Cambria Automobiles has delivered another strong set of FY results, which were ahead of our forecasts despite numerous upgrades during the course of the year. We upgrade our 2020E and 2021E forecasts to take account of the 2019 outperformance. It is clear that the move into Premium/HLS is making a real difference and has been executed well. We remain confident in Cambria’s ability to deliver further strong shareholder value from here.
- Final results: Cambria has delivered a FY 2019 adjusted PBT of £12.3m, which is 2.5% ahead of our upgraded forecast of £12.0m and +25.5% YOY. Revenues were +4.4% YOY with gross margins +10bps YOY, despite well documented pressures across the industry. Operating costs at £61.4m were also below our forecast of £64.1m, which was also a key driver in this performance, with overhead recovery (operating expenses as a % of revenue) falling 40bps YOY to 9.3% (ZC 9.6%). The impact of this significantly exceeded the higher interest costs of £1.4m (ZC £1.2m) and ensuring that the impressive YOY growth rates flowed down to adjusted EPS. DPS was +10% YOY and ahead of our forecast, with cash generation once again excellent normalised free cash flow was £11.8m equating to a 20% yield
- Key drivers: New vehicle revenues increased from £290.6m to £293.8m (+1.1%), with new vehicle sales volumes down 18%. This shows the impact of the significant increase in the average transaction price of the units sold. Importantly, gross profit increased by £2.7m in absolute terms. In used, LFL units were +1.4% or -4.9% on an absolute basis, which was driven by site closures and the shift mix into Premium/HLS. That said, total gross profit impact was £0.8m, with GPPU up £155 to £1920, which is +8.7% YOY. Aftersales revenue was +4.3% YoY, and +5.1% LFL, with gross profits +3% or £0.8m in absolute terms. Gross margins at 38.2% were lower than the 39.1% delivered last year.
- Forecasts: We upgrade our 2020E and 2021E EPS forecasts by 3-4% on the back of the outperformance delivered in 2019A. However, we take a cautious view on the trading outlook along with management. That said, it is difficult to ignore the outperformance Cambria has delivered multiple earnings upgrades during the course of the year, when earnings momentum elsewhere in the sector has been largely negative.
- Investment view: We remain confident in the Cambria Automobiles 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 >£90m invested freehold asset base. The changes to the portfolio are yielding real results that is demonstrating clear market outperformance.
