There are a few moving parts in the Cambria Automobiles interims (AIM: CAMB); but overall the message is a positive one with the shares threatening to break out of the range they’ve been stuck in for the last year.
Over the recent past the company has acquired two Land Rover dealerships and added to its Aston Martin portfolio. So despite having to dispose of a couple of Jaguar outlets, the sales mix has moved further upmarket with an 18 per cent rise in average selling prices. While new car sales volumes were down 4.6 per cent then, profit per unit rose by over £500 with the premium brands offsetting weakness in mainstream product. It’s worth noting that the company has also had trading disrupted by redevelopment at a couple of its sites.
There was a similar pattern in used sales where revenues grew 12 per cent despite a 1 per cent fall in volumes. Aftersales grew revenues 10 per cent, but profitability was hit by a fire which has taken some servicing capacity out for several months. Improved profitability helped return on capital nudge up to 21.8 per cent and net cash ended at just over £3 million. The recent acquisitions and current projects within the group offer good upside potential, according to CEO Mark Lavery, and he senses there could be some good acquisition opportunities going forward if the market continues to soften.
The crucial number plate change month of March was a record for the industry but April registrations were well down. This reflects the pulling forward of sales given the vehicle tax changes that were introduced in April. The two months combined were in line with the prior year performance for Cambria. Given the good profit performance in the first half and the solid start to the second, the company has guided market forecasts a little higher, resulting in 6 per cent upgrades.
Despite that, Mark Lavery is cautious on the industry outlook given the widespread uncertainty surrounding consumer spending prospects. This is also reflected in a p/e of just 8.5 for the current year. This seems a bit mean given the focus on profitability, upside from recent investments and the management’s strategic target to grow Cambria to £1 billion sales from its current £650 million. The shares are picking up and a modest rerating might be underway.