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Cambria Automobiles plc

Cambria Automobiles confident they have the right business model to face the challenges ahead

Cambria Automobiles plc (LON:CAMB), the franchised motor retailer, has announced its final results for the year to 31 August 2020.

The Group reported a strong first half of the financial year, however the trading performance in the second half was significantly impacted by the COVID-19 pandemic and particularly the enforced national lockdown for the period 24 March 2020 to 31 May 2020, which required the closure of all non-essential retail businesses, including car showrooms.

Financial Highlights

Year ended 31 August 20202019 
  £m£mChange
     
Revenue 524.0657.8-20.3%
Underlying EBITDA excluding transition to IFRS 16* ** 16.217.1-5.3%
Underlying EBITDA with transition to IFRS 16* ** 18.817.1+9.9%
Underlying operating profit* ** 13.013.6-4.4%
Underlying profit before tax* ** 11.112.3-9.8%
Underlying profit before tax margin* ** 2.11%1.87%+24bps
Underlying earnings per share* 8.99p9.78p-8.1%
Operating profit 12.013.9-13.7%
Profit before tax 10.212.5-18.4%
Earnings per share (basic) 8.22p9.95p-17.4%
Dividend per share 1.1p 

* These items exclude net non-recurring expense of £1.0m relating to reorganisation costs and acquisition costs (2019: profit on disposal of property assets held for resale £0.4m and closure costs £0.2m) See Note 4

**The adoption of IFRS 16 has an impact on the PBT, Operating Profit and EBITDA calculation as a result of the operating lease expense for rent payable being unwound and replaced with depreciation and finance expense.  See Note 3.

·      Strong balance sheet – net assets £71.7m (2019: £65.6m)

·      Strong operational cash flows, net cash flow from operating activities of £16.4m (2019: £22.2m)

·      Net cash of £3.5m (31 August 2019: net debt £3.8m), supported by the UK Government’s Coronavirus Job Retention Scheme and Business Rates relief measures

·      Continued disciplined investment in freehold property portfolio during year, deploying £4.2m in capital expenditure

·      Underlying Return on Equity at 13.1% (2018/19: 16.0%)

Operational Headlines

·      New unit sales to retail customers reduced 25.2% (like-for-like down 25.5%), and gross profit reduced despite the 2.7% (like-for-like up 1.5%) increase in profit per unit

·      Lower margin Fleet and Commercial units reduced 33.3% and 39.7% respectively 

·      Overall unit sales of new vehicles reduced by 26.3% (like-for-like down 26.5%)

·      Used vehicle unit sales down 20.9% following March lockdown (like-for like down 21.3%), partially offset by a 7.7% (like-for like 6.4%) improvement in profit per unit

·      Aftersales Revenue reduced 14.7% (like-for-like down 15.3%)

·      Group’s entry into the Scottish market with the acquisition of an Aston Martin dealership and its Freehold Property in Edinburgh taking the Group to four Aston Martin dealerships

·      Strengthening of High Luxury Segment with acquisition of Rolls-Royce Motor Cars dealership in leasehold premises in Edinburgh, welcoming this prestigious brand into the portfolio

·      Refranchising of Volvo Preston into Alfa Romeo and Jeep to create FCA Brand centre in Preston

·      Completion of land purchase in Solihull for the development of Aston Martin Birmingham site relocation

Mark Lavery, Chief Executive Officer of Cambria said:

“The unprecedented and ongoing effects of the Covid-19 pandemic have put the Group through the most challenging period in its history, though against this backdrop the business has demonstrated its resilience. We endured the material and devastating impact of Lockdown 1 (24 March  until  31 May), followed by the bounce back and pent up demand experienced during the summer months, which went some way to offsetting the damage the pandemic inflicted during that time.

The performance in the first half of the financial year to 29 February 2020 was unaffected by the pandemic and we had traded strongly during this period.  In our Interim Results published on 6 May 2020 we highlighted that the impact of the pandemic and that the national lockdown would have a material negative impact on the financial performance in the second half and particularly during the March to May period, the year on year negative variance was significant. 

The dramatic economic impact of the pandemic forced the Board to consider all its operating procedures and Guest handling processes. We took decisive action to protect the Group and to make it leaner, more flexible and agile in preparation for a very different market place and society once we emerged from the crisis.

At the time of writing, we are in the second enforced national lockdown and whilst our leaner, more flexible and more agile business is better equipped to deal with the challenges of a lockdown on our industry, it is still having a significant impact on our day to day trading. 

I have flagged in previous statements that the motor industry is facing some significant changes over the coming years.  We are concerned about our future relationship with the EU post conclusion of the BREXIT transition period on December 31st this year as this may lead to tariffs being in place for cars and parts being imported from Europe, which will drive up the price of those goods to UK consumers.

Our manufacturer partners continue to face the challenges of meeting compliance with the 2020 and 2021 CO2 emissions targets and a number are facing significant fines for failing to meet the targets set.  The UK Government has announced that it will be banning the sale of Internal Combustion Engine propelled vehicles from 2030 and Hybrids from 2035. These decisions will drive a need for the automotive manufacturers to develop compliant vehicles at a significant rate and incur a huge amount of R&D spend in doing so which will invariably drive up the price of vehicles for the general public.  Along with the National Franchised Dealer Association and other motor retail executives, I have lobbied hard to try to stop government ministers from making this unfortunate decision and instead urged them to consider a more technology agnostic and balanced approach to achieving net zero by 2050.  Political factors appear to be dominating the decision-making process rather than a coherent plan to finding the right practical solutions for reducing carbon emissions towards Net Zero by 2050.

The significant increase in unemployment will only accelerate post the conclusion of the Government Furlough scheme due to finish at the end of March 2021 and this leads me to be cautious about the coming financial year.

I would like to thank all our Associates across the business for their incredible application and flexibility during this unprecedented time and without which we would not have been able to navigate the challenges that the Covid-19 pandemic has forced upon the organisation.

Trading in the current financial year started well, with September and October results ahead of the previous year before the enforced Lockdown 2 commenced, which has again had a material negative impact on trading.

As a result of the unprecedented challenges imposed by COVID-19, Lockdown 2, the structural changes facing the Automotive Industry and the economic challenges that the UK will face post BREXIT and pandemic, the Board remains cautious in its outlook though confident that the Group has the right business model to face the challenges ahead.”

Continued Suspension of Forward Guidance

The enforced national Lockdown 2 period (which commenced on 5 November) has resulted in the Group’s car showrooms being required to close. This will have a material impact on the Group’s financial performance in the financial year to 31 August 2021 and as a result, the Board continues to deem it prudent to suspend financial guidance to the market.

Notice of AGM and posting of report and accounts

The Company also gives notice that the Annual General Meeting of the Company will be held at 10.30am on 7 January 2021 at Grange Aston Martin, Hatfield, AL10 9US (the “AGM”).

Given the current COVID-19 pandemic and the associated UK Government measures, the AGM this year will need to be held as a closed meeting. Shareholders will not be permitted to attend the AGM other than to meet the quorum requirement under the Company’s Articles of Association, for which the necessary members will be provided by the Company. Instead, shareholders are strongly encouraged to submit Forms of Proxy in favour of the Chairman of the AGM in order to ensure their votes will be counted.

In order to protect the health and wellbeing of our shareholders and Associates, any shareholder who seeks to attend the AGM in person, will be prevented from doing so on grounds of public safety. The proceedings of the AGM will be restricted to the formal business set out in the Notice of AGM. The results of the voting on each resolution will be announced and uploaded onto the Company’s website promptly following the close of the AGM.

The Company will continue to monitor the UK Government measures. If circumstances change resulting in the lifting of measures preventing the movement or gathering of people before the date of the AGM, it will consider whether it is appropriate to open up the AGM for attendance by shareholders. If this is the case, an update will be given on the Company’s website and by way of announcement to the regulatory news service of London Stock Exchange plc.

The annual report and financial statement for the year ended 31 August 2020 (the “Report and Accounts”) will shortly be posted to shareholders together with a notice of its AGM.

Copies of the Reports and Accounts and the AGM notice will be made available shortly from the Company’s website, www.cambriaautomobilesplc.com, in accordance with AIM Rule 20.