Strong H1 and confidence in liquidity to manage through crisis
Cambria successfully delivered on its brand portfolio and property strategies in H1 to February and PBT increased by 14.3% to £6.1m, beating our expectations by 8% (£0.5m). Gross profit rose in all 3 segments and cost control was better than forecast. Although it temporarily closed its retail sites 3 weeks into H2, some aftersales/warranty work is being done for essential workers using enhanced safety protocols. Through management’s response to the crisis, access to government schemes, and support from its OEM partners, monthly cash burn has been contained and it is confident it has sufficient liquidity to see it through the pandemic. Period end cash was £20m (£6m net debt) with £14m undrawn facilities, which have since been drawn down fully. After a land purchase post period end, available cash is therefore estimated at roughly £30m. Return to work scenarios are being actively assessed for when the time arises.
06 May 20
Cambria has announced H1 results, which are marginally ahead of our forecasts at the adjusted PBT level. We believe management have taken swift action in the current environment to minimise monthly cash burn, and believe it has sufficient balance sheet liquidity to withstand the inevitable trading pressures ahead. We continue to believe Cambria will emerge as a sector winner.
06 May 20
Despite challenging backdrop growth in H1 is in line with expectations
The key take-away from the H1 pre-close update is that trading performance in the 1st 5 months has been in line with expectations and ahead of last year. This is a solid update given the well-documented challenges in the New car market and has been achieved through a strong result in Used, stable performance in Aftersales, resilient trading in New given the backdrop, and an ongoing focus on costs. The franchise portfolio continues to build, with an Aston Martin and its first RollsRoyce dealership acquired in January. Cambria’s strong balance sheet means it is well placed to take advantage of any further market consolidation opportunities that may arise. Despite the progress, a clear track record and strategic ambition, Cambria trades at a 34% discount to its property backing and has a c17% adj FCF yield (ex growth capex) next year.
04 Mar 20
Trading inline & ahead of prior year
Cambria 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.
04 Mar 20
Acquisition of Aston Martin and Rolls Royce dealerships
Exciting new additions to the portfolio have been announced, including its 4th Aston Martin dealership, its first Rolls Royce dealership and a foothold in the Edinburgh market in Scotland, where previously it has not had representation. These businesses have been acquired from the administrator of Leven Motors for £1.6m including a freehold property worth £1.5m. Under management control and by deploying Cambria’s proven acquisition and integration processes, these businesses are expected to be earnings neutral and move into profit in the first full year. While using modest assumptions pending their integration we have upgraded FY21 EPS by 2% and with it our fair value estimate to 100p.
21 Jan 20
Acquisition of Aston Martin and Rolls-Royce dealerships
Cambria has announced this morning the successful acquisition of one Aston Martin franchise and one Rolls-Royce Motor Cars franchise in Edinburgh from the administrator of Leven Cars Group Limited. The total cash consideration, which includes one freehold and one leasehold property along with certain fixed assets, is £1.6m and this will be funded from the Group’s existing resources. We update forecasts to reflect this, with an increase in 2020E revenue of c.2.0% but no impact to earnings. In 2021E we assume an additional £30m of revenue and a 1.6% increase to adj. PBT forecasts (1.6% at the EPS level). We remain firmly confident in Cambria’s ability to continue to execute and outperform the market as it has in recent years and see this latest acquisition as further evidence of the group’s ability to effectively deploy capital and acquire assets at good value.
21 Jan 20
Solid start to year with impressive performance in Used in particular
Management continues to execute a clear data-led strategy to grow revenue to £1bn and produce attractive returns. Recent actions to transform the brand mix and increase profits, including a material shift towards the high luxury segment, produced clear results in FY19 including several upgrades. Today’s Q1 performance confirms a solid and positive start to FY20 too. Freehold backing is >80p/share and, although at an early stage currently, Cambria is planning to develop its 2nd multi-brand site which has the potential to attract incremental new brands. It also has available funding to target M&A should the right opportunities present themselves. The rating looks undemanding given the clear track record and future growth plans, and our estimate of fair value remains unchanged at 98p.
09 Jan 20
AGM Trading Update
Cambria has confirmed trading in the first three months of the financial year has been in line with expectations despite continued challenging conditions. Clearly near-term trading conditions remain difficult, albeit sterling has strengthened post-election, which may provide a platform for stronger new car sales further down the line. However, we believe It will take time for OEMs to adjust to this recent FX strength. We expect a subdued March new car market as a result but see potential for recovery in H2. We remain firmly confident in Cambria’s ability to continue to execute and outperform the market as it has in recent years. We maintain our forecasts at this juncture and anticipate a preclose H1 update in March.
09 Jan 20
Small Cap Feast
Calisen Group. Potential Intention to Float. Owner and manager of essential energy infrastructure assets . Consolidated FY Dec 18 revenue £162.1m and operating profit £25.4m. Raising up to £300m in primary plus partial vendor sale. The Global Sustainable Farmland Income Trust will invest in a diversified portfolio of operational farmland assets located in major agricultural markets including the United States, Europe, New Zealand, Australia and certain countries within Latin and South America. Raising up to $300m. Due 28 February. Investment firm Nippon Active Value fund is seeking to raise up to £200m at an issue price of 100p per share via an IPO. The company aims to invest in a portfolio of quoted Japanese stocks with market capitalisations of up to $1bn. First day of dealings expected early February.
CAMB AXM ECSC PVR MAI CERP TPG ITX UFO JSE
09 Jan 20
Class act in sector, with a clear growth strategy
Management continues to execute a clear data-led strategy to grow revenue to £1bn and produce attractive returns. Recent actions to transform the brand mix and increase profits produced clear results in FY19, with EPS beating expectations that had been upgraded twice and increasing 25% YoY. Freehold backing is >80p/share and another new multi-brand site is in the course of development, which has the potential to attract incremental new brands. CAMB also has funding available to target M&A. The rating looks undemanding given the clear track record and future growth plans, and our recently upgraded estimate of fair value remains unchanged at 98p.
20 Nov 19
Cambria has delivered another strong set of FY results, which were ahead of our forecasts despite numerous upgrades during the course of the year. We upgrade our 2020E and 2021E forecasts to take account of the 2019 outperformance. It is clear that the move into Premium/HLS is making a real difference and has been executed well. We remain confident in Cambria’s ability to deliver further strong shareholder value from here.
20 Nov 19
Pre close: Another upgrade
Cambria has announced a confident pre-close trading update this morning confirming that trading in the eleven-month period to 31 July 2019 has been significantly ahead of last year. The group expects the full year performance to be ahead of current market expectations. This follows a 10-11% EPS upgrade to our forecasts when it announced H1 results in May. We update our forecasts following this update. We now expect adj. PBT for the full year of £12.0m (vs. £11.0m previously) equating to an 8.9% EPS upgrade in 2019 (and 6-7% in 2020E and 2021E) reflecting the strong performance YTD. This has largely been driven by the outperformance in the group’s High Luxury Segment (HLS). We remain firmly confident in Cambria’s ability to deliver strong shareholder value from here and see a medium-term intrinsic value north of 100p per share.
04 Sep 19
Class act in sector with further potential
Another positive update from Cambria drives a 9% upgrade vs forecasts that were upgraded 13% in May. Forecast delivery and EBITDA margin stand-out clearly against the sub-sector, yet the stock trades in line with the peer group on just 5.4x P/E and at a 35% discount to well underpinned property value. Our formal estimate of fair value increases to 98p (10x P/E). On a theoretical ex-property basis, which captures both asset as well as earnings value, this would increase to 125p (135% TSR).
04 Sep 19
Half time report
In this note and following the SMMT June data released yesterday, we look at the key dynamics of the sector during H1 2019 and how this is likely to impact the rest of the calendar year. The dealers have challenges on several different fronts, which could lead to some earnings pressure. However, we do believe valuations have reached a trough point, balance sheets remain strong, and FCF should start to steadily build as the capex cycle for most dealers has come to an end.
CAMB LOOK MMH VTU PDG
05 Jul 19
Cambria has delivered robust H1 2019 performance, which was ahead of our forecast at the adjusted PBT level (£5.5m vs. ZC £5.3m). We update our forecasts to reflect this outperformance and now expect adj. PBT for the full year of £11.0m (vs. £9.9m previously). Organic earnings upgrades in this sector are rare at present, and we believe this is down to the strong execution in reshaping the portfolio towards the premium/luxury brands. We remain confident in Cambria’s ability to deliver strong shareholder value from here.
09 May 19
Brand transformation and earnings upgrades
Management continues to execute a clear strategy to grow revenue to £1bn and produce attractive returns. Recent actions to transform the brand mix and increase profits are producing results, with EPS 13% ahead of forecast (+14% yoy). Freehold backing has increased to 78p/share and another new multi-brand site has been secured, which has the potential to attract incremental new brands. Our estimate of fair value increases 13% to 91p on this update (52% above the current price).
09 May 19
Pre-close trading update
We note the pre-close update released this morning by Cambria, confirming that trading in the first five months has been ahead of last year. On the back of the 5-month performance we are comfortable with our full year expectations. We anticipate the trading backdrop to remain tough but remain confident in the medium-term investment case. A lot of operational progress was made in 2018, and the Group has a strong balance sheet and is well positioned to deliver shareholder value in our view.
06 Mar 19
AGM Trading Update
We note the trading update released this morning by Cambria, confirming that trading in the first three months of its financial year has been in line with management expectations. We anticipate the trading backdrop to remain tough but remain confident in the medium-term investment case. A lot of operational progress was made in 2018, and the Group has a strong balance sheet and is well positioned to deliver shareholder value in our view.
04 Jan 19
On track to meet prudent forecasts after positive Q1 (GARP on 6.5x P/E)
Trading in the 1st 3 months was in line with expectations. A positive Aftersales performance has been accompanied by GPPU gains in New/Used, both LFL and especially due to the mix shift towards higher quality premium/high luxury (HLS) brands (now >50%). The addition of 5 new HLS franchises without paying goodwill has clearly been value accretive. As they mature, the potential from these new brands and properties is significant. Despite continuing uncertainties surrounding the economy and Brexit, Cambria is therefore well positioned to meet prudent market expectations for the full year. On a cal’19 P/E of 6.7x, the market is unduly discounting future potential. Our FV estimate remains at 80p.
04 Jan 19
Adj. EPS +4.6% ahead, on track
Cambria has delivered a robust FY 2018 performance, in the context of a challenging new car market, which was ahead of our forecasts at the adjusted EPS level by +4.6%. We are maintaining our estimates on the back of these results, which we see as a positive outcome given market conditions. We also remain confident in the medium-term investment case, the company has a strong balance sheet with the successful addition of luxury brands and potentially more to come.
21 Nov 18
Supply pressure building
Market conditions have continued to deteriorate in 2018 as new car registrations in September were down 20.5% YoY. Weakness in new car sales in the key month of September, ongoing cost pressures and continuing pressure from OEMs who face their own profitability challenges lead us to take a more cautious approach to our below consensus estimates. Balance sheet strength across the sector is generally robust, and in our view, we are likely to see further consolidation activity once recovery is in sight as smaller operators become more distressed. FCF yields are compelling from next year as major investment projects reach completion.
CAMB LOOK MMH VTU
05 Oct 18
Pre-close trading update
We note the trading update released this morning by Cambria, confirming that trading in the 11 months to 31 July 2018 has been in line with management expectations. We anticipate the trading backdrop to remain tough but remain confident in the medium-term investment case. The Group has a strong balance sheet and is well positioned to deliver shareholder value in our view, we note the shares have declined 8.2% since the interim results and are near their 12 month low point of 54.5p.
04 Sep 18
On track for FY
Cambria has delivered robust H1 2018 performance, which was marginally ahead of our forecast at the adjusted PBT level (£4.8m vs. ZC £4.6m). We are maintaining our headline forecasts on the back of these results, which captures a 20% reduction in H2 PBT vs. last year that included a record March performance. We anticipate the trading backdrop to remain tough but remain confident in the medium-term investment case.
08 May 18
Strategy to transform brand mix progressing well
H1 results are 8% better than expected driven by good operational execution, standout performance in Used, and better than expected management of costs. Cambria is becoming an increasingly differentiated high return dealer group. It is data driven, agile and digitised. Significant progress has also been made transforming the brand mix and property estate, with 3 more high luxury brands secured (Bentley, McLaren and Lamborghini) without paying goodwill. A year from now, six out of the seven major new sites/brands will be operational. Each one has significant potential in terms of incremental sales and profit across Used, Aftersales and New. Despite the welldocumented tough backdrop in New, our fair value estimate has been increased to 80p (+7%) given i) the proximity to this earnings potential, ii) c£25m available financial resource for accretive M&A, should opportunities arise, and iii) 53.2p property backing. This still only equates to an undemanding 10x P/E (Aug’19).
08 May 18
Pre-close trading update
Cambria has released a pre-close trading update confirming it continues to trade in line with expectations. While trading conditions remain difficult driven by uncertainty on a number of different levels, we remain confident in the medium-term investment case. The Group has a strong balance sheet and is well positioned to delivered shareholder value in our view.
06 Mar 18
Bodycote (BOY LN) Strong FY17 performance, just above consensus | Cambria Automobiles (CAMB LN) In line update and progress with its property developments | Craneware (CRW LN) Strong interims, momentum building | Findel (FDL LN) Positive update on commercial supply arrangement with Sports | Direct | UK Housing Theresa May’s Speech and (overdone) Help to Buy coverage |SDL (SDL LN) Progressing against strategic goals Yu Group (YU LN) Very strong growth and expectations increased again
CAMB BOY CRW STU SDL YU/
06 Mar 18
AGM trading update
Cambria has released a trading update this morning, ahead of the AGM, confirming trading in Q1 has been in line with expectations, albeit behind the same period last year. The group has also confirmed that it will be opening a Lamborghini dealership in Q1 2018. The Lamborghini dealership will be located in Chelmsford in the same facility as the Bentley dealership and work is underway to complete that showroom for occupation in Q1 2018. While consumer uncertainty persists and trading conditions in the new car market continue to be difficult, we remain confident in the medium-term investment case. The company has a strong balance sheet and is well positioned to generate shareholder value in our view.
04 Jan 18
Exciting new luxury brand makes 4 new franchise wins in just 2 months
Cambria has today announced another exciting new brand win, with Lamborghini. Having recently announced one new franchise with McLaren and two with Bentley, this means management has secured four new franchises in the high luxury segment in less than two months without paying any goodwill. The new Lamborghini franchise will operate alongside Bentley in Chelmsford and is expected to start trading in Q1 2018. Alongside its JLR projects, Cambria has now established one of the most exciting new franchise development pipelines in the premium and high luxury sector. To reflect some initial value for the new brand win, we have edged up our estimate of fair value by 2% to 75p. With Q1 trading also reported to be in line with expectations, we expect the shares to respond positively today.
04 Jan 18
N+1 Singer - Morning Song 04-01-2018
Be Heard (BHRD LN) Revenues ahead but costs timing mismatch | Cambria Automobiles (CAMB LN) Exciting new luxury brand makes 4 new franchise wins in just 2 months | Churchill China (CHH LN) Positive year-end trading update | Futura Medical (FUM LN) Additional positive data published on MED2002 | MJ Gleeson (GLE LN) Striking acceleration in Gleeson Homes completions | Vectura Group (VEC LN) Trading and strategy update | Walker Greenbank (WGB LN) Trading in line with reduced forecasts; Anstey defers £0.4m profit to Q1
CAMB BHRD CHH FUM GLE WGB VEC
04 Jan 18
N+1 Singer - Cambria Automobiles - Another year of progress + exciting new brand wins
FY17 results came in 5% better than we forecast at the EPS line and £6m better in terms of net cash. Used and Aftersales were 71% of gross profit; New represented 29% where, as already assumed, management remains cautious. Given trading so far in FY18 is meeting expectations, attention can return to the size of the opportunity being targeted over the next 2-3 years through significant site investment, and the timing of upcoming launches. These now include 2 exciting new wins in McLaren and Bentley, which lead us to upgrade our estimate of fair value by 5% to 73.5p.
22 Nov 17
Adj. EPS +4% ahead, +10% YOY
Cambria has delivered a robust FY 2017 performance, which was marginally ahead of our forecasts at the adjusted PBT level. We are maintaining our recently downgraded estimates on the back of these results as we anticipate a more difficult market backdrop across the sector particularly in new cars as we move into 2018 and beyond. That said, we remain confident in the medium-term investment case, the company has a strong balance sheet with some exciting new brand partnerships coming up in the near term.
22 Nov 17
Prospects for 2018/19
Sector sentiment remains low and the new car market continues to decline. We believe the sector valuation has priced in a lot of this risk but update our forecasts to reflect the more difficult trading environment, applying a c.10% -15% downgrade to earnings across the sector. Balance sheet strength across the sector is generally robust, and in our view, we are likely to see further consolidation activity once recovery is in sight as smaller operators become more distressed. Dividend yields are attractive at current valuation and FCF yields are generally attractive despite high levels of capex.
CAMB LOOK MMH PDG VTU
03 Nov 17
N+1 Singer - Cambria Automobiles - SMMT data for September prompts downgrades
Nerves ahead of today’s registration data were well founded with the SMMT reporting a 9.3% decline, worse than feared given scrappage schemes. We have lowered assumptions across the sector on New volumes/margins as a result, noting variance between winners and losers depending on brand mix & market share changes. Sept is the first month of Cambria’s FY18, with prelims for FY17 in November. We have prudently reduced FY18/FY19 PBT forecasts by £2m (17%) but continue to flag the group’s brand development potential, with major projects underway to drive future growth. Weaker conditions will likely throw up some interesting M&A opportunities too.
05 Oct 17
While trading conditions have deteriorated post March this year, Cambria continues to deliver a robust performance, and is expected to deliver FY 2017 results to August in line with our expectations. We are therefore maintaining our forecasts on the back of this statement, albeit remain mindful of current industry trends and the importance of the September market. We remain confident in the medium-term investment case.
05 Sep 17
N+1 Singer - Motor Retail - More scrappage plans help New segment, and should offset fears
VAG (Audi, Seat, Skoda, VW) and Toyota have both announced scrappage schemes for older polluting vehicles, the latter of which like Ford’s car and van scheme is across both diesel and petrol engines. Taken together with Ford, BMW and Mercedes, brands representing c25% of the market (or >50% across both diesel and petrol) are now promoting scrappage schemes in time for the September plate change. The SMMT estimates at least 19m old standard polluting engines are still on the road, so the plans announced to date should have a material positive effect on flagging new car sales, which has been a key concern in the market, and we believe others will likely follow suit over the next few days. The scrappage scheme in 09/10 buoyed registrations by 0.4m vehicles. In today's 2.6m market an equivalent boost would equate to 15%. It is unlikely to match the prior scheme in our view though, unless most brands participate and offer both petrol and diesel options. News to date is still an important positive for the listed retailers though (CAMB, LOOK, MMH, PDG, VTU) which all have exposure to these brands, especially Marshall Motors and Lookers where the mix is over 50% of their portfolio. The sector trades on just 7x P/E (4x EV/EBITDA) so this news may support some recovery. Separately Vertu Motors has issued an in-line H1 pre-close trading update today and a freehold sale & leaseback for £14m (£4m over NBV). VTU trades on 6.8x P/E (3.4x EV/EBITDA) after adjusting for the property deal. Cambria (Corp) will issue its pre-close next week. Prospects for future portfolio enhancement look bright as does the earnings outlook as its new and upgraded JLR dealerships come on stream this and next year.
Cambria Automobiles Lookers
01 Sep 17
June SMMT data: private registrations -7.8% YOY and -4.8% YTD
The SMMT (Society of Motor Manufacturers and Traders) has released data this morning confirming new car registrations in June of 243,454 which is -4.8% YOY, implying a H1 of 1,401,811 units which is -1.3% YOY but represents the second highest H1 on record. Private registrations were -7.8%, with fleet also showing a decline at -2.4% YOY representing 57.1% of registrations vs. 55.6% last year. We continue to believe the earnings risk has been accounted for in heavily discounted valuation multiples based on cautious and below consensus forecast assumptions across our coverage universe. We continue to favor stocks with flexible balance sheets at this stage of the cycle, and believe stocks such as Vertu and Cambria remain significantly underpinned by their growing property portfolios and proven operating models.
CAMB VTU PDG INCH LOOK MMH MOTR BCA AUTO
05 Jul 17
H1 PBT +5% ahead, +21.7% YOY
Cambria delivered strong H1 results with adjusted PBT exceeding our forecast by 5.1% and delivering growth of 21.7% YOY. Softer vehicle volumes were offset by a significant uplift in average selling price and improved PPU as the group benefitted from positive mix and pricing discipline. Cambria continues to generate an industry leading return on equity, up 60 basis points to 21.8% in the period. We are upgrading our forecasts to reflect the H1 outperformance, but share management’s caution on the remainder of the year. That said, we believe the Group has a bright future as it strides towards its medium-term objectives.
09 May 17
H1 results due 9th May
We anticipate strong H1 results from Cambria on 9th May, after flagging its H1 performance is likely to be “substantially ahead” of last year. We maintain our caution on new car volumes and profits post Q1 2017 and are maintaining our FY forecast assumptions for now. We expect the used car and aftersales business to continue to trade well, and operationally the property developments and site refurbishments also remain on track. We continue to believe there is significant value at current levels with the current share price more than underpinned by the significant and growing asset base of the company.
02 May 17
Record SMMT March new car registration data
The SMMT (Society of Motor Manufacturers and Traders) has released data this morning confirming a record new car market in March of 562,337 registrations and +8.4% YOY, implying a record Q1 of 820,016 +6.2% YOY. Private registrations +4.4%, fleet continues to drive the growth in this market and was +12.6% YOY representing 46.6% of registrations vs. 44.9% last year. We believe the earnings risk has been accounted for in heavily discounted valuation multiples based on cautious forecast assumptions (we assume a 10% drop in new car registrations vs. the SMMT at -5%). We continue to favour stocks with flexible balance sheets at this stage of the cycle, and believe stocks such as Vertu and Cambria remain significantly underpinned by their growing property portfolios and strong operating models.
CAMB VTU PDG INCH LOOK MMH MOTR
05 Apr 17
Pre-Close Trading Update
Cambria has released a trading update this morning. Strong momentum following on from its prior financial year end has continued, with its H1 performance likely to be “substantially ahead” of H1 2016. That said, we maintain our caution on new car volumes and profits from Q1 2017 and are maintaining our FY forecast assumptions for now. Encouragingly, the used car and aftersales business continues to trade well, and operationally the property developments and site refurbishments are also going to plan. We continue to believe there is significant value at current levels with increasing asset backing being generated that more than underpins the current share price executed by a proven management team.
07 Mar 17
SMMT 2016 data
The SMMT (Society of Motor Manufacturers and Traders) has released data this morning confirming a record new car market of 2.69m registrations and +2.3% YOY. This is the fifth year in a row of growing new car registrations. Headline December registrations were -1.1% with private registrations -5.5% completing a third quarter in succession of negative growth in this segment. Fleet continues to drive the growth in this market and was +4.8% YOY representing 51.3% of registrations vs. 50.0% last year. The key question is what will happen in 2017 post Brexit with uncertainty levels still high. We maintain our cautious stance and downgraded our EPS forecasts by 8-15% across the sector in November accordingly. That said, we believe the earnings risk has been accounted for in trough valuation multiples based on cautious forecast assumptions (we assume a 10% drop in new car registrations vs. the SMMT at -5%). We continue to favor stocks with flexible balance sheets at this stage of the cycle, and believe stocks such as Vertu and Cambria remain significantly underpinned by their growing property portfolios.
CAMB VTU PDG INCH LOOK MMH BCA AUTO
05 Jan 17
Cambria has released an AGM trading update, which essentially confirms that it continues to perform in line with expectations. The Group has seen margin and volume pressures in its new car business during Q1 of its financial year, which is consistent with our industry thesis pointing towards a tougher market in 2017. Its performance in used and aftersales continues to be robust and remains on track. We are maintaining our forecast assumptions on the back of this statement, and continue to believe there is significant value from here based on its current valuation, increasing asset backing as well as the progress delivered to date from its proven management team.
04 Jan 17
N+1 Singer - Cambria Automobiles - Another strong year and delivery of strategy
Results confirm another strong year, with earnings in line with expectations and stronger than expected cash generation. In line with the sector, the Group has expressed some caution over the New car segment, and we prudently reduce our PBT forecasts by 15% in FY17 and FY18. However, the Group remains well positioned to build on its solid track record of growth. Significant investment in site expansion at the recently acquired Jaguar Land Rover and Aston Martin sites (£31m over the next two years) highlights management’s confidence in Cambria’s growth prospects. We believe that the potential for the acquired businesses is significant and that revised forecasts look very well underpinned. Notwithstanding uncertainty around the UK consumer and effects of Brexit, risk over 2-3 years is potentially to the upside.
22 Nov 16
A decade of delivery
Cambria has delivered another robust set of results exceeding our adjusted PBT forecast by 2%. Cash generation remains strong driven by working capital management with 12 month rolling ROE in excess of 20%. While we believe trading conditions will get tougher from here, we believe the Group is well positioned to executed its proven strategy. The current valuation based on recently downgraded earnings is undemanding in our view with 2017 likely to be a year of consolidation rather than a year of decline
22 Nov 16
N+1 Singer - Morning Song 22-11-2016
Cambria Automobiles (CAMB LN) Another strong year and delivery of strategy | Carador Income Fund (CIFU LN) Total return up 1.7% in October, inclusive of 2.25c Q3 dividend | Scapa Group (SCPA LN) From strength to strength | Vectura Group (VEC LN) Development agreement with Hikma
CAMB SCPA VEC CIFU
22 Nov 16
Looking into 2017/18
Sector sentiment is at a low point with clear uncertainty around 2017/18 earnings. We are attempting to cut through this, and believe the share price falls more than price in the earnings risk. Following a robust September, we would expect a strong 2016 performance, which has been confirmed by all dealers, but do expect conditions to get more difficult from here. We continue to favour stocks with flexible balance sheets at this stage of the cycle.
CAMB INCH LOOK MMH PDG VTU
16 Nov 16
N+1 Singer - Small-cap quantitative research - Consistent growth screen refresh + “11 with legs”
We have performed a second refresh of our consistent growth screen, first established with our research note of 17 December last year. As previously, the screen produces a basket of 25 stocks that exhibit not only good growth in EPS and sales, but also a consistency of growth in both measures each year. This basket, or style, has underperformed the small-cap benchmark by 9.1% since inception last December, and by 4.8% since the last refresh on 13 April. We highlight stocks leaving and joining the basket and take a closer look at 11 stocks “11 with legs” in the refreshed screen. We will continue to monitor performance of the basket and refresh it again in about 4 months’ time, but interestingly, consistent growth is beginning to look like consistent underperformance!
CAMB TRI IOM DOTD SFE TPFG TRCS INSE TAST MAB1 RWA
29 Sep 16
N+1 Singer - Motor Retail - Low gearing, asset backed, strategically placed
After unprecedented amounts of acquisition activity in 2015 and 2016, with c£450m spent by the 4 listed consolidators, we have refreshed our analysis of financial gearing. Contrary to popular belief, gearing in FY17 is forecast at 0.3x ND/EBITDA so well below FY14 (0.7x) and target thresholds (1.0-1.5x). We have also identified that property backing has risen c£175m to c£775m with several retailers now only leasing half their portfolio. Operationally and strategically, the key players appear well positioned to continue outperforming their weaker counterparts, taking market share and forcing more accretive consolidation. This is a virtuous circle which should continue to improve profitability. FCF will also step up in 2 years as the heightened OEM-led capex cycle concludes. Notwithstanding uncertainties around Brexit, trading has remained stable near term. These factors are not priced in, with the subsector trading on a 45% discount to the General Retail sector and on just 1.75x EV/EBITDA on a (purely theoretical) ex property basis.
CAMB VTU LOOK PDG MMH
26 Sep 16
Pre-Close Trading Update
Cambria has indicated that momentum in its business remains strong, and is firmly on track to deliver a record year and 35% EPS growth to August 2016. The order book for September is “building well”, and we maintain our forecast assumptions for now following earnings upgrades we put through in May. We remain confident that management will deliver its medium term strategic targets of becoming a £1bn+ revenue business equating to EPS of at least 16p.
05 Sep 16
N+1 Singer - Motor Retail - A compilation of recent snippets
After our interesting conference at the start of July (featuring Vertu, Lookers, Marshall, Cambria, ASE and Tesla), Motor Retail shares have generally bounced from their lows, but remain below previous levels. In this note we summarise the recent sector snippets and reiterate some key positive conclusions from our conference, plus provide a link to the video of the event. Brexit, economic uncertainties and SMMT stats are weighing on the sector in sentiment terms, but it is noticeable how the quoted companies continue to actively pursue their growth and consolidation strategies and give reassuring updates. Interims next week from Lookers and Marshall Motors should provide further insight.
CAMB MMH BCA VTU PDG LOOK
11 Aug 16
The sector has come under severe pressure following the Brexit vote with investors clearly pricing in distressed economic scenarios with share prices falling between 15% and 51% across the sector. We believe the dealer groups are better businesses this time around, albeit the uncertainty in the economy is likely to adversely impact both new and used car sales. We would favour those stocks that have been oversold with flexible balance sheets. We see significant long-term upside in Cambria and Vertu as fitting these criteria. We are also becoming more positive on Inchcape as its overseas exposure against a weak Sterling backdrop should give it some protection, backed by a strong balance sheet. We believe that Lookers and Pendragon have also been oversold, but remain nervous on Marshall Motor Holdings following its recent decision to gear up by purchasing Ridgeway.
CAMB INCH LOOK MMH PDG VTU
07 Jul 16
N+1 Singer - Cambria Automobiles - Enhancing Jaguar Land Rover acquisition
Cambria has acquired the Jaguar and Land Rover franchises in South Woodford (North East London). The effective historic multiple being paid is <4x EV/EBITDA. Based upon usage of existing premises, we have upgraded Aug17 and Aug18 EPS forecasts by 6%. However, on a successful relocation to new premises, to which it is committed, we see scope to significantly increase profit in this attractive and complementary territory. With a positive current trading update, and recent formal presentations re-iterating its compelling strategy, confidence in upgraded forecasts is high. Indeed there may yet be upside risk from either organic performance and/or more M&A.
06 Jul 16
Acquisition of JLR South Woodford
Cambria has announced the acquisition of another JLR (Jaguar Land Rover) site this time in South Woodford for £2.1m settled out of existing cash resources. We anticipate this will be EPS neutral to August 2016 due to timing but 6-7% EPS enhancing thereafter under conservative assumptions. While sector visibility is low at present, Cambria remain confident in their near term trading outlook, and we continue to be very confident that it will deliver on its medium term strategic goals as a proven consolidator in both favorable and difficult market conditions.
06 Jul 16
N+1 Singer - Retail - Matthew - Brexit driven forecasts and valuation update
Prior to the EU vote, fears of Brexit undermined consumer confidence and spending patterns, and sterling weakened against the US$ and the €. Wider fears for employment, consumer spending and economic slow-down had hit Retail stocks significantly (-10% rel. YTD). Friday’s surprise Brexit vote has impacted Sterling again and will further knock confidence and spending too. The sector came under material further pressure as a result, falling 10% on the day vs the Allshare’s 3%. As noted on Friday, there are 4 stocks in our universe where forecasts are favourably exposed to FX upside risk (BCA, Boohoo, Swallowfield, Walker Greenbank), 5 stocks which we have downgraded (Debenhams, Findel, Halfords, N Brown, Howden Joinery) with the remainder left unchanged including Motor Retailers.
CAMB BOO DEB HFD HWDN LOOK BWNG SFE BAR WGB BCA
27 Jun 16
Upbeat capital markets event underpins confidence in the future
dealership in Brentwood. This provided an in-depth review of its strategy and operating practices. Founded and led by CEO Mark Lavery (40% shareholder), Cambria’s track record on growth and financial returns speaks for itself, but yesterday’s presentations underpin our confidence in the continued progress of the group - in particular its unrelenting focus on customer service and satisfaction, and the successful adoption of velocity trading (which has contributed to a RoI of 148% in Used). We see risk to the upside from organic outperformance and/or accretive acquisitions.
15 Jun 16
8x P/E for rolling ROE of >20%
Cambria delivered another strong set of results for H1 2016, exceeding our adjusted EPS forecast by 11% and delivering 43% YOY growth. As the group approaches its 10th anniversary, its development via self-funding from just £10.8m of equity capital is impressive. Both ROE and ROCE have been significantly ahead of its WACC and the sector average for some time, which is a sign of consistent quality. We consider the stock to be significantly undervalued, and believe that an EPS of 16p is achievable in the medium term.
10 May 16
Upgrades & strength in Used cars warrant re-rating
H1 PBT beat expectations by 18% despite earlier upgrades. This was driven by strong performance in Used cars, where Cambria’s RoI increased by 20pps to 148%, double the industry average. In current trading March was substantially ahead YoY and management is confident of maintaining this momentum in H2. Upgrades of 6% will be well received. The cal’16 P/E of 8.1x looks anomalous in view of its exceptional track record and future growth potential. Property backing is c42p/share and we see risk to the upside through organic outperformance and/or accretive acquisitions. Cambri a Aut omobiles (CAMB LN) $Rat ingTOC $
10 May 16
Consistent Growth Screen refresh + “11 with legs”
We have re-run our consistent growth screen, first established with our research note of 17 December last year. As previously, the screen produces a basket of 25 stocks, which exhibit good growth in EPS and sales. The screening criteria address both the quantity AND quality of growth. Since inception last December the consistent growth basket has underperformed the small-cap benchmark by 3.1pp. We highlight stocks leaving and joining the basket and take a closer look at 11 stocks “11 with legs” in the refreshed screen. We will continue to monitor performance of the basket and refresh it again in 3-4 months’ time.
CAMB ACSO DOTD INSE IOM MAB1 SFE TAST TRCS TRI VTU
15 Apr 16
Taking the temperature
We believe that the UK motor sector has had a strong Q1 2016, which should position most companies well for H1. Consumers are still responding well to attractive financing deals, and we anticipate a strong H1 performance from dealers as a result. Valuations amongst the dealer groups remain undemanding in our view, and we see scope for further consolidation during the coming year.
CAMB INCH AUTO BCA LOOK MMH PDG VTU AN KMX CPRT KAR GPI LAD PAG SAH
08 Apr 16
Cambria has delivered another confident trading update following on from its AGM update in January, confirming that it continues to trade substantially ahead of last year and in line with our forecast expectations. We believe the shares remain attractive based on the ROCE generated, significant growth potential and track record of delivery. We remain comfortable with a valuation approaching 130p per share and believe Cambria remains well positioned.
07 Mar 16
Substantial progress in 1st 5 months, especially in Used
Cambria has established a strong record on both organic profit growth and accretive acquisitions. Last year’s results highlighted a step-change in H2 in Used car performance in particular. Today’s trading update confirms this positive momentum in Used has been sustained into FY16 as management continues to successfully implement its digital and velocity trading strategies. This is very encouraging given Used is a significant part of the group mix. With accretive acquisitions also on the cards going forward, we believe the risk to forecasts continues to lie to the upside. Trading on a cal’16 P/E of just 9.7x the shares therefore look capable of delivering further outperformance for investors.
07 Mar 16
Cambria Automobiles (CAMB LN) Substantial progress in 1st 5 months, especially in Used | Driver Group (DRV LN) Share price weakness presents opportunity | Futura Medical (FUM LN) Non-executive director appointment shows commercialisation intent | Oxford BioMedica (OXB LN) Immune Design collaboration and forecast downgrades
CAMB DRV FUM OXB
07 Mar 16
Signs of US consolidation in UK market
We note the acquisition of UK private company Spire Automotive by US listed Group 1 Automotive yesterday for an undisclosed sum. With US motor retailers seemingly struggling for growth and seeing more margin pressure, it will be interesting to see whether we see more transactions of this nature, particularly against a backdrop of a strengthening US dollar. Market conditions in the UK look to remain robust with UK new car sales for January the strongest since 2005, with residual values seemingly still robust. The sector remains good value to us, and looks like the dealers across the pond also see this too.
CAMB INCH AUTO BCA LOOK PDG VTU AN KMX CPRT KAR GPI LAD LAD SAH
05 Feb 16
Value in Motor Retail, encouraging stats in car markets
Updates/results from Cambria, Lookers, Marshall and Vertu are due in early March. Following recent weakness, sub-sector valuations have fallen too far in our opinion, now on a cal’16 P/E of 9.4x (5.4x EV/EBITDA) reducing to <9x (<5x) cal’17. Given ongoing consolidation opportunities, enhancing acquisitions are likely to reduce those multiples further in key names over the course of 2016. The sector slump in part reflects doubts and concerns about motor retail dynamics including VAG prospects. In this context, investors should take reassurance from the latest registration data from the SMMT, industry insights after a meeting with BCA, and the latest acquisition of VAG branded dealerships.
CAMB LOOK VTU MMH
05 Feb 16
AGM Trading Update
Cambria has released a solid trading update today ahead of its AGM. The group continues to trade in line with expectations with a robust performance across the group. Given the company’s track record of earnings outperformance, above average ROCE and growth potential, we continue to believe the shares are undervalued and following the acquisition announced earlier this week, are comfortable with a valuation approaching 130p per share.
14 Jan 16
Positive start to H1 including Used underpins recent forecast upgrades
Having just upgraded FY’16 EPS forecasts by 11% (part year effect), and FY’17 by 19%, on the back of the acquisition announcement on Monday, we did not anticipate further upgrades today. Nonetheless, the positive start to the year is encouraging and underpins confidence in these increased forecasts. Of note is the update on its Used vehicle division, where LFL sales and increased GPPU metrics are significantly enhancing segmental profits and RoI. Fair value is estimated to be c95p/share, with risk to the upside over the year from organic and/or acquisition related upgrades.
14 Jan 16
Cambria Automobiles (CAMB LN) Positive start to H1 including Used underpins recent forecast upgrades | easyHotel (EZH LN) UK expansion kicking off | First Derivatives (FDP LN) Partnership with analytics provider to US utilities sector | Goals Soccer Centres (GOAL LN) In line update and further management changes | Lavendon Group (LVD LN) FY15 results to be at the top end of expectations | Restaurant Group (RTN LN) Cautious update prompts move to Sell on valuation grounds | WYG (WYG LN) Forecasts upgraded for Signet acquisition
CAMB EZH FDP GOAL LVD RTN WYG
14 Jan 16
Acquisition & Disposal
Cambria has announced the acquisition of a further Land Rover dealership, this time in Welywn Garden City a territory where it already has a significant presence. Contained within this announcement is also a disposal of a Jaguar dealership in Exeter, which also includes an Aston Martin boutique dealership on the same site. The net effect is good immediate EPS enhancement of 13% to August 2016E increasing above 20% in 2017E and 2018E thereafter. While the shares have performed well YTD, we believe the shares remain undervalued post this latest earnings upgrade and there is significant growth potential ahead as it makes solid progress to deliver its strategic targets.
11 Jan 16
Acquisition of 3rd Land Rover Franchise
Cambria indicated recently that it had a pipeline of potential acquisitions under review and today it has announced its third Land Rover dealership. It also announces a Jaguar disposal, with a related Aston Martin closure – which is small and likely to be followed by a more substantial franchise addition. This is in line with its stated strategy, enriches EBIT margins and is significantly enhancing earnings. Forecasts have been upgraded by 11% this year (part year effect) and 19% in FY’17/FY’18. Following this transaction we believe Fair Value is c95p based on a 10% growth premium vs. the sector. Note that the group still has available funding with which to target other earnings enhancing acquisitions, and an update on trading is due on 14 January.
11 Jan 16
1Spatial (SPA LN) Strategic partnership with HERE | BCA Marketplace (BCA LN) Dominant player with highly compelling growth | Cambria Automobiles (CAMB LN) Acquisition of 3rd Land Rover Franchise | Hargreaves Services (HSP LN) Complementary accretive acquisition | Minds + Machines Group (MMX LN) Proposed board changes | Skyepharma (SKP LN) Pre-close update: early milestone recognition and cash > estimates | Verona Pharma (VRP LN) Directorate change
CAMB BCA HSP MMX SKP VRP SPA
11 Jan 16
Outlook for 2016
We believe that the UK Motor Sector continues to offer attractive opportunities following a successful 2015 given it’s anticipated above average growth rates, strong cash generation and attractive ROCE generated from largely robust balance sheets. We also expect further consolidation amongst the dealers, as the operating environment continues to favour larger groups in our view.
CAMB AUTO BCA INCH LOOK MMH PDG VTU
01 Jan 16
Cambria continues to perform well, delivering final results to August 2015 that are +4% ahead of our forecasts at the adjusted PBT level (+5% at the adjusted EPS level) following a number of upgrades during the year. We are upgrading our EPS forecasts once again by 4% in 2016E and 2017E due to the strong momentum in the business. We believe the shares are significantly undervalued and are comfortable with a valuation of 116p per share on a medium term basis.
24 Nov 15
Results beat expectations & drive 5-6% upgrades
Cambria has delivered an excellent set of results in FY’15 both operationally and financially. PBT increased 43% year on year, beating recently upgraded forecasts, and cashflow was well ahead of expectations driven by w/c enhancements, especially in Used where RoI is now almost twice the industry average. Trading has exceeded expectations in Sept/Oct and new bank facilities provide significantly more fire power to continue with its acquisition strategy, where it has an impressive track record. We continue to highlight property backing, now c.41p/share. Although PBT/EPS forecasts have been upgraded by 5-6%, we continue to see risk to the upside. Based on existing forecasts we estimate fair value to be c.86p.
24 Nov 15
SMMT September data
The SMMT (Society of Motor Manufacturers and Traders) has released data for the key trading period of September this morning. The headline number has again come in at record levels, showing growth in private registrations vs. what was a strong prior year comparative. However, we do think there was an element of self-registration that took place here, with the fleet market again driving a significant proportion of the growth. The VW emission issue does represent some uncertainty for dealers as we move into Q4, but this is seasonally quiet anyway and we suspect dealer profitability will be intact for 2015
CAMB INCH AUTO BCA LOOK PDG VTU AN KMX CPRT KAR GPI LAD PAG SAH True
06 Oct 15
Strong progress in all divisions drives upgrades
Cambria has delivered further strong growth in H2, ahead of expectations. Of note is the Used cars performance where volume growth has been combined with increased gross profit per unit metrics. Service hours in Aftersales have also performed well. The net effect of this is a 3% upgrade to FY15 EPS forecasts. However, we continue to highlight upside risk, especially next year, given a number of key factors. This includes a relative bias to Jaguar, where recent SMMT registration data confirms a material rise in consumption. Our fair value estimate is 80p, with upside via acquisitions/upgrades.
08 Sep 15
Cambria has delivered a confident trading update as it continues to see solid LFL growth across all of its divisions vs. strong prior year comparatives against a strong market backdrop. We are maintaining our full year forecasts for now, but do anticipate further earnings upgrades when the company announces its final results in November especially as the September order book is “building well.” We remain confident that Cambria can emerge as a £1bn revenue and 2% operating margin business, and believe it is well positioned as it continues to execute its successful strategy.
01 Sep 15
Motor retailers - positive read across from strong industry data
The latest data from the SMMT has positive read across for the motor retail stocks where the average valuation gap vs. the overall retail sector has now widened to almost 35% given the level of re-rating witnessed elsewhere. The recent £/€ rate bodes well for continued momentum. The next motor retailer to update will be Marshall Motors on Thursday (its maiden H1 pre-close) which we expect to read well. However, our preferred stocks in the sub-sector are Lookers (Buy) trading on a cal’15 P/E of 11.8x and Cambria (Corporate) trading on a cal’15 P/E of just 9.7x. In both instances we believe consensus forecasts could be overly conservative.
CAMB MMH LOOK
07 Jul 15
Buy motor retailers for next phase of growth cycle
In our 28th April motor retail sector note we concluded that the leading franchise operators have above average prospects within the retail sector, driven by organic growth opportunities and acquisition led growth potential. We flagged up two key short term risks though (election and falling residual used car values) but with these risks fading we believe the sector’s growth prospects should come back into focus. Ratings are low in both absolute and relative terms and there is a clear argument for a re-rating in the 2nd phase of the cycle as the mix and quality of earnings should improve. We turn positive on the sub-sector and highlight Cambria (intrinsic value rises to 78p) and Lookers (target price raised to 182p) in particular.
CAMB LOOK MMH PDG VTU
08 Jun 15