Marshall of Cambridge
Ticker: Private

Founded in 1909, Marshall of Cambridge (Holdings) Ltd is a private, family owned company, employing 5,786 staff. In 2018, the business generated >£80m of EBITDA on revenues of £2.5bn, and has significant organic opportunities ahead. Not only, accelerating expansion at its leading aerospace/defence (MADG) and motor retail businesses (MMH - 64.46% owned). 

Latest Reports

Significant contract win

Published: 13th May 2020

Marshall of Cambridge has announced that it has secured a meaningful, five-year contract within its Aerospace and Defence Group (MADG). The contract is to supply maintenance, support and training to the Cameroon Air Force’s fleet of C-130J Hercules transport aircraft. It is noteworthy, both in scale and for the addition of the 17th customer of the airframe, again highlighting the Group’s enduring expertise.

The contract is for an initial five years, with all in-depth maintenance work undertaken at the Group’s facilities in Cambridge. In addition, MADG will provide both technical support and training under the terms of the contract, with the latter enabling the Cameroon Air Force to deliver front-line maintenance and support in Cameroon.

Adding the Cameroon Air Force contract takes the number of MADG’s C-130J maintenance related and international customers to 17, supporting the largest number of operators globally and highlighting MADG’s expertise on the airframe. MADG also has a significant maintenance contract with the UK’s Royal Air Force fleet of C-130 aircraft, which includes the enhanced Centre Wing Replacement programme (CWRP) from 2017. Under the terms of the revised Strategic Defence & Security Review, the life of the 14-strong fleet was extended to 2035 last year.

The ongoing transformation of the Group began with the restructuring of the MADG business, the commencement of land sales and the subsequent long-term development/relocation of the Group’s asset base. There is no change to our view of fair value being 532p per NVPO share.

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A game of two halves

Published: 2nd September 2019
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. 
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First step in creating long-term value

Published: 21st May 2019
The backbone of success for Marshall of Cambridge (MCH) has been the Group’s desire to adapt and stay ahead of its rivals by being prepared to move decisively where strategic opportunities present themselves. As evidenced last week, when MCH announced that by 2030 it was intending to relocate its division MADG from its 900 acres site at Cambridge Airport to new, state-of-the-art facilities at one of 3 possible venues: Cranfield, Duxford airfield or RAF Wyton.

This move would  allow MADG to more easily service its widening international client base, whilst freeing up vital capital to further invest in its cutting edge aerospace/defence capabilities, along with MCH’s other interests. This could also lead to perhaps hundreds of new highly skilled jobs being created. 

Equally, the plan should provide the local community with an urgently required source of quality residential houses (up to 12,000), commercial property (5m sq ft) and transport solutions. A ‘win-win’ for the shared benefit of all stakeholders. 

One must be aware that there are still many hurdles to climb before this can become reality, such as obtaining full planning permission, choosing MADG’s next home, relocating employees/equipment, and finally redeveloping the Cambridge site. 

This is why at this stage, we conservatively retain our 533p/share valuation and financial forecasts. Albeit, we certainly recognise the significant potential of the announcement to create additional long-term value. 

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Undervalued Aerospace and Defence stock

Published: 10th May 2019
Marshall of Cambridge (Holdings) Ltd is a private, family owned company that was founded in 1909 and is now of significant size, employing 5,786 staff.

In 2018, the business generated over £80m of EBITDA on revenues of £2.5bn, and has significant organic opportunities ahead. We expect accelerating expansion at its leading aerospace/defence (MADG) and motor retail businesses (Marshall Motors which is AIM listed, but owning a 64.46% shareholding). 

Additionally there is scope to address  its loss making Fleet Solutions arm, and to be more active in high-tech venture capital investments. And in terms of assets the Group might be able to unlock significant value over time from its 900 acres estate at Cambridge. 

The non-voting priority ordinary shares (NVPOs) can be traded freely via a special off-exchange matching facility administered by stockbroker James Sharp. The NVPOs currently attract business property relief, and so can fall outside a person’s estate for inheritance tax purposes.

The most recent traded price for a NVPO was 285p, yet our analysis (using sum-of-the-parts methodology) indicates a current fair value for the Group of 532p. We would note that this excludes any further upside arising from additional land being made available for redevelopment. 

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Extended life

Published: 5th August 2019
We note the recent article in Jane’s Defence Weekly of the decision by the UK MoD to extend the life of the RAFs fleet of 14 Lockheed Martin C-130J/C-130J 30 Hercules transport aircraft by a further five years to 2035. Marshall Aerospace and Defence Group (MADG) has begun the work required to extend the life of the Hercules fleet. 

In addition to recent contract wins, we also view this announcement as good news, extending the life of what has been a significant programme for the business. While we are leaving estimates unchanged, we reiterate our valuation per NVPO share at 532p, which represents a near 64% premium to the last average share price trade. 

MADG, a specialist system engineering and project management business, had originally secured a contract to provide whole-life maintenance/support for the Hercules fleet in 2006. This latest announcement represents the second time that the life span of the RAFs Hercules fleet has been extended - the previous occasion being within the 2015 Strategic Defence and Security Review, from 2022 to 2030. 

The work necessary for prolonging the life of the fleet includes the replacement of the centre-wing box (CWB). This represents part of the wider £350m investment budgeted by the MoD in the Hercules fleet and announced in September 2016. The expenditure will be split into £200m on key components (including the CWB) to extend the aircraft’s life and a further £150m of upgrades to enhance its capabilities. In comparison with its ultimate replacement, the Airbus A400M, the Hercules benefits from an ability to take off and land on short runways and this is operationally invaluable. 

Like any project work, revenues are likely to be ‘lumpy’ in nature. Yet, we also note the steady improvement in the division’s book-to-bill ratio (excluding the Hercules Integrated Operational Support (HIOS) contract with the UK MoD), which rose to 2.51:1 in 2018 from 1.27:1 in 2017. This provides work to keep more of the hangars busy at any one time.

Looking ahead, we anticipate that the next trading update for Marshall of Cambridge will be in September, following the Interim results from its 65%-owned quoted subsidiary, Marshall Motor Holdings PLC (MMH). 


Our FY19 and FY20 estimates are unchanged following this announcement, as the work will be performed over the medium term, mostly beyond the scope of our current estimates. However, in terms of sentiment and future earnings visibility the announcement clearly represents good news for MADG. 

We retain our valuation of 532p per NVPO share.

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