Cambria Automobiles Plc (LON:CAMB) has released a trading update this morning, ahead of the AGM, confirming trading in Q1 has been in line with expectations, albeit behind the same period last year. The group has also confirmed that it will be opening a Lamborghini dealership in Q1 2018. The Lamborghini dealership will be located in Chelmsford in the same facility as the Bentley dealership and work is underway to complete that showroom for occupation in Q1 2018. While consumer uncertainty persists and trading conditions in the new car market continue to be difficult, we remain confident in the medium-term investment case. The company has a strong balance sheet and is well positioned to generate shareholder value in our view.
Trading update: The Group’s trading performance in the first three months of the current financial year has been in line with the Board’s expectations, albeit behind the corresponding period in 2016/17, both on a total and like-for-like basis. Trends highlighted in the group’s preliminary results have continued into Q1 of this year. This comes as no surprise to us given current sector trends.
New brand partnership: The group has announced it will be opening its first Lamborghini franchise in Q1 2018, which will share a site with the recently announced Bentley dealership in Chelmsford. The potential synergies of having both Bentley and Lamborghini at one site was likely an attractive quality from the OEM perspective. The Lamborghini franchise network in the UK is small but the product pipeline is attractive with key products such as the ‘Urus’ SUV model due for release in 2018.
Trading themes: New vehicle unit sales for the quarter were down 16.3% (like-for-like down 14.4%), with gross profit per retail unit also reducing over the same period. Used vehicle sales continued to perform well on a like-for like basis. Whilst total used unit sales were down 9.2%, like-for-like units were down 2.8% compared with the same period in the prior year. This unit reduction was offset by continued improvement in gross profit per unit. The Group’s aftersales operations delivered a good performance, with revenue increasing by 0.3% (like-for-like up 6.1%), with profitability down 0.7% year on year (like-for-like up 5.9%).
Forecasts: We are maintaining our trading forecast assumptions on the back of this update. We updated our forecast assumptions following our sector review, where we have made more conservative assumptions given the deteriorating market backdrop. We do anticipate strong medium term profitability from Lamborghini, albeit we recognise it will take time for the order book to build from a new site.
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 within the Group.
