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Cambria Automobiles PLC

Cambria Automobiles AGM Trading Update

We note the trading update released this morning by Cambria Automobiles (LON:CAMB), confirming that trading in the first three months of its financial year has been in line with management expectations. We anticipate the trading backdrop to remain tough but remain confident in the medium-term investment case. A lot of operational progress was made in 2018, and the Group has a strong balance sheet and is well positioned to deliver shareholder value in our view.

Trading update: Cambria has confirmed they continue to trade in line with expectations, with strong performances in used car sales and aftersales. On a LFL basis, new vehicle unit sales were -21% LFL for the first three months of its financial year, with new retail revenues -13.6%. Gross profit per unit has improved significantly during the period, due to the mix effect from Bentley, Lamborghini and McLaren. Group profit per unit has also improved on a LFL basis and has helped to mitigate the impact of the reduction of unit sales on the bottom line. Used continues to perform well, with unit sales -2.9% on a LFL, which was offset by an ongoing improvement in gross profit per unit. The significant changes to the franchise portfolio and closure of Blackburn site had a significant impact on sales volumes. Aftersales also continues to perform well, with revenues +1.9% (+2.6% LFL0 with gross profits +6.5% (LFL +8.3%).

Portfolio changes: The second Lamborghini dealership was opened in November 2018 alongside Bentley in Royal Tunbridge Wells. This follows a full development of the facility, and will be a key part of its High Luxury Segment (HLS) business. The major development in Hatfield (Jaguar Land Rover and Aston Martin) also appears to be progressing well, with the Land Rover facility completed in December as planned. The Aston Martin and McLaren sites in Hatfield are expected to be ready in February. On 21 December, the sale of its Royal Wootton Basset Freehold was sold for £2.75m as previously flagged.

Outlook: The Board remains cautious on current trading in light of the uncertainty around the consumer and Brexit. However, we believe the significant operational progress made during 2018 should put the Group in a good position given its improving portfolio of dealerships as well as its growing representation across Premium and High Luxury brands. The next scheduled newsflow we anticipate from Cambria is a pre-closed trading update during the first week of March.

Investment view: Trading conditions clearly remain difficult and we maintain our forecasts at this juncture. However, we remain confident in the Cambria story longer term, and believe it remains well positioned to deliver £1bn+ of revenue over the medium term. As we are seeing across the sector at present, near term valuation multiples are depressed, and the current market capitalisation of the Group remains at odds with the >£80m invested freehold asset base. Management are aligned with the shareholder base, with significant shareholdings, and are well positioned to continue to deliver value