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Market capitalisation
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Research: Industrials
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.
Marshall Motor Holdings |
Well positioned for the road ahead |
Preliminary results |
Automotive retailers |
12 March 2021 |
Share price performance
Business description
Next events
Analysts
Marshall Motor Holdings is a research client of Edison Investment Research Limited |
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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* |
EPS* |
DPS |
P/E |
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
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