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Cambria Automobiles Plc LSE:CAMB London Ordinary Share GB00B4R32X65 ORD 10P
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General Retailers 524.0 10.2 8.2 7.0 58

Cambria Automobiles Plc FINAL RESULTS 2019/20 AND NOTICE OF AGM

25/11/2020 7:00am

UK Regulatory (RNS & others)


Cambria Automobiles (LSE:CAMB)
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RNS Number : 3917G

Cambria Automobiles Plc

25 November 2020

25 November 2020

Cambria Automobiles plc

("Cambria" or the "Group")

AIM: CAMB

FINAL RESULTS 2019/20 AND NOTICE OF AGM

Resilient performance despite significant period of turbulence as a result of COVID-19

Cambria, the franchised motor retailer, announces its final results for the year to 31 August 2020.

The Group reported a strong first half of the financial year, however the trading performance in the second half was significantly impacted by the COVID-19 pandemic and particularly the enforced national lockdown for the period 24 March 2020 to 31 May 2020, which required the closure of all non-essential retail businesses, including car showrooms.

Financial Highlights

 
 Year ended 31 August              2020    2019 
                                   GBPm    GBPm   Change 
 
 Revenue                          524.0   657.8   -20.3% 
 Underlying EBITDA excluding 
  transition to IFRS 16* 
  **                               16.2    17.1    -5.3% 
 Underlying EBITDA with 
  transition to IFRS 16* 
  **                               18.8    17.1    +9.9% 
 Underlying operating profit* 
  **                               13.0    13.6    -4.4% 
 Underlying profit before 
  tax* **                          11.1    12.3    -9.8% 
 Underlying profit before 
  tax margin* **                  2.11%   1.87%   +24bps 
 Underlying earnings per 
  share*                          8.99p   9.78p    -8.1% 
 Operating profit                  12.0    13.9   -13.7% 
 Profit before tax                 10.2    12.5   -18.4% 
 Earnings per share (basic)       8.22p   9.95p   -17.4% 
 Dividend per share                   -    1.1p 
 
 

* These items exclude net non-recurring expense of GBP1.0m relating to reorganisation costs and acquisition costs (2019: profit on disposal of property assets held for resale GBP0.4m and closure costs GBP0.2m) See Note 4

** The adoption of IFRS 16 has an impact on the PBT, Operating Profit and EBITDA calculation as a result of the operating lease expense for rent payable being unwound and replaced with depreciation and finance expense. See Note 3.

   --      Strong balance sheet - net assets GBP71.7m (2019: GBP65.6m) 

-- Strong operational cash flows, net cash flow from operating activities of GBP16.4m (2019: GBP22.2m)

-- Net cash of GBP3.5m (31 August 2019: net debt GBP3.8m), supported by the UK Government's Coronavirus Job Retention Scheme and Business Rates relief measures

-- Continued disciplined investment in freehold property portfolio during year, deploying GBP4.2m in capital expenditure

   --      Underlying Return on Equity at 13.1% (2018/19: 16.0%) 

Operational Headlines

-- New unit sales to retail customers reduced 25.2% (like-for-like down 25.5%), and gross profit reduced despite the 2.7% (like-for-like up 1.5%) increase in profit per unit

   --      Lower margin Fleet and Commercial units reduced 33.3% and 39.7% respectively 
   --      Overall unit sales of new vehicles reduced by 26.3% (like-for-like down 26.5%) 

-- Used vehicle unit sales down 20.9% following March lockdown (like-for like down 21.3%), partially offset by a 7.7% (like-for like 6.4%) improvement in profit per unit

   --      Aftersales Revenue reduced 14.7% (like-for-like down 15.3%) 

-- Group's entry into the Scottish market with the acquisition of an Aston Martin dealership and its Freehold Property in Edinburgh taking the Group to four Aston Martin dealerships

-- Strengthening of High Luxury Segment with acquisition of Rolls-Royce Motor Cars dealership in leasehold premises in Edinburgh, welcoming this prestigious brand into the portfolio

-- Refranchising of Volvo Preston into Alfa Romeo and Jeep to create FCA Brand centre in Preston

-- Completion of land purchase in Solihull for the development of Aston Martin Birmingham site relocation

Mark Lavery, Chief Executive Officer of Cambria said:

" The unprecedented and ongoing effects of the Covid-19 pandemic have put the Group through the most challenging period in its history, though against this backdrop the business has demonstrated its resilience. We endured the material and devastating impact of Lockdown 1 (24 March until 31 May), followed by the bounce back and pent up demand experienced during the summer months, which went some way to offsetting the damage the pandemic inflicted during that time.

The performance in the first half of the financial year to 29 February 2020 was unaffected by the pandemic and we had traded strongly during this period. In our Interim Results published on 6 May 2020 we highlighted that the impact of the pandemic and that the national lockdown would have a material negative impact on the financial performance in the second half and particularly during the March to May period, the year on year negative variance was significant.

The dramatic economic impact of the pandemic forced the Board to consider all its operating procedures and Guest handling processes. We took decisive action to protect the Group and to make it leaner, more flexible and agile in preparation for a very different market place and society once we emerged from the crisis.

At the time of writing, we are in the second enforced national lockdown and whilst our leaner, more flexible and more agile business is better equipped to deal with the challenges of a lockdown on our industry, it is still having a significant impact on our day to day trading.

I have flagged in previous statements that the motor industry is facing some significant changes over the coming years. We are concerned about our future relationship with the EU post conclusion of the BREXIT transition period on December 31(st) this year as this may lead to tariffs being in place for cars and parts being imported from Europe, which will drive up the price of those goods to UK consumers.

Our manufacturer partners continue to face the challenges of meeting compliance with the 2020 and 2021 CO2 emissions targets and a number are facing significant fines for failing to meet the targets set. The UK Government has announced that it will be banning the sale of Internal Combustion Engine propelled vehicles from 2030 and Hybrids from 2035. These decisions will drive a need for the automotive manufacturers to develop compliant vehicles at a significant rate and incur a huge amount of R&D spend in doing so which will invariably drive up the price of vehicles for the general public. Along with the National Franchised Dealer Association and other motor retail executives, I have lobbied hard to try to stop government ministers from making this unfortunate decision and instead urged them to consider a more technology agnostic and balanced approach to achieving net zero by 2050. Political factors appear to be dominating the decision-making process rather than a coherent plan to finding the right practical solutions for reducing carbon emissions towards Net Zero by 2050.

The significant increase in unemployment will only accelerate post the conclusion of the Government Furlough scheme due to finish at the end of March 2021 and this leads me to be cautious about the coming financial year.

I would like to thank all our Associates across the business for their incredible application and flexibility during this unprecedented time and without which we would not have been able to navigate the challenges that the Covid-19 pandemic has forced upon the organisation.

Trading in the current financial year started well, with September and October results ahead of the previous year before the enforced Lockdown 2 commenced, which has again had a material negative impact on trading.

As a result of the unprecedented challenges imposed by COVID-19, Lockdown 2, the structural changes facing the Automotive Industry and the economic challenges that the UK will face post BREXIT and pandemic, the Board remains cautious in its outlook though confident that the Group has the right business model to face the challenges ahead."

Continued Suspension of Forward Guidance

The enforced national Lockdown 2 period (which commenced on 5 November) has resulted in the Group's car showrooms being required to close. This will have a material impact on the Group's financial performance in the financial year to 31 August 2021 and as a result, the Board continues to deem it prudent to suspend financial guidance to the market.

Notice of AGM and posting of report and accounts

The Company also gives notice that the Annual General Meeting of the Company will be held at 10.30am on 7 January 2021 at Grange Aston Martin, Hatfield, AL10 9US (the "AGM").

Given the current COVID-19 pandemic and the associated UK Government measures, the AGM this year will need to be held as a closed meeting. Shareholders will not be permitted to attend the AGM other than to meet the quorum requirement under the Company's Articles of Association, for which the necessary members will be provided by the Company. Instead, shareholders are strongly encouraged to submit Forms of Proxy in favour of the Chairman of the AGM in order to ensure their votes will be counted.

In order to protect the health and wellbeing of our shareholders and Associates, any shareholder who seeks to attend the AGM in person, will be prevented from doing so on grounds of public safety. The proceedings of the AGM will be restricted to the formal business set out in the Notice of AGM. The results of the voting on each resolution will be announced and uploaded onto the Company's website promptly following the close of the AGM.

The Company will continue to monitor the UK Government measures. If circumstances change resulting in the lifting of measures preventing the movement or gathering of people before the date of the AGM, it will consider whether it is appropriate to open up the AGM for attendance by shareholders. If this is the case, an update will be given on the Company's website and by way of announcement to the regulatory news service of London Stock Exchange plc.

The annual report and financial statement for the year ended 31 August 2020 (the "Report and Accounts") will shortly be posted to shareholders together with a notice of its AGM.

Copies of the Reports and Accounts and the AGM notice will be made available shortly from the Company's website, www.cambriaautomobilesplc.com, in accordance with AIM Rule 20.

Enquiries:

 
 Cambria Automobiles                 Tel: 01707 280 851 
  Mark Lavery, Chief Executive 
  James Mullins, Finance Director 
  www.cambriaautomobilesplc.com 
 N+1 Singer - Nomad & Joint Broker   Tel: 020 7496 3000 
  Mark Taylor / Jen Boorer 
 Zeus Capital - Joint Broker         Tel: 020 7533 7727 
  Dominic King 
 FTI Consulting                      Tel: 020 3727 1000 
  Alex Beagley / James Styles / 
  Sam Macpherson 
 

Chairman's statement

Despite the obvious challenges that the Group has faced during the course of the 2019/20 financial year I am pleased to report that Cambria has delivered a strong set of results in the circumstances. The Group has managed the operation of the business and risen to the challenges imposed by COVID-19 extremely well, balancing the safety of our Associates and Guests with the immediate need to sell vehicles and services and the medium term need to ensure that the Group is well placed to manage itself in a viable manner through the economic challenges that will follow in 2021 and thereafter.

Much of the strategic decision making during the year has been focussed on restructuring operations and cost base optimisation to ensure that the business is leaner, more agile, to ensure that it is able to cope with the evolving economic landscape and specific changes to the automotive industry.

Whilst dealing with the day to day operations, the management team has also continued to deliver on a number of strategic franchising and property investment objectives and been able to demonstrate profitability whilst absorbing those changes and at the same time generating positive net cash.

The Group continues to manage its cash flow well to ensure it has adequate liquidity. Some of the major investment projects were paused as a result of the pandemic and remain under review whilst the Board assesses its options in light of the pandemic, its impact on unemployment, BREXIT and the major changes impacting the automotive industry.

The Group, in its 14(th) year of trading, delivered GBP16.2m of underlying EBITDA (excluding IFRS 16 impact) and GBP11.1m of underlying pre-tax profit.

Since its inception in 2006, the Group has only raised a total of GBP10.8m in capital and continues to maintain an excellent return on shareholders' funds which this year reached 13.1%.

The strategic acquisitions, franchise changes and greenfield developments which the Group has delivered over the past six financial years have accelerated the Group's growth and created a solid foundation in the Premium and High Luxury Segment (HLS), giving Cambria a broader and enhanced franchised dealership portfolio mix. The addition of the Aston Martin and Rolls-Royce Motor Cars dealerships in Edinburgh in January 2020 continued to enhance the Group's development of its HLS portfolio and expand its geographical spread.

The new car market in the UK continues to come under pressure as a result of lockdowns, BREXIT and challenging emissions targets. 2019 finished with 2.31m registrations for the overall market. Based on the SMMT October outlook report, it is forecast to end 2020 at 1.56m registrations (down 32.5%) and the current forecast is set to see registrations in 2021 only to recover to 2.0m new car registrations. These are against a record 2.69m registrations in 2016. The biggest change in the market remains the diesel segment which is expected to be down 45.5% in the year largely as a result of negative media coverage and government measures.

Looking ahead, the new car market will be further disrupted as a result of the Government's recent announcement, as part of its Green Revolution, that it is bringing forward the banning of the sale of pure Petrol and Diesel cars from 2030 and Hybrids from 2035, which will mean a seismic shift in the need to develop pure Battery Electric Vehicles, currently the only alternative propulsion solution. This will undoubtedly lead to a significant restriction in consumer choice as these vehicles are significantly more expensive to produce than Internal Combustion Engine powered vehicles and the potential abandonment of personalised transport in rural areas.

An immediate challenge for the manufacturers is the need to meet the 2020 and 2021 CO2 emissions targets to avoid the punitive fines that they will receive for each gram of CO2 per kilometer that they exceed their target. These targets were originally set at a European level and therefore the targets that the manufacturer had to meet were averaged across the EU. The UK (which has a bigger component of higher emitting vehicles) was therefore offset by lower emitting countries. Post BREXIT the UK will adopt the same emissions targets for each manufacturer but without the benefit of averaging across the EU. This will therefore force the manufacturers to critically assess which cars they will be able to register in the UK to avoid the fines, making the sale of the cars non-viable. This again will reduce consumer choice and significantly increase the price of new cars supplied to the UK.

Focusing on the Group's 2019/20 results, revenue unsurprisingly reduced by 20.3% to GBP524.0m (2018/19: GBP657.8m). Underlying profit before tax decreased by 9.8% to GBP11.1m (2018/19: GBP12.3m) and the Group delivered underlying earnings per share of 8.99p (2018/19: 9.78p) - a decrease of 8.1%.

The Group closed the year with net cash of GBP3.5m (2018/19: net debt GBP3.8m) after capital investments of GBP5.4m of which GBP4.2m was invested into the Group's freehold property portfolio. The Group has net assets of GBP71.7m (2018/19: GBP65.6m), underpinned by the ownership of GBP81.3m (2018/19: GBP78.4m) of freehold properties.

Group overview

Cambria was established in 2006 with a strategy to build a balanced motor retail group to deliver the self-funded acquisition and turnaround of underperforming businesses. The strategy evolved in 2013 to encompass the acquisition of Premium and High Luxury businesses, located in geographically strategic locations. It has made good progress over the past six years in delivering on this strategy by acquiring businesses and refranchising dealerships as follows:

   --      Alfa Romeo and Jeep in Preston in March 2020 
   --      Aston Martin and Rolls-Royce in Edinburgh in January 2020 
   --      Vauxhall in Warrington in May 2019 
   --      Citroen in Oldham in May 2019 
   --      Suzuki in Maidstone in April 2019 
   --      Peugeot in Warrington in October 2018 
   --      Lamborghini in Tunbridge Wells in November 2018 
   --      Lamborghini in Chelmsford in April 2018 
   --      McLaren in Hatfield in January 2018 
   --      Bentley in Essex and Kent in January 2018 
   --      Woodford Jaguar Land Rover in July 2016 
   --      Aston Martin Birmingham in May 2016 
   --      Welwyn Garden City Land Rover in January 2016 
   --      Swindon Land Rover in April 2015 
   --      Barnet Jaguar Land Rover in July 2014 

Following the refranchising activity outlined above, the Group now comprises 29 locations, representing 44 franchises and 19 brands, a well-balanced brand portfolio spanning the High Luxury, Premium and Volume segments.

These new franchising and property developments are exciting for the Group and demonstrate its commitment to developing the Premium and High Luxury Segment franchises in geographically strategic locations.

Dividend

As a result of the COVID-19 pandemic and uncertainty over the outlook the Board has suspended dividends and does not propose a final dividend in respect of the financial year 2019/20 (2018/19: 0.85p).

Outlook

As highlighted at the start of my report, the COVID-19 pandemic has led to unprecedented social and economic challenges. We have little visibility on how this will continue to impact the way in which we live our lives day to day. This obviously has an impact on how motor cars are sold and since March 2020 the amount of travel that employees need to undertake for work has significantly reduced with home working and smarter technology usage for meetings becoming the norm.

The UK economy remains in a period of significant uncertainty while the ramifications of leaving the EU are worked through. Even at this late stage there is little clarity on how or if any free trade agreements will be negotiated and there continue to be major implications for the Sterling exchange rate and other fiscal levers. We are unclear as to how these factors will impact the UK motor trade although both a weaker Sterling and any tariffs would undoubtedly have a detrimental effect on the new car market.

The team has done a good job in navigating through the challenges and continues to evolve the Group strategy in light of the risks and opportunities.

Philip Swatman

Chairman

Operating and financial review

Chief Executive Officer's review

Introduction

The financial year to 31 August 2020 has seen the Group, like the rest of society, operate through truly unprecedented times. Despite the challenges that the COVID-19 pandemic has had upon the way in which we trade and the impact that the enforced lockdown from 24 March to 31 May had on the ability to retail vehicles we have delivered a good financial result in the circumstances.

The table below summarises our financial performance, which is detailed in the Finance Director's Report:

 
 Year ended 31 August              2020    2019 
                                   GBPm    GBPm   Change 
 
 Revenue                          524.0   657.8   -20.3% 
 Underlying EBITDA excluding 
  transition to IFRS 16* 
  **                               16.2    17.1    -5.3% 
 Underlying EBITDA with 
  transition to IFRS 16* 
  **                               18.8    17.1    +9.9% 
 Underlying operating profit*      13.0    13.6    -4.4% 
 Underlying profit before 
  tax*                             11.1    12.3    -9.8% 
 Underlying profit before 
  tax margin*                     2.11%   1.87%   +24bps 
 Underlying earnings per 
  share*                          8.99p   9.78p    -8.1% 
 Operating profit                  12.0    13.9   -13.7% 
 Profit before tax                 10.2    12.5   -18.4% 
 Earnings per share (basic)       8.22p   9.95p   -17.4% 
 Dividend per share                   -    1.1p 
 
 

* These items exclude net non-recurring expense of GBP1.0m relating to reorganisation costs and acquisition costs (2019: profit on disposal of property assets held for resale GBP0.4m and closure costs GBP0.2m) - See Note 4

**The adoption of IFRS 16 has an impact on the PBT, Operating Profit and EBITDA calculation as a result of the operating lease expense for rent payable being unwound and replaced with depreciation and finance expense. See Note 3.

The pandemic has forced us to change the way in which we operate with all the necessary personal protection and social distancing in place. The business is leaner and more agile and this will enable it to respond effectively to the changing nature of vehicle supply and customer demand.

The Group celebrated its 14(th) anniversary in July 2020. During those 14 years the Group has grown from one site with three new car franchises to 29 locations representing 44 new car franchises and 19 different brand partners. The Group has utilised a total of GBP10.8m of Share Capital to grow and has delivered an underlying Profit before Tax of GBP11.1m in 2019/20. During the year, the Group delivered a return on shareholder funds of 13.1%. The Group has consistently delivered strong operational cash flows and has built a net asset position of GBP71.7m underpinned by GBP81.3m of freehold property. The Group has developed an exceptional franchise portfolio which has been enhanced further during 2020 with the addition of our first Rolls-Royce Motor Cars dealership and fourth Aston Martin dealership, both in Edinburgh in January 2020.

The year under review was impacted significantly by Lockdown 1 in the period between 24 March and 31 May. As the country headed towards Lockdown 1, the Board took a series of steps to deal with the lockdown instruction:

On 23 March and in line with Government instructions, all Group car showrooms closed from midnight and the Group ensured that all assets were secured. Outstanding servicing and warranty repairs were fulfilled with enhanced personal safety measures in place. As a precautionary measure, there was a full drawdown of the GBP40m RCF facilities to ensure liquidity and to protect the cash balance. All capex projects were put on hold and kept under review. Some of the aftersales facilities remained open on a limited basis to support essential and key workers primarily.

During the lockdown period, the Board agreed to salary reductions of 20-50%. The Board carried out a detailed review by site and department of the operating structure and Associate base. Following the support package announcement on Friday 20 March, the 'Coronavirus Job Retention Scheme' was fully utilised. Business rates waivers were applied for across all sites. The Board carried out a detailed expense review by site and department to minimise the cash burn during the lockdown period. During the period the Group also maintained timely tax payments so that it did not build up a deferred payment liability.

Following the reopening of car showrooms from 1 June 2020 onwards the Group has operated in line with stringent operating guidance to ensure the safety of our Associates and Guests utilising PPE, hand sanitising and social distancing measures in the business.

In the period post lockdown, between 1 June and 31 August, the business performed well and whilst we were selling fewer cars year on year, the profit retention particularly in the used car segment was strong. Aftersales performed well in the period post lockdown and the Group's cost base was well controlled.

Whilst I had never envisaged having to close the doors on the business that had taken 14 years to build in 24 hours I believe that the whole of the Cambria Associate base reacted positively and professionally to deal with it as effectively as possible. For those Associates placed on Furlough this will have been a challenging and unsettling time and for those Associates that continued to work throughout the lockdown period it has undoubtedly been tiring. I am grateful to all our Associates that have continued to support the business throughout.

Brand partnerships

Management has continued to work hard to improve the businesses acquired in previous years and to integrate and develop those acquired and established in the current year,

Our current portfolio of brand partners and dealerships comprises:

 
 High Luxury / Premium      Volume             Motorcycle 
 
 Aston Martin           4   Abarth         2   Triumph    2 
 Bentley                2   Alfa Romeo     1 
 Jaguar                 5   Citroen        1 
 Lamborghini            2   Fiat           2 
 Land Rover             4   Ford           5 
 McLaren                1   Jeep           1 
 Rolls-Royce            1   Mazda          3 
 Volvo                  3   Peugeot        1 
                            Suzuki         1 
                            Vauxhall       3 
 Total                 22                 20              2 
 

A significant period of refranchising activity began during the 2017/18 financial year which demonstrated delivery of the Group's development strategy which evolved in 2013 to enhance our Premium and High Luxury brand representation. This continued in 2020 with the addition of the Group's fourth Aston Martin business and first Rolls-Royce Motor Cars business both in Edinburgh. The Acquisition was from the Administrator of Leven Cars Group Limited and included the trading assets and the freehold property occupied by the Aston Martin business for a total consideration of GBP1.7m.

Operations

 
 Year to 31                              2020                                   2019 
  August 
                         Revenue   Revenue     Gross   Margin   Revenue   Revenue     Gross   Margin 
                                       mix    Profit                          mix    Profit 
                            GBPm         %      GBPm        %      GBPm         %      GBPm        % 
 New vehicles              218.3      41.7      15.7      7.2     293.8      44.7      20.6      7.0 
 Used vehicles             252.2      48.1      21.4      8.5     302.8      46.0      25.1      8.3 
 Aftersales                 65.6      12.5      26.0     39.6      76.9      11.7      29.4     38.2 
 Internal sales           (12.1)     (2.3)         -        -    (15.7)     (2.4)         -        - 
                        --------  --------  --------  -------  --------  --------  --------  ------- 
 Total                     524.0     100.0      63.1     12.0     657.8     100.0      75.1     11.4 
                        --------  --------  --------  -------  --------  --------  --------  ------- 
 Administrative expenses                      (50.1)                                 (61.4) 
 Operating profit 
  before non- recurring 
  expenses                                      13.0                                   13.7 
 Non-recurring 
  income / (expenses)                          (1.0)                                    0.2 
                                            --------                               -------- 
 Operating 
  profit                                        12.0                                   13.9 
                                            --------                               -------- 
 
 

New vehicle sales

 
               2020    2019   Year on year 
                                    change 
 New units    5,535   7,509        (26.3%) 
             ------  ------  ------------- 
 

New vehicle revenue reduced from GBP293.8m to GBP218.3m (down 25.7%) with total new vehicle sales volumes being down 26.3%. Gross profit decreased by GBP4.9m (23.8%) in total. The reduced new vehicle volumes were partially offset by the improvement in the gross profit per unit sold which increased by 4.0% in total.

On a like-for-like basis, excluding the impact of the additions, our new volumes reduced by 26.5% with gross profit reducing by GBP5m as profit per unit increased 2.8% on a like for like basis.

The Group's sale of new vehicles to private individuals was 25.2% lower year-on-year at 5,116 units (like-for-like down 25.5%), the profit per unit for these vehicles improved 2.7% (like-for-like 1.5%). New commercial vehicle sales transacted at a low profit per unit and were significantly down by 39.7% to 235 units in the period. New fleet unit vehicle sales decreased by 33.3% to 184 units in the period.

The new vehicle registration data from the Society of Motor Manufacturers & Traders showed total registrations were down 26.2% in the rolling 12 month period to August 2020. The registration of cars to private individuals was also down 24.6% for the rolling 12 months. The sale of diesel engine vehicles has been hardest hit as a result of the negative media coverage around diesel engine emissions, and in the period, sales of diesel vehicles were down 39.9%.

Used vehicle sales

 
                 2020     2019   Year on year 
                                       change 
 Used units    10,346   13,072        (20.9%) 
              -------  -------  ------------- 
 

W e have delivered another good performance in used vehicle sales despite the impact of lockdown. Revenues decreased from GBP302.8m to GBP252.2m (down 16.7%) whilst the number of units sold declined by 20.9%. The gross profit on used vehicles decreased by GBP3.7m to GBP21.4m, with profit per unit sold increasing by 7.7%.

On a like-for-like basis, volumes were down 21.3% while the gross profit per unit increased by 6.4%.

We have continued our focused strategy in the used car department to increase the efficiency with which we source, prepare and market our used vehicles in order to drive our Velocity trading principles. This has produced strong results, increasing the profit per unit retailed. During the period the lockdown obviously impacted stock turn as we were unable to retail the stock that we had at the point of lockdown. Despite the reduced gross profit derived as a result of the lockdown, this strategy continued to deliver a strong 12 month rolling return on used car investment* of 97.4%. This level was reduced from the 117% achieved last year without the impact of lockdown. The ROI performance at 97.4% remains significantly ahead of the industry average of 75.6%.

* gross profit from used car operation over 12 months as a proportion of average stock levels for the year

Aftersales

 
                            2020        2019   Year on year 
                                                     change 
 Aftersales Revenue     GBP65.6m    GBP76.9m        (14.7%) 
                      ----------  ----------  ------------- 
 

Combined aftersales revenue decreased 14.7% year on year from GBP76.9m to GBP65.6m and related gross profit decreased to GBP26.0m from GBP29.4m. Like-for-like aftersales revenues were 15.3% lower year on year, with gross profit reducing 13.6% to GBP25.4m, down GBP4m.

The aftersales departments contributed 12.5% of the Group's revenue, and 41.2% of the Group's overall gross profit. The aftersales margin was improved in the year.

The Group continues to review its processes for ensuring that we engage with all of our Guests to maximise the opportunity to interact with them through our Guest Relationship Management Programme. This is our contact strategy involving the sale of service plans and delivery of service and MOT reminders in a structured manner, utilising all forms of digital media as well as traditional communication methods. The Group continues to focus on the sale of service plans and its unique warranty-4-life product to enhance Guest retention.

Administrative Expenses (including Government support)

Total underlying administrative expenses remained tightly controlled during the year but also benefitted from the Government support stimulus in the form of the Coronavirus Job Retention Scheme and Business Rates relief which amounted to GBP5.5m in the period. Administrative expenses as a percentage of revenue were 9.6% (2018/19: GBP9.3%), demonstrating good overhead recovery and strong capital disciplines as the Group navigated through the pandemic.

Automotive Industry Issues

Over the next few years, new vehicle sales will continue to be impacted by three factors. The impact of BREXIT, the immediate impact of the fines from the Corporate Average Fuel Economy (CAFÉ) legislation and most recently the Government's decision to bring forward the banning of the sale of Internal Combustion Engine vehicles to 2030.

In the near term we will find out if there is a free trade agreement to govern the UK's dealings with the EU. Given the size of the Automotive Industry in the UK and the scale of the sales of parts and cars between the UK and the EU this should be a significant consideration for both sides in the negotiation. At the time of writing the terms of any deal that is being discussed have not been released. If there are tariffs on the sale of cars both ways it will impact consumer choice and the cost of cars to consumers. This is not in the interest of either side of the negotiations but is a genuine issue that the UK motor retail trade is facing. For the avoidance of doubt the industry requires a completely frictionless and tariff free trade agreement with the EU for it to be effective.

The supply of cars in the UK is being impacted and dictated by the manufacturers' needs to comply with the 2020 and 2021 onwards CAFÉ' regulations which govern the emissions targets for each manufacturer. Failure to meet the emissions target for a manufacturer in a given year generates a fine equivalent to EUR95 per gram of CO2 over the target, multiplied by the number of cars that the manufacturer registers. It is no surprise that the manufacturers are being selective about which cars they manufacture and register in any given period. Post BREXIT this impact in the UK will be amplified as the target for a given manufacturer will be based on the registrations in the UK alone, not averaged across the EU. This will impact supply in the UK in 2021.

The decision by the Government to bring forward the banning of the sale of pure ICE engine vehicles from 2040 to 2030 and Hybrids from 2030 is best described as a "Date without a Plan". We have lobbied Government ministers continuously with the hope that they will consider a balanced approach that is technology agnostic in meeting the objective on Net Zero by 2050. We fully support the aim of Net Zero which is completely necessary. We do object to Battery Electric Vehicles (BEV) being determined as the only viable solution because of the way in which the political momentum is driving decisions that will impact technology development, the environment and will not achieve the Net Zero ambition on a whole lifecycle basis. Some of the challenges around BEV as the only solution are as follows:

-- Polestar have calculated that the breakeven Carbon Emissions point between its Polestar 2 full BEV and a Volvo XC40 Petrol ICE engine car is not reached until the cars have driven 119,000km in a global test environment. This is caused by the significantly higher Carbon output from the production of a BEV over an ICE vehicle

-- All current battery power units include 10 to 12 kilograms of Cobalt of which a significant amount comes from the People's Democratic Republic of Congo. Some of this is being mined by children and these practices are currently part of an ongoing investigation by Amnesty International into child slavery

-- Cobalt and Lithium are still described are rare earth materials and are therefore finite in resource

-- More than 70% of batteries begin life in China being manufactured using coal fired power stations. The Batteries are then shipped around the world after having had multiple commodity inputs (including cobalt) shipped to China in the first instance leaving a huge carbon footprint

-- Recycling Electric Vehicles is much more difficult because of the battery. Whilst batteries can be reused for second life energy storage in wind farms etc they do degrade and will end their life at some point - currently in landfill

-- We do not yet know the impact of a significant shift in the number of Electric Vehicles on the National Grid and whether or not it will be able to cope with those demands. The power generated for the National Grid typically comes from Nuclear Power Stations so increased electricity consumption for Electric cars needs to be generated from somewhere

-- We do not have the charging infrastructure in the UK to cope with the demand for this technology switch and it will take billions of pounds of investment to meet this demand. Anyone in the UK without a private drive or garage will need to rely on plugging their vehicle into roadside charge point of which there will be few per average street

   --      The cost of producing a BEV over an ICE engine car is significantly higher 

-- BEV's are significantly more expensive and there is a danger that a new vehicle becomes an exclusive club available only to metropolitan, well-off citizens and an abandonment of rural Britain

-- Ultimately the cost of electrification will be borne by the soft target of the UK car purchasing consumer

The acceleration by Government to a single technology solution will put a stop to any R&D that the manufacturers were considering to evolve the development of Hybrid, Hydrogen and Synthetic Fuel technologies which could all achieve the aim of Net Zero in a better manner than the route which is being forced by the policy implementation.

Outlook

The new car market in 2019 hit 2.311m registrations. The current SMMT forecasts for 2020 following Lockdown 1 and 2 is now 1.56m with a recovery to 2.0m in 2021 forecast.

We are facing challenges as a result of the COVID-19 pandemic, BREXIT and the Automotive specific issues highlighted above. We are reacting positively as we get transparency on each of the areas where we see risk and opportunity and continue to be agile in dealing with them.

Despite the significant external challenges, the 2019/20 financial year delivered an acceptable set of results. Post the period end, September and October trading were ahead of prior year. The imposition of Lockdown 2 has impacted the progress that the Group was making and despite the fact that operationally we were better prepared for Lockdown 2 than we were in March when Lockdown 1 was imposed, it is still causing a significant impact on trading.

Mark Lavery

Chief Executive

Finance Director's report

Overview

Total revenues in the period decreased 20.3% to GBP524.0m from GBP657.8m in the prior year. New vehicle unit volumes were down 26.3% and new vehicle revenues were down 25.7%. Used car revenue decreased by 16.7% with units reduced by 20.9%. Revenues from the aftersales businesses decreased by 14.7%, compared with the previous year.

Total gross profit decreased by GBP12.0m (15.9%) from GBP75.1m to GBP63.1m in the year. Gross profit margin across the Group improved 0.6% to 12.0%. The revenue mix saw an increase in used cars and aftersales with new cars a reducing proportion of revenue. The average selling price of both new and used cars increased year on year, as did the average profit per new and used units that we sold. There was an improvement in the new car margin to 7.2%, an improvement in used car margin to 8.5% and margin improvement in aftersales to 39.6%. The aftersales operations contributed 41.2% of the total gross profit for the Group. The gross profit contribution made by the used car and aftersales components of the business accounted for 75.1% of the Group's total gross profit mix.

During the year, the Group had non-recurring expenses of GBP1.0m (2018/19 net income of GBP0.2m). These related to the acquisition of the businesses of GBP0.14m and reorganisation costs of GBP0.81m.

The adoption of IFRS 16 has had a material impact on the calculation of EBITDA. In order to make sure that there is transparency and comparability we have provided a full reconciliation of EBITDA in Note 3. The comparable Underlying EBITDA (before IFRS 16 impact) was GBP16.2m in the period, slightly down from GBP17.1m in the previous year. Following adoption of IFRS 16 the Underlying EBITDA for the period was GBP18.8m because of the significant add back of depreciation on the right of use asset (GBP2.07m), Finance expense resulting from the Lease liability (GBP0.3m) and the fact that it doesn't include rent payments of GBP2.5m. Whilst I do not personally agree with IFRS 16 or what it does to a set of accounts and readers' perception of EBITDA, we have included both measures for clarity.

Underlying operating profit was GBP13m, compared with GBP13.6m in the previous year, resulting in an underlying operating margin of 2.5% (2018/19: 2.1%).

Net finance expenses increased to GBP1.9m (2018/19: GBP1.4m). IFRS 16 impacts this also and this split of the GBP1.9m expense represents third party interest costs of GBP1.6m and interest on lease liabilities of GBP0.3m.

The Group's underlying profit before tax decreased by 9.8% to GBP11.1m, compared with GBP12.3m in the previous year.

Underlying earnings per share were 8.99p (2018/19: 9.78p). Basic earnings per share were 8.22p (2018/19: 9.95p) and the Group's underlying return on shareholders' funds for the year was 13.1% (2018/19: 16.0%).

Taxation

The Group tax charge was GBP1.97m (2018/19: GBP2.5m) representing an effective rate of tax of 19.3% (2018/19: 20.3%) on a profit before tax of GBP10.2m (2018/19: GBP12.5m). As outlined in last year's report, it is anticipated that the tax rate will continue at a substantially normal effective tax rate.

Financial position

The Group has a robust balance sheet with a net asset position of GBP71.7m underpinned by GBP81.3m of freehold property (fixed assets and assets held for resale) which are held on a historic cost basis.

In November 2017, the Group entered into revised Banking facilities and as a result, the GBP40m Revolving Credit Facility has no fixed capital repayment profile throughout its five year term.

The cost of the facilities is LIBOR plus a margin. The margin attributable to the term loans will be set each quarter and is dependent on the net debt: EBITDA ratio for the Group. The spread of margin chargeable against the facility ranges from 1.2% where the net debt is less than 1 times EBITDA, up to 2% where the net debt is greater than 2.5 times EBITDA.

The net cash position of the Group as at 31 August 2020 was GBP3.5m (2018/19: net debt GBP3.8m), reflecting a cash position of GBP5.6m (31 August 2019: GBP26.3m) and debt position of GBP2.1m (2018/19: GBP30.1m).

The Group typically uses bank facilities to fund the purchase of freehold and long leasehold properties, stocking loans to fund the acquisition of consignment, demonstrator and used vehicles and has a GBP10m overdraft facility which is available to manage seasonal fluctuations in working capital. The overdraft facilities are renewable annually and are next due on 31 January 2021.

Cash flow and capital expenditure

The Group generated an operating cash inflow of GBP16.4m with working capital reducing by GBP1.9m through efficient management of the vehicle inventory and the stocking lines associated with that inventory. Total funds invested in capital expenditure and acquisitions were GBP5.4m.

During the year the material investments were:

   --      Purchase of Solihull Land for Aston Martin dealership development - GBP1.9m 
   --      Acquisition of Aston Martin Edinburgh freehold - GBP1.6m 
   --      Planning and land enhancement - GBP0.6m 
   --      Other minor refurbishments - GBP0.5m 

The Group has had the RCF drawn to varying degrees throughout the year primarily to ensure that the Group had sufficient liquidity during the lockdown period. At the period end the Group had GBP2.1m drawn having repaid a net GBP30m during the period.

As a result of the net cash outflow of GBP20.6m, the gross cash position was GBP5.8m with gross debt of GBP2.1m and overall net cash of GBP3.5m compared with net debt at 31 August 2019 of GBP3.8m.

Capital expenditure commitments

As outlined in previous Chief Executive's reports, the Group has committed to delivering property solutions to ensure the acquired businesses over the past few years comply with the franchise standards for its brand partners. Over the coming few years, the Group intends to complete the following major freehold investments; Solihull Aston Martin at c.GBP3m, Brentwood Jaguar Land Rover, Aston Martin, Bentley and Lamborghini c.GBP16m. The developments will be funded through a drawdown of RCF and existing cash.

The Board is committed to these investments and anticipates that by making the investments it will put the Group in a strong position to realise the full operational potential of the businesses.

IFRS 16 Impact

IFRS 16 Leases is effective for the first time in the current financial year and has been adopted by the Group.

The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to recognise most leases on the balance sheet. Lessor accounting is substantially unchanged from IAS 17 and therefore IFRS 16 does not have an impact for leases where the Group is a lessor.

The Group adopted IFRS 16 for the first time using the modified retrospective approach with an effective date of 1 September 2019. The Group elected to use the practical expedient on transition to not reassess whether a contract is, or contains, a lease at 1 September 2019. Instead the Group applied the standard only to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 at the date of application.

The Group also elected to use the recognition exemptions for lease contracts that, at the transition date, have a lease term of 12 months or less and do not contain a purchase option (short-term leases) and, lease contracts for which the underlying asset is of low value (low-value assets). The incremental borrowing rate applied to the lease liabilities on 1 September 2019 was 4.0%.

Upon adoption of IFRS 16, the Group applied a single recognition and measurement approach for all leases for which it is the lessee, except for short-term leases and leases of low-value assets. The Group recognised lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. In accordance with the modified retrospective method of adoption, the Group applied IFRS 16 at the date of initial application as if it had already been effective at the commencement date of existing lease contracts.

As at 1 September 2019:-

   --      Right-of-use assets of GBP5,982,000 were recognised; 
   --      Lease liabilities of GBP8,517,000 were recognised; 
   --      Trade and other receivables relating to operating leases of GBP68,000 were recognised; 

-- Deferred tax liabilities decreased by GBP249,000 due to the deferred tax impact of the changes in recognition of the related assets and liabilities;

-- Provisions reduced by GBP1,000,000 in respect of onerous lease provision no longer recognised;

-- Retained earnings decreased GBP1,218,000 as a result of the net impact of these adjustments.

Shareholders' funds

There are 100,000,000 ordinary shares of 10p each with an associated share premium account of GBP0.8m. There were no new funds raised during the year; therefore the share capital and share premium account remain at GBP10.8m, consistent with the prior year. All ordinary shares rank pari passu for both voting and dividend rights.

Pension schemes

The Group does not operate any defined benefit pension schemes and has no liability arising from any such scheme. The Group made contributions amounting to GBP0.6m (2018/19: GBP0.6m) to defined contributions schemes for certain employees.

Financial instruments

The Group does not have any contractual obligation under any financial instruments with respect to the hedging of interest rate risk.

Dividends

As outlined in the Chairman's report and as previously advised, the Board has suspended payment of dividends and therefore does not propose a dividend for the financial year to 31 August 2020.

James Mullins

Finance Director

Consolidated statement of comprehensive income

for year ended 31 August 2020

 
                                      Note           2020                2019 
                                                   GBP000              GBP000 
 
Revenue                                  2        524,016             657,777 
Cost of sales                                   (460,932)           (582,723) 
 
Gross profit                             3         63,084              75,054 
Administrative expenses                          (51,039)            (61,188) 
 
Results from operating 
 activities                              3         12,045              13,866 
 
Finance income                           7             51                  64 
Finance expenses                         7        (1,911)           (1,435) 
 
Net finance expenses                              (1,860)             (1,371) 
 
Profit before tax from operations 
 before non-recurring (expense) 
 / income                                          11,143              12,276 
 
 
Net non-recurring income 
 and expenses                            4          (958)                 219 
--------------------------------  --------      ---------      -------------- 
 
Profit before tax                        3         10,185              12,495 
Taxation                                 8        (1,969)             (2,542) 
 
Profit and total comprehensive 
income for the period                               8,216               9,953 
 
Basic earnings per share                 6          8.22p               9.95p 
 
Diluted earnings per 
 share                                   6          8.17p               9.93p 
 
 
 
 
 
 
 

All comprehensive income is attributable to owners of the Parent Company.

Consolidated statement of changes in equity

for year ended 31 August 2020

 
                         Share capital  Share premium     Retained   Total equity 
                                                          earnings 
                                GBP000         GBP000       GBP000         GBP000 
 
Balance at 31 August 
 2018                           10,000            799       45,828         56,627 
Profit for the year                  -              -        9,953          9,953 
Dividend paid                        -              -      (1,000)        (1,000) 
 
Balance at 31 August 
 2019                           10,000            799       54,781         65,580 
Impact of adoption 
 of IFRS 16                          -              -      (1,218)        (1,218) 
 
Balance at 31 August 
 2019 - restated                10,000            799       53,563         64,362 
 
Profit for the year                  -              -        8,216          8,216 
Dividend paid                        -              -        (850)          (850) 
 
Balance at 31 August 
 2020                           10,000            799       60,929         71,728 
 
 
 

Consolidated statement of financial position

at 31 August 2020

 
                                    Note       2020       2019 
                                             GBP000     GBP000 
Non-current assets 
Property, plant and equipment        9       86,943     85,336 
Intangible assets                    10      21,527     21,478 
Right-of-use asset                   18       6,509          - 
Finance lease receivables            18         118          - 
 
                                            115,097    106,814 
 
Current assets 
Inventories                          12      83,588    112,804 
Trade and other receivables          13       9,085     12,051 
Finance lease receivables            18          68          - 
Cash and cash equivalents                     5,645     26,299 
Property assets classified 
 as held for resale                  14         899        899 
 
                                             99,285    152,053 
 
Total assets                                214,382    258,867 
 
Current liabilities 
Trade and other payables             16   (126,546)  (157,750) 
Lease liabilities                    18     (2,496)          - 
Contract liabilities                 17     (1,604)    (2,379) 
Current tax liability                       (1,271)    (1,297) 
Provision                            21       (236)      (459) 
 
                                          (132,153)  (161,885) 
 
Non-current liabilities 
Borrowings                            15    (2,122)   (30,088) 
Lease liabilities                     18    (6,303)          - 
Provisions                           21           -      (877) 
Contract liabilities                 17     (1,641)          - 
Deferred tax liabilities             11       (435)      (437) 
 
                                           (10,501)   (31,402) 
 
Total liabilities                         (142,654)  (193,287) 
 
Net assets                                   71,728     65,580 
 
Equity attributable to equity holders 
 of the parent 
Share capital                        22      10,000     10,000 
Share premium                                   799        799 
Retained earnings                            60,929     54,781 
 
Shareholders' equity                         71,728     65,580 
 
 

Consolidated cash flow statement

for year ended 31 August 2020

 
                                                 Notes          2020          2019 
                                                              GBP000        GBP000 
Cash flows from operating activities 
Profit for the year                                            8,216         9,953 
Adjustments for: 
Depreciation, amortisation 
 and impairment                                9,10,18         5,779         3,437 
Financial income                                     7          (51)          (64) 
Financial expense                                    7         1,911         1,435 
Profit/(loss) on disposal of 
 fixed assets                                                      -         (414) 
Taxation                                             8         1,969         2,542 
Non-recurring (income)/expenses                      4           958         (219) 
 
                                                              18,782        16,670 
 
Change in trade and other receivables                          2,846         (609) 
Change in inventories                                         29,216      (23,129) 
Change in payables, deferred 
 income and provisions                                      (30,191)        31,607 
 
                                                              20,653        24,539 
 
Interest paid                                                (1,303)         (841) 
Tax paid                                                     (1,994)       (1,714) 
Non-recurring income / expenses                      4         (962)           219 
 
Net cash from operating activities                            16,394        22,203 
 
        Cash flows from investing activities 
Interest received                                                 51            64 
Proceeds from sale of plant 
 and equipment                                                    31         2,917 
Purchase of property, plant and 
 equipment and software                                      (3.668)      (21,907) 
Acquisition of subsidiary (net 
 of cash acquired)                                  24          (56)             - 
Acquisition of business (net 
 of cash acquired)                                  24       (1,671)             - 
 
Net cash from investing activities                           (5,313)      (18,926) 
 
Cash flows from financing activities 
Proceeds from new loan                                             -         9,000 
Interest paid                                                  (608)         (495) 
Repayment of borrowings                                     (27,966)             - 
Lease payments                                      18       (2,311)             - 
Dividend paid                                       22         (850)       (1,000) 
 
Net cash from financing activities                          (31,735)         7,505 
 
Net (decrease)/increase in 
 cash and cash equivalents                                  (20,654)        10,782 
Cash and cash equivalents at 
 1 September 2019                                             26,299        15,517 
 
Cash and cash equivalents at 
 31 August 2020                                                5,645        26,299 
 
 
  Notes to the consolidated accounts 
  (forming part of the financial 
  statements) 
 
   1              Accounting policies 

These financial statements as at 31 August 2020 consolidate those of the Company and its subsidiaries (together referred to as the "Group"). The Parent Company financial statements present information about the Company as a separate entity and not about its group.

International Financial Reporting Standards

IFRS 16 Leases is effective for the first time in the current financial year and has been adopted by the Group.

IFRS 16 supersedes IAS17. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to recognise most leases on the balance sheet. Lessor accounting is substantially unchanged from IAS 17 and therefore IFRS 16 does not have an impact for leases where the Group is a lessor.

The Group adopted IFRS 16 for the first time using the modified retrospective approach with an effective date of 1 September 2019. The Group elected to use the practical expedient on transition to not reassess whether a contract is, or contains, a lease at 1 September 2019. Instead the Group applied the standard only to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 at the date of application. The Group also elected to use the recognition exemptions for lease contracts that, at the transition date, have a lease term of 12 months or less and do not contain a purchase option (short-term leases) and, lease contracts for which the underlying asset is of low value (low-value assets). The incremental borrowing rate applied to the lease liabilities on 1 September 2019 was 4.0%.

International Financial Reporting Standards (continued)

Upon adoption of IFRS 16, the Group applied a single recognition and measurement approach for all leases for which it is the lessee, except for short-term leases and leases of low-value assets. The Group recognised lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. In accordance with the modified retrospective method of adoption, the Group applied IFRS 16 at the date of initial application as if it had already been effective at the commencement date of existing lease contracts.

As at 1 September 2019:-

-- Right-of-use assets were recognised and presented on the face of the consolidated statement of financial position;

-- Additional lease liabilities were recognised and presented on the face of the consolidated statement of financial position;

   --      Trade and other receivables relating to operating leases were de-recognised; 

-- Deferred tax liabilities decreased due to the deferred tax impact of the changes in recognition of the related assets and liabilities;

   --      Provisions reduced in respect of onerous lease provision no longer recognised; 
   --      Retained earnings decreased as a result of the net impact of these adjustments. 
 
                           31 August  1 September 
                                2020         2019 
                              GBP000       GBP000 
Assets 
Right-of-use assets            6,509        5,982 
Finance lease receivable         186          251 
Other receivables              (198)        (183) 
 
Total assets                   6,497        6,050 
 
Liabilities 
Lease liabilities            (8,799)      (8,517) 
Provisions                     1,000        1,000 
Deferred tax liabilities         206          249 
 
Total liabilities            (7,593)      (7,268) 
 
 
Net assets                   (1,096)      (1,218) 
 
Equity 
 
Retained earnings            (1,096)      (1,218) 
 
 

Impact on the consolidated statement of comprehensive income (increase/(decrease)):

 
                                            31 August 
                                                 2020 
                                               GBP000 
Administrative expenses 
Rent                                          (2,547) 
Depreciation                                    2,066 
 
Results from operating activities                 481 
 
Finance income                                      8 
Finance expense                                 (324) 
Taxation                                           43 
 
Profit for the period                             122 
 
Retained earnings on transition               (1,218) 
Retained earnings carried forward             (1,096) 
 
 
 

Impact on the consolidated cash flow statement increase/(decrease)):

 
                                            31 August 
                                                 2020 
                                               GBP000 
Operating lease payments                        2,635 
Interest paid - net                             (324) 
 
Net cash flows from operating activities      (2,311) 
 
Payment of lease liabilities                    2,311 
 
Net cash flows from financing activities        2,311 
 
 

A reconciliation of the total operating lease commitments to the IFRS 16 lease liability at 1 September 2019 is as follows:

 
 
                                           1 September 
                                                  2019 
                                                GBP000 
Operating lease commitments - 31 August 
 2019                                            9,225 
Effect of discounting                          (1,042) 
Other lease adjustment                             334 
 
Lease liabilities recognised                     8,517 
 
 

The following accounting standards and interpretations, issued by the IASB and endorsed by the EU or International Financial Reporting Interpretations Committee (IFRIC), are effective for the first time in the current financial year and have been adopted by the Group with no significant impact on the consolidated results or financial position:

   --    Annual Improvements to IFRSs - 2015-2017 Cycle (effective date 1 January 2019) 

-- Amendments to IAS 28 - Investments in Associates and Joint Ventures (effective date 1 January 2019)

   --    IFRIC 23 - Uncertainty over Income Tax Treatments (effective date 1 January 2019) 

-- Amendments to IFRS 9 - Prepayment features with negative compensation (effective date 1 January 2019)

-- Amendment to IAS 19 - Plan amendment, curtailment or settlement (effective date 1 January 2019)

   --    Covid-19-Related Rent Concessions (Amendment to IFRS 16) - early implementation 

The IASB and the IFRIC have also issued the following standards and interpretations with an effective date after the date of these Financial Statements and which therefore have not been applied in the current period. No significant impact is anticipated from the introduction of these standards in future periods:

New standards and interpretations endorsed but not yet effective:

   --    Amendments to IAS1 & IAS 8 - definition of material (effective date 1 January 2020) 
   --    Amendment to IFRS 3 - definition of business combination (effective date 1 January 2020) 

-- Amendments to references to the conceptual Framework in IFRS Standards (effective date 1 January 2020)

New standards and interpretations not yet endorsed and not yet effective:

   --    IFRS 17 - Insurance contracts (effective 1 January 2023) 
   --    Annual Improvements to IFRSs - 2018-2020 Cycle 
   --    Reference to the Conceptual Framework (Amendments to IFRS 3) 

-- Amendments to IFRS 17 and Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to IFRS 4)

-- Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)

   --    Classification of Liabilities as Current or Non-current (Amendments to IAS 1) 
   --    Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16) 
   --    Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37) 
   2              Revenue 

The Group derives its revenue from contracts with customers for the transfer of goods and services over time and at a point in time in the following major product lines. This is consistent with the revenue information that is disclosed for each reportable segment under IFRS 8 Operating Segments (see note 3). Set out below is the disaggregation of the Groups revenue from contracts with customers:

 
                          2020      2019 
                        GBP000    GBP000 
 
Sale of new cars       218,280   293,805 
Sale of used cars      252,239   302,749 
Aftersales services     65,650    76,944 
Internal sales        (12,153)  (15,721) 
 
Total revenues         524,016   657,777 
 
 

Timing of revenue recognition

The Group recognises all income at a point in time when the performance obligations are satisfied and has not identified any significant income recognised over time or received in advance of performance obligations.

 
Goods and services transferred at a point 
 in time                                    522,246  656,838 
Goods and services transferred over time      1,770      939 
 
Total revenues                              524,016  657,777 
 
 
   3              Segmental reporting 

The Group has adopted IFRS 8 'Operating Segments' which determines and presents operating segments based on information presented to the Group's Chief Operating Decision Maker ("CODM"), the Chief Executive Officer. The Group is operated and managed on a Dealership by Dealership basis. Dealerships operate a number of different business streams such as new vehicle sales, used vehicle sales and after sales operations. Management is organised based on the dealership operations as a whole rather than the specific business streams. Dealerships are considered to have similar economic characteristics and offer similar products and services which appeal to a similar customer base. As such the results of each dealership have been aggregated to form one reportable operating segment.

All segment revenue, profit before tax, assets and liabilities are attributable to the principal activity of the Group being the provision of car vehicle sales, vehicle servicing and related services. Therefore to increase transparency, the Group has included below additional voluntary disclosure analysing revenue and gross margins within the reportable segment.

 
                       2020           2020           2020    2020         2019           2019           2019    2019 
                    Revenue    Revenue mix   Gross profit    Margin    Revenue    Revenue mix   Gross profit    Margin 
                       GBPm              %           GBPm         %       GBPm              %           GBPm         % 
 New Car              218.3           41.7           15.7       7.2      293.8           44.7           20.6       7.0 
 Used Car             252.2           48.1           21.4       8.5      302.8           46.0           25.1       8.3 
 Aftersales            65.6           12.5           26.0      39.6       76.9           11.7           29.3      38.1 
 Internal 
  sales              (12.1)          (2.3)                              (15.7)          (2.4)              -         - 
 
 Total                524.0          100.0           63.1      12.0      657.8          100.0           75.1      11.4 
 
 Administrative expenses                           (50.1)                                             (61.4) 
 Operating profit before 
  non-recurring expenses                             13.0                                               13.7 
 Non-recurring income/ 
  (expenses)                                        (1.0)                                                0.2 
 
 Operating profit                                    12.0                                               13.9 
 
 

The CODM reviews the performance of the business in terms of both net profit before tax and EBITDA, as such the following table shows a reconciliation of the Profit before tax to EBITDA.

The EBITDA in the period varies significantly with the prior year comparative as a result of the transition to IFRS 16 lease accounting which reverses operating lease expenses and replaces it with Depreciation on the right of use assets and finance expenses in relation to the lease liability for those leased assets.

 
                                              2020      2019 
                                            GBP000    GBP000 
 Profit Before Tax                          10,185    12,495 
 Non-recurring (income) expenses 
  (note 4)                                     958     (219) 
 
 Underlying Profit Before Tax               11,143    12,276 
 Net finance expense                         1,544     1,371 
 Net finance Expense IFRS 16                   316         - 
 Depreciation and amortisation               3,713     3,437 
 Depreciation - Right of use asset           2,066         - 
 
 Underlying EBITDA                          18,782         - 
 Net lease payments - pre IFRS             (2,547)         - 
  16 
 
 Underlying EBITDA excluding transition 
  to IFRS 16                                16,235    17,084 
 Non-recurring income (expenses)             (958)       219 
 
 EBITDA                                     17,824         - 
 Lease payments - pre IFRS 16              (2,547)         - 
 
 EBITDA excluding transition to 
  IFRS 16                                   15,277    17,303 
 
 
   4              Non-recurring expense/ (income) 
 
Non-recurring income and expenses are items which derive from 
 events or transactions that are outside the normal course of 
 business, and do not directly relate to the on-going operations, 
 therefore have been separately disclosed in order for the financial 
 statements to present a true and fair view. 
                                                           2020      2019 
                                                         GBP000    GBP000 
Profit on disposal of property held 
 for re-sale                                                  -       414 
Site closures costs                                        (12)     (195) 
Acquisition costs (see note 24)                           (138)         - 
Reorganisation costs                                      (812)         - 
Profit on disposal of fixed assets                            4         - 
 
                                                          (958)       219 
 
 

During the COVID-19 lockdown period the Group undertook a detailed review of the business structure and operating costs. As a result of the operating impact of the pandemic, the Board took the decision to implement a rationalisation programme which led to a significant reduction in the number of Associates through a redundancy programme. The one-off cost of this relating to redundancy programme was GBP812,000.

   5              Staff numbers and costs 

The average number of persons employed by the Group (including directors) during the year, analysed by category, was as follows:

 
                                                Number of employees 
                                                     2020           2019 
 
Sales                                                 307            338 
Service                                               397            424 
Parts                                                  73             79 
Administration                                        237            235 
 
                                                    1,014          1,076 
 
The above analysis is stated based on the average number of persons 
 employed during the year and does not reflect the number employed 
 following the rationalisation programme. 
 
 

The aggregate payroll costs of these persons were as follows:

 
                                                    GBP000   GBP000 
 
Wages and salaries                                  32,096   34,996 
Social security costs                                3,149    3,433 
Expenses related to defined contribution 
 plans                                                 550      558 
Share based payments expense                            19       32 
 
                                                    35,814   39,019 
 
The Wages and salaries analysis is stated without deduction of 
 the Government Grant of GBP4.1m. 
 
   6              Earnings per share 

Basic earnings per share are calculated by dividing the earnings attributable to equity shareholders by the number of ordinary shares in issue in the year. There is one class of ordinary share with 100,000,000 shares in issue.

The Underlying Return on Equity number has been calculated as the adjusted profit attributable to equity shareholders divided by the unweighted average shareholder funds taking the average of the opening and closing shareholders equity from the statement of financial position. The calculation is therefore GBP8,992,000 divided by GBP68,654,000 giving 13.1%.

Basic earnings per share

 
                                             2020     2019 
                                           GBP000   GBP000 
 
Profit attributable to shareholders         8,216    9,953 
Non-recurring (income)/ expenses (Note 
 4)                                           958    (219) 
Tax on adjustments (at 19% (2019: 19%))     (182)       41 
 
Adjusted profit attributable to equity 
 shareholders                               8,992    9,775 
 
Number of shares in issue ('000)          100,000  100,000 
 
Basic earnings per share                    8.22p    9.95p 
 
Adjusted basic earnings per share           8.99p    9.78p 
 
 
 

Diluted earnings per share

During the period the Group cash settled a number of the vested share options and the performance conditions relating to certain other share options were satisfied and therefore 604,662 share options are considered dilutive at the year-end.

 
                                             2020     2019 
                                           GBP000   GBP000 
 
Profit attributable to shareholders         8,216    9,953 
 
Number of shares in issue ('000)          100,000  100,000 
Effect of dilutive share options ('000)       604      189 
 
                                          100,604  100,189 
 
Diluted earnings per share                  8.17p    9.93p 
 
 
   7              Finance income and expense 

Recognised in the income statement

 
                                                    2020    2019 
                                                  GBP000  GBP000 
Finance income 
 
Interest receivable                                   43      64 
Interest on finance leases receivable                  8       - 
 
Total finance income                                  51      64 
 
Finance expense 
 
Interest payable on bank borrowings                  608     594 
Interest on lease liabilities                        324       - 
Consignment and vehicle stocking interest            979     841 
 
Total finance expense                              1,911   1,435 
 
Total interest expense on financial liabilities 
 held at amortised cost                              932     594 
Total other interest expense                         979     841 
 
                                                   1,911   1,435 
 
 
   8              Taxation 

Recognised in the income statement

 
                                                      2020    2019 
                                                    GBP000  GBP000 
Current tax expense 
 
Current year                                         1,777   2,289 
Adjustment in respect of prior years                  (55)       1 
 
                                                     1,722   2,290 
 
Deferred tax 
Adjustment in respect of prior years                  (31)      79 
Origination and reversal of temporary differences      278     173 
 
                                                       247     252 
 
Total tax expense                                    1,969   2,542 
 
 

Reconciliation of total tax

 
                                            2020    2019 
                                          GBP000  GBP000 
 
Profit for the year                        8,216   9,953 
Total tax expense                          1,969   2,542 
 
Profit excluding taxation                 10,185  12,495 
 
Tax using the UK corporation tax rate 
 of 19% (2019: 19%)                        1,935   2,374 
 
Non-deductible expenses                        9      15 
Accounting deprecation for which no tax 
 relief is due                                99     130 
Tax losses brought forward utilised         (18)    (63) 
Change in tax rate                            32    (24) 
On capital disposals                           -      33 
Prior year movements                        (86)      80 
Other differences                            (2)     (3) 
 
Total tax expense                          1,969   2,542 
 
 

The applicable tax rate for the current year is 19% (2019: 19%).

Reductions to 17% (effective 1 April 2020) was substantively enacted on 6 September 2017 and was subsequently cancelled on 11 March 2020.

   9              Property, plant and equipment 
 
                                            Assets          Long   Short leasehold                  Fixtures, 
                          Freehold           under     leasehold      improvements                   fittings 
                            land &    construction          land                           Plant   & computer 
                         buildings                   & buildings                     & equipment    equipment    Total 
                            GBP000          GBP000        GBP000            GBP000        GBP000       GBP000   GBP000 
Cost 
Balance at 1 September 
 2018                       50,590           5,392        10,779             2,182         4,419        9,461   82,823 
Additions                   17,376             194             -                23         1,316        2,956   21,865 
Disposals                        -               -             -             (661)         (442)        (814)  (1,917) 
Reclassification            16,171         (5,392)      (10,779)                 -             -            -        - 
 
Balance at 1 September 
 2019                       84,137             194             -             1,544         5,293       11,603  102,771 
Additions                    2,613               -             -                38           230          707    3,588 
On acquisition               1,580               -             -                 -            70            -    1,650 
Disposals                        -               -             -                 -         (117)        (452)    (569) 
 
Balance at 31 August 
 2020                       88,330             194             -             1,582         5,476       11,858  107,440 
 
Depreciation 
Balance at 1 September 
 2018                        4,770               -           917             2,107         2,468        5,511   15,773 
Charge for the year          1,108               -            74                81           503        1,606    3,372 
Disposals                        -               -             -             (661)         (322)        (727)  (1,710) 
Reclassification               991               -         (991)                 -             -            -        - 
 
Balance at 1 September 
 2019                        6,869               -             -             1,527         2,649        6,390   17,435 
Charge for the year          1,303               -             -                29           662        1,610    3,604 
Disposals                        -               -             -                 -          (91)        (451)    (542) 
 
Balance at 31 August 
 2020                        8,172               -             -             1,556         3,220        7,549   20,497 
 
Net book value 
At 31 August 2019           77,268             194             -                17         2,644        5,213   85,336 
 
At 31 August 2020           80,158             194       -                      26         2,256        4,309   86,943 
 
 

As at 31 August 2020 the Group developing planning applications for both the Solihull Aston Martin Dealership and the Brentwood development. There were no committed contracts in place at the balance sheet date. (2019: GBPNil).

The Directors have considered the property portfolio for impairment by comparing the carrying amount to the higher of value in use or market value and have concluded that no impairment is required.

Security

The title of all freehold properties have been pledged as security to the Revolving Credit Facility disclosed in note 15.

   10           Intangible assets 
 
                              Goodwill  Software   Other           Total 
                                GBP000    GBP000  GBP000          GBP000 
Cost 
Balance at 1 September 
 2018                           21,346       988     176          22,510 
Additions                            -        42       -            42 
Disposals                            -     (180)       -         (180) 
 
Balance at 1 September 
 2019                           21,346    850        176          22,372 
Additions                            -        77       -            77 
On acquisition                      60        21       -            81 
Disposals                                    (2)       -           (2) 
 
 
Balance at 31 August 2020       21,406       946     176        22,528 
 
Amortisation and impairment 
Balance at 1 September 
 2018                                -       833     176         1,009 
Amortisation for the year            -        65       -            65 
Disposals                            -     (180)       -         (180) 
 
Balance at 1 September 
 2019                                -       718     176           894 
Amortisation for the year            -       109       -           109 
Disposals                            -       (2)       -           (2) 
 
Balance at 31 August 2020            -       825     176         1,001 
 
Net book value 
 At 31 August 2019              21,346       132       -        21,478 
 
At 31 August 2020               21,406       121       -        21,527 
 
 

Amortisation charge

The amortisation charge is recognised in the following line items in the income statement:

 
                            2020    2019 
                          GBP000  GBP000 
 
Administrative expenses      109      65 
 
 

Impairment loss and subsequent reversal

Goodwill and indefinite life intangible assets considered significant in comparison to the Group's total carrying amount of such assets have been allocated to cash generating units or Groups of cash generating units. For the purpose of impairment testing of goodwill and other indefinite life assets, the Directors recognise the Group's cash generating units ("CGU") to be connected groupings of dealerships. The identified CGUs, grouped for allocation of goodwill are as follows:

 
                                                 Goodwill 
                                                2020    2019 
                                              GBP000  GBP000 
 
Multiple units without significant goodwill      406     346 
 
Jaguar Land Rover ("JLR")                     21,000  21,000 
 
                                              21,406  21,346 
 
 

The recoverable amount of the JLR CGU has been calculated with reference to its value in use. These calculations use projections based on financial budgets approved by the Board of Directors which are extrapolated using an estimated growth rate. The budgets were prepared to 31 August 2021 and then projected for a further 4 years. The underlying expected performance of the CGU gives sufficient headroom using conservative assumptions, a growth rate of 0% was applied, and a terminal value was included with a 0% growth rate in perpetuity. The discount rate used is 8%.

Management has also performed a review of forecast EBITDA for the CGU for a number of years based on the EBITDA multiples being paid for equivalent businesses in the marketplace. The Board reviews transactional information and assesses the businesses earnings capacity in order to ensure that the recoverable amount is in excess of the carrying amount.

Sensitivity to changes in assumptions

The estimated recoverable amounts for the JLR CGU exceeds the carrying amounts by approximately GBP52m (2019: GBP73m). The Group has conducted sensitivity analysis on the impairment testing. Management believe no significant change in the key assumptions would cause the carrying amount to exceed the recoverable amount for the CGU.

The value in use exceeds the above carrying values for each CGU, therefore no impairment is considered necessary.

   11           Deferred tax assets and liabilities 

Recognised deferred tax assets and liabilities

The amount of temporary differences, unused tax losses and tax credits for which a deferred tax asset is recognised is set out below, along with the movement in the balance in the year. The asset would be recovered if offset against future taxable profits of the Group.

 
                   1 September                             Net 31 
                          2019                Recognised   August          Deferred     Deferred 
                                 As restated   in income     2020   tax liabilities   tax assets 
                        GBP000        GBP000      GBP000   GBP000            GBP000       GBP000 
 
Property, plant 
 and equipment           (467)             -        (19)    (486)             (486) 
Capital gain                 -                     (218)    (218)             (218) 
On transition to 
 IFRS                        -           249        (43)      206                 -          206 
Provisions                  25             -          32       57                 -           57 
Share options                5             -           1        6                 -            6 
 
                         (437)           249       (247)    (435)             (704)          269 
                   ===========  ============  ==========  =======  ================  =========== 
 
 

Unrecognised deferred tax assets and liabilities

The deferred tax asset in relation to loss carried forward within a subsidiary has not been recognised due to uncertainty over the future profitability of the subsidiary, these losses are locked in to this particular subsidiary and cannot be utilised in the wider Group.

 
                                       Assets 
                                     2020    2019 
                                   GBP000  GBP000 
 
Tax value of loss carry-forwards      174     167 
 
Unrecognised net tax assets           174     167 
 
 
   12           Inventories 
 
                              2020     2019 
                            GBP000   GBP000 
 
Vehicle consignment stock   45,490   63,628 
Motor vehicles              35,966   46,327 
Parts and other stock        2,132    2,849 
 
                            83,588  112,804 
 
 

Included within inventories is GBPnil (2019: GBPnil) expected to be recovered in more than 12 months.

Raw materials, consumables and changes in finished goods and work in progress recognised as cost of sales in the year amounted to GBP460 million (2019: GBP581 million). This includes inventory write downs of GBP161,694 and reversals of previous write downs of GBP454,743.

Details of stock held as security is given in note 16.

   13           Trade and other receivables 
 
                                      2020    2019 
                                    GBP000  GBP000 
 
Trade receivables                    6,608   8,864 
Prepayments and other receivables    2,477   3,187 
 
                                     9,085  12,051 
 
 

Included within trade and other receivables is GBPnil (2019: GBPnil) expected to be recovered in more than 12 months.

   14           Property assets classified as held for resale 

On closure of the Blackburn dealership, the Freehold property has been transferred to assets held for resale at its net book value. There were no movements during the year.

   15           Borrowings 

This note provides information about the contractual terms of the Group's interest-bearing loans and borrowings, which are measured at amortised cost.

 
                               2020    2019 
                             GBP000  GBP000 
Non-current liabilities 
Revolving Credit Facility     2,122  30,088 
 
Current liabilities 
 Revolving Credit Facility        -       - 
 
 
 
 

Terms and debt repayment schedule

All debt is in GBP currency

 
                      Nominal interest   Year of     Value and Carrying         Value and 
                                  rate   Maturity                Amount   Carrying Amount 
                                                                   2020              2019 
                                                                 GBP000            GBP000 
 
  Revolving 
   Credit Facility       LIBOR +1.20%*     2022                   2,122            30,088 
 
                                                                  2,122            30,088 
 
*The Facilities arranged in November 2017 have different margin 
 bandings that are dependent on the net debt: EBITDA ratio for 
 the previous quarter. The margin is 1.2% where the ratio is below 
 1 times, increasing to 2% where the ratio is in excess of 2.5 
 times. 
 
   16           Trade and other payables 
 
                                             2020     2019 
                                           GBP000   GBP000 
Current 
Vehicle consignment creditor               53,933   75,863 
Other trade payables                        7,744   10,099 
Non-trade payables and accrued expenses    32,878   26,028 
Vehicle funding                            31,991   45,760 
 
                                          126,546  157,750 
 
 

Included within trade and other payables is GBPnil (2019: GBPnil) expected to be settled in more than 12 months. Both the consignment and vehicle funding creditors are secured on the stock to which they relate.

   17           Contract liabilities 
 
                                          2020    2019 
                                        GBP000  GBP000 
At 1 September 2019                      2,379     683 
Created in the year                      2,636   2,635 
Recognised as income during the year   (1,770)   (939) 
 
At 31 August 2020                        3,245   2,379 
 
Current                                  1,604   2,379 
Non-current                              1,641       - 
 
                                         3,245   2,379 
 
 

Contract liabilities represents deferred income in relation to vehicle repair and maintenance products. Policies can be taken out over periods of up to 36 months with income received on inception of the policy. The policy covers replacement and repair of mechanical, electrical and cosmetic parts, the cost of labour to fit them and breakdown assistance for the period of the policy. When the income is received it is recognised initially as deferred income and is released to income statement over the life of the policy with consideration made for potential liabilities on a pooled basis.

   18           Leases 

The Group has lease contracts for certain of the land and buildings from which it operates. Terms can vary significantly between property and the leases at the year-end had up to ten years remaining, with some leases due to end within 12 months. In addition, the Group uses short-term leases (less than 12 months term) where considered appropriate to its requirements and takes advantage of the recognition exemptions for such leases.

 
 Right-of-use assets                                     Land & 
                                                      buildings                       Total 
                                                         GBP000                      GBP000 
Cost 
Balance at 1 September                                        -                           - 
 2019 
Transition to IFRS 16                                     5,982                       5,982 
 
Balance at 1 September 
 2019 - as restated                                       5,982                       5,982 
Additions                                                   549                       549 
On acquisition                                            2,044                     2,044 
 
Balance at 31 August 2020                                 8,575                     8,575 
 
Depreciation 
Balance at 1 September                                        -                         - 
 2019 
Charge for the year                                       2.066                     2.066 
 
Balance at 31 August 2020                                 2,066                     2,066 
 
Net book value 
At 31 August 2020                                         6,509                     6,509 
 
 Lease liabilities                                       Land &                     Total 
                                                      buildings 
                                                         GBP000                    GBP000 
Balance at 1 September                                        -                           - 
 2019 
On transition to IFRS 16                                  8,517                       8,517 
 
Balance at 1 September 
 2019 - as restated                                       8,517                       8,517 
Additions                                                   549                       549 
On acquisition                                            2,044                     2,044 
Interest expense                                            324                       324 
Payments                                                (2,635)                   (2,635) 
 
Balance at 31 August 2020                                 8,799                     8,799 
 
 
                                                         GBP000                      GBP000 
 
Current liabilities                                       2,496                       2,496 
Non-current liabilities                                   6,303                     6,303 
 
                                                          8,799                     8,799 
 
 
 
 
Maturity analysis                                 31 August 
                                                       2020 
                                                     GBP000 
On demand                                                 - 
Within 1 year                                         2,751 
Between 1 to 2 years                                  2,255 
Between 2 to 5 years                                3,375 
Over 5 years                                        1,089 
 
Total undiscounted liabilities                      9,470 
                                                      (671) 
Lease liabilities in the 
 financial statements                               8,799 
 
 

Amounts recognised in the statement of comprehensive income as an expense during the period in respect of lease arrangements are as follows:

 
                                                         2020      2019 
                                                       GBP000    GBP000 
 
Lease payments under operating leases                       -   2,815 
Expense relating to short-term leases                     135       - 
Expense relating to leases of low-value 
 assets                                                    42       - 
Income relating to variable lease payments 
 not included in lease liabilities                      (105)       - 
Depreciation                                            2,066       - 
Interest                                                  324       - 
 

The fair value of the Group's lease obligations is approximately equal to their carrying amount.

Set out below are the future cash outflows to which the lessee is potentially exposed that are not reflected in the measurement of lease liabilities:

 
Land and buildings                              2020            2019 
                                              GBP000          GBP000 
 
Less than one year                                14           2,381 
Between one and five years                         -         6,196 
More than five years                               -           648 
 
                                                  14         9,225 
 
 
Operating leases apart                          2020            2019 
 from land and buildings 
                                              GBP000          GBP000 
 
Less than one year                                54               - 
Between one and five years                         1             - 
 
                                                  55 
 
 
 
 
Finance lease receivables                     2020            2019 
 - land and buildings 
                                            GBP000          GBP000 
 
Within one year                                 74               - 
Between one and five years                      74             - 
More than five years                            48       - 
 
Total undiscounted lease 
 payments receivable                           196             - 
Unearned finance income                       (10)             - 
 
 
Net investment                                 186             - 
 
 
The present value is receivable 
 as follows: 
Within one year                                 68             - 
In two to five years                           118             - 
 
 
                                               186             - 
 
 
 
   19           Employee benefits 

Pension plans - Defined contribution plans

The Group operates a number of defined contribution pension plans.

The total expense relating to these plans in the current year was GBP550,000 (2019: GBP557,000).

   20           Share-based payments 

The Group has a share option scheme open to certain employees at the discretion of the Board. Options are exercisable at a price equal to the higher of the nominal value or market price of the Company's shares on the date of grant.

In the scheme the options vest over a ten-year period, depending on the terms of the individual grant. There are certain performance criteria relating to shareholder return and the underlying profit before tax of the Group which have to be achieved for the options to be exercisable.

During the year ended 31 August 2020, no share options were granted (2019: None).

The number and weighted average exercise prices of share options are as follows:

 
                                 Weighted       Number   Weighted       Number 
                                  average   of options    average   of options 
                                 exercise                exercise 
                                    price                   price 
                                     2020         2020       2019         2019 
                                      GBP                     GBP 
 
Outstanding at the beginning 
 of the year                         0.48    4,500,000       0.49    5,000,000 
Lapsed during the period                                     0.51    (500,000) 
Cash settled during the year         0.48      740,000                       - 
 
Outstanding at the end of the 
 year                                0.48    3,760,000       0.48    4,500,000 
 
Exercisable at the end of the                        -                       - 
 year 
 
 

The Company recognised an expense of GBP19,000 (year ended 31 August 2019: GBP32,000) in respect of share-based payments in the year. The share price during the period ranged between 33p and 71.5p and averaged 55.1p for the period.

Based on the performance of the Group in the financial year to 31 August 2019, on 1 January 2020 the first tranche of the 2015 Share Option scheme became exercisable. The Board took the Alternative Settlement Option contained within the scheme and Cash settled the difference between the market value of the shares and the exercise price. Based on the performance of the Group in the year to 31 August 2020, 185,000 of the outstanding share options have met the performance criteria and will become exercisable from 1 January 2021. Of those exercisable shares, 175,000 are in the money based on the average share price throughout the financial year and these have been included within the calculation of diluted earnings per share.

Within one of the Group Subsidiaries, Repair and Maintenance Plans Limited, the holders of the B Shares are, subject to meeting specific performance criteria, entitled to exchange the B shares in the subsidiary for shares in Cambria Automobiles plc. These have been treated as Contingently Issuable Shares. At the end of the year, the value of Cambria Automobiles plc shares to which the B Shareholders were entitled based on the performance criteria achieved was GBP295,918. Based on the share price at 31 August 2020 of 51p per share that equates to 580,231 shares. These shares have been recognised in the calculation of Basic Earnings Per Share at the year end when the contingent issuance criteria were met and included in the calculation of Diluted Earnings Per Share throughout the year. Provided that the specific performance criteria contained within the shareholders agreement are met over the life of the plan to 31 August 2024, the holders of the B Shares may be entitled to a maximum further GBP1,878,802 in value of Cambria Automobiles plc shares.

   21           Provisions 
 
                                Property 
                                  GBP000 
 
Balance at 1 September 
 2019                              1,336 
On transition to IFRS 16         (1,000) 
 
Balance at 1 September 
 2019 - as restated                  336 
Provisions utilised during 
 the year                          (100) 
Provisions made in year                - 
 
Balance at 31 August 2020            236 
 
Current                              459 
Non-current                          877 
 
Balance at 31 August 2019          1,336 
 
Current                              236 
Non-current                            - 
 
Balance at 31 August 2020            236 
 
 

The provision at year end relates to the vacant properties at Welwyn Garden City following the occupation of the Hatfield development and the vacant Blackburn freehold property that is held as an Asset for Resale.

   22           Capital and reserves 

Share capital

 
                                             2020    2019 
                                           GBP000  GBP000 
Authorised 
100,000,000 Ordinary shares of 10 pence 
 each                                      10,000  10,000 
 
Allotted, called up and fully paid 
100,000,000 Ordinary shares of 10 pence 
 each                                      10,000  10,000 
 
Shares classified in shareholders' funds   10,000  10,000 
 
 

All of the shares rank pari passu, and no shareholder enjoys different or enhanced voting rights from any other shareholder. All shares are eligible for dividends and rank equally for dividend payments.

Dividends

The following dividends were paid by the Company in the year ended 31 August.

 
                                                        2020                     2019 
                                                      GBP000                   GBP000 
 
0.85p per ordinary share - prior year final 
 (2019: 0.75p)                                           850                      750 
Nil per ordinary share - current year interim 
 (2019: 0.25p)                                             -                      250 
 
                                                         850                    1,000 
 
 
 

After the end of the reporting period, the following dividends were proposed by the Directors. The dividends have not been provided for and there are no tax consequences.

 
                                                                        2020                     2019 
                                                                      GBP000                   GBP000 
 
Nil p per ordinary share - current year 
 final (2019: 0.85p)                                                       -                      850 
 
 
   23           Post balance sheet events 

Dividend

Due to the impact of the COVID-19 pandemic and as announced in March 2020, the Board has suspended dividend payments and therefore the final dividend payment in respect of the financial year to 31 August 2020 is 0.0p (2019: 0.85p) per share in addition to the interim payment of 0.0p per share (2019: 0.25p).

   24           Acquisitions 

Aston Martin and Rolls-Royce Motor Cars Edinburgh

On 21 January 2020, the Group announced the acquisition of the trade and assets of the Aston Martin and Rolls-Royce Motor Cars dealerships in Edinburgh for a total cash consideration of GBP1.671m. Transactions fees, payroll arrears and rationalization costs of GBP138,000 have been expensed through operating expenses in the period.

 
                                                 Recognised 
                                                     values 
                                             on acquisition 
                                                     GBP000 
Acquiree's Net Assets at the acquisition 
 date 
 
Plant and equipment                                      70 
Intangible Assets                                        21 
Freehold Property                                     1,580 
Right of use asset - property                         2,044 
Lease liabilities                                   (2,044) 
 
                                                      1,671 
Goodwill on acquisition                                   - 
 
Total cash consideration                              1,671 
 
 

The acquisition contributed to GBP10,240,631 to revenue and (GBP65,153) to profit before tax.

E-Warranty Limited

On 3 March 2020, the Group announced the acquisition E-Warranty Limited a provider of IT software to the warranty industry for a total cash consideration of GBP60,000.

 
                                                        Recognised 
                                                            values 
                                                    on acquisition 
                                                            GBP000 
Acquiree's Net Assets at the acquisition 
 date 
 
Cash and cash equivalents                                        4 
Trade and other receivables                                     17 
Trade and other payables                                      (16) 
Tax liabilities                                                (5) 
Goodwill                                                        60 
 
Total cash consideration                                        60 
 
The acquisition contributed to GBP76,954 to revenue and GBP499 
 to profit before tax. 
 

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