Cambria Automobiles (LON:CAMB) has delivered robust H1 2019 performance, which was ahead of our forecast at the adjusted PBT level (£5.5m vs. ZC £5.3m). We update our forecasts to reflect this outperformance and now expect adj. PBT for the full year of £11.0m (vs. £9.9m previously). Organic earnings upgrades in this sector are rare at present, and we believe this is down to the strong execution in reshaping the portfolio towards the premium/luxury brands. We remain confident in Cambria’s ability to deliver strong shareholder value from here.
H1 results: Cambria has delivered a H1 adjusted PBT of £5.5m, which is slightly ahead of our £5.3m forecast and is +14.6% YOY. Revenues were +4.5% YOY while gross margins fell slightly by 30bps to 11.6% as a result of higher transaction prices in both new and used. During the period the Group generated an operating cash inflow of £10.9m (H1 2018: £5.8m). Net debt at the end of the period was £3.2m up from £0.4m in H1 2018. The balance sheet remains robust with net assets of £60.6m, underpinned by £69.7m of freehold and long leasehold property, or £78m including post period end investments.
Key drivers: New vehicle revenue decreased by 0.6% to £133.5m (H1 2018: £134.3m) with price increases offsetting a 23.4% (19.4% on a LFL basis) decline in sales volumes. The new vehicle gross profit margin was flat YoY at 7.2% and there was a £0.1m reduction in gross profit (£0.9m on a LFL basis). Revenues in the used car segment increased by 8.7% to £143.1m (H1 2018: £131.6m) whilst the number of units sold decreased by 8.9%. The gross profit on used vehicles increased by 1.7% to £12m (H1 2018: £11.8m), with the profit per unit sold increasing by 11.3%. Aftersales revenue was up 6.5% YoY (or 2.7%on a LFL basis) to £37.5m (H1 2018: £35.2m), and the related gross profit increased to £14.2m (H1 2018: £13.7m).
Forecasts: We update our full year forecasts to reflect the outperformance achieved in H1. We now expect adj. PBT in 2019E of £11.0m, implying £5.5m in for the second half vs. £5.0m delivered last year. We also update our cash flow assumptions to reflect updated guidance on capex, we now expect net debt at the year-end of £15.8m, going to £16.7m in 2020E, reflecting the higher levels of investment in key value enhancing developments such as the Brentwood and Solihull projects.
Investment view: We remain confident in the Cambria 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. The changes to the portfolio as they mature should be exciting in our view