Marshall Motor is the seventh largest UK motor retailer, operating 101 franchises spread across 22 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.
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.
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 and negative sentiment on diesel with ongoing new car supply disruption due to the new WLTP emissions testing regime. 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.