Marshall Motor Holdings — Trading ahead of expectations

Marshall Motor Holdings (LN: MMH)

Last close As at 27/03/2024

394.00

0.00 (0.00%)

Market capitalisation

308m

More on this equity

Research: Industrials

Marshall Motor Holdings — Trading ahead of expectations

Marshall Motor Holdings (MMH) released a pre-close interim trading statement indicating that strong trading performance has continued in the current year, despite several potential pitfalls. As a result, we are raising our estimates for the current year and expect continued progress in FY18. The better-than-expected development leaves our fair value estimate unchanged at 214p, progress towards which should become apparent as the delivery of the growth strategy continues despite market concerns.

Andy Chambers

Written by

Andy Chambers

Director, Industrials

Industrials

Marshall Motor Holdings

Trading ahead of expectations

Pre-close interim statement

Automotive retail

4 July 2017

Price

135.50p

Market cap

£105m

Adjusted net debt (£m) at 31 December 2016

54.5

Shares in issue

77.4m

Free float

34.9%

Code

MMH

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(10.6)

(20.3)

(17.1)

Rel (local)

(8.0)

(20.5)

(27.2)

52-week high/low

178.5p

133.5p

Business description

Marshall Motor is the seventh largest UK motor retailer, operating 103 franchises spread across 24 brands at 89 locations. It is one of six UK dealership groups that represent each of the top five volume and premium brands. The group has a strong presence in eastern and southern England.

Next events

Interim results

15 August 2017

Analysts

Andy Chambers

+44 (0)20 3681 2525

Roger Johnston

+44 (0)20 3077 5722

Marshall Motor Holdings is a research client of Edison Investment Research Limited

Marshall Motor Holdings (MMH) released a pre-close interim trading statement indicating that strong trading performance has continued in the current year, despite several potential pitfalls. As a result, we are raising our estimates for the current year and expect continued progress in FY18. The better-than-expected development leaves our fair value estimate unchanged at 214p, progress towards which should become apparent as the delivery of the growth strategy continues despite market concerns.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/15

1,232.8

15.8

15.8

2.98

8.6

2.2

12/16

1,899.4

25.4

26.2

5.50

5.2

4.1

12/17e

2,271.1

28.3

28.6

5.80

4.7

4.3

12/18e

2,296.5

28.9

29.2

6.00

4.6

4.4

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.

Strong Retail performance

The Retail division has had a strong H1, allowing for the additional five months’ consolidation of Ridgeway. The improvement stems from better-than-expected like-for-like new car sales, where private retail sales at MMH held up against the 4.2% decline in the UK market through May. Lower-margin new car fleet sales were softer. Used car sales showed good growth, although there was some margin pressure. More importantly, high-margin aftersales revenues continued to grow. The small Leasing segment saw reduced vehicle disposal revenues, which fed through to profits. The outlook for H217 remains cautious. Economic factors, diesel demonization, negative press around the use of personal contract plans and Brexit fears are all adversely affecting sentiment. We feel the underlying economic picture remains robust at present but will see how car sales develop in H2.

Increasing FY17e EPS by 7%

We have increased our forecast modestly reflecting the positive developments. The additional contribution from Ridgeway and healthier used car sales had largely been expected, but the strength in the Retail segment more than offset lower vehicle disposals in the much smaller Leasing business. We thus increase group revenues by around £8m for the current year. The positive margin gain in new cars together with the higher aftersales activity has led us to increase margins for the overall Retail segment. We increase our FY17e EPS by 7% from 26.8p to 28.6p and FY18e EPS by 6% from 27.5p to 29.2p. Adjusted net debt is also forecast to be some £1m better than when we initiated due to the modest portfolio adjustments.

Valuation: Progress should alleviate concerns

The market continues to worry about a downturn in the UK car market, but MMH seems to be executing well on its growth strategy nevertheless. The 20% decline in the shares since we initiated in mid May looks unwarranted given today’s news. Our fair value estimate of 214p remains unchanged since we initiated, due to the better than expected trading so far this year and a lower average peer FY18e P/E.

Financial summary

Exhibit 1: Financial summary

£m

2015

2016

2017e

2018e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

1,232.8

1,899.4

2,271.1

2,296.5

Cost of Sales

(1,087.5)

(1,678.9)

(2,003.1)

(2,025.5)

Gross Profit

145.3

220.5

268.0

271.0

EBITDA

 

 

22.8

38.6

44.7

44.9

Operating Profit (before amort. and except.)

 

 

18.7

32.3

37.1

37.7

Intangible Amortisation

(0.2)

(0.3)

(0.3)

(0.4)

Exceptionals

(0.5)

(3.3)

(0.1)

(0.1)

Other

0.0

0.0

0.0

0.0

Operating Profit

18.0

28.8

36.7

37.3

Net Interest

(2.9)

(6.9)

(8.9)

(8.8)

Profit Before Tax (norm)

 

 

15.8

25.4

28.3

28.9

Profit Before Tax (FRS 3)

 

 

15.1

21.9

27.9

28.4

Tax

(3.6)

(4.4)

(6.2)

(6.3)

Profit After Tax (norm)

9.4

20.2

22.1

22.5

Profit After Tax (FRS 3)

11.5

17.5

21.7

22.1

Average Number of Shares Outstanding (m)

59.4

77.2

77.2

77.2

EPS - normalised (p)

 

 

15.8

26.2

28.6

29.2

EPS - normalised and fully diluted (p)

 

 

15.3

25.5

27.9

28.5

EPS - (IFRS) (p)

 

 

19.3

22.6

28.1

28.6

Dividend per share (p)

3.0

5.5

5.8

6.0

Gross Margin (%)

11.8

11.6

11.8

11.8

EBITDA Margin (%)

1.8

2.0

2.0

2.0

Operating Margin (before GW and except.) (%)

1.5

1.7

1.6

1.6

BALANCE SHEET

Fixed Assets

 

 

150.0

326.4

353.7

380.3

Intangible Assets

40.8

122.0

122.2

122.2

Tangible Assets

109.2

204.4

231.6

258.1

Investments

0.0

0.0

0.0

0.0

Current Assets

 

 

307.5

475.2

483.1

476.1

Stocks

240.6

380.0

386.1

382.6

Debtors

28.9

71.0

68.1

64.3

Cash

24.1

0.1

0.1

0.1

Other

13.9

24.1

28.8

29.1

Current Liabilities

 

 

(290.1)

(584.9)

(525.0)

(535.5)

Creditors

(263.4)

(507.2)

(525.0)

(535.5)

Short term borrowings

(26.7)

(77.7)

0.0

0.0

Long Term Liabilities

 

 

(37.6)

(71.1)

(148.7)

(139.9)

Long term borrowings

(24.7)

(41.4)

(119.0)

(110.3)

Other long term liabilities

(12.9)

(29.7)

(29.7)

(29.6)

Net Assets

 

 

129.9

145.7

163.2

181.1

CASH FLOW

Operating Cash Flow

 

 

29.6

98.9

65.9

75.5

Net Interest

(1.1)

(1.4)

(2.9)

(3.8)

Tax

(3.0)

(17.3)

(6.2)

(6.3)

Capex

(39.6)

(61.9)

(66.4)

(65.1)

Acquisitions/disposals

(21.5)

(91.4)

1.0

0.0

Financing

66.9

0.0

0.0

0.0

Dividends

(15.4)

(3.3)

(4.3)

(4.6)

Other

8.6

(15.5)

13.0

13.0

Net Cash Flow

24.5

(91.8)

0.1

8.7

Opening net debt/(cash)

 

 

51.7

27.2

119.0

118.9

HP finance leases initiated

0.0

0.0

0.0

0.0

Other

0.0

0.0

0.0

(0.0)

Closing net debt/(cash)

27.2

119.0

118.9

110.2

Source: Marshall Motor Holdings reports, Edison Investment Research estimates

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Marshall Motor Holdings and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Marshall Motor Holdings and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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