Motors disposal completes

The receipt of regulatory approval by the FCA has removed the final hurdle to completing the sale of Marshall Motor Holdings (MMH) to a subsidiary of Constellation Automotive Holdings. Marshall of Cambridge Holdings (MCH) received £202m in cash at the end of May. MCH is in a strong financial position and able to consider many options on how the proceeds will be utilised. To us, the likely uses might include the paydown of debt, a special dividend, and strategic investment in the continuing businesses.

With the first phase of the construction at the Marleigh site sold, the Property business is now in a position where profits and cash generation can improve markedly. Ramping up the US Marine Corps Hercules MRO contract can compensate for any reduced activity with the RAF over the medium term, with further contract wins resulting in improved profitability from FY20 levels.

Based on the recent traded level of the NVPO and stripping out the net cash post receipt of disposal proceeds, the implied valuation of the continuing businesses amounts to some £80m which we regard as anomalous given its profitability. Particularly when one considers the ratings of its larger Aerospace & Defence peers. We shall update our previous fair value calculation of 611p / NVPO after the imminent release of results.