Cambria Automobiles PLC Q&A with Mike Allen at Zeus Capital (LON:CAMB)

Cambria Automobiles PLC

Cambria Automobiles PLC (LON:CAMB) is the topic of conversation when Zeus Capital’s Head of Research Mike Allen caught up with DirectorsTalk for an exclusive interview.


Q1: Cambria Automobiles, they’ve published their interim results today, can you talk us through the highlights?

A1: So, Cambria delivered a H1 adjusted PBT of £5.5 million, that was ahead of the £5.3 million that we pencilled in as a forecast and it’s up 15% year-on-year.

I think if you look at the revenues, they’re up 4.5% year-on-year, gross margins did fall slightly as a result of higher transaction prices in new and used but the business did very well on the cost side and also on the cash generation side as well, that was very strong.

So, net debt at the period end was £3.2 million despite a heavy capex and if you look at the balance sheet, they’ve got nearly £70 million of freehold and long leasehold property. If you look at post-period, the investments that they’ve made, that number goes to £78 million so very well capitalised business performing well.


Q2: What key themes did you note in the results?

A2: If you look at new car, new vehicle revenue decreased by about 1% and what we saw here was a 23.4% decline in sales volumes albeit that was offset by price increases due to the mix and they also managed to maintain margins there as well which was a good result given the uncertain backdrop.

Revenues in used cars were up about 9% which was a good performance, again that was aided by price mix rather than volume and the gross profits also increased as well, which is good news.

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Aftersales revenue was up 6.5% or 2.7% on a like-for-like basis and again, we saw growth in gross profits there on an absolute basis.


Q3: So, I guess all of this means you’ve had to change your forecasts?

A3: Yes, we’ve looked at the forecasts and we are upgrading our numbers so in 2019, we’re increasing our adjusted PBT from £9.9 million to £11 million and that translates into a 12% earnings upgrade and then we’ve flowed that through in 2020 and 2021 so again, around 11% earnings upgrade in those years.

We have increased our net debt assumptions and that’s really based on updated guidance on capex and that’s really on new leadership development that they’re doing such as Brentwood and Solihull. Again, if you look at the profits against the net debt, and the track record of delivering strong value, I still they’re in a comfortable position.


Q4: Finally, how do you view the company valuation at the moment?

A4: Well, I think at the moment the sector valuation is very low, we are very confident in the Cambria Automobiles story longer term and we believe in the business plan of delivering a billion plus of revenue over the medium term.

Looking at the valuation, they have a PE of about 6.8 times 2019 and EV/EBITDA below 5 times with a dividend yield of about 2%. So, it is at a discount to its peers on a PE basis but on an EV/EBITDA, it does trade on a premium albeit there’s a lot of capex in the enterprise value calculation due to the development that they’re undertaking at the moment and I think those developments will deliver strong value longer term.

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