TIDMCFYN
RNS Number : 6452T
Caffyns PLC
26 November 2021
HALF YEAR REPORT
for the six months ended 30 September 2021
Summary
6 months 6 months
to to
30 September 30 September
2021 2020
GBP'000 GBP'000
Revenue 110,785 85,352
Profit before tax 2,295 1,414
Underlying EBITDA (see note 1
below) 3,950 3,218
Underlying profit before tax (see
note 1 below) 2,396 1,534
Pence Pence
Underlying basic earnings per
share 73.0 55.9
Basic earnings per share 69.9 52.3
Interim dividend per ordinary 7.5 -
share
Financial and operational review
-- Underlying profit before tax of GBP2.40 million (2020: GBP1.53 million)
-- Profit before tax of GBP2.30 million (2020: GBP1.41 million)
-- Like-for-like revenue increase for the period of 29% (see note 2 below)
-- Underlying basic earnings per share up by 31% to 73.0 pence (2020: 55.9 pence)
-- Basic earnings per share up by 34% to 69.9 pence (2020: 52.3 pence)
-- Resumption of dividend payment reflecting first half performance
-- Net bank borrowings at 30 September 2021 of GBP8.7 million (2020: GBP12.2 million)
Simon Caffyn, Chief Executive, commented:
"Our results to September benefited from an unprecedented used
car performance. We have also implemented greater operational
efficiencies throughout the group and I am proud of the way our
operational and support teams have risen to the challenges to
deliver this strong performance'"
Enquiries:
Simon Caffyn, Chief
Caffyns plc Executive Tel: 01323 730201
Mike Warren, Finance
Director
Headland Chloe Francklin Tel: 020 3805 4855
Note 1: Underlying results exclude items that have non-trading
attributes due to their size, nature or incidence. Non-underlying
items for the period totalled GBP0.10 million (2020: GBP0.12
million) and are detailed in Note 4 to these condensed consolidated
financial statements. Underlying EBITDA of GBP3.95 million (2020:
GBP3.22 million) represents Operating profit before non-underlying
items of GBP2.97 million (2020: GBP2.23 million) and Depreciation
and amortisation of GBP0.98 million (2020: GBP0.99 million).
Note 2: Like-for-like comparisons exclude from the current year
the impact of the Lotus and MG businesses at Ashford, both of which
were opened during the period, as well as the LEVC business in
Eastbourne which opened during the prior year period. All other
businesses operated throughout both the current and prior six-month
periods.
INTERIM MANAGEMENT REPORT
Summary
The board is very pleased to report a strong underlying profit
before tax of GBP2.40 million for the half-year ended 30 September
2021 ("the period"). This is a considerable improvement on the
GBP1.53 million recorded for the comparative period in 2020.
Trading in the period, especially for used cars, has been robust
and actions implemented over the last year have strengthened the
resilience of the business, including against the adverse effects
of the covid-19 pandemic. During the period, the Company utilised
the support made available by Government from reductions in
business rates for retail premises and to a lesser extent from
Coronavirus Job Retention Scheme furlough grants, which assisted us
to maintain employment. New car availability for the important
September bi-annual registration plate change on 1 September was
constrained by the global shortage of semiconductors adversely
affecting car production levels and we expect this issue also to
affect the second half of the current financial year.
Revenue for the period increased by 30% to GBP110.8 million
(2020 GBP85.4 million). The increase resulted primarily from
business activity in the prior period being heavily restricted in
two of the six months due to covid-19, but partially offset by the
global shortage of semiconductors affecting the availability of new
cars in the period. Underlying basic earnings per share were 73.0
pence (2020: 55.9 pence).
The Company's defined-benefit pension scheme deficit, calculated
in accordance with the requirements of IAS 19 Pensions, showed an
encouraging reduction of GBP4.5 million from the last financial
year-end at 31 March 2021 to GBP4.9 million at 30 September 2021.
The Scheme's investments performed well, outpacing the increase in
the present value of the Scheme's pension liabilities, resulting in
a welcome narrowing of the deficit.
The Company continues to own all but two of the freeholds of the
properties from which it operates and this provides the dual
strengths of a strong asset base and minimal exposure to rent
reviews, which is reassuring in these uncertain times.
Profit before tax for the period was GBP2.30 million (2020:
GBP1.41 million) with basic earnings per share of 69.9 pence (2020:
52.3 pence).
The Board is aware of the importance of dividend payments to its
shareholders and is mindful that it has not paid a dividend for two
years due to the inherent uncertainty the covid-19 pandemic has
placed on the business. Having considered the interests of all
stakeholders and, i n light of the strong financial performance and
associated cash generation in the period and the longer-term
prospects for the business, the board has judged that it is
appropriate to re-start payment of dividends and has declared an
interim dividend of 7.5 pence per ordinary share (2020: Nil pence
per ordinary share).
Operating review
New and used cars
Our new car deliveries in the period rose by 12% from the
previous year on a like-for-like basis with our VAG-branded new car
deliveries performing strongly, ahead of the increase in the UK
market. Nationally, the SMMT reported a 19% increase in new car
registrations in the retail and small business market segment in
which we primarily operate. Used car sales volumes for the period
rose by 36% on a like-for-like basis. A number of improvements have
been made to our on-line presence and customer journeys over the
last year which have helped to make for a much more enjoyable
customer experience. Demand was further boosted by customers
switching into used car purchases due to the lack of availability
of new cars towards the end of the period.
Aftersales
Our aftersales revenues rose by 21% in the period on a
like-for-like basis, despite a slow start to the period in April
and May as that two-month period coincided with the 12-month
anniversary of the first covid-19 lockdown in 2020. The period also
faced the headwind of staff shortages from the "pingdemic" and from
social-distancing requirements adversely affecting productivity
levels. Throughout the period, we have continued to realise
improvements to our customer retention processes.
Operations
Given the headwinds to trading that the business has experienced
in the period from the background covid-19 pandemic and the growing
lack of availability of new cars, it was extremely pleasing that
all six of our established franchise businesses reported improved
profitability in comparison to the previous period. Our Audi and
Volkswagen businesses, in particular, performed very strongly. Our
Motorstore used car operation performed satisfactorily in the
period, particularly as the business was disrupted by building
improvement works at its base in Ashford.
During the period, we commenced representation with Lotus and
MG, opening in Ashford on 1 July 2021. Both businesses have
performed well, and we are encouraged by the starts that they have
made.
The Company benefited in the period from the Government's
business rates holiday for retail premises with savings of GBP0.5
million (2020: GBP0.6 million). Savings will continue until March
2022, albeit at a lower level. The Company also utilised the
Government's Coronavirus Job Retention Scheme, receiving GBP0.1
million in the period (2020: GBP1.7 million).
Property
Capital expenditure in the period was GBP1.2 million (2020:
GBP0.2 million). This included GBP0.7 million of assets in the
course of construction associated with an upgrade to our Volvo site
in Eastbourne, to allow for an expansion of the showroom facility
to better represent Volvo's extended model range. This upgrade will
be completed in the second half of the year.
We operate primarily from freehold sites and our property
portfolio provides additional stability to our business model.
Annually, we obtain an independent assessment of the values of our
freehold properties against their carrying value in our accounts
and had an unrecognised surplus to carrying value of GBP12.3
million at 31 March 2021, our last financial year-end. The board
does not consider there to have been any material movement in the
value of the Company's freehold properties since the year-end.
As part of the sale of the Land Rover business in April 2016,
our freehold premises in Lewes had been leased to a third-party but
that lease came to an end in early June 2021. The Board is
evaluating future opportunities for the site.
Pensions
The Company's defined-benefit pension scheme started the period
with a net deficit of GBP9.4 million. The board has little control
over the key assumptions in the valuation calculations as required
by accounting standards and the size and nature of the Scheme's
underlying assets and liabilities means that the deficit can be
subject to significant change. However, the board was pleased to
note a significant reduction in the assessed level of the deficit
at 30 September 2021, to GBP4.9 million. Net of deferred tax, the
net deficit was GBP4.0 million at 30 September 2021 (2020: GBP10.8
million) and GBP7.6 million at 31 March 2021. In the period, growth
in the value of the Scheme's gross assets was good, increasing in
value by GBP5.8 million, whilst the Scheme's liabilities increased
by just GBP1.3 million.
The pension cost under IAS 19 is recognised in the Condensed
Consolidated Statement of Financial Performance and continues to be
charged as a non-underlying cost, amounting to GBP101,000 in the
period (2020: GBP113,000).
As the Scheme is in deficit, the Company has in place a recovery
plan which has been agreed with the trustees, and which was last
updated in May 2021. During the period, the Company made cash
payments into the Scheme of GBP1.4 million, which included a
one-off payment of GBP1.0 million in June 2021. The recurring
element of these payments increase by a minimum of 2.25% per
annum.
Bank and other funding facilities
The Company has banking facilities with HSBC which comprise a
term loan, originally of GBP7.5 million, and a revolving-credit
facility of GBP7.5 million, both of which will become renewable in
March 2023. HSBC also provides an overdraft facility of GBP3.5
million, renewable annually. In addition, there is an overdraft
facility of GBP4.0 million provided by Volkswagen Bank, renewable
annually, together with a term loan, originally of GBP5.0 million,
which is repayable over the ten years to November 2023.
The Company has been cash generative during the period with
GBP2.7 million (2020: GBP4.4 million) generated from operating
activities, including a favorable working capital improvement of
GBP1.0 million (2020: GBP2.0 million).
Bank borrowings, net of cash balances, at 30 September 2021 were
GBP8.7 million (2020: GBP12.2 million), down from GBP10.3 million
at 31 March 2021. As a proportion of shareholders' funds, bank
borrowings, net of cash balances were 27% at 30 September 2021
(2020: 50%).
Taxation
The tax charge for the period has been based on an estimation of
the effective tax rate on profits for the full financial year of
20% (2020: 22%). The current year effective tax rate is marginally
higher than the standard rate of corporation tax in force for the
year of 19% due to the effect of items disallowable for tax
purposes.
Payments of corporation tax in the period, net of refunds, were
GBP0.3 million (2020: refund of GBP0.1 million).
The narrowing of the deficit of the Company's defined-benefit
pension scheme in the period contributed to the recognition of a
deferred tax liability on the Statement of Financial Position at 30
September 2021 of GBP0.4 million (2020: deferred tax asset of
GBP1.1 million).
People
The health and safety of our employees and customers during the
ongoing covid-19 pandemic has been our paramount concern with
policies implemented so that our showroom and workshop activities
continue to be undertaken in a responsible and socially distanced
way. The response from everyone in the Company to the pandemic
continues to be outstanding and the board would like to express its
gratitude to them for their hard work and professional application
. Our results to September benefited from an unprecedented used car
performance. We have also implemented greater operational
efficiencies throughout the group and our operational and support
teams have risen to the challenges to deliver this strong
performance .
Dividend
The Company has not declared a dividend since the interim
dividend in late 2019. The Board is aware of the importance of
dividend payments to its shareholders, and for the need to resume
dividend payments once it is appropriate to do so. Despite the
uncertainty that remains over the covid-19 pandemic and the ongoing
supply chain issues the industry is facing, the judgement of the
board is that the first half performance and longer term prospects
mean that it is now appropriate to restart dividend payments.
Accordingly it has declared an interim dividend of 7.5 pence per
ordinary share (2020: Nil pence per ordinary share). This interim
dividend will be paid to shareholders on 10 January 2022 to those
shareholders on the register at close of business on 10 December
2021. The ordinary shares will be marked ex-dividend on 9 December
2021.
Strategy
Our continuing strategy is to focus on representing premium and
premium-volume franchises as well as maximising opportunities for
premium used cars, with an emphasis on delivering the highest
quality of customer experience. We recognise that we operate in a
rapidly changing environment and carefully monitor the
appropriateness of this strategy whilst also seeking new
opportunities to invest in the future growth of the business.
We concentrate on stronger markets so as to deliver higher
returns from fewer but bigger sites. We continue to seek to deliver
performance improvement, in particular in our used car and
aftersales operations.
Current trading and outlook
Customer demand for used cars remains strong, with few signs of
slowing. The Company's forward-order bank for new cars is at a
historically high level, which is especially encouraging for 2022
when it is hoped that new car availability will improve. However,
in the short-term new cars are expected to remain in short supply
and the high level of national covid-19 infections continues to be
a concern as winter approaches. Given these uncertainties, the
board remains cautious for the second half of the financial
year.
Our balance sheet is appropriately funded and our freehold
property portfolio is a source of substantial stability. We have
taken several actions over the last eighteen months that have
significantly enhanced our online presence, as well as improving
our productivity and increasing the resilience of the business. We
remain confident in the longer-term prospects for the Company and
are ready to explore future business opportunities as they
arise.
Simon G M Caffyn
Chief Executive
25 November 2021
Condensed Consolidated Statement of Financial Performance
for the half year ended 30 September 2021
Unaudited Unaudited Audited
Half year Half year Year ended
N o to to 31 March
t e 30 September 30 September 2021
2021 2020 Total
Total Total
GBP'000 GBP'000 GBP'000
Revenue 110,785 85,352 165,085
Cost of sales (95,058) (73,884) (142,304)
---------------------------------------- ------ -------------- -------------- ------------
Gross profit 15,727 11,468 22,781
Operating expenses (13,036) (9,618) (20,798)
---------------------------------------- ------ -------------- -------------- ------------
Operating profit before other income 2,691 1,850 1,983
Other income (net) 3 259 360 909
---------------------------------------- ------ -------------- -------------- ------------
Operating profit 2,950 2,210 2,892
---------------------------------------- ------ -------------- -------------- ------------
Operating profit before non-underlying
items 2,966 2,229 3,142
Non-underlying items within operating
profit 4 (16) (19) (250)
---------------------------------------- ------ -------------- -------------- ------------
Operating profit 2,950 2,210 2,892
Net finance expense 5 (570) (695) (1,266)
Non-underlying net finance expense
on pension scheme 4 (85) (101) (202)
---------------------------------------- ------ -------------- -------------- ------------
Net finance expense (655) (796) (1,468)
---------------------------------------- ------ -------------- -------------- ------------
Profit before taxation 2,295 1,414 1,424
---------------------------------------- ------ -------------- -------------- ------------
Profit before tax and non-underlying
items 2,396 1,534 1,876
Non-underlying items within operating
profit 4 (16) (19) (250)
Non-underlying net finance expense
on pension scheme 4 (85) (101) (202)
---------------------------------------- ------ -------------- -------------- ------------
Profit before taxation 2,295 1,414 1,424
Taxation 6 (410) (5) (14)
---------------------------------------- ------ -------------- -------------- ------------
Profit for the period 1,885 1,409 1,410
---------------------------------------- ------ -------------- -------------- ------------
Earnings per share
Basic 7 69.9p 52.3p 52.4p
Diluted 7 69.0p 52.3p 52.1p
Non-GAAP measure
Underlying basic earnings per share 7 73.0p 55.9p 66.0p
Underlying diluted earnings per
share 7 72.0p 55.9p 65.6p
Condensed Consolidated Statement of Comprehensive Expense
for the half year ended 30 September 2021
Note Unaudited Unaudited Audited
Half year Half year Year to
to to
30 September 30 September 31 March
2021 2020 2021
GBP'000 GBP'000 GBP'000
Profit for the period 1,885 1,409 1,410
--------------------------------------- ----- ------------- ------------- ---------
Items that will never be reclassified
to profit and loss:
Remeasurement of net pension
scheme obligation 12 3,224 (4,025) (301)
Deferred tax on remeasurement
of pension scheme obligation (612) 765 57
--------------------------------------- ----- ------------- ------------- ---------
Other comprehensive income/(expense),
net of tax 2,612 (3,260) (244)
--------------------------------------- ----- ------------- ------------- ---------
Total comprehensive income/(expense)
for the period 4,497 (1,851) 1,166
--------------------------------------- ----- ------------- ------------- ---------
Condensed Consolidated Statement of Financial Position
at 30 September 2021
Unaudited Unaudited Audited
30 September 30 September 31 March
Note 2021 2020 2021
GBP'000 GBP'000 GBP'000
Non-current assets
Right-of-use assets 9 550 768 610
Property, plant and equipment 9 38,060 38,206 37,624
Investment properties 10 7,703 7,994 7,751
Interest in lease 473 643 557
Goodwill 286 286 286
Deferred tax asset - 1,080 412
--------------------------------------- ------- -------------- -------------- ----------
Total non-current assets 47,072 48,977 47,240
--------------------------------------- ------- -------------- -------------- ----------
Current assets
Inventories 27,703 31,309 36,562
Trade and other receivables 4,003 8,106 5,072
Interest in lease 171 175 173
Current tax recoverable - - 34
Cash and cash equivalents 4,958 5,273 5,735
--------------------------------------- ------- -------------- -------------- ----------
Total current assets 36,835 44,863 47,576
--------------------------------------- ------- -------------- -------------- ----------
Total assets 83,907 93,840 94,816
--------------------------------------- ------- -------------- -------------- ----------
Current liabilities
Interest-bearing overdrafts, loans
and borrowings 1,875 4,875 3,875
Trade and other payables 30,735 35,737 39,338
Lease liabilities 434 493 495
Current tax payable 165 320 306
--------------------------------------- ------- -------------- -------------- ----------
Total current liabilities 33,209 41,425 44,014
--------------------------------------- ------- -------------- -------------- ----------
Net current assets 3,626 3,438 3,562
Non-current liabilities
Interest-bearing loans and borrowings 11,750 12,625 12,187
Lease liabilities 695 1,115 783
Preference shares 812 812 812
Pension scheme obligation 12 4,920 13,310 9,434
Deferred tax liability 411 - -
--------------------------------------- ------- -------------- -------------- ----------
Total non-current liabilities 18,588 27,862 23,216
--------------------------------------- ------- -------------- -------------- ----------
Total liabilities 51,797 69,287 67,230
--------------------------------------- ------- -------------- -------------- ----------
Net assets 32,110 24,553 27,586
--------------------------------------- ------- -------------- -------------- ----------
Shareholders' equity
Ordinary share capital 1,439 1,439 1,439
Share premium 272 272 272
Capital redemption reserve 707 707 707
Non-distributable reserve 1,724 1,724 1,724
Retained earnings 27,968 20,411 23,444
--------------------------------------- ------- -------------- -------------- ----------
Total equity 32,110 24,553 27,586
--------------------------------------- ------- -------------- -------------- ----------
Condensed Consolidated Statement of Changes in Equity
for the half year ended 30 September 2021 (unaudited)
Capital
Share Share redemption Non-distributable Retained Total
capital premium reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 2021
Total comprehensive income 1,439 272 707 1,724 23,444 27,586
Profit for the period - - - - 1,885 1,885
Other comprehensive income - - - - 2,612 2,612
----------------------------------- ---------- ---------- ------------ ------------------ ----------- ----------
Total comprehensive income
for the period - - - - 4,497 4,497
Transactions with owners:
Share-based payment - - - - 27 27
---------------------------------- ---------- ---------- ------------ ------------------ ----------- ----------
At 30 September 2021 (unaudited) 1,439 272 707 1,724 27,968 32,110
----------------------------------- ---------- ---------- ------------ ------------------ ----------- ----------
for the half year ended 30 September 2020 (unaudited)
Capital
Share Share redemption Non-distributable Retained Total
capital premium reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 2020 1,439 272 707 1,724 22,238 26,380
Total comprehensive
income/(expense)
Profit for the period - - - - 1,409 1,409
Other comprehensive expense - - - - (3,260) (3,260)
----------------------------------- ---------- ---------- ------------ ------------------ ----------- ----------
Total comprehensive expense
for the period (1,851) (1,851)
Transactions with owners:
Share-based payment - - - - 24 24
---------------------------------- ---------- ---------- ------------ ------------------ ----------- ----------
At 30 September 2020 (unaudited) 1,439 272 707 1,724 20,411 24,553
----------------------------------- ---------- ---------- ------------ ------------------ ----------- ----------
for the year ended 31 March 2021 (audited)
Capital
Share Share redemption Non-distributable Retained Total
capital premium reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 2020 1,439 272 707 1,724 22,238 26,380
Total comprehensive
income/(expense)
Profit for the year - - - - 1,410 1,410
Other comprehensive expense - - - - (244) (244)
--------------------------------- ---------- ---------- ------------ ------------------ ----------- ----------
Total comprehensive income
for the year 1,166 1,166
Transactions with owners:
Issue of shares - SAYE - - - - 3 3
Share-based payment - - - - 37 37
-------------------------------- ---------- ---------- ------------ ------------------ ----------- ----------
At 31 March 2021 (audited) 1,439 272 707 1,724 23,444 27,586
--------------------------------- ---------- ---------- ------------ ------------------ ----------- ----------
Condensed Consolidated Cash Flow Statement
for the half year ended 30 September 2021
Unaudited Unaudited Audited
Half year Half year Year to
to to 31 March
30 September 30 September 2021
2021 2020 GBP'000
GBP'000 GBP'000
Cash flows from operating activities
Profit before taxation 2,295 1,414 1,424
Adjustments for:
Net finance expense and pension scheme
service cost 655 796 1,468
Depreciation of property, plant and equipment,
investment properties and right-of-use
assets 984 989 1,982
Impairment against investment properties - - 184
Cash payments into the defined-benefit
pension scheme (1,391) (262) (526)
Loss on disposal of property, plant and
equipment - 1 3
Share-based payments 27 24 37
Decrease in inventories 8,859 1,221 3,484
Decrease/(increase) in receivables 1,069 (3,788) (754)
(Decrease)/increase in payables (8,881) 4,601 697
------------------------------------------------ --------------- --------------- -----------
Cash generated from operations 3,617 4,996 7,999
Net tax (paid)/recovered (307) 66 (31)
Interest paid (562) (683) (1,244)
------------------------------------------------ --------------- --------------- -----------
Net cash generated from operating activities 2,748 4,379 6,724
------------------------------------------------ --------------- --------------- -----------
Investing activities
Proceeds generated on disposal of property, - - -
plant and equipment
Purchases of property, plant and equipment (913) (198) (394)
Receipt from investment in lease 93 - 185
------------------------------------------------ --------------- --------------- -----------
Net cash used in investing activities (820) (198) (209)
------------------------------------------------ --------------- --------------- -----------
Financing activities
Bank revolving-credit facility repaid (2,000) (1,000) (2,000)
Revolving-credit facility utilised - - 1,000
Secured loans (repaid)/utilised (437) 781 (657)
Issue of shares - SAYE scheme - - 3
Repayment of lease liabilities (268) (167) (604)
------------------------------------------------ --------------- --------------- -----------
Net cash used in financing activities (2,705) (386) (2,258)
------------------------------------------------ --------------- --------------- -----------
Net (decrease)/increase in cash and cash
equivalents (777) 3,795 4,257
Cash and cash equivalents at beginning
of period 5,735 1,478 1,478
------------------------------------------------ --------------- --------------- -----------
Cash and cash equivalents at end of period 4,958 5,273 5,735
------------------------------------------------ --------------- --------------- -----------
Cash and cash equivalents 4,958 5,273 5,735
Bank revolving-credit facility (1,000) (4,000) (3,000)
------------------------------------------------ --------------- --------------- -----------
3,958 1,273 2,735
------------------------------------------------ --------------- --------------- -----------
Notes to the Condensed Consolidated Financial Statements
for the half year ended 30 September 2021
1. GENERAL INFORMATION
Caffyns plc is a company domiciled in the United Kingdom. The
address of the registered office is Meads Road, Eastbourne, East
Sussex, BN20 7DR.
These condensed consolidated financial statements for the half
year to 30 September 2021 and similarly for the half year to 30
September 2020 are unaudited. They do not include all the
information required for full annual financial statements and
should be read in conjunction with the financial statements of the
Company for the year ended 31 March 2021.
The comparative financial information for the year ended 31
March 2021 in these condensed consolidated financial statements
does not constitute statutory accounts for that year. The statutory
accounts for 31 March 2021 have been delivered to the Registrar of
Companies. The auditor's report on those accounts was unqualified,
did not draw attention to any matters by way of emphasis, and did
not contain a statement under 498(2) or 498(3) of the Companies Act
2006.
These condensed consolidated financial statements have been
reviewed by the Company's auditor and a copy of their review report
is set out at the end of these statements.
These consolidated interim financial statements were approved by
the directors on 25 November 2021.
2. ACCOUNTING POLICIES
The annual financial statements of Caffyns plc are prepared in
accordance with UK adopted International Accounting Standards . The
set of condensed consolidated financial statements included in this
half yearly financial report has been prepared in accordance with
UK adopted International Accounting Standard 34 'Interim Financial
Reporting'. As required by the disclosure guidance and transparency
rules of the Financial Conduct Authority, this set of condensed
consolidated financial statements has been prepared in accordance
with the accounting policies set out in the Annual Report for the
year ended 31 March 2021 .
Segmental reporting
Based upon the management information reported to the Group's
chief operating decision maker, the Chief Executive, in the opinion
of the directors, the Group only has one reportable segment. There
are no major customers amounting to 10% or more of the Group's
revenue. All revenue and non-current assets derive from, or are
based in, the United Kingdom.
Basis of preparation: Going concern
These condensed consolidated financial statements have been
prepared on a going concern basis which the directors consider
appropriate for the reasons set out below.
The directors have considered the going concern basis and have
undertaken a detailed review of trading and cash flow forecasts for
a period in excess of one year from the date of approval of this
Interim Report. This has focused primarily on the achievement of
the Company's banking covenants. These comprise two covenant tests,
the first of which requires the Company's underlying profit before
interest for the rolling twelve-month period to the testing date to
exceed 200% of interest paid in that period on bank borrowings. The
second covenant test requires that the Company's bank borrowings at
the testing date remain below 70% of the open-market value of its
freehold properties that have been charged as security. Both bank
covenant tests were passed for the period under review.
The Company has modelled the period to the end of 2022,
including the biannual registration plate change months of March
and September 2022, and has concluded that there is headroom that
would allow for a significant reduction in expected new and used
units over this period. External market commentary provided by the
Society of Motor Manufacturers and Traders ("SMMT") indicate that
new car registrations for the final quarter of the calendar year to
31 December 2021 are forecast to be 345,000, some 11% lower than
the same three-month period to December 2020, but thereafter with
an 18% increase in new car registrations being forecast for the
2022 calendar year. The Company's current new car forward-order
book for delivery in December and beyond is significantly ahead of
this time last year. T he used car market has remained stable over
the past four years, has been growing strongly in 2021 and is
expected to remain healthy in 2022 .
The directors have also considered the Company's working capital
requirements. The Company meets its day-to-day working capital
requirements through short-term stocking loans, bank overdrafts,
medium-term revolving credit facilities and term loans. At the
period end, the medium-term banking facilities included a term loan
with an outstanding balance of GBP6.4 million and a revolving
credit facility of GBP7.5 million from HSBC, its primary bankers,
with both facilities being renewable in March 2023. HSBC also make
available a short-term overdraft facility of GBP3.5 million, which
is due for its next annual renewal in August 2022. The Company also
has a ten-year term loan from VW Bank with a balance outstanding at
30 September 2021 of GBP1.3 million which is repayable to November
2023, and a short-term overdraft facility of GBP4.0 million, which
is renewable annually with the next scheduled renewal in August
2022. In the opinion of the directors, there is a reasonable
expectation that all facilities will be renewed at their scheduled
expiry dates. The failure of a covenant test would render these
facilities repayable on demand at the option of the lender.
The directors have a reasonable expectation that the Company has
adequate resources and headroom against the covenant test to be
able to continue in operational existence for the foreseeable
future and for at least twelve months from the date of approval of
this Interim Report. For those reasons, they continue to adopt the
going concern basis in preparing these condensed consolidated
financial statements .
Non-underlying items
Non-underlying items are those items that are unusual because of
their size, nature or incidence. Management considers that these
items should be disclosed separately to enable a full understanding
of the operating results. Profits and losses on disposal of
property, plant and equipment and property impairment charges are
disclosed as non-underlying, as are certain redundancy costs and
costs attributable to vacant properties held pending their
disposal.
The net financing return and service cost on pension obligations
in respect of the defined benefit pension scheme is presented as a
non-underlying item due to the inability of management to influence
the underlying assumptions from which the charge is derived. The
defined benefit pension scheme is closed to future accrual.
All other activities are treated as underlying.
3. OTHER INCOME (NET)
Unaudited Unaudited Audited
half year half year year to
to to 31 March
30 September 30 September 2021
2021 2020 GBP'000
GBP'000 GBP'000
Rent receivable 205 361 710
Local Government covid-19 support
grants 54 - 202
Loss on disposal of tangible fixed
assets - (1) (3)
------------------------------------ -------------- -------------- ----------
Total other income 259 360 909
------------------------------------ -------------- -------------- ----------
4. NON-UNDERLYING ITEMS
Unaudited Unaudited Audited
half year half year year to
to to 31 March
30 September 30 September 2021
2021 2020
GBP'000 GBP'000 GBP'000
Other income:
Net loss on disposal of property,
plant and equipment - 1 3
---------------------------------------- -------------- -------------- ----------
Within operating expenses:
Service cost on pension scheme 16 12 23
Redundancy and restructuring costs - 6 40
Property impairments - - 184
--------------------------------------- -------------- -------------- ----------
16 18 247
---------------------------------------- -------------- -------------- ----------
Total non-underlying items within
operating profit 16 19 250
---------------------------------------- -------------- -------------- ----------
Net finance expense on pension scheme 85 101 202
---------------------------------------- -------------- -------------- ----------
Total non-underlying items within
profit before taxation 101 120 452
---------------------------------------- -------------- -------------- ----------
5. NET FINANCE EXPENSE
Unaudited Unaudited Audited
half year half year year to
to to 31 March
30 September 30 September 2021
2021 2020 GBP'000
GBP'000 GBP'000
Interest in lease interest receivable (5) - -
Interest payable on bank borrowings 156 227 367
Interest payable on inventory stocking
loans 306 367 681
Interest on lease liabilities 14 12 21
Financing costs amortised 63 53 125
Preference dividends 36 36 72
---------------------------------------- -------------- -------------- ----------
Finance expense 570 695 1,266
---------------------------------------- -------------- -------------- ----------
6. TAXATION
Unaudited Unaudited Audited
half year half year year to
to to 31 March
30 September 30 September 2021
2021 2020 GBP'000
GBP'000 GBP'000
Current UK corporation tax
Charge for the period 239 320 401
Reversal of impairment of Advanced - (302) -
Corporation Tax asset
Adjustments recognised in the period
for current tax of prior periods (40) - (33)
-------------------------------------- -------------- -------------- ----------
Total current tax charge 199 18 368
-------------------------------------- -------------- -------------- ----------
Deferred tax
Origination and reversal of timing
differences 211 (12) (381)
Adjustments recognised in the period
for deferred tax
of prior periods - (1) 27
-------------------------------------- -------------- -------------- ----------
Total deferred tax charge/(credit) 211 (13) (354)
-------------------------------------- -------------- -------------- ----------
Total tax charged in the Income
Statement 410 5 14
-------------------------------------- -------------- -------------- ----------
The tax charge arises as follows:
Unaudited Unaudited Audited
half year half year year to
to to 31 March
30 September 30 September 2021
2021 2020 GBP'000
GBP'000 GBP'000
On normal trading 429 27 100
Non-underlying items (19) (22) (86)
-------------------------------------- -------------- -------------- ----------
Total tax charge 410 5 14
-------------------------------------- -------------- -------------- ----------
Taxation of trading items for the half year has been provided at
the current rate of taxation of 20% (2020: 22%) expected to apply
to the full year. This effective rate is marginally higher than the
standard rate of corporation tax in force of 19% due to the effect
of items disallowable for tax purposes.
7. EARNINGS PER SHARE
The calculation of basic earnings per share is based on the
earnings attributable to ordinary shareholders divided by the
weighted average number of shares in issue during the period.
Treasury shares are treated as cancelled for the purposes of this
calculation.
The calculation of diluted earnings per share is based on the
basic earnings per share, adjusted to allow for the issue of shares
and the post-tax effect of dividends and/or interest, on the
assumed conversion of all dilutive options and other dilutive
potential ordinary shares .
Reconciliations of the earnings and the weighted average number
of shares used in the calculations are set out below.
Unaudited Unaudited Audited
half year half year year to
to to
30 September 30 September 31 March
2021 2020 2021
GBP'000 GBP'000 GBP'000
Basic
Profit after tax for the period 1,885 1,409 1,410
---------------------------------- ------------- ------------- ---------
Basic earnings per share 69.9p 52.3p 52.4p
---------------------------------- ------------- ------------- ---------
Diluted earnings per share 69.0p 52.3p 52.1p
---------------------------------- ------------- ------------- ---------
Underlying
Profit before tax 2,295 1,414 1,424
Adjustment: Non-underlying items
(note 4) 101 120 452
---------------------------------- ------------- ------------- ---------
Underlying profit for the period 2,396 1,534 1,876
Taxation on normal trading (note
6) (429) (27) (100)
---------------------------------- ------------- ------------- ---------
Underlying earnings 1,967 1,507 1,776
---------------------------------- ------------- ------------- ---------
Underlying basic earnings per
share 73.0p 55.9p 66.0p
---------------------------------- ------------- ------------- ---------
Underlying diluted earnings per
share 72.0p 55.9p 65.6p
---------------------------------- ------------- ------------- ---------
The number of fully paid ordinary shares in issue at the period
end was 2,879,298 (2020: 2,879,298). Excluding the shares held for
treasury, the weighted average shares in issue for the purposes of
the earnings per share calculation were 2,695,376 (2020:
2,694,790).
The shares granted under the Company's current SAYE scheme for
the period, and for the year ended 31 March 2021, are dilutive. The
weighted average number of shares in issue for the purposes of the
diluted earnings per share calculation were 2,733,587 (2020:
2,694,790). The shares granted under the Company's previous SAYE
scheme, in place for the comparative period, have not been treated
as dilutive as the market price of the Company's ordinary shares at
30 September 2020 of GBP2.70 was less than the option price of
GBP3.99.
The Directors consider that underlying earnings per share
figures provide a better measure of comparative performance.
8. DIVIDS
Ordinary shares of 50p each
An interim dividend of 7.5 pence per ordinary share has been
declared and will be paid to shareholders on 10 January 2022 to
those shareholders on the register at the close of business on 10
December 2021. The ordinary shares will be marked ex-dividend on 9
December 2021 . No interim dividend was declared in respect of the
half-year ended 30 September 2020 and no final dividend was
declared in respect of the year ended 31 March 2021.
Preference shares
Preference dividends were paid in October 2021. The next
preference dividends are payable in April 2022. The cost of the
preference dividends has been included within finance costs.
9. PROPERTY, PLANT AND EQUIPMENT AND RIGHT-OF-USE ASSETS
The following is a reconciliation of changes in the balances of
Property, plant and equipment and Right-of-use assets.
Property, plant and equipment:
Unaudited
half year
to
30 September
2021
GBP'000
Property, plant and equipment at
1 April 2021 37,624
Less: Depreciation charges (772)
Less: Net book value of disposals -
Add: Purchases 545
Add: Assets in the course of construction 663
--------------------------------------------- ---------------
Property plant and equipment at
30 September 2021 38,060
--------------------------------------------- ---------------
At 30 September 2021, assets in the course of construction
amounting to GBP295,000 had been invoiced but not settled.
Right-of-use assets:
Unaudited
half year
to
30 September
2021
GBP'000
Right-of-use assets at 1 April 2021 610
Less: Amortisation of right-of-use
assets (164)
Add: Purchases 104
--------------------------------------- ---------------
Right-of-use assets at 30 September
2021 550
--------------------------------------- ---------------
10. INVESTMENT PROPERTIES
The following is a reconciliation of changes in the balances of
Investment Properties.
Investment properties:
Unaudited
half year
to
30 September
2021
GBP'000
Investment properties at 1 April
2021 7,751
Less: Depreciation charges (48)
------------------------------------ ---------------
Property plant and equipment at
30 September 2021 7,703
------------------------------------ ---------------
11. LOANS AND BORROWINGS
Liabilities
Revolving arising Bank
Bank credit Lease Preference from and cash Net
loans facilities liabilities shares financing balances debt
GBP'000 GBP'000 GBP'000 GBP'000 activities GBP'000 GBP'000
GBP'000
At 1 April 2021
(audited) 8,062 8,000 1,278 812 18,152 (5,735) 12,417
Cash movement (437) (2,000) (268) - (2,705) 777 (1,928)
Other movements - - 119 - 119 - 119
---------------------- ---------- ------------- ------------- ------------- ------------ ----------- ----------
At 30 September
2021 7,625 6,000 1,129 812 15,566 (4,958) 10,608
(unaudited)
---------------------- ---------- ------------- ------------- ------------- ------------ ----------- ----------
Current
liabilities/(assets) 875 1,000 434 - 2,309 (4,958) (2,649)
Non-current
liabilities 6,750 5,000 695 812 13,257 - 13,257
---------------------- ---------- ------------- ------------- ------------- ------------ ----------- ----------
At 30 September
2021 7,625 6,000 1,129 812 15,566 (4,958) 10,608
---------------------- ---------- ------------- ------------- ------------- ------------ ----------- ----------
12. PENSIONS
The pension scheme deficit reflects a defined benefit obligation
that has been updated to reflect its valuation as at 30 September
2021. This has been calculated by a qualified actuary using a
consistent valuation method to that which was adopted in the
audited financial statements for the year ended 31 March 2021 and
in the period to 30 September 2020, and which complies with the
accounting requirements of IAS 19 Pensions (revised).
The net liability for defined benefit obligations has decreased
from GBP9,434,000 at 31 March 2021 to GBP4,920,000 at 30 September
2021. The reduction of GBP4,514,000 comprises the net charge to the
Condensed Consolidated Statement of Financial Performance of
GBP101,000, a net remeasurement surplus credited to the Condensed
Consolidated Statement of Comprehensive Income of GBP3,224,000 and
contributions of GBP1,391,000.
Asset values increased significantly in the period, by
GBP5,763,000, despite divestments to pay pension transfers and
benefits in the period of GBP1,981,000. Despite these transfers and
pensions that were paid in the period, pension liabilities also
increased by GBP1,249,000, as a result of an increase in the CPI
inflation assumption rate from 2.75% at 31 March 2021 to 3.00% at
30 September 2021. The discount rate applied to discount the
scheme's liabilities to their net present value remained unchanged
at 30 September 2021, at 1.95%.
13. RISKS AND UNCERTAINTIES
There are a number of potential risks and uncertainties which
could have a material impact on the Group's performance over the
remaining six months of the financial year and could cause actual
results to differ materially from expected and historical results.
The Board believes these risks and uncertainties to be consistent
with those disclosed in our latest Annual Report, including the
ongoing covid-19 pandemic and general economic factors, their
impact on the Group's defined benefit pension scheme, liquidity and
financing, the Group's dependency on its manufacturers and their
stability, used car prices and regulatory compliance.
14. CAPITAL COMMITMENTS
At 30 September 2021, the Company had capital commitments of
GBP0.9 million (2020: GBPNil) relating to the redevelopment of one
dealership's premises.
15. CONTINGENT LIABILITIES
Since 2015, the Company has been named as co-defendant in a
number of legal actions that have been initiated against certain of
the vehicle manufacturers which it represents. These actions
contend that customers have been unfairly treated as a result of
their vehicles having been fitted with software which is suggested
by the claimant law firms to have operated such that when the
vehicles were experiencing test conditions, the emission levels of
nitrogen oxides ("NOx") were affected. The vehicles remain safe and
roadworthy.
These claims on behalf of multiple claimants, arising out of or
in relation to their purchase or acquisition on finance of a
vehicle affected by the NOx issue, have been brought against a
number of Jaguar Land Rover, Vauxhall, Volkswagen and Audi group
entities and dealers, including the Company. The Company has been
named as a defendant on a number of claim forms alleging fraudulent
misrepresentation, breach of contract, breach of statutory duty,
breach of the Consumer Credit Act 1974 and a breach of the Consumer
Protection from Unfair Trading Regulations 2008, although not all
of these causes of action are being brought against the Company
specifically.
In all cases brought to date, the relevant vehicle manufacturers
listed above have agreed to indemnify the Company for the
reasonable legal costs of defending the litigation and any damages
and adverse legal costs that Caffyns may be liable to pay to the
claimants as a result of these legal actions. The possibility,
therefore, of an economic cost to the Company resulting from the
defence of these legal actions is remote.
At present, no timetable can be determined for the resolution of
these cases and the relevant issues of liability, loss and
causation have not yet been decided. It is therefore too early to
assess reliably the merit of any claim and so we cannot confirm
that any future outflow of resources is probable.
Accordingly, no provision for liability has been made in these
condensed consolidated financial statements.
16. RESPONSIBILTY STATEMENT
We confirm that to the best of our knowledge:
a) these condensed consolidated financial statements have been
prepared in accordance with IAS 34 'Interim Financial
Reporting';
b) these condensed consolidated financial statements include a
fair review of the information required by DTR 4.2.7R of the
disclosure guidance and transparency rules (indication of important
events during the first six months and their impact on the set of
financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year); and
c) the Half Year Report includes a fair review of the
information required by DTR 4.2.8R of the disclosure and guidance
transparency rules (disclosure of related parties' transactions and
changes therein).
By order of the Board
S G M Caffyn
Chief Executive
M Warren
Finance Director
25 November 2021
INDEPENT REVIEW REPORT
to Caffyns plc
Introduction
We have been engaged by the Company to review the condensed
consolidated set of financial statements in the half year report
for the six months ended 30 September 2021 which comprises the
Condensed Consolidated Statement of Financial Performance, the
Condensed Consolidated Statement of Comprehensive Expense, the
Condensed Consolidated Statement of Financial Position, the
Condensed Consolidated Statement of Consolidated Changes in Equity,
the Condensed Consolidated Cash Flow Statement and the notes to the
set of financial information.
We have read the other information contained in the half year
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed consolidated set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and
has been approved by the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
group will be prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this interim financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed consolidated set of financial statements in the half
year report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed consolidated set of
financial statements in the half-yearly report for the six months
ended 30 September 2021 is not prepared, in all material respects,
in accordance with UK adopted International Accounting Standard 34
and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting its responsibilities in
respect of half-yearly financial reporting in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
Southampton
25 November 2021
BDO LLP is a limited liability partnership registered in England
and Wales
(with registered number OC305127).
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IR KZMZMKKLGMZM
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