Marshall Motors Holdings PLC Q&A: Interim Results (LON:MMH)

Marshall Motor Holdings Plc

Marshall Motors Holdings PLC (LON:MMH) Chief Executive Officer Daksh Gupta caught up with DirectorsTalk for an exclusive interview to discuss their interim results for the six months ended 30 June 2017

 

Q1: We saw the delivery of your interim results today, what are the highlights from these results?

A1: Ok, well we’re delighted this morning to announce that the group has delivered another set of record results, this is both at revenue & PBT level, our revenues were up 43.7% & our Profit Before Tax at £18.6 million was up 32.9%. I’m particularly pleased with our like-for-like performance where we saw overall revenues up 6.7%, in additional all of our retail revenue streams also enjoyed good like-for-like growth which helps drive our retail segment to a PBT growth of 38.2%. Our leasing business has performed well & we continue to enjoy good levels of profitability & all of this really gave the Board confidence to approve an interim dividend of 2.15p which was up 19.4% against the prior year.

 

Q2: So, how have Marshall Motors managed to deliver another record performance?

A2: Well, I think it’s worth saying that since IPO in 2015, we’ve delivered a step change in our financial performance, our revenue in 2014 was £1.1 billion & by 2017, we will have more than doubled that. We’re really pleased with the first half performance, as we said, & we really continue that trend, as we said revenue up 43.7% & PBT up 32.9%.

The key drivers of this really was the contributions from Ridgeway & that contributed in the first half of the year, £5.4 million, worth mentioning that on a like -for-like basis, we did benefit from £1 million profit from Ridgeway as we acquired in May last year. So, the contribution effectively was £4.4 million this year which meant our retail segment actually delivered an operating improvement of £1.4 million so particularly pleased with that performance. Really, this has been on the back of Marshall Motors’ strategy around partnering with the right brand, we now have 50% of the portfolio is premium & it’s about n focussing on driving that quality of earnings. It hasn’t just been however an acquisitions story, our like-for-like revenue growth was 6.7%, when you look at all of our key KPI’s, new was up 6.7% from a revenue perspective, significantly outperforming the UK market which of course, as you know, was down, used was up 8.1% & after-sales was up 2.3%.

 

Q3: How is your balance sheet looking 12 months after Ridgeway?

A3: We think our balance sheet is in great shape & Ridgeway, for us, was obviously a big deal, it was one of the biggest deals that the sector has seen for over a decade & I think the third biggest in history. £106 million was a big transaction, we really thought long & hard about how we should finance that & the conclusion we came to is to create the best value for shareholders, we used our own balance sheet & that’s really helped drive a first half EPS growth of 33%.

So, 12 months on, we’re in a much stronger position, a couple factors to highlight, we’ve got very strong asset backing per share, our net assets at the end of the first half has moved to £158 million, that’s up 15% from the year end & that equates to £2.04 per share. In addition, we’ve substantially improved our freehold property mix so we now have £112.5 million in our freehold property & our mix is now 45% of the portfolio. Our net debt adjusted out for our leasing debt which, of course, is asset-backed & carved out for banking covenant purposes, is just £35 million which is 0.7 times EBITDA so well within the Board’s stated indebtedness target of 1.25 times. In addition, of course, we have our £120 million secured RCF which gives us significant fire power to continue our growth & acquisition story.

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Q4: Finally, how do you see Marshall Motors placed for the future?

A4: Well, I think the group’s clearly been one of the leading consolidators in recent years, I joined the business in 2008 & over that period, we bought & sold over 130 businesses & over the same period we’ve transformed our brand representation.

So, today we have over 20 car brands, it’s exactly the same number we started with back in ’08 but what we have done is added 11 brands to the portfolio & these include brands like Mercedes Benz, Audi, BMW, Mini & so on so strong brands we’ve added, we’ve also exited 11. Really, what’s worth saying is there are around 37 brands that operate in the UK & the 20 car brands we partner with cover 83.6% of the market so for me, that tells me we’re absolutely partnering with the right brands.

Now, part of this, of course, is because of the strength of the British premium brands, namely JLR, & the German brands because they essentially cover 40% of the market & of course we continue to see the premium brands dominate. The year-to-date position on the new car market, the premium brands accounted for just under 28%, now we feel that we are in a very fortunate position to be one of only five groups in the UK to be in a position that represents JLR & these German bands & actually, 62% of our portfolio is in that category. When you also add Volvo to that number which is becoming increasingly more premium that figures jumps to over 70%.

So, what that says is right brands, right mix in terms of the portfolio but also we’re operating in the right market so we’ve extended our geographic footprint to cover 26 counties in England & that footprint is weighted towards the affluent & scalable markets. We see that as a key reflection of the fact that Marshall Motors trade in the right markets so for these reasons, partnering with the right brand in the right markets, we believe we’re well placed to take advantage of future developments which may come with the brands & also the consolidation opportunities this may also bring.

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