Marshall Motor is the seventh largest UK motor retailer, operating 106 franchises spread across 23 brands at 89 locations. It is one of six UK dealership groups that represent each of the top five volume and premium brands. It has a strong presence in eastern and southern England.
FY18 was another record year for the continuing businesses, with underlying PBT delivered as we expected, a modest rise on FY17 aided by a strong Q4 performance in used cars. The outlook remains challenging for car retailers, compounded by the uncertainty of any Brexit outcome. Nevertheless, Marshall Motor Holdings’ (MMH) management is displaying confidence in its robust financial position by continuing investment and increasing the dividend. The resultant yield provides significant support for the shares, which like those of its peers continue to be rated for sharp declines in profitability.
Market dynamics favour larger motor dealership groups against smaller independent groups, which still command c 60% of the franchise market. Global manufacturing overcapacity still points to OEM support, although market and buyer confidence is undermined by Brexit concerns, negative sentiment on diesel and PCP finance and potential H218 new car supply disruption rates. The large rating discount to the FTSE All-Share General Retailers Index fails to recognise defensive qualities across a sector where used vehicle and aftersales activities account for the majority of profits.