# Marshall Motor Holdings PLC Q&A with Zeus Capital (LON:MMH)

- Link: https://www.directorstalkinterviews.com/marshall-motor-holdings-plc-qa-zeus-capital-lonmmh/412742267
- Published: 2017-12-15T11:32:38+00:00
- Author: Amilia Stone

**Marshall Motor Holdings PLC** ([LON:MMH](https://www.directorstalkinterviews.com/company/marshall-motor-holdings/mmh.l))
is the topic of conversation when Zeus Capital’s Head of Research Mike Allen caught
up with DirectorsTalk for an exclusive interview

 

**Q1: Now, Marshall Motors, they’ve recently made some changes to their portfolio,
can you talk us through the changes that they’ve made?**

**A1**: Yes, of course. So, they’ve made a couple of changes in the run up to the
year-end, first of all they agreed to sell their leasing business to Bank of Ireland,
that has now been approved by the FCA and they’ve agreed a gross cash consideration
of £42.5 million, that’s 11.5 times 2016 earnings which we felt was a good price.
The net cash proceeds of that will be to reduce the existing levels of debt and 
they are settling a pension liability with that as well.

The other transaction is a portfolio update really, so they’ve closed five franchise
dealerships and one used car centre and those businesses were loss-making at the
moment and the closure costs on that is about £6 million. Again, we think that’s
a good move in terms of cleaning up the portfolio and looking at driving quality
returns from what they’ve got so we think both are good moves.

 

**Q2: Do these changes change your forecast in any way?**

**A2**: They do, so they combine effect on our 2018 numbers is to reduce earnings
by about 15% in 2018 and 2019, however the total net debt falls by over 80% so we
think strategically, particularly on certain points in the cycle as well, that’s
a sensible move.

 

**Q3: So, just to round up, what’s your view on the Marshall Motor Holdings stock
at the moment?**

**A3**: We accept that the trading conditions will get difficult for the dealers
from here, but we do think a lot has been priced in and there’s good asset backing
in that sector as well. I think, the case of Marshall Motors, it still trades at
a discount to the sectors so it’s on a PE of about 7 times but with a much stronger
balance sheet going into that as well.

So, we do think the sector is poised for more difficult trading, but we think a 
lot of that has been priced in and there is potential for Marshall to catch up with
the sector rating in terms of the portfolio changes that they’ve made.

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