The H1 results from Marshall of Cambridge were modestly below last year’s outcome, largely reflecting the difficult market conditions within motor retail (MMH). However, what provides us with confidence for the full year outlook and beyond is the level of contract wins secured by the Group’s aerospace & defence subsidiary (MADG).
Due to the planned investment undertaken within the business this year the dividend has been held. The balance sheet remains very strong, which will provide management with the firepower to take advantage of both M&A and investment opportunities, as they arise.
Divisional revenues at MADG in H1 were 8.9% higher year-on-year, and its order book increased markedly during the period to £900m. Even excluding the order book for the UK MoD C-130J fleet, whose contract was recently extended to 2035, the pipeline still rose 33% from the year-end to £600m. In addition, the Land Systems sub-division also grew its order book by 19% to £200m. The Global 6000 project work continues as anticipated, with the customer signing an in-territory support contract during H1. We believe that the commencement on the newer contracts should result in an even stronger H2 and beyond.
MMH delivered revenues marginally ahead (+0.9% on a like-for-like basis, including the dealership acquisitions), which markedly outperformed a deteriorating motor retail market and saw gross margins maintained at 11.4%. In the short-term challenges remain for MMH: a combination of Brexit (potential backlog of vehicle imports) and waning consumer confidence due to political and economic uncertainty, plus the potential for supply disruptions as new emissions legislation is introduced (WLTP).
H2 2019 is expected to be eventful for the Property division. Following the construction of the GRE to reduce noise pollution from the airfield, detailed planning permission is expected for the first phase of the Marleigh development. Infrastructure on the site is already in progress, with reservations for new homes anticipated during H1 2020. Outline planning approval for the development on land north of Cherry Hinton is expected during Q1 of next year.
The new management team within Fleet Solutions has begun the process of turning the business around. The rising order book should result in a stronger H2 outcome, with the division moving to break-even in H2 2020.
