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Marshalls celebrates 'transformational' results as revenues rise 54.1%

Daksh Gupta, chief executive Marshall Motor Group

Marshall Motor Holdings has secured its position as the UK’s seventh largest car retail group with annual accounts which show a 54.1% rise in revenues and a 60.4% rise in profit before tax.

Chief executive Daksh Gupta described said that he was “really pleased” with the “transformational set of results” to the year ended December 31, 2016, which recorded revenues of £1.9 billion (2015: £1.2bn) and underlying profit before tax £25.4m (2015: £15.8m).

Speaking to AM following publication of the results by the London Stock Exchange this morning, Gupta said: “I think we are really pleased. 2015 was a big year for us and 2016 has proved to be transformational, achieving record levels across the business.

“The car business has produced double digit increases in what has been a very challenging year economically.

“The result is that we have been able to recommend a final full year dividend of 5.5p to our shareholders. I would hope that they are very happy with our progress.”

Marshalls saw new car revenues up by 54.2% (like-for-like up by 13.1) to £983.3 million, used car revenues up by 56.4% (like-for-like up by 8.3%) to £718.3 million and aftersales revenues up by 58.4% (like-for-like up by 5.7%) to £202.6 million as the group recorded an underlying operating profit margin of 1.7%, up 18 basis points.

Marshalls sold a total of 48,884 new cars and 37,787 used cars in the 12 month period.

Significant investment

The results come in a financial year which followed the group’s £106.9 million acquisition of the Ridgeway Group in May last year, the £24.4 million acquisition of SG Smith in November 2015 and the establishment of three new flagship Jaguar Land Rover dealerships.

The acquisition of Ridgeway extended the Group’s footprint into new territories and added 30 franchises to move the group from 10th to 7th among the UK’s largest dealer groups.

Mark Raban, Marshall’s chief financial officer, said: “It has been a period where we have invested and seen significant growth, but growth of the franchised business continues to be our strategy.

“We are comfortable with our debt, which is bang on what we had predicted despite the market headwinds. The debt to EBITDA now stands at 1.2x, which is right where we aim to be, and looking forward we are continuing to grow the group with another £25 to £26 million to go out.”

Net debt (excluding asset-backed leasing loans) stood at £54.5 million (2015: Net cash £24.1m), according to Marshall’s balance sheet, with net debt to EBITDA of 1.4x (1.2x including full year net assets per share) stand at £1.88 (2015: £1.68).

Asked where Marshall sought to exploit growth in the year ahead, Raban said that there were no plans to pursue used sales aggressively, as Pendragon and Sytner have done in recent months.

Marshalls’ financial statement said that the strategic vision is to become the UK’s premier automotive and leasing group, aiming to produce 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.

Future growth

Raban said: “Our aim is to grow the franchised business. Our target area is England – we don’t see growth outside that area – and we are not targeting used specifically.

“Our growth will come from new car sales. They bring retention in terms of aftersales and future sales.

“In 2016 84% of our new car sales were completed with a PCP and customer renewal rates on PCP are in the mid-90s percentage-wise.

“I think at the moment we are gaining control of that segment two market that used to be the preserve of the independent and the used car supermarket and we are very content with that.”

Raban admitted that it was difficult to predict what 2017 would hold given the economic uncertainty in the marketplace, but suggested that early talk of a near-double-digit new car sales slump were “off the mark”.

Commenting on Marshalls financial results, Mike Allen, markets analyst at Zeus Capital, said: “Marshall Motor Holdings (MMH) has delivered solid results, which are 4% ahead of our forecasts at the adjusted PBT level.

“This marks a transformational year for the group following the acquisitions of SGS and Ridgeway, which appear to be bedding in well.

“We are maintaining our FY forecasts for the year ahead, albeit the order book for March appears to be building well. The shares have recovered from their post Brexit slump, but the long term valuation remains attractive to us based on near term multiples based on cautious forecasts and in the context of £106.5m of freehold/long term leases underpinning the current market value of the shares.”


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