Cambria gives "cautious" update as investors appraise Lavery's MBO bid

Investors clamouring for a trading update from Cambria Automobiles before they vote on its chief executive's bid to take the dealer group private have had their wish Friday afternoon.

The AM100 dealer group has issued a measured statement, which ends with chief executive Mark Lavery emphasising "a cautious outlook" while optimising the immediate returns from the strong used car market.

Some investors have been outspoken recently, querying the shareholder value of Lavery's £82.5 million MBO bid, when they said they've read of other dealer groups' strong profits in used cars while values are climbing currently but had seen nothing from Cambria.

Today a Financial Times columnist questioned whether "Cambria investors are being asked to trade in their Lamborghini for the price of a second-hand Mini", and added that "used cars account for around half of Cambria's sales, so it's hard to believe they haven't benefited" from the unusual used car market.

Today's Cambria statement, updating on the 11 months to July 31, reported that Cambria's used car sales volume has dropped 4%, although used vehicles "continue to perform well" in a marketplace where demand exceeds supply.

"This performance is consistent with the updates provided by the other listed car dealer groups over the past month," it added.

Cambria stated that overall trading has been "pleasingly in line with pre-pandemic seasonality and in line with management's expectations, despite the uncertain trading environment and a number of market challenges".

Its new vehicle retail sales are 3.9% down versus the same period last year, and fleet and commercial sales were down 3%.

Looking forward, Cambria said: "The board is pleased with the performance in the eleven months of the financial year, but as highlighted previously, there remains forward looking uncertainty in both the new and used car market as a result of supply issues.

"There will be a correction at some point in time in the used car market, but, until the new car market normalises, this remains uncertain. There also remains the challenges of associate absences resulting from COVID-19 and the general labour shortages in the UK.

"The new car order bank for the important September trading month is currently significantly behind prior year and the level of new vehicle inventory available for the group to sell from stock is significantly reduced from prior year. 

"The used car market looks like it will remain strong throughout September with the continued level of demand exceeding supply."

Lavery added: "I am pleased with the performance of the group in a highly unusual market where the supply constraints are driving up prices of the vehicles that we sell. 

"The cost actions taken by the group last year have reduced the operating expenses and this has enabled the group to continue the strong performance seen in the first half of the financial year."

With the first closing date of the acquisition offer being September 3, Cambria has also announced Cambria Bidco intends to announce an extension to the offer for a period of at least 14 days from today.

Earlier this months Lavery talked to AM after we heard complaints from a US-based investor that the acquisition bid offer of 82.5p per share was a poor deal.

Lavery responded that Cambria’s average share price over the past five years has been 49p to 51p, and when the buyout process started the share price was at 33p, and when the business was first listed it was at 50p.

“At 82.5p per share the price we are offering shareholders is 66.6% above the mean price over the past 12 months.

“This is a fair and reasonable offer that gives people the opportunity to cash out," he said.