Marshall Motor Holdings — Well positioned for the road ahead

Marshall Motor Holdings (LN: MMH)

Last close As at 21/12/2024

394.00

0.00 (0.00%)

Market capitalisation

308m

More on this equity

Research: Industrials

Marshall Motor Holdings — Well positioned for the road ahead

Our investment case for Marshall Motor Holdings (MMH) is rooted in the strong performance demonstrated in FY20. PBT for FY20 came in 9% ahead of our expectations. Management emphasised the group’s performance as resilient. We would highlight an agile team that has responded to the pandemic and achieved earnings ahead of our expectations through outperforming the market and utilising government support. This keeps the group on a strong financial footing, giving MMH the opportunity to strengthen its market position as the UK dealerships continue to consolidate. This in turn should position MMH well for the growth in car ownership that is anticipated post pandemic as consumers seek alternatives to public transport and shift to electric vehicles.

Written by

Neil Shah

Industrials

Marshall Motor Holdings

Well positioned for the road ahead

Preliminary results

Automotive retailers

12 March 2021

Price

154.5p

Market cap

£121m

Net cash (£m) at end FY20, excluding leases

28.8

Shares in issue

78.2m

Free float

35%

Code

MMH

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

8.0

4.8

11.6

Rel (local)

4.8

0.4

(4.5)

52-week high/low

154.5p

85p

Business description

Marshall Motor Holdings is the seventh largest UK motor retailer, operating 117 franchises spread across 24 brands in 28 counties. It is one of six UK dealership groups that represent each of the top five volume and premium brands. The group has a strong presence in eastern and southern England.

Next events

AGM

20 May 2021

Analysts

Neil Shah

+44 (0)20 3077 5715

Andy Chambers

+44 (0)20 3681 2525

Marshall Motor Holdings is a research client of Edison Investment Research Limited

Our investment case for Marshall Motor Holdings (MMH) is rooted in the strong performance demonstrated in FY20. PBT for FY20 came in 9% ahead of our expectations. Management emphasised the group’s performance as resilient. We would highlight an agile team that has responded to the pandemic and achieved earnings ahead of our expectations through outperforming the market and utilising government support. This keeps the group on a strong financial footing, giving MMH the opportunity to strengthen its market position as the UK dealerships continue to consolidate. This in turn should position MMH well for the growth in car ownership that is anticipated post pandemic as consumers seek alternatives to public transport and shift to electric vehicles.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/19

2,276

22.1

22.9

2.85

6.7

1.8

12/20

2,154

20.9

21.1

0.00

7.3

N/A

12/21e

2,266

19.3

19.3

6.00

8.0

3.9

12/22e

2,346

21.2

21.3

6.00

7.3

3.9

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

FY20 results driven by a strong H220

FY20 benefited from a strong second half. The group has a longstanding record of outperforming the market. This was achieved in both new and used car sales. In new car sales, volumes were down 9.2% and down 19.4% on a like-for-like basis against a market that was down 29.4%. In used car sales, volumes were down 5.3% and down 14.6% on a like-for-like basis against a market that was down 14.9%. This was achieved by responding to the pandemic through the introduction of click and collect, keeping staff motivated and support from MMH’s brand partners. Profitability was supported by utilising the government support schemes, with business rate relief adding £7.2m to PBT and the job retention scheme adding £20.4m. Offsetting this was the loss of new car sales bonuses, which it would normally achieve on outperforming the market.

Expected to participate in industry consolidation

Despite the pandemic, the group continued to optimise its portfolio sites in Volkswagen Aylesbury, Seat Oxford and Ford Commercial Vehicles, King’s Lynn, while closing four loss-making sites. The infrastructure for a digital omnichannel approach suggests that smaller groups are likely to find becoming part of a larger group with a strong balance sheet attractive and we expect MMH to be active in consolidating the market.

Valuation: Continue to expect multiple expansion

On our updated estimates, the FY21 P/E multiple of 8.0x is undemanding and we would expect it to start expanding on evidence of demand returning, market positioning strengthening and the longer-term trend of greater car ownership starting to be seen. A notable statistic from the results was used car depreciation. In 2019, this was running at 15%, while in 2020 it was at 5%, reflecting pent-up demand as consumers look for alternatives to public transport.

Exhibit 1: Financial summary

£m

2018

2019

2020

2021e

2022e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

2,186.9

2,276.1

2,154.4

2,266.0

2,346.3

Cost of Sales

(1,933.6)

(2,015.3)

(1,916.2)

(2,016.7)

(2,083.5)

Gross Profit

253.2

260.8

238.2

249.3

262.8

EBITDA

 

 

52.3

52.0

53.4

50.1

52.5

Operating Profit (before amort. and except).

 

 

34.3

32.0

31.1

30.0

32.3

Intangible Amortisation

(0.3)

(0.4)

(0.2)

(0.2)

(0.3)

Exceptionals

(6.7)

(2.4)

(0.6)

0.0

0.0

Other

0.0

0.0

0.0

0.0

0.0

Operating Profit

27.3

29.2

30.3

29.8

32.0

Net Interest

(9.6)

(9.9)

(10.2)

(10.8)

(11.1)

Profit Before Tax (norm)

 

 

24.7

22.1

20.9

19.3

21.2

Profit Before Tax (FRS 3)

 

 

17.7

19.2

20.1

19.0

20.9

Tax

(4.7)

(4.1)

(6.4)

(4.1)

(4.6)

Profit After Tax (norm)

20.5

17.9

16.5

15.1

16.6

Profit After Tax (FRS 3)

13.1

15.2

13.7

14.9

16.4

Average Number of Shares Outstanding (m)

77.7

78.2

78.2

78.2

78.2

EPS - normalised (p)

 

 

26.3

22.9

21.1

19.3

21.3

EPS (p)

 

 

25.5

22.2

20.5

18.7

20.6

EPS - (IFRS) (p)

 

 

16.8

19.4

17.5

19.0

20.9

Dividend per share (p)

8.54

2.85

0.00

6.00

6.00

Gross Margin (%)

11.6

11.5

11.1

11.0

11.2

EBITDA Margin (%)

2.4

2.3

2.5

2.2

2.2

Operating Margin (before GW and except.) (%)

1.6

1.4

1.4

1.3

1.4

BALANCE SHEET

Fixed Assets

 

 

262.9

390.2

378.2

383.3

388.1

Intangible Assets

112.2

119.3

119.5

119.7

119.8

Tangible Assets

150.7

162.9

159.8

164.8

169.5

Right of use asset

108.0

98.8

98.8

98.8

Investments

0.0

0.0

0.0

0.0

0.0

Current Assets

 

 

466.3

560.5

464.8

559.8

602.2

Stocks

384.0

470.7

362.9

430.5

454.6

Debtors

71.9

79.2

58.2

85.0

88.0

Cash

1.2

0.1

33.8

33.8

48.8

Other

9.2

10.6

10.0

10.4

10.7

Current Liabilities

 

 

(502.2)

(608.4)

(494.1)

(570.8)

(591.0)

Creditors

(501.5)

(582.8)

(493.4)

(570.8)

(591.0)

Short term borrowings

(0.6)

(25.6)

(0.6)

0.0

0.0

Long Term Liabilities

 

 

(30.8)

(139.9)

(133.0)

(145.9)

(161.4)

Long term borrowings

(5.7)

(5.0)

(4.4)

(17.3)

(32.8)

Lease Liabilities

0.0

(108.1)

(99.3)

(99.3)

(99.3)

Other long-term liabilities

(25.2)

(26.8)

(29.3)

(29.2)

(29.2)

Net Assets

 

 

196.3

202.3

215.9

226.4

237.8

CASH FLOW

Operating Cash Flow

 

 

39.2

43.6

87.5

20.4

35.0

Net Interest

(2.1)

(1.0)

(1.0)

(1.7)

(1.1)

Tax

(4.7)

(4.1)

(6.4)

(4.1)

(4.6)

Capex

(23.4)

(19.5)

(10.5)

(16.3)

(16.0)

Acquisitions/disposals

1.6

(27.4)

(0.6)

0.0

0.0

Financing

(1.0)

(0.9)

0.0

0.0

0.0

Dividends

(5.0)

(7.2)

0.0

(1.6)

(4.8)

Other

(7.6)

(9.0)

(8.7)

(9.0)

(9.0)

Net Cash Flow

(2.9)

(25.4)

60.4

(12.3)

(0.5)

Opening adjusted net debt/(cash)

 

 

2.2

5.1

30.6

(28.8)

(16.5)

HP finance leases initiated

0.0

0.0

0.0

0.0

0.0

Other

0.0

0.0

(1.1)

0.0

0.0

Closing adjusted net debt/(cash)

 

 

5.1

30.6

(28.8)

(16.5)

(16.0)

Net financial liabilities (including lease liabilities)

138.6

70.5

82.8

83.3

Source: Company accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Marshall Motor Holdings and prepared and issued by Edison, in consideration of a fee payable by Marshall Motor Holdings. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Marshall Motor Holdings and prepared and issued by Edison, in consideration of a fee payable by Marshall Motor Holdings. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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