TIDMCFYN
RNS Number : 4010X
Caffyns PLC
24 November 2017
HALF YEAR REPORT
for the half year ended 30 September 2017
Summary
6 months 6 months
to to
30 September 30 September
2017 2016
GBP'000 GBP'000
Revenue 106,504 105,188
Underlying EBITDA 1,817 2,068
Underlying profit
before tax 743 1,012
Discontinued operations
profit from business
disposal before deferred
tax expense - 4,684
Profit before tax
(including discontinued
businesses) 682 5,492
Pence Pence
Underlying basic earnings
per share 20.8 30.2
Basic earnings per
share (including discontinued
businesses) 19.1 164.3
Interim dividend per
ordinary share 7.50 7.50
Note: Underlying results exclude items that have non-trading
attributes due to their size, nature or incidence. Following a
business disposal that occurred in April 2016, the 2016 results
have been presented between continuing and discontinued operations.
Underlying EBITDA of GBP1,817,000 (2016: GBP2,068,000) represents
Operating profit before non-underlying items of GBP1,203,000 (2016:
GBP1,479,000) and Depreciation and amortisation of GBP614,000
(2016: GBP589,000).
Financial and operational review
-- Underlying profit before tax of GBP0.74 million (2016: GBP1.01 million)
-- Profit before tax of GBP0.68 million compared to the prior
year profit of GBP5.49 million which included a GBP4.68 million
gain from a business disposal
-- Like-for-like new car unit sales down by 7.4% compared to an
11.7% fall in national retail and small business market segment
registrations
-- Like-for-like used car unit sales up by 4.6%
-- Adjusted basic earnings per share of 20.8 pence (2016: 30.2 pence)
-- Basic earnings per share of 19.1 pence (2016: 164.3 pence)
-- Net bank borrowings higher at GBP10.3 million (2016: GBP5.39 million)
-- Interim dividend declared unchanged at 7.50 pence (2016: 7.50 pence)
Simon Caffyn, Chief Executive, commented:
"In a challenging trading environment, we have generated an
underlying profit before tax of GBP0.74 million and finished the
period with a stronger than anticipated September performance. It
is encouraging for the second half that our manufacturer new car
sales targets have been adjusted to take into account the reduced
national new car market, providing an increased bonus
potential."
Enquiries:
Simon Caffyn, Chief
Caffyns plc Executive Tel: 01323 730201
Mike Warren, Finance
Director
Headland Francesca Tuckett Tel: 020 3805 4822
INTERIM MANAGEMENT REPORT
Summary
Revenue from continuing operations increased by 1.3% to GBP106.5
million (2016: GBP105.2 million). Turnover from new cars was
unchanged from the previous year with a reduction in volume being
fully mitigated by an increase in average transaction values.
Turnover from used cars and aftersales increased by 2.7% and 3.3%
respectively.
The Company operated in a challenging environment in the six
months to 30 September 2017:
-- Increases in rates of vehicle excise duty were amended from 1
April 2017 which caused some customers to accelerate the timing of
their purchases from April 2017 into March 2017. Whilst this
benefitted our previous financial year, it resulted in a very slow
start to this current financial year with a consequent negative
impact on profitability. Looking across a period of the first nine
months of the calendar year, turnover and underlying profit before
tax increased by 6.2% and 9.8% respectively against the comparative
nine-month period in 2016;
-- The Government's re-rating of commercial properties was
implemented in April 2017 which resulted in an annualised increase
in the cost of business property rates to the Company of some
GBP0.25 million; and
-- The national backdrop of a declining new car market which
showed a year-on-year increase of 6.3% in the first quarter of the
calendar year but then fell to a 9.6% decrease over the following
two quarters.
Despite these significant challenges we have generated an
underlying profit before tax of GBP0.74 million (2016: GBP1.01
million) and finished the period with a strong September
performance. A key element of our profitability is the bonuses we
receive from manufacturers for achieving new car sales targets and
it is encouraging for our second half that these targets have been
adjusted to take account of the expected reduced national new car
market.
Underlying basic earnings per share were 20.8 pence (2016: 30.2
pence).
Profit before tax for the period was GBP0.68 million with basic
earnings per share of 19.1 pence (2016: 164.3 pence). The profit
for the previous financial period of GBP5.49 million included a
profit on disposal, net of costs and before tax, of GBP4.68 million
arising from the sale of our Land Rover business in Lewes in April
2016.
The Company continues to operate at low levels of gearing and
remains well placed to exploit future business opportunities
including the continued expansion of our used car business.
Operating review
New and used cars
New car unit sales were down by 7.4% on a like-for-like basis in
the half-year period, which outperformed the 11.7% fall in
registrations in the national retail and small business market
segment in which we principally operate. Used cars like-for-like
unit sales were up 4.6% on the comparative period as our investment
in this area of the business continues to yield useful returns.
This is an encouraging result in the light of recently released
national used car sales figures showing a 1.4% fall. Over a
three-year period, the Company has now recorded 30% like-for-like
growth in the number of used cars sold and we continue to see this
part of the business as providing an opportunity for future growth.
We have enhanced our website further to improve our customers'
online searching abilities which, in turn, makes for an easier,
more enjoyable car-buying experience.
Our performance in the bi-annual registration plate change month
of September was pleasing, producing a stronger than anticipated
trading performance and a 7% year-on-year growth in the number of
new cars sold, despite a 9% weakening in national national
registrations in that month.
Aftersales
The number of one to three-year old cars in circulation
continues to increase. Historically strong sales of both new and
used cars has meant our three-year car parc has also grown. It was
encouraging to see like-for-like service revenues grow by 4.7% as
we continued to realise improvements to our customer retention
processes. Our parts business also reported sales growth, up by
1.7% on a like-for-like basis from the comparative period.
Operations
Our Audi businesses have continued to perform well. The planned
relocation of our dealership in Worthing to a new, and
significantly larger, site in the summer of 2018 will ensure that
this business can better fulfil its potential.
The performance of our Volkswagen division in the period has
been disappointing with new and used car sales declining by 7% and
3% respectively from last year's levels. However, we are encouraged
for our second half that our manufacturer new car sales targets
have been reduced and tactical bonus opportunities improved. We
remain confident that the strength of the brand, the excellent
model range and exciting new products will lead to improvements in
its future trading performance.
Our Volvo business in Eastbourne is in a period of transition as
we look to further develop our site and the manufacturer continues
to launch new models. These have been positively received by
customers and we are confident this will be reflected in the
profitability of the business.
Our SEAT business in Tunbridge Wells, together with the adjacent
Skoda business, has delivered healthy levels of profitability.
Our used car business in Ashford continues to expand with
significant increases in like-for-like sales volumes being achieved
in the first six months of this financial year. The concept has
been very well received by our customers who particularly value the
link to the Caffyns brand. The business has traded profitably since
its inception in October 2014 and we have now started a further
significant expansion of this operation. During the period, the
Company utilised cash balances of GBP2.0 million, primarily as a
result of the purchase of a freehold property and from short-term
movements in working capital balances at the period end.
Property
Capital expenditure in the half year was GBP1.04 million (2016:
GBP1.43 million) of which GBP0.87 million was incurred on the
purchase in August 2017 of a freehold industrial unit in Eastbourne
to facilitate the expansion of Volvo Eastbourne.
In September 2017, we commenced construction of a new Audi site
in Angmering which will allow for the relocation of Audi Worthing.
We anticipate that this development will be completed by June
2018.
In Ashford, we have submitted a planning application to fully
utilise the additional land acquired adjacent to our existing Skoda
and Vauxhall operations. This investment will almost double our
local footprint and will enable us to further grow the exciting
used car concept as well as our franchised operations at the
site.
The Government implemented its rating revaluation for all
commercial property on 1 April 2017. Although nationally this was
not targeted to raise additional revenues, the increases have
fallen disproportionately on the South-East region in which we
operate, where property values have increased the most over the
previous seven years since the last valuation exercise was
undertaken. As a result, our annualised cost of business property
rates has risen by almost GBP0.25 million to GBP1.06 million.
Pensions
The unprecedented low yields of gilts and bonds continues to
have a significant impact on the net funding position of the
Company's defined-benefit pension, in line with most similar
schemes, although it was pleasing to note an increase in the
discount rate in the period. The scheme's investments performed
well and the combination of these two factors helped the deficit at
the period-end narrow to GBP5.03 million net of tax (GBP6.06
million gross of tax). This compared with a deficit of GBP7.10
million net of tax at 31 March 2017 (GBP8.55 million gross of tax)
and a deficit of GBP11.58 million net of tax at 30 September 2016
(GBP13.95 million gross of tax).
The scheme's recovery plan, which was agreed with the trustees
following the actuarial valuation in March 2014, resulted in a
total cash payment of GBP0.16 million being made in the first six
months of this financial year. Under the terms of the recovery
plan, it has been agreed that this payment will increase in future
financial years by 2.25% per annum.
People
I am very grateful for the dedication and professionalism shown
by our employees. The marketplace in which we have operated in the
first half of the financial year has been very challenging and
their hard work and professional application has been instrumental
in achieving growth in both our used car sales and aftersales
businesses and, whilst our new car sales are reduced, in again
outperforming our target sales market.
Dividend
Despite the reduction in profitability experienced in this
six-month period, the Board remains confident in the longer-term
prospects of the Company and has therefore declared an unchanged
interim dividend of 7.50 pence per ordinary share. This will be
paid on 8 January 2018 to shareholders on the register at close of
business on 18 December 2017. The ordinary shares will be marked
ex-dividend on 17 December 2017.
Strategy
The Company's continued low gearing levels provides us with the
flexibility to expand upon our recent successes in used car sales,
opportunities to invest in additional freehold premises and assess
further opportunities for organic growth.
Current trading and outlook
Our performance in the bi-annual registration plate change month
of September was stronger than anticipated. The importance to the
Company's full year result of a continued recovery in the financial
performance of the Volkswagen division, as well as a successful
next bi-annual registration plate change month in March 2018 means
that the Board remains cautious for the second half of the year.
Other factors prompting caution include the consensus for an
overall smaller new car market in 2017, the wider challenge to the
economy from the weakness in sterling, likely further increases in
interest base rates and the uncertainty surrounding the Brexit
process. However, it is encouraging for our second half that our
manufacturer new car sales targets have been adjusted to take into
account the reduced national new car market, providing an increased
bonus potential.
Simon G M Caffyn
Chief Executive
23 November 2017
Condensed Consolidated Statement of Financial Performance
for the half year ended 30 September 2017
Unaudited Unaudited Audited
Half year Half year Year ended
N to 30 to 30 31 March
o September September 2017
t 2017 2016 Total
e Total Total
GBP'000 GBP'000 GBP'000
Continuing operations:
Revenue 106,504 105,188 212,581
Cost of sales (94,157) (93,099) (187,971)
-------------------------------------- ---- ----------- ----------- ------------
Gross profit 12,347 12,089 24,610
Operating expenses (11,396) (10,918) (22,400)
-------------------------------------- ---- ----------- ----------- ------------
Operating profit before
other income 951 1,171 2,210
Other income (net) 293 246 541
-------------------------------------- ---- ----------- ----------- ------------
Operating profit 1,244 1,417 2,751
Operating profit before
non-underlying items 1,203 1,479 2,981
Non-underlying items within
operating profit 3 41 (62) (230)
-------------------------------------- ---- ----------- ----------- ------------
Operating profit 1,244 1,417 2,751
Finance expense 4 (460) (467) (930)
Non-underlying net finance
expense on pension scheme 3 (102) (81) (162)
-------------------------------------- ---- ----------- ----------- ------------
Net finance expense (562) (548) (1,092)
-------------------------------------- ---- ----------- ----------- ------------
Profit before taxation 682 869 1,659
Profit before tax and non-underlying
items 743 1,012 2,051
Non-underlying items within
operating profit 3 41 (62) (230)
Non-underlying net finance
expense on pension scheme 3 (102) (81) (162)
-------------------------------------- ---- ----------- ----------- ------------
Profit before taxation 682 869 1,659
Taxation 5 (167) (148) (375)
-------------------------------------- ---- ----------- ----------- ------------
Profit for the period from
continuing operations 515 721 1,284
-------------------------------------- ---- ----------- ----------- ------------
Discontinued operations:
Profit on disposal of discontinued
operations net of deferred
tax 9 - 3,888 3,888
Loss after tax attributed
to discontinued operations 9 - (51) (49)
-------------------------------------- ---- ----------- ----------- ------------
Profit for the period from
discontinued operations - 3,837 3,839
-------------------------------------- ---- ----------- ----------- ------------
Profit for the period 515 4,558 5,123
-------------------------------------- ---- ----------- ----------- ------------
Earnings per share
Basic 6 19.1p 164.3p 186.3p
Diluted 6 19.0p 164.2p 186.3p
Non GAAP measure
Underlying basic earnings
per share 6 20.8p 30.2p 58.0p
Underlying diluted earnings
per share 6 20.7p 30.2p 58.0p
Condensed Consolidated Statement of Comprehensive Income
for the half year ended 30 September 2017
Unaudited Unaudited Audited
Half year to Half year Year to
30 to 30 31
September 2017 September March
2016 2017
GBP'000 GBP'000 GBP'000
Profit for the period 515 4,558 5,123
--------------------------------------- --------------- ----------- ---------
Items that will never
be reclassified to profit
and loss:
Remeasurement of net pension
scheme obligation 2,436 (9,055) (3,725)
Deferred tax on remeasurement
of pension scheme obligation (414) 1,539 633
--------------------------------------- --------------- ----------- ---------
Other comprehensive income/(expense),
net of tax 2,022 (7,516) (3,092)
--------------------------------------- --------------- ----------- ---------
Total comprehensive income/(expense)
for the period 2,537 (2,958) 2,031
--------------------------------------- --------------- ----------- ---------
Condensed Consolidated Statement of Financial Position
at 30 September 2017
Note Unaudited Unaudited Audited
30 September 30 September 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
Non-current assets
Property, plant and
equipment 36,090 32,974 35,623
Investment property 6,939 7,032 6,986
Goodwill 286 286 286
Deferred tax asset - 41 -
----------------------------- ----- -------------- -------------- ----------
Total non-current
assets 43,315 40,333 42,895
----------------------------- ----- -------------- -------------- ----------
Current assets
Inventories 28,981 27,425 29,904
Trade and other receivables 8,456 8,048 7,838
Cash and cash equivalents 305 6,231 2,321
----------------------------- ----- -------------- -------------- ----------
Total current assets 37,742 41,704 40,063
----------------------------- ----- -------------- -------------- ----------
Total assets 81,057 82,037 82,958
Current liabilities
Bank overdraft - 500 -
Interest-bearing
loans and borrowings 500 500 500
Trade and other payables 32,522 31,931 34,179
Tax liabilities 113 469 197
----------------------------- ----- -------------- -------------- ----------
Total current liabilities 33,135 33,400 34,876
----------------------------- ----- -------------- -------------- ----------
Net current assets 4,607 8,304 5,187
Non-current liabilities
Interest-bearing
loans and borrowings 10,125 10,625 10,375
Preference shares 812 812 812
Deferred tax liability 1,248 - 805
Pension scheme obligation 8 6,063 13,953 8,554
----------------------------- ----- -------------- -------------- ----------
Total non-current
liabilities 18,248 25,390 20,546
----------------------------- ----- -------------- -------------- ----------
Total liabilities 51,383 58,790 55,422
----------------------------- ----- -------------- -------------- ----------
Net assets 29,674 23,247 27,536
----------------------------- ----- -------------- -------------- ----------
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
Other reserve 5 - -
Retained earnings 25,527 19,105 23,394
----------------------------- ----- -------------- -------------- ----------
Total equity 29,674 23,247 27,536
----------------------------- ----- -------------- -------------- ----------
Consolidated Statement of Changes in Equity
for the half year ended 30 September 2017
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 2017 1,439 272 707 1,724 23,394 27,536
------------------------ ---------- ---------- ------------ ------------------ ----------- ----------
Total comprehensive
income
Profit for the period - - - - 515 515
Other comprehensive
expense - - - - 2,022 2,022
------------------------ ---------- ---------- ------------ ------------------ ----------- ----------
Total comprehensive
expense for
the period - - - - 2,537 2,537
Transactions with
owners:
Dividends - - - - (404) (404)
Share-based payment - - - - 5 5
At 30 September
2017 (unaudited) 1,439 272 707 1,724 25,532 29,674
------------------------ ---------- ---------- ------------ ------------------ ----------- ----------
for the half year ended 30 September 2016
Capital
Share Share redemption Non-distributable Other Retained Total
capital premium reserve reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 2016 1,439 272 707 1,724 132 22,422 26,696
---------------------- ---------- ---------- ------------ ------------------ --------- ----------- ----------
Total comprehensive
income
Profit for the
period - - - - - 4,558 4,558
Other comprehensive
expense - - - - - (7,516) (7,516)
---------------------- ---------- ---------- ------------ ------------------ --------- ----------- ----------
Total comprehensive
income for
the period - - - - - (2,958) (2,958)
Dividends - - - - - (401) (401)
Purchase of own
shares for treasury - - - - - (383) (383)
Issue of shares
- SAYE scheme - - - - - 272 272
Share-based payment - - - - 21 - 21
Transfer - SAYE
scheme (2013) - - - - (153) 153 -
At 30 September
2016 (unaudited) 1,439 272 707 1,724 - 19,105 23,247
---------------------- ---------- ---------- ------------ ------------------ --------- ----------- ----------
for the year ended 31 March 2017
Capital
Share Share redemption Non-distributable Other Retained Total
capital premium reserve reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 2016 1,439 272 707 1,724 132 22,422 26,696
---------------------- ---------- ---------- ------------ ------------------ --------- ----------- ----------
Total comprehensive
income
Profit for the year - - - - - 5,123 5,123
Other comprehensive
income - - - - - (3,092) (3,092)
---------------------- ---------- ---------- ------------ ------------------ --------- ----------- ----------
Total comprehensive
income for the year - - - - - 2,031 2,031
Transactions with
owners:
Dividends - - - - - (603) (603)
Purchase of own
shares
for treasury - - - - - (919) (919)
Issue of shares -
SAYE scheme - - - - - 310 310
Share-based payment - - - - 21 - 21
Transfer - SAYE
scheme - - - - (153) 153 -
--------------------- ---------- ---------- ------------ ------------------ --------- ----------- ----------
At 31 March 2017
(audited) 1,439 272 707 1,724 - 23,394 27,536
---------------------- ---------- ---------- ------------ ------------------ --------- ----------- ----------
Condensed Consolidated Cash Flow Statement
for the half year ended 30 September 2017
Unaudited Unaudited Audited
Half year Half year Year to
to to 31 March
30 September 30 September 2017
2017 2016 GBP'000
GBP'000 GBP'000
Cash flows from operating activities
Profit before taxation from continuing
operations 682 869 1,659
Adjustments for:
Net finance expense and pension
scheme service cost 578 570 1,092
Depreciation and amortisation 614 589 1,196
Contribution to pension scheme
obligation (172) (182) (350)
Loss on disposal of property,
plant and equipment 4 - 1
Share-based payments 5 21 21
Loss generated from discontinued
operations before tax - (61) (61)
Decrease in inventories 923 3,579 1,100
(Increase)/decrease in trade
and other receivables (618) 401 611
Decrease in payables (1,657) (4,321) (2,034)
---------------------------------------- --------------- --------------- -----------
Cash generated from operations 359 1,465 3,235
Income taxes (222) - (557)
Interest paid (460) (470) (935)
---------------------------------------- --------------- --------------- -----------
Net cash (used in)/generated
from operating activities (323) 995 1,743
---------------------------------------- --------------- --------------- -----------
Investing activities
Proceeds generated on sale of
Land Rover business, net of costs - 6,707 6,707
Purchases of property, plant
and equipment (1,039) (1,428) (4,636)
---------------------------------------- --------------- --------------- -----------
Net cash (used in)/generated
from investing activities (1,039) 5,279 2,071
---------------------------------------- --------------- --------------- -----------
Financing activities
Secured loans repaid (250) (250) (500)
Purchase of own shares for treasury - (383) (919)
Issue of shares - SAYE scheme - 272 310
Dividends paid to shareholders (404) (401) (603)
---------------------------------------- --------------- --------------- -----------
Net cash used in financing activities (654) (762) (1,712)
---------------------------------------- --------------- --------------- -----------
Net (decrease)/increase in cash
and cash equivalents (2,016) 5,512 2,102
Cash and cash equivalents at
beginning of period 2,321 219 219
---------------------------------------- --------------- --------------- -----------
Cash and cash equivalents at
end of period 305 5,731 2,321
---------------------------------------- --------------- --------------- -----------
Cash and cash equivalents 305 6,231 2,321
Bank overdraft - (500) -
---------------------------------------- --------------- --------------- -----------
Net cash and cash equivalents 305 5,731 2,321
---------------------------------------- --------------- --------------- -----------
Notes to the Set of Financial Information
for the half year ended 30 September 2017
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 unaudited condensed consolidated interim financial
statements for the half year to 30 September 2017 and similarly for
the half year to 30 September 2016 are unaudited. They do not
include all the information required for full annual financial
statements and should be read in conjunction with the consolidated
financial statements of the Group for the year ended 31 March
2017.
The figures for the year ended 31 March 2017 have been extracted
from the statutory accounts, filed with the Registrar of Companies
on which the auditor gave an unqualified opinion and did not
contain statements under section 498(2) or (3) of the Companies Act
2006.
These 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 23 November 2017.
2. ACCOUNTING POLICIES
The annual financial statements of Caffyns plc are prepared in
accordance with IFRSs as adopted by the European Union. The set of
financial statements included in this half yearly financial report
has been prepared in accordance with International Accounting
Standard 34 'Interim Financial Reporting' as adopted by the
European Union. This interim financial report has been prepared
under the historical cost convention as modified by the fair value
accounting of defined benefit schemes and share-based payment
transactions. As required by the Disclosure and Transparency Rules
of the Financial Conduct Authority, this set of financial
statements has been prepared in accordance with the accounting
policies set out in the Annual Report for the year ended 31 March
2017.
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
The condensed financial statements have been prepared on a going
concern basis which the directors consider appropriate for the
reasons set out below:
The Group meets its day to day working capital requirements
through short-term stocking loans and bank overdraft and
medium-term revolving-credit facilities. The overdraft and
revolving-credit facilities include certain covenant tests. The
failure of a covenant test would render these facilities repayable
on demand at the option of the lenders.
The directors have undertaken a detailed review of trading and
cash flow forecasts for a period in excess of one year from the
date of this Half Year Report which projects that the facility
limits are not exceeded over the duration of the forecasts. These
forecasts have made assumptions in respect of future trading
conditions, particularly volumes and margins of new and used car
sales, aftersales and operational improvements together with the
timing of capital expenditure. The forecasts take into account
these factors to an extent which the directors consider to be
reasonable, based on the information that is available to them at
the time of approval of this financial information. These forecasts
indicate that the Group will be able to operate within the
financing facilities that are available to it and meet the covenant
tests with sufficient margin for reasonable adverse movements in
expected trading conditions.
The directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. For those reasons, they continue to adopt the
going concern basis in preparing this Half Year Report.
Discontinued operations
A discontinued operation represents an individually significant
component of the Group that is either held for sale or has been
disposed of. The Statement of Financial Performance discloses the
results of a discontinued operation separately with comparative
information being restated where applicable. The assets and
liabilities are presented separately on the Statement of Financial
Position, although comparative information is not restated.
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 are also 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 volatility of this amount. The
defined benefit pension scheme is closed to future accrual.
All other activities are treated as underlying.
3. NON-UNDERLYING ITEMS
Half year Half year Year to
to to 31 March
30 September 30 September 2017
2017 2016
GBP'000 GBP'000 GBP'000
Other income:
Net loss on disposal of
property, plant and equipment (4) - (1)
------------------------------------ -------------- -------------- ----------
Within operating expenses:
Service cost on pension
scheme (15) (19) (37)
Redundancy costs - (43) (43)
Dilapidation provision
release/(charge) 60 - (149)
----------------------------------- -------------- -------------- ----------
45 (62) (229)
------------------------------------ -------------- -------------- ----------
Non-underlying items within
operating profit 41 (62) (230)
------------------------------------ -------------- -------------- ----------
Net finance expense on pension
scheme (102) (81) (162)
------------------------------------ -------------- -------------- ----------
Total non-underlying items
within profit before taxation (61) (143) (392)
------------------------------------ -------------- -------------- ----------
The following amounts have been presented as non-underlying
items in these financial statements:
There were no branch specific redundancy costs (2016:
GBP43,000).
The Company exercised a break clause of its lease for a site in
Tonbridge in June 2017. The Company negotiated a total cost for the
remedial work on this property of GBP80,000 with a further GBP9,000
incurred in associated professional fees in the period. The
remaining provision held was credited to operating expenses as a
non-underlying item.
4. FINANCE EXPENSE
Half year Half year Year to
to to 31 March
30 September 30 September 2017
2017 2016 GBP'000
GBP'000 GBP'000
Interest payable on bank
borrowings 95 119 190
Vehicle stocking plan interest 291 269 569
Financing costs amortised 38 43 99
Preference dividends 36 36 72
-------------------------------- -------------- -------------- ----------
Total finance costs 460 467 930
-------------------------------- -------------- -------------- ----------
5. TAXATION
Half year Half year Year to
to to 31 March
30 September 30 September 2017
2017 2016 GBP'000
GBP'000 GBP'000
Current UK corporation tax
Charge for the period (138) (53) (338)
Total current tax charge (138) (53) (338)
------------------------------------- -------------- -------------- ----------
Deferred tax
Origination and reversal
of timing differences (29) (979) (919)
Adjustments recognised in
the period due to change
in rate of corporation tax - 98 98
------------------------------------- -------------- -------------- ----------
Total deferred tax charge (29) (881) (821)
------------------------------------- -------------- -------------- ----------
Total tax charged in the
Statement of Financial Performance (167) (934) (1,159)
------------------------------------- -------------- -------------- ----------
The tax charge arises as
follows:
On normal trading (182) (173) (455)
Non-underlying items 15 25 80
------------------------------------- -------------- -------------- ----------
Continuing operations (167) (148) (375)
Discontinued operations - (786) (784)
------------------------------------- -------------- -------------- ----------
Total tax charge (167) (934) (1,159)
------------------------------------- -------------- -------------- ----------
Taxation of trading items for the half year has been provided at
the current rate of taxation of 19% (2016: 20%) expected to apply
to the full year. Tax on the disposal gain from discontinued
operations items in the prior year was provided at the
substantially enacted rate of 17%.
6. EARNINGS PER SHARE
The calculation of the 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.
Half year Half year Year to
to to
30 September 30 September 31 March
2017 2016 2017
GBP'000 GBP'000 GBP'000
Basic
Profit for the period 515 4,558 5,123
----------------------------- ------------- ------------- ---------
Basic earnings per share 19.1p 164.3p 186.3p
----------------------------- ------------- ------------- ---------
Diluted earnings per share 19.0p 164.2p 186.3p
----------------------------- ------------- ------------- ---------
Adjusted
Profit before tax 682 5,492 6,282
Profit before tax relating
to discontinued operations - (4,623) (4,623)
Adjustment: Non-underlying
items (note 3) 61 143 392
----------------------------- ------------- ------------- ---------
Underlying profit for the
period 743 1,012 2,051
Taxation on normal trading
(note 5) (182) (173) (455)
----------------------------- ------------- ------------- ---------
Underlying earnings 561 839 1,596
----------------------------- ------------- ------------- ---------
Underlying basic earnings
per share 20.8p 30.2p 58.0p
----------------------------- ------------- ------------- ---------
Diluted earnings per share 20.7p 30.2p 58.0p
----------------------------- ------------- ------------- ---------
The number of fully paid ordinary shares in issue at the period
end was 2,879,298 (2016: 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 2,694,790 (2016:
2,773,616). The shares granted under the Company's SAYE scheme are
dilutive. The number of dilutive shares under option at fair value
was 12,374 (2016: 2,011) giving a total diluted weighted average
number of shares of 2,707,164 (2016: 2,775,627).
The Directors consider that underlying earnings per share
figures provide a better measure of comparative performance.
7. DIVIDS
Ordinary shares of 50p each
The interim dividend proposed at the rate of 7.50 pence per
share (2016: 7.50 pence) is payable on 8 January 2018 to
shareholders on the register at the close of business on 8 December
2017. The shares will be marked ex-dividend on 7 December 2017.
Preference shares
Preference dividends were paid in October 2017. The next
preference dividends are payable in April 2018. The cost of the
preference dividends has been included within finance costs.
8. PENSIONS
The pension scheme deficit reflects a defined benefit obligation
that has been updated to reflect its valuation as at 30 September
2017. 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 2017 and
in the period to 30 September 2016, and which complies with the
accounting requirements of IAS 19 (revised).
The net liability for defined benefit obligations has decreased
from GBP8,554,000 at 31 March 2017 to GBP6,063,000 at 30 September
2017. The decrease of GBP2,491,000 comprises the net charge to the
Statement of Financial Performance of GBP117,000 and a net
remeasurement gain credited to the Statement of Comprehensive
Income of GBP2,436,000 and contributions of GBP172,000. Although
assets have decreased, the liabilities have decreased by a greater
amount as a result of an increase in the discount rate from 2.40%
at 31 March 2017 to 2.55% at 30 September 2017.
9. DISCONTINUED OPERATIONS
In the prior financial year, in April 2016, the Group sold the
business and assets (excluding the freehold property) of its Land
Rover business to Harwoods Limited ("Harwoods"). Cash consideration
of GBP7.5 million comprised GBP5.5 million for goodwill together
with GBP0.2 million for property, plant and equipment and GBP1.9
million for inventories less GBP0.1 million in respect of
liabilities transferred. The total consideration was received at
completion on 29 April 2016.
Ownership of the freehold property in Lewes from which Harwoods
will continue to operate the Land Rover business remains with the
Group, and is being leased to Harwoods for a four year period to 29
April 2020.
As a result of this transaction, the operating activities
attributed to that business have been disclosed as a discontinued
operation.
Half year Half year Year to
to to 31 March
30 September 30 September 2017
2017 2016 GBP'000
GBP'000 GBP'000
Revenue - 5,828 5,828
Cost of sales - (5,516) (5,516)
--------------------------------- --------------- -------------- ----------
Gross profit - 312 312
Operating expenses - (370) (370)
--------------------------------- --------------- -------------- ----------
Operating loss - (58) (58)
--------------------------------- --------------- -------------- ----------
Finance expense - (3) (3)
--------------------------------- --------------- -------------- ----------
Loss before taxation - (61) (61)
Income tax credit - 10 12
--------------------------------- --------------- -------------- ----------
Loss attributed to discontinued
operations - (51) (49)
Profit on sale of business
net of deferred tax - 3,888 3,888
--------------------------------- --------------- -------------- ----------
Profit for the period from
discontinued operations - 3,837 3,839
--------------------------------- --------------- -------------- ----------
The results of the business shown above represent its trading
from the start of the financial year until disposal on 29 April
2016.
Half year Half year Year to
to to 31 March
30 September 30 September 2017
2017 2016 GBP'000
GBP'000 GBP'000
Proceeds generated on sale
of business - 7,512 7,512
Sale of property, plant
and equipment - (218) (218)
Transfer of inventories - (1,921) (1,921)
Transfer of liabilities - 116 116
----------------------------------- --------------- -------------- ----------
- 5,489 5,489
Associated transaction costs:
Professional fees - (470) (470)
Adjustments arising on completion - (230) (230)
Provision for onerous costs - (105) (105)
----------------------------------- --------------- -------------- ----------
Net transaction costs - (805) (805)
----------------------------------- --------------- -------------- ----------
Net gain on sale of business - 4,684 4,684
----------------------------------- --------------- -------------- ----------
Deferred tax expense - (796) (796)
----------------------------------- --------------- -------------- ----------
Profit on sale of business
net of deferred tax - 3,888 3,888
----------------------------------- --------------- -------------- ----------
10. 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 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. Following the UK's decision to leave the EU,
a degree of uncertainty in the UK economy has been created and we
believe that the main risks to arise from this relate to consumer
confidence and the potential impact that Sterling/Euro exchange
rates may have on vehicle prices.
11. CONTINGENT LIABILITIES
In September 2015, Volkswagen Aktiengesellschaft announced that
certain diesel vehicles manufactured by Volkswagen, Skoda, SEAT and
Audi, which contain 1.2, 1.6 and 2.0 litre EA 189 diesel engines
were fitted with software which is thought to have operated such
that when the vehicles were experiencing test conditions, the
characteristics of nitrogen oxides ("NOx") were affected. The
vehicles remain safe and roadworthy.
Technical measures have been approved by the German type
approval authority, the Kraftfahrt-Bundesamt (the "KBA") in respect
of Volkswagen and Audi branded vehicles, by the UK type approval
authority, the Vehicle Certification Agency (the "VCA") in respect
of Skoda branded vehicles, and by the Ministerio de Industria,
Energía y Turismo (the "MDI") in respect of SEAT branded vehicles.
The KBA and VCA have confirmed for all affected vehicles that the
implementation of all technical measures does not adversely impact
fuel consumption figures, CO2 emissions figures, engine output,
maximum torque and noise emissions. The MDI is also content that
the technical measures be applied to those SEAT vehicles for which
they are the relevant approval authority.
We understand that to date in the region of 810,000 affected UK
vehicles have now had the technical measures applied.
Notwithstanding the above, claims on behalf of multiple
claimants, arising out of or in relation to their purchase or
ownership of a Volkswagen Group vehicle affected by the NOx issue,
have been brought or intimated against a number of Volkswagen
entities and dealers, including Caffyns. To date, one firm of
solicitors acting on behalf of sixteen claimants has threatened
legal action against Caffyns in respect of the NOx issue, claiming
breach of contract and a breach of the Consumer Protection from
Unfair Trading Regulations 2008. As litigation progresses further,
there is the potential for the number of claimants bringing claims
against Caffyns to increase.
A claim in respect of one of the sixteen claimants has been
issued protectively in the High Court (due to the limitation period
being close to expiry), served and stayed by consent pending the
determination of the Group Litigation Order ("GLO") application. On
28 October 2016, one of the claimant firms served its application
for a GLO. During a hearing in the High Court on 30 January 2017,
the Senior Master adjourned by consent the hearing of the
application for a GLO to 12 and 13 October 2017. The hearing was
further adjourned by consent to a date to be agreed at a directions
hearing scheduled for 27 November 2017. As at 23 November 2017 no
other claim form has been served on Caffyns in relation to the NOx
issue.
At present, litigation with the potential to coalesce into a
group civil claim in respect of the NOx issue is in its early
stages, and therefore at this stage it is too early to assess
reliably the merit of any such claim. Accordingly, no provision for
liability has been made in these financial statements.
Notwithstanding the early stage of the litigation, Volkswagen
has agreed to indemnify Caffyns 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
the litigation and the conduct of the Volkswagen Group. The
possibility, therefore, of an economic cost to Caffyns resulting
from the defence of the litigation is remote.
12. RESPONSIBILITY STATEMENT
We confirm to the best of our knowledge:
a) the Half Year Report has been prepared in accordance with
IAS34 'Interim Financial Reporting';
b) the Half Year Report includes a fair review of the
information required by DTR 4.2.7R of the Disclosure 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
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
23 November 2017
INDEPENDENT REVIEW REPORT
to Caffyns plc
Introduction
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report of
Caffyns plc for the six months ended 30 September 2017 which
comprises the Condensed Consolidated Statement of Financial
Performance, the Condensed Consolidated Statement of Comprehensive
Income, the Condensed Consolidated Statement of Financial Position,
the Consolidated Statement of Changes in Equity, the Condensed
Consolidated Cash Flow Statement and the related notes. We have
read the other information contained in the half yearly financial
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the company, 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 Auditing Practices
Board. Our review work has been undertaken so that we might state
to the company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company for our review work, for this
report, or for the conclusion we have formed.
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 and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
company are prepared in accordance with International Financial
Reporting Standards as adopted by the European Union. The condensed
set of financial statements included in this half-yearly financial
report has been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union.
Our responsibility
Our responsibility is to express a conclusion on the condensed
set of financial statements in the half-yearly financial 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 Auditing Practices Board 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 Ireland) 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 set of financial statements
in the half-yearly financial report for the six months ended 30
September 2017 is not prepared, in all material respects, in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the
Disclosure and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Crawley
23 November 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DMMZMVFNGNZM
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