Cambria Automobiles Plc (LON:CAMB) has delivered a robust FY 2017 performance, which was marginally ahead of our forecasts at the adjusted PBT level. We are maintaining our recently downgraded estimates on the back of these results as we anticipate a more difficult market backdrop across the sector particularly in new cars as we move into 2018 and beyond. That said, we remain confident in the medium-term investment case, the company has a strong balance sheet with some exciting new brand partnerships coming up in the near term.
Final results: Cambria has delivered a FY adjusted PBT of £11.3m, which compares to our forecast of £11.2m and is +6.6% YOY. Operating margins increased by 10bps during the year after it continued to benefit from overhead leverage. Operating costs as a % of revenue fell from 9.8% in 2016 to 9.5% in 2017 showing good cost control. Interest costs were £0.2m lower than we forecast, which helped to deliver the marginal beat to adjusted PBT. Adjusted EPS was +10.1% YOY and 4.4% ahead of our forecast, with the dividend bang in line with our forecast of 1.0p which was +11% YOY.
Key drivers: New vehicle revenue was +3.7% YOY, at £308.7m vs. £297.4m last year. This was a good performance in the context of a -11.7% drop in sales volumes. This was offset by a +25.7% increase in average profit per unit, which was enhanced by the strengthening brand mix. Used revenues were ahead in absolute terms on a YOY basis by 4.9%. Units sold declined by 6.1%, which was partly driven by the closure of Swindon Motor Park, which was a high volume used car operation. The gross profit fell by £0.2m in absolute terms to £23.5m, albeit the profit per unit increased by 5.6%. Aftersales revenue increased by 9% to £71.4m or +2.9% on a LFL basis, with gross profit improving 1.7% to £27.8m, which was a £1.2m positive movement. Aftersales margins were diluted by 180 bps during the course of the year as the parts component of the revenue mix increased.
Forecasts: We updated our forecast assumptions following our sector review, where we have made more conservative assumptions given the deteriorating market backdrop. Our net debt forecasts have been revised to account for the phasing of large capital projects that should complete in 2018E and 2019E.
Zeus 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.