2020 interim results presentation - mmh plc

2020 InterimResultsPresentation

Daksh GuptaChief Executive Officer

Richard BlumbergerChief Financial Officer

18th August 2020

2

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


H1 2020 –COVID-19 update and market overview

4

COVID-19 timeline – pre lockdownMarch April May June

FY19 results - March

orderbook encouraging

10th

YTD: -31.0%

Mar

MMH decision to temporarily

close showrooms

22nd

MAR

KET*

90% of 4,300 colleagues furloughed

26th

GO

VTC

OLL

EAG

UES

EXTE

RN

ALO

PER

ATIO

NS

TRAD

ING

Furlough scheme announced

20th

Government imposed lockdown

23rd

Significant YTD LFL outperformance

New: -10.6%

Mar

EXTE

RN

ALIN

TER

NAL

* Source: SMMT

Ongoing bi-weekly management video briefings to all colleagues

5


COVID-19 timeline – during lockdownMarch April May June



10th

YTD: -31.0%

Mar

MAR

KET*

Month: -97.3%

Apr


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

GO

VTC

OLL

EAG

UES

EXTE

RN

ALO

PER

ATIO

NS

TRAD

ING


20th


23rd


New: -10.6%

Mar

EXTE

RN

ALIN

TER

NAL

* Source: SMMT


close showrooms

22nd

6


COVID-19 timeline – during lockdownMarch April May June



10th

YTD: -31.0%

Mar

MAR

KET*

Month: -97.3%

Apr


26th


MMH recognised with GPTW award

10th year running

May


Month: -89.0%

May

Dealership management team returns

18th

GO

VTC

OLL

EAG

UES

EXTE

RN

ALO

PER

ATIO

NS

TRAD

ING


20th


23rd

Government announcement ref re-opening of showrooms

26th

Click and collect

11th


New: -10.6%

Mar

EXTE

RN

ALIN

TER

NAL

* Source: SMMT


close showrooms

22nd

7


COVID-19 timeline – post lockdownMarch April May June



10th

YTD: -31.0%

Mar

MAR

KET*

Month: -97.3%

Apr


26th


MMH showrooms reopen under revised,

COVID-secure, operating procedures

1st

MMH recognised with GPTW award

10th year running

May

50% of colleagues

returned to work

1st


Month: -89.0%

May

YTD: -48.5%

Jun

Dealership management team returns

18th

GO

VTC

OLL

EAG

UES

EXTE

RN

ALO

PER

ATIO

NS

TRAD

ING


New: -37.7%

Jun

Trading strong due to pent-up demand & delivery of outstanding vehicles ordered prior to lockdown

Jun


20th


23rd

Government announcement ref re-opening of showrooms

26th

Click and collect

11th


New: -10.6%

Mar

EXTE

RN

ALIN

TER

NAL

* Source: SMMT


close showrooms

22nd

8

• 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

9

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

GROSSPROFIT % *

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 DN E T

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

£27.4m

H1 19: £5.8m

L E V E R A G E

NilFY 19: (£30.6m)

H1 19: Nil

FY 19: 0.72x

(37.7%)vs market (48.5%)****

TOTAL NEW UNITS*

10

Market overviewNew 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 outstripping 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 BlumbergerChief Financial Officer

12

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

13

Impact of closure period – H1 underlying PBT bridge

Net zero

* Generated from internal management information

COVID-related

14

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 other 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

15

Net cash increase, will see partial unwind in H2Investing and

financing activitiesNet cash outflow from

operating activities

* Excluding IFRS 16; ** Unwound in July; *** Payable in March 2021

Working capital movement

16

Resilient balance sheet

£m H1 2020 H1 2019Goodwill and intangibles 119.2 115.5Freehold land and buildings 123.9 120.9Right-of-use assets 104.2 86.3Other 38.8 34.3Fixed assets 386.1 356.9Inventory 401.2 376.4Trade / other receivables 96.8 113.0Cash & equivalents 32.7 11.9Assets held for sale - 0.8Other assets 0.3 -Current assets 531.0 502.2Vehicle 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

17

Full year 2020 guidance itemsClass 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


Update on future outlook and summary

19

Strategic update: accelerating consolidation

Rationalisation of dealer networks

Fewer, bigger dealers

Marshall well placed

to grow scale with brand partners and extendgeographic 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% 0 13% 87%

Kia 4.4% 185 1% 0 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% 0 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% 0 46% 51%

Volkswagen 9.0% 187 8% 0 42% 50%

BMW 7.1% 137 4% 0 48% 47%

Jaguar 1.6% 87 7% 2 57% 36%

Land Rover 3.9% 120 7% 5 58% 36%

Audi 6.2% 117 9% 0 61% 31%

Smart 0.1% 79 5% 0 68% 27%

Mercedes-Benz 7.0% 124 7% 0 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 finesfor 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

20

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

2020 interim results presentation - mmh plc

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