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Marshalls says it will 'comfortably' achieve financial goals, but Brexit vote will spell decline in new car market

Marshall Motor Holdings says its latest financial performance will “comfortably” be in-line with its expectations.

It released a pre-close statement today ahead of publication of its full results on March 15 for the year to December 31.

In a statement this morning Marshalls said: “The group continued to build on the record financial performance reported during the first half of 2016, delivering further material improvements during the second half.

“This was driven by continued strong like-for-like revenue growth and contributions from recent acquisitions including SG Smith, acquired on November 16, 2015, and Ridgeway Garages, acquired on May 25. 

“The financial performance of the group during 2016 is anticipated to be comfortably in line with our expectations.”

Retail performance

During 2016, the group's retail business showed strong growth in both revenue and profitability, including contributions from both SGS and Ridgeway.

“The like-for-like growth in sales of new vehicle units reported in the first half of 2016 strengthened in the second, although margins remained under pressure.”

Like-for-like sales of used vehicle units during 2016 were “marginally above” the comparable period last year.

Strong like-for-like growth in after-sales revenues and margins continued throughout 2016.

Marshall's outlook

The referendum result which saw the UK vote to leave the EU has led the Marshall’s board to “remain cautious” on the UK vehicle market in 2017 and “concurs with current industry forecasts for a decline in the UK market for new vehicle sales”.

“Nevertheless, as a result of the strategic acquisitions of SGS and Ridgeway, the Group remains well positioned and continues to seek to drive further growth in its profitability and return on capital, supported by a balanced portfolio of brands, attractive geographic locations and excellent brand partner relationships.”

Analyst view

Mike Allen at analyst Zeus Capital gave the following assessment on Marshalls: "The shares have fallen nearly 40% from its post Ridgeway peak and are close to trough levels at present.

"While we did have some concerns over the level of total debt in the business and it has less balance sheet flexibility versus some of its peers, we do think these fears have been overdone and the valuation based on cautious forecast assumptions looks compelling.

"It’s also important to note that the business has significant asset backing, which covers the current market capitalisation of the company. The shares trade at a more than 25% price/earnings discount to the UK dealers on five-times versus a discounted sector multiple of seven times, which looks oversold on both counts." 

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