TIDMMMH
RNS Number : 0210P
Marshall Motor Holdings PLC
14 October 2021
14 October 2021
MARSHALL MOTOR HOLDINGS PLC
("MMH" or the "Group")
Strategic Acquisition of Motorline Holdings Limited adding 48
franchises
Marshall Motor Holdings Plc, one of the UK's leading automotive
retail groups, announces the strategic acquisition of the entire
issued share capital of Motorline Holdings Limited (including all
of its subsidiaries) ('Motorline'), (the 'Acquisition'), for a cash
consideration of GBP64.5m funded from the Group's existing cash
resources . The net assets on acquisition include c.GBP20m of cash
and c.GBP10m of debt.
The Group has also separately acquired a related freehold
property for GBP2.9m and has the option to acquire two additional
strategic freehold properties for GBP24.9m.
Motorline is a leading multi-franchise dealer group
headquartered in Canterbury and operating across Kent, West Sussex,
Surrey, Berkshire, Bristol, South Wales and the West Midlands. It
represents ten brands through 48 operating franchises including
Toyota, Lexus, Hyundai, Volkswagen, Audi, KODA, Nissan, Peugeot,
and Maserati. In addition, it operates four Volkswagen Group Trade
Parts Specialist (TPS) businesses and five used car centres.
Motorline's consolidated revenues for the year ending 31
December 2020 were GBP695.2m with profit before tax of GBP6.1m
(which included a one-off profit on the disposal of freehold
property and other one-off items of in aggregate cGBP4.0m).
Motorline's consolidated shareholder funds at completion are
c.GBP30m, including c.GBP20m of cash and c.GBP10m of debt.
Strategic Rationale Overview
-- The Acquisition is in line with the Group's strategy which
includes growing scale with its chosen brand partners; annual
revenues expected to exceed GBP3bn.
-- Scaled entry to the Toyota and Lexus brands - Motorline is
the second largest retail partner for Toyota and Lexus in the UK
with 19 franchises; Toyota/Lexus is the largest vehicle
manufacturer globally with a passenger car market share of
approximately 7.2% in the UK.
-- Scaled entry to the Hyundai brand - Motorline is the joint
second largest Hyundai retail partner in the UK with seven
franchises. Hyundai is the third largest vehicle manufacturer
globally with a UK market share of approximately 4.0%.
-- Further strengthens the Group's position in terms of scale
and depth of relationship with Volkswagen Group through new
locations with the Volkswagen, Audi and KODA brands in attractive
territories, together with additional Volkswagen Group TPS
locations.
-- Addition of seven further Nissan franchises, making the Group
the fourth largest Nissan retail partner in the UK with ten
franchises.
-- Addition of four further Peugeot franchises, making the Group
the joint second largest Peugeot retail partner in the UK with
seven franchises.
-- Addition of new brands increases the Group's brand coverage
to 85.4%, enabling synergies for used vehicle remarketing and fleet
sales.
-- Extends the Group's geographic footprint into a further eight
counties with the Group now having representation in 37 counties in
England and Wales, further strengthening the Group's used car
proposition.
-- Acquisition fully supported by all brand partners, both new and existing.
Financial Benefits Overview
-- Earnings enhancing from first full year of ownership with
significant potential for further improvement in financial and
operating performance.
-- Internal rate of return materially in excess of the Group's
weighted average cost of capital.
-- Well invested property portfolio; no material capital
expenditure in the short to medium term.
-- Option to acquire two additional strategic freehold properties.
-- Funded from the Group's existing cash resources; the Group
remains in an adjusted net cash* position post-Acquisition (pre
exercise of property options).
* adjusted net cash/debt excludes the impact of IFRS16
Leases
Daksh Gupta, Group Chief Executive, commented:
"We are delighted to announce the acquisition of Motorline in
line with our strategy which includes growing both further scale
with existing brand partners and developing scaled relationships
with selected new brand partners.
Motorline is an extremely well-respected, long-standing
business. The Obee family have overseen a significant expansion of
the business in recent years and have invested in a market-leading
property portfolio.
The acquisition has been funded from existing cash resources and
is expected to generate attractive financial returns for our
Group.
We are delighted to begin new and significant partnerships with
Toyota/Lexus and Hyundai. These brands, with a combined market
share in the UK of over 11%, have been a target for the Group for
some time and the acquisition of Motorline provides immediate scale
with each of them. I would like to thank each of them for
supporting this acquisition and very much look forward to working
with them over the coming years to develop a mutually successful
partnership.
I would also like to take the opportunity to thank our existing
brand partners for their continued support for the further growth
and development of the Group for which we are extremely
grateful.
Finally, and most importantly, I would like to welcome our 1,500
new Motorline colleagues to the Group. I look forward to meeting
you soon and to working with you over the coming years."
About Motorline
Founded in 1972, Motorline is a leading family-owned,
multi-franchise dealer group headquartered in Canterbury and
operating across Kent, West Sussex, Surrey, Berkshire, Bristol,
South Wales and the West Midlands.
Motorline employs c.1,500 colleagues and represents ten brands
through 48 operating franchises including:
-- Toyota (13 sites)
-- Toyota Commercial Vehicles (1 site)
-- Hyundai (7 sites)
-- Nissan (7 sites)
-- Lexus (5 sites)
-- Peugeot (4 sites)
-- Volkswagen (4 sites)
-- Audi (3 sites)
-- KODA (3 sites)
-- Maserati (1 site).
In addition, it operates four Volkswagen Group TPS businesses
and five used car centres.
Motorline is the second largest Toyota and Lexus partner in the
UK and has represented Toyota for over 45 years.
Financial Overview of Motorline
The consolidated statutory accounts for Motorline for the year
ended 31 December 2020 showed revenue of GBP695.2m. This was a 3.1%
decline versus 2019 reported revenue of GBP717.8m, driven by the
impact of COVID lockdowns. 2020 profit before tax was GBP6.1m which
included a one-off profit on the disposal of freehold property and
other one-off items of in aggregate c.GBP4.0m, as well as the
benefit of Government support such as CJRS.
Net assets at completion are c.GBP30m, including c.GBP20m of
cash and c.GBP10m of debt.
2021 trading to date has been strong, benefiting from the same
industry tailwinds as previously reported by the Group.
Strategic Rationale
Growing scale with its chosen brand partners is a key part of
the Group's overall strategy. Scale facilitates our ongoing
investment in new technologies, increases the efficiency of our
business model by spreading costs, enables an expansion of our
consumer proposition, both digital and physical, as well as
providing greater consumer choice as a result of increased stock
availability, particularly in used cars. As previously stated, the
automotive sector is undergoing a period of significant change and
we believe that scale, both in its own right but also importantly
with the right brand partners, will increasingly be an important
factor to the success of automotive retailers.
As the Group has grown over recent years, so has the depth of
its relationships with manufacturer partners. These strong and
deepening relationships will help to ensure the Group remains a
relevant and important part of manufacturers' future retail and
aftersales strategies.
The Group therefore identified Motorline for acquisition for a
number of reasons aligned to its strategy:
-- A well respected dealer group with well-invested facilities
but with scope for operational and financial improvements:
Motorline has been owned by the Obee family for 50 years and has
grown to become a significant Top 20 dealer group with strong brand
partner relationships and well-invested facilities. Whilst
Motorline's performance has been good, there is significant further
potential to leverage the enlarged group's scale and maximise its
operational and financial performance as part of the wider Marshall
business.
-- Scaled entry into the Toyota and Lexus brands : Toyota/Lexus
is the largest vehicle manufacturer globally and with a market
share of approximately 7.2% in the UK. Motorline is the second
largest representative for Toyota and Lexus in the UK and the
Acquisition therefore enables immediate, meaningful scale across 19
franchises with these brands in excellent territories.
-- Scaled entry into Hyundai brand : the Acquisition provides
scaled entry to the Hyundai brand with seven franchises, again in
excellent territories and making the Group the joint second largest
Hyundai retail partner in the UK.
-- Further strengthens relationship with Volkswagen Group : the
addition of three Audi, four Volkswagen and three KODA franchises,
together with four TPS businesses, further strengthens the Group's
relationship with Volkswagen Group and cements its position as a
major partner for Volkswagen Group in the UK.
-- Growth with Nissan : the addition of seven further Nissan
franchises makes the Group the fourth largest Nissan retail partner
in the UK with 10 franchises.
-- Growth with Peugeot : the addition of four further Peugeot
franchises makes the Group the joint second largest Peugeot retail
partner in the UK with seven franchises.
-- New and attractive geographical territories: Motorline
operates in attractive territories, a number of which are new
territories for the Group, including in Kent, West Sussex, Bristol,
South Wales and the West Midlands. The Group now operates in 37
counties in England and Wales covering a significant proportion of
the population and providing a strong platform for future used car
growth.
-- Manufacturer support : the Acquisition is fully supported by
all relevant manufacturers, both those whom the Group currently
represents and those it does not, including in particular, Toyota,
Lexus and Hyundai.
The table below shows the current and resultant number of sites
for the Group following the Acquisition:
Franchised Dealerships
Brand MMH Motorline Enlarged
group
Audi 9 3 12
BMW 4 - 4
Ford 2 - 2
Ford Commercial 2 - 2
Honda 7 - 7
Hyundai - 7 7
Jaguar 7 - 7
Kia 2 - 2
Land Rover 9 - 9
LEVC 1 - 1
Lexus - 5 5
Maserati - 1 1
Mercedes-Benz 9 - 9
Mercedes-Benz Commercial 4 - 4
MINI 4 - 4
Nissan 3 7 10
Peugeot 3 4 7
SEAT 4 - 4
KODA 12 3 15
smart 2 - 2
Toyota - 13 13
Toyota Commercial - 1 1
Vauxhall 2 - 2
Volkswagen 15 4 19
Volkswagen Commercial 6 - 6
Volvo 9 - 9
Total 116 48 164
-------------------------- ---- ---------- ---------
Other Standalone Operations
TPS 6 4 10
Used car centres 2 5 7
Body shops 6 - 6
PDI centre 1 - 1
Total 131 57 188
-------------------------- ---- ---------- ---------
Following the Acquisition, the Group now operates a total of 164
franchises covering 27 brands, across 37 counties in England and
Wales. In addition, the Group operates 10 trade parts specialists,
seven used car centres, six standalone body shops and one pre
delivery inspection centre.
The Group does not expect to make any material changes to its
portfolio as a result of the Acquisition but will continue to
review its portfolio on an ongoing basis to ensure appropriate
representation and maximisation of opportunities. The Group's
strategy is to continue to grow scale with selected brand partners.
However, it will only do so where it makes strategic and financial
sense for its shareholders whilst maintaining its strong balance
sheet.
Acquisition Terms
The Group has acquired the entire issued share capital of
Motorline from Glen Obee, Thomas Obee, Sarah Obee and Anne Obee
(Sellers) for a cash consideration of GBP64.5m, funded from the
Group's existing cash resources. In addition, the Group has
acquired the freehold property occupied by Motorline's Canterbury
KODA dealership for GBP2.9m from GGT Estates Limited (GGTE), a
property company controlled by the Sellers.
The Group has also been granted options (Property Options) to
acquire from GGTE the strategic freeholds of the Tunbridge Wells
Audi dealership for GBP12.1m and the newly constructed Bristol
Toyota/Lexus dealership for GBP12.8m. The Property Options may be
exercised by the Group within 6 months and 18 months respectively
of the Acquisition and it is currently expected that the Group will
exercise these options in due course. Pending exercise of the
Property Options, these properties will be occupied under lease
from GGTE.
Finally, 14 other properties occupied by Motorline are leased
from GGTE. New leases have been negotiated and put in place between
Motorline and GGTE on arm's length commercial terms.
A retention amount of GBP1.3m will be held for a period of one
year from completion of the Acquisition from which the Group may
set off any successful warranty and/or indemnity claims it has
against the Sellers.
Financing
The Acquisition has been funded from the Group's existing cash
resources following strong cash generation over the past 18
months.
At completion, the Group assumed c.GBP10m of Motorline debt and
acquired c.GBP20m of Motorline cash. The Group remains in an
adjusted net cash* position post-Acquisition (pre-exercise of the
Property Options).
Financial Guidance Items
-- Return on investment materially in excess of the Group's weighted average cost of capital.
-- Earnings enhancing from first full year: 2022 profit before
tax expected to be impacted by well documented supply constraints ;
profit before tax increases in 2023 and achieves normalised levels
from 2024/2025 .
-- Integration programme to deliver optimal profitability from
2024/2025 . Integration planning well underway; non-underlying
integration costs of c.GBP10.0m over two years.
-- Acquisition fees of approximately GBP1.3m plus stamp duty of
approximately GBP1.0m in 2021 .
-- Underlying effective tax rate expected to remain at c.21-22%
(subject to any changes in the prevailing tax rates).
-- Enlarged Group's ongoing capital expenditure (including
maintenance expenditure) expected to increase by only c.GBP2.5m per
year, reflecting the well-invested nature of Motorline's
properties.
-- Option to purchase two further strategic freehold properties for GBP24.9m.
-- Initial fair value estimates to be included in the Group's 2021 full year results .
-- Limited net debt expected at 31 December 2021 even if
Property Options are exercised before then; the Group's balance
sheet remains strong.
S
For further information and enquiries please contact:
Marshall Motor Holdings plc c/o Hudson Sandler
Daksh Gupta, Chief Executive Officer Tel: +44 (0) 20 7796
4133
Richard Blumberger, Chief Financial Officer
Investec Bank plc (Financial Adviser, Tel: +44 (0) 20 7597
NOMAD & Broker) 5970
Christopher Baird
David Anderson
Hudson Sandler Tel: +44 (0) 20 7796
4133
Nick Lyon
Bertie Berger
Nick Moore
Notes to Editors
About Marshall Motor Holdings plc ( www.mmhplc.com )
The Group's principal activities are the sale and repair of new
and used vehicles. Following the Acquisition, the Group's
businesses have a total of 164 franchises covering 27 brands,
across 37 counties in England and Wales. In addition, the Group
operates 10 trade parts specialists, seven used car centres, six
standalone body shops and one pre delivery inspection centre.
In April 2021 the Group was recognised by the Great Place to
Work Institute, being ranked the 12(th) best place to work in the
UK (super large company category). This was the eleventh year in
succession that the Group has achieved Great Place to Work
status.
LEI number: 213800BP3HZWHDWXAY78
This announcement contains inside information. The person
responsible for arranging the release of this announcement on
behalf of the Group is Stephen Jones, Group Counsel and Company
Secretary.
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. Forward-looking statements often use words such as
anticipate, target, expect, estimate, intend, plan, goal, believe,
will, may, should, would, could, is confident, or other words of
similar meaning. Undue reliance should not be placed on any such
statements because they speak only as at the date of this document
and, by their very nature, they 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. There are a number of factors which
could cause actual results to differ materially from those
expressed or implied in forward-looking statements. The Group
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.
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