Q1: Marshall Motor Holdings have announced today the disposal of its Marshall Leasing, can you talk us through that?
A1: The company undertook a strategic review of the business towards the end of last year, they’ve agreed to sell the leasing business to Bank of Ireland. The gross cash consideration is £42 million and that equates to 11.5 times 2016 earnings which we think is a good price and certainly a higher price than where the shares are currently trading. I think the decision to do this is very sensible, I think it gives them a cleaner business model, significantly gives them more flexibility in the balance sheet and they will have proforma net cash, post this, to their disposal. So, I think it’s a very good move strategically and I think they’ve achieved a good financial outcome on this as well.
Q2: I spoke with Mark Raban, the CFO, a little earlier and he said the effect on the balance sheet was transformational, does this have any effect on your forecasts?
A2: It will, I think we’ll wait until the deal actually completes but yes, the deal will be transformational, they will be left with a non-geared balance sheet as well and I think also they’ll face less risks from residual values so I think it’s transformational in a number of ways and it does set the business up.
So, we think the deal will initially be dilutive next year, marginally, because of the good financial contribution this business made but I think the clarity and the strength of the balance sheet more than outweighs that factor. We would expect there to be a marginal dilutive impact on the back of this deposal.
Q3: Finally, what are your thoughts on the stock at the moment for Marshall Motor Holdings?
A3: I think with the sector, it looks very oversold to us, Marshall looks cheap as well, I think the cash consideration is about 35% of the current market cap. They’ve got a very strong balance sheet, they’ve got a good track record of making acquisitions and integrating them so I think it is an interesting stock within the sector at the moment. I think this move this morning should help them secure better quality medium-term growth with a strong balance sheet in an uncertain time in the sector.