TIDMCFYN
RNS Number : 9876M
Caffyns PLC
27 May 2022
Caffyns plc
Preliminary Results for the year ended 31 March 2022
Summary
2022 2021
GBP'000 GBP'000
-------------------------------------------- ---------- ----------
Revenue 223,928 165,085
Underlying EBITDA (see note A) 7,712 5,124
Underlying profit before tax (see note A) 4,574 1,876
Profit before tax 4,385 1,424
-------------------------------------------- ---------- ----------
pence pence
--------------------------------------------- ------- -------
Underlying earnings per share 117.0 66.0
Earnings per share 111.3 52.4
Proposed final dividend per ordinary share 15.0 -
Dividend per ordinary share for the year 22.5 -
--------------------------------------------- ------- -------
Note A: Underlying results exclude items that have non-trading
attributes due to their size, nature or incidence. Non-underlying
items for the year totalled a charge of GBP189,000 (2021:
GBP452,000) and are detailed in Note 2 to these consolidated
financial statements. Underlying EBITDA of GBP7,712,000 (2021:
GBP5,124,000) represents Operating profit before non-underlying
items of GBP5,690,000 (2021: GBP3,142,000) adding back Depreciation
and Amortisation of GBP2,022,000 (2021: GBP1,982,000).
Overview
-- Revenue up 36% to GBP223.9 million (2021: 165.1 million) due to a buoyant used car market
-- Like-for-like new car unit deliveries up by 7%
-- Like-for-like used car unit sales up by 24%
-- Like-for-like aftersales revenues up by 19% to GBP19.2 million
-- Underlying profit before tax of GBP4.6 million (2021: GBP1.9 million)
-- Final dividend of 15.0 pence per ordinary share (2021: nil pence per ordinary share)
-- Net bank borrowings at 31 March 2022 as disclosed in note 21
were GBP10.4 million (2021: GBP10.3 million)
-- Property portfolio revaluation at 31 March 2022 showed a
GBP13.3 million surplus (2021: GBP12.3 million surplus) to net book
value (not recognised in these accounts)
Like-for-like comparisons exclude the impact of the Lotus and MG
businesses at Ashford, both of which were opened during the year
under review. All other businesses operated for the full
twelve-month period in both years
Commenting on the results Simon Caffyn, Chief Executive, said: "
The underlying profit before tax of GBP4.6 million was a
significant improvement on the prior year. Despite limited new car
supply, operating profits improved due to very buoyant trading in
used cars and our strong focus on improving operational
effectiveness .
The outlook will depend on consumer confidence, but we carry
forward a strong new car order book and have substantially
strengthened our balance sheet "
Enquiries:
Caffyns plc Simon Caffyn, Chief Executive Tel: 01323 730201
Mike Warren, Finance Director
HeadLand Chloe Francklin Tel: 0203 805 4855
Operational and Business Review
Summary
The underlying profit before tax of GBP4.6 million for the
financial year ended 31 March 2022 ("the year") was a significant
improvement on the GBP1.9 million recorded for the prior year. Full
year turnover increased by 36% to GBP223.9 million (2021: GBP165.1
million), predominantly from significantly higher levels of car
deliveries. Operating margins improved significantly to GBP5.7
million (2021: GBP2.9 million) due to very buoyant trading in used
cars and a strong focus on improving operational effectiveness.
Our statutory profit before tax for the year was GBP4.4 million
(2021: GBP1.4 million). Basic earnings per share for the year were
111.3 pence (2021: 52.4 pence). Underlying earnings per share for
the year were 117.0 pence (2021: 66.0 pence).
The Company's defined-benefit pension scheme deficit, calculated
in accordance with the requirements of IAS 19 Pensions, reduced
significantly to GBP2.8 million at 31 March 2022 (2021: GBP9.4
million). Investment gains in the Scheme's investments were strong
and combined with reductions to the net present value of the
Scheme's liabilities. The Company also made an additional GBP1.0
million cash contribution to the pension scheme in the year to
assist with reducing the deficit position.
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.
The board was able to restart the payment of dividends during
the year with an interim dividend of 7.5 pence. The board is
proposing a final dividend for the year of 15.0 pence (2021: nil
pence per ordinary share).
Net bank borrowings at 31 March 2022 were GBP10.4 million (2021:
GBP10.3 million), which equated to gearing of 30% (2021: 37%).
Covid-19
The Company started the financial year with its car showrooms
temporarily closed and able to operate only on a
"click-and-collect" basis . However, by mid-April 2021 we were able
to fully reopen and for the remainder of the financial year were
able to operate as usual, albeit with certain social-distancing
precautions remaining in place.
In April 2021, 88 employees, around one-fifth of the total
workforce, remained on furlough under the Government's Coronavirus
Job Retention Scheme but we were able to return those employees to
the workplace over the spring and summer months and we ceased to
utilise the scheme from August. Grants received in the year
amounted to GBP0.1 million. The business also continued to benefit
from the business rates holiday for retail premises, which provided
a year-on-year saving of GBP0.8 million. This holiday expired on 31
March 2022. We remain grateful to the Government for the actions
that it took to protect employment during lockdown periods where
activity levels were suppressed and there was insufficient work to
occupy certain employees.
Whilst covid-19 infection levels remained at elevated levels it
was pleasing to see a waning of the impact of the covid pandemic on
the business as the year progressed. Through careful management of
the workplace, we were able to successfully manage staff absences
and to continue to offer an environment that our customers were
happy to visit and transact in.
Omni-channel retailing
Our omni-channel offering allows customers to interact with us
in a way that suits them best, from the traditional showroom
discussion through to a fully online sales process, and any
combination in between. We learnt a great deal during the lockdown
periods of the pandemic and were able to introduce new options
which significantly advanced our on-line selling capabilities.
These have been further enhanced in the current year allowing us to
provide our customers with a full omni-channel approach to
purchasing their vehicle.
Our People
I am very grateful for the dedication of our employees and the
effort they applied throughout the year to provide our customers
with a first-class experience. Their response to th e covid-19
pandemic has been outstanding . We have been , and remain, very
focused on the health and safety of our employees and customers,
ensuring that o u r showroom and workshop activities are undertaken
in a responsible and socially distanced way. As a result of the
hard work and professionalism shown by everyone involved, we have
successfully navigated the covid pandemic to leave the business in
a strong position.
The Company has a long tradition of investing in apprenticeship
programmes. Despite the pressures on the business, we have kept our
apprenticeship numbers at a high level and continue to see the
benefits flow through the business as more apprentices complete
their training and become fully qualified. Due to our apprentice
numbers, we continue to fully utilise our Government apprenticeship
levy payments within the stipulated time limits.
We remain firmly committed to the long-term benefits of
apprenticeships and our recruitment programme continues with the
aim of maintaining a healthy complement in the coming year which
will assist the Company to continue to grow.
New and used car sales
Total UK new car registrations in the year increased by 4% as
the impacts of the covid-19 pandemic waned. However, the global
shortage of semiconductors throughout the year disrupted the
production of new cars and, more recently, the conflict in Ukraine
added additional strains to supply chains, further restricting
increases in registrations. Within the total, new car registrations
in the private and small business sector, in which we principally
operate, rose by 19%. Our own new car deliveries rose by 7% on a
like-for-like basis, which was in line with the movement for those
manufacturers that we represent.
Our volume of used cars sales also rose, by 24%, on a
like-for-like basis. The shortage of new car product created a
strong used car market and, together with enhanced controls, we
were able to retain significantly enhanced unit margins. Great
efforts have been made over the last twelve months to further
enhance and develop our omni-channel offering for our customers and
we continue to see this providing a major opportunity for further
growth. The number of used cars sold again exceeded the number of
new cars sold in the year. Procedures have been strengthened to
monitor and control used car stock turn and yield and to broaden
our sources of replenishing inventory.
The Company's total revenues for the year increased by GBP58.8
million over the previous year, of which GBP56.6 million arose from
the from the sale of new and used cars .
Aftersales
The impact of the covid-19 pandemic on our aftersales business
reduced during the year and we were encouraged that our service
revenues in the year rose by 8% on a like-for-like basis. We
continue to place great emphasis on our customer retention
programmes and in growing sales of service plans. Our parts
business also reported higher sales, up by 25% on a like-for-like
basis from the previous year.
Operations
Our Audi businesses produced another exceptional performance in
the year, significantly growing both their new and used car
deliveries.
The performance of our Volkswagen businesses improved in the
year boosted by the strength of the brand, the excellent model
range, and exciting new products.
Our Volvo businesses also enjoyed very strong performances in
the year. Both businesses, in Worthing and in Eastbourne, performed
very well. The Eastbourne result was especially commendable given
the business was heavily disrupted by building works throughout
much of the year as the site underwent a significant refurbishment.
The brand continues to reap the benefits of an excellent model
range of cars, which are being positively received by
customers.
In Tunbridge Wells, our combined SEAT/Skoda business continued
to perform well and our Skoda business in Ashford recorded an
excellent result, significantly ahead of the prior year.
Our Vauxhall business in Ashford performed in line with our
expectations in the year.
During the year we opened businesses for Lotus and MG, adjacent
to our existing Vauxhall operation in Ashford. The board was
encouraged with their first year of trading.
Trading at Caffyns Motorstore, our used car business in Ashford,
remained subdued as the business suffered from disruptions from
building works to accommodate the new franchises of Lotus and MG.
However, the performance improved in the year and we remain
reassured that the concept continues to be well received by our
customers, who particularly value the reassurance of the Caffyns
brand.
Groupwide projects
We remain focused on generating further improvements in used car
sales, used car finance and service labour sales. These three areas
will be key to achieving further increases in profitability in the
coming years. In addition, we continue to make very good progress
utilising technology to enhance the customer-buying experiences
from their first point of contact right through the buying process,
as well as improving aftersales retention.
New brands and models
We continue to invest in enhanced facilities to allow us to sell
and service our manufacturers' ever-increasing range of electric
and hybrid vehicles. During the year we also added two new brands
to our portfolio, both based at existing premises in Ashford.
Lotus, which is part of the Zhejiang Geely group that also owns
Volvo, and MG, a subsidiary of SAIC, commenced trading in July
2021. Both of these brands have battery-powered electric products
and MG offers outstanding value for money in this field. We will
shortly be expanding our representation with Lotus with the opening
of a new dealership for Sussex, in Lewes.
Property
We operate primarily from freehold sites which provides
additional stability to our business model. As in previous years,
our freehold premises were revalued at the balance sheet date by
chartered surveyors CBRE Limited, based on an existing use
valuation. The excess of the valuation over net book value of our
freehold properties at 31 March 2022 was GBP13.3 million (2021:
GBP12.3 million). In accordance with our accounting policies, this
surplus has not been incorporated into our accounts.
During the year, we incurred capital expenditure of GBP2.9
million (2021: GBP0.4 million). There was one major property
development project in the year, which was the expansion and
complete refurbishment of our Volvo premises in Eastbourne. The
remaining spend reflected a mixture of further installations of
electric charging points and replacement spend on existing
assets.
The lease to the purchaser of our former Land Rover business in
2016, for our freehold premises in Lewes, terminated on 9 June 2021
and the property was returned to us. Our current intention is to
dispose of the premises and we expect to exchange contracts
shortly. Completion of the sale will be dependent on the purchaser
gaining an appropriate planning consent and the board expects this
will take at least two years. Due to the uncertainty of a
successful outcome to the planning process, the property has
continued to be shown as an investment property on the Company's
balance sheet.
The Company operates two of its franchised businesses from
leased premises as well as having a leased vehicle storage
compound, which are shown on the balance sheet as right of use
assets. During the year, management reassessed its likely future
requirement for one of those premises and, as a result, extended
its estimate of the duration of its stay. As a result, the
valuation of that lease increased by GBP1.0 million, equal and
opposite to an increase in its lease liability.
The Company has agreed with Volvo UK to relocate its business in
Worthing to a new-build facility, adjacent to its existing Audi
operation at Angmering. Planning permission for the new facility is
being sought and construction is expected to start once a planning
consent is granted, with the new facility expected to be available
to open in 2023.
Bank facilities and borrowings
The Company's banking facilities with HSBC comprise a term loan,
originally of GBP7.5 million, repayable by instalments over a
twenty-year period to 2038 and a revolving-credit facility of
GBP6.0 million, both of which will next become renewable in April
2026. HSBC also provides an overdraft facility of GBP3.5 million,
renewable annually. The Company continues to enjoy a supportive
relationship with HSBC and successfully refinanced its borrowings
in March 2022, twelve months in advance of the scheduled review
date for the facilities. The refinancing did not affect the market
value of the Company's borrowings.
In addition to its facilities with HSBC, the Company also has a
revolving-credit facility of GBP4.0 million provided by Volkswagen
Bank, renewable annually, together with a term loan, originally of
GBP5.0 million, which is repayable by instalments over the ten
years to March 2024.
The term loan and revolving credit facilities provided by HSBC
include certain covenant tests which were comfortably passed at the
year-end on 31 March 2022. Any failure of a covenant test would
render these facilities repayable on demand at the option of the
lender.
During the year, cash generated by operating activities was
GBP3.4 million (2021: GBP6.7 million). This reflected the
deficit-reduction payment of GBP1.0 million made to the Company's
defined-benefit pension scheme as part of the recovery plan to the
March 2020 triennial valuation, as well as outflows associated with
working capital movements. Other significant cash movements in the
year included capital expenditure of GBP2.8 million (2021: GBP0.4
million) and repayment of bank revolving-credit facilities and term
loans of GBP2.9 million (2021: GBP1.7 million). Cash balances held
at 31 March 2022 were GBP5.7 million, a reduction of GBP3.0 million
from the previous year-end.
Bank borrowings, net of cash balances, at 31 March 2022 were
GBP10.4 million (2021: GBP10.3 million) and as a proportion of
shareholders' funds at 31 March 2022 were 30% (2021: 37%). This
reduction in gearing level reflected the strong financial result
for the year as well as a significant narrowing of the deficit in
the Company's defined-benefit pension scheme. Available but undrawn
facilities with HSBC and Volkswagen Bank at 31 March 2022 were
GBP10 million (2021: GBP16 million) owing to the reduction in
certain facility levels in the year, in agreement with the
Company's bank lenders.
Taxation
The year ended 31 March 2022 resulted in a tax charge of GBP1.39
million (2021: GBP0.01 million). The effective tax rate for the
year was higher than the standard rate of corporation tax in force
for the year of 19% due to the effect on deferred tax liabilities
of the scheduled increase in the corporation tax rate to 25% in
2023. In the prior year, the effective tax rate was significantly
lower than the standard rate of corporation tax in force for the
year of 19% due to the reversal of an impairment provision against
the carrying value of an Advanced Corporation Tax ("ACT")
asset.
The Company has no current outstanding trading losses awaiting
relief (2021: GBPNil). There are also no capital losses awaiting
relief. Capital gains which remain unrealised, where potentially
taxable gains arising from the sale of properties and goodwill have
been rolled over into replacement assets, amount to GBP7.1 million
(2021: GBP8.3 million) which could equate to a future potential tax
liability of GBP1.8 million (2021: GBP1.6 million). The Company was
able to utilise GBP0.6 million of its ACT in the year, leaving an
amount carried forward to future trading periods of GBP0.5 million
(2021: GBP1.1 million).
Pension Scheme
The Company's defined benefit scheme was closed to future
accrual in 2010. The board has little control over the key
assumptions in the valuation calculations as required by accounting
standards and the low yields of gilts and bonds continue to have a
significant impact on the net funding position of the scheme. At 31
March 2022 the deficit was GBP2.8 million (2021: GBP9.4 million).
The deficit, net of deferred tax, was GBP2.1 million (2021: GBP7.6
million).
The Scheme operates with a fiduciary manager and the board,
together with the independent pension fund trustees, continues to
review options to reduce the cost of operation and its deficit.
Actions that could further reduce the risk profile of the assets
and more closely match the nature of the Scheme's assets to its
liabilities continue to be considered.
The pension cost under IAS 19 is charged as a non-underlying
cost and amounted to GBP0.2 million in the year (2021: GBP0.2
million).
During the year, the latest formal triennial valuation of the
Scheme, effective 31 March 2020, was completed with the valuation
being formally submitted to the Pensions Regulator in June 2021. A
recovery plan to address the Scheme deficit identified from this
triennial valuation was agreed with the trustees under which the
annual recovery plan payment would increase from GBP0.5 million to
GBP0.8 million, with an additional one-off contribution of GBP1.0
million, which was paid in June 2021. The recurring annual recovery
plan payment for each subsequent year will then increase by 2.25%,
until superseded by any future new recovery plan to be agreed
between the Company and the trustees. Therefore, the Company made
deficit-reduction contributions into the Scheme during the year of
GBP1.8 million (2021: GBP0.5 million).
Dividend
The uncertainty caused by the covid-19 pandemic resulted in the
Company temporarily pausing its dividend payments to shareholders.
The board is aware of the importance of dividend payments to its
shareholders and remained committed to restarting dividend payments
once it was appropriate to do so. The judgement of the board was
that the performance of the business in the first half of the year
meant that it would be appropriate to restart dividend payments
and, accordingly, the board declared an interim dividend of 7.5
pence per ordinary share (2021: Nil pence per ordinary share). The
board is also declaring a final dividend for the year of 15.0 pence
(2021: Nil pence per ordinary share) which will be paid on 9 August
2022 to those shareholders on the register at close of business on
8 July 2022, subject to shareholder approval at the 2022 Annual
General Meeting. The ordinary shares will be marked ex-dividend on
7 July 2022.
Strategy
Our continuing strategy is to focus on growing our loyal
customer base through representing premium and premium-volume
franchises, maximising opportunities for premium used cars and
delivering an excellent after sales service. We recognise that we
operate in a rapidly changing environment and continue to carefully
monitor the appropriateness of this strategy. We continue to seek
opportunities to invest in the future growth of our business.
We are concentrating on business opportunities in stronger
markets 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, and to enhance both the
purchasing and after sales experience for our customers.
Annual General Meeting
T he Annual General Meeting will be held on 2 August 2022. As no
regulations remain in place regarding social distancing, it is
intended that the Annual General Meeting will be an open meeting,
to which shareholders will be invited to attend in person.
Outlook
We have started the new financial year with a sense of optimism,
although we are mindful of disruptions to manufacturers' supply
chains and dependent upon consumer confidence. We continue to enjoy
supportive relationships with our banking partners, HSBC and
Volkswagen Bank, with available but undrawn facilities at the
year-end in excess of GBP10 million. The balance sheet is
appropriately funded and our freehold property portfolio is a
source of stability. We remain confident in the prospects of the
Company and are ready to exploit future business opportunities.
S G M Caffyn
Chief Executive
26 May 2022
Group Income Statement
for the year ended 31 March 2022
2022 2021
Note GBP'000 GBP'000
------------------------------------------------- -------- ----------- -----------
Revenue 223,928 165,085
Cost of sales (191,982) (142,304)
------------------------------------------------- -------- ----------- -----------
Gross profit 31,946 22,781
Operating expenses
Distribution costs (17,442) (13,481)
Administration expenses (9,227) (7,317)
------------------------------------------------- -------- ----------- -----------
Operating profit before other income 5,277 1,983
Other income (net) 390 909
------------------------------------------------- -------- ----------- -----------
Operating profit 5,667 2,892
------------------------------------------------- -------- ----------- -----------
Operating profit before non-underlying items 5,690 3,142
Non-underlying items within operating profit 5 (23) (250)
------------------------------------------------- -------- ----------- -----------
Operating profit 5,667 2,892
------------------------------------------------- -------- ----------- -----------
Finance expense 6 (1,116) (1,266)
Finance expense on pension scheme (166) (202)
------------------------------------------------- -------- ----------- -----------
Net finance expense (1,282) (1,468)
------------------------------------------------- -------- ----------- -----------
Profit before taxation 4,385 1,424
------------------------------------------------- -------- ----------- -----------
Profit before tax and non-underlying items 4,574 1,876
Non-underlying items within operating profit 5 (23) (250)
Non-underlying items within finance expense on
pension scheme 5 (166) (202)
------------------------------------------------- -------- ----------- -----------
Profit before taxation 4,385 1,424
------------------------------------------------- -------- ----------- -----------
Taxation 7 (1,386) (14)
------------------------------------------------- -------- ----------- -----------
Profit for the year 2,999 1,410
------------------------------------------------- -------- ----------- -----------
Earnings per share
Basic 8 111.3p 52.4p
Diluted 8 109.6p 52.1p
Underlying earnings per share
Basic 8 117.0p 66.0p
Diluted 8 115.2p 65.6p
------------------------------------------------- -------- ----------- -----------
Group Statement of Comprehensive Income
for the year ended 31 March 2022
2022 2021
Note GBP'000 GBP'000
------------------------------------------------- -------- ---------- ----------
Profit for the year 2,999 1,410
Items that will never be reclassified to
profit and loss:
Remeasurement of net defined benefit liability 5,045 (301)
Deferred tax on remeasurement 17 (1,261) 57
Effect of change in deferred tax rate 17 511 -
------------------------------------------------- ------- ----------- ----------
Total other comprehensive income/(expense),
net of taxation 4,295 (244)
------------------------------------------------- ------- ----------- ----------
Total comprehensive income for the year 7,294 1,166
------------------------------------------------- ------- ----------- ----------
Group Statement of Financial Position
at 31 March 2022
2022 2021
Note GBP'000 GBP'000
-------------------------------------------- -------- ---------- ----------
Non-current assets
Right-of-use assets 10 1,413 610
Property, plant and equipment 11 38,975 37,624
Investment properties 12 7,646 7,751
Interest in lease 13 389 557
Goodwill 14 286 286
Deferred tax asset 17 - 412
48,709 47,240
-------------------------------------------- -------- ---------- ----------
Current assets
Inventories 15 27,546 36,562
Trade and other receivables 5,264 5,072
Interest in lease 13 168 173
Current tax recoverable 40 34
Cash and cash equivalents 2,759 5,735
-------------------------------------------- -------- ---------- ----------
35,777 47,576
-------------------------------------------- -------- ---------- ----------
Total assets 84,486 94,816
-------------------------------------------- -------- ---------- ----------
Current liabilities
Interest-bearing bank overdrafts and
loans 1,875 3,875
Trade and other payables 16 29,495 39,338
Lease liabilities 496 495
Current tax payable 236 306
-------------------------------------------- -------- ---------- ----------
32,102 44,014
-------------------------------------------- -------- ---------- ----------
Net current assets 3,675 3,562
-------------------------------------------- -------- ---------- ----------
Non-current liabilities
Interest-bearing bank loans 11,312 12,187
Lease liabilities 1,434 783
Deferred tax liability 17 1,298 -
Preference shares 812 812
Retirement benefit obligations 2,797 9,434
-------------------------------------------- -------- ---------- ----------
17,653 23,216
-------------------------------------------- -------- ---------- ----------
Total liabilities 49,755 67,230
-------------------------------------------- -------- ---------- ----------
Net assets 34,731 27,586
-------------------------------------------- -------- ---------- ----------
Capital and reserves
Share capital 1,439 1,439
Share premium account 272 272
Capital redemption reserve 707 707
Non-distributable reserve 1,724 1,724
Retained earnings 30,589 23,444
-------------------------------------------- -------- ---------- ----------
Total equity attributable to shareholders 34,731 27,586
-------------------------------------------- -------- ---------- ----------
Group Statement of Changes in Equity
for the year ended 31 March 2022
Capital Non-
Share Share redemption distributable Retained
capital premium reserve reserve Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ----------- ----------- ------------- ---------------- ------------ -----------
At 1 April 2021 1,439 272 707 1,724 23,444 27,586
Total comprehensive
income
Profit for the
year - - - - 2,999 2,999
Other comprehensive
income - - - - 4,295 4,295
---------------------- ----------- ----------- ------------- ---------------- ------------ -----------
Total comprehensive
income - - - - 7,294 7,294
Transactions
with
owners:
Dividends - - - - (202) (202)
Issue of shares - - - - - -
- SAYE
Share-based payment - - - - 53 53
---------------------- ----------- ----------- ------------- ---------------- ------------ -----------
At 31 March
2022 1,439 272 707 1,724 30,589 34,731
---------------------- ----------- ----------- ------------- ---------------- ------------ -----------
for the year ended 31 March 2021
Capital Non-
Share Share redemption distributable Retained
capital premium reserve reserve Earnings Total
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 - - - - 1,166 1,166
Transactions
with
owners:
Issue of shares
- SAYE - - - - 3 3
Share-based payment - - - - 37 37
---------------------- ----------- ----------- ------------- ---------------- ------------ -----------
At 31 March
2021 1,439 272 707 1,724 23,444 27,586
---------------------- ----------- ----------- ------------- ---------------- ------------ -----------
Group Cash Flow Statement
for the year ended 31 March 2022
2022 2021
Note GBP'000 GBP'000
-------------------------------------------------------- -------- ----------- -----------
Net cash inflow from operating activities 18 3,390 6,724
Investing activities
Proceeds on disposal of property, plant and equipment - -
Purchases of property, plant and equipment (2,837) (394)
Receipt from investment in lease 185 185
Net cash outflow from investing activities (2,652) (209)
-------------------------------------------------------- -------- ----------- -----------
Financing activities
Revolving-credit facility repaid (2,000) (2,000)
Revolving-credit facility utilised - 1,000
Secured loans repaid (875) (657)
Bank refinancing arrangement fees (98) -
Issue of shares - SAYE scheme - 3
Dividends paid (202) -
Repayment of lease liabilities (539) (604)
-------------------------------------------------------- -------- ----------- -----------
Net cash outflow from financing activities (3,714) (2,258)
-------------------------------------------------------- -------- ----------- -----------
Net (decrease)/increase in cash and cash equivalents (2,976) 4,257
-------------------------------------------------------- -------- ----------- -----------
Cash and cash equivalents at beginning of year 5,735 1,478
Cash and cash equivalents at end of year 2,759 5,735
-------------------------------------------------------- -------- ----------- -----------
Notes
for the year ended 31 March 2022
1. GENERAL INFORMATION
Caffyns plc is a company domiciled in the United Kingdom. The
address of the registered office is Saffrons Rooms, Meads Road,
Eastbourne BN20 7DR. The registered number of the Company is
105664.
This financial information has been extracted from the
consolidated financial statements which were approved by the
directors on 26 May 2022.
2. ACCOUNTING POLICIES
The financial statements have been prepared in accordance with
UK adopted international accounting standards in conformity with
the requirements of the Companies Act 2006 and in accordance with
International Financial Reporting Standards ("IFRS") as adopted in
the United Kingdom .
Whilst the financial information included in this announcement
has been computed in accordance with IFRSs, this announcement does
not itself contain sufficient information to comply with IFRSs.
The financial information set out does not constitute the
Company's statutory accounts for the year ended 31 March 2022, but
is derived from those accounts. Statutory accounts for the year
ended 31 March 2021 have been delivered to the Registrar of
Companies and those for the year ended 31 March 2022 will be
delivered following the Company's annual general meeting. The
auditors have reported on those accounts: their reports were
unqualified, did not draw attention to any matters by way of
emphasis without qualifying their report and did not contain
statements under section 498(2) or (3) Companies Act 2006 or
equivalent preceding legislation.
A copy of the annual report for the year ended 31 March 2022
will be available at www.caffynsplc.co.uk and will be posted to
shareholders by 8 July 2022.
3. GOING CONCERN
The 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 of one year from the date of approval of this Annual
Report. This has focused primarily on the achievement of the
banking covenants, which have all been achieved for the year under
review.
Under the Company's first covenant test, it is required to make
underlying earnings before bank interest, depreciation and
amortisation ("senior EBITDA") for the rolling twelve-month period
to 31 March 2022, which is at least four times the level of
interest payable on bank borrowings to HSBC and Volkswagen Bank
("senior interest").
The Company's second covenant test requires total bank
borrowings to HSBC and Volkswagen Bank at 31 March 2022 not to
exceed 375% of senior EBITDA for the rolling twelve-month period to
31 March 2022.
The Company's final covenant test requires that the level of its
bank borrowings do not exceed 70% of the independently assessed
value of its charged freehold properties.
In the coming twelve months, each of the three covenant tests
must be passed at 30 June 2022, 30 September 2022, 31 December 2022
and 31 March 2023, with the test on 31 March 2023 being the final
test to be carried out within the twelve-month period from the
anniversary of the signing of these financial statements. The
Company has modelled this period and conclude that there is
headroom that would allow for an approximate 10% 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 are forecast
to show a year-on-year increase of 5% in 2022 to 1.72 million, with
a further 17% increase into 2023 to 2.02 million registrations as
the global shortage in semiconductors end allowing manufacturing
levels to rise. The used car market has remained stable over the
five years from 2015 to 2019, at between 7.6 and 8.2 million
transactions and dropped by only 15% in 2020 due to the effects of
the covid-19 pandemic, compared to a comparable 29% fall in new car
registrations . Since showrooms reopened in April 2021, demand for
used cars has been buoyant and transactions grew by 12 % in 2021.
The continuing shortage in new car supply has assisted the used car
market, and is expected to continue to do so. The Company's
financial results in the year under review were robust and the
current new car order take held for future delivery is at elevated
levels.
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 and bank overdraft
and medium-term revolving credit facilities and term loans. At the
year-end, the medium-term banking facilities included a term loan
with an outstanding balance of GBP6.2 million and a revolving
credit facility of GBP6.0 million from HSBC, its primary bankers,
with both facilities being renewable in April 2026. HSBC also make
available a short-term overdraft facility of GBP3.5 million, which
is renewed annually in August. The Company also has a ten-year term
loan from Volkswagen Bank with a balance outstanding at 31 March
2022 of GBP1.0 million, which is repayable to March 2024, and a
short-term revolving-credit facility of GBP4.0 million, which is
renewed annually in August. 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.
Information concerning the Company's liquidity and financing
risk are set out on page 12 and note 21 to the financial
statements.
The directors have a reasonable expectation that the Company has
adequate resources and headroom against the covenant test to be
able continue in operational existence for the foreseeable future
and for a period of one year from the date of approval of the
Annual Report. For those reasons, they continue to adopt the going
concern basis in preparing this Annual Report.
4. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of financial statements requires management to
make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of
assets and liabilities, income and expense. Actual results may
differ from these estimates.
These judgements and estimates are continually evaluated and are
based on historical experience and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances.
Certain critical accounting estimates in applying the Company's
accounting policies are listed below.
Retirement benefit obligation
The Company has a defined-benefit pension scheme. The
obligations under this scheme are recognised in the balance sheet
and represent the present value of the obligation calculated by
independent actuaries, with input from management. These actuarial
valuations include assumptions such as discount rates, return on
assets and mortality rates. These assumptions vary from time to
time depending on prevailing economic conditions. Details of the
assumptions used are provided in note 23. At 31 March 2022, the net
liability included in the Statement of Financial Position was
GBP2.8 million (2021: GBP9.4 million).
Impairment
The carrying value of property, plant and equipment and goodwill
are tested annually for impairment as described in notes 11, 12, 13
and 15 to the financial statements. For the purposes of the annual
impairment testing, the directors recognise Cash Generating Units
(CGUs) to be those assets attributable to an individual dealership,
which represents the smallest group of assets which generate cash
inflows that are independent from other assets or CGUs. The
recoverable amount of each CGU is based on the higher of its fair
value less costs to sell and its value in use. The fair value less
costs to sell of each CGU is based upon the market value of any
property contained within it and is determined by an independent
valuer, and its value in use is determined through discounting
future cash inflows (as described in detail in note 15). As a
result of this review the directors considered that no impairments
were required to the carrying value of its property assets (2021:
GBP184,000 to a single property asset) (see notes 11, 12, 13 and
15).
Surplus ACT recoverable
The Company carries a balance of surplus unrelieved advanced
corporation tax ("ACT") which can be utilised to reduce corporation
tax payable subject to a restriction to 19% of taxable profits less
shadow ACT calculated at 25% of dividends. Uncertainty arises due
to the estimation of future levels of profitability, levels of
dividends payable and the reversal of deferred tax liabilities in
respect of accelerated capital allowances and on unrealised capital
gains. For example, a reduction in the Company's profitability
could result in a delay in the utilisation of surplus unrelieved
ACT. However, based on the Company's current projections, the
directors have a reasonable expectation that the surplus ACT will
be fully relieved against future corporation tax liabilities by 31
March 2024.
Support arrangements
On occasion, the Company can be assisted in the relocation,
development and support of certain of its businesses. On receipt of
these payments the Company forms a judgement whether the payment is
capital in nature, in which case the payment is deducted from the
capital cost of the development in question, or revenue in nature,
in which case the payment is amortised over a two-year period from
the date or relocation.
In November 2018, the Company received a contribution of
GBP255,000 from a brand partner towards the cost of developing its
Angmering dealership. The contribution agreement was not specific
as to whether the amount contributed was in respect of the capital
expenditure incurred by the Company, or in respect of other
operating activities (such as marketing) that the Company was
required to undertake as part of the relocation. Consequently, the
directors needed to apply judgement in determining the appropriate
accounting treatment. Having considered all information available,
including the contribution agreement and past correspondence with
the brand partner, the directors determined it appropriate to
account for the contribution as capital in nature, and deducted the
amount received from the carrying amount of property, plant and
equipment assets associated with the Angmering dealership.
The directors considered an alternative treatment, including
recognising the amount received over the rolling two-year term of
the franchise agreement. This would have resulted in an increase in
profit of GBP96,000 during the year ended 31 March 2019 and an
increase in net assets of the same amount as at 31 March 2019, with
the remaining GBP159,000 standing to be recognised over the
remaining contractual period as follows: year ended 31 March 2020:
GBP127,500, year ending 31 March 2021: GBP31,500.
In December 2019, the Company separately received a contribution
of GBP225,000 from a brand partner as support for establishing a
new franchise business. In the judgement of the directors, and
having considered all information available, the directors
determined it appropriate to account for the contribution as
revenue in nature, with the support to be allocated on a
straight-line basis over the first 24 months of operation of the
new business. The launch of the new business was delayed by the
covid-19 pandemic with the business unable to commence trading
until car showrooms were allowed to re-open in June 2020. As a
result, GBP93,750 of the GBP225,000 support package was recognised
in the Income Statement for the prior year with a further
GBP112,500 being recognised in the Income Statement for the current
year. It is expected that the remaining GBP18,750 will be
recognised in the Income Statement for the year ending 31 March
2023.
5. Non-underlying items
The following amounts have been presented as non-underlying
items in these financial statements:
2022 2021
GBP'000 GBP'000
-------------------------------------------------------- ---------- ----------
Net loss on disposal of property, plant and equipment - (3)
-------------------------------------------------------- ---------- ----------
Other income, net - (3)
-------------------------------------------------------- ---------- ----------
Within operating expenses:
Service cost on pension scheme (23) (23)
Redundancy and restructuring costs - (40)
Property impairments - (184)
-------------------------------------------------------- ---------- ----------
(23) (247)
-------------------------------------------------------- ---------- ----------
Non-underlying items within operating profit (23) (250)
-------------------------------------------------------- ---------- ----------
Net finance expense on pension scheme (166) (202)
-------------------------------------------------------- ---------- ----------
Non-underlying items within net finance expense (166) (202)
-------------------------------------------------------- ---------- ----------
Total non-underlying items before taxation (189) (452)
-------------------------------------------------------- ---------- ----------
Taxation credit on non-underlying items 36 86
-------------------------------------------------------- ---------- ----------
Total non-underlying items after taxation (153) (366)
-------------------------------------------------------- ---------- ----------
In the prior period, the following amounts have been presented
as non-underlying items:
-- redundancy and restructuring costs of GBP40,000 were incurred
in the year as a result of changes necessitated by the covid-19
pandemic;
-- the carrying value of a freehold property was impaired by a
total of GBP184,000 following advice from the Company's independent
valuer, CBRE Limited (see notes 11 and 12).
6. Finance expense
2022 2021
GBP'000 GBP'000
----------------------------------------------- ---------- ----------
Interest payable on bank borrowings 297 367
Interest payable on inventory stocking loans 581 681
Interest on lease liabilities 37 21
Finance costs amortised 141 125
Preference dividends (see note 9) 72 72
Finance income on interest in lease (12) -
----------------------------------------------- ---------- ----------
Finance expense 1,116 1,266
----------------------------------------------- ---------- ----------
7. Tax
2022 2021
GBP'000 GBP'000
-------------------------------------------------------- ---------- ----------
Current tax
UK corporation tax 432 401
Adjustments recognised in the period for current tax
of prior periods (5) (33)
-------------------------------------------------------- ---------- ----------
Total charge 427 368
-------------------------------------------------------- ---------- ----------
Deferred tax (see note 17)
Origination and reversal of temporary differences 312 (381)
Change in corporation tax rate 647 -
Adjustments recognised in the period for deferred tax
of prior periods - 27
-------------------------------------------------------- ---------- ----------
Total charge/(credit) 959 (354)
-------------------------------------------------------- ---------- ----------
Tax charged in the Income Statement 1,386 14
-------------------------------------------------------- ---------- ----------
2022 2021
The tax charge arises as follows: GBP'000 GBP'000
--------------------------------------- ---------- ----------
On normal trading 1,422 100
On non-underlying items (see note 5) (36) (86)
--------------------------------------- ---------- ----------
Tax charged in the Income Statement 1,386 14
--------------------------------------- ---------- ----------
The charge for the year can be reconciled to the profit per the
Income Statement as follows:
2022 2021
GBP'000 GBP'000
---------------------------------------------------------------- ---------- ----------
Profit before tax 4,385 1,424
---------------------------------------------------------------- ---------- ----------
Tax at the UK corporation tax rate of 19% (2021: 19%) 833 271
Tax effect of expenses that are not deductible in determining
taxable profit 126 133
Other differences - 34
Effect of change in corporation tax rate 647 -
Movement in rolled over and held over gains (215) (117)
Reversal of impairment of Advanced Corporation Tax asset - (301)
Adjustment to tax charge in respect of prior periods (5) (6)
---------------------------------------------------------------- ---------- ----------
Tax charge for the year 1,386 14
---------------------------------------------------------------- ---------- ----------
The current year total tax charge is impacted by the effect of
non-deductible expenses, which includes non-qualifying
depreciation; and one-off rate change adjustments to take into
account the legislative increase in the corporation tax rate to 25%
in 2023 .
In the prior year an impairment provision against the carrying
value of an Advanced Corporation Tax asset was reversed. This
impairment was initially made in the year ended 31 March 2019 at
which time management did not recognise an overall deferred tax
asset due to the inherent uncertainty at that date. This approach
remained unchanged at the previous year end, with 31 March 2020
being immediately after the start of the first covid-19 lockdown,
and at the height of the accompanying economic uncertainty, but was
altered at the half-year, at 30 September 2020. Forecasts prepared
by management at that time, extending across a five year period,
reflected an improvement to the levels of profits and these
forecasts allowed the previously held view to be revised and the
impairment to be reversed, given management's judgement of a higher
level of certainty that the available Advanced Corporation Tax and
other deferred tax assets would be utilised in future years.
The total tax charge for the year is made up as follows:
2022 2021
GBP'000 GBP'000
-------------------------------------------------------- ---------- ----------
Total current tax charge 427 368
-------------------------------------------------------- ---------- ----------
Deferred tax credit/(charge)
(Charged)/credited in the Income Statement 959 (354)
Charged/(credited) against other comprehensive income 750 (57)
-------------------------------------------------------- ---------- ----------
Total deferred tax charge 1,709 (411)
-------------------------------------------------------- ---------- ----------
Total tax charge/(credit) for the year 2,136 (43)
-------------------------------------------------------- ---------- ----------
Factors affecting the future tax charge
The Company has unrelieved advance corporation tax of GBP0.5
million (2021: GBP1.1 million), which is available to be utilised
against future mainstream corporation tax liabilities and is
accounted for in deferred tax (see note 24).
8. Earnings per ordinary 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 year.
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 pots-tax effect of dividends and/or interest on the assumed
conversion of all dilutive options and other dilutive potential
ordinary shares.
Reconciliations of earnings and weighted average number of
shares used in the calculations are set out below:
Underlying Basic
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ---------- ---------- ---------- ----------
Profit before tax 4,385 1,424 4,385 1,424
Adjustments:
Non-underlying items (note 5) 189 452 - -
------------------------------------- ---------- ---------- ---------- ----------
Profit before tax 4,574 1,876 4,385 1,424
Tax (note 7) (1,422) (100) (1,386) (14)
------------------------------------- ---------- ---------- ---------- ----------
Profit after tax 3,152 1,776 2,999 1,410
------------------------------------- ---------- ---------- ---------- ----------
Earnings per share (pence) 117.0p 66.0p 111.3p 52.4p
Diluted earnings per share (pence) 115.2p 65.6p 109.6p 52.1p
------------------------------------- ---------- ---------- ---------- ----------
2022 2021
GBP'000 GBP'000
------------------------------------------------ ---------- ----------
Underlying earnings after tax 3,152 1,776
Underlying earnings per share (pence) 117.0p 66.0p
Underlying diluted earnings per share (pence) 115.2p 65.6p
------------------------------------------------ ---------- ----------
Non-underlying losses after tax (153) (366)
Losses per share (pence) (5.7)p (13.6)p
Diluted losses per share (pence) (5.6)p (13.5)p
------------------------------------------------ ---------- ----------
Total earnings 3,019 1,410
------------------------------------------------ ---------- ----------
Earnings per share (pence) 111.3p 52.4p
Diluted earnings per share (pence) 109.6p 52.1p
------------------------------------------------ ---------- ----------
The number of fully paid ordinary shares in circulation at the
year-end was 2,695,502 (2021: 2,695,376). The weighted average
number of shares in issue for the purposes of the earnings per
share calculation were 2,695,418 (2021: 2,694,846). The shares
granted in the year under the Company's SAYE scheme have been
treated as dilutive. For the purposes of this calculation, the
weighted average number of shares in issue for the purposes of the
earnings per share calculation were 2,737,264 (2021:
2,707,660).
9. Dividends
2022 2021
GBP'000 GBP'000
---------------------------------------------------------- ---------- ----------
Preference shares
7% Cumulative First Preference 12 12
11% Cumulative Preference 48 48
6% Cumulative Second Preference 12 12
---------------------------------------------------------- ---------- ----------
Included in finance expense (see note 6) 72 72
---------------------------------------------------------- ---------- ----------
Ordinary shares
Interim dividend of 7 1/2 pence per ordinary share paid 202 -
in respect
of the current year (2021: Nil pence)
No final dividend paid in respect of the March 2021 - -
year end (2020: Nil pence)
---------------------------------------------------------- ---------- ----------
202 -
---------------------------------------------------------- ---------- ----------
A final dividend of 15.0 pence per ordinary share w as declared
in respect of the current year ended 31 March 2022.
10. Right-of-use assets
2022
GBP'000
---------------------------- ----------
Deemed cost
At 1 April 2021 1,181
Additions in the year 1,142
----------------------------- ----------
At 31 March 2022 2,323
----------------------------- ----------
Accumulated depreciation
At 1 April 2021 571
Depreciation for the year 339
----------------------------- ----------
At 31 March 2022 910
----------------------------- ----------
Net book value
At 31 March 2022 1,413
----------------------------- ----------
The right-of-use assets above represent three long term property
leases for premises from which the Company operates a Volkswagen
dealership in Brighton, a Volvo dealership in Worthing and a car
storage compound in Tunbridge Wells.
Depreciation charges of GBP339,000 (2021: GBP315,000) in respect
of right-of-use assets has been recognised within administration
expenses in the Income Statement.
The interest expense on the associated lease liability of
GBP37,000 (2021: GBP21,000) is disclosed is note 6.
Payments made in the year on the above leases were GBP539,000
(2021: GBP335,000).
11. Property, plant and equipment
Freehold Leasehold Fixtures Plant &
property improvements & machinery Total
GBP'000 GBP'000 fittings GBP'000 GBP'000
GBP'000
--------------------------- ----------- --------------- ----------- ------------ -----------
Cost or deemed cost
At 1 April 2021 40,752 728 5,350 6,735 53,565
Additions at cost 1,945 - 508 476 2,929
Disposals - - (229) (2,135) (2,364)
--------------------------- ----------- --------------- ----------- ------------ -----------
At 31 March 2022 42,697 728 5,629 5,076 54,130
--------------------------- ----------- --------------- ----------- ------------ -----------
Accumulated depreciation
At 1 April 2021 6,113 581 4,091 5,156 15,941
Depreciation charge
for the year 616 73 506 383 1,578
Disposals - - (229) (2,135) (2,364)
--------------------------- ----------- --------------- ----------- ------------ -----------
At 31 March 2022 6,729 654 4,368 3,404 15,155
--------------------------- ----------- --------------- ----------- ------------ -----------
Net book value
31 March 2022 35,968 74 1,261 1,672 38,975
--------------------------- ----------- --------------- ----------- ------------ -----------
Short-term leasehold property for both the Company and the Group
comprises GBP74,000 at net book value in the Statement of Financial
Position (2021: GBP147,000).
Depreciation charges of GBP1,578,000 (2021: GBP1,550,000) in
respect of Property, plant and equipment was recognised within
Administration Expenses in the Income Statement.
The Company valued its portfolio of freehold premises and
investment properties as at 31 March 2022. The valuation was
carried out by CBRE Limited, Chartered Surveyors, in accordance
with the Royal Institution of Chartered Surveyors valuation -
global and professional standards requirements. The valuation is
based on existing use value which has been calculated by applying
various assumptions as to tenure, letting, town planning, and the
condition and repair of buildings and sites including ground and
groundwater contamination. Management are satisfied that this
valuation is materially accurate. The excess of the valuation over
net book value as at 31 March 2022 of those sites was GBP13.3
million (2021: GBP12.3 million). In accordance with the Company's
accounting policies, this surplus has not been incorporated into
these financial statements.
12. Investment properties
2022
GBP'000
------------------------------------ ----------
Cost
At 1 April 2021 and 31 March 2022 9,650
------------------------------------- ----------
Accumulated depreciation
At 1 April 2021 1,899
Depreciation for the year 105
At 31 March 2022 2,004
------------------------------------- ----------
Net book value
At 31 March 2022 7,646
------------------------------------- ----------
Depreciation charges of GBP105,000 (2021: GBP301,000) in respect
of Investment properties have been recognised within administration
expenses in the Income Statement.
The Company owns a freehold property that is partially leased
out to a third-party tenant, and accordingly accounts for the
property as an investment property. Based on an independent
valuation of the property carried out by CBRE, no impairment
charges were required to be recognised in the Income Statement, as
part of administration expenses (2021: GBP184,000). This investment
property represents the only asset included in that CGU. In
assessing this property for impairment, the directors based their
assessment of the recoverable amount on fair value less selling
costs.
The fair value measurement of the CGU in its entirety was
categorised as a Level 3 within the hierarchy set out in IFRS 13
Fair Measurement. The valuation technique that is used to measure
the fair value less costs of disposal is consistent with that
applied in respect of the Company's property, plant and equipment,
which is set out in note 12. The following are key assumptions on
which the directors based their determination of fair value less
costs of disposal in respect of that CGU:
-- Market value of buildings per square foot: GBP195
-- Market value of site per acre: GBP2,472,000
-- Initial and reversionary yields: 6.7% and 7.0% respectively
-- Costs of disposal: 1.5% of fair value
As described in note 11, the total excess of the valuation of
all of the Company's freehold properties over net book value as at
31 March 2022 was GBP13.3 million (2021: GBP12.3 million).
Investment properties accounted for GBP0.8 million (2021: GBP0.6
million) of this surplus.
13. Net investment in lease
2022 2021
GBP'000 GBP'000
------------------------------- ---------- ----------
Due after more than one year 389 557
Due within one year 168 173
------------------------------- ---------- ----------
At 31 March 2022 557 730
------------------------------- ---------- ----------
The premises shown above are sub-let to a third-party under a
lease which has the same terms and duration as the Company's own
lease.
14. Goodwill
2022 2021
Group and Company: GBP'000 GBP'000
------------------------------------- ---------- ----------
Cost
At 1 April 2021 and 31 March 2022 481 481
------------------------------------- ---------- ----------
Provision for impairment
At 1 April 2021 and 31 March 2022 195 195
------------------------------------- ---------- ----------
Carrying amounts allocated to CGUs
Volkswagen, Brighton 200 200
Audi, Eastbourne 86 86
------------------------------------- ---------- ----------
At 31 March 2022 286 286
------------------------------------- ---------- ----------
For the purposes of the annual impairment testing, goodwill is
allocated to a CGU. Each CGU is allocated against the lowest level
within the entity at which goodwill is monitored for management
purposes. Consequently, the directors recognise CGUs to be those
assets attributable to individual dealerships and the table above
sets out the allocation of goodwill into the individual dealership
CGUs. The carrying amount of goodwill allocated to the Volkswagen,
Brighton CGU is the only amount considered significant in
comparison with the Group's total carrying amount of goodwill.
Goodwill impairment reviews are undertaken annually, or more
frequently if events or changes in circumstances indicate that the
carrying amount may not be recoverable and a potential impairment
may be required. Impairment reviews have been performed for all
CGUs for the years ended 31 March 2022 and 2021.
Valuation basis
The recoverable amount of each CGU is based on the higher of its
fair value less selling costs and value in use. The fair value less
selling costs of each CGU is based initially upon the market value
of any property contained within it and is determined by an
independent valuer as described in note 11. Where the fair value
less selling costs of a CGU indicates that an impairment may have
occurred, a discounted cash flow calculation is prepared in order
to assess the value in use of that CGU, involving the application
of a pre-tax discount rate to the projected, risk-adjusted pre-tax
cash inflows and terminal value.
Period of specific projected cash flows (Volkswagen, Brighton
CGU)
The recoverable amount of the Volkswagen, Brighton CGU is based
on value in use. Value in use is calculated using cash flow
projections for a five-year period from 1 April 2022 to 31 March
2027. These projections are based on the most recent budget which
has been approved by the board being the budget for the year ending
31 March 2023. The key assumptions in the most recent annual budget
on which the cash flow projections are based relate to expectations
of sales volumes and margins, and expectations around changes in
the operating cost base. These assumptions are based on past
experience, adjusted to expected changes, and on external sources
of information. The cash flows include ongoing capital expenditure
required to maintain the dealership but exclude any growth capital
expenditure projects to which the Group was not committed at the
reporting date.
Growth rates, ranging from -1% (2021: -1%) to 15% (2021: 176%)
have been used to forecast cash flows for a further four years
beyond the budget period, through to 31 March 2027. These growth
rates reflect the products and markets in which the CGU operates.
These growth rates do not give rise to an impairment. Growth rates
are internal forecasts based on a combination of internal and
external information. Based on these forecasts, the headroom
available on the total future profits is GBP3.2 million (2021:
GBP2.4 million) before an impairment would be necessary.
Period of specific projected cash flows (Volvo, Worthing
CGU)
The recoverable amount of the Volvo, Worthing CGU is based on
value in use. Value in use is calculated using cash flow
projections for a five-year period from 1 April 2022 to 31 March
2027. These projections are based on the most recent budget which
has been approved by the board being the budget for the year ending
31 March 2023. The key assumptions in the most recent annual budget
on which the cash flow projections are based relate to expectations
of sales volumes and margins, and expectations around changes in
the operating cost base. These assumptions are based on past
experience, adjusted to expected changes, and on external sources
of information. The cash flows include ongoing capital expenditure
required to maintain the dealership but exclude any growth capital
expenditure projects to which the Group was not committed at the
reporting date.
Growth rates, ranging from -46% (2021: -25%) to 7% (2021: 8%)
have been used to forecast cash flows for a further four years
beyond the budget period, through to 31 March 2027. These growth
rates reflect the products and markets in which the CGU operates.
These growth rates do not give rise to an impairment. Growth rates
are internal forecasts based on a combination of internal and
external information. Based on these forecasts, the headroom
available on the total future profits is GBP1.1 million (2021:
GBP1.7 million) before an impairment would be necessary.
Discount rate
The cash flow projections have been discounted using a rate
derived from the Group's pre-tax weighted average cost of capital,
adjusted for industry and market risk. The discount rate used was
12.4% (2021: 12.4%).
Terminal growth rate
The cash flows subsequent to the forecast period are
extrapolated into the future over the useful economic life of the
CGU using a steady or declining growth rate that is consistent with
that of the product and industry. These cash flows form the basis
of what is referred to as the terminal value. The growth rate to
perpetuity beyond the initial budgeted cash flows used in the value
in use calculations to arrive at a terminal value is 0.5% (2021:
0.5%). Terminal growth rates are based on management's estimate of
future long-term average growth rates.
Conclusion
At 31 March 2022, no impairment charge in respect of goodwill
was identified (2021: no impairment charge).
Sensitivity to changes in key assumptions
Impairment testing is dependent on estimates and judgements,
particularly as they relate to the forecasting of future cash
flows. The outcome of the impairment test is not sensitive to
reasonably possible changes in respect of the projected cash flows,
the discount rate applied, nor in respect of the terminal growth
rate assumed.
15. Inventories
Group and Company: 2022 2021
GBP'000 GBP'000
--------------------------------- ---------- ----------
Vehicles 22,561 19,741
Vehicles on consignment 3,969 15,995
Oil, spare parts and materials 1,009 821
Work in progress 7 5
--------------------------------- ---------- ----------
At 31 March 2022 27,546 36,562
--------------------------------- ---------- ----------
2022 2021
Group and Company: GBP'000 GBP'000
------------------------------------------------------- ---------- ----------
Inventories recognised as an expense during the year 185,398 135,348
Inventories stated at fair value less costs to sell 884 708
Carrying value of inventories subject to retention
of title clauses 14,675 23,940
------------------------------------------------------- ---------- ----------
All vehicle inventories held under consignment stocking
arrangements are deemed to be assets of the Group and are included
on the Statement of Financial Position from the date of
consignment. The corresponding liabilities to the manufacturers are
included within trade and other payables. Inventories can be held
on consignment for a maximum consignment period set by the
manufacturer, which is generally between 180 and 365 days. Interest
is payable in certain cases for part of the consignment period, at
various rates indirectly linked to the Bank of England base
rate.
During the year, GBP25,000 was recognised in respect of the
write-down of inventories of spare parts due to general
obsolescence (2021: 37,000).
16. Trade and other payables
2022 2021
GBP'000 GBP'000
-------------------------------------------- ---------- ----------
Trade payable 14,034 14,742
Obligations relating to consignment stock 3,969 15,995
Vehicle stocking loans 7,327 5,100
Social security and other taxes 823 1,173
Accruals 2,732 1,482
Deferred income 532 614
Other creditors 78 232
-------------------------------------------- ---------- ----------
At 31 March 2022 29,495 39,338
-------------------------------------------- ---------- ----------
Trade and other payables principally comprise amounts
outstanding for trade purchases and ongoing costs. The average
credit period taken for these trade-related purchases was 28 days
(2021: 33 days).
The directors consider that the carrying amount of trade
payables approximates to fair value.
The Group finances the purchases of new car inventory through
the use of consignment funding facilities provided by its
manufacturer partners and which are shown above as Obligations
relating to consignment stock. Vehicles are physically supplied by
the manufacturers with payment deferred until the earlier of the
registration of the vehicle or the end of the consignment period,
generally 180 days. In certain circumstances consignment periods
can be extended with the agreement of the manufacturer. The
consignment funding facilities attract interest at a commercial
rate.
The Group utilises vehicle stocking loans to assist with the
purchase of certain used car inventory. Facilities are available
from both its manufacturer partners and a third-party finance
provider and are generally available for a period of 90 days from
the date of purchase. These vehicle stocking loans attract interest
at a commercial rate.
Interest charges on consignment stocking loans and vehicle
stocking loans described above for the year ended 31 March 2022
were GBP581,000 (2021: GBP681,000).
The obligations relating to consignment stock are all subject to
retention of title clauses for the vehicles to which they relate.
Obligations for used and demonstrator cars which have been funded
are secured on the vehicles to which they relate and are shown
above as vehicle stocking loans. From a risk perspective, the
Company's funding is split between manufacturers through their
related finance arms and that funded by the Company through bank
borrowings.
The Company deferred payments of VAT of GBP440,000 under the
covid-19 payment deferral scheme operated by HMRC. This VAT was to
be settled by eleven equal monthly instalments, with payments
having commenced in April 2021. At 31 March 2022, all amounts had
been settled (2021: GBP400,000 outstanding and included in within
Social security and other taxes).
The movements in deferred income in the year were as
follows:
2022 2021
GBP'000 GBP'000
--------------------------------------------- ---------- ----------
At 1 April 2021 614 592
Utilisation of deferred income in the year (1,401) (1,136)
Income received and deferred in the year 1,319 1,158
--------------------------------------------- ---------- ----------
At 31 March 2022 532 614
--------------------------------------------- ---------- ----------
17. Deferred tax
The following are the major deferred tax assets and liabilities
recognised and the movements thereon during the current and prior
reporting period.
Accelerated Unrealised Retirement Short-term
tax capital benefit temporary Recoverable
depreciation gains obligations differences ACT Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------------- ------------ -------------- -------------- --------------- -----------
At 1 April 2021 (925) (1,572) 1,792 (19) 1,136 412
Change in tax rates
and
prior year adjustments (225) (428) (39) 45 - (647)
Utilisation of ACT - - - - (599) (599)
Timing differences 210 216 (303) 163 - 286
Recognised in other
comprehensive income - - (750) - - (750)
------------------------- --------------- ------------ -------------- -------------- --------------- -----------
At 31 March 2022 (940) (1,784) 700 189 537 (1,298)
------------------------- --------------- ------------ -------------- -------------- --------------- -----------
The Finance Act 2021 introduced an increase in the main
corporation tax rate to 25% from 1 April 2023.
The Company carries a balance of surplus unrelieved advanced
corporation tax ("ACT") which can be utilised to reduce corporation
tax payable subject to a restriction of 19% of taxable profits less
shadow ACT calculated at 25% of shareholder ordinary dividends.
Shadow ACT has no effect on the corporation tax payable itself but
any surplus shadow ACT on dividends must be fully absorbed before
surplus unrelieved ACT can be utilised. During the year the Shadow
ACT was fully utilised allowing a partial utilisation of the ACT,
leaving the remaining value of surplus ACT available for
utilisation in future periods at 31 March 2022 of GBP537,000 (2021:
GBP1,136,000).
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against
current tax liabilities and it is considered that this requirement
is fulfilled. The offset amounts are as follows:
2022 2021
GBP'000 GBP'000
--------------------------- ---------- ----------
Deferred tax liabilities (2,724) (2,516)
Deferred tax assets 1,426 2,928
--------------------------- ---------- ----------
At 31 March 2022 (1,298) 412
--------------------------- ---------- ----------
The unrealised capital gains include deferred tax on gains
recognised on revaluing the land and buildings in 1995 and where
potentially taxable gains arising from the sale of properties have
been rolled over into replacement assets. Such tax would become
payable only if such properties were sold without it being possible
to claim rollover relief.
There were no trading losses available for use in future periods
(2021: GBPNil).
18. Notes to the cash flow statement
2022 2021
GBP'000 GBP'000
------------------------------------------------------------ ---------- ----------
Profit before tax for the year 4,385 1,424
Adjustments for net finance expense 1,282 1,468
------------------------------------------------------------ ---------- ----------
5,667 2,892
Adjustments for:
Depreciation of property, plant and equipment, investment
properties and
right-of-use assets 2,022 1,982
Impairment against property, plant and equipment and
investment properties - 184
Cash payments into the defined-benefit pension scheme (1,781) (526)
Loss on disposal of property, plant and equipment - 3
Share-based payments 53 37
------------------------------------------------------------ ---------- ----------
Operating cash flows before movements in working capital 5,961 4,572
Decrease in inventories 9,016 3,484
Increase in receivables (94) (754)
(Decrease)/increase in payables (9,911) 697
------------------------------------------------------------ ---------- ----------
Cash generated by operations 4,972 7,999
Tax paid, net of refunds (503) (31)
Interest paid (1,079) (1,244)
------------------------------------------------------------ ---------- ----------
Net cash derived from operating activities 3,390 6,724
------------------------------------------------------------ ---------- ----------
All interest payments are treated as operating cash movements as
they arise from movements in working capital.
Reconciliation of debt
Liabilities
Revolving arising Bank and
Bank credit Lease Preference from cash Net
Group and loans facilities liabilities shares financing balances debt
Company: GBP'000 GBP'000 GBP'000 GBP'000 activities GBP'000 GBP'000
GBP'000
-------------- ----------- -------------- -------------- -------------- ------------- ------------- -----------
At 1 April
2021 8,062 8,000 1,278 812 18,152 (5,735) 12,417
Cash
movement (875) (2,000) (539) - (3,414) 2,976 (438)
Non-cash
movement - - 1,191 - 1,191 - 1,191
-------------- ----------- -------------- -------------- -------------- ------------- ------------- -----------
At 31 March
2022 7,187 6,000 1,930 812 15,929 (2,759) 13,170
-------------- ----------- -------------- -------------- -------------- ------------- ------------- -----------
Current
liabilities 875 1,000 495 - 2,370 (2,759) (389)
Non-current
liabilities 6,312 5,000 1,435 812 13,559 - 13,559
-------------- ----------- -------------- -------------- -------------- ------------- ------------- -----------
At 31 March
2022 7,187 6,000 1,930 812 15,929 (2,759) 13,170
-------------- ----------- -------------- -------------- -------------- ------------- ------------- -----------
Non-cash movements in lease liabilities relate to the
reassessment of the expected duration of one existing lease and one
new lease that was entered into during the year.
19. Legal contingent liability
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 Audi, SEAT and
Skoda 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
financial statements.
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END
FR FLFSEEAIRFIF
(END) Dow Jones Newswires
May 27, 2022 02:00 ET (06:00 GMT)
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