Marshall Motor : Strategic Disposal of Marshall Leasing

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 £42.5m. 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 £101.1m. 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 £4.6m.

· 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 £196.7m, equivalent to 254p per share (actual net assets at 30 June 2017: £158.0m, 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 Groupremains 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 £39.3m, an underlying profit before tax of £4.9m and profit after tax of £3.7m. In the six months ended 30 June 2017, MLL generated an underlying profit before tax of £2.4m (H1 16: £2.7m).

As at 30 June 2017, MLL had gross assets of £95.0m and net assets of £19.8m. 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 £1.1m.

As at 30 June 2017, the Group's reported net debt was £101.1m. 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 £196.7m (equivalent to 254p per share) and pro forma net cash of approximately £4.6m.

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 £42.5m 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 £0.5m.

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 £1.0m 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 £1.7m 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:

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.