Q1: Now Mike, Marshall Motor Holdings, they’ve just put out their pre-close statement, what are your thoughts on the trading update?
A1: I think it’s a strong statement, it confirms a very good first half performance and that was particularly driven by a very strong first quarter of the year, I think that’s a record for the industry as well. The company have indicated that they’re trading ahead of expectations for the full year, they had delivered modest like-for-like growth across the core divisions and the Ridgeway acquisition that they made last year has made a very strong contribution as well which is positive. The leasing business has experienced good profitability although we think that’ll be down slightly year-on-year but last year was an exceptional performance for that division.
Q2: Being a positive update, does this mean that you’ve made some adjustments to your forecast?
A2: Yes, we have. We’ve upgraded our 17/18 EPS forecast by about 6%-7% so for the first half we’re expecting PBT of £18 million versus £14 million last year and most of that is made up from Ridgeway and the timing impact of having that in the full period. Our revised upgraded forecast does imply that H2 will be down year-on-year and that reflects our view of tougher market conditions so we have increased the forecast to reflect the strong run rate in the first half but I still think we’re being cautious in the second half, just given the greater levels of uncertainty.
Q3: So, what are your thoughts on the stock at the moment then for Marshall Motor Holdings PLC?
A3: We think that the shares look very cheap at the moment, if you look at it on a perspective PE basis i.e. through to December ’17, PE is on below 5 times at the moment and the dividend yield is approaching 5% as well. If you look at the current market cap of the business, that’s more than backed by freehold and long-lease hold assets as at the 2016 balance sheet position.
So, I think clearly it is the cheapest motor retail stock at the moment, it doesn’t have as much liquidity as the others and the free float is low but I think on these multiples the share price does look compelling at the moment. The business is delivering against a tougher trading backdrop and the integration of the major acquisition last year appears to be going very well.