Cambria Automobiles Plc (LON:CAMB) has delivered robust H1 2018 performance, which was marginally ahead of our forecast at the adjusted PBT level (£4.8m vs. ZC £4.6m). We are maintaining our headline forecasts on the back of these results, which captures a 20% reduction in H2 PBT vs. last year that included a record March performance. We anticipate the trading backdrop to remain tough but remain confident in the medium-term investment case.
H1 results: Cambria has delivered a FY adjusted PBT of £4.8m, which is slightly ahead of our £4.6m forecast and is -14.3% YOY. Given the softening backdrop particularly in new car sales, a decline vs. last year was very much as anticipated. Revenues were -4.5% YOY, which lead to a -8.6% drop in adjusted EBIT with margins down 8bps YOY. Gross margins increased 20bps YOY to 11.9% driven by the mix shifting away from new cars. The interim dividend was flat YOY despite the anticipated fall in profitability.
Key drivers: New vehicle revenues fell from £143.5m to £134.3m during the period, with unit sales -16.2% or -14.1% on an LFL basis. Gross margins fell by 60bps to 7.2% during the period, which was largely volume driven by gross profit per unit was +5.2% in retail. The average profit per unit sold across the portfolio was +2.4%. The upshot of the volume reductions was a £1.5m reduction in gross profit or £1.3m on a LFL basis. The performance in used cars remained robust and on a LFL basis, used volumes fell by 0.8% but was more than offset by a profit per unit increase of 7.3%. Aftersales revenue increased by 1.1%, and 6.1% on a LFL basis, with gross profits +£1.0m during the course of the year. Within the mix, parts revenue were +5.8% on a LFL basis with a margin of 20.6%, with the overall gross margins up 70bps during the period to 38.9%. Aftersales now represents just short of 40% of Group gross profit.
Forecasts: Our headline forecasts remain unchanged following these results and implies a H2 PBT of £4.6m vs. £5.7m last year, which included a strong March. We have tweaked our net debt forecasts, which have increased due to the phasing of major development projects into 2018E from 2019E.
Valuation: While the near term trading outlook remains tough, 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 we believe the current market capitalisation of the Group remains at odds with the >£80m invested freehold asset base.
