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Cambria reports 19.3% profit decline amid Luxury car franchise restructure

Mark Lavery, Cambria Automobiles

Cambria Automobiles has recorded a 2.2% decline in revenues and 19.7% drop in profit before tax as an overhaul of its franchise representation led to “significant disruption” in its financial year to August 31.

Revenues declined to £630m (2017: £644.3m) and profit before tax to £9.1m (2017: £11.3m) during a period of change in which eight of the Group’s 42 outlets either changed franchises or closed to accommodate a shift into the luxury car retail segment.

Cambria chief executive, Mark Lavery, said that he was “pleased with the progress that has been made”, but conceded: “The changes made in the brand portfolio have led to significant disruption in our day to day operations as we have closed these businesses and developed the new facilities for the new franchises.”

Three luxury brand franchises were added to the group during the period, with a temporary McLaren dealership opened in Hatfield and Bentley dealerships in Essex and Kent opened in January 2018 and Lamborghini dealerships also opened in Essex and Kent in April and November 2018.

Further investments delivered the completion of a new Jaguar Land Rover Arch retail concept showroom in Swindon during July and work on new Hatfield JLR and Aston Martin showroom developments scheduled for completion in December and January, respectively. Cambria's represntentation of Aston Martin will be boosted by the addition of a new Birmingham site during Q2, 2019.

Development of Cambria's mainstream brand portfolio during the period saw the addition of Peugeot into Warrington – to replace Fiat – during September 2018 and the planned closure of the Group’s loss-making Blackburn location, which previously represented Fiat, Alfa Romeo, Renault and Volvo.

The planned closure of the Group’s two bodyshop operations, Alfa Romeo and Jeep in Chelmsford and Mazda and Honda in Tunbridge Wells to facilitate the addition of Bentley and Lamborghini in both locations, was also carried out.

Changes to the group’s portfolio contributed to a 17.2% decline in new vehicle sales (like-for-like down 14.8%) and used car sales down down by 6.9% (like-for like down 2.6%).

In its statement accompanying the group’s financial results, Cambria said that the financial impact of the decline in new car sales had been “slightly offset” by a 1.2% increase in profit per unit as a result of the premium mix shift. The like-for-like units saw margin pressure with profit per unit down 2.6%.

The used car sales decline was offset by a 11.6% (like-for like 6.3%) improvement in profit per unit which reflects the Group’s portfolio changes and the additional new luxury brands, it said.

Lavery said that the reported period had seen a difficult new car market, impacted by weakening consumer demand in the face of the uncertainty around the Brexit negotiations, inconsistent messaging around the future of diesel engines and the impact on car supply from the change in emissions testing regulations to WLTP (Worldwide Harmonised Light Vehicle Test Procedure) in September.

He added: “We have also had to cope with Government driven central cost increases including the Apprenticeship Levy, pension contributions, increases in debit and credit card charges and increased property rating costs. Regrettably we have no control over these areas of cost increase.

“That being said, our exceptional management team have worked incredibly hard and despite the uncertainty, disruption and brand portfolio changes we have delivered a solid revenue result and profit levels slightly ahead of market expectations. Our strong used car profit performance combined with growth in aftersales has been a significant contributor.”

Cambria reported that it maintained a “robust balance sheet” despite the franchise restructure carried out over the reported period.

The AM100 group, which was founded back in 2006, increased its net assets to £56.6m (2016/17: £50.4m) and made a significant investment in its property portfolio during the year, deploying £20m in capex to secure the ownership of £64.3m (2016/17: £45.2m) of freehold and long leasehold properties.

Its net debt declined from £6.1m to £5.5m and the refinancing of the its debt facilities have provided a new £40m, five-year revolving credit facility arranged in November 2017.

Cambria chairman, Phillip Swatman, said: “The team have done an incredible job by securing the addition of Bentley, Lamborghini, McLaren and Peugeot to the Group’s brand portfolio.

“Whilst these businesses are very much in their infancy, the potential to contribute to the Group’s growth as they mature is significant.

“Cambria’s robust balance sheet, industry leading return on investment and proven management team leave it well positioned to manage any uncertainty that the broader market creates.”

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