Caffyns Share Discussion Threads

[cjohn] 28/11/2016 09:40

At the moment pension fund assets are round about 85m (That's an estimate. We are told that pension assets have risen since the year end at which time pension assets were 78m)

Each 1% rise in the discount rate will knock about 14m sterling off the present value of future pension liabilites. The discount rate used dropped from 3.35% at last year end to 2.2% at the half year. If the discount rate goes back to its year end level, the fund will be in surplus. (Assuming no other changes, of course.)

In this half year, Land Rover contributed 5.8m to revenues; last half year, it contributed 22.2m to revenue. In spite of the loss of 17m revenue from Land Rover, overall turnover was up from 95.5m to 105m. So quite a decent revenue performance.

Underlying profitability was more or less flat.

[rolo7] 26/11/2016 20:14

like the fact the cfyn are into used cars with the FX going against companies at the moment, price comparisons between new and 1-3year used can be quite effective.

[cjohn] 26/11/2016 11:15

hi Woodwards,

at the balance sheet date of 30t September, gilt yields were at historic lows (following the Brexit vote.) Gilt yields are used as an indicator for the discount rate on calculating the present value of future pension liabilities. Sincé that time, gilt yields have risen. Were the pension déficit calculated today, it would be less than the sum in the half-year results.

Gilt yields remain very low, and it is more likely than not that they will rise in the future. This will eliminate the déficit on CFYN's pension scheme. As I'm sure you're aware, all companies with defined benefit pension schemes have seen liabilities balloon, because of the gilt yield falls. CFYN is not in a bad situation compared to the many other such companies I know.

So they will not have to "pay off" the déficit from their profits. No pension administrator worth his salt would insist they did so.

[miikke] 25/11/2016 22:15

They should be very careful about further expansion at the moment- very uncertain times. Is this the right time to be considering expansion?

[woodwards26] 25/11/2016 20:20

The pension deficit is frightening even half of it would take many years of profit to pay off.150k payment isn't going to scratch the surface .Would worry me

[cjohn] 11/10/2016 12:47

Hello Muckshifter,

yes, you're right: I was only right in part. Thankyou for the correction.

[muckshifter] 05/10/2016 11:22

I think you're wrong, and right, CJohn. There were three categories of prefs of which the most significant was the "2nd preference shares", three million in total, which I believe are all held by the Caffyn family. These were effectively not touched in the changes and give the family overall control of the voting rights.... except, if you read the rules for shares on the premium list of the LSE, they lose the right to vote on certain major issues. Although it's not very well spelled out in the rules, I think this would disqualify these 2nd prefs from having a vote on a takeover bid.

That pleased me when it occurred, as I felt that cfyn were so undervalued that one of the big dealerships which was under represented in cfyn's part of the UK might be tempted to make a bid. Since brexit, I think that has become highly unlikely because of the predominance of VW brands, which is disappointing.
Regards.

PS. IIrc they actually only issued 2m of the authorised 3m 2nd prefs, but the purpose of them was very clearly one of control - they paid a dividend of just £12k / year.

[cjohn] 07/9/2016 16:58

Hi NTV, best not to rely on memory. Check the balance sheet for yourself. There are 812k preference shares left. These reamining preference have been stripped of voting rights. The compensation was a 1% increase in interest paid.

It would be best if these preference shares were bought out. 425k were bought out last year.

I agree with you that the directors pay themselves too much - not an uncommon problema in small companies - but the preference shares are only a very minor issue.

[ntv] 05/9/2016 19:35

you forgotten the large lot of almost 2m from memory. these have equal voting rights
what will the family demand for those?
bet it won't be £1
and don't forget the fees on top and profits will fall this year as well

[cjohn] 26/8/2016 08:00

812k left of preference shares. A likely premium to buy out these shares will be about 400k sterling. So that sum can be subtracted from the total asset value of the company. Very small beer.

[cjohn] 10/8/2016 09:55

Assets are not the same as in 2004. Did you mean something else?

The preference shares should be bought off, I agree. That makes financial sense. The company bought out 425k last year at a small Premium to par. This really doesn't seem to me to be such a major issue given that there are only 812 k left.It's just a form of debt. This is particularly so as the preference shares have been stripped of their voting rights.

[ntv] 27/7/2016 07:25

no comment about trading from the agm then?
the company appears not to want inform shareholders of current sales etc

[ntv] 27/7/2016 07:21

you have forgotten about about all the pref shares on the balance sheet. the directors dictate at what price these are repurchased
one lot yields 11% but the bulk yield 6%
effectively
this is a two tier share structure which is controlled by directors
prefs are valued at par it seems on the balance sheet and at mkt prices
maybe that will change at the next balance sheet date
also very old fashioned to have pension owning a chunk of share capital
share price and assets the same as 2004

[beazer2] 22/7/2016 15:48

When you add back the revaluation surplus of £9.5m and the £5m goodwill on the Land Rover sale the net assets come to £41m. Divide by 2.8m shares and you come to a nav of just under £15 per share. At some stage the family will release this but it may be a while during which the dividend yield of 4% is some compensation.

[cjohn] 20/6/2016 10:11

More importantly, it would be beneficial to tangible asset value per share.

[onwego] 18/6/2016 18:06

Everything else being equal, buying back shares at this level would be beneficial to per share earnings.

[cjohn] 17/6/2016 10:27

The preferences are correctly included in non-current liabilities.

Why is buying freeholds and developing "running on the spot"?

[ntv] 13/6/2016 22:04

why not, that is the cost of the debt
ordinary share price does affect the balance as the caffyns' pension fund owns a lot of ord shares

[prop_joe] 13/6/2016 21:51

The prefs should not be included in the balance sheet at the most recent buyout price, just as the ordinary shares are not be included at the most recent price they have changed hands in the stock market.

[ntv] 13/6/2016 21:23

not sure remaining prefs have been valued on the balance sheet in the correct way either
because surely they should be valued as a liability at there most recent buyout price because in therory this is the min price holders will accept except we don't know what price the 2m 6% prefs shares could be bought for
maybe a 50% premium
so this would create a liabilty of £3m instead of £2m
without associated costs again

[ntv] 13/6/2016 21:15

but that doesn't grow the company because it is just like running on the spot

[cjohn] 13/6/2016 09:58

Hi NTV,

Yes, you're right. Trading at such a discount to book, it makes obvious sense to buy in their own shares, the blessed preferences included.

I wasn't aware that they were thinking of acquiring dealerships. The modus opreandi seems to be buy freehold property and then develop.

[prop_joe] 12/6/2016 10:55

I would like the company to give their broker instructions to buy any available shares at the current share price which would effectively put a floor under it. IMV it would be a low risk earnings enhancing strategy. Another of my investments appears to be doing this and retiring shares which is benefiting those happy to remain holders.

[ntv] 12/6/2016 10:37

i was referring to possible acquistions
anything bought on a higher pe than about 6.5 will be earnings dilutive straight away unless loads of costs can be stripped
though could be hidden by the so called mkt rent from LR property
buying in its own shares would be a better option but not the skies the limit price, lets make up a price on pref shares like the last one
if as according to the board they are so undervalued surely redeeming the prefs
creates value to the ords boosting the value of those by the equilivant probably
more. board gains as they own most of the shares and so do smaller holders for once

[cjohn] 10/6/2016 11:44

You're right, there can always be more information given in accounts. But it's not difficult for us to work out the effects of the Land Rover sale in any case.

I'm sorry I don't understand your remark re a dealership prepared to exit on a PE of 7 or lower. What are you referring to? Possible acquisitions?