MMH.L Regulatory News (MMH)

17 March 2016

MARSHALL MOTOR HOLDINGS plc

("MMH" or the "Group")

Annual results for the twelve months ended 31 December 2015

Marshall Motor Holdings plc delivers record results

Marshall Motor Holdings plc, one of the UK's leading automotive retail and leasing groups, is pleased to announce its annual results for the twelve months ended 31 December 2015 (the "Period").

Financial highlights

· Revenue increased by 13.5% to £1,232.8m (2014: £1,085.9m)

· Adjusted profit before tax* up 21.4% to £15.8m (2014: £13.1m)

· Record results from both retail & leasing segments: PBT growth of 29.0% and 24.0% respectively

· Earnings per share of 19.7p

· Proposed final dividend of 2.40p per share which, with the pro rata interim dividend of 0.58p per share, gives a total dividend for the Period of 2.98p per share

· Strong balance sheet - net cash before leasing loans of £24.1m

Operational & Strategic highlights

· Record trading performance driven by organic growth, full year contributions from acquisitions and ongoing portfolio management

· New car unit sales up by 9.9% (like-for-like up by 7.2%)

· Used car unit sales up by 8.2% (like-for-like up by 1.5%)

· Aftersales revenues up by 8.5% (like-for-like up by 2.4%)

· Gross profit margin up by 0.2% to 11.8%

· Acquisition of SG Smith Holdings Limited ("SG Smith") for c£24.0m

· Three major new facility developments underway for Audi and Jaguar / Land Rover

Daksh Gupta, Group Chief Executive, said:

"The Board is pleased to announce record trading in the Period, underpinned by like-for-like organic volume growth and improved gross profit margin. In addition, we benefitted from contributions from recent acquisitions and ongoing portfolio management. Our retail and leasing segments have reported record results showing growth in profit before tax of 29.0% and 24.0% respectively.

Our transition to an independent public company marked a significant moment in the Group's 106 year history. We continue to pursue both our organic and acquisition growth strategies and we were pleased to complete the acquisition of SG Smith in November 2015 in line with our stated strategy.

Trading in the current financial year has started in line with our expectations. Based on current market conditions and visibility of the important March plate change month, we continue to have confidence in delivering further material growth in 2016, in line with current expectations.

I would like to take this opportunity on behalf of the Board to thank the entire Marshall team, our brand partners and new investors for their continued support."

* Adjusted profit before tax = profit before tax and acquisition costs

For further information and enquiries please contact:

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 the leasing of vehicles through Marshall Leasing. The Group's businesses are integrated and include a total of 76 franchises covering 24 brands, operating from 68 sites across 19 counties in England. Its diverse portfolio means it represents manufacturer brands whose combined share of all new vehicle sales in the UK gives the Group the highest market coverage of any UK dealer group. In addition, the Group operates three trade parts businesses, two used car centres, two stand-alone bodyshops and a petrol forecourt.

With revenues of £1.2bn in 2015, the Group is the tenth largest dealer group in the UK.

In May 2015 the Group was recognised by the Great Place to Work Institute, being ranked the 26th best place to work in the UK (large company category).

Cautionary statement

This announcement contains unaudited information 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 MMH'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. 

Marshall Motor Holdings plc

Annual results for the year ended 31 December 2015

Chairman's Statement

Introduction

I am delighted to present our annual results for the year ended 31 December 2015 (the "Year"), our first as an independent public company. In April 2015 we successfully completed our listing on the AIM market of the London Stock Exchange ("Admission"), raising gross proceeds of £40m. This major milestone in the Company's 106 year history leaves us well positioned to exploit further growth opportunities in the future.

Strategy

Our vision to become the UK's premier automotive retail and leasing group remains and I am pleased to report considerable progress in each of the strategic pillars which underpin this vision. In particular, on 16 November 2015 we completed the acquisition of the entire issued share capital of SG Smith Holdings Limited ("SG Smith") for a cash consideration of approximately £24.0m. We are particularly pleased to have acquired this long established, family run business and we welcome our new colleagues to the Marshall Motor Holdings plc group of companies (the "Group"). The acquisition is in line with our stated strategy to grow scale with existing brand partners and extend our geographic footprint into new regions. The business is a good cultural fit for the Group and we are delighted to have significantly grown our relationship with Audi, strengthened our Skoda representation and extended our partnership with Mercedes-Benz in commercial vehicles.

Results

The Group has enjoyed another record year, delivering 13.5% revenue growth and 21.4% adjusted PBT growth despite absorbing significant additional costs as a result of our new public company status. Net cash at 31 December 2015 of £24.1m continues to underpin the balance sheet and, together with its unutilised £75m debt facility, leaves the Group well positioned to drive further organic and acquisitive growth.

Dividend

As stated at Admission, the Board intends to maintain a progressive dividend policy where dividends are covered between four to five times by underlying earnings. The Board is, therefore, pleased to recommend a final dividend of 2.40p per share which, with the pro-rata interim dividend of 0.58p per share, gives a total dividend for the Year ended 31 December 2015 of 2.98p per share. If approved by shareholders at our AGM on 24 May 2016, the final dividend will be paid by 27 May 2016 to shareholders who are on the Company's register at close of business on 22 April 2016.

People and partnerships

I have been able to visit over sixty of our dealerships since Admission and have been immensely impressed with the energy and commitment of the colleagues I have met.

We have excellent relationships with our brand partners which we value highly. Working in partnership with them we will drive further organic and acquisition related growth.

AGM

Our first annual general meeting as a public company will be held on 24 May 2016 and I look forward to meeting all shareholders who are able to attend.

Outlook

Trading in the current financial year has started in line with our expectations. Based on current market conditions and visibility of the important March plate change month, we continue to have confidence in delivering further material growth in 2016, in line with current expectations.

Finally, I would like to thank the Board, the executive team, our brand partners, business suppliers and colleagues throughout the Group for their support in what was an historic year for the Group.

Peter Johnson

Chairman

16 March 2016

Operating Review

Overview

I am delighted to report that the Group has delivered a record trading performance during the Year. Revenue of £1,232.8m was ahead of last year by 13.5% and adjusted PBT was up 21.4%. Both our retail and leasing segments have reported significant growth in profit before tax, up 29.0% and 24.0% respectively.

The UK economic and market backdrop has remained generally positive, providing a stable platform for further growth and development. Following three consecutive years of strong growth in the UK new car market, the rate of underlying growth has returned to more normalised levels. UK new car registrations in 2015 were 6.3% ahead of 2014 including self/dealer registrations. The strength of sterling in 2015 and slower growth rates in some overseas markets made the UK an attractive market for many of our brand partners.

Our strategy to become the UK's premier automotive and leasing group remains central to everything we do. We measure and monitor performance against our five strategic pillars of creating value for our shareholders through: class leading returns; putting our customers first; delivering retailing excellence for the benefit of our customers particularly with the use of technology; being people centric by focusing on employee engagement; and pursuing strategic growth both organically and through targeted acquisitions.

Class leading returns

During the Year the Group recorded new vehicle revenue growth of 17.1% (10.5% like-for-like) and used vehicle revenue growth of 11.2% (3.1% like-for-like).

The Group's retail segment showed strong growth in aftersales. Revenue grew by 8.5% aligned to a 12.8% improvement in margin. We benefitted from a growing UK vehicle parc (particularly in vehicles aged between 1-3 years old where customers typically return to franchised dealerships for aftersales services) and a number of continuing management initiatives.

The Group also made significant progress within its leasing segment with profitability up 24.0%. At 31 December 2015, the leasing fleet was 6,029 vehicles (31 December 2014: 6,031).

Customer first

The Group continues to enjoy high levels of customer advocacy. In 2015 43.1% of 28,755 customers surveyed who visited our showrooms indicated that they were either previous customers or were recommended to us. Plans are well advanced to launch our new website in the first half of 2016 which will provide additional content and functionality to support the customer journey.

Retailing excellence

We recognise the importance of the opportunities that exist from the use of technology to both attract customers and provide them with an enhanced retail experience. In particular, during the second half of the Year we commenced the implementation across the Group of a tablet-based enquiry management system which facilitates a seamless customer experience and assists compliance in the marketing and sale of ancillary products.

We have now completed the second iteration and roll out of "Phoenix", the Group's bespoke management information system. This in-house developed system provides real-time management information on all operational and financial aspects of the business and is a valuable tool in driving returns and competitive performance.

People centric

The Group has continued to focus on all aspects of colleague engagement and we were delighted that this was recognised by The Great Place to Work Institute in April 2015 with the Group being ranked amongst the best companies in the UK, including Capital One, Microsoft, Cisco Systems and the Hyatt Group.

Strategic growth

We will continue to grow scale with our existing brand partners and our strong balance sheet will facilitate further organic and acquisition related growth in new regions. Our acquisitive growth agenda has always been conducted by working in partnership with all of our brand partners.

I would like to take this opportunity to thank our brand partners for their continued support, particularly in respect of our Admission in 2015.

Retail segment

* mix calculation excludes internal revenue

Overview

During the Year the retail segment achieved a record profit before tax of £18.8m, a growth of 29.0% versus the same period last year.

During the Year the Group operated 76 franchise dealerships representing 24 manufacturer brands as well as a number of after sales and used car operations. The Group operates a well-balanced portfolio of volume, prestige and alternate premium brands giving it the highest market coverage of any UK dealer group. The Board believes this diversified spread of representation helps mitigate the effect of the cyclical nature of individual brand performance. In addition, the Group has significant headroom with a number of its manufacturer partners to achieve further scale in representation through future acquisitions in line with the Group's strategy.

Integration of acquisitions made in 2014

We have now successfully completed the integration of the three acquisitions made in 2014 all of which have made a positive contribution in 2015 and are performing in line with expectations.

Acquisition of SG Smith

In November 2015 we completed the acquisition of SG Smith, our first acquisition as a public company. This acquisition was in line with our stated strategy of growth with existing brand partners in new geographic territories.

This acquisition has significantly grown our relationship with Audi with four franchised dealerships in the attractive markets of Wimbledon, Coulsdon, Bexley and Beckenham along with an Audi approved used car centre in Sydenham. We have also strengthened our Skoda representation with the addition of Croydon Skoda and extended our partnership with Mercedes Benz in Commercial vehicles with an authorised repair facility in Croydon. In addition, the acquisition included two Volkswagen Group Trade Parts Specialist businesses in the South London area.

We expect this acquisition to be materially earnings enhancing in 2016.

Investment in existing businesses

In addition to the acquisition of SG Smith, we have undertaken significant investment in our existing portfolio with facility improvements at our Cambridge Ford Commercial Vehicles, Cambridge Peugeot, Milton Keynes Volvo, Taunton VW, Plymouth Audi and a number of our North West Mercedes-Benz sites.

Investment in new retail locations

Further material investment projects were progressed during the Year. In particular:

· In March 2015, we purchased the long leasehold interest of our Jaguar/Land Rover facility in Cambridge in preparation for the re-development of the site.

· In December 2015, we completed the purchase of land for development in Ipswich to support the establishment of a new Jaguar/Land Rover facility. This development is part of the reorganisation of the Jaguar/Land Rover Suffolk market area and will see the relocation of the Group's existing Halesworth Land Rover and Ipswich Jaguar dealerships to the new site.

· We exchanged contracts for (and in March 2016 subsequently completed) the purchase of land for development in Exeter to support the relocation of our Audi facility.

Each of these new facilities is expected to commence trading in the latter part of 2016. Whilst a period of disruption to these businesses is likely they are all expected to generate additional revenue and profitability over the medium to longer term.

Acquisitions

We continue to review a number of potential acquisition opportunities in line with our stated strategy to grow scale with existing brand partners and extend our geographic footprint into new regions. Our focus remains on ensuring a strong strategic and financial case for any transaction we seek to make, working with our brand partners.

New vehicles

During the Year, the Group increased its new car unit sales by 9.9% (like-for-like 7.2%). This strong performance was delivered against an overall year-on-year increase of 6.3% in new car registrations including self/dealer registrations, of which the private registration element of the UK market increased by 2.5% with fleet growing at 11.8%.

Market growth in new vehicle sales continues to be driven by the availability of low interest finance. Personal contract purchase ("PCP") with minimal or zero deposit requirements and affordable monthly payments have been instrumental in driving the new retail market. In addition, a weaker than expected economic recovery in the Eurozone and the strength of sterling in 2015, coupled with slower demand in certain overseas markets, have resulted in additional new vehicle supplies being drawn to the UK market.

Recent reductions in fuel costs, the introduction of more fuel efficient vehicles and a stable used car market have also played their part in driving new retail sales as consumers seek to access the benefits of new car ownership.

Total gross profit from new vehicles increased by 16.3%.

Used vehicles

During the Year, the Group increased its used car unit sales by 8.2% (like-for-like 1.5%).

The Group continues to operate a prudent 56 day stocking policy and continues to account for used car refurbishment and preparation costs at full retail rates. Whilst these policies impact the Group's reported margin in used cars, we consider these combined policies promote improved stock turnover, reduce residual value stock holding risk and ensure rigour in appraising and valuing part exchange vehicles acquired by the Group.

Used car gross margin at 7.2% was 0.5% up against the same period last year (2014: 6.7%) and remains a key area of opportunity moving forward. This was driven by both improved F&I performance and other point of sale initiatives. The Group continues to implement a number of incremental margin-driving initiatives including a greater focus on used vehicles aged between three to five years. These vehicles have a lower average selling price whilst maintaining similar levels of gross profit per unit and are attractive to consumers seeking reassurance and warranty protection from a franchised dealer.

Total gross profit from used vehicles increased by 19.8%.

Aftersales

During the Year, the Group increased aftersales revenue by 8.5% (like-for-like 2.4%).

Aftersales involves the servicing, maintenance and repair of vehicles. The Group operates two standalone body shops and one standalone petrol forecourt. Aftersales makes a significant financial contribution to the Group which is important in the context of a more cyclical new car market.

The aftersales market is highly dependent on the UK vehicle parc. The latest estimate from the Society of Motor Manufacturers and Traders is that the UK car parc currently stands at 31.9m vehicles, increasing over recent years as a result of the strong new car market.

In addition, increased penetration of service plans has supported market growth allowing customers to plan and budget for service costs with a higher level of certainty and ensuring repeat visits to the dealership. In addition to offering brand partner service plans, the Group operates its own-brand service plan covering both new and used vehicles. This represents a key area of focus for the Group moving forward.

The policy of charging full retail for preparation costs means our aftersales performance is strong which we believe acts as a defensive driver against any downturn. This strategy ensures the Group enjoys a significantly higher overhead absorption compared to the UK average.

Gross margin at 44.5% has also seen a significant improvement, up from 42.8% in the same period last year partly due to workshop efficiency, productivity improvements and management initiatives.

Leasing segment

During the Year the leasing segment achieved a record profit before tax of £4.9m, a growth of 24.0% versus the same period last year.

The leasing segment continues to focus on its business-to-business strategy, providing a service-led fleet management offering high added value service to clients. During the Year the Group successfully recruited a number of new clients and converted a number of existing clients to exclusive supply arrangements. The segment is fully integrated within the Group and wherever possible, sources new vehicles and de-fleets end of lease vehicles via the Group's retail segment. Of the 1,771 additions to the fleet, 1,335 were sourced via the Group's retail operation.

The client base of the leasing segment remains well diversified and balanced with no single customer representing more than 11.0% of the fleet and with the top 10 customers accounting for 44.0% of the fleet.

Robust risk management and control is a core discipline of the leasing segment's business model and the segment employs sophisticated techniques to monitor and control residual value risk. The used car market remained stable during the Year and management continues to monitor residual values closely.

The leasing fleet continues to be financed by asset-backed loans secured against the vehicles. The net book value of the fleet at 31 December 2015 was £62.5m against £51.4m of loans (2014: £58.3m against £47.0m of loans).

We believe that a prudent approach to residual value setting in the leasing fleet provides a sustainable and resilient model for the business. The leasing segment will therefore remain focused on recruiting and retaining clients through its service-driven offering.

Summary

2015 was an historic year for the Group. Our Admission in April 2015 facilitated our largest acquisition to date in November 2015. During the Year we also achieved record results in both our retail and leasing segments. We look forward to building on this success in 2016.

I would therefore like to join the Chairman in thanking our brand partners, business suppliers and my colleagues throughout the Group for their hard work and support and I look forward to continuing to work with them in the coming year.

Daksh Gupta

Chief Executive

16 March 2016

Financial Review

Group results

Turnover £1,232.8m

2014: £1,085.9m

Group turnover increased by 13.5% to £1,232.8m (2014: £1,085.9m). Like-for-like revenues showed pleasing growth of 6.5%. Revenues in new, used and aftersales all recorded growth against the same period last year.

Gross margin at 11.8% is 0.2% up on the prior year (2014: 11.6%). An increase in the mix of lower margin new vehicles (particularly fleet) has been more than offset by margin improvements in used vehicles and aftersales.

Operating expenses of £127.1m were 14.5% higher than in the same period last year principally driven by the growth of the business through acquisitions but allied to the anticipated increase in the unallocated segment costs as a result of our new public company status. Within our retail segment operating overheads on a like-for-like basis grew by 5.8%.

Adjusted profit before tax at £15.8m was 21.4% ahead of last year. This was achieved through a combination of organic performance improvement, full year contributions from acquisitions and portfolio management undertaken in 2014.

The retail and leasing segments showed PBT growth of 29.0% and 24.0% respectively which represented record results for each segment.

The unallocated segment consists principally of administrative and asset management functions which are not directly attributable to the Group's retail or leasing segment. The unallocated segment recorded a loss of £7.8m which was, as previously highlighted at the time of our interim results, £2.4m higher than the same period last year. This was driven in part by the first time occurrence of on going costs to support our new public company status and a one-off cost relating to the settlement of historic, pre-Admission long term incentive plan liabilities.

During the period the Directors reassessed the economic life of freehold buildings to 50 years. This change in estimate resulted in a reduction in the depreciation charge for the year of £0.5m.

Finance costs and taxation

Finance costs: £2.9m

2014: £2.4m

Finance costs of £2.9m were £0.5m higher than the same period last year, reflecting increased costs associated with the Group's unutilised £75m revolving credit facility, including amortisation of arrangement fees and non-utilisation charges. The Group has also incurred higher stock funding costs driven by additional working capital requirements in line with the significant revenue growth of the Group.

At 23.8%, the effective tax rate is above last year (2014: 22.9%) partly as a result of disallowable acquisition expenses.

Acquisitions

Spend (net of cash acquired): £21.5m

2014: £15.8m

On 16 November 2015 the Group acquired the entire issued share capital of SG Smith for approximately £24.0m. The consideration included approximately £9.1m in respect of the total net assets and £15.8m in respect of goodwill (after adjusting for deferred tax arising on IFRS conversion).

The net assets included approximately £6.8m of property, plant and equipment and £2.5m of cash. The net assets are subject to finalisation of completion accounts.

The Group incurred £0.5m of transaction costs in relation to this acquisition. These costs are presented separately on the face of the Income Statement and are excluded from adjusted profit before tax.

Cash flow

Net increase in cash: £22.3m

2014: £0.1m

Total cash inflow in the Year was £22.3m (2014: £0.1m).

The Group received net proceeds from the Admission of £36.9m after charging certain fees and expenses in relation to the Admission to the share premium account. As part of the Admission process the Group separated from its former parent's treasury arrangements through a number of related transactions which were described in the Admission document (available on the Company's website at www.mmhplc.com).

Excluding the impact of all Admission related transactions and the acquisition of SG Smith, the underlying total cash inflow of the Group in the Year was £8.3m, after retail capital expenditure of £9.8m. The Group has planned for a significant increase in retail capital expenditure during 2016 to support facility developments, particularly in Jaguar/Land Rover and Audi. As at 31 December 2015, the Group had capital commitments totalling £10.8m.

Total inventory at 31 December 2015 was £240.6m (2014: £163.0m) including £29.2m relating to SG Smith. As reported at the time of the Group's interim results, increases to inventory are primarily being driven by increases in new consignment stock to support new products. At the period end the Group had £186.2m of vehicle financing arrangements (2014: £110.5m) in relation to its total inventory holding. At 31 December 2015, the Group had £49.4m of fully paid and unencumbered inventory providing further balance sheet strength.

Net cash

£24.1m

2014: £1.8m

Net cash at 31 December 2015 was £24.1m. Including the £51.4m asset-backed loans within the leasing segment, total net debt was £27.2m.

A new £75m three year banking facility was put in place in March 2015 for general corporate purposes including acquisitions and working capital requirements. The facility remains undrawn providing significant resources to fund organic and acquisitive growth opportunities. The facility agreement contains a £25m extension option which is available by agreement with the two lending banks. The Group is also able to extend the term of the facility by up to 12 months.

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 continues to target net bank indebtedness (excluding leasing segment loans) of not more than 1.25x net debt/EBITDA. 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 and provided a clear plan exists to achieve reduction in the target over the investment cycle.

Dividends

The Board is pleased to recommend a final dividend of 2.40p per share, which, with the pro-rata interim dividend of 0.58p per share gives a total dividend for the Year of 2.98p per share. If approved by shareholders, the dividend will be paid by 27 May 2016 to shareholders who are on the company's register at close of business on 22 April 2016. As set out in our Admission document, the Board intends to maintain a progressive dividend policy where dividends are covered between 4 to 5 times underlying earnings.

Mark Raban

Chief Financial Officer

16 March 2016

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2015

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 December 2015

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2015

NOTES TO THE FINANCIAL INFORMATION

For the year ended 31 December 2015

1. General information

Marshall Motor Holdings PLC (the 'Company') is a company which is quoted on the AIM market, and incorporated and domiciled in the UK. The address of the registered office is: Airport House, The Airport, Cambridge, CB5 8RY. The Company is the holding company of Marshall Motor Group Limited and its subsidiaries (collectively, the "Group"), whose activities consist principally of car and commercial vehicle sales, leasing, distribution, service and associated activities trading under the name Marshall Motor Holdings PLC. The registered number of the company is 2051461.

The condensed consolidated financial information for the year to 31 December 2015 has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRS") as adopted for use in the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The accounting policies applied are consistent with those set out in the Marshall Motor Holdings plc Placing and Admission to AIM document published on 30 March 2015.

The financial information contained within this preliminary announcement for the years to 31 December 2015 and 31 December 2014 does not comprise statutory financial statekements within the meaning of section 434 of the Companies Act 2006. Statutory accounts, prepared under UK GAAP, for the year to 31 December 2014 have been filed with the Registrar of Companies and those for the year to 31 December 2015 will be filed following the Company's annual general meeting. The auditors' reports on the statutory accounts for the years to 31 December 2015 and 31 December 2014 are unqualified, do not draw attention to any matters by way of emphasis, and do not contain any statement under section 498 of the Companies Act 2006.

A copy of the full Group accounts that comply with IFRSs for the period ended 31 December 2015 can be found at www.mmhplc.com from 21st March 2016.

'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.

2. Going concern

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 the financial statements are signed. For these reasons they continue to adopt the going concern basis in preparing the Group's financial statements.

In preparing the preliminary announcement, the Directors have also made reasonable and prudent judgements and estimates and prepared the preliminary announcement on the going concern basis. The preliminary announcement and management report contained herein give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group.

3. Segmental information

Management has determined the operating segments based on the operating reports reviewed by the Chief Executive Officer that are used to assess both performance and strategic decisions. These results have been determined using consistent accounting policies as the overall financial statements. Management has identified that the Chief Executive Officer is the chief operating decision maker in accordance with the requirements of IFRS 8 'Operating Segments'.

The business is split into two main operating segments generating revenue and a third support segment. No significant judgements have been made in determining the reporting segments.

· Retail - sales and servicing of motor vehicles and ancillary services.

· Leasing - leasing of vehicles to end consumers and fleet customers.

· Unallocated - administrative and asset management functions in support of the wider business.

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, leasing, vehicle service and other related services. All revenue is generated in the UK. Depreciation presented in the segmental note is restricted to assets other than assets held for contract rental, on the basis that depreciation on our leasing fleet is presented within cost of sales.

Segmental information (continued)

Retail revenue is derived from a number of service lines, principally being new vehicle sales and aftersales, as set out below.

4. Operating expenses

£982,000 of the management charges from Marshall of Cambridge (Holdings) Limited in 2015 are related to pre-admission costs.

5. Finance costs

6. Taxation

7. Earnings per share

Basic and diluted earnings per share are calculated by dividing the earnings attributable to equity shareholders by the weighted average number of ordinary shares during the year or the diluted weighted average number of ordinary shares in issue in the year.

The diluted earnings per share are based on the weighted average number of shares after taking account of the dilutive impact of shares under option of 1,929,528 (2014: nil).

For the year ended 31 December 2014 the weighted average number of ordinary shares in issue for the basic and diluted earnings per share has been adjusted to reflect the impact of the sub-division of shares in 2015.

8. Dividends

A final dividend of £15,000,000 for the year ended 31 December 2014 was paid in March 2015 before Admission. This represented a payment of 666.67p per share in issue at that time and 426.67p per share after adjustment to reflect the impact of the sub-division of shares.

An interim dividend in respect of the year ended 31 December 2015 of £448,000 was paid on 25 September 2015.

A final dividend of 2.40p per share in respect of the year ended 31 December 2015 is to be proposed at the annual general meeting to be held on 24 May 2016. The ex-dividend date will be 21 April 2016 and the associated record date will be 22 April 2016. This dividend will be paid subject shareholder approval on 27 May 2016 and these financial statements do not reflect this final dividend payable.

9. Called up share capital and share premium

On 27 March 2015 30 million ordinary shares of 100p each were issued at par and subsequently the entire share capital of the Company was subdivided into 50,390,625 ordinary shares of 64p each.

On 2 April 2015 26,845,638 new ordinary shares of 64p each were issued at 149p each. The premium arising on issue is shown net of transaction costs amounting to £3.1 million.

All shares issued are fully paid.

10. Intangible assets

Goodwill

On 16 November 2015 the Company acquired the entire share capital of SG Smith Holdings Limited ('SGS'). SGS itself is the holding company of 9 wholly owned subsidiary companies, SG Smith Automotive Limited, SG Smith (Motors) Limited, SG Smith (Motors) Beckenham Limited, SG Smith (Motors) Forest Hill Limited, SG Smith (Motors) Crown Point Limited, SG Smith (Motors) Sydenham Limited, SG Smith (Motors) Croydon Limited, SG Smith Trade Parts Limited and Prep-Point Limited. The companies acquired operate Audi, Skoda and Mercedes-Benz Commercial dealerships and service centres in Kent, Surrey and London.

Intangible assets (continued)

The estimated net assets at the date of acquisition are stated at their provisional fair value as set out below.

The estimated net assets above have been estimated by the directors at the point of preparing these financial statements and are subject to the completion of the fair value exercise.

11. Property, plant and equipment

Property, plant and equipment (continued)

During the year ended 31 December 2015 the Directors reassessed the depreciable life of freehold buildings to 50 years (previously 25 years). This change in estimate resulted in a reduction in the depreciation charge for the year of £530,000.

As at 31 December 2015, the Group had capital commitments totalling £10.8m relating to new retail sites at Cambridge Jaguar Land Rover and Ipswich Jaguar Land Rover. After the year end, the Group made further capital commitments of £6.9m (inclusive of land purchase) relating to a new retail site at Exeter Audi.