2019 Full Year Results Presentation 10th March 2020 Daksh Gupta - - PowerPoint PPT Presentation

2019 Full Year Results Presentation

Daksh Gupta Chief Executive Officer Richard Blumberger Chief Financial Officer

10th March 2020

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New Audi RS Q8

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Agenda

• 2019 and 5 year key highlights, and market overview

– Daksh Gupta

• Financial review

– Richard Blumberger

• Update on business initiatives, strategy, 2020 outlook and summary

– Daksh Gupta

• Q&A

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Daksh Gupta Chief Executive Officer

2019 and 5 year key highlights, and market overview

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Strong track record since IPO provides solid platform for growth

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Strong M&A track record

£160m+ invested

SG Smith, Ridgeway and 20 additions in 2019

Continual focus

• n portfolio

management

Leasing, non-core and sub-scale exits

National footprint

28 counties (2015: 16) 132 operating units (2015: 76)

Strong organic growth and consistent market

• utperformance

5 years ranked in UK’s best workplaces

Driving customer satisfaction

Continual investment in retailing excellence, technology and

• nline presence

Revenue growth of 217% to £2.3bn

16.7% CAGR

Continuing underlying PBT up 246% to £22.1m

19.8% CAGR

Over £100m invested into the portfolio

* 2019 dividend to be approved by shareholders at 2020 AGM

£24.9m returned to shareholders in dividends*

Equating to 31.96p per share

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Another year of strong like-for-like outperformance against the market

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* Like-for-like (includes group businesses or activities that have been active or trading for a period of 12 consecutive months and excludes businesses

• r activities that do not have 12 months trading activity); ** Continuing operations underlying; *** Throughout the presentation adjusted net debt is

a non GAAP measure that excludes IFRS 16-related lease liabilities; **** SMMT registrations which includes impact of dealer self-registration activity

REVENUE *

£2,209.6m +2.2%

2018: £2,161.5m GROSS PROFIT % *

11.4%

• 17bps

2018: 11.6% TOTAL PBT **

£22.1m

• 10.8%

2018: £24.7m

DIVIDEND MAINTAINED

Final 5.69p

N E T D E B T * * *

£30.6m

2018: £5.1m

L E V E R A G E

0.72x

2018: 0.12x

NEW RETAIL UNITS *

• 2.2%

FLEET UNITS *

+4.5%

USED UNITS *

+6.1%

AFTERSALES REVENUE *

+3.2%

OPERATING PROFIT*

£33.1m

• 4.1%

2018: £34.5m market -3.2%**** market -1.7%****

FYR 8.54p

market -0.1%****

A D J U S T E D

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2019 key highlights

• Record revenue of £2.3bn, with fifth successive year of like-for-like growth since IPO of 2.2% to £2.2bn
• Strong like-for-like outperformance against the market for total new units, new retail units, new fleet units and

used units

• £31.6m invested in 20 new businesses through 8 acquisitions or start-ups
• Marshall is now the largest partner for Volkswagen Group in the UK, adding 5 Volkswagen passenger car

franchises, 2 Volkswagen commercial vehicle franchises and 7 ŠKODA franchises. The Group is now the largest partner for each of these brands by number of sites

• Acquired 2 Honda franchises in Reading and Newbury, taking our representation to 8 locations and

reinforcing our number 2 position with the brand

• Extended our relationship with Volvo by adding 9th franchise, cementing our number 1 position with the

brand

• Continued investment in our portfolio – £15.2m in the year*
• Full year dividend maintained at 8.54p per share
• Ranked as one of the UK’s best workplaces for the 5th consecutive year – recognised with coveted

laureate award

* Excluding freeholds from acquisitions

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New car market update

BMW Concept 4 Series Coupé

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Despite new car market decline, MMH grew like-for-like volumes

UK Market

• 2.31m new cars registered in 2019, down 2.4%
• Retail down 3.2%, fleet / business down 1.7%
• Registrations by fuel type:
• Diesel down 21.8% (25.2% share)
• Petrol up 2.2% (64.8% share)
• AFVs up 20.6% (7.4% share)
• BEVs up 144.0% (1.6% share)
• Fines introduced under CAFE regulations in 2020
• As a result, December 2019 experienced some pull-forward
• Latest SMMT forecast for full year 2020 -2.6% to 2.25m
• Increased VED and company car tax from April 2020

MMH

• Despite declining markets, MMH outperformed the total new car

market, as well as new retail and fleet units, an excellent result

• Like-for-like total new unit sales up 0.3%
• Like-for-like new retail unit sales down 2.2%
• Like-for-like fleet unit sales up 4.5%
• Strong like-for-like margin growth to 7.4%, +27bps
• PCP remains popular with 80% of new car finance cases

(2018: 81%), 83,268 Live PCPs (2018: 69,429)

0.0 0.5 1.0 1.5 2.0 2.5 UK NEW CAR REGISTRATIONS (m)

Source: SMMT

Diesel AFV Petrol

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Used car market update

New Ford Mustang Mach-E

11 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

UK USED CAR MARKET (m)

Market outperformance delivering record result

Source: SMMT and Cox Automotive

UK Market

• 2019 used car transactions down -0.1% to 7.9m
• Q2 saw residual value pressures driven by a

combination of factors

• H2 residual value stabilisation
• 2020 full year forecast down -1.4%

MMH

• Record used unit sales performance
• Like-for-like used unit sales up 6.1%
• Like-for-like revenue up 5.3%
• Like-for-like margin down 47bps to 6.7%
• Continued 56 day stocking policy and use of data /

technology through ‘Phoenix 2’ remain key differentiators

• PCP penetration of used finance cases stable at 63%

(2018: 63%) 7 8

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New Hyundai Kona Electric

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Aftersales continues to remain resilient

UK Market

• 34.3m passenger vehicles in UK*
• 40.1m including commercial vehicles
• 2019 new car market down -14.2% on 2016 peak
• Decline in segment 1 (vehicles 0 - 3 years old)
• Lower new car sales volumes resulted in less pre

delivery inspection work

• Lower warranty work in certain brands

MMH

• Like-for-like aftersales revenues up 3.2%
• Further investment in resource to drive aftersales
• New Aftersales Director joined Operating Board
• Increase in new and used car PCP increasing

segment 2 and 3 penetration 25 26 27 28 29 30 31 32 33 34 35 14 15 16 17 18 19* UK PASSENGER VEHICLE PARC (m)

34.3m

Passenger vehicles in UK*

1.6%

CAGR 6 year growth * Source: Department for Transport Q3 2019

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Richard Blumberger Chief Financial Officer

Financial review

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2019 key financials

• Record revenue of £2.3bn, with fifth successive year of like-for-like growth since IPO up 2.2% to £2.2bn
• Strong like-for-like outperformance against the market for total new, new retail, new fleet and used units
• Gross margin remains strong at 11.4%, marginally down
• Continued disciplined cost management, like-for-like operating expenses up 1.5%, or 1.8% excluding lease

disposal

• Reported underlying PBT of £22.1m, down by 10.8% against last year’s record result, reflecting difficult

market conditions and after absorbing losses of recent acquisitions

• Strong balance sheet with £202.3m of net assets, £2.59 per share
• £124.9m of freehold land and buildings
• Adjusted net debt £30.6m, driven by acquisitions, capital expenditure and the working capital impact of

strong fleet volumes at the end of the year

• £31.6m on acquisitions, including 7 ŠKODA retail centres, 5 Volkswagen passenger cars, 2 Honda, 1 Volvo
• £15.2m capital expenditure
• Full year dividend 8.54p per share, in line with prior year

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New Jaguar F-Pace SVR

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Strong organic and acquisitive revenue growth

Reported (£m) 2019 2018 Var Revenue 2,276.1 2,186.9 4.1% Underlying PBT 22.1 24.7 (10.8%) Reported PBT 19.6 18.0 8.9% Underlying EPS 22.9 26.3 (12.9%) ROCE 10.9% 12.8% (184 bps) Like-for-like (£m) 2019 2018 Var Revenue 2,209.6 2,161.5 2.2% Gross profit 252.3 250.4 0.8% Gross profit % 11.4% 11.6% (17bps) Operating expenses (219.3) (215.9) (1.5%) Operating profit 33.1 34.5 (4.1%) ROS 1.5% 1.6% (10bps)

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• Pleasing organic like-for-like

growth in revenue

• Gross profit increase by 0.8%
• Gross profit % marginally down
• Revenue benefitted from

acquisitions and strong organic growth

• EPS down due to lower profit

and higher effective tax rate

• Return on capital employed

impacted by loss making acquisitions

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New Kia Sorento

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Like-for-like unit sales 2019 2018 Var New retail 28,047 28,666 (2.2%) Fleet 17,994 17,217 4.5% New 46,041 45,883 0.3% Used 44,752 42,177 6.1% Total 90,793 88,060 3.1%

Like-for-like outperformance in all segments

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Like-for-like revenue (£m) 2019

mix *

2018

mix *

Var New 1,056.7

46.8% 1,060.2 48.1%

(0.3%) Used 951.0

42.1%

903.4

40.9%

5.3% AFS 250.1

11.1%

242.3

11.0%

3.2% Other (48.2) (44.4) Total 2,209.6 2,161.5 2.2%

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• New retail turnover per unit

impacted by fleet mix

• Increased used to new retail car

ratio, 1.60:1 (2018: 1.47:1)

• Growth in both service and parts

drive 3.2% increase in aftersales revenue

SMMT 2019 New retail (3.2%) New fleet (1.7%) New total (2.4%) Used (0.1%)

* Excludes internal sales

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New Land Rover Defender

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Like-for-like

gross profit (£m)

2019

mix *

2018

mix *

Var New 78.0

31.0%

75.4

30.1%

3.5% Used 63.3

25.1%

64.4

25.8%

(1.7%) AFS 110.8

43.9%

110.4

44.1%

0.4% Other 0.2 0.2 Total 252.3 250.4 0.8%

Like-for-like gross profit %

2019 2018 Var New 7.4% 7.1% 27 bps Used 6.7% 7.1% (47 bps) AFS 44.3% 45.6% (127 bps) Total 11.4% 11.6% (17 bps)

Growth in gross profit despite margin pressures

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• New margins benefitted from

easing of supply issues

• Used margins impacted by Q2

residual value declines

• Aftersales parts mix at lower

margin

* Excludes internal sales

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New Mercedes-Benz GLS

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Resilient business model protects like-for-like operating profit

£m

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Volume Margin

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Volume: £6.4m Margin: (£4.5m) Gross profit: £1.9m

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Mercedes-Benz Vito

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Effective cost discipline

14 14.3

Cost headwinds Management actions

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£m +3.3m

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New Mini Electric

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Non underlying items

• Acquisition related professional and advisory costs – £0.8m
• Acquisition restructuring and site closures – £2.1m
• Revaluation on investment properties – £0.6m
• Increase in the value of investment properties following independent valuation carried out during

the year (revaluation on non-investment properties £14.8m not recognised) 17

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New Nissan Juke

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Balance sheet provides platform for growth

£m 2019 2018 Goodwill and intangibles 119.3 112.2 Freehold land and buildings 124.9 117.7 Right-of-use assets 108.0 85.4 Other 39.5 34.5 Fixed assets 391.6 349.8 Inventory 470.7 384.0 Trade / other receivables 87.5 79.0 Cash & equivalents 0.1 1.2 Assets held for sale 0.8 0.8 Current assets 559.1 464.9 Vehicle funding (443.7) (370.8) Trade / other payables (140.6) (127.2) Lease liabilities (108.1) (87.6) Bank / other debt (30.7) (6.3) Other liabilities (25.2) (28.7) Total liabilities (748.4) (620.6) Net assets 202.3 194.0

• Acquisitions added £6.5m of goodwill and

intangible assets

• Continued investment in freehold land and

buildings

• External property revaluation completed
• £14.8m increase not recognised
• £0.6m increase in investment properties

recognised

• Total inventory up £87.2m versus 2018
• £51.3m due to acquisitions
• Like-for-like up £35.9m, largely driven by

future fleet orders

• 94.4% of inventory funded (2018: 96.6%)
• Excellent used car stock turn of 9.1*

(2018: 8.2). 56 day policy would give 6.5

• IFRS 16 right of use asset and lease liability

increased due to acquisition

• Net assets increased by £8.3m

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* Stock turn calculated based on cost of sales

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New Peugeot 2008

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Capital allocation

• £31.6m on acquisitions, including freeholds
• Northampton Skoda, Derby Volvo, Letchworth Volkswagen and St Albans Volkswagen
• £15.2m invested in our asset base within 2019*
• Freehold developments:
• Substantial new build at Nursling Mercedes Benz Commercial Vehicles
• Major refurbishment of Wimbledon Audi, introducing second “city concept” in Europe
• Completion of relocation of Lincoln Jaguar Land Rover and Lincoln Nissan
• Freehold land purchase to extend Grimsby BMW used car display area
• Continued software development in our ‘Phoenix 2’
• Investment in strategic people initiatives and systems, including back office enhancements
• Risk mitigation – defined benefit pension scheme risk eliminated – £5.6m
• Total dividend of £7.2m

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* Excluding freeholds from acquisitions

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New SEAT Leon e-Hybrid

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Adjusted net debt increase due to acquisitions and strong fleet volume

28.9 Investing and financing activities Net cash inflow from operating activities * Underlying EBITDA net of IFRS 16 lease payments

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smart EQ fortwo

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Full year 2020 guidance items

Class Leading Returns

• 2020 capital expenditure £18m - £20m
• Full year effective tax rate around 20 - 21%
• Well documented structural cost headwinds to continue 2 - 3% increase
• Stronger H1 weighting

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Daksh Gupta Chief Executive Officer

Update on business initiatives, strategy and future outlook

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Long track record of successful M&A in the core business

*Start-up

EXITS

EXIT OF 42 NON-CORE, SUBSCALE OR LOSS MAKING OPERATIONS

1ST

GERMAN BRAND ADDED MERCEDES

• BENZ

2ND

GERMAN BRAND ADDED VOLKSWAGEN

3RD

GERMAN BRAND ADDED AUDI

4TH

GERMAN BRAND ADDED BMW

2010 2011 2012 2013 2014 2015 2016 2017

CORPORATE

2009

MMH LISTS ON THE LSE STRATEGIC EXIT FROM MARSHALL LEASING

2 TRANSACTIONS & 4 START-UPS 2 TRANSACTIONS & 1 START-UP 2 TRANSACTIONS 2 TRANSACTIONS 2 TRANSACTIONS 3 TRANSACTIONS & 1 START-UP 1 TRANSACTION 1 TRANSACTION 1 TRANSACTION & 1 START-UP

ACQUISITIONS / STARTUPS

2018 2019

* * * *

Ridgeway integration £75m capex investment Leasing disposal

Balance sheet strengthened

* * * 5 TRANSACTIONS & 3 START-UPS * *

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Recently acquired Volkswagen Loughton dealership

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Marshall becomes the largest partner for Volkswagen Group UK

• Marshall is Volkswagen Group UK’s largest partner
• 14 Volkswagen passenger cars, 7 Volkswagen commercial

vehicles, 9 Audi, 12 ŠKODA, 3 SEAT and 5 TPS

• Acquired with full OEM support the passenger car franchises in

Harlow, Letchworth, Loughton, Milton Keynes and St Albans. Expect to complete Aylesbury during 2020

• Acquired commercial vehicle franchise in Loughton
• Awarded commercial vehicle franchise in Lincoln
• All sites fully compliant with the latest brand requirements
• Strategy to partner with the right brands
• Volkswagen Group is one of the world’s leading automobile

manufacturers and the largest carmaker in Europe

• Volkswagen passenger car 2019 sales: 200,771, number two

position in the market with share of 8.7%

• Volkswagen commercial vehicle 2019 sales: 42,444, also

number two position with share 11.6%

• VW Group is investing €60bn in e-mobility, hybridisation and

digitisation between 2020 and 2024

• Integration progressing well and early signs encouraging,

performing in line with expectations

* Grimsby is a CV Authorised Repairer and Bridgwater is a PC Authorised Repairer

Lincoln CV Scunthorpe Bridgwater* Newbury South Oxford Reading Barnstaple Taunton St Albans Loughton Harlow North Oxford Milton Keynes Letchworth Grimsby* Aylesbury

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New ŠKODA Kamiq

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3 transactions making Marshall ŠKODA’s largest retailer

• Strategy to partner with the right brands
• ŠKODA benefits from being part of the wider Volkswagen

Group and will benefit from their €60bn investment

• ŠKODA 2019 sales: 75,053, market share 3.3%, up 14.4%

in the last 3 years

• Strategy to grow scale with key brand partners and

geographic footprint:

• Collectively, c.10% UK market share
• All acquisitions fully supported by OEM
• Feb 2013: Entry to brand, Barnstaple
• Nov 2015: Croydon
• May 2016: Newbury, Oxford and Reading
• Jan 2019: Nottingham, Leicester
• Feb 2019: Northampton, Bedford, Letchworth and Harlow
• Dec 2019: Milton Keynes
• Integration of sites acquired earlier in the year now

complete, with latest addition progressing well. All these businesses performing in line with expectations

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42

Acquired Honda Reading Dealership

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Second largest Honda partner in the UK

• Acquisition of two Honda franchises in Reading and

Newbury in September 2019

• Reinforcing Marshall’s position as the second largest

Honda partner in the UK with 8 franchises

• Completed with the full support of Honda UK
• Strategy to partner with the right brands
• Honda 2019 sales: 43,913, market share 1.9%
• Strategy to grow scale with key brand partners and

geographic footprint:

• Entry to brand: Peterborough
• 2009: York, Hull and Scarborough
• 2010: Leicester
• 2011: Harrogate
• 2019: Newbury, Reading
• Contiguous to existing M4 corridor representation
• Integration complete and businesses performing in line

with expectations

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44

LEVC TX

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Marshall remains largest Volvo retailer in the UK

• Cementing Marshall’s position as the largest Volvo

franchise group in the UK

• Acquisition of Volvo franchise in Derby on 19th December
• Completed with the full support of Volvo Cars UK
• Franchise relocated to a new freehold facility
• Growing from 8 to 9 franchises (c.10% of Volvo volumes)
• Volvo car 2019 sales: 56,208, up 2.4% versus 2018,

market share 2.4%

• Commenced a new partnership with London EV

Company (LEVC) start-up

• Marshall awarded LEVC franchise for Nottingham
• Shared facility with the Group’s Volvo franchise
• Owned by Geely Automotive Holdings, who have invested

more than £500m into the company’s redevelopment

• Manufacturer of electric London taxis
• An electric LCV will be available to order in H2
• Over 3,800 have been sold since launch in 2018, with

2,507 sold in 2019

Milton Keynes Welwyn Derby Nottingham Leeds Grantham Peterborough Cambridge Bishop’s Stortford

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46

Future Leaders Programme latest cohorts

47 MMH score

80%

vs UK average

52%

5 years running ranked within the UK’s best companies

11th

Best UK workplace

10 Years

Running GPTW status

5 Years

Running ranked Top 30

No.1

Automotive employer

• 10th consecutive year of Great Place to Work status
• Received coveted Laureate award – ranked 5 years running
• Committed to diversity
• Member of Automotive 30% Club – MMH CEO now patron
• 24% of management positions filled by females (within our

like-for-like businesses), up from 15% in 2015

• Progress on strategic initiatives
• Second year of future leaders programme
• In-house recruitment team launched in September to

increase candidate quality and experience, as well as save

• costs. Since inception, 311 colleagues already recruited
• New learning management system introduced
• Marshall celebrates 100 years of apprentice intake – 115

current participants

• Group took part in ‘Drive My Career Apprentice Takeover’ –

the Group won best campaign for 2nd year running

• Jo Moxon appointed as Human Resources Director
• Extensive experience across a range of industries including

financial services, property, online and retail

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48

First-time use of TV advertising

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Omnichannel approach to leverage the Marshall brand

Source: Google analytics, internal management information

www.marshall.co.uk Sector Leading Social Media

48,634 Followers

+17.4%

126,332 Likes

+14.7%

15,546 Followers

+55.8%

6.0m

visits +3.4%

25.2m

page views +10.6%

Marshall brand

consistency

Automotive Management Awards Winner - “Best Use of Social Media” Motor Trader Awards Winner - “Social Media” category 21 industry digital marketing accolades since 2015

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• New website launching in H1
• Use of the Marshall brand consistently across all

franchises provides numerous benefits

• Greater name recognition
• Nationwide geographic footprint
• Promote the Marshall brand nationally – TV advertising

50

New Vauxhall Corsa-e

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Brand UK Market Share % UK Sales Outlets Marshall 2019 (share) Marshall 2008 (sites) Held by AM top 20 Remaining network Hyundai 3.6% 168 1% 12% 88% Kia 4.2% 191 1% 14% 85% Nissan 4.0% 174 1% 2 16% 83% Volvo 2.4% 99 9% 3 13% 78% Skoda 3.2% 128 9% 16% 76% Honda 1.9% 142 6% 1 20% 75% Seat 3.0% 122 2% 1 23% 75% Peugeot 3.5% 191 2% 6 32% 66% Vauxhall 6.9% 276 1% 7 35% 64% Ford 10.2% 403 1% 3 44% 55% Volkswagen 8.7% 185 8% 41% 51% Mini 2.8% 132 3% 48% 48% BMW 7.3% 137 4% 47% 48% Audi 6.0% 124 7% 59% 34% Land Rover 3.3% 120 7% 5 60% 33% Jaguar 1.6% 86 7% 2 62% 31% Mercedes-Benz 7.4% 126 7% 75% 17% Smart 0.2% 56 7% 91% 2% Total 80.3%

MMH well placed for future UK motor retail market

Climate change and regulation forcing industry evolution towards zero emissions by

2050

OEM investment requirements forcing

cost reduction

Rationalisation of dealer networks

Fewer, bigger

dealers

OEMs face significant fines for missing CAFE regulations therefore moving towards

EVs

Source: Automotive Management Top 100 as at 31/12/2019

Evolution to EVs requires significant investment from OEMs which is driving collaboration and

consolidation

30

Marshall well placed

to grow scale with brand partners and extend geographic footprint

52

New Lincoln Volkswagen commercial vehicle dealership

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Current trading and 2020 outlook

• 2020 new car market expected to decline 2.6% to 2.25m*
• December 2019 experienced some pull-forward as a result of CAFE introduction
• Potential March pull-forward as consumers mitigate exposure on VED and company car tax.

May result in decline in April

• 2020 full year used car market forecast to decline 1.4%**
• Whilst early, March order bank encouraging and building as anticipated
• March key underpin to first half and full year result, as ever
• Given political and economic uncertainty surrounding ongoing trade negotiations with the EU,

Board continues to remain cautious

• Although no impact to date, the Board is monitoring potential impact of COVID-19
• Outlook for the full year remains unchanged

* Source: SMMT, ** Source: Cox Automotive

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54

New Volvo XC40 Recharge

55

Summary

• Added 20 businesses throughout the year
• Excellent 2019 results despite the challenging market conditions
• 5th successive year of like-for-like revenue growth
• Market outperformance across all key operational metrics
• Final year dividend of 5.69p, taking full year to 8.54p, in line with 2018
• Strong balance sheet with £202.3m of net assets, equating to £2.59 per share
• Low levels of debt and highly cash generative
• Strong platform in place with significant firepower to take advantage of future opportunities

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