Q1: Marshall Motor Holdings released its annual results the other day, can you talk us through the highlights?
A1: So, the results were slightly ahead of our expectations. They delivered an adjusted PBT of £29.1 million which was ahead of our £29 million which we’d upgraded twice during the course of the year and that was ahead 14.4% year-on-year which was a good performance.
The company delivered 20% revenue growth, EBIT was up 15% and earnings was up 18% year-on-year as well, the earnings number was 9% ahead of our forecast owing to a lower tax rate, the dividend was bang in line with our forecast of 6.4p and that was up 16.4% year-on-year.
Following the disposal of Marshall Leasing earlier on in the year, net debt fell from £119 million to £2.2 million and that was better than our £4.9 million forecast, so the balance sheet is extremely strong at the moment as well which is clearly good news.
Q2: What were the key drivers behind those results?
A2: I’d say the key highlight was probably their performance in used cars so that was up 5.2% on a like-for-like basis or 17.1% year-on-year. Clearly, the Ridgeway acquisition played a key role, but I think the like-for-like performance was very strong particularly in the context of the market down about 1%.
In terms of new, again, they did benefit from the Ridgeway integration during the course of the year so new retail sales were up 12%, like-for-likes were down 2.6% but the market was down nearly 7% so again, for that performance there.
After sales revenues were up 2% on a like-for-like basis as well, I’d also point towards gross margins being slightly ahead year-on-year which I think is a particularly good performance in the context of a very tough second half during the calendar year 2017.
Q3: Has these changed your forecasts in any way?
A3: No, so we have been cautious particularly during the first quarter of the year and there is clearly a lot of uncertainty around at the moment as well, so we have left our forecast assumptions unchanged at this juncture. However, given the performance that they’ve delivered today, and they’ve got a strong balance sheet as well, then I think they’re relatively well-positioned in the sector. They’ve also indicated that current trading is line of expectations, ahead of the key period of March so we’re leaving things unchanged at the moment.
Q4: What can you tell us in terms of valuation for Marshall Motor Holdings?
A4: Our forecasts are slightly below consensus, the stock is trading on about 7.5 times PE, EV/EBITDA below 4 times and the dividend yields in excess of 4% as well so the valuation remains at a slight discount to the sector which is on depressed multiples at the moment.
I’d also make the point about the asset backing within the balance sheet so freehold and non-leasehold assets account for about 146p per share, so the current share price is significantly underpinned really by its property efforts at the moment.