Automotive retailer and AIM newcomer Marshall Motor (MMH:AIM) accelerates in with better-than-expected maiden interims and a confident outlook statement. Balance sheet strength, demonstrating Marshall's ability to move quickly on acquisitions in a fragmented market, also helps to drive the shares up 3% to 191.5p.
Click here to read the results from the Cambridge-headquartered car dealer, now trading almost 30% north of April's 149p IPO issue price. Key takeaways include a 9.8% taxable profits gain to £10.5 million, driven by organic growth and recent acquisitions, as well as strength across its retail and leasing operations, pre-tax profits from the latter leaping 41% higher to £2.5 million. Marshall also pleases by declaring a 0.58p half-time payout.
CEO Daksh Gupta (pictured below) reports 5.9% growth in like-for-like new car sales for the first six months. Although the UK new car market's growth rate has normalised after three strong years on the spin, Marshall's robust turn proves there's still plenty of gas left in the tank for leading players.
Growth in new car sales is being driven by a wealth of new models featuring the latest technologies, low interest rates and the trend towards vehicle financing, which has created more stability in demand, as the bulk of customers re-sign new finance arrangements at the end of existing contracts. Anaemic economic conditions in the eurozone and the strength of sterling are also drawing new vehicle supplies to the UK market.
Gupta highlights aftersales as a particular area of strength, with Marshall growing sales and margin in this high-quality area of the business. Here, Marshall and quoted rivals including Pendragon (PDG), Lookers (LOOK), Vertu Motors (VTU:AIM) and Cambria Automobiles (CAMB:AIM) are benefitting from a growing UK vehicle parc, notably in cars aged between one and three years old, where motorists typically return to franchised dealerships for repairs.
As we outlined in our recent look at the automotive retail industry, Marshall operates two highly-complementary businesses: Marshall Motors and Marshall Leasing. A key competitive strength is its status as the only franchised UK dealer group representing all the top five prestige car manufacturer brands; namely Audi, BMW, Mercedes-Benz, Land Rover and Jaguar, and each of the top ten volume brands, among them Ford, Volkswagen and Toyota. Marshall claims this diverse portfolio means it 'represents manufacturer brands accounting for around 88% of all new vehicle sales in the UK, the highest market coverage of any UK dealer group'.
The company remains hungry for acquisitions in a highly fragmented industry and has the financial firepower to move quickly on the right deals. Net cash at the half year stood at £39.9 million, while Marshall also has access to an undrawn £75 million overdraft.
