Marshall Motor Holdings (MMH) has issued a pre-close trading statement indicating that performance was in line with management expectations even though markets remain challenging. It also comes at a time when peers have been suffering from what increasingly appear to be company-specific issues. With new and used-car demand continuing to decline in the face of Brexit-induced confidence issues, MMH again outperformed. However, margin pressures and further potential H2 supply-side constraints are expected to lead to a modest fall in profitability. Our estimates remain unchanged and MMH is trading on a current-year multiple of just 5.9x supported by a healthy dividend yield. Any recovery in markets post the Brexit outcome is not reflected by the multiple contraction, even if much of the downside now appears discounted.
With new car sales down 3.4% in H119, MMH unit volumes outperformed the declines in both the retail (-3.2%) and fleet (-3.6%) market segments. It achieved strong growth in used-vehicle unit sales, although margin pressures grew as Q219 progressed. The higher-margin aftersales revenue also grew. Cost inflation headwinds continue and overall profits are in line with management expectations, despite the volume outperformance. MMH retains a strong financial position to pursue opportunities as they arise, as evidenced by the acquisition of six ŠKODA dealerships in H119 for £3.5m. MMH subsequently acquired the freehold to the Northampton dealership for a further £1.7m. As previously advised £6m was paid to eliminate all outstanding defined benefit pension liabilities, as was the increased final FY18 dividend. Despite the spending, MMH expects H119 net cash of c £5m (FY18 net debt £5.1m). H219 remains challenged by cost pressures, Brexit and more changes to emission testing procedures from 1 September. Further detail will be provided when the company reports half-year results on 13 August.