Cambria Automobiles PLC (LON:CAMB) is the topic of conversation when Zeus Capital’s Head of Research Mike Allen caught up with DirectorsTalk for an exclusive interview
Q1: Cambria Automobiles released its interim results for the 6 months to the end of Feb, what are your thoughts on the results?
A1: They’re a good set of numbers, clearly the car market has been down so revenues were down 4.5% year-on-year, PBT was down 14.3% year-on-year but actually the numbers came in about 3% ahead of our expectations so we were looking at £4.6 million and they’ve come in at £4.8 million which was good.
Earnings were also slightly ahead of expectations as well and the balance sheet was stronger than what we expected albeit that was due some phase capex investments which was getting delayed into next year, and the dividend was flat year-on-year.
Q2: What are the key drivers for Cambria?
A2: I think the main driver really was the impact of a fall in new car markets so that that really caused a large amount, the main amount really, of the fall in PBT. The used car business grew marginally, the aftersales of the business continued to grow and I think management did very well controlling their operating expenses. So, it really was driven by the fall in the new car market which has been well documented.
Q3: Now, you said results came in just a little bit ahead of your original forecasts, have your forecasts changed in any way?
A3: No, we’ve kept the headline forecasts unchanged following these results. It implies H2 PBT down about 20% year-on-year which to us feels about right given last year had a record March in it. So, we’ve kept that headline forecast unchanged on the back of these results.
Q4: Finally, what’s your view on the current company valuation for Cambria Automobiles?
A4: I think the valuation is depressed along with the rest of the sector as well. We’re very comfortable with the medium-term story of Cambria at the moment, we think it’s very well positioned to be a £1 billion plus revenue business with improving margins over time. The mix is moving more towards premium and luxury brands as well and we think, given the investment that they’ve taken into freehold assets as well, the current market cap is at odds with over £80 million of invested freehold asset base.
The business is very well managed whose interests are aligned with shareholders, they’ve got an excellent track record of delivering value given the start up capital they received which was £10 million. I think they’ve proven themselves over the last 11.5 years and I think with the market still proving to be quite tough, I think they’re well positioned given their strong balance sheet and proven track record.
So, very comfortable with this as a medium-term play and I think the current valuation still looks compelling to us really so one to tuck away we think.
