Cambria Automobiles has now released its interim results for the year ending 2016.
Revenues increased when compared to the first half of last year with a £21.5M growth in new car revenue, a £12.5M increase in used vehicle revenue and a £2.5M growth in aftersales revenue. Cost of sales also increased to give a gross profit £3.7M above that of the first half of 2015. The group made a £1.1M profit on the disposal of a branch, which did not occur last time but admin expenses grew by £2.4M to give an operating profit £2.4M above last time. Finance costs reduced modestly buy tax was up £449K to give a profit for the period of £4.6M, a growth of £2M year on year.
When compared to the end point of last year, total assets increased by £48.9M, driven by a £30.4M growth in inventories, a £10M increase in intangible assets and a £9.9M increase in cash, partially offset by a £1M fall in receivables. Total liabilities also increased due to a £33.7M growth in payables and a £10.6M increase in borrowings. The end result is a net tangible asset level of £19.3M, a decline of £6M over the past six months.
Before movements in working capital, cash profits increased by £1.3M to £5.9M. There was a cash inflow from working capital with a large increase in inventories more than offset by an even bigger growth in payables, and after tax and interest declined somewhat, the net cash from operations came in at £9.9M, a growth of £5.2M year on year. The group received £1.3M from the sale of a branch which, together with the operating cash, nearly exactly covered the acquisition of property, plant and equipment and new branches to give a cash flow before financing of £88K. The group then took out a new loan to give a cash flow of £9.9M and a cash level of £25.3M at the period-end.
The gross profit in the new vehicles business was £8.8M, a growth of £1.6M year on year on margins that increased from 6.6% to 6.7%. The average profit per unit sold increased by 15.4%, a combination of like for like increase and strengthening mix of the businesses acquired. On a like for like basis, new volume sales rose by just 0.1% with gross profit increasing by £700K as profit per unit increased by 9.7%.
The group’s sale of new vehicles to private individuals was 5.4% higher year on year at 4,832 units, supported by continued strong consumer offers from the manufacturers. New commercial vehicle sales reduced by 6.5% to 478 units due to the timing of the delivery of a commercial fleet order which concluded in March. New fleet unit vehicle sales increased by 22.9% to 327 units. The new registration data showed continued growth in registrations which were up 5.6% in the period, and they continued to benefit from favourable exchange rates and a low interest rate environment.
The gross profit in the used vehicles division was £11.3M, an increase of £1.4M when compared to the first half of last year on margins that increased from 9% to 9.3%. The profit per unit sold increased by 9.7%. On a like for like basis, used volumes increased by 2.4% and profit per unit increased by 8.1%. The group have increased the efficiency with which the source, prepare and market their used vehicles which has helped improve the profitability of the department.
The gross profit in the aftersales business was £13.1M, a growth of £700K year on year on margins that declined from 42.8% to 41.6%. On a like for like basis, service hours were up 1.7%.
The major redevelopment of the Barnet JLR site began in February and it is anticipated that it will be year-long project with full occupation of the facility expected in February 2017. The building and corporate identity fit out cost of the project will be £6.8M. The group have also begun the planning process for delivery of the new Swindon JLR development and it is the intention to be operating that completed facility by the end of 2017. The anticipated cost of the Swindon refurbishment is £6M. There will also be a number of other smaller refurbishment projects ending in the current year.
In January the group acquired the Land Rover dealership in Welwyn Garden City from Jardine Motors for a total cash consideration of £10.8M which generated goodwill of £10M. Also in January they disposed of the Jaguar dealership in Exeter for a cash consideration of £1.3M, resulting in a profit on disposal of £1.1M. The board are actively pursuing acquisition opportunities.
After the period-end, the group opened a third Aston Martin business, in Birmingham and they disposed Croydon Jaguar in line with the JLR strategy for a net cash consideration of £730K, resulting in a profit on disposal of £700K. This business occupied a joint franchise facility shared with Volvo and post-sale the buyer has relocated the Jaguar business to one of its own properties so Cambria will be continuing to operate the Volvo business form this location and will be undertaking a redevelopment of the site in line with Volvo’s corporate identity requirements.
The March registration data saw the largest single month of registrations since the turn of the century. The consumer offers from the manufacturers make new car purchasing much more affordable with strong accessibility programmes and a strong PCP product penetration in the new car market. PCP renewal activity is now becoming the norm and customers change their vehicles in a more structured manner, led by the finance product on a three to four year cycle which has structurally changed the new car market over the past four years. The board believe that the new car market is mid-cycle and registrations will continue above the 2.6m unit level for the foreseeable future.
Trading in the key plate change month of March was strong, ahead of plan and substantially ahead of last year. The board is confident that they will maintain this momentum in the second half of the year and will be ahead of current market expectations for the year as a whole, expecting to deliver an underlying pre-tax profit in excess of £10M.
At the current share price the shares trade on a PE ratio of 12.9 which declines to 9.3 on the full year forecast. At the period-end, the group had a net cash position of £300K compared to a net debt position of £900K at the same point of last year. After a 33% increase in the interim dividend, the shares are now yielding 1% which increases to 1.2% on the full year forecast.
Overall then this has been a pretty decent period for the group. Profits were up, as was operating cash flow, although after the investments in new branches, there was no free cash flow. Net tangible assets did decline, however. New vehicle profits were up and although like for like volumes were flat, an increase in profit per unit saw an underlying improvement in earnings. Used vehicle sales and aftersales also saw increases in profits, although the latter did see a modest decline in margins during the period.
There is some considerable capex planned with £6.8M due to be spent on the Barnet JLR site and a further £6M being spent on the Swindon JLR outlet so this might constrain further acquisitions (hopefully, at least). Trading in march has been strong, ahead of plan and considerably up on last year and a forward PE of 9.3 looks cheap to me so I have bought back in here.
On the 10th May the group announced that Chairman Philip Swatman purchased 10,000 shares for £7.5K to give him a total of 260,000 shares.
On the 14th June the group announced that Chairman Philip Swatman purchased 15,000 shares at a value of £10.4K which gives him a total of 275,000 shares.
On the 6th July the group announced that it had acquired a JLR franchise in South Woodford from Pendragon for a total cash consideration of £2.1M. The business has a sales facility in South Woodford and an aftersales facility in Hainault operating from leasehold premises. The acquisition generated goodwill of £2M and the business generated a pre-tax profit of £700K last year with the board expecting it to be earnings neutral this year and earnings enhancing in 2017
The group have committed to relocating the business to a new dealership facility that will be compliant with the JLR Arch Corporate Identity Concept. The lease on the current showroom facility has nine years remaining and therefore it will be necessary to sublet the facility for about six years while it is not occupied by the group. They have been advised that the passing rent on the showroom lease is over-rented when compared against the market rent (not sure what that means) and the directors have made a fair value assessment of the lease liability amounting to £1M which is being accounted for as an addition to the overall goodwill.
The group have also stated that they continue to trade well and the strong trading performance reported to March has continued through to the end of June which leaves them significantly ahead of last year and trading in line with current market expectations.
On the 11th July the group announced that Chairman Philip Swatman purchased 25,000 shares at a value of £16K.
On the 5th September the group released a trading update. Trading in the second half of the year continued strongly and in the first eleven months of the year it was substantially ahead of the same period of 2015 on a like for like basis. The board is confident of delivering results for the full year in line with market expectations.
New vehicle unit sales were up 3.8% on a like for like basis with gross profit per unit increasing. Used vehicle sales also performed well, with unit sales 2.6% ahead of last year. Gross profit per unit continued to increase and this improved performance has driven profit growth from the used car segment of the business. The group’s aftersales operations also continued to perform well, with profitability up 3.7%, although it was flat on a like for like basis.
The Swindon Land Rover business that was acquired in April 2015 has continued to perform in line with expectations and the Welwyn Garden City Land Rover dealership is integrating to plan. The Woodford Jaguar and Land Rover business acquired in July is being integrated into the group and the board is confident that this will show a positive contribution in 2017. The newly opened Aston Martin dealership in Solihull is now fully operational and a forward order bank is building.
Heading into the important September trading period, the new car order book for the group is building well and in line with expectations so the board expect to deliver another strong trading performance in this month. All in all, this sounds rather positive and the group seems a better bet than Vertu in my view.