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Cambria Automobiles PLC

INTERVIEW: Cambria Automobiles Compelling Medium Term Play – Zeus Capital

Cambria Automobiles Plc (LON:CAMB) is the topic of conversation when Mike Allen, Head of Research at Zeus Capital talks to DirectorsTalk. Mike shares his view on the interim results for the 6 months to the end of Feb, explains the key drivers, how this effects his forecast and shares his thoughts on the company valuation.

Financial highlights:

·     Revenue reduced by 4.5% to £295.1m (H1 2017: £309.1m)

·     Underlying profit before tax down 14.3% at £4.8m (H1 2017: £5.6m)

·     Underlying earnings per share decreased 13.4% to 3.82p (H1 2017: 4.41p)

·     Underlying net profit margin of 1.63% (H1 2017: 1.8%)

·     Positive operational cash flows maintained, with a cash position of £16.1m (H1 2017: £17.2m) and net debt of £0.39m (H1 2017 net cash: £3.3m) following significant capital investment

·     Strong balance sheet with net assets of £53.20m (H1 2017: £45.86m)

·     Rolling twelve month return on equity* of 17.38% (H1 2017: 21.76%)

·     Interim dividend maintained at 0.25p (H1 2017: 0.25p)

 

Operational highlights:

·     New vehicle sales, were as expected given market softening, down 16.2% (like-for-like down 14.1%) with the reduced unit impact partially offset by an increase in average profit per unit as a result of improved portfolio mix

·     Used vehicle sales were slightly down 0.8% on a like-for-like basis although profit per unit increased by 7.3% to more than offset the small volume reduction.  Overall units were down 6.7% after the site closures which was more than offset by a 9.7% increase in profit per unit

·     Aftersales revenue increased by 6.1% on a like-for-like basis and 1.1% overall with accompanying gross profit improvement

·     Acquired trade and assets of the Bentley Essex and Kent businesses in January and relocated into newly refurbished facilities at the Group’s existing Chelmsford and Tunbridge Wells sites

·     Addition of the high luxury Lamborghini franchise to the Group with a newly developed facility in Chelmsford

·     Group’s first McLaren dealership opened in January 2018 in Hatfield, operating on the Group’s major Hatfield development site

·     As planned, closure of the Group’s two bodyshop operations, Alfa Romeo and Jeep in Chelmsford and Mazda and Honda in Tunbridge Wells, to facilitate the addition of Bentley in both locations and Lamborghini in Chelmsford

·     Swindon Jaguar Land Rover development progressing well ahead of anticipated occupation in July 2018

·     Hatfield Jaguar Land Rover, Aston Martin and McLaren development progressing well for completion of Jaguar Land Rover in December 2018 and Aston Martin and McLaren in January 2019

 

* underlying profit after tax as a proportion of Average Shareholder’s funds

 

Mark Lavery, Chief Executive of Cambria Automobiles Plc, said: “I am pleased that the Group has delivered a solid financial performance in the first half which gives us confidence that we will maintain momentum in the second half and deliver a financial performance which is in line with current market expectations for the year as a whole. This is a notable achievement given the economic backdrop, consumer uncertainty, diesel demonisation and cost pressures.  The continued pressure in the new car market was predictable and we highlighted this in our preliminary results last year.  I am pleased with the improvements in both the used car and aftersales departments that have partially offset the pressure seen in new cars.     

“We have made excellent progress with the Group’s franchising strategy, adding two Bentley dealerships, one Lamborghini dealership and one McLaren dealership in the period.   

“Aside from the property refurbishments to facilitate the addition of the four newly opened High Luxury businesses, we have also made positive strides with the major property projects underway in Swindon for Jaguar Land Rover and at Hatfield for Jaguar Land Rover, Aston Martin and McLaren. The developments are progressing well and, once completed, will enhance our already excellent site portfolio and brand representation whilst supporting the Group’s long term trading prospects. The Board remains confident that Cambria, with its strong balance sheet and superior stable of brands, will maintain its momentum in the second half and deliver a financial performance in line with current market expectations.”