Marshall Motor Holdings (MMH) continued to perform robustly, although the FY19 PBT was slightly below our estimate as the losses of recently acquired businesses at the year end were slightly higher than we expected. We nevertheless have slightly increased our FY20 PBT estimates to reflect the higher than expected FY19 sales, partly offset by a slightly weaker margin due to both the acquisitions and still challenged markets. An FY21 P/E ratio of 6.5x remains undemanding. It is further supported by the FY19 dividend, which has been maintained and yields 6.0%.
Companies: Marshall Motor
Marshall Motor Group “MMH” has delivered another strong set of full-year results despite what was a difficult market backdrop. On an underlying basis, PBT was 4% ahead of our forecast. Cost pressures were well mitigated, and strong outperformance was demonstrated across all core areas of the Group. We are maintaining our underlying forecasts at this juncture albeit with some presentational changes as a result of IFRS 16. We remain happy with the long-term investment case and see MMH as a highly credible platform for growth, backed by an experienced and stable management team with the potential to emerge as a sector winner.
Although the UK election result may provide greater certainty for car buyers, the most recent forecasts from industry bodies continue to anticipate weaker demand in 2020. While Marshall Motor Holdings (MMH) is delivering on its profit expectations for 2019, the combination of the potential further weakness in car markets and the investment being made in loss-making businesses to grow future share and profits leads us to reduce our FY20 PBT estimate by £4.1m. However, a FY20 P/E ratio of 7.7x remains undemanding and is supported by the healthy dividend yield.
Marshall Motors (MMH) has announced the acquisition of a portfolio of Volkswagen and SKODA franchises from Jardine Motor Group. MMH will pay a cash consideration of up to £9.3m. The group has also provided a positive trading update confirming that despite the challenging markets and trading headwinds experienced through 2019, full year expectations remain unchanged. We update our 2020E and 2021E forecasts to reflect the impact of this acquisition and the impact of the Honda acquisitions and Lincoln Volkswagen Commercial Vehicles which together is 11.5% dilutive to 2020E and 4.9% dilutive to 2021E earnings, we expect the acquired assets to make a positive contribution to group EPS in 2022. We remain comfortable with the long term investment case, the group has a solid track record of execution and is outperforming against the market.
Marshall Motor Holdings (MMH) remains one of the most progressive automotive retail groups in the UK. It has the management experience and financial strength to continue its strategy to drive organic performance by outperforming UK car markets, augmented by appropriate value-creating acquisitions. Market challenges over the last few years have been numerous and persistent, but MMH has delivered a robust performance during the period, including in H119. The share price has recovered modestly since the H119 announcement, but MMH’s rating does not reflect its robust performance, with the support of a healthy dividend yield.
With more than 100 years of trading, Marshall Motor Holdings (MMH) is now the seventh largest car retailer in the UK selling both new and used vehicles to consumers and businesses. It has been one of the leading consolidators in the UK automotive retail sector in the last decade, including the transformational £106.9m acquisition of Ridgeway Group in 2016. Following the successful IPO in 2015, the majority owner (64.5% at 3 April 2019) remains Marshall of Cambridge (Holdings), a family-run private company in the UK. The sale of its leasing operation in late 2017 has left the company essentially ungeared (before lease liabilities introduced by IFRS 16). Today MMH operates 106 dealership businesses representing 23 manufacturer brands across 27 counties in England, with aftersales activities including service centres, spare parts and five standalone bodyshops.
In this video Daksh Gupta, the CEO since 2008, discusses MMH’s growth, strategic ambitions and differentiators. The CFO Richard Blumberger, who joined the company in early 2019, outlines the company’s financial strengths as well as its recent trading performance.
Marshall Motors has delivered a strong set of H1 results for 2019E in the context of a challenging trading environment. The group’s H1 results reflect a strong unit sales performance, outperforming the new retail, new fleet and used car markets, together with further growth in aftersales revenues. We update our forecast to reflect the impact of IFRS 16, albeit some of this is absorbed by the strong underlying trading patterns and the performance delivered to date, with our assumptions also at the lower end of the consensus range. We remain happy with the long term investment case, aided by a robust balance sheet and solid track record of execution and outperforming the wider market.
In contrast to some of its immediate peers, Marshall Motor Holdings (MMH) continues to deliver robust performances in even more challenging UK car markets. Increased revenues and gross profit, with gross margins maintained at 11.4%, limited the fall in H119 PBT to just £0.8m or 5% compared to H118, allowing for the restatement for adoption of IFRS 16. We maintain our underlying PBT estimates for FY19, which are reduced by the non-cash impact from the implementation to IFRS 16 by around 3.6%. We feel recent price weakness was due to company-specific issues at peers. While MMH may be facing a plateau in profitability as UK car markets await clearer economic signals, we feel the yield is supportive while investors await any improvement in fundamentals for the automotive retail sector overall.
We note the announcement released this morning by Marshall Motor Holdings (MMH) confirming that the group has outperformed the broader market in both retail and fleet new vehicle sales. The strong H1 performance is encouraging in the context of a challenging market and a record prior year comparative. We are leaving full year trading assumptions unchanged but update our net debt forecasts to reflect the cash outperformance driven by lower capex for 2019E. The shares are trading at a clear EV/EBITDA discount to the sector. MMH has a robust balance sheet with £125m freehold and long leasehold assets as at the time of the 2018 results (160p per share) underpinning the valuation.
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We note this morning’s announcement from Boohoo Group strongly refuting several allegations made in a short-selling note published yesterday afternoon. In our opinion arguments made in the short selling note are flawed and do not disclose any new or unexpected information about the Group. The unprecedented market backdrop resulting from the COVID-19 crisis has only acted to highlight the strengths of Boohoo’s agile, pure play, e-commerce model and we see current share price weakness as offering an attractive entry point.
Boohoo Group has announced the acquisition of the remaining 34% of shares in prettylittlething.com (‘PLT’).
- Terms of the deal: Boohoo Group has acquired the remaining 34% of shares in PLT for initial consideration of £269.8m, comprising cash consideration of £161.9m and share consideration of £108.0 including £54m of share consideration subject to an 18 month lock-up, £54m of share consideration subject to a 24 month lock-up payable on completion. A further £54.0m of contingent consideration is payable if the Group’s share price averages 491p (+46.7% on last night’s closing price) over a six-month period between completion and 14 March 2024. PLTs management team will remain in the Group, with the structure of the share consideration providing strong alignment of management interests with the wider Group shareholder base.
After launching a £1bn recapitalisation by way of a rights issue at a price with a heavy discount, the UK-based restaurant and (the largest) hospitality group, Whitbread, saw its share price plummet by 13%. The market movement reflects investors’ concern about the uncertain duration of Whitbread’s business downturn.
Whitbread was on our list of issuers likely to be wrongfooted by the crisis the day before the rights issue announcement.
GVC reported FY 19 sales growth of 3%, thanks to strong momentum in online (+13%), a decent showing in European retail (+5%) and a slower than expected decline in UK retail (machine revenue down 26% vs initial expectations of over -40%).
Pro forma EBITDA margin was down 10%, hurt by regulatory headwinds across multiple geographies. The company announced a final dividend of 17.6p/share.
Following the FY 19 performance, we do not expect any significant revisions in our estimates.
Directorate change: DWF has announced that Andrew Leaitherland will step down as Group CEO and a managing partner of DWF Law LLP and DWF LLP with immediate effect and will be replaced by the Group’s Chairman Sir Nigel Knowles. Sir Nigel has over 40 years of experience in the legal sector and was previously. Global Co-Chairman and Senior Partner of DLA Piper. We believe he has the experience and leadership qualities required to lead the Group through the near-term challenges it faces. Chris Sullivan, Senior Independent Non-Executive Director, has been appointed as interim Chairman.
Companies: DWF Group
In FY20, prior to COVID-19, management delivered on its four key proof points, including growing group EBITDA and membership at Roadside. The business model is proving resilient during COVID-19 and we have reduced our FY21 EBITDA forecast by only 7% since the outbreak began – much less than most.
Companies: AA Plc
Unsurprisingly, the limited business progression in H1 19/20 and the pandemic outbreak towards the end of the year have resulted in a significant FY profit contraction.
However, the unprecedented pandemic crisis seems to be dragging all the industry to the same starting line, in terms of market transformation. In particular, after the group showed a better than expected cash position after additional RCF and CCFF and substantial cost-savings, this gives new hope to the market.
Companies: Marks And Spencer Group
Following last week’s trading update, in this note we revisit the progress Inchcape has made, along with the structural benefits it has gained, in focusing its business on its distribution model. Whilst there is no doubt the Group faces pressures at present, we believe it has sufficient liquidity to withstand this crisis within its current banking facilities and see scope for further significant cost savings and efficiencies that should help mitigate current pressures, which we expect hear more on at the H1 results in July.
H1 (to end of March) adj. PBT of £1.2m is in line amidst difficult trading. COVID-19 and closing all stores has seen April’s sales decline 80% y/y. There are promising signs with online sales 3x pre-COVID levels and management is being very pro-active in adapting and re-opening stores, such that the entire estate could be open on a controlled entry basis by the end of June. Liquidity at c.£14m remains comfortable and should rise by £10m in June as additional CLBILS funding becomes available. We move to BUY and present a scenario for FY20E in this note. We will publish formal forecasts when Topps next reports in early July.
Companies: Topps Tiles
FY20 results report EPS slightly ahead (4%) of our previous forecast. Net debt (pre-IFRS 16) was also slightly better than expected at £6.9m (N+1SE: £7.5m). The Group had a very strong start to FY21, achieving PBT of £6.0m in Q1 and trading is expected to be strongly ahead of budget in May. The order book for June is also encouraging. This is an impressive result against the significant challenges posed by COVID-19 for the aviation industry. Performance in H2 will likely depend upon the recovery in activity levels in Private Jets and Safety & Security, but Air Partner is already seeing some signs of recovery here. We believe the Group is well placed to achieve a strong full year result given the diversity of its model and the strength of the balance sheet.
Companies: Air Partner
FY19 was a transformational year, with the addition of seven new hostels to the estate/pipeline and strong growth in Revenue (+26%) and adj EBITDA (+11%) demonstrating that the model can work across European cities. Significant liquidity headroom remains following the RCF extension and £5m overdraft facility recently agreed.
Loungers continues to outperform, delivering the scarce trinity of LFL sales growth (5.4%), unit growth (10 openings) and margin growth (40bps). This drove a 22% increase in Revenues and 26% increase in EBITDA in the first half of FY20E.
The travel bans and quarantines due to COVID-19 have had a significant impact on PPHE since mid-March and are likely to continue to do so. We now expect a deeper and longer downturn than previously and a slower recovery, so we reduce our forecasts for occupancy for FY20, while holding our prior EBITDA margin assumptions reflecting cost cutting and a high level of government support on key costs. We downgrade FY20 revenue by c 32% and EBITDA by c 29%. The shares are trading at a c 54% discount to the last-quoted EPRA NAV of 2,546p per share.
Companies: PPHE Hotel Group
FY20 year-end trading update
Companies: Dart Group
2019 finals are a smidgen ahead at the EBITDA level. The company executed well in expanding the estate by 10% and collaboration with food aggregator Pyszene.pl (takeaway.com) has proved positive. DPP finished the year with £3.5m of net-cash and importantly, management today signal that this provides sufficient liquidity on a 12m view. COVID-19 to date has had relatively little impact with sales holding up robustly. A strong online presence and a delivery model means the business has continued to operate through the lockdown. Recent easing of restrictions to allow restaurants to open and some cost deflation are welcome developments also. New CEO, Iwona Olbrys, has proven F&C experience, most recently at Telepizza Poland which moved into profitability under her leadership. Whilst no major strategic review type commentary today, there is reference to self-help initiatives to drive the top line, lower costs and enhance the online platform. With little 2020 visibility management has removed financial guidance. N+1 Singer currently has no formal forecasts in the market and will initiate coverage in due course Overall, looking through the current uncertainty, we feel that with a proven new CEO at the helm and an online focused business model, DPP should ultimately reward investors with a move into profitability and value creation.
Companies: DP Poland