TIDMMMH
RNS Number : 3632R
Marshall Motor Holdings PLC
21 September 2017
21 September 2017
MARSHALL MOTOR HOLDINGS PLC
("MMH" or the "Group")
Strategic Disposal of Marshall Leasing; takes MMH pro forma net
assets per share to 254p
Marshall Motor Holdings plc, one of the UK's leading automotive
retail groups, is pleased to announce the proposed strategic
disposal ("Disposal") of its wholly-owned leasing segment, Marshall
Leasing Limited ("MLL" or "Marshall Leasing") to N.I.I.B Group
Limited (which trades as 'Northridge Finance'), a wholly owned
subsidiary of Bank of Ireland (UK) plc ("Bank of Ireland") for a
gross cash consideration of GBP42.5m. The Disposal is conditional
upon Bank of Ireland receiving regulatory approval from the
Financial Conduct Authority ("FCA") to acquire MLL.
Highlights
-- The Disposal will allow MMH to focus on its core motor retail
business and to continue the Group's successful strategy of driving
both organic growth and increasing its UK geographic footprint
through targeted acquisitions with existing brand partners.
-- The net cash proceeds of the Disposal will initially be used
to reduce existing levels of indebtedness. The Group's reported net
debt at 30 June 2017 was GBP101.1m. As a result of the Disposal,
the Group's pro forma 30 June 2017 balance sheet would have been
un-geared with net cash of approximately GBP4.6m.
-- The Disposal will further strengthen the Group's balance
sheet. As a result of the Disposal, pro forma net assets at 30 June
2017 would have been approximately GBP196.7m, equivalent to 254p
per share (actual net assets at 30 June 2017: GBP158.0m, equivalent
to 204p per share).
-- The MMH board believes the Disposal provides an opportunity
to create greater long term value for its shareholders.
Rationale
Marshall Leasing is a nationally recognised and well regarded
independent automotive leasing and fleet management provider for UK
corporates and has been part of the Group since it was established
in 1979. It is considered by the Board to be a quality business
that has performed well over recent years.
The leasing and fleet management market continues to consolidate
and the Board considers that scale is becoming increasingly
important to underpin the capital intensive nature of the business
model. Eight of the top ten UK motor leasing businesses are owned
by financial institutions or vehicle manufacturers. The Board
therefore believes that the future growth of Marshall Leasing is
better supported under different ownership and is pleased to have
agreed a sale of MLL to Bank of Ireland.
After completion of the Disposal, the Group will be focused
exclusively on its UK motor retail operations, a segment which the
Board believes continues to offer attractive opportunities for
future growth.
Since its IPO in April 2015, the Group's retail segment has
continued to show significant growth in both revenue and
profitability. This has been underpinned by strong organic growth
and contributions from the strategic acquisition of SG Smith and
Ridgeway. The Group has an excellent track record of acquiring and
integrating motor retail businesses. Carefully targeted
acquisitions remain a core part of MMH's strategy, specifically to
grow with existing brand partners in new geographic territories and
to generate an attractive return on the invested capital.
MMH aims to deliver class leading returns for its shareholders
as a result of the Group's focus on retailing excellence, strategic
growth, customer service and people centricity. The Board believes
the Group remains well positioned in what is still a consolidating
market and continues to seek to drive further growth in its
profitability and return on capital, supported by a balanced
portfolio of brands, attractive geographic locations and excellent
brand partner relationships.
Financial effects
The Disposal is expected to be dilutive to underlying earnings
per share in the year ending 31 December 2017 although there will
be a significant gain on disposal. In the year ended 31 December
2016, MLL generated total revenue of GBP39.3m, an underlying profit
before tax of GBP4.9m and profit after tax of GBP3.7m. In the six
months ended 30 June 2017, MLL generated an underlying profit
before tax of GBP2.4m (H1 16: GBP2.7m).
As at 30 June 2017, MLL had gross assets of GBP95.0m and net
assets of GBP19.8m. Prior to completion of the Disposal, MLL will
have repaid certain intra-group loans/liabilities and will have
declared and paid an intra-group dividend such that the net assets
of MLL at 30 June 2017 would have been approximately GBP1.1m.
As at 30 June 2017, the Group's reported net debt was GBP101.1m.
The net proceeds of the Disposal will initially be used to reduce
existing indebtedness and the Disposal will also remove Marshall
Leasing's vehicle financing obligations from the Group. If the
Disposal had been completed on 30 June 2017, MMH would have had pro
forma net assets at that date of approximately GBP196.7m
(equivalent to 254p per share) and pro forma net cash of
approximately GBP4.6m.
Terms of the Disposal
MMH has agreed to sell MLL to Bank of Ireland, subject only to
approval of the transaction by the FCA. The gross cash
consideration of GBP42.5m will be due on completion. The sale
agreement contains customary warranties and indemnities given by
MMH in respect of MLL, subject to certain customary limitations.
Completion is expected to occur before 31 December 2017.
Management believes that the valuation achieved is reflective of
MLL's scalable platform, strong management team and differentiated,
service-led offering.
On completion, Bank of Ireland will enter into a brand licensing
arrangement with Marshall of Cambridge (Holdings) Limited ("MCH")
for a maximum of five years. The agreement provides for the
continued use of Marshall trade marks for a one-off consideration
of GBP0.5m.
In addition, on completion, MMH will enter into a transitional
services arrangement to enable the smooth integration of MLL into
Bank of Ireland and an agreement for the supply of new vehicles by
MMH to MLL.
Completion of the Disposal will trigger a section 75 settlement
liability in respect of the Group's defined benefit pension scheme,
payment of which will release MLL from all historic pension
liabilities under those arrangements. This liability is expected to
be approximately GBP1.0m and will be settled by MLL
post-completion. An element of the Consideration will therefore be
retained pending final determination and settlement of this
liability.
MMH has incurred transaction costs of approximately GBP1.7m
including certain MLL management incentives and the discharge of
certain MLL long term incentive arrangements.
Daksh Gupta, Chief Executive Officer commented:
"The strategic disposal of our leasing business is an important
step for MMH. It further strengthens our financial position and
allows us to remain focused on driving our core retail operations.
In a changing and consolidating retail landscape, we see various
exciting opportunities ahead which, with the support of our brand
partners, we are now even better positioned to exploit.
"MLL has been an important part of our Group for many years. On
behalf of the Board I would like to thank all my leasing colleagues
for their significant support and contribution over this period and
wish them well for the exciting times ahead under new
ownership."
This announcement contains inside information. The person who
arranged for release of this announcement on behalf of Marshall
Motor Holdings plc was Stephen Jones, Group Counsel and Company
Secretary.
Ends
For further information and enquiries please contact:
Marshall Motor Holdings plc c/o Hudson Sandler
Daksh Gupta, Group Chief Executive Tel: +44 (0) 20
7796 4133
Mark Raban, Chief Financial
Officer
Investec Bank plc (Financial Tel: +44 (0) 20
Adviser, NOMAD & Broker) 7597 5970
Christopher Baird
David Flin
David Anderson
Hudson Sandler Tel: +44 (0) 20
7796 4133
Nick Lyon
Bertie Berger
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 through Marshall Motor Group and, until the
completion of the Disposal, the leasing of vehicles through
Marshall Leasing. The Group's businesses have a total of 104
franchises covering 24 brands, operating from 90 locations across
26 counties in England. In addition, the Group operates five trade
parts specialists, five used car centres, five standalone body
shops and one pre delivery inspection centre.
In May 2017 the Group was recognised by the Great Place to Work
Institute, being ranked the 22nd best place to work in the UK
(large company category). This was the seventh year in succession
that the Group has achieved Great Place to Work status.
In November 2016 Marshall Leasing was named Fleet Service
Company of the Year 2016 by the Association of Car Fleet Operators
(ACFO), an award it also won in 2010 and 2013.
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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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