2021 proved to be an eventful year for MCH. The new Board sought to re-engineer the Group into a structure that maximises shareholder value over the medium term. This involved several disposals, not least the motor retail arm as well as other non-core divisions. We expect the proceeds will be used to clear debt, invest in growth, and a return of cash to shareholders.
The decision by the UK MoD to retire its Hercules C-130J fleet from March 2023 represents both an opportunity for the Aerospace division, as well as a threat. In advance of the decision, the Group had begun to seek out additional international air force customers, adding the US Marine Corps from late 2020 and India in early 2022.
The pipeline of new opportunities remains strong throughout the Group, not least within the core divisions. The combination of new customer wins, improved manufacturing processes at Land Systems, the prospect of recovery in the food service and hospitality sectors within Fleet Solutions and growth in renewables, plus continued cash generation and rising profitability of Group Property augurs well for the future and recovery in profitability over the medium term.
Our sum-of-the-parts valuation, based on conservative EBITDA expectations and ratings, suggests a fair value / share of 523p, representing a 23.1% premium to the last traded price.
