Cambria has now released their final results for the year ended 2019.
Revenue increased when compared to last year due to a £23.7M growth in used cars revenue, a £3.2M increase in new car revenue and a £3.2M growth in after sales revenue. Internal sales increased by £2.3M and coast of sales were up £23.8M to give a gross profit £3.9M higher. Site closure costs reduced by £508K, there was a £414K profit on the disposal of a property, staff costs fell by £424K and operating leases declined by £576KJ, although depreciation and amortisation was up £956K and other admin costs were £1.2M higher to give an operating profit which was £3.7M higher. Loan interest was up £277K and tax charges grew by £689K to give a profit for the year of £10M, a growth of £2.7M year on year.
When compared to the end point of last year, total assets increased by £50.5M driven by a £31.4M growth in freehold land and buildings, a £23.1M increase in inventories and a £10.8M growth in cash, partially offset by a £9.9M decrease in long leasehold land and buildings, a £5.2M decline in assets under construction and a £2.3M decrease in properties held for sale. Total liabilities also increased during the year due to a £24M growth in the vehicle consignment creditor, a £9M increase in the revolving credit facility, a £4M growth in vehicle funding and a £4M increase in other payables. The end result was a net tangible asset level of £44.1M, a growth of £9M year on year.
Before movements in working capital, cash profits increased by £3.3M to £16.7M. There was a cash inflow from working capital and after the reduction in one-off costs, the net cash from operations was £22.2M, a growth of £9M year on year. The group made £2.9M from the sale of plant and equipment and spent £21.9M on capex to give a free cash flow of £3.3M. They spent £495K on interest and £1M on dividends and then took out new loans of £9M to give a cash flow of £10.8M and a cash level of £26.3M at the year-end.
Overall this has been a difficult new car market that has been impacted by weakening consumer demand in the face of uncertainty around the Brexit negotiations, inconsistent messaging around the future of diesel engines and the impact on car supply from the change in emissions testing. The challenges facing vehicle manufacturers in achieving compliance with the 2020 and 2021 CO2 emissions targets will impact the new car market over the next two years. The group are also having to cope with rising costs including the national minimum wage increases, apprenticeship levy, pension contributions, increases in credit card charges and increases property rating costs.
The overall new car market is forecast to end the year at 2.3M registrations and the current forecast is set to see them continue to fall in 2020 to 2.2M compared to 2.7M in 2016. The biggest change remains the diesel segment which is down 24%. The new car market will be further disrupted as the plethora of different technologies hit the car market over the coming years. It is worth noting that the comparatives look favourable due to the disruption encountered last year whilst the franchise and property changes were being delivered.
The gross profit in the new car division was £20.6M, a growth of £2.7M year on year on revenue that increased by 1.1% despite sales volumes dropping by 18% which illustrates that significant increase in the average transaction price of units sold which was up 40%. This was a result of the like for like increase in profit, a reduction in sales volume of low margin commercial and fleet units, and the strengthening mix. The business has gone through a significant period of disruption with the site closures in the previous year and the franchise changes this year. The addition of two Lamborghini, two Bentley one McLaren franchise have made a marked difference to the new car department profitability.
On a like for like basis, new volumes declined by 15% with gross profit down £200K with profit per unit up 20%. The sales volume decline was attributable to reductions in unit sales from certain volume manufacturer partners who have experienced a significant reduction in registrations. The sale of new vehicles to private individuals was 12% lower (like for like down 8%) and profit per unit was up 32% (11% like for like). New commercial vehicle transactions were down 60% to just 390 units and new fleet vehicle sale decreased by 36%. Total registrations were down 6.4% in the period.
The gross profit in the used car division was £25.1M, an increase of £800K when compared to last year with a £23.7M increase in revenues and a 5% decline in sales volumes, partly driven by site closures and shift in mix to more premium and luxury cars. Profit per unit sold was up 8.7%. On a like for like basis, sales volumes increased by 1.4% and gross profit was up £1.2M with profit per unit growing by 7%. They have continued their strategy to increase the efficiency with which they source, prepare and market their used vehicles. This has resulted in the increase in like for like profitability.
The gross profit in the aftersales division was £29.3M, an increase of £400K when compared to 2018 with a 4.3% increase in revenue. The increase was £800K and 5.1% respectively on a like for like basis.
During the year the group incurred capex of £21.9M with the main projects being £8.1M for the Hatfield JLR, Aston Martin and McLaren build completion and fit out; £3.7M for the Hatfield PDI centre land acquisition for storage and preparation; £5.4M for a Brentwood land purchase and £2.7M for the Swindon freehold land purchase and completion of development. Over the next two years the group intends to complete Solihull Aston Martin for £5M and the Brentwood JLR, Aston Martin, Bentley and Lamborghini for £16M.
On closure of the Blackburn dealership, the Freehold property has been transferred to assets held for sale at its net book value.
Going forward, trading in the current year has started in line with board expectations. The UK economy remains in a period of significant uncertainty while the ramifications of Brexit are worked through. There is little clarity on how or if any free trade agreements will be negotiated and there continue to be major implications for the Sterling exchange rate. A weaker sterling and any tariffs would undoubtedly have a detrimental effect on the new car market. The changes made over the past two years with regards the franchise mix have started to contribute positively and the board believes that they have further potential.
At the current share price the shares are trading on a PE ratio of 6.9 which falls to 6.6 on next year’s consensus forecast. After the final dividend was increased by 10% the shares are yielding 1.7% which remains the same on next year’s forecast. Net debt at the year-end stood at £3.8M compared to £5.5M at the end of last year.
Overall then this has been a pretty successful year despite the challenges in the new car market. Profits were up, as was net tangible assets. The operating cash flow also improved with a decent amount of free cash being generated although it is worth noting that were it not for the favourable working capital movements, there would be none generated. All divisions did well, although this was against some favourable comparatives last year. The new car market looks like it will be very difficult over the next couple of years so there are going to be challenges. I do like the way the company is investing in its own assets to improve their product mix though so I am going to hold with a forward PE of 6.6 and yield of 1.7%.
On the 9th January the group released a trading update. Their performance in Q1 has been in line with expectations. In the period the new car market was down 1.2% with the private segment down 4.4%. The group’s new vehicle unit sales for the quarter were down 9.4%. This reduction was offset by a significantly improved profit per unit, reflecting the change in mix to the luxury segment.
Used vehicle sales performed well. Total used unit sales were up 2% and the group delivered an improved gross profit per unit. As a result, the profit from the used car department increased year on year. Overall the aftersales operations delivered a stable performance, with revenue increasing by 1.9%.
The board remains cautious about the general uncertainty in the economy and around the consumer environment while Brexit is worked through but the group is well positioned for 2020 with strong representation across the premium segments.
On the 21st January the group announced the acquisition of an Aston Martin and Rolls Royce franchise in Edinburgh from the administrators of Leven Cars. The total cash consideration, which includes a freehold property is £1.6M. The board believes the acquisition will be earnings neutral in its first full year of ownership. This is the first Rolls Royce dealership for the group and it is the only outlet for the cars in Scotland.
On the 2nd February the group announced that chairman Philip Swatman sold 100,000 shares at a value of £68.5K.