Cambria Automobiles Plc (LON:CAMB) has released a trading update this morning. Strong momentum following on from its prior financial year end has continued, with its H1 performance likely to be “substantially ahead” of H1 2016. That said, we maintain our caution on new car volumes and profits from Q1 2017 and are maintaining our FY forecast assumptions for now. Encouragingly, the used car and aftersales business continues to trade well, and operationally the property developments and site refurbishments are also going to plan. We continue to believe there is significant value at current levels with increasing asset backing being generated that more than underpins the current share price executed by a proven management team.
Pre-Close Trading update: Cambria has released a trading update confirming that the strong momentum seen in its last financial year has been maintained during the first five months of the current year to August 2017. Its H1 performance is therefore expected to be “substantially ahead” both on a total and LFL basis. The all-important order book for new car sales in March is also building well and in line with management expectations. Operationally, the Group has made “significant progress” with its property developments and site refurbishments. The closure of its Swindon Motor Park operation has also been completed, to allow for the Jaguar Land Rover Arch concept development to commence in mid-March, which is in line with previous guidance.
Key performance drivers: As previously flagged, and consistent with what we have seen elsewhere in the sector, new vehicle unit sales were -2.9% and -11.1% on a LFL basis. That said, gross margins did improve with gross profit per unit on a LFL continuing to increase demonstrating good pricing discipline. The used car business continues to trade well, with unit sales +0.6% or +2.6% on a LFL basis with gross profit per unit also continuing to advance resulting in enhanced profitability. Aftersales saw revenues +11.7% or 2.6% on a LFL basis, with profitability +3.8% YOY. On a LFL basis, profitability was -2.0% impacted by a fire at the Welwyn Garden City Jaguar/Aston Martin site, which has already been well flagged. There will be a business interruption insurance claim, which has not been factored into these figures yet.
Forecasts: We are maintaining our forecasts on the back of this statement, which is consistent with management comments of trading in line with market expectations. We anticipate H1 PBT to be c£5.3m based on management comments that they are “substantially ahead YOY” and compares to £4.6m delivered last year. This would imply a flat H2 based on our FY PBT assumption of £10.6m, and reflects our caution on the new car market with some conservatism built in on that basis.
Investment view: We continue to believe that Cambria Automobiles Plc will execute its strategy of becoming a £1bn+ revenue business implying EPS of 16p. However, the timing of this has become more unclear in the face of current market uncertainty. That said its trough ROCE of 11% remains ahead of its WACC and testament to its strategy that aims to deliver long term value at all stages of the cycle. We would also point out that Cambria should have a property portfolio worth approaching £80m once its investment strategy is fully executed, which also points to significant long term value from here.
