Putting our customers above all else since 1909.

Transcription

1 Marshall Motor Holdings plc Interim Report & Accounts Six months ended 30 th June 2018

2 Putting our customers above all else since 1909.

3 MARSHALL MOTOR HOLDINGS PLC ( MMH or the Group ) Unaudited interim results for the six months ended 30 June 2018 Marshall delivers robust H1 and further profit growth Marshall Motor Holdings plc, one of the UK s leading automotive retail groups, announces its unaudited interim results for the six months ended 30 June 2018 ( H1 or the Period ). 14 August 2018 Financial Summary H H Var % FY 2017 Continuing Operations Revenue ( m) 1, , % 2,232.0 Underlying profit before tax 1 ( m) % 25.4 Reported profit before tax ( m) % 12.6 Total Operations 2 Revenue ( m) 1, , % 2,268.9 Underlying profit before tax ( m) % 29.1 Reported profit before tax ( m) % 53.1 Dividend per share (p) Net Cash / (Debt) ( m) 0.9 (101.1) - (2.2) Highlights Robust financial performance in our continuing business; continuing underlying profit before tax of 16.4m, up 1.2% on previous record result (H1 2017: 16.2m). Like-for-like 3 new unit sales to retail customers down 5.9%. Like-for-like used unit sales down 0.3%; like-for-like used revenues up 5.2% with strong gross margin improvement, up 37bp to 7.2%. Like-for-like aftersales revenue up 3.2%. Continuing gross margin maintained at 11.5% (H1 2017: 11.5%). Net operating expenses lower than H despite significant cost headwinds; driven by strong management actions on discretionary costs and site closures. Net cash at 30 June 2018: 0.9m following the disposal of Marshall Leasing Limited (30 June 2017: Net debt 101.1m). Net assets at 30 June 2018: 201.2m, 2.58 per share (30 June 2017: 158.0m, 2.04 per share). Strong balance sheet underpinned by 121.1m of freehold / long leasehold property (30 June 2017: 112.5m); 120m revolving credit facility extended to June Continued investment in the Group s property portfolio; 10.0m capital expenditure during the Period. Interim dividend maintained at 2.15p per share (2017: 2.15p). 1

4 Notes to Editors About Marshall Motor Holdings plc ( The Group's principal activities are the sale and repair of new and used vehicles. The Group's businesses comprise a total of 101 franchises covering 23 brands, operating from 84 locations across 26 counties in England. In addition, the Group operates five trade parts specialists, three used car centres, five standalone body shops and one pre delivery inspection centre. In April 2018 the Group was recognised by the Great Place to Work Institute, being ranked the 21st best place to work in the UK (large company category). This was the eighth year in succession that the Group has achieved Great Place to Work status. Cautionary statement This announcement contains unaudited information based on management accounts and forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts and undue reliance should not be placed on any such statements because they speak only as at the date of this document and are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and the Group's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. MMH undertakes no obligation to revise or update any forward-looking statement contained within this announcement, regardless of whether those statements are affected as a result of new information, future events or otherwise, save as required by law and regulations. For further information and enquiries please contact: Marshall Motor Holdings plc c/o Hudson Sandler Tel: +44 (0) Daksh Gupta, Chief Executive Officer Mark Raban, Chief Financial Officer Investec Bank plc (NOMAD & Broker) Tel: +44 (0) Christopher Baird David Flin David Anderson Hudson Sandler Tel: +44 (0) Nick Lyon Bertie Berger 2

5 The Board is pleased to announce further profit growth in our continuing retail business in the Period against an ongoing background of a challenging UK new car market. This has been achieved by a combination of robust operating disciplines, strong management actions on cost control and the benefit of site closures in With our excellent portfolio, robust operating disciplines, strong balance sheet and the support of our brand partners, I am confident the Group remains very well positioned for the future. The Board s current outlook for the full year remains unchanged. Daksh Gupta Chief Executive Officer Operating Review Introduction Our unaudited interim results for the six months ended 30 June 2018 ( H1 or the Period ) reflect a robust performance in the context of a challenging market. The Group has delivered underlying profit before tax from continuing operations of 16.4m, 1.2% ahead of the record result reported last year. I am pleased to report that our gross margin in the Period was maintained at 11.5%. This result has been underpinned by robust trading disciplines, tight control of discretionary costs despite significant cost headwinds and the positive impact of the previously announced closure of six loss making sites. The strategic disposal of our leasing business, Marshall Leasing Limited ( MLL ), in November 2017 has enabled us to focus exclusively on our retail businesses. At 30 June 2018 the Group consisted of 101 franchises representing 23 brand partners trading in 26 counties in England. In addition, the Group operates five trade parts specialists, three used car centres, five standalone body shops and one pre-delivery inspection (PDI) centre. The Group closed five franchised dealerships and one used car centre in November 2017 and the Group s financial performance in the Period has benefited from these actions. The Group operates a well balanced portfolio of volume, premium and alternative premium brands which at 30 June 2018 accounted for 24%, 50% and 26% respectively of the Group s total franchises. The Group s diverse portfolio means it represents manufacturer brands accounting for over 80% of all new vehicle sales in the UK. The Board continues to believe that this scale and diversified spread of representation helps protect the Group from the effect of the cyclical nature of individual brand performance. Six months ended 30 June 2018 Revenue Gross Profit m mix* m mix* New Car % % Used Car % % Aftersales % % Internal (22.7) Sales/Other Total 1, % % Six months ended 30 June 2017 Revenue Gross Profit m mix* m mix* New Car % % Used Car % % Aftersales % % Internal (24.8) Sales/Other Total 1, % % *Revenue and gross profit mix calculated excluding internal sales / other 1 Underlying profit before tax is presented excluding nonunderlying items (see Note 6) 2 Includes discontinued operations 3 Like-for-like businesses are defined as those which traded under the Group s ownership throughout both the period under review and the whole of the corresponding comparative period 3

6 New Vehicles New Retail Units Fleet Units Total New Units H1 H1 Variance Total LFL 15,803 16, % -5.9% 9,396 11, % -14.5% 25,199 27, % -9.3% Total new car revenue in the Period was 584.6m (H1 2017: 611.2m). As widely forecast, the UK new car market continued to decline during the Period. The Society of Motor Manufacturers and Traders ( SMMT ) has reported that during the Period, total registrations of new vehicles, including the impact of dealer self-registration activity, declined by 6.3%. The first quarter of the Period declined by 12.4%, being particularly impacted by the changes to vehicle excise duty in the corresponding period last year which caused some consumers to pull forward purchasing decisions to avoid higher vehicle excise duties. The SMMT has reported that during the Period, UK new car registrations to retail and fleet customers declined by 4.9% and 7.3% respectively. Over the same period, the Group s like-for-like sales of new units to retail customers declined by 5.9%. New retail unit sales were impacted by the Group s mix of premium brands which, due in part to their historic weighting towards diesel models, experienced the greatest levels of retail decline over the Period. Premium brands are now increasing the proportion of petrol derivatives being produced to address current consumer demand. As previously disclosed, in 2017 the Group took a commercial decision to withdraw from certain low margin fleet business which has impacted comparative sales volumes in the Period. Excluding this, the Group s overall new car unit sales in the Period were down 3.5%. This action has improved the Group s fleet business profitability and the fleet sector remains a market to which the Group is fully committed as it seeks to grow its corporate customer base profitably. New car gross margin during the Period was 7.0%, down 40bp on the same period last year (H1 2017: 7.4%). This margin pressure across the new car segment was driven by the challenging and more competitive new car market. Sales of new vehicles on Personal Contract Purchase agreements ( PCPs ) continue to remain popular, accounting for 80% of the Group s financed new retail vehicle sales in the Period (H1 2017: 83%). PCPs remain an important driver behind the attraction and retention of customers, particularly into the premium market. As at 30 June 2018 the Group had 66,540 active PCP customers (H1 201:7 66,450). Used Vehicles Total Used Units H1 H1 Variance Total LFL 22,659 23, % -0.3% Total used car revenue in the Period was 474.6m (H1 2017: 458.2m). Like-for-like sales of used units during the Period were down 0.3% versus the corresponding period last year. In H1 2018, the Group focused its used vehicle strategy on improving gross margin retention and despite the marginal volume decrease, delivered a 9.2% improvement in total gross profit. Used vehicle margin at 7.2% during the Period was 37bp ahead of the comparable period last year. The significant improvement in used vehicle unit profitability has been achieved by robust operating controls supported by the further development of the Group s management information system Phoenix 2. During the Period, the system has been enhanced to include wider external market data to support optimum pricing and enhance visibility of the Group s overall competitive price position. In addition to these developments, the Group continues its commitment to its prudent 56-day used vehicle stocking policy which has supported a reduction in used and demonstrator inventory levels. PCPs have continued to grow in the used vehicle sector increasing customer retention and helping to support residual values which during the Period have remained relatively stable. PCP s accounted for 63% of used vehicles purchased on finance in the Period (H1 2017: 62%). 4

7 Aftersales Revenue ( m) H1 H1 Variance Total LFL % 3.2% At 46.1%, aftersales margin remained strong, albeit 37bp below the comparable period last year. This was driven by an increased mix of lower margin parts revenue, reduced internal PDI work as a result of lower new vehicle sales and reduced levels of warranty work in a number of brands. Total aftersales revenue in the Period was 126.4m (H1 2017: 123.3m). In addition to the servicing, maintenance and repair of vehicles in our franchised retail centres, the Group also operates five standalone bodyshops, five Trade Parts Centres and one standalone central PDI facility. During the Period, the Group has continued to deliver consistent like-for-like growth in aftersales revenues, up 3.2%. At 30 June 2018, the Group had over 78,000 customers in live service plans. Service plans continue to form a key part of the Group s retention strategy, allowing customers to spread the maintenance cost of their vehicle whilst providing a greater level of certainty over future aftersales profits. Total aftersales gross profit was up 1.7% to 58.3m (H1 2017: 57.3m) and accounted for 43.8% of the Group s total gross profit (H1 2017: 42.9%). Operating Costs In anticipation of the challenging UK new vehicle market and as part of the Group s ongoing commitment to control costs and maximise efficiency, during the latter part of 2017 the Group implemented a number of cost reduction initiatives. These initiatives mainly focused on managing discretionary costs more efficiently and have enabled the Group to partly offset significant structural and inflationary cost pressures. During the Period, like-for-like costs within the Group s retail dealerships increased by 1.3% versus the comparable period last year. Portfolio Management As announced on 21 November 2017, the Group closed six loss making and sub-scale sites at an estimated cost of 6.8m. During H1 2017, these sites contributed combined revenue of 21.1m and a pre-tax loss of 0.7m. During the Period, the Group successfully completed the disposal of a surplus freehold property in relation to one of the closures giving rise to a non-underlying profit of 0.3m. The Group is making positive progress on dealing with the remaining surplus property and further updates will be provided in due course. Capital Investment The Group s , 75m capital expenditure programme is nearing completion with 10.0m incurred in H During the Period, the Group has focused on the following developments: Completion of a significant redevelopment of Bedford Land Rover, an existing freehold site with a total additional investment of 2.4m to achieve the new JLR Arch concept. The purchase of freehold land and the commencement of the development of a new combined Jaguar Land Rover facility in Lincoln. The purchase of a long leasehold site in Cambridge and the commencement of development of a new Ford Store which will allow the Group to sell the full range of Ford products and exit from its current leasehold premises. Commencement of significant customer experience upgrades in Grantham and Leeds Volvo. Customer experience refurbishment in Salisbury BMW. Reading Skoda relocation and refurbishment. Reading VWCV relocation and refurbishment. 5

8 People Centric The Group was delighted to be ranked as a great place to work for the eighth consecutive year. Marshall Motor Holdings plc was ranked amongst the Top 30 large employers based on The Great Place to Work Institute s 2017 survey for a fourth year, being ranked 21st. The Group was also the number one ranked automotive company for the second year running. Technology and Online The Group continues to leverage its strength in technology, online and social media to drive both increased customer engagement levels and support the optimal efficiency of the day-to-day operation of the business. Despite the more challenging new vehicle market in H1 2018, the Group recorded 3.2m visits to the Group s website an increase of 16% on the comparable period last year. The Group remains committed to active participation in relevant social media channels which supports further customer engagement and additional online visibility and profile. In recognition of the Group s innovative work in this important area, we were awarded Most Influential Dealer on Social Media by Car Dealer Expo and were highly commended for Best Social Media Strategy at the 2018 Automotive Management Awards. Financial Review Revenue 1.2bn 1.2bn 2017 On 24 November 2017 the Group completed the strategic disposal of MLL. In the first half of 2017, MLL contributed 19.5m of revenue and 2.4m of underlying profit before tax to the overall Group results. Unless otherwise stated, the commentary below (including comparisons versus the comparable period last year), relates to the continuing Retail operation only and therefore excludes the contribution from MLL. Group revenue declined by 0.4% to 1,162.9m (H1 2017: 1,167.9m). As announced on 21 November 2017, the Group closed six sites which contributed combined revenue of 21.1m during the first half of Like-for-like revenues grew 0.1% with revenues in used and aftersales showing growth against the same period last year. Likefor-like revenue from the sale of new vehicles declined in the Period as a result of the declining UK new car market and the Group s decision to withdraw from certain low margin fleet business. Gross margin at 11.5% was flat against the same period last year. As expected, the challenging new car retail market resulted in margin pressure on new retail vehicle sales. This was offset by a favourable mix impact resulting from the withdrawal from certain low margin new car fleet business together with improved used car margins. The Group s management information system, Phoenix 2, remains an essential ingredient of our operational effectiveness. The system has been further enhanced during the Period. Working with third parties, the Group has been able to improve the quality of its used vehicle data-set which we believe provides competitive advantage, facilitating a more dynamic approach to vehicle pricing and margin retention. Worldwide Harmonised Light Vehicle Test Procedure From 1 September 2018 all new vehicles sold in the UK are required to have been tested and certified under the new Worldwide Harmonised Light Vehicle Test Procedure ( WLTP ). The new testing regime replaces the outgoing New European Driving Cycle ( NEDC ) test first introduced in the 1980s and is based on more accurate, real-driving data. This is a significant change for automotive manufacturers and it is anticipated that it will have an impact on the new car retail market over the remainder of the year and into The extent of this impact is not yet known and it will vary by manufacturer and by vehicle model. Industry forecasts suggest there is likely to be some impact on vehicle supply and longer lead times for some models and brands of new vehicles. In addition, because implementation of the new regime coincides with the key September platechange, it is anticipated that the spread of vehicle registrations and sales throughout Q3 and Q will deviate from historical norms. Used vehicles gross margin at 7.2% was 37bp above the same period last year. During the Period, the Group remained focused on robust used vehicle trading disciplines which have enabled the Group to deliver strong improvements in used vehicle profitability. Aftersales gross margin at 46.1% was 37bp below the same period last year. This has been driven by an increased mix of lower margin parts revenues together with lower levels of new car preparation, used car refurbishment and warranty activity in certain brands. Underlying operating expenses of 113.6m were 0.3% lower than in the same period last year, primarily driven by the impact of six site closures. Like-for-like costs in the Group s retail dealerships increased by 1.3% during the Period. The Group continues to face a number of structural and inflationary cost head-winds which have been contained by ongoing tight control of discretionary costs. Total finance costs of 3.3m were 0.6m lower than the same period last year. As expected, the Group has benefitted from lower structural debt levels following the disposal of MLL which has been partly offset by increased costs relating to the Group s various stock funding lines following the increase in the bank base rate in November

9 During the Period, the Group generated 0.6m of non-underlying other income primarily related to additional profit on the disposal of MLL following the agreement and settlement of certain historic pension liabilities. In addition, the Group made a 0.3m profit on the disposal of surplus freehold property. The reported effective tax rate for the Period was 21.0% (H1 2017: 22.2%). The Group s balance sheet remains strong. At 30 June 2018 the Group had a net cash position of 0.9m compared to a net debt position of 101.1m at 30 June During the Period, the Group exercised its option to extend its 120m revolving credit facility for a further 12 months until 3 June 2021, to provide it with increased financial flexibility to take advantage of opportunities if and when they arise. Capital expenditure during the Period was 10.0m, in line with expectations including further spend on freehold property development. This year marks the completion of the Group s three year, 75m capital expenditure programme. At 30 June 2018 the Group had 121.1m of freehold/long-leasehold property representing 1.56 per share. Over the longer term, the Board continues to believe it is in the best interests of all stakeholders that the Group maintains a sound financial position. In this respect, the Board targets net bank indebtedness of not more than 1.25x net debt/ebitda within its future results. This leverage may rise for a period of time towards the Group s banking facility limit of not more than 3.0x should an exceptional investment opportunity arise. Interim Dividend Dividend Per Share 2.15p 2.15p 2017 In line with the Group s dividend policy, the Board is pleased to announce an interim dividend of 2.15p per share (2017 interim dividend: 2.15p). The dividend will be paid by 21 September 2018 to shareholders who are on the Company s register at close of business on 24 August The Board intends to maintain a progressive dividend policy whereby dividends are covered between 4 to 5 times underlying earnings and paid in an approximate one-third (interim dividend) and two-thirds (final dividend) split. Summary and Outlook The Group has delivered a positive performance in the Period with a record profit performance from our continuing retail business. The challenges presented by a decline in the new vehicle market have been mitigated by strong operational disciplines and the benefits of the decisive action taken in 2017 to proactively manage costs and the Group s dealership portfolio. In light of continued economic uncertainty and ongoing consumer confusion around diesel vehicles, together with the anticipated impact of WLTP on new vehicle supply and the phasing of vehicle registrations and sales around the key September plate-change month, the Board believes it is right to remain cautious for the UK car market for the remainder of the year and into Nevertheless, with the support of the Group s brand partners, excellent portfolio, robust operating disciplines and strong balance sheet, the Board continues to believe that the Group remains very well positioned for the future. The Board s current outlook for the full year remains unchanged. Daksh Gupta Chief Executive Officer 13 August

10 Condensed Consolidated Statement of Comprehensive Income For the six months ended 30 June 2018 Six months Six months ended 30 June 2017 Year ended 31 December 2017 ended Continuing Discontinued Total Continuing Discontinued Total 30 June 2018 operations operations operations operations operations operations Note (unaudited) (unaudited) (unaudited) (unaudited) (audited) (audited) (audited) '000 '000 '000 '000 '000 '000 '000 Revenue 4 1,162,904 1,167,937 19,508 1,187,445 2,231,979 36,969 2,268,948 Cost of sales (1,029,604) (1,034,202) (15,611) (1,049,813) (1,973,678) (30,159) (2,003,837) Gross profit 133, ,735 3, , ,301 6, ,111 Net operating expenses (113,352) (113,938) (1,289) (115,227) (238,204) (2,524) (240,728) Group operating profit 19,948 19,797 2,608 22,405 20,097 4,286 24,383 Other income - profit on disposal of subsidiary ,851 36,851 Net finance costs 7 (3,300) (3,606) (248) (3,854) (7,519) (580) (8,099) Profit before taxation 5 17,237 16,191 2,360 18,551 12,578 40,557 53,135 Analysed as: Underlying profit before tax 16,380 16,191 2,360 18,551 25,361 3,706 29,067 Non-underlying items (12,783) 36,851 24,068 Taxation 8 (3,620) (3,595) (524) (4,119) (3,080) (716) (3,796) Profit for the period 13,617 12,596 1,836 14,432 9,498 39,841 49,339 Attributable to: Owners of the parent 13,617 12,596 1,836 14,432 9,519 39,841 49,360 Non-controlling interests (21) - (21) 13,617 12,596 1,836 14,432 9,498 39,841 49,339 Total comprehensive income for the period net of tax 13,617 12,596 1,836 14,432 9,498 39,841 49,339 Attributable to: Owners of the parent 13,617 12,596 1,836 14,432 9,519 39,841 49,360 Non-controlling interests (21) - (21) 13,617 12,596 1,836 14,432 9,498 39,841 49,339 Earnings per share (expressed in pence per share) Basic earnings per share Diluted earnings per share All activities of the Group in the current period are continuing. The above Condensed Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes. 8

11 Condensed Consolidated Statement of Changes in Equity For the six months ended 30 June 2018 For the half year ended 30 June 2018 (unaudited) '000 '000 '000 '000 '000 '000 Balance at 31 December 2017 as originally presented 49,531 19, , , ,210 Change in accounting policy (91) (91) - (91) Restated balance at 1 January ,531 19, , , ,119 Total comprehensive income ,617 13,617-13, ,617 13,617-13,617 Transactions with owners Dividends paid (3,309) (3,309) - (3,309) Issue of share capital (303) Exercise of share options (760) (760) - (760) Share based payments charge Acquisition of non-controlling interest in subsidiaries (50) (50) - (50) Balance at 30 June ,834 19, , , ,157 Total comprehensive income ,432 14,432-14, ,432 14,432-14,432 Transactions with owners Dividends paid (2,864) (2,864) - (2,864) Share based payments charge Balance at 30 June ,531 19,672 88, , ,976 Equity attributable Non- Share Share Retained to owners of controlling Total Note capital premium earnings the parent interests equity Equity attributable Non- Share Share Retained to owners of controlling Total Note capital premium earnings the parent interests equity For the half year ended 30 June 2017 (unaudited) '000 '000 '000 '000 '000 '000 Balance at 1 January ,531 19,672 76, , ,659 Equity attributable Non- Share Share Retained to owners of controlling Total Note capital premium earnings the parent interests equity For the year ended 31 December 2017 (audited) '000 '000 '000 '000 '000 '000 Balance at 1 January ,531 19,672 76, , ,659 Total comprehensive income ,360 49,360 (21) 49, ,360 49,360 (21) 49,339 Transactions with owners Dividends paid (4,527) (4,527) - (4,527) Share based payments charge Balance at 31 December ,531 19, , , ,210 9

12 Condensed Consolidated Statement of Financial Position At 30 June June 30 June 31 December Note (unaudited) (unaudited) (audited) '000 '000 '000 Assets Non-current assets Goodwill and other intangible assets , , ,596 Property, plant and equipment , , ,428 Investment property 2,590 2,590 2,590 Investments Deferred tax asset Total non-current assets 272, , ,653 Current assets Inventories 351, , ,260 Trade and other receivables 114, ,551 92,141 Cash and cash equivalents 7,687 8,327 4,867 Assets classified as held for sale Total current assets 473, , ,018 Total assets 745, , ,671 Shareholders equity Share capital 11 49,834 49,531 49,531 Share premium 19,672 19,672 19,672 Retained earnings 131,651 88, ,007 Equity attributable to owners of the parent 201, , ,210 Share of equity attributable to non-controlling interests Total equity 201, , ,210 Non-current liabilities Loans and borrowings 6,145 40,428 6,466 Trade and other payables 4,970 8,382 4,281 Provisions 3,688 1,323 4,015 Deferred tax liabilities 20,591 20,803 20,448 Total non-current liabilities 35,394 70,936 35,210 Current liabilities Loans and borrowings , Trade and other payables 496, , ,614 Provisions 8,459 2,119 8,815 Current tax liabilities 2,883 3,956 2,180 Total current liabilities 508, , ,251 Total liabilities 543, , ,461 Total equity and liabilities 745, , ,671 10

13 Condensed Consolidated Cash Flow Statement For the six months ended 30 June 2018 Six months Six months Year ended ended ended 31 December 30 June June Note (unaudited) (unaudited) (audited) '000 '000 '000 Cash flows from operating activities Profit before taxation 17,237 18,551 53,135 Adjustments for: Depreciation and amortisation 13/14 4,510 14,172 25,183 Net finance costs 7 3,300 3,854 8,099 Share-based payments charge Profit on disposal of assets classified as held for sale 6 (268) - - (Profit)/loss on disposal of property plant and equipment (25) (67) 1,085 (Reversal of)/loss on impairment of property, plant and equipment (14) Impairment of investment Profit on disposal of subsidiary 6 (589) - (38,664) 24,866 37,259 50,532 Changes in working capital: Decrease/(increase) in inventories 49,848 7,187 (21,223) (Increase)/decrease in trade and other receivables (21,955) (5,450) 450 (Decrease)/increase in trade and other payables (31,456) 16,235 33,703 (Decrease)/increase in provisions (683) (3,250) 6,138 (4,246) 14,722 19,068 Tax paid (2,774) (4,765) (7,443) Interest paid (3,300) (3,854) (8,099) Net cash inflow from operating activities 14,546 43,362 54,058 Cash flows from investing activities Purchase of property, plant, equipment and software and leased vehicles (8,838) (29,486) (57,549) Acquisition of business, net of cash acquired - (77) (77) Acquisition of non-controlling interest in subsidiaries 12 (50) - - Net cash flow from sale of discontinued operation ,695 Proceeds from disposal of property, plant and equipment and software and leased vehicles 153 7,019 11,985 Proceeds from disposal of assets classified as held for sale 1, Net cash outflow from investing activities (7,128) (22,544) (946) Cash flows from financing activities Proceeds from borrowings 15,000 22,783 41,778 Repayment of borrowings (15,321) (32,493) (85,579) Dividends paid (3,309) (2,864) (4,527) Settlement of exercised share awards (968) - - Net cash outflow from financing activities (4,598) (12,574) (48,328) Net increase in cash and cash equivalents 2,820 8,244 4,784 Cash and cash equivalents at 1 January 4, Cash and cash equivalents at period end 7,687 8,327 4,867 11

14 Net Debt Reconciliation For the six months ended 30 June 2018 Six months Six months Year ended ended ended 31 December 30 June June (unaudited) (unaudited) (audited) '000 '000 '000 Reconciliation of net cash flow to movement in cash/(debt) Net increase in net cash and cash equivalents 2,820 8,244 4,784 Proceeds from drawdown of RCF (15,000) - (10,000) Repayment of drawdown of RCF 15,000-45,000 Proceeds of asset backed borrowings - (22,783) (31,778) Repayment of asset backed borrowings - 21,347 68,185 Repayment of other borrowings ,791 Repayment of bank overdraft - 10,825 10,825 Repayment of acquired debt with acquisitions ,705 Repayment of acquired derivatives with acquisitions - - 1,258 Decrease in net debt 3,141 17, ,770 Opening net debt (2,241) (119,011) (119,011) Net cash/(debt) at period end 900 (101,057) (2,241) Net cash/(debt) at period end consists of: Cash and cash equivalents 7,687 8,327 4,867 Loans and borrowings (6,787) (109,384) (7,108) 900 (101,057) (2,241) 12

15 Notes to the Condensed Consolidated Financial Statements 1. General information Marshall Motor Holdings plc (the Company) is incorporated and domiciled in the United Kingdom. The Company is a public limited company, limited by shares, whose shares are listed on the Alternative Investment Market (AIM) of the London Stock Exchange. The Company is registered in England under the Companies Act 2006 (registration number ) with the address of the registered office being: Airport House, The Airport, Cambridge, CB5 8RY, United Kingdom. These interim condensed consolidated financial statements were authorised for issue by the Board of Directors on 13 August Basis of preparation The interim condensed consolidated financial statements for the six months ended 30 June 2018 have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union. They do not include all the information and disclosures required for full annual financial statements and should be read in conjunction with the Group s consolidated financial statements for the year ended 31 December A copy of the full Annual Report and Accounts for the year ended 31 December 2017 can be found on the Marshall Motor Holdings plc website at: The interim condensed consolidated financial statements for the six months ended 30 June 2018, and for the comparative six months ended 30 June 2017, are unaudited but have been reviewed by the Auditor. A copy of their Review Report is set out at the end of these financial statements. The financial information for the year ended 31 December 2017 does not constitute the Group s statutory financial statements for that period as defined in section 434 of the Companies Act 2006, but is instead an extract from those financial statements. The Group s financial statements for the year ended 31 December 2017 were authorised for issue by the Board of Directors on 13 March 2018 and have been delivered to the Registrar of Companies. The Auditor s Report on those financial statements contained an unqualified opinion, did not draw attention to any matters by way of emphasis and did not contain any statement under section 498 of the Companies Act The interim condensed consolidated financial statements are prepared in Sterling which is both the functional and presentational currency of the Group and all values are rounded to the nearest thousand pounds ( 000) except where otherwise indicated. Principal risks and uncertainties The principal risks and uncertainties for the six months ended 30 June 2018 are consistent with those set out in the Marshall Motor Holdings plc Annual Report and Accounts 2017 dated 13 March These principal risks and uncertainties are expected to be consistent for the year ending 31 December Going concern The interim condensed consolidated financial statements are prepared on the going concern basis. After making appropriate enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and for at least one year from the date that these interim condensed consolidated financial statements are signed. For these reasons they continue to adopt the going concern basis in preparing the interim condensed consolidated financial statements. 2. Accounting policies Except where disclosed otherwise in Note 3 Changes in Accounting Policies and Disclosures, the accounting policies as well as the critical accounting judgements, estimates and assumptions applied are consistent with those set out in the Marshall Motor Holdings plc Annual Report and Accounts 2017 dated 13 March 2018, and these accounting policies and critical accounting judgements, estimates and assumptions are expected to apply for the year ending 31 December

16 Notes to the Condensed Consolidated Financial Statements 3. Changes in accounting policies and disclosures New standards, amendments and interpretations adopted by the Group A number of new or amended standards became effective on 1 January 2018 for the current reporting period. The Group had to change its accounting policies and make adjustments as a result of adopting the following standards: IFRS 9 Financial Instruments, and IFRS 15 Revenue from Contracts with Customers The impact of the adoption of these standards and the new accounting policies are disclosed below. Other standards, amendments and interpretations apply for the first time with effect from 1 January 2018, however, they do not have an impact on the interim condensed consolidated financial statements of the Group. Impact on current period of the adoption of new standards, amendments and interpretations a) IFRS 9 Financial Instruments impact of adoption The Group has adopted IFRS 9 Financial Instruments issued in July 2014 with a date of initial application of 1 January The requirements of IFRS 9 represent a significant change from IAS 39 Financial Instruments: Recognition and Measurement. The nature and effects of the key changes to the Group s accounting policies resulting from its adoption of IFRS 9 are summarised below. Additionally, the Group adopted consequential amendments to IFRS 9 Financial Instruments: Disclosures that are applied to disclosures about 2018 but generally have not been applied to comparative information in compliance with IFRS 9. Classification of financial assets and financial liabilities IFRS 9 contains three principal classification categories for financial assets: measured at amortised cost, fair value reported in other comprehensive income (FVOCI) and fair value reported in profit and loss (FVPL). The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed based on its contractual cash flow characteristics. IFRS 9 eliminates the previous IAS 39 categories of held to maturity, loans and receivables and available for sale. For an explanation of how the Group classifies and measures financial assets and accounts for related gains and losses under IFRS 9, see the Financial Assets accounting policy. The adoption of IFRS 9 has not had a significant effect on the Group s accounting policies for financial liabilities. Impairment of financial assets IFRS 9 replaces the incurred loss model in IAS 39 with an expected credit loss (ECL) model. The new impairment model applies to financial assets measured at amortised cost. Under IFRS 9, credit losses are recognised earlier than under IAS 39. Hedge accounting IFRS 9 introduces a new general hedge accounting model. The Group has not previously applied hedge accounting under IAS 39, and has not commenced hedge accounting under IFRS 9; therefore, this change has had no impact on the Group s financial statements. Transition Changes in accounting policies resulting from the adoption of IFRS 9 have been applied retrospectively, except as described below: Comparative figures have not been restated. Differences in the carrying amounts of financial assets resulting from the adoption of IFRS 9 have been recognised in opening retained earnings and reserves as at 1 January 2018 in accordance with IFRS 9. Accordingly, the information presented for the six months ended 30 June 2017 and for the year ended 31 December 2017 does not generally reflect the requirements of IFRS 9 and, therefore, is not comparable to the information presented for the six months ended 30 June 2018 under IFRS 9. 14

17 Notes to the Condensed Consolidated Financial Statements 3. Changes in accounting policies and disclosures (continued) Impact on current period of the adoption of new standards, amendments and interpretations (continued) Transition (continued) The assessment of the determination of the business model within which a financial asset is held has been made on the basis of the facts and circumstances that existed at 1 January 2018, the date of initial application. The following table summarises the impact, net of tax, of transition to IFRS 9 on reserves and retained earnings at 1 January Retained earnings 000 Closing balance as at 31 December IAS ,007 Recognition of expected credit losses from adoption of IFRS 9 on 1 January 2018 (91) Opening balance as at 1 January IFRS 9 121,916 Classification and measurement of financial assets and financial liabilities on the date of initial application of IFRS 9 The following table shows the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the Group s financial assets as at 1 January Original carrying New carrying New amount amount Original classification classification under IAS 39 under IFRS 9 under IAS 39 under IFRS 9 '000 '000 Trade and other receivables Loans and receivables Amortised cost 92,141 92,050 Cash and cash equivalents Loans and receivables Amortised cost 4,867 4,867 Trade and other receivables that were classified as loans and receivables under IAS 39 are now classified as at amortised cost. An increase of 91,000 in the allowance for impairment was recognised in opening retained earnings as at 1 January 2018 on transition to IFRS 9. There has been no change in the classification and measurement of financial liabilities on the transition to IFRS 9. b) IFRS 9 Financial Instruments accounting policies applied from 1 January 2018 Financial assets Recognition and initial measurement Trade receivables are initially recognised when they originated. All other financial assets are initially recognised when the Group becomes a party to the contractual provisions of the instrument. On initial recognition, a financial asset (unless it is a trade receivable without a significant financing component) is initially measured at fair value plus, for a financial asset not at fair value reported in profit or loss, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price. Classification and subsequent measurement A financial asset is classified either as being; measured subsequently at fair value (either through other comprehensive income or through profit or loss), or measured at amortised cost. The classification depends on the Group s business model for managing the financial assets and the contractual terms of the cash flows. All financial assets of the Group are classified as measured at amortised cost. 15

18 Notes to the Condensed Consolidated Financial Statements 3. Changes in accounting policies and disclosures (continued) Impact on current period of the adoption of new standards, amendments and interpretations (continued) b) IFRS 9 Financial Instruments accounting policies applied from 1 January 2018 (continued) Financial assets (continued) Classification and subsequent measurement (continued) Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model. A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at fair value reported in profit or loss: it is held within a business model whose objective is to hold assets to collect contractual cash flows; and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Financial assets at amortised cost are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairments are recognised in profit or loss. Any gain or loss on de-recognition is recognised in profit or loss. Impairment of financial assets The Group recognises loss allowances for expected credit losses (ECL) on financial assets measured at amortised cost. Loss allowances for trade receivables are always measured at an amount equal to lifetime ECL. ECL are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive). An assessment of the ECL is calculated using a provision matrix model to estimate the loss rates to be applied to each trade receivable category. ECL are discounted at the effective interest rate of the financial asset. Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit-impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group s procedures for recovery of amounts due. c) IFRS 15 Revenue from Contracts with Customers impact of adoption The Group has adopted IFRS 15 Revenue from Contracts with Customers issued in May 2014 with a date of initial application of 1 January As a result, the Group has changed its accounting policy for revenue recognition as detailed below. The Group has applied IFRS 15 using the cumulative effect method (i.e. by recognising the cumulative effect of initially applying IFRS 15 as an adjustment to the opening balance of retained earnings as at 1 January 2018). Therefore, the comparative information has not been restated in accordance with the transition exemptions available under IFRS 15. Following the disposal of Marshall Leasing Limited, no changes to the timing and measurement of revenue across the Group s revenue streams have been identified on transition to IFRS

19 Notes to the Condensed Consolidated Financial Statements 3. Changes in accounting policies and disclosures (continued) Impact on current period of the adoption of new standards, amendments and interpretations (continued) d) IFRS 15 Revenue from Contracts with Customers accounting policies applied from 1 January 2018 The Group has applied IFRS 15 using the cumulative effect method, therefore, the comparative information has not been restated in accordance with the transition exemptions available under IFRS 15. The following reflect the new revenue recognition policy adopted for the current reporting period onwards. Revenue recognition Revenue is measured based on the consideration received or receivable as specified in a contract with a customer and represents amounts receivable for goods supplied, stated net of discounts, returns and value added taxes. Revenue excludes amounts collected on behalf of third parties. Revenue comprises sales and charges for vehicles sold and services rendered during the period, including sales to other Marshall of Cambridge (Holdings) Limited group companies but excluding inter-company sales within the Group. The Group recognises revenue when it transfers control over a product or service to a customer, as described below. Sale of motor vehicles, parts and aftersales services The Group generates revenue through the sale of new and used motor vehicles and through the provision of aftersales services in the form of vehicle servicing, maintenance and repairs. The Group recognises revenue from the sale of new and used motor vehicles when a customer takes possession of the vehicle, at which point they have an obligation to pay in full and as such control is considered to transfer at this point. The Group recognises revenue from the provision of aftersales services when the service has been completed, at which point customers have an obligation to pay in full. Sale of warranty products Income received in respect of warranty policies sold and administered by the Group is recognised over the period during which a customer can exercise their rights under the warranty; as such, revenue is recognised over the period of the policy on a straight line basis. Commission income The Group receives commissions when it arranges vehicle financing and related insurance products for its customers to purchase its products and services, acting as agent on behalf of various finance and insurance companies. Commissions are based on agreed rates. Where the Group acts as an agent on behalf of a principal, the associated income is recognised within revenue on completion of the arranging of the various products (i.e. at the point at which control passes to the customer). Contract liabilities Where the Group receives an amount of consideration in advance of completion of performance obligations under a contract with a customer, the value of the advance consideration is initially recognised as a contact liability in liabilities. Revenue is subsequently recognised as the performance obligations are completed over the period of the contract (i.e. as control is passed to the customer). Contract liabilities are presented within trade and other payables in the Consolidated Statement of Financial Position. Disaggregation of revenue Revenue recognised from contracts with customers has been disaggregated into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. This disclosure, as well as the reconciliation between the disaggregated revenue disclosures and the revenue figures disclosed for each of the Group s reportable segments, is made in Note 4 Segmental Information. 17

20 Notes to the Condensed Consolidated Financial Statements 3. Changes in accounting policies and disclosures (continued) New standards, amendments and interpretations not yet adopted by the Group The following standards, amendments and interpretations were in issue, but were not yet effective at the balance sheet date. These standards have not been applied when preparing the interim condensed consolidated financial statements for the period ended 30 June Effective for accounting periods beginning on Date issued or after IFRS 16 Leases January January 2019 Impact on future periods of the adoption of new standards, amendments and interpretations IFRS 16 Leases The Group continues to assess the impact of adopting IFRS 16. The Group will adopt the new standard in 2019 and will apply IFRS 16 for the first time in the interim report for the six months ending 30 June 2019 and the annual report for the year ending 31 December 2019, The Group currently expects to adopt the standard using the retrospective method, therefore, in the 2019 financial statements, comparatives for 2018 will be restated and the cumulative impact of adoption will be recognised in opening retained earnings as of 1 January Lessee accounting Based on analysis of the Group s lease portfolio held at the transition date, initial assessments indicate that the adoption of IFRS 16 will have a significant impact on key metrics and profitability measures used by the Group. In addition, a material adjustment to reserves is expected as is the recognition of significant right-of-use assets in non-current assets and significant lease liabilities in financial liabilities. Lessor accounting With the exception of where the Group is an intermediate lessor, the adoption of IFRS 16 does not significantly change the Group s lessor accounting. Initial impact assessments based on analysis of the Group s lease portfolio held at the transition date indicate that the majority of properties for which the Group is an intermediate lessor are expected to meet the definition of a finance lease. As a result, it is anticipated that new finance lease receivables will be recognised on adoption of IFRS Segmental information a) Operating segments 2018 onwards IFRS 8 Operating Segments requires operating segments to be consistent with the internal management reporting provided to the Chief Operating Decision Makers who are responsible for allocating resources and assessing the performance of the operating segments. The Group considers the Chief Executive Officer to be the Chief Operating Decision Maker. The Group has identified its key product and service lines as being its operating segments because both performance and strategic decisions are analysed at this level. The IFRS 8 aggregation criteria have been met as a result of the Group s key product and service lines sharing common characteristics such as; similar types of customer for the products and services, similar nature of the product and service offerings, similar methods used to distribute the products and provide the services and similar regulatory and economic environment. As a result of these criteria being satisfied, the Group s operating segments constitute one reportable segment (retail) and all segmental information has been disclosed as such. The retail segment includes sales of new and used vehicles, together with the associated ancillary aftersales services of; servicing, body shop repairs and parts sales. The Group has concluded that rental income arising from investment properties does not meet the quantitative thresholds required to constitute a reportable segment as defined in IFRS 8. Due to the non-material nature of these amounts, they are combined with the retail segment rather than being disclosed separately. As a result, all of the Group s activities are disclosed within the one reportable segment the retail segment. 18

21 Notes to the Condensed Consolidated Financial Statements 4. Segmental information (continued) a) Operating segments 2018 onwards (continued) Geographical information Revenue earned from sales is disclosed by origin and is not materially different from revenue by destination. All of the Group s revenue is generated in the United Kingdom. Information about reportable segment All segment revenue, profit before taxation, assets and liabilities are attributable to the principal activity of the Group being the provision of car and commercial vehicle sales, vehicle service and other related services. The following tables show the disaggregation of revenue by major product/service lines for continuing operations: Revenue Gross Profit For the half year ended 30 June 2018 (unaudited) '000 mix* '000 mix* New Car 584, % 40, % Used Car 474, % 34, % Aftersales 126, % 58, % Internal/Other (22,660) Total 1,162, % 133, % *mix calculation excludes internal/other sales Revenue Gross Profit For the year ended 31 December 2017 (audited) '000 mix* '000 mix* New Car 1,166, % 84, % Used Car 869, % 59, % Aftersales 243, % 114, % Internal/Other (47,289) Total 2,231, % 258, % Revenue Gross Profit For the half year ended 30 June 2017 (unaudited) '000 mix* '000 mix* New Car 611, % 45, % Used Car 458, % 31, % Aftersales 123, % 57, % Internal/Other (24,762) Total 1,167, % 133, % *mix calculation excludes internal/other sales b) Operating segments prior periods Prior to the disposal Marshall Leasing Limited, the Group s business was split into two main revenue-generating operating segments and a third support segment. No significant judgements were made in determining the reporting segments. Retail The retail segment included sales of new and used vehicles, together with the associated ancillary aftersales services of; servicing, body shop repairs and parts sales. Leasing The leasing segment included the leasing of vehicles to end consumers and fleet customers. 19

22 Notes to the Condensed Consolidated Financial Statements 4. Segmental information (continued) b) Operating segments prior periods (continued) Unallocated The unallocated segment included the Group s head office and central management functions including; the Board, group finance functions, the human resources department, the IT department and all governance and compliance related functions in support of the wider business. Also included was rental income arising from investment properties. All segment revenue, profit before taxation, assets and liabilities were attributable to the principal activity of the Group being the provision of car and commercial vehicle sales, leasing, vehicle service and other related services. Geographical information Revenue earned from sales was disclosed by origin and was not materially different from revenue by destination. All of the Group s revenue was generated in the United Kingdom. Information about reportable segments Information related to each reportable segment is set out below. Retail Leasing Unallocated Total For the half year ended 30 June 2017 (unaudited) '000 '000 '000 '000 Total revenue from external customers 1,167,795 19, ,187,445 Depreciation and amortisation (5,007) (2) (14) (5,023) Segment operating profit/(loss) 24,151 2,608 (4,354) 22,405 Net finance costs (3,067) (248) (539) (3,854) Underlying profit before tax 21,084 2,360 (4,893) 18,551 Non-underlying items Profit/(loss) before taxation 21,084 2,360 (4,893) 18,551 Total assets 637,106 94,956 84, ,624 Total liabilities 418,935 75, , ,648 Additions in the period (including acquisitions) Property, plant, equipment and software assets 12,324 17,194-29,518 Retail Leasing Unallocated Total For the year ended 31 December 2017 (audited) '000 '000 '000 '000 Total revenue from external customers 2,231,696 36, ,268,948 Depreciation and amortisation (9,190) (4) (27) (9,221) Segment operating profit/(loss) 34,714 4,286 (14,617) 24,383 Other income - gain on disposal of subsidiary - 36,851-36,851 Net finance costs (6,586) (580) (933) (8,099) Underlying profit before tax 34,911 3,706 (9,550) 29,067 Non-underlying items (6,783) 36,851 (6,000) 24,068 Profit/(loss) before taxation 28,128 40,557 (15,550) 53,135 Total assets 762,304-3, ,671 Total liabilities 537,064-37, ,461 Additions in the period (including acquisitions) Property, plant, equipment and software assets 24,365 34,700-59,065 20

23 Notes to the Condensed Consolidated Financial Statements 5. Profit before taxation Profit before taxation is arrived at after charging/(crediting): Six months Six months Year ended ended ended 31 December 30 June June (unaudited) (unaudited) (audited) '000 '000 '000 Depreciation of assets held for contract rental (note 14) - 9,149 15,962 Depreciation on property, plant and equipment (note 14) 4,342 4,769 8,917 Amortisation of other intangibles (note 13) Profit on disposal of assets classified as held for sale (note 6) (268) - - (Profit)/loss on disposal of property plant and equipment (25) (67) 1,085 (Reversal of)/loss on impairment of property, plant and equipment (note 14) (14) Operating lease rentals - property 5,849 5,748 11, Non-underlying items Six months Six months Year ended ended ended 31 December 30 June June (unaudited) (unaudited) (audited) '000 '000 '000 Profit on disposal of subsidiary (589) - (36,851) Post-retirement benefits charge - - 6,000 Restructuring costs - - 6,783 Profit on disposal of assets classified as held for sale (268) - - (857) - (24,068) Profit on disposal of subsidiary In November 2017 the Group disposed of Marshall Leasing Limited and its subsidiary (Gates Contract Hire Limited) for gross consideration of 42,500,000 generating a profit on disposal of 36,851,000. A retention of 1,500,000 was withheld in respect of anticipated settlement of legacy defined benefit pension obligations triggered by the change in ownership of Marshall Leasing Limited. In April 2018, the surplus retention withheld was calculated and returned to the Group, generating an additional 589,000 profit on disposal of Marshall Leasing Limited and its subsidiary. Profit on disposal of assets classified as held for sale In May 2018, the Group sold the freehold property classified as held for sale for a profit of 268,000. Other non-underlying items More information about the non-underlying items in the year ended 31 December 2017 are available in the consolidated financial statements for the year ended 31 December 2017 which are available at 21

24 Notes to the Condensed Consolidated Financial Statements 7. Net finance costs Six months Six months Year ended ended ended 31 December 30 June June (unaudited) (unaudited) (audited) '000 '000 '000 Interest income on short term bank deposits (11) (8) (11) Net interest payable on asset backed finance (Discontinued) Stock financing charges and other interest 2,857 2,470 5,385 Interest payable on bank borrowings 454 1,144 2,145 Net finance costs 3,300 3,854 8, Taxation The tax charge for the six months ended 30 June 2018 is recognised based on best estimates of the average annual effective tax rate expected for the full financial year, adjusted for the tax impact of any discrete items arising in the period. The estimated average annual effective tax rate used for the six months to 30 June 2018 is 21.72% (six months ended 30 June 2017: 22.20%). The reported effective tax rate for the six months ended 30 June 2018 is 21.00% (six months ended 30 June 2017: 22.20%). The underlying effective tax rate for the six months ended 30 June 2018 is 21.84% (six months ended 30 June 2017: 22.10%). The reported effective tax rate in the current period is lower than in the previous period due to the non-taxable gain on disposal of subsidiary. 9. Earnings per share Basic and diluted earnings per share are calculated by dividing the earnings attributed to equity shareholders by the weighted average number of ordinary shares during the year and the diluted weighted average number of ordinary shares in issue in the year after taking account of the dilutive impact of shares under option of 2,757,186 (June 2017: 2,380,040, December 2017: 2,866,231). Underlying earnings per share are based on basic earnings per share adjusted for the impact of non-underlying items. Six months Six months Six months Six months Year ended Year ended Year ended ended ended ended ended 31 December 31 December 31 December 30 June June June June Continuing Discontinued Continuing Discontinued Total operations operations Total operations operations Total (unaudited) (unaudited) (unaudited) (unaudited) (audited) (audited) (audited) '000 '000 '000 '000 '000 '000 '000 Profit for the period 13,617 12,596 1,836 14,432 9,519 39,841 49,360 Non-controlling interests (21) - (21) Basic earnings 13,617 12,596 1,836 14,432 9,498 39,841 49,339 Weighted average number of ordinary shares in issue for the basic earnings per share 77,604,442 77,392,862 77,392,862 77,392,862 77,392,862 77,392,862 77,392,862 Diluted weighted average number of ordinary shares in issue for diluted earnings per share 79,845,094 79,772,902 79,772,902 79,772,902 79,929,238 79,929,238 79,929,238 Basic earnings per share (in pence per share) Diluted earnings per share (in pence per share) Underlying earnings per share (non GAAP measure)

25 Notes to the Condensed Consolidated Financial Statements 10. Dividends An interim dividend of 2.15p per share will be paid by 21 September 2018 to shareholders who are on the Company s register at close of business on 24 August An interim dividend of 1,663,000 in respect of the year ended 31 December 2017 was paid in September This represented a payment of 2.15p per share in issue. A final dividend of 3,309,000 for the year ended 31 December 2017 was paid in May This represented a payment of 4.25p per share in issue. 11. Share-based payments In April 2018, the third tranche of the IPO Restricted Share Awards as well as the first tranche of the IPO Performance Awards vested and became exercisable. On 11 April 2018, all option holders exercised these options as well as the second tranche of the IPO Restricted Awards which had previously vested and become exercisable in the prior period. As such, 472,791 ordinary shares of 64p were issued. During the period, the decision was made for a portion of the share options being exercised to be settled in cash rather than being equity-settled. The total value of cash-settled transactions is 968, Acquisition of non-controlling interest in subsidiaries On 22 February 2018 the Group acquired the remaining 1% of the share capital of the following subsidiary undertakings; Marshall of Peterborough Limited, Marshall of Ipswich Limited and Marshall of Stevenage Limited, taking the Group s shareholdings in these entities up to 100%. Total consideration for these shares amounted to 49,553; the value of consideration in excess the carrying value of the non-controlling interest acquired has been recognised in retained earnings. 13. Goodwill and other intangible assets Six months Six months Year ended ended ended 31 December 30 June June (unaudited) (unaudited) (audited) '000 '000 '000 Net book value At the beginning of the period 121, , ,033 Net additions/(disposals) (133) Amortisation charge for the period (168) (254) (304) At the end of the period 121, , ,596 The carrying value of goodwill and other intangible assets principally consists of goodwill and franchise agreements of 120.8m (June 2017: 121.2m, December 2017: 120.8m). 23

26 Notes to the Condensed Consolidated Financial Statements 14. Property, plant and equipment Freehold and long leasehold land and Leasehold Plant and Assets under buildings improvements equipment construction Total '000 '000 '000 '000 '000 For the half year ended 30 June 2018 (unaudited) Cost At 1 January ,351 17,684 38,544 5, ,702 Additions at cost 1, ,375 6,745 9,906 Disposals - (837) (1,991) - (2,828) Transfers 2,831 1,515 1,243 (5,589) - At 30 June ,858 18,472 39,171 6, ,780 Accumulated depreciation At 1 January ,166 5,116 24,992-40,274 Charge for the period ,623-4,342 Disposals - (829) (1,871) - (2,700) Reversal of impairment - - (14) - (14) Transfers (324) - - At 30 June ,004 5,492 25,406-41,902 Net book value At 30 June ,854 12,980 13,765 6, ,878 At 30 June 2018, the Group had capital commitments totalling 17.6m relating to ongoing construction projects. 24

27 Notes to the Condensed Consolidated Financial Statements 14. Property, plant and equipment (continued) Freehold and long leasehold Assets held land and Leasehold Plant and for contract Assets under buildings improvements equipment rental construction Total '000 '000 '000 '000 '000 '000 For the half year ended 30 June 2017 (unaudited) Cost At 1 January ,487 15,015 35, ,944 7, ,594 Additions at cost ,260 17,194 9,565 29,435 Additions on acquisition Disposals (1,361) (248) (3,292) (13,790) - (18,691) Transfers (143) (721) (349) At 30 June ,989 15,579 34, ,348 15, ,021 Accumulated depreciation At 1 January ,996 3,383 21,146 32,258-65,783 Charge for the period ,088 9,149-13,918 Disposals (200) - (3,260) (8,279) - (11,739) Transfers (357) 357 (188) - - (188) At 30 June ,290 4,570 20,786 33,128-67,774 Net book value At 30 June ,699 11,009 13,453 72,220 15, ,247 At 30 June 2017, the Group had capital commitments totalling 11.7m relating to ongoing construction projects. 25

28 Notes to the Condensed Consolidated Financial Statements 14. Property, plant and equipment (continued) Freehold and long leasehold Assets held land and Leasehold Plant and for contract Assets under buildings improvements equipment rental construction Total '000 '000 '000 '000 '000 '000 For the year ended 31 December 2017 (audited) Cost At 1 January ,487 15,015 35, ,944 7, ,594 Additions at cost ,206 34,700 18,016 58,798 Additions on acquisition Disposals (2,485) (673) (2,734) (23,148) - (29,040) Disposal of subsidiary - (42) (45) (113,496) - (113,583) Transfers 16,052 2,555 1,308 - (19,915) - Transfers to Software - - (349) - - (349) Transfers to Assets held for sale (750) (750) At 31 December ,351 17,684 38,544-5, ,702 Accumulated depreciation At 1 January ,996 3,383 21,146 32,258-65,783 Charge for the year 1,434 1,913 5,570 15,962-24,879 Disposals (53) (608) (2,083) (13,673) - (16,417) Disposal of subsidiary - (42) (35) (34,547) - (34,624) Impairment Transfers (405) Transfers to Software - - (292) - - (292) At 31 December ,166 5,116 24, ,274 Net book value At 31 December ,185 12,568 13,552-5, ,428 At 31 December 2017, the Group had capital commitments totalling 7.7m relating to ongoing construction projects. More information about the transfers to software, transfers to assets held for sale and the impairment are available in the consolidated financial statements for the year ended 31 December 2017 which are available at 26

29 Notes to the Condensed Consolidated Financial Statements 15. Fair value measurement The carrying amounts and fair values of non-current financial assets and financial liabilities are as below. The fair values are based on cash flows discounted using the prevailing rates. Six months ended Six months ended Year ended 30 June June December 2017 (unaudited) (unaudited) (audited) Carrying Carrying Carrying amount Fair value amount Fair value amount Fair value '000 '000 '000 '000 '000 '000 Financial assets: Investment properties 2,590 2,590 2,590 2,590 2,590 2,590 Assets held for sale Financial liabilities: Mortgages 6,145 4,668 6,627 4,959 6,466 4,917 Asset backed financing (leasing - discontinued) ,801 32, ,145 4,668 40,428 36,988 6,466 4,917 All financial assets and liabilities shown in the table above are Level 2 and there have been no transfers between levels during 2018 or Commitments and contingencies Operating lease commitments Group as lessee The Group, as lessee, has non-cancellable operating lease agreements. The lease terms vary and the majority of lease agreements are renewable at the end of the lease period at market rate. The lease expenditure charged to the Consolidated Statement of Comprehensive Income during the year is disclosed in Note 5 Profit before Taxation. The future aggregate minimum lease payments under non-cancellable operating leases are set out below. Six months ended Six months ended Year ended 30 June June December 2017 (unaudited) (unaudited) (audited) Vehicles and Vehicles and Vehicles and Property equipment Property equipment Property equipment '000 '000 '000 '000 '000 '000 Within 1 year 11, , , Later than 1 year and less than 5 years 40, , , After 5 years 71,028-73,825-69, , , ,

30 Independent Review Report to Marshall Motor Holdings Plc Introduction We have been engaged by the Company to review the condensed consolidated set of financial statements in the interim financial report for the six months ended 30 June 2018 which comprises the condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity, condensed consolidated statement of financial position, condensed consolidated cash flow statement and the related notes 1 to 16. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated set of financial statements. This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed. Directors Responsibilities The interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim financial report in accordance with International Accounting Standards 34, Interim Financial Reporting, as adopted by the European Union. As disclosed in Note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed consolidated set of financial statements included in this half-yearly financial report have been prepared in accordance with International Accounting Standards 34, Interim Financial Reporting, as adopted by the European Union. Our Responsibility Our responsibility is to express to the Company a conclusion on the condensed consolidated set of financial statements in the interim financial report based on our review. Scope of Review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated set of financial statements in the interim financial report for the six months ended 30 June 2018 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union. Ernst & Young LLP Cambridge 13 August

31 Putting our customers above all else since 1909.

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