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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Caffyns Plc | LSE:CFYN | London | Ordinary Share | GB0001615219 | ORD 50P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 450.00 | 400.00 | 500.00 | 450.00 | 450.00 | 450.00 | 9,403 | 00:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Motor Veh Dealers (new,used) | 251.43M | 2.52M | 0.8766 | 5.13 | 12.96M |
TIDMCFYN
RNS Number : 6452T
Caffyns PLC
26 November 2021
HALF YEAR REPORT
for the six months ended 30 September 2021
Summary
6 months 6 months to to 30 September 30 September 2021 2020 GBP'000 GBP'000 Revenue 110,785 85,352 Profit before tax 2,295 1,414 Underlying EBITDA (see note 1 below) 3,950 3,218 Underlying profit before tax (see note 1 below) 2,396 1,534 Pence Pence Underlying basic earnings per share 73.0 55.9 Basic earnings per share 69.9 52.3 Interim dividend per ordinary 7.5 - share
Financial and operational review
-- Underlying profit before tax of GBP2.40 million (2020: GBP1.53 million) -- Profit before tax of GBP2.30 million (2020: GBP1.41 million) -- Like-for-like revenue increase for the period of 29% (see note 2 below) -- Underlying basic earnings per share up by 31% to 73.0 pence (2020: 55.9 pence) -- Basic earnings per share up by 34% to 69.9 pence (2020: 52.3 pence) -- Resumption of dividend payment reflecting first half performance -- Net bank borrowings at 30 September 2021 of GBP8.7 million (2020: GBP12.2 million)
Simon Caffyn, Chief Executive, commented:
"Our results to September benefited from an unprecedented used car performance. We have also implemented greater operational efficiencies throughout the group and I am proud of the way our operational and support teams have risen to the challenges to deliver this strong performance'"
Enquiries:
Simon Caffyn, Chief Caffyns plc Executive Tel: 01323 730201 Mike Warren, Finance Director Headland Chloe Francklin Tel: 020 3805 4855
Note 1: Underlying results exclude items that have non-trading attributes due to their size, nature or incidence. Non-underlying items for the period totalled GBP0.10 million (2020: GBP0.12 million) and are detailed in Note 4 to these condensed consolidated financial statements. Underlying EBITDA of GBP3.95 million (2020: GBP3.22 million) represents Operating profit before non-underlying items of GBP2.97 million (2020: GBP2.23 million) and Depreciation and amortisation of GBP0.98 million (2020: GBP0.99 million).
Note 2: Like-for-like comparisons exclude from the current year the impact of the Lotus and MG businesses at Ashford, both of which were opened during the period, as well as the LEVC business in Eastbourne which opened during the prior year period. All other businesses operated throughout both the current and prior six-month periods.
INTERIM MANAGEMENT REPORT
Summary
The board is very pleased to report a strong underlying profit before tax of GBP2.40 million for the half-year ended 30 September 2021 ("the period"). This is a considerable improvement on the GBP1.53 million recorded for the comparative period in 2020. Trading in the period, especially for used cars, has been robust and actions implemented over the last year have strengthened the resilience of the business, including against the adverse effects of the covid-19 pandemic. During the period, the Company utilised the support made available by Government from reductions in business rates for retail premises and to a lesser extent from Coronavirus Job Retention Scheme furlough grants, which assisted us to maintain employment. New car availability for the important September bi-annual registration plate change on 1 September was constrained by the global shortage of semiconductors adversely affecting car production levels and we expect this issue also to affect the second half of the current financial year.
Revenue for the period increased by 30% to GBP110.8 million (2020 GBP85.4 million). The increase resulted primarily from business activity in the prior period being heavily restricted in two of the six months due to covid-19, but partially offset by the global shortage of semiconductors affecting the availability of new cars in the period. Underlying basic earnings per share were 73.0 pence (2020: 55.9 pence).
The Company's defined-benefit pension scheme deficit, calculated in accordance with the requirements of IAS 19 Pensions, showed an encouraging reduction of GBP4.5 million from the last financial year-end at 31 March 2021 to GBP4.9 million at 30 September 2021. The Scheme's investments performed well, outpacing the increase in the present value of the Scheme's pension liabilities, resulting in a welcome narrowing of the deficit.
The Company continues to own all but two of the freeholds of the properties from which it operates and this provides the dual strengths of a strong asset base and minimal exposure to rent reviews, which is reassuring in these uncertain times.
Profit before tax for the period was GBP2.30 million (2020: GBP1.41 million) with basic earnings per share of 69.9 pence (2020: 52.3 pence).
The Board is aware of the importance of dividend payments to its shareholders and is mindful that it has not paid a dividend for two years due to the inherent uncertainty the covid-19 pandemic has placed on the business. Having considered the interests of all stakeholders and, i n light of the strong financial performance and associated cash generation in the period and the longer-term prospects for the business, the board has judged that it is appropriate to re-start payment of dividends and has declared an interim dividend of 7.5 pence per ordinary share (2020: Nil pence per ordinary share).
Operating review
New and used cars
Our new car deliveries in the period rose by 12% from the previous year on a like-for-like basis with our VAG-branded new car deliveries performing strongly, ahead of the increase in the UK market. Nationally, the SMMT reported a 19% increase in new car registrations in the retail and small business market segment in which we primarily operate. Used car sales volumes for the period rose by 36% on a like-for-like basis. A number of improvements have been made to our on-line presence and customer journeys over the last year which have helped to make for a much more enjoyable customer experience. Demand was further boosted by customers switching into used car purchases due to the lack of availability of new cars towards the end of the period.
Aftersales
Our aftersales revenues rose by 21% in the period on a like-for-like basis, despite a slow start to the period in April and May as that two-month period coincided with the 12-month anniversary of the first covid-19 lockdown in 2020. The period also faced the headwind of staff shortages from the "pingdemic" and from social-distancing requirements adversely affecting productivity levels. Throughout the period, we have continued to realise improvements to our customer retention processes.
Operations
Given the headwinds to trading that the business has experienced in the period from the background covid-19 pandemic and the growing lack of availability of new cars, it was extremely pleasing that all six of our established franchise businesses reported improved profitability in comparison to the previous period. Our Audi and Volkswagen businesses, in particular, performed very strongly. Our Motorstore used car operation performed satisfactorily in the period, particularly as the business was disrupted by building improvement works at its base in Ashford.
During the period, we commenced representation with Lotus and MG, opening in Ashford on 1 July 2021. Both businesses have performed well, and we are encouraged by the starts that they have made.
The Company benefited in the period from the Government's business rates holiday for retail premises with savings of GBP0.5 million (2020: GBP0.6 million). Savings will continue until March 2022, albeit at a lower level. The Company also utilised the Government's Coronavirus Job Retention Scheme, receiving GBP0.1 million in the period (2020: GBP1.7 million).
Property
Capital expenditure in the period was GBP1.2 million (2020: GBP0.2 million). This included GBP0.7 million of assets in the course of construction associated with an upgrade to our Volvo site in Eastbourne, to allow for an expansion of the showroom facility to better represent Volvo's extended model range. This upgrade will be completed in the second half of the year.
We operate primarily from freehold sites and our property portfolio provides additional stability to our business model. Annually, we obtain an independent assessment of the values of our freehold properties against their carrying value in our accounts and had an unrecognised surplus to carrying value of GBP12.3 million at 31 March 2021, our last financial year-end. The board does not consider there to have been any material movement in the value of the Company's freehold properties since the year-end.
As part of the sale of the Land Rover business in April 2016, our freehold premises in Lewes had been leased to a third-party but that lease came to an end in early June 2021. The Board is evaluating future opportunities for the site.
Pensions
The Company's defined-benefit pension scheme started the period with a net deficit of GBP9.4 million. The board has little control over the key assumptions in the valuation calculations as required by accounting standards and the size and nature of the Scheme's underlying assets and liabilities means that the deficit can be subject to significant change. However, the board was pleased to note a significant reduction in the assessed level of the deficit at 30 September 2021, to GBP4.9 million. Net of deferred tax, the net deficit was GBP4.0 million at 30 September 2021 (2020: GBP10.8 million) and GBP7.6 million at 31 March 2021. In the period, growth in the value of the Scheme's gross assets was good, increasing in value by GBP5.8 million, whilst the Scheme's liabilities increased by just GBP1.3 million.
The pension cost under IAS 19 is recognised in the Condensed Consolidated Statement of Financial Performance and continues to be charged as a non-underlying cost, amounting to GBP101,000 in the period (2020: GBP113,000).
As the Scheme is in deficit, the Company has in place a recovery plan which has been agreed with the trustees, and which was last updated in May 2021. During the period, the Company made cash payments into the Scheme of GBP1.4 million, which included a one-off payment of GBP1.0 million in June 2021. The recurring element of these payments increase by a minimum of 2.25% per annum.
Bank and other funding facilities
The Company has banking facilities with HSBC which comprise a term loan, originally of GBP7.5 million, and a revolving-credit facility of GBP7.5 million, both of which will become renewable in March 2023. HSBC also provides an overdraft facility of GBP3.5 million, renewable annually. In addition, there is an overdraft facility of GBP4.0 million provided by Volkswagen Bank, renewable annually, together with a term loan, originally of GBP5.0 million, which is repayable over the ten years to November 2023.
The Company has been cash generative during the period with GBP2.7 million (2020: GBP4.4 million) generated from operating activities, including a favorable working capital improvement of GBP1.0 million (2020: GBP2.0 million).
Bank borrowings, net of cash balances, at 30 September 2021 were GBP8.7 million (2020: GBP12.2 million), down from GBP10.3 million at 31 March 2021. As a proportion of shareholders' funds, bank borrowings, net of cash balances were 27% at 30 September 2021 (2020: 50%).
Taxation
The tax charge for the period has been based on an estimation of the effective tax rate on profits for the full financial year of 20% (2020: 22%). The current year effective tax rate is marginally higher than the standard rate of corporation tax in force for the year of 19% due to the effect of items disallowable for tax purposes.
Payments of corporation tax in the period, net of refunds, were GBP0.3 million (2020: refund of GBP0.1 million).
The narrowing of the deficit of the Company's defined-benefit pension scheme in the period contributed to the recognition of a deferred tax liability on the Statement of Financial Position at 30 September 2021 of GBP0.4 million (2020: deferred tax asset of GBP1.1 million).
People
The health and safety of our employees and customers during the ongoing covid-19 pandemic has been our paramount concern with policies implemented so that our showroom and workshop activities continue to be undertaken in a responsible and socially distanced way. The response from everyone in the Company to the pandemic continues to be outstanding and the board would like to express its gratitude to them for their hard work and professional application . Our results to September benefited from an unprecedented used car performance. We have also implemented greater operational efficiencies throughout the group and our operational and support teams have risen to the challenges to deliver this strong performance .
Dividend
The Company has not declared a dividend since the interim dividend in late 2019. The Board is aware of the importance of dividend payments to its shareholders, and for the need to resume dividend payments once it is appropriate to do so. Despite the uncertainty that remains over the covid-19 pandemic and the ongoing supply chain issues the industry is facing, the judgement of the board is that the first half performance and longer term prospects mean that it is now appropriate to restart dividend payments. Accordingly it has declared an interim dividend of 7.5 pence per ordinary share (2020: Nil pence per ordinary share). This interim dividend will be paid to shareholders on 10 January 2022 to those shareholders on the register at close of business on 10 December 2021. The ordinary shares will be marked ex-dividend on 9 December 2021.
Strategy
Our continuing strategy is to focus on representing premium and premium-volume franchises as well as maximising opportunities for premium used cars, with an emphasis on delivering the highest quality of customer experience. We recognise that we operate in a rapidly changing environment and carefully monitor the appropriateness of this strategy whilst also seeking new opportunities to invest in the future growth of the business.
We concentrate on stronger markets so as to deliver higher returns from fewer but bigger sites. We continue to seek to deliver performance improvement, in particular in our used car and aftersales operations.
Current trading and outlook
Customer demand for used cars remains strong, with few signs of slowing. The Company's forward-order bank for new cars is at a historically high level, which is especially encouraging for 2022 when it is hoped that new car availability will improve. However, in the short-term new cars are expected to remain in short supply and the high level of national covid-19 infections continues to be a concern as winter approaches. Given these uncertainties, the board remains cautious for the second half of the financial year.
Our balance sheet is appropriately funded and our freehold property portfolio is a source of substantial stability. We have taken several actions over the last eighteen months that have significantly enhanced our online presence, as well as improving our productivity and increasing the resilience of the business. We remain confident in the longer-term prospects for the Company and are ready to explore future business opportunities as they arise.
Simon G M Caffyn
Chief Executive
25 November 2021
Condensed Consolidated Statement of Financial Performance
for the half year ended 30 September 2021
Unaudited Unaudited Audited Half year Half year Year ended N o to to 31 March t e 30 September 30 September 2021 2021 2020 Total Total Total GBP'000 GBP'000 GBP'000 Revenue 110,785 85,352 165,085 Cost of sales (95,058) (73,884) (142,304) ---------------------------------------- ------ -------------- -------------- ------------ Gross profit 15,727 11,468 22,781 Operating expenses (13,036) (9,618) (20,798) ---------------------------------------- ------ -------------- -------------- ------------ Operating profit before other income 2,691 1,850 1,983 Other income (net) 3 259 360 909 ---------------------------------------- ------ -------------- -------------- ------------ Operating profit 2,950 2,210 2,892 ---------------------------------------- ------ -------------- -------------- ------------ Operating profit before non-underlying items 2,966 2,229 3,142 Non-underlying items within operating profit 4 (16) (19) (250) ---------------------------------------- ------ -------------- -------------- ------------ Operating profit 2,950 2,210 2,892 Net finance expense 5 (570) (695) (1,266) Non-underlying net finance expense on pension scheme 4 (85) (101) (202) ---------------------------------------- ------ -------------- -------------- ------------ Net finance expense (655) (796) (1,468) ---------------------------------------- ------ -------------- -------------- ------------ Profit before taxation 2,295 1,414 1,424 ---------------------------------------- ------ -------------- -------------- ------------ Profit before tax and non-underlying items 2,396 1,534 1,876 Non-underlying items within operating profit 4 (16) (19) (250) Non-underlying net finance expense on pension scheme 4 (85) (101) (202) ---------------------------------------- ------ -------------- -------------- ------------ Profit before taxation 2,295 1,414 1,424
Taxation 6 (410) (5) (14) ---------------------------------------- ------ -------------- -------------- ------------ Profit for the period 1,885 1,409 1,410 ---------------------------------------- ------ -------------- -------------- ------------ Earnings per share Basic 7 69.9p 52.3p 52.4p Diluted 7 69.0p 52.3p 52.1p Non-GAAP measure Underlying basic earnings per share 7 73.0p 55.9p 66.0p Underlying diluted earnings per share 7 72.0p 55.9p 65.6p
Condensed Consolidated Statement of Comprehensive Expense
for the half year ended 30 September 2021
Note Unaudited Unaudited Audited Half year Half year Year to to to 30 September 30 September 31 March 2021 2020 2021 GBP'000 GBP'000 GBP'000 Profit for the period 1,885 1,409 1,410 --------------------------------------- ----- ------------- ------------- --------- Items that will never be reclassified to profit and loss: Remeasurement of net pension scheme obligation 12 3,224 (4,025) (301) Deferred tax on remeasurement of pension scheme obligation (612) 765 57 --------------------------------------- ----- ------------- ------------- --------- Other comprehensive income/(expense), net of tax 2,612 (3,260) (244) --------------------------------------- ----- ------------- ------------- --------- Total comprehensive income/(expense) for the period 4,497 (1,851) 1,166 --------------------------------------- ----- ------------- ------------- ---------
Condensed Consolidated Statement of Financial Position
at 30 September 2021
Unaudited Unaudited Audited 30 September 30 September 31 March Note 2021 2020 2021 GBP'000 GBP'000 GBP'000 Non-current assets Right-of-use assets 9 550 768 610 Property, plant and equipment 9 38,060 38,206 37,624 Investment properties 10 7,703 7,994 7,751 Interest in lease 473 643 557 Goodwill 286 286 286 Deferred tax asset - 1,080 412 --------------------------------------- ------- -------------- -------------- ---------- Total non-current assets 47,072 48,977 47,240 --------------------------------------- ------- -------------- -------------- ---------- Current assets Inventories 27,703 31,309 36,562 Trade and other receivables 4,003 8,106 5,072 Interest in lease 171 175 173 Current tax recoverable - - 34 Cash and cash equivalents 4,958 5,273 5,735 --------------------------------------- ------- -------------- -------------- ---------- Total current assets 36,835 44,863 47,576 --------------------------------------- ------- -------------- -------------- ---------- Total assets 83,907 93,840 94,816 --------------------------------------- ------- -------------- -------------- ---------- Current liabilities Interest-bearing overdrafts, loans and borrowings 1,875 4,875 3,875 Trade and other payables 30,735 35,737 39,338 Lease liabilities 434 493 495 Current tax payable 165 320 306 --------------------------------------- ------- -------------- -------------- ---------- Total current liabilities 33,209 41,425 44,014 --------------------------------------- ------- -------------- -------------- ---------- Net current assets 3,626 3,438 3,562 Non-current liabilities Interest-bearing loans and borrowings 11,750 12,625 12,187 Lease liabilities 695 1,115 783 Preference shares 812 812 812 Pension scheme obligation 12 4,920 13,310 9,434 Deferred tax liability 411 - - --------------------------------------- ------- -------------- -------------- ---------- Total non-current liabilities 18,588 27,862 23,216 --------------------------------------- ------- -------------- -------------- ---------- Total liabilities 51,797 69,287 67,230 --------------------------------------- ------- -------------- -------------- ---------- Net assets 32,110 24,553 27,586 --------------------------------------- ------- -------------- -------------- ---------- Shareholders' equity Ordinary share capital 1,439 1,439 1,439 Share premium 272 272 272 Capital redemption reserve 707 707 707 Non-distributable reserve 1,724 1,724 1,724 Retained earnings 27,968 20,411 23,444 --------------------------------------- ------- -------------- -------------- ---------- Total equity 32,110 24,553 27,586 --------------------------------------- ------- -------------- -------------- ----------
Condensed Consolidated Statement of Changes in Equity
for the half year ended 30 September 2021 (unaudited)
Capital Share Share redemption Non-distributable Retained Total capital premium reserve reserve earnings equity GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 At 1 April 2021 Total comprehensive income 1,439 272 707 1,724 23,444 27,586 Profit for the period - - - - 1,885 1,885 Other comprehensive income - - - - 2,612 2,612 ----------------------------------- ---------- ---------- ------------ ------------------ ----------- ---------- Total comprehensive income for the period - - - - 4,497 4,497 Transactions with owners: Share-based payment - - - - 27 27 ---------------------------------- ---------- ---------- ------------ ------------------ ----------- ---------- At 30 September 2021 (unaudited) 1,439 272 707 1,724 27,968 32,110 ----------------------------------- ---------- ---------- ------------ ------------------ ----------- ----------
for the half year ended 30 September 2020 (unaudited)
Capital Share Share redemption Non-distributable Retained Total capital premium reserve reserve earnings equity GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 At 1 April 2020 1,439 272 707 1,724 22,238 26,380 Total comprehensive income/(expense) Profit for the period - - - - 1,409 1,409 Other comprehensive expense - - - - (3,260) (3,260) ----------------------------------- ---------- ---------- ------------ ------------------ ----------- ---------- Total comprehensive expense for the period (1,851) (1,851) Transactions with owners: Share-based payment - - - - 24 24 ---------------------------------- ---------- ---------- ------------ ------------------ ----------- ---------- At 30 September 2020 (unaudited) 1,439 272 707 1,724 20,411 24,553 ----------------------------------- ---------- ---------- ------------ ------------------ ----------- ----------
for the year ended 31 March 2021 (audited)
Capital Share Share redemption Non-distributable Retained Total capital premium reserve reserve earnings equity GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 At 1 April 2020 1,439 272 707 1,724 22,238 26,380 Total comprehensive income/(expense) Profit for the year - - - - 1,410 1,410 Other comprehensive expense - - - - (244) (244) --------------------------------- ---------- ---------- ------------ ------------------ ----------- ---------- Total comprehensive income for the year 1,166 1,166 Transactions with owners: Issue of shares - SAYE - - - - 3 3 Share-based payment - - - - 37 37 -------------------------------- ---------- ---------- ------------ ------------------ ----------- ---------- At 31 March 2021 (audited) 1,439 272 707 1,724 23,444 27,586 --------------------------------- ---------- ---------- ------------ ------------------ ----------- ----------
Condensed Consolidated Cash Flow Statement
for the half year ended 30 September 2021
Unaudited Unaudited Audited Half year Half year Year to to to 31 March 30 September 30 September 2021 2021 2020 GBP'000 GBP'000 GBP'000 Cash flows from operating activities Profit before taxation 2,295 1,414 1,424 Adjustments for: Net finance expense and pension scheme service cost 655 796 1,468 Depreciation of property, plant and equipment, investment properties and right-of-use assets 984 989 1,982 Impairment against investment properties - - 184 Cash payments into the defined-benefit pension scheme (1,391) (262) (526) Loss on disposal of property, plant and equipment - 1 3 Share-based payments 27 24 37 Decrease in inventories 8,859 1,221 3,484 Decrease/(increase) in receivables 1,069 (3,788) (754) (Decrease)/increase in payables (8,881) 4,601 697 ------------------------------------------------ --------------- --------------- ----------- Cash generated from operations 3,617 4,996 7,999 Net tax (paid)/recovered (307) 66 (31) Interest paid (562) (683) (1,244) ------------------------------------------------ --------------- --------------- ----------- Net cash generated from operating activities 2,748 4,379 6,724 ------------------------------------------------ --------------- --------------- ----------- Investing activities Proceeds generated on disposal of property, - - - plant and equipment Purchases of property, plant and equipment (913) (198) (394) Receipt from investment in lease 93 - 185 ------------------------------------------------ --------------- --------------- ----------- Net cash used in investing activities (820) (198) (209) ------------------------------------------------ --------------- --------------- ----------- Financing activities Bank revolving-credit facility repaid (2,000) (1,000) (2,000) Revolving-credit facility utilised - - 1,000 Secured loans (repaid)/utilised (437) 781 (657) Issue of shares - SAYE scheme - - 3 Repayment of lease liabilities (268) (167) (604) ------------------------------------------------ --------------- --------------- ----------- Net cash used in financing activities (2,705) (386) (2,258) ------------------------------------------------ --------------- --------------- ----------- Net (decrease)/increase in cash and cash equivalents (777) 3,795 4,257 Cash and cash equivalents at beginning of period 5,735 1,478 1,478 ------------------------------------------------ --------------- --------------- ----------- Cash and cash equivalents at end of period 4,958 5,273 5,735 ------------------------------------------------ --------------- --------------- ----------- Cash and cash equivalents 4,958 5,273 5,735 Bank revolving-credit facility (1,000) (4,000) (3,000) ------------------------------------------------ --------------- --------------- ----------- 3,958 1,273 2,735 ------------------------------------------------ --------------- --------------- -----------
Notes to the Condensed Consolidated Financial Statements
for the half year ended 30 September 2021
1. GENERAL INFORMATION
Caffyns plc is a company domiciled in the United Kingdom. The address of the registered office is Meads Road, Eastbourne, East Sussex, BN20 7DR.
These condensed consolidated financial statements for the half year to 30 September 2021 and similarly for the half year to 30 September 2020 are unaudited. They do not include all the information required for full annual financial statements and should be read in conjunction with the financial statements of the Company for the year ended 31 March 2021.
The comparative financial information for the year ended 31 March 2021 in these condensed consolidated financial statements does not constitute statutory accounts for that year. The statutory accounts for 31 March 2021 have been delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
These condensed consolidated financial statements have been reviewed by the Company's auditor and a copy of their review report is set out at the end of these statements.
These consolidated interim financial statements were approved by the directors on 25 November 2021.
2. ACCOUNTING POLICIES
The annual financial statements of Caffyns plc are prepared in accordance with UK adopted International Accounting Standards . The set of condensed consolidated financial statements included in this half yearly financial report has been prepared in accordance with UK adopted International Accounting Standard 34 'Interim Financial Reporting'. As required by the disclosure guidance and transparency rules of the Financial Conduct Authority, this set of condensed consolidated financial statements has been prepared in accordance with the accounting policies set out in the Annual Report for the year ended 31 March 2021 .
Segmental reporting
Based upon the management information reported to the Group's chief operating decision maker, the Chief Executive, in the opinion of the directors, the Group only has one reportable segment. There are no major customers amounting to 10% or more of the Group's revenue. All revenue and non-current assets derive from, or are based in, the United Kingdom.
Basis of preparation: Going concern
These condensed consolidated financial statements have been prepared on a going concern basis which the directors consider appropriate for the reasons set out below.
The directors have considered the going concern basis and have undertaken a detailed review of trading and cash flow forecasts for a period in excess of one year from the date of approval of this Interim Report. This has focused primarily on the achievement of the Company's banking covenants. These comprise two covenant tests, the first of which requires the Company's underlying profit before interest for the rolling twelve-month period to the testing date to exceed 200% of interest paid in that period on bank borrowings. The second covenant test requires that the Company's bank borrowings at the testing date remain below 70% of the open-market value of its freehold properties that have been charged as security. Both bank covenant tests were passed for the period under review.
The Company has modelled the period to the end of 2022, including the biannual registration plate change months of March and September 2022, and has concluded that there is headroom that would allow for a significant reduction in expected new and used units over this period. External market commentary provided by the Society of Motor Manufacturers and Traders ("SMMT") indicate that new car registrations for the final quarter of the calendar year to 31 December 2021 are forecast to be 345,000, some 11% lower than the same three-month period to December 2020, but thereafter with an 18% increase in new car registrations being forecast for the 2022 calendar year. The Company's current new car forward-order book for delivery in December and beyond is significantly ahead of this time last year. T he used car market has remained stable over the past four years, has been growing strongly in 2021 and is expected to remain healthy in 2022 .
The directors have also considered the Company's working capital requirements. The Company meets its day-to-day working capital requirements through short-term stocking loans, bank overdrafts, medium-term revolving credit facilities and term loans. At the period end, the medium-term banking facilities included a term loan with an outstanding balance of GBP6.4 million and a revolving credit facility of GBP7.5 million from HSBC, its primary bankers, with both facilities being renewable in March 2023. HSBC also make available a short-term overdraft facility of GBP3.5 million, which is due for its next annual renewal in August 2022. The Company also has a ten-year term loan from VW Bank with a balance outstanding at 30 September 2021 of GBP1.3 million which is repayable to November 2023, and a short-term overdraft facility of GBP4.0 million, which is renewable annually with the next scheduled renewal in August 2022. In the opinion of the directors, there is a reasonable expectation that all facilities will be renewed at their scheduled expiry dates. The failure of a covenant test would render these facilities repayable on demand at the option of the lender.
The directors have a reasonable expectation that the Company has adequate resources and headroom against the covenant test to be able to continue in operational existence for the foreseeable future and for at least twelve months from the date of approval of this Interim Report. For those reasons, they continue to adopt the going concern basis in preparing these condensed consolidated financial statements .
Non-underlying items
Non-underlying items are those items that are unusual because of their size, nature or incidence. Management considers that these items should be disclosed separately to enable a full understanding of the operating results. Profits and losses on disposal of property, plant and equipment and property impairment charges are disclosed as non-underlying, as are certain redundancy costs and costs attributable to vacant properties held pending their disposal.
The net financing return and service cost on pension obligations in respect of the defined benefit pension scheme is presented as a non-underlying item due to the inability of management to influence the underlying assumptions from which the charge is derived. The defined benefit pension scheme is closed to future accrual.
All other activities are treated as underlying.
3. OTHER INCOME (NET) Unaudited Unaudited Audited half year half year year to to to 31 March 30 September 30 September 2021 2021 2020 GBP'000 GBP'000 GBP'000 Rent receivable 205 361 710 Local Government covid-19 support grants 54 - 202 Loss on disposal of tangible fixed assets - (1) (3) ------------------------------------ -------------- -------------- ---------- Total other income 259 360 909 ------------------------------------ -------------- -------------- ---------- 4. NON-UNDERLYING ITEMS Unaudited Unaudited Audited half year half year year to to to 31 March 30 September 30 September 2021 2021 2020 GBP'000 GBP'000 GBP'000 Other income: Net loss on disposal of property, plant and equipment - 1 3 ---------------------------------------- -------------- -------------- ---------- Within operating expenses: Service cost on pension scheme 16 12 23 Redundancy and restructuring costs - 6 40 Property impairments - - 184 --------------------------------------- -------------- -------------- ---------- 16 18 247 ---------------------------------------- -------------- -------------- ---------- Total non-underlying items within operating profit 16 19 250 ---------------------------------------- -------------- -------------- ---------- Net finance expense on pension scheme 85 101 202 ---------------------------------------- -------------- -------------- ---------- Total non-underlying items within profit before taxation 101 120 452 ---------------------------------------- -------------- -------------- ---------- 5. NET FINANCE EXPENSE Unaudited Unaudited Audited half year half year year to to to 31 March 30 September 30 September 2021 2021 2020 GBP'000 GBP'000 GBP'000 Interest in lease interest receivable (5) - - Interest payable on bank borrowings 156 227 367 Interest payable on inventory stocking loans 306 367 681 Interest on lease liabilities 14 12 21 Financing costs amortised 63 53 125 Preference dividends 36 36 72 ---------------------------------------- -------------- -------------- ---------- Finance expense 570 695 1,266 ---------------------------------------- -------------- -------------- ---------- 6. TAXATION Unaudited Unaudited Audited half year half year year to to to 31 March 30 September 30 September 2021
2021 2020 GBP'000 GBP'000 GBP'000 Current UK corporation tax Charge for the period 239 320 401 Reversal of impairment of Advanced - (302) - Corporation Tax asset Adjustments recognised in the period for current tax of prior periods (40) - (33) -------------------------------------- -------------- -------------- ---------- Total current tax charge 199 18 368 -------------------------------------- -------------- -------------- ---------- Deferred tax Origination and reversal of timing differences 211 (12) (381) Adjustments recognised in the period for deferred tax of prior periods - (1) 27 -------------------------------------- -------------- -------------- ---------- Total deferred tax charge/(credit) 211 (13) (354) -------------------------------------- -------------- -------------- ---------- Total tax charged in the Income Statement 410 5 14 -------------------------------------- -------------- -------------- ---------- The tax charge arises as follows: Unaudited Unaudited Audited half year half year year to to to 31 March 30 September 30 September 2021 2021 2020 GBP'000 GBP'000 GBP'000 On normal trading 429 27 100 Non-underlying items (19) (22) (86) -------------------------------------- -------------- -------------- ---------- Total tax charge 410 5 14 -------------------------------------- -------------- -------------- ----------
Taxation of trading items for the half year has been provided at the current rate of taxation of 20% (2020: 22%) expected to apply to the full year. This effective rate is marginally higher than the standard rate of corporation tax in force of 19% due to the effect of items disallowable for tax purposes.
7. EARNINGS PER SHARE
The calculation of basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period. Treasury shares are treated as cancelled for the purposes of this calculation.
The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares and the post-tax effect of dividends and/or interest, on the assumed conversion of all dilutive options and other dilutive potential ordinary shares .
Reconciliations of the earnings and the weighted average number of shares used in the calculations are set out below.
Unaudited Unaudited Audited half year half year year to to to 30 September 30 September 31 March 2021 2020 2021 GBP'000 GBP'000 GBP'000 Basic Profit after tax for the period 1,885 1,409 1,410 ---------------------------------- ------------- ------------- --------- Basic earnings per share 69.9p 52.3p 52.4p ---------------------------------- ------------- ------------- --------- Diluted earnings per share 69.0p 52.3p 52.1p ---------------------------------- ------------- ------------- --------- Underlying Profit before tax 2,295 1,414 1,424 Adjustment: Non-underlying items (note 4) 101 120 452 ---------------------------------- ------------- ------------- --------- Underlying profit for the period 2,396 1,534 1,876 Taxation on normal trading (note 6) (429) (27) (100) ---------------------------------- ------------- ------------- --------- Underlying earnings 1,967 1,507 1,776 ---------------------------------- ------------- ------------- --------- Underlying basic earnings per share 73.0p 55.9p 66.0p ---------------------------------- ------------- ------------- --------- Underlying diluted earnings per share 72.0p 55.9p 65.6p ---------------------------------- ------------- ------------- ---------
The number of fully paid ordinary shares in issue at the period end was 2,879,298 (2020: 2,879,298). Excluding the shares held for treasury, the weighted average shares in issue for the purposes of the earnings per share calculation were 2,695,376 (2020: 2,694,790).
The shares granted under the Company's current SAYE scheme for the period, and for the year ended 31 March 2021, are dilutive. The weighted average number of shares in issue for the purposes of the diluted earnings per share calculation were 2,733,587 (2020: 2,694,790). The shares granted under the Company's previous SAYE scheme, in place for the comparative period, have not been treated as dilutive as the market price of the Company's ordinary shares at 30 September 2020 of GBP2.70 was less than the option price of GBP3.99.
The Directors consider that underlying earnings per share figures provide a better measure of comparative performance.
8. DIVIDS
Ordinary shares of 50p each
An interim dividend of 7.5 pence per ordinary share has been declared and will be paid to shareholders on 10 January 2022 to those shareholders on the register at the close of business on 10 December 2021. The ordinary shares will be marked ex-dividend on 9 December 2021 . No interim dividend was declared in respect of the half-year ended 30 September 2020 and no final dividend was declared in respect of the year ended 31 March 2021.
Preference shares
Preference dividends were paid in October 2021. The next preference dividends are payable in April 2022. The cost of the preference dividends has been included within finance costs.
9. PROPERTY, PLANT AND EQUIPMENT AND RIGHT-OF-USE ASSETS
The following is a reconciliation of changes in the balances of Property, plant and equipment and Right-of-use assets.
Property, plant and equipment: Unaudited half year to 30 September 2021 GBP'000 Property, plant and equipment at 1 April 2021 37,624 Less: Depreciation charges (772) Less: Net book value of disposals - Add: Purchases 545 Add: Assets in the course of construction 663 --------------------------------------------- --------------- Property plant and equipment at 30 September 2021 38,060 --------------------------------------------- ---------------
At 30 September 2021, assets in the course of construction amounting to GBP295,000 had been invoiced but not settled.
Right-of-use assets: Unaudited half year to 30 September 2021 GBP'000 Right-of-use assets at 1 April 2021 610 Less: Amortisation of right-of-use assets (164) Add: Purchases 104 --------------------------------------- --------------- Right-of-use assets at 30 September 2021 550 --------------------------------------- --------------- 10. INVESTMENT PROPERTIES
The following is a reconciliation of changes in the balances of Investment Properties.
Investment properties: Unaudited half year to 30 September 2021 GBP'000 Investment properties at 1 April 2021 7,751 Less: Depreciation charges (48) ------------------------------------ --------------- Property plant and equipment at 30 September 2021 7,703 ------------------------------------ --------------- 11. LOANS AND BORROWINGS Liabilities Revolving arising Bank Bank credit Lease Preference from and cash Net loans facilities liabilities shares financing balances debt GBP'000 GBP'000 GBP'000 GBP'000 activities GBP'000 GBP'000 GBP'000 At 1 April 2021 (audited) 8,062 8,000 1,278 812 18,152 (5,735) 12,417 Cash movement (437) (2,000) (268) - (2,705) 777 (1,928) Other movements - - 119 - 119 - 119 ---------------------- ---------- ------------- ------------- ------------- ------------ ----------- ---------- At 30 September 2021 7,625 6,000 1,129 812 15,566 (4,958) 10,608 (unaudited) ---------------------- ---------- ------------- ------------- ------------- ------------ ----------- ---------- Current liabilities/(assets) 875 1,000 434 - 2,309 (4,958) (2,649) Non-current liabilities 6,750 5,000 695 812 13,257 - 13,257 ---------------------- ---------- ------------- ------------- ------------- ------------ ----------- ---------- At 30 September 2021 7,625 6,000 1,129 812 15,566 (4,958) 10,608 ---------------------- ---------- ------------- ------------- ------------- ------------ ----------- ---------- 12. PENSIONS
The pension scheme deficit reflects a defined benefit obligation that has been updated to reflect its valuation as at 30 September 2021. This has been calculated by a qualified actuary using a consistent valuation method to that which was adopted in the audited financial statements for the year ended 31 March 2021 and in the period to 30 September 2020, and which complies with the accounting requirements of IAS 19 Pensions (revised).
The net liability for defined benefit obligations has decreased from GBP9,434,000 at 31 March 2021 to GBP4,920,000 at 30 September 2021. The reduction of GBP4,514,000 comprises the net charge to the Condensed Consolidated Statement of Financial Performance of GBP101,000, a net remeasurement surplus credited to the Condensed Consolidated Statement of Comprehensive Income of GBP3,224,000 and contributions of GBP1,391,000.
Asset values increased significantly in the period, by GBP5,763,000, despite divestments to pay pension transfers and benefits in the period of GBP1,981,000. Despite these transfers and pensions that were paid in the period, pension liabilities also increased by GBP1,249,000, as a result of an increase in the CPI inflation assumption rate from 2.75% at 31 March 2021 to 3.00% at 30 September 2021. The discount rate applied to discount the scheme's liabilities to their net present value remained unchanged at 30 September 2021, at 1.95%.
13. RISKS AND UNCERTAINTIES
There are a number of potential risks and uncertainties which could have a material impact on the Group's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results. The Board believes these risks and uncertainties to be consistent with those disclosed in our latest Annual Report, including the ongoing covid-19 pandemic and general economic factors, their impact on the Group's defined benefit pension scheme, liquidity and financing, the Group's dependency on its manufacturers and their stability, used car prices and regulatory compliance.
14. CAPITAL COMMITMENTS
At 30 September 2021, the Company had capital commitments of GBP0.9 million (2020: GBPNil) relating to the redevelopment of one dealership's premises.
15. CONTINGENT LIABILITIES
Since 2015, the Company has been named as co-defendant in a number of legal actions that have been initiated against certain of the vehicle manufacturers which it represents. These actions contend that customers have been unfairly treated as a result of their vehicles having been fitted with software which is suggested by the claimant law firms to have operated such that when the vehicles were experiencing test conditions, the emission levels of nitrogen oxides ("NOx") were affected. The vehicles remain safe and roadworthy.
These claims on behalf of multiple claimants, arising out of or in relation to their purchase or acquisition on finance of a vehicle affected by the NOx issue, have been brought against a number of Jaguar Land Rover, Vauxhall, Volkswagen and Audi group entities and dealers, including the Company. The Company has been named as a defendant on a number of claim forms alleging fraudulent misrepresentation, breach of contract, breach of statutory duty, breach of the Consumer Credit Act 1974 and a breach of the Consumer Protection from Unfair Trading Regulations 2008, although not all of these causes of action are being brought against the Company specifically.
In all cases brought to date, the relevant vehicle manufacturers listed above have agreed to indemnify the Company for the reasonable legal costs of defending the litigation and any damages and adverse legal costs that Caffyns may be liable to pay to the claimants as a result of these legal actions. The possibility, therefore, of an economic cost to the Company resulting from the defence of these legal actions is remote.
At present, no timetable can be determined for the resolution of these cases and the relevant issues of liability, loss and causation have not yet been decided. It is therefore too early to assess reliably the merit of any claim and so we cannot confirm that any future outflow of resources is probable.
Accordingly, no provision for liability has been made in these condensed consolidated financial statements.
16. RESPONSIBILTY STATEMENT
We confirm that to the best of our knowledge:
a) these condensed consolidated financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting';
b) these condensed consolidated financial statements include a fair review of the information required by DTR 4.2.7R of the disclosure guidance and transparency rules (indication of important events during the first six months and their impact on the set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year); and
c) the Half Year Report includes a fair review of the information required by DTR 4.2.8R of the disclosure and guidance transparency rules (disclosure of related parties' transactions and changes therein).
By order of the Board
S G M Caffyn
Chief Executive
M Warren
Finance Director
25 November 2021
INDEPENT REVIEW REPORT
to Caffyns plc
Introduction
We have been engaged by the Company to review the condensed consolidated set of financial statements in the half year report for the six months ended 30 September 2021 which comprises the Condensed Consolidated Statement of Financial Performance, the Condensed Consolidated Statement of Comprehensive Expense, the Condensed Consolidated Statement of Financial Position, the Condensed Consolidated Statement of Consolidated Changes in Equity, the Condensed Consolidated Cash Flow Statement and the notes to the set of financial information.
We have read the other information contained in the half year report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and has been approved by the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the group will be prepared in accordance with UK adopted international accounting standards. The condensed set of financial statements included in this interim financial report has been prepared in accordance with UK adopted International Accounting Standard 34, "Interim Financial Reporting".
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed consolidated set of financial statements in the half year report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity", issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated set of financial statements in the half-yearly report for the six months ended 30 September 2021 is not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting its responsibilities in respect of half-yearly financial reporting in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
Southampton
25 November 2021
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
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