Cambria Automobiles plc (LON:CAMB) is the topic of conversation when Zeus Capital’s Head of Research Mike Allen caught up with DirectorsTalk for an exclusive interview.
Q1: Cambria Automobiles provided an update on its trading for the five months to the 31st of January 2021. Mike, what were the key points?
A1: The company gave the trading update, as you say, for the five months to the end of January, what we saw was volumes were down broadly on track with the market after aftersales seeing a 14% drop in revenue during the period as well.
What’s clear is gross profit per unit in new and used continues to be helped by the premium mix in the business and also the company has done a lot of work on the cost base as well so costs were significantly down on last year. There was, obviously, some government help there with some support everybody’s received but management have also done a lot of self-help work on part on the cost base as well. Net debt at the end of February was just £5.7 million and the group is fully up to date on all VAT payments as well.
So, I think from a cost and cash point of view, the company is in very good shape.
Q2: Have you had to tweak your forecast at all?
A2: No so, at the moment, we don’t have any forecast in the market, the guidance is currently suspended but we’d expect to reissue forecast when they announced results in May, and we’ve got a better feel for how the business traded through the key period of March.
Q3: How do you view the company in terms of a valuation?
A3: Obviously, we think that the business will, again, be a kind of key survivor in the industry, management team is very strong, we think the property values is around £18 million, which is below the current market cap as well.
So, the business, based on 2020 historic numbers, trades on a PE of 7 and an EV/EBITDA of about 3 which looks low for a business that continues to outperform the market and has delivered value.
Q4: Finally, how do you view the outlook for Cambria Automobiles?
A4: Obviously, the outlook is tricky at the moment, obviously with dealerships being closed but obviously we expect them to reopen on the 12th of April.
The company did indicate that the order book for March is behind where it was last year, that doesn’t surprise us, and we’d expect to see pent-up demand in April, May, and June as we saw last year as well.
So, we’ll hear more when they report their H1 results on the 5th of May.
