Cambria Automobiles PLC (LON:CAMB) has issued a pre-close trading update for the five months to 31 January 2020, confirming trading is in line with expectations and ahead of the prior year, despite ongoing challenging market conditions. We anticipate a H1 adjusted PBT of c£6.0m this year vs. £5.5m last year and are maintaining our forecasts at this juncture. We do acknowledge the current uncertainties in the market, particularly in new cars that is difficult to quantify. That said, we remain comfortable in Cambria’s ability to continue to outperform the market as it has consistently demonstrated high levels of execution.
Market backdrop: The new car market has faced a number of headwinds in the period including the uncertainty of both the general election and Brexit as well as changes made to emissions regulations which is resulting in adjustments to manufacturer vehicle production and supply. The total new car market was down 1.5% in the period, with private registrations down 5.3%. Diesel registrations continue to fall sharply, down 18.6% YOY with diesel engines now making up 26.6% of the market versus 42% three years ago. Looking ahead, the spread of Coronavirus has the potential to disrupt new car supply as well as new car manufacturing in the UK, where factories are reliant on parts sourced in China. Both the potential supply side and consumer demand side impact due to lower economic growth is therefore difficult to quantify at this stage. Importantly, the order book for March is building more slowly vs. last years record level, albeit this does not come as a surprise given the current environment.
Trading performance: The Group has seen a 9.8% YOY decline in the volume of new retail car sales in the period, with total new vehicle unit sales down 11%. Despite this fall in sales, a much-improved profit per unit sold as a result of the Group’s strategic shift in mix towards High Luxury franchises means total profit generated from the Group’s new car divisions is in line with the prior year. The new car market is expected to remain challenging with the Group’s March new car order bank building more slowly than in previous years. The Group’s used vehicle performance was strong, up 4.4% YOY and accelerating on the 2.0% growth seen in the first three months of the year. Aftersales also remains stable, with sales 2.0% higher than the prior period, building on the 1.9% growth reported in the three months to 30 November 2019. The acquisition in Edinburgh has been well flagged and covered on 21st January. We note in February, the Group’s Volvo Preston dealership was refranchised into Alfa Romeo and Jeep creating an FCA Brand centre in Preston.
Forecasts & valuation: We are maintaining our forecasts at this juncture and anticipate Cambria Automobiles will deliver a H1 adjusted PBT of c£6.0m vs. £5.5m last year, which would imply a H2 of £6.4m vs. £6.8m last year. On a medium term basis, we remain confident in the strategy of becoming a £1bn+ revenue business, and see significant value both based on current multiples and the >£80m invested freehold asset base.
