Last close As at 06/08/2026
—
— 0.00 (0.00%)
Market capitalisation
—
Research: Industrials
Following the recent announcement of dealer portfolio adjustments, and the completion of the strategic disposal of Marshall Leasing, we adjust our forecasts to reflect these events. As previously commented, the leasing deal eliminates MMH’s gross debt and lifts the NAV to £199.5m or 258p per share. It provides financial flexibility to implement the investment programme, including M&A to help mitigate the initial dilution that is seen in FY18e. The dealership closures eliminate losses and reduce turnover by around £40m. Overall, MMH is well positioned as it enters FY18 where market conditions are expected to remain unhelpful.
Written by
Marshall Motor Holdings |
Resetting numbers following leasing sale |
Completion of disposal |
Automotive retailers |
27 November 2017 |
Share price performance
Business description
Next events
Analysts
Marshall Motor Holdings is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||||
Following the recent announcement of dealer portfolio adjustments, and the completion of the strategic disposal of Marshall Leasing, we adjust our forecasts to reflect these events. As previously commented, the leasing deal eliminates MMH’s gross debt and lifts the NAV to £199.5m or 258p per share. It provides financial flexibility to implement the investment programme, including M&A to help mitigate the initial dilution that is seen in FY18e. The dealership closures eliminate losses and reduce turnover by around £40m. Overall, MMH is well positioned as it enters FY18 where market conditions are expected to remain unhelpful.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/15 |
1,232.8 |
15.8 |
15.8 |
2.98 |
9.9 |
1.9 |
12/16 |
1,899.4 |
25.4 |
26.2 |
5.50 |
6.0 |
3.5 |
12/17e |
2,271.1 |
28.3 |
28.6 |
6.45 |
5.5 |
4.1 |
12/18e |
2,219.0 |
24.5 |
24.8 |
6.90 |
6.3 |
4.4 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.
Balance sheet ungeared entering 2018
Our FY17 earnings estimates remain unchanged as a result of the disposal of Marshall Leasing (MLL) and the recently announced portfolio closures. However, the balance sheet should end the year debt free as both the asset backed loans of MLL and the £42.5m cash proceeds from the deal are received. Until this strengthened financial position can be put to work for shareholders through both organic investment and new M&A opportunities, the disaggregation of MLL from the financial statements is initially earnings dilutive from FY18. Our FY18e EPS drops 15% to 24.8p from 29.2p. Revenues forecast are 3.4% or £77.6m lower at £2,219m as the MLL sales and the dealership closures are both effectively deconsolidated with similar impacts. Our FY18 Retail operating margin is modestly increased as the dealerships being closed were loss-making. MMH is also now more focused as Retail is the only operating division. We now forecast FY18e closing net cash of £10m, and expect dividend progression to be as previously forecast.
Underpinning from enhanced NAV
The deal significantly enhances the NAV and eliminates residual value risk that resides in MLL. NAV per share is now £199.5m, up 23% as a result of the deal. Backed by a strong portfolio of freehold and long leasehold property this equates to 258p per share. The SMMT forecast now indicates a further fall in new car sales in 2018, similar to the current year (c 5%). Trading progression in such conditions is always likely to remain tricky, but car manufacturers do appear to be responding favourably. MMH is positioned to take any value creating opportunities that arise.
Valuation: Still a discount to peers
Despite the unrelieved EPS dilution in FY18e MMH is still trading on a P/E of just 6.3x, a 13% discount to peers. Our fair value is now 246p up from 219p prior to the deal as the cash returns exceed the DCF for leasing.
Estimates revisions
Our earnings revisions following the disposal of MLL and allowing for the closure of six locations announced last week are as follows.
Exhibit 1: Marshall Motor Holding estimate revisions
Year to December (£m) |
2017E |
2017E |
|
2018E |
2018E |
|
|
Prior |
New |
% change |
Prior |
New |
% change |
New Car |
1,199.6 |
1,199.6 |
0.0% |
1,199.6 |
1,154.6 |
-3.0% |
Aftersales |
855,2 |
855.2 |
0.0% |
243.7 |
238.7 |
-2.0% |
Used Car |
234.4 |
234.4 |
0.0% |
872.3 |
872.3 |
0.0% |
Intra group |
(55.6) |
(55.6) |
0.0% |
(57.0) |
(57.0) |
0.0% |
Retail sales |
2,233.5 |
2,233.5 |
0.0% |
2,258.6 |
2,218.6 |
-1.8% |
Leasing |
37.2 |
37.2 |
0.0% |
37.6 |
0.0 |
-100.0% |
Unallocated |
0.4 |
0.4 |
0.0% |
0.4 |
0.4 |
0.0% |
Group revenues |
2,271.1 |
2,271.1 |
0.0% |
2,296.5 |
2,219.0 |
-3.4% |
|
|
|
|
|
|
|
EBITDA |
44.4 |
44.4 |
0.0% |
44.9 |
39.6 |
-11.7% |
|
|
|
|
|
|
|
Retail |
41.4 |
41.4 |
0.0% |
42.1 |
42.3 |
0.4% |
Leasing |
5.2 |
5.2 |
0.0% |
5.3 |
0.0 |
-100.0% |
Unallocated |
(9.5) |
(9.5) |
0.0% |
(9.7) |
(9.7) |
0.0% |
Underlying operating profit |
37.1 |
37.1 |
0.0% |
37.7 |
32.6 |
-13.5% |
|
|
|
|
|
|
|
Underlying PTP |
28.3 |
28.3 |
0.0% |
28.9 |
24.5 |
-15.1% |
|
|
|
|
|
|
|
EPS - underlying continuing (p) |
28.6 |
28.6 |
0.0% |
29.2 |
24.8 |
-15.1% |
DPS (p) |
6.5 |
6.5 |
0.0% |
6.9 |
6.9 |
0.0% |
Net debt/(cash) |
46.9 |
(7.1) |
N/M |
35.9 |
(10.2) |
N/M |
Source: Edison Investment Research
Exhibit 2: Financial summary
£m |
2015 |
2016 |
2017e |
2018e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
1,232.8 |
1,899.4 |
2,271.1 |
2,219.0 |
Cost of Sales |
(1,087.5) |
(1,678.9) |
(2,003.1) |
(1,957.1) |
||
Gross Profit |
145.3 |
220.5 |
268.0 |
261.8 |
||
EBITDA |
|
|
22.5 |
38.4 |
44.4 |
39.6 |
Operating Profit (before amort. and except). |
|
|
18.7 |
32.3 |
37.1 |
32.6 |
Intangible Amortisation |
(0.2) |
(0.3) |
(0.4) |
(0.4) |
||
Exceptionals |
(0.5) |
(3.2) |
35.4 |
0.0 |
||
Other |
0.0 |
0.0 |
0.0 |
0.0 |
||
Operating Profit |
18.0 |
28.8 |
72.1 |
32.2 |
||
Net Interest |
(2.9) |
(6.9) |
(8.8) |
(8.1) |
||
Profit Before Tax (norm) |
|
|
15.8 |
25.4 |
28.3 |
24.5 |
Profit Before Tax (FRS 3) |
|
|
15.1 |
21.9 |
63.3 |
24.1 |
Tax |
(3.6) |
(4.4) |
(4.9) |
(5.4) |
||
Profit After Tax (norm) |
9.4 |
20.2 |
22.1 |
19.1 |
||
Profit After Tax (FRS 3) |
11.5 |
17.5 |
58.4 |
18.7 |
||
Average Number of Shares Outstanding (m) |
59.4 |
77.2 |
77.2 |
77.2 |
||
EPS - normalised (p) |
|
|
15.8 |
26.2 |
28.6 |
24.8 |
EPS - normalised and fully diluted (p) |
|
|
15.3 |
25.5 |
27.9 |
24.1 |
EPS - (IFRS) (p) |
|
|
19.3 |
22.6 |
75.6 |
24.2 |
Dividend per share (p) |
2.98 |
5.50 |
6.45 |
6.90 |
||
Gross Margin (%) |
11.8 |
11.6 |
11.8 |
11.8 |
||
EBITDA Margin (%) |
1.8 |
2.0 |
2.0 |
1.8 |
||
Operating Margin (before GW and except.) (%) |
1.5 |
1.7 |
1.6 |
1.5 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
150.0 |
326.4 |
274.9 |
293.7 |
Intangible Assets |
40.8 |
122.0 |
122.2 |
122.2 |
||
Tangible Assets |
109.2 |
204.4 |
152.7 |
171.5 |
||
Investments |
0.0 |
0.0 |
0.0 |
0.0 |
||
Current Assets |
|
|
307.5 |
475.2 |
472.5 |
466.6 |
Stocks |
240.6 |
380.0 |
374.7 |
366.1 |
||
Debtors |
28.9 |
71.0 |
61.9 |
62.1 |
||
Cash |
24.1 |
0.1 |
7.1 |
10.2 |
||
Other |
13.9 |
24.1 |
28.8 |
28.2 |
||
Current Liabilities |
|
|
(290.1) |
(584.9) |
(518.2) |
(517.4) |
Creditors |
(263.4) |
(507.2) |
(518.2) |
(517.4) |
||
Short term borrowings |
(26.7) |
(77.7) |
0.0 |
0.0 |
||
Long Term Liabilities |
|
|
(37.6) |
(71.1) |
(29.7) |
(29.6) |
Long term borrowings |
(24.7) |
(41.4) |
(0.0) |
(0.0) |
||
Other long term liabilities |
(12.9) |
(29.7) |
(29.7) |
(29.6) |
||
Net Assets |
|
|
129.9 |
145.7 |
199.5 |
213.3 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
29.6 |
98.9 |
85.2 |
43.1 |
Net Interest |
(1.1) |
(1.4) |
(2.9) |
(3.8) |
||
Tax |
(3.0) |
(17.3) |
(4.9) |
(5.4) |
||
Capex |
(39.6) |
(61.9) |
(66.4) |
(25.8) |
||
Acquisitions/disposals |
(21.5) |
(91.4) |
106.7 |
0.0 |
||
Financing |
66.9 |
0.0 |
0.0 |
0.0 |
||
Dividends |
(15.4) |
(3.3) |
(4.5) |
(5.1) |
||
Other |
8.6 |
(15.5) |
13.0 |
0.0 |
||
Net Cash Flow |
24.5 |
(91.8) |
126.1 |
3.0 |
||
Opening net debt/(cash) |
|
|
51.7 |
27.2 |
119.0 |
(7.1) |
HP finance leases initiated |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
0.0 |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
27.2 |
119.0 |
(7.1) |
(10.2) |
Source: Company reports, Edison Investment Research estimates
|
|
Nanogate has announced that it is to acquire the plastics division of Austrian company HTI High Tech industries (HTI) for 275,000 new shares, (c €13m at today’s price). The transaction broadens the portfolio of services offered to customers, expands the customer base, reduces exposure to the automotive sector, and extends the international footprint. Depending on the timing of completion (in Q118), management expects the acquisition to raise group FY18 revenues by around 16% to above €220m and to enhance EBITDA, though it will be earnings dilutive short term.