TIDMCFYN
RNS Number : 4101B
Caffyns PLC
02 June 2023
Caffyns plc
Preliminary Results for the year ended 31 March 2023
Summary
2023 2022
GBP'000 GBP'000
-------------------------------------------- ---------- ----------
Revenue 251,426 223,928
Underlying EBITDA (see note A) 6,955 7,712
Underlying profit before tax (see note A) 3,140 4,574
Profit before tax 3,090 4,385
-------------------------------------------- ---------- ----------
pence pence
--------------------------------------------- ------- -------
Underlying earnings per share 95.1 117.0
Earnings per share 93.6 111.3
Proposed final dividend per Ordinary share 15.0 15.0
Dividend per ordinary share for the year 22.5 22.5
--------------------------------------------- ------- -------
Note A: Underlying results exclude items that have non-trading
attributes due to their size, nature or incidence. Non-underlying
items for the year totalled a charge of GBP50,000 (2022:
GBP189,000) and are detailed in Note 2 to these consolidated
financial statements. Underlying EBITDA of GBP6,955,000 (2022:
GBP7,712,000) represents Operating profit before non-underlying
items of GBP4,827,000 (2022: GBP5,690,000) adding back Depreciation
and Amortisation of GBP2,128,000 (2022: GBP2,022,000).
Overview
-- Revenue up 12% to GBP251.4 million (2022: GBP223.9 million)
-- Like-for-like new car unit deliveries up by 34%
-- Like-for-like used car unit sales down by 4%
-- Like-for-like aftersales revenues up by 9% to GBP27.0 million
-- Underlying profit before tax of GBP3.1 million (2022: GBP4.6 million)
-- Final dividend of 15.0 pence per Ordinary share (2022: 15.0 pence per Ordinary share)
-- Net bank borrowings at 31 March 2023 were GBP8.1 million (2022: GBP10.4 million)
-- Property portfolio revaluation at 31 March 2023 showed a
reduced surplus to net book value of GBP11.5 million (2022: GBP13.3
million) due to a general softening in the property market. This
surplus is not recognised in these accounts).
Like-for-like comparisons exclude the impact of the Lotus and MG
businesses at Ashford, both of which were opened during the prior
year and the Lotus business which was opened in Lewes during the
year under review. All other businesses operated for the full
twelve-month period in both years.
Commenting on the results Simon Caffyn, Chief Executive, said: "
Underlying profit before tax for the year of GBP3.1 million, whilst
lower than the GBP4.6 million recorded for the prior year, was a
strong result and still remained significantly ahead of that
reported in the years running up to the covid-19 pandemic. "
Enquiries:
Caffyns plc Simon Caffyn, Chief Executive Tel: 01323 730201
Mike Warren, Finance Director
Operational and Business Review
Summary
Trading levels in the financial year ended 31 March 2023 (the
"year") were robust, generating higher levels of sales and gross
profits. However, profitability was constrained by significant
upward cost pressures in areas such as business rates and funding
and other overhead costs in an inflationary environment.
Full-year turnover increased by 12% to GBP251.4 million (2022:
GBP223.9 million), predominantly due to significantly higher levels
of car deliveries and car price inflation. Operating profit was
GBP4.8 million (2022: GBP5.7 million).
Underlying profit before tax for the year of GBP3.1 million,
whilst lower than the GBP4.6 million recorded for the prior year,
still remained significantly ahead of that reported in the years
running up to the covid-19 pandemic and was achieved without the
positive impact from Government support measures on business rates
and the rebound in trading that followed the reopening of business
after the covid-19 lockdowns.
Statutory profit before tax for the year was GBP3.1 million
(2022: GBP4.4 million). Basic earnings per share for the year were
93.6 pence (2022: 111.3 pence). Underlying earnings per share for
the year were 95.1 pence (2022: 117.0 pence).
The Company's defined benefit pension scheme deficit, calculated
in accordance with the requirements of IAS 19 Pensions, increased
significantly to GBP8.8 million at 31 March 2023 (2022: GBP2.8
million). Although higher interest rates led to significant
reductions in the net present value of the Scheme's liabilities,
they also resulted in sharp falls in the value of certain of the
Scheme's investments, and the investment performance during the
year was adversely affected by volatile market movements.
The Company continues to own all but two of the freeholds of the
dealership premises from which it operates, and this provides the
dual strengths of a strong asset base and minimal exposure to rent
reviews.
The board declared an interim dividend of 7.5 pence per Ordinary
share (2022: 7.5 pence), which was paid in January 2023, and is
proposing a final dividend for the year of 15.0 pence per Ordinary
share (2022: 15.0 pence).
Net bank borrowings at 31 March 2023 were GBP8.1 million (2022:
GBP10.4 million), which equated to gearing of 26% (2022: 30%).
Omni-channel retailing
Our omni-channel offering allows customers to interact with us
in the way that suits them best, from the traditional showroom
discussion through to a fully online sales process, and any
combination in between. We learnt a great deal during the lockdown
periods of the pandemic and were able to introduce new options
which significantly advanced our on-line selling capabilities.
These were further enhanced in the year allowing us to provide our
customers with a full omni-channel approach to purchasing their
vehicle.
Our people
I am very grateful for the dedication of our employees and the
effort they applied throughout the year to provide our customers
with a first-class experience. As a result of the hard work and
professionalism shown by everyone involved, the business remains in
a strong position in the competitive retail environment in which we
operate and we continue to be an employer of choice in our Kent and
Sussex area of operations.
The Company has a long tradition of investing in apprenticeship
programmes. Despite the pressures on the business, we have kept our
apprenticeship numbers at a high level and continue to see the
benefits flow through the business as more apprentices complete
their training and become fully qualified. Due to our apprentice
numbers, we continued to fully utilise our Government
apprenticeship levy payments within the stipulated time limits.
We remain firmly committed to the long-term benefits of
apprenticeships and our recruitment programme continues with the
aim of maintaining a healthy complement in the current year, which
will assist the Company to continue to grow.
New and used car sales
The Company's total revenues increased by GBP27 million over the
previous year, of which GBP25 million arose from the sale of new
and used cars.
Total UK new car registrations in the year increased by 3% to
1.69 million as the impacts from the global shortage of
semiconductors began to wane. However, the continuing conflict in
Ukraine added additional strains to supply chains and growing
cost-of-living pressures have made customers more careful of
spending. Within this total, new car registrations in the private
and small business sector, in which we principally operate,
actually fell by 1%. Our own retail new car deliveries rose by 5%
on a like-for-like basis, which was better than the movement for
those manufacturers that we represent, whilst our Audi corporate
agency business doubled the registrations it achieved for the year.
In total, our new car deliveries for the year increased by 34%.
Our volume of used cars sales fell in the year by 4% on a
like-for-like basis. Although not a perfect match, used car data
from the Society of Motor Manufacturers and Traders showed the
number of used cars being transacted in the UK fell by 9% in the
2022 calendar year, so our performance exceeded that of the general
market. Our unit margins in the year fell from the exceptional
levels achieved in the covid-impacted prior year, although the
continuing constraints on the supply of new car product to the
market helped to buoy used car prices. Lower levels of new car
registrations over the last three years have also reduced the
number of less than 3-year-old used cars, again helping to shore up
prices. Great efforts have been made over the last twelve months to
further enhance and develop our omni-channel offering for our
customers and we continue to see this providing a major opportunity
for further growth. The number of used cars sold again exceeded the
number of new cars sold in the year, although by a reduced amount
than in the prior year. Procedures have been strengthened to
monitor and control used car stock turn and yield and to broaden
our sources for replenishing inventory.
Aftersales
Our aftersales business performed strongly during the year with
service revenues rising by 9% on a like-for-like basis. We continue
to place great emphasis on our customer retention programmes and in
growing sales of service plans. Our parts business also reported
higher sales, up by 9% on a like-for-like basis from the previous
year.
Operations
Our Audi and Volkswagen businesses produced very strong
financial performances in the year, with both growing their new car
deliveries. Sales of used cars were broadly in line with last year.
Both franchises continue to be boosted by the strength of the
brands, the excellent model range, and exciting new products.
Our Volvo businesses had a transitional year, with the
redevelopment of our Eastbourne business completing in the year and
that at Worthing about to commence. The brand continues to reap the
benefits of an excellent model range of cars, which are being
positively received by customers.
Our combined SEAT/Skoda businesses continued to perform well,
despite a lack of availability of new car product, and will be
boosted in the coming year by the addition of the CUPRA brand.
Our Vauxhall business in Ashford under-performed in the year.
However, Stellantis, its parent company, have publicly announced
plans to restructure and slim down their dealer networks, of which
we will be a part, so we anticipate a brighter future for this
brand.
During the year, we opened an additional business for Lotus, in
Lewes, to operate alongside our original Lotus business at Ashford
in Kent. The business was constrained from a lack of new car
product in the year but deliveries of the Emira began in earnest in
March 2023. Lotus' second new model, the Eletre, was launched to
much acclaim and, with deliveries expected in the current year, the
board remains encouraged with the opportunity for this brand.
Trading at Caffyns Motorstore, our used car business in Ashford,
remained subdued as the business struggled to source used cars.
However, we remain reassured that the concept continues to be well
received by our customers, who particularly value the reassurance
of the Caffyns brand. A second Performance Motorstore was opened
during the year, alongside our Lotus business in Lewes.
Groupwide projects
We remain focused on generating further improvements in used car
sales, used car finance and service labour sales. These three areas
will be key to achieving increases in profitability in the coming
years. In addition, we continue to make very good progress
utilising technology to enhance the customer-buying experiences
from their first point of contact right through the buying process,
as well as improving aftersales retention.
New brands and models
We continue to invest in enhanced facilities to allow us to sell
and service our manufacturers' ever-increasing range of electric
and hybrid vehicles. During the year, we extended our
representation for Lotus, part of the Zhejiang Geely group that
also owns Volvo, with the opening of a new dealership in Lewes and
expect shortly to commence the redevelopment of our Volvo premises
in Worthing. However, with effect from 31 March 2023, we
relinquished the franchise for The London Electric Vehicle Company,
LEVC.
Zero-emission vehicle ("ZEV") targets
With effect from 1 January 2024 the Government has announced
that vehicle manufacturers will be required to meet minimum annual
registration targets for ZEV cars, with the target for the 2024
calendar year to be set at 22% of registrations. Failure to achieve
the set target would result in potential financial penalties being
levied on the manufacturer. We have reviewed our franchise
relationships in the light of these announcements and are satisfied
that we remain well placed based on the manufacturers that we
represent.
Climate-related emissions
The board is acutely aware of the impact that the Company's
operations have on the environment, its responsibility to minimise
these wherever possible, and to supporting the Government's efforts
to transition towards net-zero carbon emissions. To assist with
this process an Environmental, Sustainability and Efficiency
Committee was constituted in the year, headed by a senior
operational manager who reports directly to the Chief Executive.
The Committee started its work in August 2022 with the aim of
scrutinising and reducing the Company's energy usage and was able
to achieve savings in electricity and gas usage in the year.
Investments are being made to improve the efficiency of lighting
and heating equipment and further progress in making energy savings
is expected in future periods.
Property
We operate primarily from freehold sites, which provides
additional stability to our business model. As in previous years,
our freehold premises were revalued at the balance sheet date by
chartered surveyors CBRE Limited, based on an existing use
valuation. The excess of the valuation over net book value of our
freehold properties at 31 March 2023 was GBP11.5 million (2022:
GBP13.3 million). The reduction in the valuation in the year
reflected the general softening of the property market. In
accordance with our accounting policies, this surplus has not been
incorporated into our accounts.
During the year, we incurred capital expenditure of GBP0.9
million (2022: GBP2.9 million). This reflected a mixture of
replacement spend on existing assets and further installations of
electric charging points.
The board is progressing the sale process of our freehold
premises in Lewes which is currently being utilised for Lotus
Sussex. Completion of this process will be dependent both on the
potential purchaser gaining an appropriate planning consent and,
potentially, the approval of our shareholders. The board expects
this process will take at least two years. Due to the uncertainty
of a successful outcome the property has continued to be shown as
an investment property on the Company's balance sheet.
The Company operates two of its franchised businesses from
leased premises as well as having two leased vehicle storage
compounds, which are shown on the balance sheet as right of use
assets. During the year, the lease for one of those premises was
extended for a further five years. As a result, the valuation of
that lease increased by GBP1.2 million, equal and opposite to an
increase in its lease liability.
Bank facilities and borrowings
The Company's banking facilities with HSBC comprise a term loan,
originally of GBP7.5 million, repayable by instalments over a
twenty-year period to 2038 and a revolving credit facility of
GBP6.0 million, both of which will next become renewable in April
2026. HSBC also provides an overdraft facility of GBP3.5 million,
renewable annually. The Company continues to enjoy a supportive
relationship with HSBC and successfully refinanced its borrowings
in the prior year, twelve months in advance of the scheduled review
date for the facilities.
In addition to its facilities with HSBC, the Company also has a
revolving credit facility of GBP4.0 million provided by Volkswagen
Bank, renewable annually, together with a term loan, originally of
GBP5.0 million, which is repayable by instalments over the ten
years to March 2024.
The term loan and revolving credit facilities provided by HSBC
include certain covenant tests which were comfortably passed at the
year-end on 31 March 2023. Any failure of a covenant test would
render these facilities repayable on demand at the option of the
lender.
During the year, cash generated by operating activities was
GBP4.2 million (2022: GBP3.4 million), reflecting profitable
trading in the year. Changes in net working capital were minimal,
although inventories and payables both increased significantly as
levels of new cars held on consignment from manufacturers increased
as the global shortage of semiconductors began to wane, allowing
car production levels to increase. Other significant cash movements
in the year included capital expenditure of GBP0.9 million (2022:
GBP2.8 million), repayment of bank term loans, also of GBP0.9
million (2022: GBP2.9 million) and dividends paid to shareholders
of GBP0.6 million (2022: GBP0.2 million). Cash balances held at 31
March 2023 were GBP4.2 million, an increase of GBP1.5 million from
the previous year-end.
Bank borrowings, net of cash balances, at 31 March 2023 were GBP
8.1 million (2022: GBP10.4 million) and as a proportion of
shareholders' funds at 31 March 2023 were 26% (2022: 30%). This
reduction in gearing level reflected cash generated from operating
activities combined with a lower requirement for capital
expenditure in the year. In addition to the year-end cash balances,
available but undrawn facilities with HSBC and Volkswagen Bank at
31 March 2023 were GBP7.5 million (2022: GBP7.5 million).
Taxation
The year ended 31 March 2023 produced a tax charge against
profits of GBP 0.6 million (2022: GBP1.4 million). The effective
tax rate for the year was similar to the standard rate of
corporation tax in force for the year of 19%.
The Company has no current outstanding trading losses awaiting
relief (2022: GBPNil). There are also no capital losses awaiting
relief. Capital gains which remain unrealised, where potentially
taxable gains arising from the sale of properties and goodwill have
been rolled over into replacement assets, amounted to GBP 6.8
million (2022: GBP7.1 million) which could equate to a future
potential tax liability of GBP1 .7 million (2022: GBP1.8 million).
The Company was able to utilise GBP 0.5 million of its Advanced
Corporation Tax in the year, leaving an amount carried forward to
future trading periods of GBP 0.3 million (2022: GBP0.8
million).
Pension scheme
The Company's defined benefit scheme was closed to future
accrual in 2010. The board has little control over the key
assumptions in the valuation calculations as required by accounting
standards and movements in yields of gilts and bonds can have a
significant impact on the net funding position of the scheme. At 31
March 2023, the deficit of the scheme was GBP8.8 million (2022:
GBP2.8 million). The deficit, net of deferred tax, was GBP6 .6
million (2022: GBP2.1 million). Although higher interest rates led
to significant reductions in the net present value of the Scheme's
liabilities they also resulted in sharp falls in the value of
certain of the Scheme's investments, and the investment performance
during the year was adversely affected by volatile market
movements.
The Scheme operates with a fiduciary manager and the board,
together with the independent pension fund trustees, continues to
review options to reduce the cost of operation and its deficit.
Actions that could further reduce the risk profile of the assets
and more closely match the nature of the Scheme's assets to its
liabilities continue to be considered.
The pension cost under IAS 19 is charged as a non-underlying
cost and amounted to GBP0 .1 million in the year (2022: GBP0.2
million).
The most recent completed triennial valuation of the Scheme was
as at 31 March 2020 and was formally submitted to the Pensions
Regulator in June 2021. A recovery plan to address the Scheme
deficit identified from this triennial valuation was agreed with
the trustees under which the annual recovery plan payment was set
at a base level of GBP0.75 million for the year ended 31 March
2022, along with an additional one-off contribution of GBP1.0
million which was paid in the prior year. The recurring annual
recovery plan payment for each subsequent year thereafter would
then increase by 2.25%, until superseded by any future new recovery
plan to be agreed between the Company and the trustees. In
accordance with the recovery plan, the Company made deficit
reduction contributions into the Scheme during the year of GBP0 .8
million (2022: GBP1.8 million).
A formal valuation of the Scheme will be carried out as at 31
March 2023, to be agreed with the trustees and submitted to the
Pensions Regulator by 30 June 2024.
Dividend
The board declared an interim dividend of 7.5 pence per Ordinary
share (2022: 7.5 pence). The board is also declaring a final
dividend for the year of 15.0 pence per Ordinary share (2022: 15.0
pence) which will be paid on 11 August 2023 to those shareholders
on the register at close of business on 14 July 2023, subject to
shareholder approval at the 2023 Annual General Meeting. The
Ordinary shares will be marked ex-dividend on 13 July 2023.
Strategy
Our continuing strategy is to focus on growing our loyal
customer base through representing premium and premium-volume
franchises, maximising opportunities for premium used cars and
delivering an excellent after sales service. We recognise that we
operate in a rapidly changing environment and continue to carefully
monitor the appropriateness of this strategy. We continue to seek
opportunities to invest in the future growth of our business.
We are concentrating on business opportunities in stronger
markets to deliver higher returns from fewer but bigger sites. We
continue to seek to deliver performance improvement, in particular
in our used car and aftersales operations, and to enhance both the
purchasing and aftersales experience for our customers.
Annual General Meeting
T he Annual General Meeting will be held on 3 August 2023 and
will be an open meeting, to which shareholders will be invited to
attend in person.
Outlook
We have started the new financial year with a strong new car
forward-order book, although we are mindful of the challenges that
inflationary pressures and higher interest rates will have on our
cost base and on our customers' confidence levels. We are also
actively aware of other cost increases that will arise in the
coming year such as business rates and utility costs.
The current financial year will see certain manufacturers begin
their transition to new agency arrangements for their dealer
networks, which might result in some short-term disruption to the
market.
In recent months enquiry rates for electric cars have fallen
since the removal of government incentives for retail customers and
with increases in electricity prices. However, our manufacturers
are well placed for the future with a pipeline of market-leading
electric new car product due to come to market over the next few
years.
Our businesses enjoy an exceptional workforce who represent
excellent brands. W e also continue to enjoy supportive
relationships with our banking partners, HSBC and Volkswagen Bank,
with cash in hand balances at the year-end of GBP4.2 million and
available but undrawn facilities of GBP 7.5 million. The balance
sheet is appropriately funded and our freehold property portfolio
is a source of stability. We remain confident in the prospects of
the Company and are ready to exploit future business
opportunities.
S G M Caffyn
Chief Executive
1 June 2023
Group Income Statement
for the year ended 31 March 2023
2023 2022
Note GBP'000 GBP'000
------------------------------------------------- -------- ----------- -----------
Revenue 251,426 223,928
Cost of sales (217,844) (191,982)
------------------------------------------------- -------- ----------- -----------
Gross profit 33,582 31,946
Operating expenses
Distribution costs (19,009) (17,442)
Administration expenses (10,076) (9,227)
------------------------------------------------- -------- ----------- -----------
Operating profit before other income 4,497 5,277
Other income (net) 344 390
------------------------------------------------- -------- ----------- -----------
Operating profit 4,841 5,667
------------------------------------------------- -------- ----------- -----------
Operating profit before non-underlying items 4,827 5,690
Non-underlying items within operating profit 5 14 (23)
------------------------------------------------- -------- ----------- -----------
Operating profit 4,841 5,667
------------------------------------------------- -------- ----------- -----------
Finance expense 6 (1,687) (1,116)
Finance expense on pension scheme (64) (166)
------------------------------------------------- -------- ----------- -----------
Net finance expense (1,751) (1,282)
------------------------------------------------- -------- ----------- -----------
Profit before taxation 3,090 4,385
------------------------------------------------- -------- ----------- -----------
Profit before tax and non-underlying items 3,140 4,574
Non-underlying items within operating profit 5 14 (23)
Non-underlying items within finance expense on
pension scheme 5 (64) (166)
------------------------------------------------- -------- ----------- -----------
Profit before taxation 3,090 4,385
------------------------------------------------- -------- ----------- -----------
Taxation 7 (566) (1,386)
------------------------------------------------- -------- ----------- -----------
Profit for the year 2,524 2,999
------------------------------------------------- -------- ----------- -----------
Earnings per share
Basic 8 93.6p 111.3p
Diluted 8 92.4p 109.6p
Underlying earnings per share
Basic 8 95.1p 117.0p
Diluted 8 93.9p 115.2p
------------------------------------------------- -------- ----------- -----------
Group Statement of Comprehensive Income
for the year ended 31 March 2023
2023 2022
Note GBP'000 GBP'000
------------------------------------------------- -------- ---------- ----------
Profit for the year 2,524 2,999
Items that will never be reclassified to
profit and loss:
Remeasurement of net defined benefit liability (6,715) 5,045
Deferred tax on remeasurement 17 1,679 (1,261)
Effect of change in deferred tax rate 17 - 511
------------------------------------------------- ------- ----------- ----------
Total other comprehensive (expense)/income,
net of taxation (5,036) 4,295
------------------------------------------------- ------- ----------- ----------
Total comprehensive(expense)/income for the
year (2,512) 7,294
------------------------------------------------- ------- ----------- ----------
Group Statement of Financial Position
at 31 March 2023
2023 2022
Note GBP'000 GBP'000
-------------------------------------------- -------- ---------- ----------
Non-current assets
Right-of-use assets 10 2,348 1,413
Property, plant and equipment 11 38,145 38,975
Investment properties 12 7,531 7,646
Interest in lease 13 225 389
Goodwill 14 286 286
Deferred tax asset 17 - -
48,535 48,709
-------------------------------------------- -------- ---------- ----------
Current assets
Inventories 15 39,989 27,546
Trade and other receivables 7,121 5,264
Interest in lease 13 164 168
Current tax recoverable - 40
Cash and cash equivalents 4,226 2,759
-------------------------------------------- -------- ---------- ----------
51,500 35,777
-------------------------------------------- -------- ---------- ----------
Total assets 100,035 84,486
-------------------------------------------- -------- ---------- ----------
Current liabilities
Interest-bearing bank overdrafts and
loans 1,875 1,875
Trade and other payables 16 43,674 29,495
Lease liabilities 511 496
Current tax payable 28 236
-------------------------------------------- -------- ---------- ----------
46,088 32,102
-------------------------------------------- -------- ---------- ----------
Net current assets 5,412 3,675
-------------------------------------------- -------- ---------- ----------
Non-current liabilities
Interest-bearing bank loans 10,437 11,312
Lease liabilities 2,203 1,434
Deferred tax liability 17 34 1,298
Preference shares 812 812
Retirement benefit obligations 8,799 2,797
-------------------------------------------- -------- ---------- ----------
22,285 17,653
-------------------------------------------- -------- ---------- ----------
Total liabilities 68,373 49,755
-------------------------------------------- -------- ---------- ----------
Net assets 31,662 34,731
-------------------------------------------- -------- ---------- ----------
Capital and reserves
Share capital 1,439 1,439
Share premium account 272 272
Capital redemption reserve 707 707
Non-distributable reserve 1,724 1,724
Retained earnings 27,520 30,589
-------------------------------------------- -------- ---------- ----------
Total equity attributable to shareholders 31,662 34,731
-------------------------------------------- -------- ---------- ----------
Group Statement of Changes in Equity
for the year ended 31 March 2023
Capital Non-
Share Share redemption distributable Retained
capital premium reserve reserve Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ----------- ----------- ------------- ---------------- ------------ -----------
At 1 April 2022 1,439 272 707 1,724 30,589 34,731
Total comprehensive
Income/(expense)
Profit for the
year - - - - 2,524 2,524
Other comprehensive
expense - - - - (5,036) (5,036)
---------------------- ----------- ----------- ------------- ---------------- ------------ -----------
Total comprehensive
expense - - - - (2,512) (2,512)
Transactions
with
owners:
Dividends - - - - (606) (606)
Issue of shares
- SAYE - - - - 3 3
Share-based payment - - - - 46 46
---------------------- ----------- ----------- ------------- ---------------- ------------ -----------
At 31 March
2023 1,439 272 707 1,724 27,520 31,662
---------------------- ----------- ----------- ------------- ---------------- ------------ -----------
for the year ended 31 March 2022
Capital Non-
Share Share redemption distributable Retained
capital premium reserve reserve Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ----------- ----------- ------------- ---------------- ------------ -----------
At 1 April 2021 1,439 272 707 1,724 23,444 27,586
Total comprehensive
Income
Profit for the
year - - - - 2,999 2,999
Other comprehensive
income - - - - 4,295 4,295
---------------------- ----------- ----------- ------------- ---------------- ------------ -----------
Total comprehensive
income - - - - 7,294 7,294
Transactions
with
owners:
Dividends - - - - (202) (202)
Issue of shares - - - - - -
- SAYE
Share-based payment - - - - 53 53
---------------------- ----------- ----------- ------------- ---------------- ------------ -----------
At 31 March
2022 1,439 272 707 1,724 30,589 34,731
---------------------- ----------- ----------- ------------- ---------------- ------------ -----------
Group Cash Flow Statement
for the year ended 31 March 2023
2023 2022
Note GBP'000 GBP'000
-------------------------------------------------------- -------- ----------- -----------
Net cash inflow from operating activities 18 4,237 3,390
Investing activities
Proceeds on disposal of property, plant and equipment 1 -
Purchases of property, plant and equipment (902) (2,837)
Receipt from investment in lease 185 185
Net cash outflow from investing activities (716) (2,652)
-------------------------------------------------------- -------- ----------- -----------
Financing activities
Revolving-credit facility repaid - (2,000)
Secured loans repaid (875) (875)
Bank refinancing arrangement fees - (98)
Issue of shares - SAYE scheme 3 -
Dividends paid (606) (202)
Repayment of lease liabilities (576) (539)
-------------------------------------------------------- -------- ----------- -----------
Net cash outflow from financing activities (2,054) (3,714)
-------------------------------------------------------- -------- ----------- -----------
Net increase/(decrease) in cash and cash equivalents 1,467 (2,976)
-------------------------------------------------------- -------- ----------- -----------
Cash and cash equivalents at beginning of year 2,759 5,735
Cash and cash equivalents at end of year 4,226 2,759
-------------------------------------------------------- -------- ----------- -----------
Notes
for the year ended 31 March 2023
1. GENERAL INFORMATION
Caffyns plc is a company domiciled in the United Kingdom. The
address of the registered office is Saffrons Rooms, Meads Road,
Eastbourne BN20 7DR. The registered number of the Company is
105664.
This financial information has been extracted from the
consolidated financial statements which were approved by the
directors on 1 June 2023.
2. ACCOUNTING POLICIES
The financial statements have been prepared in accordance with
UK adopted international accounting standards in conformity with
the requirements of the Companies Act 2006 and in accordance with
International Financial Reporting Standards ("IFRS") as adopted in
the United Kingdom .
Whilst the financial information included in this announcement
has been computed in accordance with IFRSs, this announcement does
not itself contain sufficient information to comply with IFRSs.
The financial information set out does not constitute the
Company's statutory accounts for the year ended 31 March 2023, but
is derived from those accounts. Statutory accounts for the year
ended 31 March 2022 have been delivered to the Registrar of
Companies and those for the year ended 31 March 2023 will be
delivered following the Company's annual general meeting. The
auditors have reported on those accounts: their reports were
unqualified, did not draw attention to any matters by way of
emphasis without qualifying their report and did not contain
statements under section 498(2) or (3) Companies Act 2006 or
equivalent preceding legislation.
A copy of the annual report for the year ended 31 March 2023
will be available at www.caffynsplc.co.uk and will be posted to
shareholders by 10 July 2023.
3. GOING CONCERN
The financial statements have been prepared on a going concern
basis, which the directors consider appropriate for the reasons set
out below.
The directors have considered the going concern basis and have
undertaken a detailed review of trading and cash flow forecasts for
a period of one year from the date of approval of this Annual
Report. This has focused primarily on the achievement of the
banking covenants. All three bank covenant tests have been passed
for the year under review. Under the Company's first covenant test,
it is required to make underlying profits before senior interest
(that being paid to HSBC and VW Bank on its term loan and revolving
credit facility borrowings), corporation tax, depreciation and
amortisation ("senior EBITDA") for a rolling twelve-month period
which is at least four times the level of senior interest. Under
the second test, the Company's borrowings from HSBC and VW Bank on
its term loan and revolving credit facilities must be less than
375% of its senior EBITDA.
The Company's final covenant test requires that the level of its
bank borrowings do not exceed 70% of the independently assessed
value of its charged freehold properties. Property values would
need to reduce by some two-thirds before this covenant test became
at risk of failure.
These Company's covenants are tested quarterly with the test on
31 March 2024 being the final test to be carried out within the
twelve-month period from the anniversary of the signing of these
financial statements. The Company's financial results in the year
under review were robust and the current new car orders held for
future delivery is at elevated levels. External market commentary
provided by the Society of Motor Manufacturers and Traders ("SMMT")
indicate that new car registrations are forecast to show a
year-on-year increase of 9% in 2023 to 1.8 million, with a further
9% increase into 2024 to reach almost two million registrations.
The used car market remains healthy, at just under 7 million annual
transactions in 2022, and t he recent shortages in new car supply
have assisted the used car market and are expected to continue to
do so. Financial modelling for the coming twelve-month period has
allowed the directors to conclude that there is satisfactory
headroom in the Company's banking covenants.
The directors have also given consideration to the current
uncertainties in the state of the UK economy, as well as to cost
pressures which are impacting on businesses such as increases to
staffing costs from the rise in the National Minimum and National
Living Wages, from business rates and from increases to funding
costs from rising interest base rates.
The directors have also considered the Company's working capital
requirements. The Company meets its day-to-day working capital
requirements through short-term stocking loans, bank overdraft and
revolving-credit facility, and medium-term revolving credit
facilities and term loans. At the year-end, the medium-term banking
facilities included a term loan with an outstanding balance of
GBP5.8 million and a revolving credit facility of GBP6.0 million
from HSBC, its primary bankers, with both facilities being next
renewable in April 2026. HSBC also make available a short-term
overdraft facility of GBP3.5 million, which is renewed annually
each August. The Company also has a ten-year term loan from
Volkswagen Bank with a balance outstanding at 31 March 2023 of
GBP0.5 million, which is repayable, to March 2024, and a short-term
revolving-credit facility of GBP4.0 million, which is renewed
annually each August. In the opinion of the directors, there is a
reasonable expectation that all facilities will be renewed at their
scheduled expiry dates. The failure of a covenant test would render
these facilities repayable on demand at the option of the lender.
At 31 March 2023 the Company held cash in hand balances of GBP4.2
million and had undrawn borrowing facilities of GBP7.5 million, all
of which would be immediately available.
Information concerning the Company's liquidity and financing
risk are set out in the financial statements on page 14 and note
21.
The directors have a reasonable expectation that the Company has
adequate resources and headroom against the covenant tests to be
able to continue in operational existence for the foreseeable
future and for a period of one year from the date of approval of
the Annual Report. For those reasons, they continue to adopt the
going concern basis in preparing this Annual Report.
4. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of financial statements requires management to
make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of
assets and liabilities, income and expense. Actual results may
differ from these estimates.
These judgements and estimates are continually evaluated and are
based on historical experience and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances.
Certain critical accounting estimates in applying the Company's
accounting policies are listed below.
Retirement benefit obligation
The Company has a defined benefit pension scheme. The
obligations under this scheme are recognised in the balance sheet
and represent the present value of the obligation calculated by
independent actuaries, with input from management. These actuarial
valuations include assumptions such as discount rates, return on
assets and mortality rates. These assumptions vary from time to
time depending on prevailing economic conditions. Details of the
assumptions used are provided in note 23. At 31 March 2023, the net
liability of the scheme included in the Statement of Financial
Position was GBP8.8 million (2022: GBP2.8 million).
Impairment
The carrying value of property, plant and equipment and goodwill
are tested annually for impairment as described in notes 11, 12, 13
and 15. For the purposes of the annual impairment testing, the
directors recognise Cash Generating Units (CGUs) to be those assets
attributable to an individual dealership, which represents the
smallest group of assets which generate cash inflows that are
independent from other assets or CGUs. The recoverable amount of
each CGU is based on the higher of its fair value less costs to
sell and its value in use. The fair value less costs to sell of
each CGU is based upon the market value of any property contained
within it and is determined by an independent valuer, and its value
in use is determined through discounting future cash inflows (as
described in detail in note 15). As a result of this review, the
directors considered that no impairments were required to the
carrying value of its property assets (2022: no impairments) (see
notes 11, 12, 13 and 14).
Surplus ACT recoverable
The Company carries a balance of surplus unrelieved advanced
corporation tax ("ACT") which can be utilised to reduce corporation
tax payable subject to a restriction to 19% of taxable profits less
shadow ACT calculated at 25% of dividends. Uncertainty arises due
to the estimation of future levels of profitability, levels of
dividends payable and the reversal of deferred tax liabilities in
respect of accelerated capital allowances and on unrealised capital
gains. For example, a reduction in the Company's profitability
could result in a delay in the utilisation of surplus unrelieved
ACT. However, based on the Company's current projections, the
directors have a reasonable expectation that the surplus ACT will
be fully relieved against future corporation tax liabilities by 31
March 2025.
5. Non-underlying items
The following amounts have been presented as non-underlying
items in these financial statements:
2023 2022
GBP'000 GBP'000
-------------------------------------------------------- ---------- ----------
Net loss on disposal of property, plant and equipment - -
-------------------------------------------------------- ---------- ----------
Other income, net 37 -
-------------------------------------------------------- ---------- ----------
Within operating expenses:
Service cost on pension scheme (23) (23)
(23) (23)
-------------------------------------------------------- ---------- ----------
Non-underlying items within operating profit 14 (23)
-------------------------------------------------------- ---------- ----------
Net finance expense on pension scheme (64) (166)
-------------------------------------------------------- ---------- ----------
Non-underlying items within net finance expense (64) (166)
-------------------------------------------------------- ---------- ----------
Total non-underlying items before taxation (50) (189)
-------------------------------------------------------- ---------- ----------
Taxation credit on non-underlying items 10 36
-------------------------------------------------------- ---------- ----------
Total non-underlying items after taxation (40) (153)
-------------------------------------------------------- ---------- ----------
The following item was recorded in the year as a non-underlying
item:
-- A sum of GBP37,000 was received from the liquidators of MG Rover Group Limited.
6. Finance expense
2023 2022
GBP'000 GBP'000
----------------------------------------------- ---------- ----------
Interest payable on bank borrowings 621 297
Interest payable on inventory stocking loans 856 581
Interest on lease liabilities 51 37
Finance costs amortised 104 141
Preference dividends (see note 9) 72 72
Finance income on interest in lease (17) (12)
----------------------------------------------- ---------- ----------
Finance expense 1,687 1,116
----------------------------------------------- ---------- ----------
7. Tax
2023 2022
GBP'000 GBP'000
------------------------------------------------------------------------ ---------- ----------
Current tax
UK corporation tax 152 432
Adjustments recognised in the period for current tax of prior periods - (5)
------------------------------------------------------------------------ ---------- ----------
Total charge 152 427
------------------------------------------------------------------------ ---------- ----------
Deferred tax (see note 17)
Origination and reversal of temporary differences 442 312
Change in corporation tax rate 10 647
Adjustments recognised in the period for deferred tax of prior (38) -
periods
------------------------------------------------------------------------ ---------- ----------
Total charge 414 959
------------------------------------------------------------------------ ---------- ----------
Tax charged in the Income Statement 566 1,386
------------------------------------------------------------------------ ---------- ----------
2023 2022
The tax charge arises as follows: GBP'000 GBP'000
--------------------------------------- ---------- ----------
On normal trading 576 1,422
On non-underlying items (see note 5) (10) (36)
--------------------------------------- ---------- ----------
Tax charged in the Income Statement 566 1,386
--------------------------------------- ---------- ----------
The charge for the year can be reconciled to the profit per the
Income Statement as follows:
2023 2022
GBP'000 GBP'000
---------------------------------------------------------------- ---------- ----------
Profit before tax 3,090 4,385
---------------------------------------------------------------- ---------- ----------
Tax at the UK corporation tax rate of 19% (2022: 19%) 587 833
Tax effect of expenses that are not deductible in determining
taxable profit 106 126
Other differences (6) -
Effect of change in corporation tax rate 10 647
Movement in rolled over and held over gains (93) (215)
Adjustment to tax charge in respect of prior periods (38) (5)
---------------------------------------------------------------- ---------- ----------
Tax charge for the year 566 1,386
---------------------------------------------------------------- ---------- ----------
The current year total tax charge is impacted by the effect of
non-deductible expenses, which includes non-qualifying
depreciation.
The total tax charge for the year is made up as follows:
2023 2022
GBP'000 GBP'000
-------------------------------------------------------- ---------- ----------
Total current tax charge 152 427
-------------------------------------------------------- ---------- ----------
Deferred tax (credit)/charge
Charged in the Income Statement 414 959
(Credited)/charged against other comprehensive income (1,679) 750
-------------------------------------------------------- ---------- ----------
Total deferred tax (credit)/charge (1,265) 1,709
-------------------------------------------------------- ---------- ----------
Total tax (credit)/charge for the year (1,113) 2,136
-------------------------------------------------------- ---------- ----------
Factors affecting the future tax charge
The Company has unrelieved advance corporation tax of GBP0.3
million (2022: GBP0.8 million), which is available to be utilised
against future mainstream corporation tax liabilities and is
accounted for in deferred tax.
8. Earnings per ordinary share
The calculation of the basic earnings per share is based on the
earnings attributable to ordinary shareholders divided by the
weighted average number of shares in issue during the year.
Treasury shares are treated as cancelled for the purposes of
this calculation.
The calculation of diluted earnings per share is based on the
basic earnings per share, adjusted to allow for the issue of shares
and the post-tax effect of dividends and/or interest on the assumed
conversion of all dilutive options and other dilutive potential
ordinary shares.
Reconciliations of earnings and weighted average number of
shares used in the calculations are set out below:
Underlying Basic
2023 2022 2023 2022
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ---------- ---------- ---------- ----------
Profit before tax 3,090 4,385 3,090 4,385
Adjustments:
Non-underlying items (note 5) 50 189 - -
------------------------------------- ---------- ---------- ---------- ----------
Profit before tax 3,140 4,574 3,090 4,385
Tax (note 7) (576) (1,422) (566) (1,386)
------------------------------------- ---------- ---------- ---------- ----------
Profit after tax 2,564 3,152 2,524 2,999
------------------------------------- ---------- ---------- ---------- ----------
Earnings per share (pence) 95.1p 117.0p 93.6p 111.3p
Diluted earnings per share (pence) 93.9p 115.2p 92.4p 109.6p
------------------------------------- ---------- ---------- ---------- ----------
2023 2022
GBP'000 GBP'000
------------------------------------------------ ---------- ----------
Underlying earnings after tax 2,564 3,152
Underlying earnings per share (pence) 95.1p 117.0p
Underlying diluted earnings per share (pence) 93.9p 115.2p
------------------------------------------------ ---------- ----------
Non-underlying losses after tax (40) (153)
Losses per share (pence) (1.5)p (5.7)p
Diluted losses per share (pence) (1.5)p (5.6)p
------------------------------------------------ ---------- ----------
Total earnings 2,524 2,999
------------------------------------------------ ---------- ----------
Earnings per share (pence) 93.6p 111.3p
Diluted earnings per share (pence) 92.4p 109.6p
------------------------------------------------ ---------- ----------
The number of fully paid Ordinary shares in circulation at the
year-end was 2,696,343 (2022: 2,695,502). The weighted average
number of shares in issue for the purposes of the earnings per
share calculation were 2,695,678 (2022: 2,695,418). The shares
granted in the year under the Company's SAYE scheme have been
treated as dilutive. For the purposes of this calculation, the
weighted average number of shares in issue for the purposes of the
earnings per share calculation were 2,730,313 (2022:
2,737,264).
9. Dividends
2023 2022
GBP'000 GBP'000
--------------------------------------------------------------------- ---------- ----------
Preference shares
7% Cumulative First Preference 12 12
11% Cumulative Preference 48 48
6% Cumulative Second Preference 12 12
--------------------------------------------------------------------- ---------- ----------
Included in finance expense (see note 6) 72 72
--------------------------------------------------------------------- ---------- ----------
Ordinary shares
Interim dividend of 7 1/2 pence per ordinary share paid in respect
of the current year (2022: Nil pence) 202 202
Final dividend paid of 15 pence per Ordinary share in respect of 404 -
the
March 2022 year end (2021: Nil pence)
--------------------------------------------------------------------- ---------- ----------
606 202
--------------------------------------------------------------------- ---------- ----------
A final dividend of 15.0 pence per ordinary share has been
declared in respect of the year ended 31 March 2023.
10. Right-of-use assets
GBP'000
---------------------------- -----------
Deemed cost
At 1 April 2022 2,323
Additions in the year 1,308
----------------------------- -----------
At 31 March 2023 3,631
----------------------------- -----------
Accumulated depreciation
At 1 April 2022 910
Depreciation for the year 373
----------------------------- -----------
At 31 March 2023 1,283
----------------------------- -----------
Net book value
At 31 March 2023 2,348
----------------------------- -----------
The right-of-use assets above represent four long-term property
leases for premises from which the Company operates a Volkswagen
dealership in Brighton, a Volvo dealership in Worthing and two car
storage compounds in Eastbourne and Tunbridge Wells.
Depreciation charges of GBP373,000 (2022: GBP339,000) in respect
of right-of-use assets was recognised within Administration
Expenses in the Income Statement.
The interest expense on the associated lease liability of
GBP51,000 (2022: GBP37,000) is disclosed in note 6.
Payments made in the year on the above leases were GBP391,000
(2022: GBP353,000).
11. Property, plant and equipment
Freehold Leasehold Fixtures Plant &
property improvements & machinery Total
GBP'000 GBP'000 fittings GBP'000 GBP'000
GBP'000
--------------------------- ----------- --------------- ----------- ------------ -----------
Cost or deemed cost
At 1 April 2022 42,697 728 5,629 5,076 54,130
Additions at cost 327 - 314 169 810
Disposals - - (448) (505) (953)
--------------------------- ----------- --------------- ----------- ------------ -----------
At 31 March 2023 43,024 728 5,495 4,740 53,987
--------------------------- ----------- --------------- ----------- ------------ -----------
Accumulated depreciation
At 1 April 2022 6,729 654 4,368 3,404 15,155
Depreciation charge
for the year 673 74 500 393 1,640
Disposals - - (448) (505) (953)
--------------------------- ----------- --------------- ----------- ------------ -----------
At 31 March 2023 7,402 728 4,420 3,292 15,842
--------------------------- ----------- --------------- ----------- ------------ -----------
Net book value
31 March 2023 35,622 - 1,075 1,448 38,145
--------------------------- ----------- --------------- ----------- ------------ -----------
Short-term leasehold property for both the Company and the Group
comprises net book value of GBPNil in the Statement of Financial
Position (2022: GBP74,000).
Depreciation charges of GBP1,640,000 (2022: GBP1,578,000) in
respect of Property, plant and equipment was recognised within
Administration Expenses in the Income Statement.
The Company valued its portfolio of freehold premises and
investment properties as at 31 March 2023. The valuation was
carried out by CBRE Limited, Chartered Surveyors, in accordance
with the Royal Institution of Chartered Surveyors valuation -
global and professional standards requirements. The valuation is
based on existing use value which has been calculated by applying
various assumptions as to tenure, letting, town planning, and the
condition and repair of buildings and sites including ground and
groundwater contamination. Management are satisfied that this
valuation is materially accurate. The excess of the valuation over
net book value as at 31 March 2023 of those sites was GBP11.5
million (2022: GBP13.3 million). In accordance with the Company's
accounting policies, this surplus has not been incorporated into
these financial statements.
12. Investment properties
GBP'000
------------------------------------ -----------
Cost
At 1 April 2022 and 31 March 2023 9,650
------------------------------------- -----------
Accumulated depreciation
At 1 April 2022 2,004
Depreciation for the year 115
At 31 March 2023 2,119
------------------------------------- -----------
Net book value
At 31 March 2023 7,531
------------------------------------- -----------
Depreciation charges of GBP115,000 (2022: GBP105,000) in respect
of Investment properties was recognised within Administration
Expenses in the Income Statement.
As described in note 11, the total excess of the valuation of
all of the Company's freehold properties over net book value as at
31 March 2023 was GBP11.5 million (2022: GBP13.3 million).
Investment properties accounted for GBP0.7 million (2022: GBP0.8
million) of this surplus.
13. Net investment in lease
2023 2022
GBP'000 GBP'000
------------------------------- ---------- ----------
Due after more than one year 225 389
Due within one year 164 168
------------------------------- ---------- ----------
At 31 March 2023 389 557
------------------------------- ---------- ----------
The premises shown above are sub-let to a third-party under a
lease which has the same terms and duration as the Company's own
lease.
14. Goodwill
Group and Company: GBP'000 GBP'000
------------------------------------- ----------- -----------
Cost
At 1 April 2022 and 31 March 2023 481 481
------------------------------------- ----------- -----------
Provision for impairment
At 1 April 2022 and 31 March 2023 195 195
------------------------------------- ----------- -----------
Carrying amounts allocated to CGUs
Volkswagen, Brighton 200 200
Audi, Eastbourne 86 86
------------------------------------- ----------- -----------
At 31 March 2023 286 286
------------------------------------- ----------- -----------
For the purposes of the annual impairment testing, goodwill is
allocated to a CGU. Each CGU is allocated against the lowest level
within the entity at which goodwill is monitored for management
purposes. Consequently, the directors recognise CGUs to be those
assets attributable to individual dealerships and the table above
sets out the allocation of goodwill into the individual dealership
CGUs. The carrying amount of goodwill allocated to the Volkswagen,
Brighton CGU is the only amount considered significant in
comparison with the Group's total carrying amount of goodwill.
Goodwill impairment reviews are undertaken annually, or more
frequently if events or changes in circumstances indicate that the
carrying amount may not be recoverable and a potential impairment
may be required. Impairment reviews have been performed for all
CGUs for the years ended 31 March 2022 and 2023.
Valuation basis
The recoverable amount of each CGU is based on the higher of its
fair value less selling costs and value in use. The fair value less
selling costs of each CGU is based initially upon the market value
of any property contained within it and is determined by an
independent valuer as described in note 12. Where the fair value
less selling costs of a CGU indicates that an impairment may have
occurred, a discounted cash flow calculation is prepared in order
to assess the value in use of that CGU, involving the application
of a pre-tax discount rate to the projected, risk-adjusted pre-tax
cash inflows and terminal value.
Period of specific projected cash flows (Volkswagen, Brighton
CGU)
The recoverable amount of the Volkswagen, Brighton CGU is based
on value in use. Value in use is calculated using cash flow
projections for a five-year period from 1 April 2023 to 31 March
2028. These projections are based on the most recent budget which
has been approved by the board being the budget for the year ending
31 March 2024. The key assumptions in the most recent annual budget
on which the cash flow projections are based relate to expectations
of sales volumes and margins, and expectations around changes in
the operating cost base. These assumptions are based on past
experience, adjusted to expected changes, and on external sources
of information. The cash flows include ongoing capital expenditure
required to maintain the dealership but exclude any growth capital
expenditure projects to which the Group was not committed at the
reporting date.
Growth rates, ranging from 1% (2022: -1%) to 12% (2022: 15%)
have been used to forecast cash flows for a further four years
beyond the budget period, through to 31 March 2028. These growth
rates reflect the products and markets in which the CGU operates.
These growth rates do not give rise to an impairment. Growth rates
are internal forecasts based on a combination of internal and
external information. Based on these forecasts, the headroom
available on the total future profits is GBP1.4 million (2022:
GBP3.2 million) before an impairment would be necessary.
Period of specific projected cash flows (Volvo, Worthing
CGU)
The recoverable amount of the Volvo, Worthing CGU is based on
value in use. Value in use is calculated using cash flow
projections for a five-year period from 1 April 2023 to 31 March
2028. These projections are based on the most recent budget which
has been approved by the board being the budget for the year ending
31 March 2024. The key assumptions in the most recent annual budget
on which the cash flow projections are based relate to expectations
of sales volumes and margins, and expectations around changes in
the operating cost base. These assumptions are based on past
experience, adjusted to expected changes, and on external sources
of information. The cash flows include ongoing capital expenditure
required to maintain the dealership but exclude any growth capital
expenditure projects to which the Group was not committed at the
reporting date.
Growth rates, ranging from -25% (2022: -46%) to 9% (2022: 7%)
have been used to forecast cash flows for a further four years
beyond the budget period, through to 31 March 2028. These growth
rates reflect the products and markets in which the CGU operates.
These growth rates do not give rise to an impairment. Growth rates
are internal forecasts based on a combination of internal and
external information. Based on these forecasts, the headroom
available on the total future profits is GBP2.4 million (2022:
GBP1.1 million) before an impairment would be necessary.
Discount rate
The cash flow projections have been discounted using a rate
derived from the Group's pre-tax weighted average cost of capital,
adjusted for industry and market risk. The discount rate used was
12.4% (2022: 12.4%).
Terminal growth rate
The cash flows subsequent to the forecast period are
extrapolated into the future over the useful economic life of the
CGU using a steady or declining growth rate that is consistent with
that of the product and industry. These cash flows form the basis
of what is referred to as the terminal value. The growth rate to
perpetuity beyond the initial budgeted cash flows used in the value
in use calculations to arrive at a terminal value is 0.5% (2022:
0.5%). Terminal growth rates are based on management's estimate of
future long-term average growth rates.
Conclusion
At 31 March 2023, no impairment charge in respect of goodwill
was identified (2022: no impairment charge).
Sensitivity to changes in key assumptions
Impairment testing is dependent on estimates and judgements,
particularly as they relate to the forecasting of future cash
flows. The outcome of the impairment test is not sensitive to
reasonably possible changes in respect of the projected cash flows,
the discount rate applied, nor in respect of the terminal growth
rate assumed.
15. Inventories
Group and Company: 2023 2022
GBP'000 GBP'000
--------------------------------- ---------- ----------
Vehicles 28,651 22,561
Vehicles on consignment 10,229 3,969
Oil, spare parts and materials 1,100 1,009
Work in progress 9 7
--------------------------------- ---------- ----------
At 31 March 2023 39,989 27,546
--------------------------------- ---------- ----------
2023 2022
Group and Company: GBP'000 GBP'000
------------------------------------------------------- ---------- ----------
Inventories recognised as an expense during the year 216,265 185,398
Inventories stated at net realisable value 976 884
Carrying value of inventories subject to retention
of title clauses 22,519 14,675
------------------------------------------------------- ---------- ----------
All vehicle inventories held under consignment stocking
arrangements are deemed to be assets of the Group and are included
on the Statement of Financial Position from the date of
consignment. The corresponding liabilities to the manufacturers are
included within trade and other payables. Inventories can be held
on consignment for a maximum consignment period set by the
manufacturer, which is generally between 180 and 365 days. Interest
is payable in certain cases for part of the consignment period, at
various rates indirectly linked to the Bank of England base
rate.
During the year, GBP24,000 (2022: 25,000) was recognised in
respect of the write-down of inventories of spare parts due to
general obsolescence.
16. Trade and other payables
2023 2022
GBP'000 GBP'000
-------------------------------------------- ---------- ----------
Trade payable 21,810 14,034
Obligations relating to consignment stock 10,229 3,969
Vehicle stocking loans 7,511 7,327
Social security and other taxes 1,204 823
Accruals 2,342 2,732
Deferred income 493 532
Other creditors 85 78
-------------------------------------------- ---------- ----------
At 31 March 2022 43,674 29,495
-------------------------------------------- ---------- ----------
Trade and other payables principally comprise amounts
outstanding for trade purchases and ongoing costs. The average
credit period taken for these trade-related purchases was 27 days
(2022: 28 days).
The directors consider that the carrying amount of trade
payables approximates to fair value.
The Group finances the purchases of new car inventory through
the use of consignment funding facilities provided by its
manufacturer partners and which are shown above as Obligations
relating to consignment stock. Vehicles are physically supplied by
the manufacturers with payment deferred until the earlier of the
registration of the vehicle or the end of the consignment period,
generally between 180 and 365 days. In certain circumstances
consignment periods can be extended with the agreement of the
manufacturer. The consignment funding facilities attract interest
at a commercial rate.
The Group utilises vehicle stocking loans to assist with the
purchase of certain used car inventory. Facilities are available
from both its manufacturer partners and a third-party finance
provider and are generally available for a period of 90 days from
the date of purchase. These vehicle stocking loans attract interest
at a commercial rate.
Interest charges on consignment stocking loans and vehicle
stocking loans described above for the year ended 31 March 2023
were GBP856,000 (2022: GBP581,000).
The obligations relating to consignment stock are all subject to
retention of title clauses for the vehicles to which they relate.
Obligations for used and demonstrator cars which have been funded
are secured on the vehicles to which they relate and are shown
above as vehicle stocking loans. From a risk perspective, the
Company's funding is split between manufacturers through their
related finance arms and that funded by the Company through bank
borrowings.
The movements in deferred income in the year were as
follows:
2023 2022
GBP'000 GBP'000
--------------------------------------------- ---------- ----------
At 1 April 2022 532 614
Utilisation of deferred income in the year (1,021) (1,401)
Income received and deferred in the year 982 1,319
--------------------------------------------- ---------- ----------
At 31 March 2023 493 532
--------------------------------------------- ---------- ----------
17. Deferred tax
The following are the major deferred tax assets and liabilities
recognised and the movements thereon during the current and prior
reporting period.
Accelerated Unrealised Retirement Short-term
tax capital benefit temporary Recoverable
depreciation gains obligations differences ACT Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------------- ------------ -------------- -------------- --------------- -----------
At 1 April 2022 (940) (1,784) 700 189 537 (1,298)
Change in tax rates
and
prior year adjustments (252) - - - 280 28
Utilisation of
ACT - - - - (475) (475)
Timing differences 202 94 (179) (85) - 32
Recognised in other
comprehensive
income - - 1,679 - - 1,679
------------------------- --------------- ------------ -------------- -------------- --------------- -----------
At 31 March 2023 (990) (1,690) 2,200 104 342 (34)
------------------------- --------------- ------------ -------------- -------------- --------------- -----------
The Finance Act 2021 introduced an increase in the main
corporation tax rate to 25% from 1 April 2023.
The Company carries a balance of surplus unrelieved advanced
corporation tax ("ACT") which can be utilised to reduce corporation
tax payable subject to a restriction of 19% of taxable profits less
shadow ACT calculated at 25% of shareholder Ordinary dividends.
Shadow ACT has no effect on the corporation tax payable itself but
any surplus shadow ACT on dividends must be fully absorbed before
surplus unrelieved ACT can be utilised. At the commencement of the
financial year on 1 April 2023 there was no Shadow ACT outstanding.
During the year all Shadow ACT generated by the payment of
dividends was fully utilised, which allowed for a further
utilisation of the available ACT, leaving the remaining value of
surplus ACT available for utilisation in future periods at 31 March
2023 of GBP342,000 (2022: GBP537,000).
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against
current tax liabilities and it is considered that this requirement
is fulfilled. The offset amounts are as follows:
2023 2022
GBP'000 GBP'000
--------------------------- ---------- ----------
Deferred tax liabilities (2,680) (2,724)
Deferred tax assets 2,646 1,426
--------------------------- ---------- ----------
At 31 March 2023 (34) (1,298)
--------------------------- ---------- ----------
The unrealised capital gains include deferred tax on gains
recognised on revaluing the land and buildings in 1995 and where
potentially taxable gains arising from the sale of properties have
been rolled over into replacement assets. Such tax would become
payable only if such properties were sold without it being possible
to claim rollover relief.
There were no trading losses available for use in future periods
(2022: GBPNil).
18. Notes to the cash flow statement
2023 2022
GBP'000 GBP'000
------------------------------------------------------------ ---------- ----------
Profit before tax for the year 3,090 4,385
Adjustments for net finance expense 1,751 1,282
------------------------------------------------------------ ---------- ----------
4,841 5,667
Adjustments for:
Depreciation of property, plant and equipment, investment
properties and
right-of-use assets 2,128 2,022
Cash payments into the defined-benefit pension scheme (800) (1,781)
Loss on disposal of property, plant and equipment - -
Share-based payments 46 53
------------------------------------------------------------ ---------- ----------
Operating cash flows before movements in working capital 6,215 5,961
(Increase)/decrease in inventories (12,444) 9,016
Increase in receivables (1,857) (94)
Increase/(decrease) in payables 14,296 (9,911)
------------------------------------------------------------ ---------- ----------
Cash generated by operations 6,210 4,972
Tax paid, net of refunds (320) (503)
Interest paid (1,653) (1,079)
------------------------------------------------------------ ---------- ----------
Net cash derived from operating activities 4,237 3,390
------------------------------------------------------------ ---------- ----------
All interest payments are treated as operating cash movements as
they arise from movements in working capital.
Reconciliation of debt
Liabilities
Revolving arising Bank and
Bank credit Lease Preference from cash Net
Group and loans facilities liabilities shares financing balances debt
Company: GBP'000 GBP'000 GBP'000 GBP'000 activities GBP'000 GBP'000
GBP'000
-------------- ----------- -------------- -------------- -------------- ------------- ------------- -----------
At 1 April
2022 7,187 6,000 1,930 812 15,929 (2,759) 13,170
Cash
movement (875) - (576) - (1,451) (1,467) (2,918)
Non-cash
movement - - 1,360 - 1,360 - 1,360
-------------- ----------- -------------- -------------- -------------- ------------- ------------- -----------
At 31 March
2023 6,312 6,000 2,714 812 15,838 (4,226) 11,612
-------------- ----------- -------------- -------------- -------------- ------------- ------------- -----------
Current
liabilities 875 1,000 511 - 2,386 (4,226) (1,840)
Non-current
liabilities 5,437 5,000 2,203 812 13,452 - 13,452
-------------- ----------- -------------- -------------- -------------- ------------- ------------- -----------
At 31 March
2023 6,312 6,000 2,714 812 15,838 (4,226) 11,612
-------------- ----------- -------------- -------------- -------------- ------------- ------------- -----------
Non-cash movements in lease liabilities relate to an extension
in the year of one existing lease and one new lease that was
entered into during the year.
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END
FR FLFLRRDILIIV
(END) Dow Jones Newswires
June 02, 2023 02:00 ET (06:00 GMT)
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