Cambria Automobiles Share Blog – Interim Results Year Ending 2019

Cambria Automobiles have now released their interim results for the year ending 2019.

Revenues increased when compared to the first half of last year as an £800K decline in new car retail revenue was more than offset by an £11.5M increase in used vehicles revenue, and a £2.3M growth in aftersales revenue.  Cost of sales also increased to give a gross profit £661K higher.  Depreciation was up £407K but there was a £414K profit on disposal of assets and other admin costs were down £619K to give an operating profit £1.4M higher.  Finance expenses increased by £141K and tax charges were up £124K which meant that the profit for the period was £4.7M, a growth of £1.1M year on year.

When compared to the end point of last year, total assets increased by £50.2M driven by a £30.9M increase in inventories, an £8.8M growth in property, plant and equipment, a £7.4M increase in cash and a £5.3KM growth in receivables, partially offset by a £2.3M decrease in property assets held for sale.  Total liabilities also increased due to a £40.9M growth in payables and a £5M increase in borrowings.  The end result was a net tangible asset level of £39.4M, a growth of £4M over the past six months.

Before movements in working capital, cash profits increased by £1.3M to £7.7M.  There was a cash inflow from working capital due to a large increase in payables due to strong new vehicle deposits ahead of the plate change month, and after tax payments reduced the net cash from operations came in at £10.9M, a growth of £5.2M over the past six months.  The group brought in £2.9M on asset sales and spent £10.5M on capex to give a free cash flow of £3.3M.  This covered the £214K of interest and £750K of dividends and after the cash flow was £7.4M, the cash level at the period-end was £22.9M. 

The significant disruption incurred last year as a result of the group’s refranchising activity is now at an end and they are starting to see the benefit of these changes coming through.  The new franchises are still in their infancy but the potential earnings streams from these businesses are encouraging. 

The gross profit in the new vehicles division was £9.6M, a decline of £100K year on year on revenues that fell 0.6% despite volumes being down 23%, illustrating the significant increase in average transaction price of units sold.  The group’s sales of new vehicles to private individuals was 16% lower and the profit per unit improved by 22%.  New commercial vehicle sales transacted at low profit per unit decreased by 61% and new fleet vehicle sales decreased by 53%.  The new car volume reduction that has been experienced reflects a challenging and uncertain consumer outlook which is impacting the market.

The gross profit in the used vehicles division was £12M, a growth of £200K when compared to the first half of last year with revenues up 9% and volumes down by 9% as a result of the closure of the loss-making Blackburn site and the refranchising of volume businesses into high luxury businesses.  The gross profit per unit increased by 11%.  They have continued their strategy of increasing the efficiency with which they source, prepare and market their used vehicles which has increased the profitability of the business.

The gross profit in the aftersales division was £14.2M, an increaser of £500K when compared to the first half of 2018 with revenues up 7%.  Like for like revenues were up 3% with gross profit up £200K. 

The major property development for JLR in Hatfield was completed in December and the relocation of the separate JLR facilities was also concluded at that time  The operations are bedding in well and the Aston Martin and McLaren facilities in Hatfield have also been achieved with Aston Martin taking occupation in early April and McLaren in May.

The group spent £10.5M on capex.  They were able to secure the freehold title to the land containing their Swindon JLR leasehold property for £2.4M.  This was the last of their properties held as long leasehold.  The Hatfield property development incurred £5.9M in capex along with £1.2M of fixtures, fittings, plant and machinery costs.  A further £1M was spent on the completion of Tunbridge Wells, delivery of a specialist used car site in Swindon and other fixtures and fittings.  In December the recouped £2.8M of cash by selling the freehold property in Wootton Bassett, which generated a profit of £400K.  The site was the former Land Rover dealership which was held for sale since the relocation to the new Swindon JLR dealership.

After the period-end the group completed the purchase of land on Hatfield Business Park to develop a secure compound and preparation centre to support their Barnet and Hatfield operations which cost £3.6M.  They also secured a development plot of land in Brentwood for £5M to deliver dealership facilities for JLR, Aston Martin, Lamborghini and Bentley.  They are working through the planning process for delivery of this development with a view to taking occupation in 2021.  Over the next two years they intend to buy a freehold in Solihull for Aston Martin for £5M and invest £16M in the Brentwood development.  They also continue to review its franchise mix and has added the Citroen franchise in Oldham, the Suzuki franchise in Maidstone and the Vauxhall franchise in Warrington alongside their Peugeot franchise. 

During the period the new car market was significantly affected by the impact of changes in the emission regime and the negative impact of weak sterling on the imported price of cars.  The diesel segment has been worst hit, with diesel registrations down 29% compared to a 9% fall in the market as a whole.  The board are therefore cautious about the new car market.  They continue to take action in the used car and aftersales departments which is offsetting some of the pressures on new car sales.  They are also adding new franchises that will make a potentially significant contribution to earnings once established in their locations and the board are pleased with the early contributions from them. 

The steps taken in relation to the national minimum wage, increases in business rates, pension contributions, the apprenticeship levy, debit and credit charges are all creating inflationary pressures in admin expenses but the group has taken steps to mitigate cost increases and ensure that the cost base of the business is controlled. 

Challenges remain given the ongoing uncertainty of Brexit but the ongoing franchising and property development activities have enhanced the dealership mix and changes made last year have further benefitted the group. Despite the uncertainty of the current economic environment, the board expect that performance in the full year will be ahead of current market expectations. 

At the current share price the shares are trading on a PE ratio of 8 which falls to 6.6 on the full year consensus forecast.  After the interim dividend was kept the same the shares are yielding 1.7% which remains the same for the full year forecast.  At the end of the period the group had a net debt position of £3.2M compared to £400K at the same point of last year.

Overall then this has been a good period for the group.  Profits are up, net assets increased and the operating cash flow improved with some free cash being generated as the refranchising and investments made last year seem to be baring fruit.  New vehicle profits were down but they held up rather well given the current market and both used vehicles and aftersales saw profits increased with the former helped by more efficient sourcing.  There are inflationary issues to look out for and Brexit along with the Diesel issues make for a very difficult market but Cambria seem to be navigating it well and if anything a forward PE of 6.6 and yield of 1.7% seems quite cheap to me. Considering buying more.

On the 4th September the group released a trading update covering the first eleven months of the year.  Trading performance has been ahead of last year and current market expectations.  During the period the new car market has been significantly affected by a number of factors including the impact of the changes to the emissions testing regime.  Sterling weakness has also negatively impacted the imported price of the cars.

During the period the total new car market was down 6.6%.  The diesel segment fell by 24%.  Supply side market influences have contributed to a reduction in the group’s new vehicle sales, although this was fully offset by improved gross profit per unit in the like for like business and further outweighed by the improved gross profit per unit across the total group.  This has improved significantly as a result of the stronger mix from the new franchised outlets such as Bentley, Lamborghini and McLaren.  The disruption experienced last year during the significant refranchising activity has also not been experienced this year.

Sales of new cars to private guests were down 11.7% and total new vehicle sales were down 18% although the last year included a low margin commercial vehicle deal which was not repeated.  As a result of the improved profit per unit, however, the total profit from the division improved significantly.

Like for like used vehicle sales were up 0.8% although the total used unit sales were down 5% impacted by the significant changes in franchise portfolio mix and the closure of the Blackburn site last year.  This unit reduction was offset by improvements in gross profit per unit.  As a result of this, both the total and like for like profit from the division improved year on year.  Overall the group’s aftersales operations saw revenue increasing by 4.7%, gross profit up 2.6% and contribution up 4.7%. 

Whilst challenges remain given the ongoing uncertainty around Brexit, the group has delivered positive franchising and property development activities over the past two years that have enhanced their portfolio mix and boosted earnings capacity.  The disruption experienced in the prior year is over and they have seen the benefits coming through in the current year.  These new businesses are still in their infancy.

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