Cambria Automobiles (LON:CAMB) has confirmed trading in the first three months of the financial year has been in line with expectations despite continued challenging conditions. Clearly near-term trading conditions remain difficult, albeit sterling has strengthened post-election, which may provide a platform for stronger new car sales further down the line. However, we believe It will take time for OEMs to adjust to this recent FX strength. We expect a subdued March new car market as a result but see potential for recovery in H2. We remain firmly confident in Cambria’s ability to continue to execute and outperform the market as it has in recent years. We maintain our forecasts at this juncture and anticipate a pre-close H1 update in March.
- Trading update: Cambria have confirmed trading in the first three months the financial year has been in line with expectations, despite continued challenging conditions. In the period, the new car market was down 1.2% with the private segment down 4.4% and diesel down 17.9%. The Group’s new vehicle unit sales for the quarter were down 9.4%, with the sales of new retail cars to private guests down 7.4%. This reduction in Group new vehicle sales was offset by a significantly improved gross profit per unit performance, reflecting the change in mix towards the High Luxury segment. Used vehicle sales continued to perform well. Total used unit sales were up 2.0% compared with the same period in the prior year and the Group delivered continued improvement in gross profit per unit. As a result of the increased units and improved profit per unit, the profit from the used car department increased year on year. Overall, the Group’s aftersales operations delivered a stable performance, with revenue increasing by 1.9%.
- Outlook: The outlook statement was cautious highlighting the general uncertainty in the economy and around the consumer environment as a result of Brexit. The Group’s franchising and property development during 2019 has further enhanced the dealership portfolio and leaves the business well positioned for 2020, with strong representation across the Premium and High Luxury Segments of motor retail.
- 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 >£80m invested freehold asset base. The changes to the portfolio as they mature should be exciting in our view. Cambria trades at a discount on a P/E basis to its direct UK peer group, in a sector that looks oversold to us.
