2020 Interim Results Presentation 18th August 2020 Daksh Gupta - - PowerPoint PPT Presentation

2020 Interim Results Presentation

Daksh Gupta Chief Executive Officer Richard Blumberger Chief Financial Officer 18th August 2020

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Agenda

• H1 2020 – COVID-19 update and market overview

– Daksh Gupta

• Financial review

– Richard Blumberger

• Update on future outlook and summary

– Daksh Gupta

• Q&A

Daksh Gupta Chief Executive Officer

H1 2020 – COVID-19 update and market overview

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COVID-19 timeline – pre lockdown

March April May June

FY19 results

• March
• rderbook

encouraging 10th YTD: -31.0% Mar MMH decision to temporarily close showrooms 22nd MARKET* 90% of 4,300 colleagues furloughed 26th GOVT COLLEAGUES EXTERNAL OPERATIONS TRADING Furlough scheme announced 20th Government imposed lockdown 23rd Significant YTD LFL

• utperformance

New: -10.6% Mar EXTERNAL INTERNAL

* Source: SMMT

Ongoing bi-weekly management video briefings to all colleagues

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Ongoing bi-weekly management video briefings to all colleagues

COVID-19 timeline – during lockdown

March April May June

FY19 results

• March
• rderbook

encouraging 10th YTD: -31.0% Mar MARKET* Month: -97.3% Apr 90% of 4,300 colleagues furloughed 26th 3,700 new and used vehicle orders taken during lockdown. Maintained our retail presence and supported our customers (online & telephone services) 62 aftersales operations kept open during lockdown to support emergency services, CV operators, vulnerable customers and key workers GOVT COLLEAGUES EXTERNAL OPERATIONS TRADING Furlough scheme announced 20th Government imposed lockdown 23rd Significant YTD LFL

• utperformance

New: -10.6% Mar EXTERNAL INTERNAL

* Source: SMMT

MMH decision to temporarily close showrooms 22nd

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Ongoing bi-weekly management video briefings to all colleagues

COVID-19 timeline – during lockdown

March April May June

FY19 results

• March
• rderbook

encouraging 10th YTD: -31.0% Mar MARKET* Month: -97.3% Apr 90% of 4,300 colleagues furloughed 26th 3,700 new and used vehicle orders taken during lockdown. Maintained our retail presence and supported our customers (online & telephone services) MMH recognised with GPTW award 10th year running May 62 aftersales operations kept open during lockdown to support emergency services, CV operators, vulnerable customers and key workers Month: -89.0% May Dealership management team returns 18th GOVT COLLEAGUES EXTERNAL OPERATIONS TRADING Furlough scheme announced 20th Government imposed lockdown 23rd Government announcement ref re-opening of showrooms 26th Click and collect 11th Significant YTD LFL

• utperformance

New: -10.6% Mar EXTERNAL INTERNAL

* Source: SMMT

MMH decision to temporarily close showrooms 22nd

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Ongoing bi-weekly management video briefings to all colleagues

COVID-19 timeline – post lockdown

March April May June

FY19 results

• March
• rderbook

encouraging 10th YTD: -31.0% Mar MARKET* Month: -97.3% Apr 90% of 4,300 colleagues furloughed 26th 3,700 new and used vehicle orders taken during lockdown. Maintained our retail presence and supported our customers (online & telephone services) MMH showrooms reopen under revised, COVID-secure,

• perating procedures

1st MMH recognised with GPTW award 10th year running May 50% of colleagues returned to work 1st 62 aftersales operations kept open during lockdown to support emergency services, CV operators, vulnerable customers and key workers Month: -89.0% May YTD: -48.5% Jun Dealership management team returns 18th GOVT COLLEAGUES EXTERNAL OPERATIONS TRADING Significant YTD LFL

• utperformance

New: -37.7% Jun Trading strong due to pent-up demand & delivery of outstanding vehicles ordered prior to lockdown Jun Furlough scheme announced 20th Government imposed lockdown 23rd Government announcement ref re-opening of showrooms 26th Click and collect 11th Significant YTD LFL

• utperformance

New: -10.6% Mar EXTERNAL INTERNAL

* Source: SMMT

MMH decision to temporarily close showrooms 22nd

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• Management early actions to protect the business
• Strong focus on cash
• Stopped discretionary spend, purchasing of stock and capital expenditure
• Targeted stock reduction
• In addition to outstanding communication, the Group worked hard to protect its most valuable asset – its people – by

supplementing the support provided by the CJRS:

• Enhanced pay of 100% for March, 90% for April and 85% for May
• Not imposing the CJRS cap of £2,500 per month
• Board and senior management took voluntary pay reductions
• Business responded quickly to new ways of working – e.g. remote working
• Bi-weekly Executive Committee meetings, weekly Operations Board, fortnightly management meetings
• Our people have been exceptional throughout – demonstrating the strong culture of the Group
• Successful reactivation plan following the business re-opening on 1st June, providing a safe environment for our customers,

colleagues and partners

• Significant steps taken to ensure safety, with revised, COVID-secure, operating procedures introduced
• PPE purchased and distributed throughout the business
• All colleagues required to complete mandated reactivation plan, detailed 100 page training and test (100% pass mark

required)

• A number of new learnings have come through reactivation phase around efficiencies and customer experience
• As of today 88% of colleagues now returned to work. No cross-company redundancies have been implemented

COVID-19 actions and impact on business

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Impact on like-for-like operational and financial metrics

* Like-for-like (includes group businesses or activities that have been active or trading for a period of 12 consecutive months and excludes businesses or activities that do not have 12 months trading activity); ** Reported underlying; *** Non GAAP measure that excludes IFRS 16-related lease liabilities; **** SMMT registrations which includes impact of dealer self-registration activity

REVENUE *

£798.4m

H1 19: £1,156.2m GROSS PROFIT % *

10.4%

H1 19: 11.4% PROFIT/(LOSS) BEFORE TAX **

(£8.9m)

H1 19: £15.2m OPERATING PROFIT/(LOSS)*

(£2.4m)

H1 19: £20.4m

NEW RETAIL UNITS *

(37.7%)

FLEET UNITS *

(37.7%)

USED UNITS *

(31.8%)

AFTERSALES REVENUE *

(28.5%)

vs market (44.6%)**** vs market (51.7%)**** vs market (28.7%)****

A D J U S T E D N E T C A S H / ( D E B T ) * * *

£27.4m

H1 19: £5.8m

L E V E R A G E

Nil

FY 19: (£30.6m) H1 19: Nil FY 19: 0.72x

(37.7%)

vs market (48.5%)****

TOTAL NEW UNITS *

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Market overview

New vehicles

• 0.65m new cars registered in H1, down -48.5%
• Retail down -44.6%, fleet / business down -51.7%
• July +11.3%, YTD -41.9%
• Latest SMMT forecast for full year 2020 -30.6% to

1.6m, which implies Aug-Dec -12.4%

• Supply a potential issue due to factory lockdown
• From 1st January 2021 emissions will be fully

reported in WLTP values

Source: SMMT

Used vehicles

• H1 used car transactions down -28.7% to 2.9m
• Strong demand for used cars post lockdown driven by

pent-up demand, “revenge buying” and loss of confidence in public transport

• Demand has benefited older used vehicles in

particular (sub-£10k), where demand has been

• utstripping supply and stock levels remain low
• Used car values expected to remain robust due to

supply constraints and demand Aftersales

• Pent-up demand driven by 6 month MOT extension

and deferred aftersales work due to lockdown

• Service plans a key part of the Group’s retention

strategy and provides a greater level of certainty over future aftersales profits

• Since full reopening on 1 June, our aftersales

facilities have predominantly been carrying out delayed scheduled service and maintenance work which typically have higher margins Finance and insurance

• Finance companies acted responsibly and allowed

extensions to consumers’ contracts – delayed renewals underpinning pent-up demand

• Discretionary commission models will be banned by

the Financial Conduct Authority from 28 January 2021

• MMH welcomes transparency for all consumers

Financial review

Richard Blumberger Chief Financial Officer

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H1 2020 financial summary

• Results include 10 weeks of lockdown closure
• Revenue includes acquisitions made in 2019.

Like-for-like revenue decreased by 30.9% to £798.4m

• GP% at 10.6% versus 11.4% impacted by

reduced manufacturer bonus payments due to lower new car volumes

• Like-for-like operating expenses reduced by

23.4%

• Like-for-like operating loss of £2.4m
• Non-underlying includes:
• Enhanced pay for furloughed colleagues
• COVID-secure costs
• Profit on disposal of assets held for sale
• Acquisitions and disposals related costs
• £58.0m cash generation in H1

£m H1 20 H1 19 Revenue 895.3 1,183.3 Gross profit 95.2 135.0 Operating expenses* (98.8) (114.9) Operating loss / profit* (3.6) 20.2 Net finance costs (5.3) (5.0) Loss / profit before tax* (8.9) 15.2 Non-underlying items (1.8) (0.4) Reported loss / profit before tax (10.7) 14.8 Adjusted net cash 27.4 5.8 Underlying EPS (p) (11.2) 15.0 Net assets 190.5 200.7

* Underlying

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Impact of closure period – H1 underlying PBT bridge

Net zero

* Generated from internal management information

COVID-related

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Financial impacts of COVID-19

• Trading significantly ahead of the market in period prior to COVID-19 closure
• Disciplined cost mitigation and cash preservation actions taken
• Group highly operationally geared. Run rate overheads of c.£20m per month. Cost savings of c.50% achieved

during closure period through proactive cost mitigations and utilisation of support from Government, OEMs and

• ther partners:
• Coronavirus Jobs Retention Scheme (CJRS) claimed – £16.4m
• c.90% of colleagues on furlough during lockdown – at a cost of £18.2m
• Cost of enhanced pay for furloughed colleagues – £1.8m
• Business rates relief – £2.3m
• Reductions in marketing, property-related costs and other discretionary spend
• Increase expenditure making the dealerships COVID-secure – £1m
• Cash generated during period benefitted from:
• Revised vehicle stock funding periods
• Government VAT Payment Deferral Scheme
• Other working capital timing benefits
• Cancellation of 2019 full year dividend
• Deferment of capital expenditure

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Net cash increase, will see partial unwind in H2

Investing and financing activities Net cash outflow from

• perating activities

* Excluding IFRS 16; ** Unwound in July; *** Payable in March 2021 Working capital movement

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Resilient balance sheet

£m H1 2020 H1 2019 Goodwill and intangibles 119.2 115.5 Freehold land and buildings 123.9 120.9 Right-of-use assets 104.2 86.3 Other 38.8 34.3 Fixed assets 386.1 356.9 Inventory 401.2 376.4 Trade / other receivables 96.8 113.0 Cash & equivalents 32.7 11.9 Assets held for sale

• 0.8

Other assets 0.3

• Current assets

531.0 502.2 Vehicle funding (398.6) (361.2) Trade / other payables (193.5) (177.9) Lease liabilities (104.8) (88.0) Bank / other debt (5.3) (6.1) Other liabilities (24.3) (25.1) Total liabilities (726.6) (658.4) Net assets 190.5 200.7

• Acquisitions – £3.3m of goodwill and

intangible assets

• Total inventory up £24.8m versus H1 2019
• £27.4m due to acquisitions
• Like-for-like down £2.6m
• 99.3% of inventory funded due to mix

(H1 2019: 94.3%)

• Excellent used car stock turn of 9.3*

(H1 2019: 9.1). 56 day policy would give 6.5

• IFRS 16 right of use asset and lease liability

increased due to acquisitions

• Net assets of £190.5m, £2.44 per share
• £120m RCF extended for 2.5 years

* Stock turn calculated based on cost of sales

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Full year 2020 guidance items

Class Leading Returns

• Targeting breakeven profit before tax for the full year, with small taxable profit
• H2 capital expenditure c.£6m (full year £10.7m), some major projects postponed to 2021
• Anticipate some further non-underlying COVID-19 related expenses

Daksh Gupta Chief Executive Officer

Update on future

• utlook and

summary

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Strategic update: accelerating consolidation

Rationalisation of dealer networks

Fewer, bigger

dealers

Marshall well placed

to grow scale with brand partners and extend geographic footprint

Brand UK Market Share % UK Sales Outlets Marshall 2019 (share) Marshall 2008 (sites) Held by AM top 20 Remaining network Hyundai 2.7% 166 1% 13% 87% Kia 4.4% 185 1% 14% 85% Nissan 4.6% 174 1% 2 14% 84% Volvo 2.7% 100 9% 3 14% 77% Honda 1.8% 146 5% 1 17% 77% Skoda 3.5% 130 8% 15% 76% Seat 3.1% 123 2% 1 24% 74% Peugeot 3.3% 192 2% 6 32% 66% Vauxhall 5.7% 263 1% 7 36% 63% Ford 9.2% 405 1% 3 44% 55% Mini 2.8% 134 3% 46% 51% Volkswagen 9.0% 187 8% 42% 50% BMW 7.1% 137 4% 48% 47% Jaguar 1.6% 87 7% 2 57% 36% Land Rover 3.9% 120 7% 5 58% 36% Audi 6.2% 117 9% 61% 31% Smart 0.1% 79 5% 68% 27% Mercedes-Benz 7.0% 124 7% 73% 19% Total 78.8% Source: Automotive Management Top 100 as at 30/06/2020

Climate change and regulation forcing industry evolution towards zero emissions by

2050

OEM investment requirements forcing

cost reduction

OEMs face significant fines for missing CAFE regulations therefore moving towards

EVs

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

consolidation

COVID-19 will accelerate the prediction we made 3 years ago: industry moving towards consolidation

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Current trading and outlook

• 2020 new car market expected to decline 30.6%*, implies Aug to Dec -12.4%
• 2021 SMMT forecast 2.04m, an increase of 26.9% on 2020 outlook, a decline of 11.9% on 2019
• From 1st January 2021 emissions will be fully reported in WLTP values
• Q3 expected to benefit from pent-up demand
• Both new and used finance agreements extended by finance companies during lockdown
• “Revenge buying” post lockdown
• Strong demand for used cars due to loss of confidence in public transport and advice from

Government – positively impacting used car residual values. Demand expected to level off during latter part of 2020

• Whilst still early, September order bank encouraging
• Q4 uncertain due to underlying health of economy, potential for further lockdowns and supply constraints
• Board continues to remain cautious given political and economic uncertainty
• Targeting breakeven underlying PBT for the full year

* Source: SMMT, ** Source: Cox Automotive