Hop behind the wheel at franchised motor retailer Cambria Automobiles (CAMB:AIM) at 54p following positive read-across from sector peer Vertu Motors (VTU:AIM). The latter’s trading update suggests the UK new car market has not yet run out of fuel.

Steered by chief executive officer Mark Lavery, motor retailer Cambria trades under local brand names such as Dees, Doves, Grange and Invicta and has a balanced portfolio spanning the volume, premium and high luxury brands. At a time when the UK consumer is feeling more confident, the Swindon-headquartered company is growing organically and through acquisitions, with Lavery looking to boost annual sales from almost £400 million last year to £1 billion plus in time.

Small Caps - Cambria - Jul 14

Given its strengthening balance sheet, flush with £25.8 million net assets at the half-year and underpinned by substantial property, Cambria is ready to move on a buoyant bid pipeline.

Though the £54 million cap made its name buying and turning round underperforming dealerships, it is now moving towards immediately earnings-enhancing deals that strengthen the brand portfolio mix.

Cambria’s latest acquisition (8 Jul) is its first Land Rover franchise, a canny move given bumper demand for the brand, and a sixth Jaguar dealership. Bought from larger quoted rival Lookers (LOOK) for £10.5 million in cash, these assets have boosted Cambria’s prestige brand presence and enriched what are admittedly low industry margins.

Vertu’s latest trading update is encouraging for both businesses, trading ahead of expectations in the four months to June, during which the UK new retail market continued to enjoy double-digit year-on-year growth. This reflects the compelling product and finance offers coming the way of UK consumers at a time when manufacturers see overcapacity and weak demand in continental European markets.

Cambria pleased investors on 8 July with news that it should ‘at least match market expectations’ for the year to August. These results will be published in November where joint broker Panmure Gordon forecasts £5 million pre-tax profit, earnings per share of 3.9p and a 0.5p dividend. For the financial year to August 2015, Cambria is forecast to make £6.1 million pre-tax profit for earnings per share of 4.8p, rising to £6.4 million and 5p by August 2016.

Issue Date: 04 Aug 2014