Shaping the group for the future

Management has taken action to offset the end of the RAF C-130J support programme (Hercules Integrated Operational Support – ‘HIOS’) by implementing cost efficiencies, strengthening the senior leadership team, and focusing on converting the £4bn pipeline of opportunities into future revenues. In 2023 Property performed well, as did the smaller businesses, but Aerospace was impacted by the end of the significant HIOS contract in mid-2023.

The retirement of the RAF’s C-130 fleet and its attendant work in Maintenance, Repair & Overhaul (MRO) was always going to be problematic within Aerospace and is responsible for the Group’s decline in revenue. Yet progress was made, not least in some acceleration of the US Marine Corps (USMC) MRO contract during H2, with the anticipated sale of most of the UK C-130 fleet likely to boost revenues in Q4 ’24 / H1 ‘25.

Marshall Group Properties continues to perform strongly. Phase one of the Marleigh development is nearing completion, with sales gathering pace in phase two. Despite the challenging residential property market, the Cambridge market remains robust. The Marleigh development completed on more units in H2 compared to H1 (54 vs 37), generally at better margins reflecting a higher proportion of house sales. Also, the division benefitted from an increase in the valuation of its investment portfolio. Phase three of the Marleigh development is moving to the planning stage with vacant possession seen in early 2026.

Net cash has declined from £129m to £35m during FY23. Most of the shortfall reflects higher working capital and the line stoppage, with the underperformance in profitability accounting for the remainder. We expect an improvement in cash flow towards Q4 / H1'25 as the businesses implement the transformation strategy and on the outcome on any sale of the C-130s.

We still regard the likely NAV as a useful guide to the inherent worth of the Group in the absence of financial forecasts, and our indicative value / share falls slightly to 453p (from 478p).