Following the vote for Brexit, visibility of big ticket items demand is limited and motor retailers have sold-off accordingly. However Swindon-headquartered Cambria Automobiles (CAM:AIM) is one industry consolidator with a proven track record in both favourable and difficult market conditions.
Shares in the franchised motor dealer rebound 3.9% to 66.5p as the £2.1 million acquisition of a Jaguar and Land Rover franchise in North London, combined with a positive trading update, demonstrate management's confidence in the near-term outlook.
Established in 2006 as a motor retail 'buy and build' focused on turnaround opportunities, management's success in turning round struggling dealerships has allowed it to build a strong balance sheet and as a result, it is now in a position to acquire valuable premium operations.
Today, Cambria announces the acquisition of Jaguar and Land Rover franchises in South Woodford from larger rival Pendragon (PDG), a deal settled out of existing cash resources after which Cambria operates five Jaguar and four Land Rover dealerships under the Grange fascia.
CEO Mark Lavery says he is 'pleased to have acquired this Jaguar and Land Rover franchise in North London, which complements and enhances the group's existing Jaguar Land Rover businesses. The acquisition represents continued delivery of the strategy to develop our portfolio of premium and high luxury franchises in strategic locations by acquiring businesses that are earnings enhancing.'
Lavery believes that 'the South Woodford territory provides significant potential and we are keen to maximise the opportunity as we build and relocate to a new dealership facility.'
A brief-but-upbeat trading update also provides fuel for the share price, Lavery stating Cambria's strong trading performance reported to March continued through to the end of June, 'which leaves the group significantly ahead of the prior year and trading in line with current market expectations for the year to 31 August 2016.'
Mike Allen, automotive retail sector sage at joint broker Zeus Capital, forecasts adjusted pre-tax profit of £10.4 million on £626.2 million sales for the current year, rising to £12.1 million on £709.7 million revenue by 2017. Noting recent sector share price weakness, Allen points out 'this business was a very effective consolidator during the last recession, and we remain very confident that this management team will deliver on their medium term objectives of becoming a £1 billion plus revenue business.'