interim financial statements six months ended 30th ......market conditions, however, have continued...

Marshall of Cambridge (Holdings) Ltd

INTERIM FINANCIAL STATEMENTSSix months ended 30th June 2016

Marshall of Cambridge

Marshall Group Finance

Marshall Motor Holdings plcMarshall Fleet Solutions

Martlet and Marquity

Military AerospaceCivil Aerospace

Aviation ServicesLand Systems

Advanced CompositesAerostructuresMajor Projects

ORGANISATIONAL STRUCTURE

Marshall Aerospace and Defence Group

QuorumWing and North Works

Land North of Cherry HintonAirfield and Airside Properties

Marshall Group Properties

The business is a serviceprovider to a range ofcustomers in military andcommercial markets in theair, land and sea domains.There are seven primarybusiness streams,supported by centralfunctional supportdepartments andCambridge Airport.

The property businessholds and rents out bothinvestment properties andproperties used in thebusiness of other Groupcompanies, sited inCambridge. The propertybusiness is alsoprogressing two majordevelopment projects:Wing and Land North ofCherry Hinton.

As an operating entitywithin the company,Marshall Group Finance(MGF) aims to be profitand cash generative,through the activemanagement of its assetsand investments. Underthe new structure, MGFwill control the treasuryfunctions for the Group.

n Turnover up 23.7%n UK GAAP operating profit just above break evenn Adjusted operating profit up 34.4% (see note 3)n Maintained interim dividend at 1.00p for ordinary shares and 3.00p for NVPO sharesn Marshall Motor Holdings plc acquires Ridgeway for £109mn Marshall Aerospace and Defence Group receives Queen’s Award for Enterprise:

International Traden Local authorities approve resolution to grant planning permission on Wingn Increased NVPO share pricen Sir Michael Marshall confirmed as President from 1st October 2016 and

Alex Dorrian CBE appointed as Chairman

HEADLINES For six months ended 30th June 2016

Integrity | Customers | People | Innovation

Chairman’s Statement 3

Operational and Financial Performance 4

Risks and Uncertainties 6

Consolidated Income Statement 8

Consolidated Statement of Cash Flows 9

Net Debt Reconciliation 10

Balance Sheet 11

Notes to the Interim Financial Statements 12

CONTENTS

3

CHAIRMAN’S STATEMENT

I am immensely proud to have taken on the role of Chairman ofthe Marshall Group, which is so highly respected across theglobe in all of its business segments. I look forward to leadingthe continued growth and development of the Group, whilstremaining committed to the values which have beenembedded in the business for so long.

I would like to take thisopportunity of thanking SirMichael for the commitmentand leadership that he showedduring his 27 years asChairman. In his new role asPresident he will, I am sure,continue to be an outstandingambassador for Marshall locally,nationally and internationally.

Whilst there is a great deal to beupbeat and excited aboutacross the Group, there aresome challenges with some ofour projects and business unitswhich will have an impact onour profitability in 2016.

Marshall Aerospace andDefence Group (MADG) hasseen good progress in the LandSystems and Aerostructuresbusiness units and there hasbeen rapid growth in the re-established civil aircraftbusiness. Our successfulMilitary Aircraft division iscurrently working with tenseparate national air forces insupport of their C-130 Herculesaircraft. This year we havecelebrated the 50th anniversaryof the important C-130relationship between Marshall,the Royal Air Force andLockheed Martin. MADG is alsodelighted to have received asecond Queen’s Award, thistime in the International Trade

section. Regrettably however,we have seen some slippage inone of our largest and mostcomplex programmes, resultingin the recognition of a £7m lossprovision against the project.

Marshall Group Properties wasdelighted with the news in Aprilthat the Joint DevelopmentControl Committee had passeda resolution to grant planningpermission for the proposedWing development on land weown to the north of NewmarketRoad in Cambridge. Thisexciting development willeventually deliver around 1,300much needed homes, togetherwith a primary school, businessand retail units, and leisurefacilities. We are now workingclosely with the variousstakeholders to finalise the legaldetailed agreements linked tothe grant of planningpermission.

Marshall Motor Holdings plc(MMH) has had a strong firsthalf of 2016 and in Mayannounced the acquisition ofRidgeway, a large privately-owned group with 31dealerships across the south ofEngland. MMH is now the 7thlargest dealer group in the UK,with 103 franchised dealershipsand over 4,000 employees.

The Group’s net debt position at30th June 2016 was £19.2m,which compares with a net cashbalance at 31st December 2015of £53.1m. The change is dueto the significant acquisition ofRidgeway by MMH and, inMADG, the effect of advancepayments from the customer ona major contract reducingduring the period and the newterms of the MoD C-130contract.

Although the reported profit forthis year will be below the levelachieved in the prior period,next year we expect profitabilityin MADG to recover and insubsequent years income willbegin to flow from our propertydevelopment initiatives.Therefore, we will maintain theinterim dividend at 1.00p pershare for both Ordinary andNVPO shares, and pay thepriority dividend of 2.00p on theNVPO shares. This will be paidon 16th December 2016 to allshareholders on the register at25th November 2016.

Alex Dorrian CBE25th October, 2016

OPERATIONAL AND FINANCIAL PERFORMANCE

Group turnover was up 23.7% to just under£1.0bn with good underlying organic growth,assisted by the benefit of the MMH acquisitionsof S.G. Smith in November 2015 and Ridgewayin May 2016. FRS102 reported results show abreak even position; adjusted for separatelydisclosed items, as highlighted in note 3,operating profit was £11.8m for the first sixmonths of 2016, compared with £8.7m for thesame period in 2015. As a result of funding theRidgeway acquisition in MMH, the Groupended the half year with a consolidatedadjusted net debt of £19.2m.

Aerospace and Defence (MADG)The 2016 reported operating losshas increased compared with the2015 half year position. The coreC-130 business continues toperform strongly, meeting thechallenges of the new pricingperiod agreed with the UK MoDand growing with overseascustomers.

Similarly, the Land Systems andAerostructures businesses havealso performed aboveexpectations in the first half year,whilst the Civil business hasachieved sales growth of 28.9%as the strategy to balance the mixof civil and military business isimplemented.

Market conditions, however, havecontinued to worsen for AviationServices, and operational issuesat Advanced Composites and in

one major programme have had amaterially negative impact onresults. MADG will, therefore,report further losses in thesecond half of 2016, the quantumbeing dependent upon a numberof sensitivities, particularly inthese areas.

Order intake for the year is in linewith the Board’s expectationswhilst longer term opportunitiesarising from the Strategic DefenceSpending Review, published in2015, are much improved.

PropertyFollowing the resolution to grantplanning permission for the Wingproject, received in April 2016,work continues to negotiate thefinal agreement and achieve anoutline planning approval beforethe end of the year.

Marshall of Cambridge (Holdings) Ltd Interim Financial Statements 2016

Adjusted (net debt) / cash

Key Performance Indicators

4

Turnover

£805.6m

£8.7m

H1 2016 H1 2015

£996.5m

AdjustedOperating Profit

£11.8m

H1 2016 H1 2015

H1 2016 H1 2015

£(19.2)m

£66.6m

“It is a great honour to have won a 2016Queen’s Award for Enterprise in InternationalTrade and to be recognised for our role in theexport of the UK’s engineering capabilities, inthe commercial and military aerospace sector.”

Steve Fitz-Gerald

CEO – Marshall Aerospace and Defence Group


5

6

In addition to the Wingdevelopment, collaborationagreements have beennegotiated with a local landowner to apply for planningpermission to develop land to thenorth of Cherry Hinton (LNCH).An outline planning application isdue to be submitted in 2017 forthe development ofapproximately 1,200 new homes,of which around 700 will be onMarshall land.

The former Peugeot dealershipand associated petrol fillingstation in Cambridge weredemolished during the first half of2016. A lease has been signedwith BP, and construction hascommenced of a new facility,including an M&S Simply Foodoutlet. These new facilities onNewmarket Road are likely toopen before the year end.

Group FinanceMMH interim results reported arevenue increase of 30.7% to£826.4m and record profitabilityfrom both retail and leasingsegments. As well as growththrough acquisition, like-for-likevolumes of new vehicles (3.2%),used vehicles (0.9%) andaftersales revenues (6.3%) wereall up on 2015. The strategicacquisition of Ridgeway,completed in May 2016 for£109m, extended thegeographical spread of MMH andstrengthened relationships withkey brand partners. A new threeyear committed, unsecured£120m revolving credit facility hasbeen signed, which means theenlarged MMH remains wellpositioned to execute its growthstrategy moving forward.

Marshall Fleet Solutions (MFS)has had a difficult start to 2016 asexchange rate movements andlower volumes reduced grossprofits. As the year progresses,market conditions remain difficult,therefore MFS will report furtherdeterioration in the second half.

The Martlet early stage financeportfolio realised a positive returnfrom the sale of its investment inCambridge CMOS SensorsLimited and made three newinvestments in the first half of2016.

OutlookIt remains too early to assess theextent of any long term impact ofthe UK’s decision on 23rd June,2016 to leave the EuropeanUnion. The Board, however,continues to monitor the positionclosely.

MADG has a number of short-term operational challenges toresolve, especially the delivery ofthe critical phases of one majorproject. Excluding the MOD longterm contract for the C-130 fleet,the order book stood at £188.8m,an increase of 3.3% from the yearend position and is furthersupported by a number ofpipeline opportunities across thebusiness. Progress is beingmade on securing theopportunities made available bythe 2015 Strategic DefenceSpending Review.

Within MMH, the strategicacquisitions of Ridgeway andS.G. Smith leave the businesswell positioned for further longterm growth. Whilst it is right toremain cautious given wider

economic uncertainties, thebusiness remains well positionedto execute its growth strategymoving forward and the outlookfor the full year remainsunchanged.

The Board remains committed toincreasing shareholder value,through operationalimprovements and selectiveacquisitions, which are in line withthe Group’s strategic growthaspirations. Near term, however,reported profit for the current yearwill be materially lower than theprior year.

RISKS AND UNCERTAINTIES

The Group’s performance overthe remaining six months of thefinancial year may be impactedmaterially by a number ofpotential risks and uncertaintieswhich could have an effect on theactual results. These include: adecline in the general economicenvironment, budgetarypressures on UK and overseasmilitary customers which mightlead to a reduction in orders, andprogress on one majorprogramme.

Other than the inclusion of theunknown impact of the UK’sdecision to leave the EuropeanUnion, the Directors do notconsider that the underlyingprincipal risks and uncertaintieshave materially changed sincethe publication of the annualreport for the year ended 31stDecember, 2015.


7


Marshall Motor Groupn 24 brandsn 103 locations

Pictured: Ridgeway Volkswagen, Oxford

CONSOLIDATED INCOME STATEMENT

for the six months ended 30th June 2016

GROUP TURNOVER: continuing operations

Cost of sales

GROSS PROFIT

Administrative expenses and other operating income

GROUP OPERATING PROFIT

Profit on disposal of tangible fixed assets, investments and subsidiaries

Fair value adjustments on investment properties

Fair value (loss) / gain on investments less amounts provided against investments

Income from investments

Interest receivable

Interest payable and similar charges

Other finance costs

(LOSS) / PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION

Tax on (loss) / profit on ordinary activities

(LOSS) / PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION

Equity minority interests

(LOSS) / PROFIT FOR THE PERIOD

Net costs included in operating profit that are separately disclosed in note 3

BASIC AND DILUTED (LOSS) / EARNINGS PER ORDINARY SHARE

UNDERLYING EARNINGS PER ORDINARY SHARE

Six months ended

30th June 2016

(unaudited)

£000

996,514

(841,715)

154,799

(154,680)

119

476

-

(229)

7

214

(2,456)

(175)

(2,044)

413

(1,631)

(2,940)

(4,571)

(11,631)

(8.4)p

8.5p

Note

2

3

Year ended

31st Dec 2015

(audited)

£000

1,585,732

(1,314,531)

271,201

(248,504)

22,697

1,602

791

211

25

341

(3,003)

(433)

22,231

(6,863)

15,368

(1,542)

13,826

(3,626)

22.3p

26.2p

Six months ended

30th June 2015

(unaudited)

£000

805,583

(669,652)

135,931

(128,953)

6,978

728

-

(92)

7

322

(1,414)

(225)

6,304

(1,603)

4,701

(343)

4,358

(1,762)

6.8p

9.8p

8


CONSOLIDATED STATEMENT OF CASH FLOWS


NET CASH INFLOW FROM OPERATING ACTIVITIES

INVESTING ACTIVITIES

Income from investments

Interest received

Payments to acquire tangible fixed assets and investments

Receipts from sales of tangible fixed assets and investments

Acquisition of businesses

Net cash acquired on acquisitions

Net cash outflow from investing activities

FINANCING ACTIVITIES

Bank and stock finance interest paid

Equity dividends paid

Dividends paid to non-controlling interests

Proceeds from borrowings

Repayment of borrowings

Issue of share capital net of costs

Net cash inflow from financing activities

(DECREASE) / INCREASE IN CASH AT BANK AND IN HAND

CASH BALANCE AT START OF PERIOD

Effect of exchange rates on cash and cash resources

(Decrease) / increase in cash and cash equivalents

CASH BALANCE AT CLOSE OF PERIOD

Six months ended

30th June 2016

(unaudited)

£000

72,727

7

38

(36,104)

9,711

(109,110)

12,664

(122,794)

(2,415)

(2,144)

(649)

76,163

(34,148)

663

37,470

(12,597)

54,317

-

(12,597)

41,720

Year ended

31st Dec 2015

(audited)

£000

39,809

25

341

(64,769)

10,891

(24,450)

2,477

(75,485)

(3,003)

(6,758)

(155)

28,642

(30,812)

36,203

24,117

(11,559)

65,471

405

(11,559)

54,317

Six months ended

30th June 2015

(unaudited)

£000

396

7

322

(31,552)

5,771

-

-

(25,452)

(1,414)

(1,978)

-

13,172

(13,942)

36,853

32,691

7,635

65,471

-

7,635

73,106

9

10


NET DEBT RECONCILIATION


Cash at bank and in hand

Bank loans and overdrafts due in less than one year

Bank loans and overdrafts due in more than one year

Derivative financial instruments

Net (debt) / cash at end of period

Six months ended

30th June 2016

(unaudited)

£000

41,720

(51,225)

(8,435)

(1,224)

(19,164)

Year ended

31st Dec 2015

(audited)

£000

54,317

(1,219)

-

-

53,098

Six months ended

30th June 2015

(unaudited)

£000

73,106

(6,500)

-

-

66,606

11

BALANCE SHEET

as at 30th June 2016

FIXED ASSETS

Intangible assets

Tangible assets

Investments

TOTAL FIXED ASSETS

CURRENT ASSETS

Stocks

Debtors

Cash at bank and in hand

CREDITORS: amounts falling due within one year

Bank loans and overdrafts

Asset backed financing - leasing

Other creditors

NET CURRENT (LIABILITIES) / ASSETS

TOTAL ASSETS LESS CURRENT LIABILITIES

CREDITORS: amounts falling due after more than one year

Bank loans and overdrafts

Asset backed financing - leasing

Derivative financial instruments

Other creditors

PROVISION FOR LIABILITIES

NET ASSETS BEFORE PENSION LIABILITY

PENSION LIABILITY

NET ASSETS

CAPITAL AND RESERVES

Called up share capital

Share premium account

Capital redemption reserve

Cashflow hedge reserve

Non-distributable reserve

Profit and loss account

SHAREHOLDERS' FUNDS

Non-controlling interests

TOTAL CAPITAL EMPLOYED

Year ended 31st Dec 2015

(audited) £000

35,279

194,542

4,543

234,364

264,949

129,665

54,317

448,931

(1,219)

(26,700)

(382,712)

(410,631)

38,300

272,664

-

(24,677)

-

(10,195)

(34,872)

(3,953)

233,839

(11,516)

222,323

15,733

-

130

263

6,917

155,009

178,052

44,271

222,323

30th June 2016

(unaudited) £000

115,693

272,397

4,789

392,879

380,189

174,994

41,720

596,903

(51,225)

(27,341)

(606,893)

(685,459)

(88,556)

304,323

(8,435)

(33,349)

(1,224)

(6,491)

(49,499)

(24,747)

230,077

(11,516)

218,561

15,785

611

130

263

6,917

148,294

172,000

46,561

218,561

As reported in the interim financial statements for 2015, a balance sheet at 30th June 2015 was excluded due to the implementation ofFRS102, the UK’s new Financial Reporting Standard.

NOTES TO THE INTERIM FINANCIAL STATEMENTS

2. Segmental analysis Year ended

31st December 2015

(audited)

£000

1,232,761

311,823

41,148

1,585,732

Six months ended

30th June 2015

(unaudited)

£000

632,477

152,027

21,079

805,583

Six months ended

30th June 2016

(unaudited)

£000

826,401

145,040

25,073

996,514

Revenue

Motor retail and leasing

Aerospace and defence

Other

Total

18,775

10,958

4,491

369

11,865

(715)

2,362

(86)

16,321

(1,429)

1,942

(459)

Operating profit / (loss)

Motor retail and leasing

Aerospace and defence

Property

Other

34,593

(8,270)

26,323

(3,626)

22,697

13,426

(4,686)

8,740

(1,762)

6,978

16,375

(4,625)

11,750

(11,631)

119

Operating profit before central overheads

and separately disclosed items

Central overheads

Operating profit before separately disclosed items

Separately disclosed items (note 3)

Reported operating profit

12


1. Basis of preparationThe Group transitioned from the previously extant UK GAAP to FRS102 as at 1st January 2014. An

explanation of how the transition to FRS102 affected the reported financial position and financial

performance was included in the report and accounts for the year ended 31st December 2015. These

unaudited statements have been prepared in compliance with applicable UK accounting standards.

13


3. Detailed consolidated income statement

Year ended

31st December 2015

(unaudited)

£000

26,323

(3,626)

22,697

Six months ended

30th June 2015

(unaudited)

£000

8,740

(1,762)

6,978

Six months ended

30th June 2016

(unaudited)

£000

11,750

(11,631)

119

Operating profit

Before separately disclosed items

Separately disclosed items

Reported operating profit

(2,843)

(467)

-

(316)

-

(3,626)

(1,446)

-

-

(316)

-

(1,762)

(3,229)

-

(7,000)

-

(1,402)

(11,631)

Details of separately disclosed items

Amortisation of acquired intangible assets

Impairment of tangible fixed assets

Provision for losses on complex programme

Non directly attributable IPO costs

Restructuring costs

Separately disclosed items

The Group has incurred a number of material items, whose significance is sufficient to warrant separate

disclosure. The key elements included within separately disclosed items are:n Charges for amortisation of acquired intangible assets and impairment of tangible assets;n Provision for losses incurred anticipated on the completion of a complex project within MADG; andn Other costs relating to organisational restructuring and the raising of capital.


14

Fair value

adjustments

£000

(2,600)

59,504

(10,728)

-

(724)

-

-

(10,060)

-

(5,086)

-

30,306

Book

value

£000

2,600

-

-

65,414

124,124

51,627

12,664

(174,964)

(25,705)

(954)

(1,258)

53,548

Goodwill

Intangible assets

Deferred tax on intangible assets

Property, plant and equipment

Inventories

Trade and other receivables

Cash and cash equivalents

Trade and other payables

Debt

Deferred tax

Derivatives

Net assets acquired

Goodwill

Acquisition costs

Cash consideration


Fair

value

£000

-

59,504

(10,728)

65,414

123,400

51,627

12,664

(185,024)

(25,705)

(6,040)

(1,258)

83,854

23,093

2,163

109,110

4. AcquisitionOn 26th May 2016 Marshall Motor Holdings plc acquired the entire share capital of Ridgeway Garages

(Newbury) Limited. The estimated net assets at the date of acquisition are stated at their provisional fair

value as set out below:


15

5. Interim dividendThe Board has approved the payment of a maintained dividend of 1.00p per share on both Ordinary and

NVPO shares to be paid on 16th December, 2016, together with priority dividends of 2.00p per share on

the NVPO shares. These dividends will be payable to all shareholders who are on the register of

shareholders at 25th November, 2016.

6. Share pricesThe market prices of the Group’s shares were:

Marshall of Cambridge (Holdings) Ltd

Non-voting priority ordinary shares of 12.5p each – 335p (31st December, 2015 – 290p)

Marshall Motor Holdings plc

Ordinary shares of 64p each – 163.5p – (31st December, 2015 – 184.5p)

Marshall of Cambridge (Holdings) LtdThe Airport Cambridge CB5 8RY England+44 (0)1223 373737

marshallgroup.co.uk

interim financial statements six months ended 30th ......market conditions, however, have continued...

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