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Increased margins and volume bonuses see Cambria turn falling car sales into profits

Mark Lavery, Cambria Automobiles

An increase in margins has seen Cambria Automobiles weather a fall in car sales to turn in a pre-tax profit boost in its interim results, published this morning.

In the six months to February 28, new vehicle sales were down 4.6% (like-for-like down 12.4%), but the impact was more than offset by a “substantial increase” in average profit per unit as a result of improved portfolio mix, the plc said, and annual volume bonuses.

Used car sales were also down  - 1.2% (like-for like up 1.3%) -  but also offset by  an improvement in profit per unit as revenue grew by 11.0% to £309.1 million in the six months and underlying pre-tax profit up 21.7% to £5.6m.

Reflecting on the results in an interview with AM, Cambria chief executive Mark Lavery put the margin gains down to the success of the group’s increased representation of Jaguar Land Rover and Aston Martin during the reporting period.

“The period saw the new DB11 starting to flow through and also numbers related to the Jaguar F-Pace, which we hadn’t seen the previous year” said Lavery.

“Really, the F-Pace has been Jaguar’s ‘Evoque moment’ and what you see is that sea-change reflected in five dealerships over the course of six months.”

Lavery said that the group’s used car success was also the result of the close relationship with JLR, with SUVs increasing the average profit-per-unit 3.5% YoY to £1,578.

Aftersales revenue increased by 9.9% (like-for-like up 1.8%) with a gross profit improvement as the group achieved 54.7% overhead absorption, but the results elicited disappointment from Lavery, who sees greater potential for growth in this area.

The results acknowledge the effects of redevelopment of the Barnet Jaguar Land Rover site and a fire at the group’s Welwyn Garden City facility which impacted on aftersales performance along with a change of DMS which was “not seamless” according to Lavery.

He said: “I’m indifferent to our aftersales results because I know we should have done so much better.

“We have 7,100 Warranty For Life plans out there, add to that service plans and other retention tools and we should have around 25,000 customers retuning to us for aftersales work. Not being able to optimise that potential is a huge frustration, but we know that will change going forward.”

Many of Cambria’s investment plans are set to come to fruition in 2017. The Barnet JLR facility is nearing completion and the recent acquisitions of Welwyn Garden City Land Rover, Woodford Jaguar Land Rover and Birmingham Aston Martin are “progressing well”.

Swindon Motor Park, the group’s first business, was closed to make way for the Swindon Jaguar Land Rover dealership development on its site, meanwhile, with development set to begin imminently.

Lavery said that, overall, he was “pleased with the group’s financial performance” in the first half in which the it delivered 21.7% profit growth in an uncertain consumer environment.

He added: “Following on from the significant number of acquisitions, site openings and disposals completed in the 2016 financial year, the aim for the current year is to continue integrating these businesses and progressing our property developments.

“This in turn will help to realise the full potential of these acquisitions and to increase their operational capacity.  We are making good inroads into both of these areas.     

“Whilst the board remains cautious, we are pleased that Cambria’s performance in the combined months of March and April was in line with the previous year. We are therefore confident that the full year results will be slightly ahead of the current market expectations”.

Financial highlights

  • Revenue increased by 11.0% to £309.1m (H1 2016: £278.4m)
  • Underlying profit before tax up 21.7% at £5.6m (H1 2016: £4.6m)
  • Underlying earnings per share increased 19.5% to 4.41p (H1 2016: 3.69p)
  • Underlying net profit margin up to 1.8% (H1 2016: 1.67%)
  • Positive operational cash flows maintained, with a cash position of £17.2m (H1 2016: £25.3m) and net cash of £3.3m (H1 2016 net cash: £0.3m)
  • Strong balance sheet with net assets of £45.8m (H1 2016: £37.6m)
  • Rolling twelve month return on equity* of 21.76% (H1 2016: 21.15%)
  • Interim dividend increased by 25% to 0.25p (H1 2016: 0.2p) 

> Cambria's financial history, directors and shareholders (xlsx)

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