Q1: Now, Marshall Motor have just put out a pretty impressive trading update especially given how the sector is trading as a whole. Can you outline for us the statement?
A1: So, they put out a pre-close trading update this morning, they’ve confirmed that they’re trading ahead of expectations to December 2017, that’s the second time they’ve done it in the last 6 months which is impressive given some of the pressures we’re seeing at the moment.
They have delivered some good like-for-like performance in the second half of the year which ended up being slightly better than what we initially forecast. They have disposed of the leasing business which we think has been a good move and that does really clean up its balance sheet as well, so they look well positioned.
Q2: Has this changed your forecast in any way?
A2: Well, we changed our 2017 forecast to reflect the guidance that the company have given us, so we were previously on an adjusted PBT of £28 million in 2017, we’ve pushed that up 4% to £29 million. As a consequence, the net debt position also falls slightly as well so we expect them to have minimum debt of below £5 million in 2017 as a result of that leasing disposal.
Q3: Finally, what’s your view on Marshall Motor’s stock as an investment?
A3: I think it’s right to be cautious on the industry, particularly in the first quarter of this year, we do face a very tough comparator in March where that was a record last year as we had the pull forward from the VED issue.
I think we are definitely seeing pressures in the industry however I do think the valuation of the sector is reflecting that and I think Marshall Motor Holdings does trade at a very clear PE and EV/EVITDA discount to the UK dealer average in 2017 and the discount there is in excess of 30%. The discount does narrow as we go into 2018 and there is an element of unchartered waters there really, but I think on our 2018 numbers, which we haven’t changed because we are cautious going into this year.
Marshall is trading on a PE of just over 7 times, the EV/EBITDA below 4 times and a progressive yield in excess of 4% as well with a clean balance sheet post the disposal so I think there will be pressures in the industry but given their brand mix and where they’re located as well, I think they are well positioned.