Zeus Capital Head of Research Mike Allen caught up with DirectorsTalk for an exclusive interview to discuss Cambria Automobiles PLC (LON:CAMB)
Q1: Mike, can you explain for us how Cambria Automobiles performed in the first half compared to your expectations?
A1: Cambria delivered a very good set of interim results this morning and very good year-on-year growth so revenues up 11% and that actually translated into PBT up 21.7% year-on-year delivering £5.6 million which was 5% ahead of the forecast that we had in the market. So, good results and that translated into a 20% increase in adjusted earnings per share.
Q2: So, what were the key drivers behind those results?
A2: I think there are a number of key drivers really, I think we definitely saw a good increase in average selling prices, both in terms of new and used vehicles, after sales revenue was very resilient as well and we also saw good demonstration of overheads recovering so they clearly optimised their cost base during that period as well. I think it is important to put into context that they, during this period delivering this growth, Cambria Automobiles were in the middle of some complex building projects and integration acquisitions as well and there was some disruption to one of their major service sites. So, in that context, I think the performance is certainly very good.
Q3: How this changed your forecast on the company in any way?
A3: We’ve increased our forecast, really given the performance that we saw in the first half of the years. So, we’ve increased our revenue expectations by about 4% and PBT by about 6%, we are cautious on the markets at the moment, even despite putting that upgrade through. We are assuming it will slow down in the second half year-on-year and that was despite delivery a very strong March, looking at what we saw in April does lead us to be a little bit cautious for the rest of the year at the moment.
Q4: Finally then, what’s your view on the stock and valuation for Cambria Automobiles?
A4: I think the stock itself looks very cheap to us, from a PE of sub 8 times, EV EBITDA of about 6 times which falls quite drastically. In future years, I think this business if they deliver their strategic objectives should double to treble earnings over the medium term. I’d probably also point out that the investment that they’ve undertaken at the moment should translate into a three-hold property portfolio worth in excess of £80 million, which is below the current market cap as well. Also, bear in mind, this business started with just over £10 million of start-up capital over a decade ago and has delivered a very good business and isn’t stopping yet, it sees a very bright future no matter what the market throws at it.