Caffyns – Property worth four times market capitalisation

PUBLISHED: 16 Dec 2017 @ 08:00 | Comments (0) |

The icing on the cake with Caffyns (LSE:CFYN) is the very strong balance sheet. Even if selling and servicing cars became a fruitless activity the company can fall back on its land and buildings to give value to shareholders, either by liquidation or renting-out and them paying dividends to shareholders.

Property

The 2017 Report contained this revaluation statement:

“Our portfolio of freehold premises was revalued as at 31 March 2017 by chartered surveyors CBRE Limited based on an existing use valuation. The excess of the valuation over net book value of our freehold properties was £10.1 million. In accordance with our accounting policies (which reflect those generally utilised throughout the motor retail industry), this surplus has not been incorporated into our accounts.”

With that in mind let’s look at the value put on property.

£000s	April 2017	April 2016	April 2015
Balance sheet value	32,490	34,932	34,600
Revaluation exercise: excess over BS valuation	10,100	9,500	8,490
Additional property held in separate “investment property account”	6,986	1,167	0
Sums to TOTAL	49,576	45,599	43,090
More information:
Additions during the prior 12 months	3,924	2,367	2,412
Disposals in prior 12 months	0	1,148	1,623

There is an impressive gap between MCap of £12.2m and property assets of £49.6m. But the company might be heavily indebted and have negative net working capital, so we need to check a few things.

Current assets, current liabilities and non-current liabilities

£’000s	Sept 2017	2016	Sept 2017 with Ben Graham adjustments
Inventories	28,981	32,925	19,319
Receivables	8,456	8,449	6,765
Cash	305	219	305
CURRENT ASSETS	37,742	41,593	26,389
Minus current liabilities (almost all payables)	-33,522	-37,284	-33,522
Minus interest-bearing debt	-10,125	-10,875	-10,125
Minus preference shares	-812	-812	-812
Minus deferred tax	-1,248	-617	-1,248
Minus retirement benefit obligations	-6,063	-4,980	-6,063
TOTAL Current assets minus all liabilities	-14,028	-12,975	-25,381

If we deduct the “current assets minus liabilities” number derived straight from the balance sheet (column one) from the freehold property total we have a “net asset” total of…….

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