Cambria Automobiles Plc (LON:CAMB) has released a pre-close trading update confirming it continues to trade in line with expectations. While trading conditions remain difficult driven by uncertainty on a number of different levels, we remain confident in the medium-term investment case. The Group has a strong balance sheet and is well positioned to delivered shareholder value in our view.
Trading update: The Group’s trading performance in the first five months of the current financial year has been in line with the Board’s expectations, albeit behind the corresponding period in 2016/17, both on a total and like-for-like basis. This comes as no surprise to us given current sector trends, driven by uncertainty impacting consumer demand (in particularly diesel) with sterling uncertainty continuing to impact supply into the UK market in some quarters. We note the SMMT February data released yesterday showing new car registrations -2.8% (YTD -5.1%) with diesel registrations within this -23.5% (-24.9% YTD).
Trading themes: Operationally, the refurbishment of the Bentley businesses in Tunbridge Wells and Chelmsford have been completed efficiently and are establishing themselves in new facilities. The Hatfield site (comprising JLR/Maclaren/Aston Martin) has started construction, albeit on a slight delay due to planning, while the substantial temporary McLaren showroom on the same site started to actively trade at the end of January. During this period of activity with premium brands, the Group has closed a Honda, Alfa Romeo and Jeep dealerships alongside two body shop operations. New vehicle unit sales were -16.5% or -14.6% on a LFL basis, albeit gross profit per unit (GPPU) did improve due to premium mix to partially offset the volume declines. Used car volumes continue to perform relatively well with LFL in line with the prior period, albeit total unit sales were -6.8% due to site closures and refranchising activity. GPPU also continued to improve in this division. Aftersales also remained robust, with revenue +0.6% or LFL +6.1% with profitability +2.1% or +8.2% on a LFL basis excluding the site and body shop closures.
Forecasts: We are maintaining our trading forecast assumptions on the back of this update. We do anticipate strong medium-term profitability from Lamborghini, albeit we recognise it will take time for the order book to build from a new site. For H1 we have penciled in a H1 adjusted PBT of £4.6m, which compares to £5.6m last year representing a -17.4% YOY reduction.
Valuation: While trading conditions have no doubt got more difficult, we remain confident in the Cambria Automobiles Plc 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 within the Group.
