Shares in Marshall Motor (MMH:AIM) revved up 4.7% to a five-year high of 200p after the automotive dealership upgraded profit guidance again in an unscheduled trading update.
Following on from a significant profit upgrade in May, Marshall Motor insisted it is on the road to recording another record result for 2021, management also flagged up a ‘high level of uncertainty’ ahead due to factors such as the ongoing impact of the pandemic and a global shortage of semiconductors.
GOING THROUGH THE GEARS
Steered by CEO Daksh Gupta, the car retailer now expects to report an ‘exceptionally strong first half performance in both profit and cash generation’.
Furthermore, it sees pre-tax profits for 2021 coming in ‘significantly ahead’ of market expectations and ‘well ahead’ of 2020’s ‘historic record result’.
The key driver of the latest upgrade is Marshall’s strong market outperformance, particularly in a used car arena witnessing ‘unprecedented’ used vehicle value appreciation.
LIMITED VISIBILITY
In today’s update, Marshall Motor cautioned: ‘There remains a high level of uncertainty over the second half of 2021, and possibly longer, given the potentially significant impacts of new vehicle supply issues as a result of a well-documented worldwide shortage of semiconductors, a realignment of used vehicle values and the continuing impact of the Covid-19 pandemic.’
These supply issues have had ‘limited impact’ on its sales volumes thus far, though Marshall warned supply in both new and used vehicles has ‘tightened’ and there are ‘signs that these issues will become more acute in the second half of the year and maybe beyond’.
Marshall Motor joined Inchcape (INCH) and Vertu Motors (VTU:AIM) in upgrading estimates as the world unlocks from Covid.
‘This latest earnings upgrade reinforces our view that Marshall Motor is a highly reliable platform that is well positioned to emerge as a sector winner,’ said broker Zeus Capital, which is ‘increasing our 2021 forecasts from an adjusted PBT of £22.1 million to £26.5 million, which is in line with management guidance that it is well ahead of its historic record result of £24.7 million.’
‘Used car prices are shooting up and demand remains very strong,’ said Russ Mould, investment director at AJ Bell.
‘The key question is whether this is a short-term boost as individuals seek alternative ways to travel to work than use public transport, or whether the car retail sector is going through a long-term structural change.’
