Q1: Marshall Motor Holdings have released interim results for the six months ended 30th June, what key features did you note in the H1 results?
A1: Clearly, trading did deteriorate sharply when the dealerships were shut from 23rd March until 1st June, there were 62 strategic sites which remained open to support key workers, essential services etc. The upshot is revenues declined by 24% during the period and the generated a loss before tax of £8.9 million.
However, you’ve got to put it into context that impact of declared closure during lockdown was £26 million on the bottom line. The cost of furloughing staff was about £18 million of which they recouped £16 million from the government and then there were additional COVID closure costs on top of that as well. So, clearly a difficult period and I think they actually did well to contain their losses at that level.
The other point I’d probably make is just the cash management in the business was very strong in the context of the environment so adjusted net cash at the end of the period was £27.4 million. They’ve got a £125 million revolving credit facility so they’ve managed cash in this difficult period.
Q2: How do you view the outlook for the company?
A2: The company has shown the ability to outperform in the new and used car markets and aftersales if you look at their margins in the first half are very strong as well so they naturally tend to outperform the market.
I think we’ve definitely seen pent up demand since dealerships have been open and that’s continued to where we stand today. The company commented that the September order book was also encouraging as well, which is good news.
I think you can’t get away from the fact that you’re dealing in uncertain economic times and as we get through to September, the economic uncertainty, you’d be cautious about it on the fourth quarter of the year.
Quite frankly, looking beyond that, it’s pretty difficult in the sector at the moment particularly with Brexit on the horizon as well so a mixture of the uncertain environment that we’re in at the moment. I think Brexit will distort a lot of the supply and demand dynamics in the industry so their visibility is limited at the moment.
Q3: With that in mind, what are you thoughts on Marshall Motor Holdings in terms of an investment?
A3: I think the company has got a really good platform, they’ve got a strong track record of outperformance, they’ve got a very strong M&A track record as well. I think if you look, they represent nearly 18% of the brand in the UK market with some brands there an even player but it might still be less than 10% of the overall network.
I think the impact of COVID on the industry is going to cause more distress, I think we’ll get more capacity that comes out of the market and I think there are very few larger groups that are well capitalised to grow in this environment.
MMH is definitely one of those businesses, they’ve got the financial resources and the track record to successfully consolidate so I think there’s a lot of opportunity for the company, I think investors should take comfort in the platform that it’s developed and I’m sure they’ll want to expand upon that going forward.