Q1: Marshall Motor Holdings, they’ve provided year end result today, can you talk us through them?
A1: The company delivered final results to December ’18, they were anticipated so just the PBT came in at 1% above our expectations at £25.7 million that was a new record set for the business, and they exceeded last year’s record.
Revenues were broadly in line with our forecasts, EBITA was slightly below but low interest costs ensured that they exceeded our PBT expectations. Cash conversation again was very strong, 88%, net debt was a little bit high versus our forecast but again, we’re looking at about £5 million of net debt so fairly modest and that’s in the context of nearly £24 million of capital investment they’ve spent in the core estate this year as well.
The balance sheet is very strong, you’ve got net assets of just £200 million which equates to 2.57p per share and the Return of Capital Employed pre-tax was a very respectable 12.8%.
So, the key positive in the financials was the dividend and they’ve moved that to a cover range of 2.5-3.5 times from 4-5 previously and the dividend was up 33% year-on-year and 22% ahead of our forecasts.
Q2: What key themes did you note in the results?
A2: The performance in used cars was really strong, we saw like-for-like revenues up 8% and that was also backed with a 32 basis points improvements in margins, we think that’s a very credible performance. Aftersales also delivered growth of around 2% in terms of like-for-like revenues.
New cars were tough, as we expected, revenues were down 4.5% on a like-for-like basis, however I think that showed good outperformance against the market following the impact of WLTP in diesels. They did also manage to maintain margins there as well which we felt was a good performance given the exposure they’ve got to premium diesel brands. They also showed good evidence of cost management as well which was good to see.
Q3: Has this meant that you’ve had to adjust your forecasts in any way?
A3: No, our 2019 and 2020 forecasts are at the lower end of the consensus range, I think my estimate would expect to beat the numbers that they have in the market at the moment but given the ongoing political and economic uncertainty, we’ve decided to hold them at the moment.
Net debt forecast did move up a little bit due to the high dividend etc. but this is a business that should be generating at least £10 million of free cash flow on a normalised basis therefore wet think that’s pretty attractive given where the share price is at present.
Q4: Talking about company attraction, how do you view the Marshall Motors Holdings valuation at the moment?
A4: The company is still trading on a PE of 8 times and EV/EBITDA below 4 times, and that’s on below consensus forecasts, it’s got over £100 million of freehold and long leasehold assets as well so very strong asset backing. We’ve seen the dividend yield of 5% that they declared today and free cash generation at circa 10% so it looks attractive to us in a number of ways at present.