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Marshall Motors reports record half-year results

Daksh Gupta, chief executive Marshall Motor Group

Marshall Motors has this morning announced record six month results.

To June 30, revenue increased by 30.7% to a record £826.4 million (first half of 2015: £632.5m), with profit before tax growth in its retail and leasing operations up a 27% an 5.8% respectively to record levels.

Total adjusted PBT was up 33.6% to £14m (H1 2015: £10.5m).

Operational and strategic highlights

·    New car unit sales up by 20.3% (like-for-like up by 3.2%). Revenue at £363.2m, gross profit at £23.8m. 81% of new cars bought on PCP finance

·    Used car unit sales up by 15.8% (like-for-like up by 0.9%). Revenue: £238.1m, gross profit £16.9m. 48% of used cars bought on PCP finance.

·    Aftersales revenues up by 36.6% (like-for-like up by 6.3%). Revenue: £63.1m, gross profit £28.3m.

·    Gross profit margin up by 20bp to 11.9% (H1 2015: 11.7%).

·    Strategic acquisition of Ridgeway Garages (Newbury) Limited for £106.9m.

Daksh Gupta (pictured), group chief executive, said: “The board is pleased to announce another period of strong trading, underpinned by like-for-like organic growth in both revenue and gross profit together with contributions from recent acquisitions.

“We were delighted to complete the strategic acquisition of Ridgeway which has extended the group’s geographical reach and strengthened relationships with key brand partners. The enlarged group remains well positioned to execute its growth strategy moving forward.”

In November Marshall acquired SG Smith and in May Ridgeway. Gupta said the integration of the former is now complete and Ridgeway is going “according to plan”. Combined they have made a £2.4m contribution to group profits - "exactly as anticipated", said chief financial officer Mark Raban.

Looking ahead, Gupta said: “It remains too early to assess the extent of any impact of the UK’s decision on June 23 to leave the European Union on the UK’s motor retail industry. In frontline terms, it's business as usual: all efforts aimed at out-performing the market and maximising every opportunity.

“However, the board continues to monitor the position closely, particularly the impact on consumer confidence and the strength of sterling.

“Trading since June 30 has continued to show positive like-for-like new unit sales growth outperforming the wider UK market. Whilst still early, the current new car order bank for the important September plate change month is building in-line with expectations.

“In used vehicles, the group has experienced some pressure on like-for-like unit sales volumes, partly offset by a continued emphasis on driving margin retention and a focus on older cars that are less likely to compete with new vehicles.

“Our aftersales activities have continued to show further like-for-like revenue and margin growth.

“The group’s leasing segment has also continued to perform in line with expectations.

“Whilst the board believes it is right to remain cautious given wider economic uncertainties, the group remains well positioned to execute its growth strategy moving forward and the board’s outlook for the full year remains unchanged.”

As at June 30 Marshalls had adjusted net debt (excluding leasing loans) of £32.4m and recently extended its committed, unsecured revolving credit facility to £120m from £75m.

Net assets were £137.4m including £98.2m of freehold property (including assets under construction).

Current construction projects:

  • Three new Jaguar Land Rover dealerships are currently under construction at the group’s long leasehold site in Cambridge and at new freehold sites in Ipswich and Oxford. Each of these new facilities is scheduled to open during Q4 2016;
  • Construction is due to start soon on a new Audi dealership at a freehold site in Exeter and is scheduled to open during 2017;
  • Construction of a new Jaguar Land Rover dealership at an open point in Newbury is expected to start during H2 2016 following the H1 2016 acquisition of a long leasehold interest;
  • The group is also carrying out a "significant" re-development of its Bexley Audi dealership which will be completed in Q4 2016.

Balance sheet

  • Net debt: £32.4m
  • Net assets of £137.4m, equating to £1.78 per share
  • More than £100m of freehold property (2015: £25.4m)
  • Net debt of EBITDA of 0.8x (£45m)
  • Revolving credit facility of £120m 

"We've a very strong balance sheet so if the appropriate acquisition opportunity comes about which fits within our strategic framework of existing brand partners and provides opportunities to move into new geographic locations, we will take it," Gupta said.

Apprenticeship levy

Gupta was critical of the Government's decision to press on with the introduction of the levy in April, describing it as a "blunt instrument" that penalised a sector that was already heavily invested in developing a young, skilled workforce. He is keen to see the levy refunded.

"The lack of investment in other sectors makes the levy an understandable move, but the way it is being introduced as one rule for all makes it a blunt instrument. We have more than 100 apprentices, entailing a spend of around £2m with a total payroll billl of more than £100m. Our levy will be about £500,000.

"Now, we're already spending more than that on apprentice training. We send our apprentices to vehicle manufacturers for training - so can we reclaim our levy? It's right and proper that we should be able to."

From April, businesses with annual payroll costs of  £3 million or more will pay 0.5% of their annual payroll bill, minus an allowance of £15,000, into a special account.

Apprenticeship levy:

> Government pressing ahead with April 2017 introduction of apprenticeship levy

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