98,832
The premises used by the franchised dealerships closed in October 2020 became vacant on cessation of trade. The right of-use
assets have therefore been fully impaired. This impairment loss of £527,000 was recognised in the Consolidated Statement of
Comprehensive Income in net operating expenses.
2019
Impairments
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.
137
137
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
16. Leases (continued)
a) Group as lessee (continued)
The maturity analysis of the Group’s lease liabilities is as follows:
Within 1 year
Between 1 and 5 years
After 5 years
Total lease liabilities
2020
£’000
10,961
39,416
48,967
99,344
2019
£’000
10,689
40,215
57,181
108,085
The percentages in the table below reflect the current proportions of lease payments that are either fixed or variable.
31 December 2020
Property leases with payments linked to inflation
Property leases with fixed payments
Vehicle leases
31 December 2019
Property leases with payments linked to inflation
Property leases with fixed payments
Vehicle leases
b) Group as lessor – finance leases
Lease
contracts
number
Fixed
payments
%
Variable
payments
%
9
112
81
202
-
85%
2%
87%
13%
-
-
13%
Lease
contracts
number
Fixed
payments
%
Variable
payments
%
9
111
104
224
-
85%
3%
88%
12%
-
-
12%
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:
Income received from subleasing right-of-use assets
Finance income on net investment in leases
Total amount recognised in profit or loss
2020
£’000
(185)
(83)
(268)
2019
£’000
(201)
(63)
(264)
138
Marshall Motor Holdings plc | Annual Report & Accounts 2020
Notes to the Consolidated Financial Statements
16. Leases (continued)
b) Group as lessor – finance leases (continued)
Future minimum lease payments receivable for property under non-cancellable finance leases are 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
Total undiscounted lease payments receivable
Unearned finance income
Net investment in the lease
Current (note 19)
Non-current
Total finance lease receivable
c) Group as lessor – operating leases
2020
£’000
185
185
185
185
185
969
1,894
(452)
1,442
2020
£’000
108
1,334
1,442
2019
£’000
185
185
185
185
185
1,154
2,079
(535)
1,544
2019
£’000
102
1,442
1,544
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
2020
£’000
93
54
-
-
-
-
2019
£’000
326
246
208
154
154
602
147
1,690
139
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
17. Investment property
Fair value at 1 January
Transfer from freehold land and buildings
Change in fair value
Fair value at 31 December 2019
Disposals
Fair value at 31 December 2020
Freehold
land and
buildings
£’000
Right-of-use
asset
£’000
2,000
438
140
2,578
(2,140)
438
590
-
470
1,060
-
1,060
Total
£’000
2,590
438
610
3,638
(2,140)
1,498
Investment properties are stated at fair value; a formal valuation is required at least every three years by a Chartered Surveyor
on an open market value basis. The most recent 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 Directors assessed the valuation of property based on a desktop review carried out by BNP Paribas Real Estate as at
18 December 2020; no indicators were identified which signalled a material change in the fair value of investment properties As
such, investment properties continue to be held at their 31 December 2019 valuations.
The properties are rented out to third parties. Rental income of £448,000 was recognised in 2020 (2019: £383,000). 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
2020
£’000
374,347
(11,468)
362,879
2019
£’000
480,087
(9,387)
470,700
Inventories held for resale include new and used vehicles held for resale, vehicle parts and other inventory. As at 31 December
2020 £364,883,000 (2019: £443,749,000) of finished goods 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 £1,870 million (2019: £1,979 million).
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
2020
£’000
29,838
28,937
816
6,081
108
65,780
2019
£’000
50,269
28,879
3
8,209
102
87,462
Other receivables include accrued supplier income of £11,687,000 (2019: £17,385,000). More information in respect of principal
risk management is provided in Note 26 ‘Financial Instruments – Risk Management’.
140
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Marshall Motor Holdings plc | Annual Report & Accounts 2020
Notes to the Consolidated Financial Statements
19. Trade and other receivables (continued)
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
2020
£’000
33,844
2019
£’000
110
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
Transfer from property, plant and equipment
Disposals
At 31 December
2020
£’000
2019
£’000
797
703
(797)
703
797
-
-
797
Following the closure of two of the Group’s dealerships in October 2020, the decision was taken to sell the freehold properties
owned by the Group and used by the dealership. The freehold properties were reclassified as held for sale and transferred from
property, plant and equipment into current assets. On reclassification, the freehold properties were measured at their carrying
values, which was the lower of their carrying value and fair value less costs to sell at the date of reclassification (fair value was
determined by a desktop valuation from Chartered Surveyors). No impairments was required as fair value less costs to sell
exceed the asset’s carrying value.
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. This property was subsequently sold in June 2020. Profits on disposal of assets
classified as held for sale are included in Note 7 ‘Non-Underlying Items’.
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
141
141
2020
£’000
2019
£’000
364,883
71,024
22,256
354
4,910
9,657
18,164
491,248
443,749
102,170
10,502
42
4,803
1,893
14,851
578,010
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
22. Trade and other payables (continued)
Non-current – other payables
Contract liabilities
Total non-current other payables
2020
£’000
6,008
6,008
2019
£’000
6,371
6,371
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
2020
£’000
310
22,069
5,885
28,264
2019
£’000
949
10,238
5,686
16,873
Contract liabilities include OEM contributions received in advance from manufacturer’s which the Group acts as principal.
At 1 January
Deferred during the year
Recognised as revenue during the year
At 31 December
2020
£'000
949
45
(684)
310
2019
£'000
590
517
(158)
949
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
2020
£’000
10,238
24,179
(12,348)
22,069
2019
£’000
18,165
4,408
(12,335)
10,238
Contract liabilities include service packages received in advance from customers for which the Group acts as principal.
142142
Marshall Motor Holdings plc | Annual Report & Accounts 2020
Notes to the Consolidated Financial Statements
22. Trade and other payables (continued)
Contract liabilities (continued)
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
2020
£'000
5,686
17,311
(17,112)
5,885
2019
£'000
5,596
21,001
(20,911)
5,686
2020
Nominal and
book value
£’000
2019
Nominal and
book value
£’000
641
-
641
4,383
4,383
5,024
641
25,000
25,641
5,024
5,024
30,665
Mortgages comprise amounts borrowed from commercial financial institutions and are secured by fixed charges over specified
property assets of certain subsidiaries of the Group.
Committed facilities
The Group has a revolving credit facility of £120,000,000 of which £nil was drawn at 31 December 2020 (2019: £25,000,000).
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
January 2023.
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
4,383
2020
Fair
value
£’000
3,607
Carrying
amount
£’000
5,024
2019
Fair
value
£’000
3,951
143143
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
23. Loans and borrowings (continued)
Interest rate profile of borrowings
Mortgages
Bank loan
2020
Debt
£’000
641
-
Weighted average cost of drawn borrowings
641
2020
Average
effective
interest rate
2.16
-
2.16
2019
Debt
£’000
5,665
25,000
30,665
2019
Average
effective
interest rate
2.40
1.92
2.01
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.
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
2020
£’000
641
2,565
1,818
5,024
2019
£’000
25,641
2,565
2,459
30,665
All loans and borrowings are subject to floating rates of interest which are determined by reference to official market rates such
as LIBOR.
24. Provisions
Dilapidations Closed sites Other Total
£’000 £’000 £’000 £’000
At 1 January 2020 1,198 415 1,771 3,384
Amount provided in the year 647 290 - 937
Amount released in the year (715) (126) (103) (944)
Amount utilised in the year (136) (354) (157) (647)
As at 31 December 2020 994 225 1,511 2,730
Provisions have been allocated between current and non-current as follows:
Current
Non-current
Total provisions
Dilapidations and closed sites
2020
£’000
2,190
540
2,730
2019
£’000
3,085
299
3,384
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.
144144
Marshall Motor Holdings plc | Annual Report & Accounts 2020
Notes to the Consolidated Financial Statements
24. Provisions (continued)
Other
Other provisions include a total amount of £1,167,000 (2019: £1,167,000) 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 was expected to occur in 2020, however due to delays and the impact of
COVID-19, these are now expected to conclude in 2021.
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
Impact of change in accounting policy (note 3)
Deferred tax acquired
Income statement (charge) / credit (note 11)
At 31 December
a) Deferred tax liabilities
2020
£’000
2019
£’000
(42,056)
19,341
(22,715)
(39,227)
19,093
(20,134)
2020
£’000
2019
£’000
(20,134)
(19,574)
203
(49)
(2,735)
(22,715)
-
(727)
167
(20,134)
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:
S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
F
I
I
Fixed
assets
acquired
on a
business
depreciation combination
£’000
Accelerated
tax
£’000
As at 1 January 2019
Acquisitions
1,242
-
5,131
328
Charged/(credited) to the income statement
- current year
(148)
(177)
Charged/(credited) to the income statement
- prior year
At 31 December 2019
(317)
777
3
Assets
Roll previously
over
relief
£’000
Intangible
qualifying Investment assets and
goodwill
£’000
for IBAs properties
£’000
£’000
Right-of-
use asset
£’000
13,828
-
13,825
4,489
Total
£’000
35,504
4,817
172
(682)
(780)
-
-
(314)
28
-
80
-
1,254
-
-
-
196
-
(25)
-
171
5,285
1,254
108
14,000
17,632
39,227
Acquisitions
-
49
-
-
-
-
127
176
Charged/(credited) to the income statement
- current year
Charged to the income statement - prior year
Impact of corporation tax rate reduction reversal
At 31 December 2020
(44)
34
95
862
(203)
15
623
(79)
-
148
5,769
1,323
(27)
-
20
164
(121)
-
13
-
270
32
1,651
15,953
(1,849)
(2,053)
-
2,075
17,985
81
4,625
42,056
145145
FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
25. Deferred tax assets and liabilities (continued)
b) Deferred tax assets
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:
Disposals
Capital
on a
losses sale basis
£’000
£’000
Other
Lease temporary
liabilities differences
£’000
£’000
Total
£’000
As at 1 January 2019
Acquisitions
(Charged)/credited to the income statement
- current year
(Charged)/credited to the income statement
- prior year
At 31 December 2019
Impact of change in accounting policy (note 3)
At 1 January 2020
Acquisitions
(Charged)/credited to the income statement
- current year
(Charged)/credited to the income statement
- prior year
Impact of corporation tax rate reduction reversal
At 31 December 2020
368
-
12
30
410
-
410
-
(228)
-
48
230
209
-
-
14,515
4,090
838
15,930
-
4,090
(603)
(212)
(803)
(209)
-
18,002
203
18,205
127
55
681
-
(124)
19,093
203
681
19,296
-
127
(1,775)
(306)
(2,309)
(30)
2,115
18,642
12
82
(18)
2,245
469
19,341
-
-
-
-
-
-
-
-
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
2020
Tax
losses
£’000
211
211
2020
Unrecognised
deferred tax
asset
£’000
40
40
2019
Tax
losses
£’000
211
211
2019
Unrecognised
deferred tax
asset
£’000
36
36
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 2020
and 2019. For all financial assets and liabilities, fair value equals carrying value except for long-term borrowings as disclosed in
Note 23.
146146
Marshall Motor Holdings plc | Annual Report & Accounts 2020
Notes to the Consolidated Financial Statements
26. Financial instruments – risk management (continued)
a)
Financial instruments by category (continued)
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.
2020
£’000
1,442
59,699
33,844
94,985
5,024
99,344
492,346
596,714
2019
£’000
1,544
79,253
110
80,907
30,665
108,085
579,578
718,328
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.
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 2020, the Group does not have significant sensitivities
to the impact of future changes in interest rates on floating rate debt.
147147
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A
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A
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N
A
N
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
26. Financial instruments – risk management (continued)
b) Risk management (continued)
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.
Credit quality of trade receivables
The provision for credit losses recognised against trade receivables is based on an expected credit loss model that calculates
the expected loss applicable to the receivable balance over its lifetime. Default rates are calculated considering historical loss
experience and are applied to trade receivables within a provision matrix. The matrix approach allows for the application of
different default rates to different groups of customers with similar characteristics. The characteristics used to determine the
groupings of receivables are the factors that have the greatest impact on the likelihood of default; namely, number of days past
due. The rate of default increases once the balance is 90 days past due and subsequently in 90-day increments. This matrix
calculation approach is considered to be appropriate as the Group’s trade receivable balance consists of a high volume of
individually low value balances.
The most significant assumptions included within the expected credit loss provisioning model that gives rise to estimation
uncertainty, albeit immaterial, are that future default rates will be consistent with actual past performance and that there will be no
significant change in the payment profile or recovery rates. Historical default rates are calculated using a ‘roll rate’ method based
on the probability of a receivable progressing through successive stages of delinquency to write-off. Default rates are based on
average actual credit loss experience over the previous two-year period. The Group reviews and updates these default rates on
a quarterly basis to ensure that the default rates used as the basis of the assumption are calculated based on the most up-to-date
data. Actual historical default rates are then adjusted for current, forward-looking information; namely, regulatory changes and
macroeconomic factors applicable to the Group’s customer base that may have an impact, now or in the future, on recoverability.
While forward-looking information is usually considered to be immaterial, exceptions to this could arise in the event of a forecast
significant, one-off event. The Group does not believe that Brexit will have a material impact on the outstanding receivables balance.
The Group has factored an increased risk of default resulting from the macroeconomic impacts of the COVID-19 pandemic into
the expected credit loss calculations, resulting in an increase in the loss allowance recognised as at 31 December 2020.
148148
Marshall Motor Holdings plc | Annual Report & Accounts 2020
Notes to the Consolidated Financial Statements
26. Financial instruments – risk management (continued)
b) Risk management (continued)
Credit risk (continued)
Credit quality of trade receivables (continued)
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
Net remeasurement of loss allowances
Balance at 31 December per IFRS 9
Cash and cash equivalents
2020
£’000
460
211
671
2019
£’000
677
(217)
460
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
Group 2
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 \ A+ (stable)*
Loss allowance
Cash at bank
2020
£’000
Not credit-
impaired
2020
£’000
Credit-
impaired
2019
£’000
Not credit-
impaired
2019
£’000
Credit-
impaired
517
29,992
30,509
(671)
29,838
1,334
-
1,334
33,844
-
33,844
-
-
-
-
-
-
-
-
-
-
-
1,893
48,836
50,729
(460)
50,269
1,544
-
1,544
110
-
110
-
-
-
-
-
-
-
-
-
-
-
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)
149149
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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
Due within 6
months
£’000
366
7,395
362
7,318
Due
between
1 and 2
years
£’000
Due
between
2 and
5 years
£’000
717
2,078
Due
after 5
years
£’000
1,863
Total
£’000
5,386
14,161
36,826
101,774
167,474
486,338
494,099
-
6,008
-
-
492,346
7,680
20,886
38,904
103,637
665,206
Due
between
6 months
and
1 year
£’000
Due
between
1 and 2
years
£’000
382
-
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
Mortgages
Lease liabilities
Trade and other payables
(excluding other taxes and social security)
At 31 December 2020
Mortgages
Bank loan*
Lease liabilities
Trade and other payables
(excluding other taxes and social security)
At 31 December 2019
*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.
150150
Marshall Motor Holdings plc | Annual Report & Accounts 2020
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 103, the Group
had net debt of £70,524,000 as at 31 December 2020 (2019: £138,640,000).
27. Fair value measurement
The carrying amounts and fair values of the Group’s financial assets and financial liabilities are as below. The Group considers
that the carrying amount of the following financial assets and financial liabilities are a reasonable approximation of their fair value:
trade receivables, trade payables, bank loans and cash and cash equivalents. Therefore, these assets are not disclosed below.
All fair values shown in the table below are measured using observable inputs (Level 2). The fair value of non-current mortgages
is determined by reference to future contractual cash flows discounted using the prevailing market interest rates for facilities with
similar characteristics.
Financial liabilities
Mortgages
2020
Carrying
amount Fair value
£’000
£’000
2019
Carrying
amount
£’000
Fair value
£’000
4,383
3,607
5,024
3,951
There have been no transfers between levels in the fair value hierarchy during either 2020 or 2019.
151151
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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 2019
Issued 2 April 2019
Issued 23 December 2019
At 31 December 2019
At 31 December 2020
Number
of shares
77,865,653
306,795
59,789
78,232,237
78,232,237
Ordinary
shares
£'000
49,834
196
38
50,068
50,068
Share
premium
£'000
19,672
-
-
19,672
19,672
Total
£'000
69,506
196
38
69,740
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.
All shares issued are fully paid. Details of Directors’ interests in shares are shown in the Directors’ Remuneration Report on pages
86 to 89.
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.
Shares held by subsidiaries
No shares in the Company were held by subsidiaries in 2020 (2019: 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’.
152152
Marshall Motor Holdings plc | Annual Report & Accounts 2020
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 2020, six 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, (e) 2019 Awards and (f) 2020 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 2020 was £668,000 (2019: £1,282,000).
This is split as £107,000 in accruals (2019: £152,000) and £561,000 (2019: £1,130,000) 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 2020 is 8.2 years (2019: 8.7 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 2020 is £1.45 (2019: £1.56). The fair value of options granted during
the year was £1.25 (2019: £1.43). The fair value of equity settled share options granted was based on market value on 20 August
2020 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 2020. See the Directors’ Remuneration Report on pages 86 to 89
for further details.
In September 2020, the 2017 Performance Awards became exercisable. These awards remain unexercised as at 31 December
2020.
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 was £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 2020 outstanding share options were as follows:
S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
F
I
I
Award
Award date
2017 Performance Awards
29 September 2017
2018 Performance Awards
11 April 2018
2019 Awards
2020 Awards
No of shares
over which
options are Exercise
price
outstanding
Date
from which
exercisable
Expiry
date
577,690
644,760
668,577
Nil
Nil
Nil
Nil
29 September 2020
29 September 2027
11 April 2021
11 April 2028
28 November 2022
28 November 2029
11 March 2023
11 March 2030
28 November 2019
20 August 2020
1,035,632
153153
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.
IPO 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
b)
2016 Performance Awards
2020
No.
2020
WAEP
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2019
No.
578,856
-
-
(578,856)
-
-
-
2019
WAEP
-
-
-
-
-
-
-
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
-
-
-
-
-
-
-
2020
No.
2020
WAEP
-
-
-
-
-
-
-
-
-
-
-
-
-
-
154154
Marshall Motor Holdings plc | Annual Report & Accounts 2020
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 during the year
Expired during the year
Outstanding as at 31 December
Exercisable as at 31 December
d)
2018 Performance Awards
2020
No.
611,373
-
(33,683)
-
-
577,690
577,690
2020
WAEP
-
-
-
-
-
-
-
2019
No.
619,763
-
(8,390)
-
-
611,373
-
2019
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
2020
No.
680,249
-
(35,489)
-
-
Outstanding as at 31 December
644,760
Exercisable as at 31 December
-
155155
2020
WAEP
-
-
-
-
-
-
-
2019
No.
731,054
-
(50,805)
-
-
680,249
-
2019
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 during the year
Expired during the year
2020
No.
710,682
-
(42,105)
-
-
Outstanding as at 31 December
668,577
Exercisable as at 31 December
-
f)
2020 Awards
2020
WAEP
-
-
-
-
-
-
-
2019
No.
-
710,682
-
-
-
710,682
-
2019
WAEP
-
-
-
-
-
-
-
The 2020 Awards are subject to the service condition of continuous employment.
These options all become exercisable on the vesting date of 11 March 2023.
The 2020 Awards are subject to a holding period which starts on the grant date and ends on the first anniversary of the vesting
date.
2020
No.
2020
WAEP
2019
No.
2019
WAEP
2020 Awards
Outstanding as at 1 January
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
-
1,107,632
(72,000)
-
-
Outstanding as at 31 December
1,035,632
Exercisable as at 31 December
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
156156
Marshall Motor Holdings plc | Annual Report & Accounts 2020
Notes to the Consolidated Financial Statements
30. Analysis of net debt
At 31
At 1 January Cash New Non-cash December
2020 flows leases items* 2020
£’000 £’000 £’000 £’000 £’000
Cash and cash equivalents 110 33,734 - - 33,844
Liabilities arising from financing activities
Loans and borrowings (30,665) 25,641 - - (5,024)
Lease liabilities (108,085) 11,323 (3,627) 1,045 (99,344)
(138,750) 36,964 (3,627) 1,045 (104,368)
Net debt (138,640) 70,698 (3,627) 1,045 (70,524)
Lease liabilities 108,085 (11,323) 3,627 (1,045) 99,344
Adjusted net (debt) / cash at year end
(non GAAP measure) (30,555) 59,375 - - 28,820
*Non-cash items include remeasurements to existing lease liabilities as well as the unwinding of the discount on lease liabilities.
At 31
At 1 January Cash New Non-cash December
2019 flows leases items* 2019
£’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) 9,780 (28,778) (1,445) (108,085)
(93,948) (14,579) (28,778) (1,445) (138,750)
Net debt (92,774) (15,643) (28,778) (1,445) (138,640)
Lease liabilities 87,642 (9,780) 28,778 1,445 108,085
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.
157157
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M
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A
T
S
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A
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FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
31. Related party transactions
Key management compensation is given in Note 9 ‘Employees and Directors’.
During 2020 and 2019 the Directors were members of an employee car ownership scheme under which the following transactions
were made in the year. The Directors purchased 18 cars in 2020 (2019:24) at a price of £1,385,000 (2019: £1,725,000) and sold
back 19 (2019:23) at a price of £1,773,000 (2019: £1,577,000). 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 for which the disclosure exemption does not apply.
2020
Ultimate parent undertaking
Marshall of Cambridge (Holdings) Limited
Other group entities
Marshall of Cambridge Aerospace Limited
Marshall Group Properties Limited
Marshall Land Systems Limited
Other related parties
RPJ Consulting Services Limited*
Sales
£’000
Purchases
£’000
Year-end
balance
£’000
50
4
-
808
-
862
-
77
934
-
10
1,021
10
(28)
(323)
806
(3)
462
*The Group purchases administrative support services from RPJ Consulting Services Limited, a company whose sole director is also Marshall Motor Holdings plc’s
Non-Executive Chairman.
2019
Ultimate parent undertaking
Marshall of Cambridge (Holdings) Limited
Other group entities
Marshall of Cambridge Aerospace Limited
Marshall Thermo King 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 Consulting Services Limited, a company whose sole director is also Marshall Motor Holdings plc’s
Non-Executive Chairman.
Outstanding balances with group entities are unsecured, interest free and are expected to be settled in cash.
During the year ended 31 December 2020, the Group has not made any provision for doubtful debts relating to amounts owed
by related parties (2019: £nil).
158158
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Notes to the Consolidated Financial Statements
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 2020 was £2,993,000 (2019: £2,732,000).
The total unpaid pension contributions outstanding at the year end were £539,000 (2019: £526,000).
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.
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 2020
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
2020
£’000
2019
£’000
6
7
9
10
154,689
156,622
5,442
-
5,442
(51,830)
(46,388)
108,301
50,068
19,672
1,586
(12)
36,987
108,301
5,060
5,465
10,525
(54,343)
(43,818)
112,804
50,068
19,672
1,025
(12)
42,051
112,804
The total comprehensive loss of the Company for the year ended 31 December 2020 was £5,064,000 (2019: £9,219,000).
The Company financial statements were approved for issue by the Board of Directors and authorised for issue on 8 March 2021.
Richard Blumberger
Chief Financial Officer
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Company Financial Statements
Statement of Changes in Equity
For the year ended 31 December 2020
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 2019 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
Loss for the financial year - - - - (5,064) (5,064)
Total comprehensive loss
for the year - - - - (5,064) (5,064)
Share-based payments charge 11 - - 561 - - 561
At 31 December 2020 50,068 19,672 1,586 (12) 36,987 108,301
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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 domiciled 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 2019.
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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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.
Employee benefit trust
The Marshall Motor Holdings Employee Benefit Trust (the Trust) was established in the context of the share-based compensation
plans operated by the Group. The Trust is registered in Jersey and was formed on 30 June 2015.
The Trust is treated as an extension of the Company (the sponsoring entity of the employee share option plans); therefore, the
assets and liabilities of the Trust are included in the Company Balance Sheet. The Company Balance Sheet includes all shares in
the Company held by the Trust. These shares are disclosed in the Own Shares Reserve as a deduction from 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.
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Notes to the Company Financial Statements
3. Accounting policies (continued)
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.
4. Auditor’s remuneration
The auditor’s remuneration for audit and other services was £3,000 (2019: £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
2020
£’000
1,431
338
81
315
2019
£’000
2,458
377
113
672
2,165
3,620
2020
No.
3
3
2019
No.
3
3
Employee costs stated above exclude grant income received under the Coronavirus Job Retention Scheme, as none was received
for these employees.
Details of the remuneration of the Directors, their share incentives and pension entitlements are set out in the Directors’
Remuneration Report on pages 86 to 89.
6.
Investments in subsidiaries
Cost
At 1 January 2020
Share-based payment awards to employees of subsidiaries
Impairment
At 31 December 2020
2020
£’000
156,622
374
(2,307)
154,689
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
investments in subsidiaries for the years ended 31 December 2020 and 2019. Impairment charges are recorded within
administrative expenses in the Income Statement.
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Notes to the Company Financial Statements
6.
Investments in subsidiaries (continued)
As at 31 December 2020, the Company recorded impairment charges totalling £2,307,000 in relation to two of the investments in
subsidiaries. One impairment resulted due to the cessation of the trade of Marshall of Stevenage Limited during the year following
the closure of the franchise dealership operated by this subsidiary. The other impairment arose due to a deterioration in assumptions
around future profitability and growth rates within the business activities of the subsidiary entity in which the investment is held.
As at 31 December 2019, the Company had recorded impairment charges totalling £5,716,000. The impairments recorded arose
following an improvement in processes to allocate central income and expenses to relevant statutory entities, consistent with the
allocation to CGUs in the consolidated financial statements.
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 99 to 159.
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^
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
Dormant
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 2020
^ direct subsidiary of Marshall Motor Holdings plc
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Notes to the Company Financial Statements
7. Debtors
Trade debtors
Amounts owed by Group undertakings
Other debtors
VAT
Corporation tax
Prepayments
Deferred tax asset (note 8)
2020
£’000
2
4,356
24
24
281
754
1
2019
£’000
-
5,025
28
-
-
-
7
5,442
5,060
During the year ended 31 December 2020, the Group has not made any provision for doubtful debts relating to amounts owed to
related parties (2019: £nil).
Amounts owed by group undertakings are unsecured, bear no interest and have no fixed repayment date.
8. Deferred tax assets
The analysis and movements in deferred tax assets during the year are as follows:
At 1 January 2019
Charged to the income statement - current year
At 31 December 2019
Charged to the income statement - current year
At 31 December 2020
Temporary
differences
£’000
13
(6)
7
(6)
1
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
2020
£’000
-
5,033
703
45,022
-
71
30
971
51,830
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.
Details of loans and borrowings can be found in Note 23 ‘Loans and Borrowings’ of the consolidated financial statements.
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Notes to the Consolidated Financial Statements
10. Called-up share capital
78,232,237 (2019: 78,232,237) ordinary shares of 64p each
Ordinary shares
At 1 January
Issued on 2 April 2019
Issued on 23 December 2019
2020
£’000
50,068
2020
£’000
50,068
-
-
2019
£’000
50,068
2019
£’000
49,834
196
38
50,068
50,068
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 64 each were issued as part of the exercise of share options awarded under the
2016 Performance share option scheme.
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.
12. Dividends
Paid during the year
Final dividend for 2018
Interim dividend for 2019
Final dividend for 2019
Interim dividend for 2020
2020
£’000
-
-
-
-
-
2019
£’000
4,995
2,228
-
-
7,223
In light of the circumstances resulting from the ongoing COVID-19 pandemic, the previously proposed final dividend of 5.69p per
share for the year ended 31 December 2019 was cancelled.
The Group similarly suspended the payment of an interim dividend in respect of the year ended 31 December 2020.
(2019: An interim dividend of £2,228,000, representing a payment of 2.85p per ordinary share in issue at that time, was paid in
September 2019.)
The Board is mindful of the importance of dividends to its shareholders and intends to resume the payment of dividends as soon
as conditions allow.
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Notes to the Consolidated Financial Statements
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 £81,000 (2019: £113,000).
The total unpaid pension contributions outstanding at the year end were £7,000 (2019: £7,000).
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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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.
Underlying operating profit
Total continuing operating profit as reported
Impact of non-underlying items
Post-retirement benefits charge
Acquisition costs
Net recognition of restructuring costs
Profit on disposal of assets classified as held for sale
(Profit) / loss on disposal of investment property
Loss on impairment of goodwill and other tangible assets
Gain on revaluation of investment properties
Continuing underlying operating profit
Like-for-like 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
Adjusted net debt
Net debt consists of:
Cash and cash equivalents
Loans and borrowings
Lease liabilities
Closing net debt
Lease liabilities
Adjusted net cash / (debt)
170170
2020
£’000
2019
£’000
30,532
29,586
-
13
2,070
(1,563)
(148)
218
-
590
31,122
2020
£’000
23
835
2,123
-
72
-
(610)
2,443
32,029
2019
£’000
2,154,415
2,276,129
(253,859)
(34,186)
(59,281)
(59,655)
(288,045)
(118,936)
1,866,370
2,157,193
2020
£’000
2019
£’000
33,844
(5,024)
(99,344)
(70,524)
(99,344)
28,820
110
(30,665)
(108,085)
(138,640)
(108,085)
(30,555)
Marshall Motor Holdings plc | Annual Report & Accounts 2020
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
BDO LLP
Arcadia House
Maritime Walk – Ocean Village
Southampton
SO14 3TL
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 Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
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Notes
172
Perivan 260577
Marshall Motor Holdings plc | Annual Report & Accounts 2020
22 BRAND PARTNERS
128 OPERATING UNITS
28 COUNTIES NATIONWIDE
Volkswagen ID.4
2
Audi
BMW
BMW Motorrad
CUPRA
Ford
Ford Vans
Honda
Jaguar
Kia
Land Rover
LEVC
Mercedes-Benz
Mercedes-Benz Commercials
MINI
Nissan
Peugeot
Seat
ŠKODA
Smart
Vauxhall
Vauxhall Vans
Volkswagen
Volkswagen Commercials
Volvo
Paint & Body Repair Centres
Trade Parts Specialists
Used Car Centres
22 BRAND PARTNERS
128 OPERATING UNITS
28 COUNTIES NATIONWIDE
www.mmhplc.com
Marshall Motor Holdings plc
Airport House, The Airport, Cambridge, CB5 8RY
© 2021 Marshall Motor Holdings plc
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Annual Repor t
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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