TIDMCFYN
RNS Number : 2717V
Caffyns PLC
01 December 2023
HALF YEAR REPORT
for the six months ended 30 September 2023
Summary
Half year Half year
to to
30 September 30 September
2023 2022
GBP'000 GBP'000
Revenue 134,252 118,992
Profit before tax 44 1,558
Underlying EBITDA (see note 1
below) 2,564 3,283
Underlying profit before tax (see
note 1 below) 259 1,566
Pence Pence
Underlying basic earnings per
share 7.1 47.3
Basic earnings per share 1.1 47.0
Interim dividend per Ordinary
share 5.0 7.5
Financial and operational review
-- Underlying profit before tax of GBP0.26 million (2022: GBP1.57 million)
-- Profit before tax of GBP0.04 million (2022: GBP1.56 million)
-- Like-for-like revenue increase of 13% (see note 2 below)
-- Underlying basic earnings per share of 7.1 pence (2022: 47.3 pence)
-- Basic earnings per share of 1.1 pence (2022: 47.0 pence)
-- Interim ordinary dividend declared of 5.0 pence (2022: 7.5 pence)
-- Net bank borrowings at 30 September 2023 of GBP9.5 million (2022: GBP9.5 million)
Simon Caffyn, Chief Executive, commented:
"Revenue growth enabled us to maintain gross profits despite a
challenging economic background and significant pressures on used
car profitability. Inflationary pressures on costs remain elevated,
particularly for funding charges and energy costs, significantly
impacting overall profitability. In time, the levels of both these
costs are expected to fall back, although short-term pressures will
remain ."
Enquiries:
Simon Caffyn, Chief
Caffyns plc Executive Tel: 01323 730201
Mike Warren, Finance
Director
Note 1: Underlying results exclude items that have non-trading
attributes due to their size, nature or incidence. Non-underlying
items for the period totalled GBP0.22 million (2022: GBP0.01
million) and are detailed in Note 4 to these condensed consolidated
financial statements. Underlying EBITDA of GBP2.5 million (2022:
GBP3.3 million) represents Operating profit before non-underlying
items of GBP1.5 million (2022: GBP2.2 million) and Depreciation and
Amortisation of GBP1.0 million (2022: GBP1.1 million).
Note 2: Like-for-like comparisons exclude the impact of the
Lotus business at Lewes, as this dealership did not trade for the
full six-month period in the previous financial period and the LEVC
dealership in Eastbourne, which was closed in March 2023. All other
businesses operated throughout both the whole of the current and
prior six-month periods.
INTERIM MANAGEMENT REPORT
Summary
The underlying profit before tax of GBP0.3 million for the half
year ended 30 September 2023 ("the period") is a significant
reduction on the GBP1.6 million profit reported last year. While
our profit performance from new cars and aftersales in the period
has been satisfactory, we experienced a significant reduction in
used car profitability, compounded by scarcity of supply of
appropriately priced, one-to-four year old cars. Customer demand
for such cars has remained robust, despite the challenging economic
backdrop. Taken together, total gross margins generated in the
period fell by just GBP0.2 million, or 1%. However, inflationary
pressures on costs remained elevated and, in particular, funding
charges and energy costs alone increased by GBP0.9 million in the
period. In time, the levels of both these costs are expected to
fall back, although short-term pressures will remain.
Revenue for the period increased by 13% to GBP134.3 million
(2022: GBP119.0 million), primarily due to improved levels of new
car sales as supply constraints from our manufacturers eased.
The Company continues to own all but two of the freeholds of the
properties from which it operates, and this provides the dual
strengths of a strong asset base and minimal exposure to rent
reviews.
The Company's defined-benefit pension scheme deficit, calculated
in accordance with the requirements of IAS 19 Pensions, showed an
increase of GBP0.7 million from the March 2023 year-end to GBP9.5
million at 30 September 2023. Financial returns on investments were
slightly lower than had been expected, which resulted in the
widening of the deficit in the period.
Profit before tax for the period was GBP44,000 (2022:
GBP1,557,000) with basic earnings per share of 1.1 pence (2022:
47.0 pence). Underlying basic earnings per share were 7.1 pence
(2022: 47.3 pence).
T he Company has declared an interim dividend of 5.0 pence per
Ordinary share, reflecting the performance for the period and the
board's confidence in the prospects for the Company.
Operating review
New and used cars
Our new car deliveries rose by 23% on a like-for-like basis from
the prior year period. Nationally, the Society of Motor
Manufacturers and Traders reported a 21% increase in total new car
registrations but only a 3% increase in the retail and small
business market segment in which we primarily operate. We are
pleased that the majority of our brands performed ahead of the UK
market.
Our used car sales volumes for the period fell by 4% on a
like-for-like basis. Demand remained buoyant as customers looked
for used car purchases due to the lack of availability of new cars
but the supply of appropriately-priced used cars remained
challenging. We are putting in place actions to enhance our supply
of used cars and to increase margin retention. Increasing the
efficiency of our procurement processes is expected to enable
management to improve our sales performance in the second half.
Aftersales
Our aftersales revenues rose by 5% in the period on a
like-for-like basis despite the recruitment of vehicle technicians
remaining challenging and adversely affecting throughput levels. We
continued to realise improvements to our customer retention
processes.
Operations
During this period, we have seen some manufacturers move to
agency distribution models away from the traditional wholesale
agreements. In June, Volvo moved to an agency arrangement and,
after an initial transitional period, the new system is performing
in line with expectations. Under this model, the manufacturer
transacts with the customer for the sale of new cars whilst we
retain the handover process as an agent, for which we receive a
fee. Of our other brands, CUPRA and Skoda have already moved their
electric models to this agency arrangement and Volkswagen and Audi
brands are scheduled to transition in the coming months.
As mentioned above, we are putting in place actions to increase
our supply of used cars and to enhance margin retention. We
increasingly use market-driven data to secure better quality used
cars with higher expected margins and faster selling times.
Semi-automated systems will speed this process and improve the
efficiency of the procurement of used cars enabling sales
management to target a better sales performance in the second
half.
We have just completed the refurbishment of our Volvo dealership
in Worthing, providing much improved showroom and aftersales
facilities. In Tunbridge Wells we have refurbished and enlarged our
showroom to enable the addition of the CUPRA franchise.
Property
Capital expenditure in the period was GBP1.8 million (2022:
GBP0.6 million) and included assets in the course of construction
of GBP1.2 million (2022: GBP0.3 million), primarily being a
redevelopment of the Company's Volvo premises in Worthing.
We operate primarily from freehold sites and our property
portfolio provides additional stability to our business model.
Annually, we obtain an independent assessment of the values of our
freehold properties against their carrying value in our accounts
and had an unrecognised surplus to carrying value of GBP11.5
million at 31 March 2023, our last financial year-end. The board
does not consider there to have been any material movement in the
value of the Company's freehold properties since the year-end.
The board continues to evaluate opportunities for our freehold
premises in Lewes and no sale is expected to complete for at least
a twelve-month period. Currently, the main showroom is being
utilised for our Lotus Sussex operation, while the side showroom
and workshop are let to third-party tenants.
Pensions
The Company's defined-benefit pension scheme started the period
with a net deficit of GBP8.8 million. The board has little control
over the key assumptions in the valuation calculations as required
by accounting standards and the size and nature of the Scheme's
underlying assets and liabilities means that the deficit can be
subject to significant change. The actuary's estimate of the
deficit increased by GBP0.7 million to GBP9.5 million at 30
September 2023 (2022: GBP1.5 million). Net of deferred tax, the net
deficit at 30 September 2023 was GBP7.0 million (2022: GBP1.1
million).
During the period, the net present value of the Scheme's future
pension liabilities fell by GBP5.5 million due to a combination of
the payment of GBP2.2 million of pensions and changes to
assumptions on future mortality and discount rates . However, this
reduction was less than the fall in the value of the Scheme's
assets, producing an overall widening of the net deficit position
by GBP0.7 million.
The pension cost under IAS 19 Pensions is recognised in the
Condensed Consolidated Statement of Financial Performance and
continues to be charged as a non-underlying cost, amounting to
GBP215,000 (2022: GBP46,000).
As the Scheme is in deficit, the Company has in place a recovery
plan which has been agreed with the trustees, and which was last
updated in May 2021. During the period, the Company made cash
payments into the Scheme of GBP0.4 million (2022: GBP0.4 million).
These payments increase by a minimum of 2.25% per annum.
Bank and other funding facilities
The Company has banking facilities with HSBC, which comprise a
term loan of GBP5.6 million, originally of GBP7.5 million, and a
revolving-credit facility of GBP6.0 million, both of which will
become renewable in April 2026. HSBC also provides an overdraft
facility of GBP3.5 million, renewable annually. In addition, there
is an overdraft facility of GBP4.0 million provided by Volkswagen
Bank, renewable annually, together with a term loan of GBP0.3
million, originally of GBP5.0 million, which is repayable over the
period to March 2024.
The Company was cash generative during the period with GBP1.0
million (2022: GBP2.2 million) generated from operating activities.
Working capital levels remained broadly unchanged in the period, as
in the prior period. The primary cash outflows in the period were
from capital expenditure, dividends and lease payments.
Bank borrowings, net of cash balances, at 30 September 2023 were
GBP9.5 million (2022: GBP9.5 million), up from GBP8.1 million at 31
March 2023. As a proportion of shareholders' funds, bank
borrowings, net of cash balances, were 31% at 30 September 2023
(2022: 26%).
During the period, the Company received a loan of GBP350,000
from a manufacturer partner under their dealership development
assistance programme. The loan is repayable over a five-year
period.
Taxation
The tax charge for the period has been based on an estimation of
the effective tax rate on profits for the full financial year of
31% (2022: 19%). The current year effective tax rate is greater
than the standard rate of corporation tax in force for the year of
25% due to certain items that are disallowable for corporation
tax.
Payments of corporation tax in the period, net of refunds, were
GBP28,000 (2022: GBP196,000).
At 30 September 2023, the company recognised a deferred tax
asset on the Statement of Financial Position of GBP0.2 million
(2022: deferred tax liability of GBP1.8 million).
People
The response from everyone in the Company to inflationary
pressures and other marketplace challenges is commendable and the
board would like to express its gratitude to them for their hard
work and professional application. The efforts of our operational
and support teams to continue to improve our efficiency will be
instrumental in our ability to deliver a stronger second half
performance.
Dividend
Despite the uncertainty that remains over the outlook for the UK
economy and the effect on used car profitability in our second
quarter, the board remains confident in the prospects of the
Company and has, therefore, declared an interim dividend of 5.0
pence per Ordinary share (2022: 7.5 pence per Ordinary share). This
will be paid on 12 January 2024 to shareholders on the register at
close of business on 15 December 2023. The Ordinary shares will be
marked ex-dividend on 14 December 2023.
Strategy
Our continuing strategy is to focus on representing premium and
premium volume franchises as well as maximising opportunities for
used cars and aftersales service, with an emphasis on delivering
the highest quality of customer experience. We recognise that we
operate in a rapidly changing environment and carefully monitor the
appropriateness of this strategy while also seeking new
opportunities to invest in the future growth of the business.
We concentrate on stronger market areas so as to deliver higher
returns from fewer but larger sites. We are focusing on delivering
performance improvement, particularly in our used car and
aftersales operations.
Current trading and outlook
Our forward-order bank for new cars is strong with improved
levels of supply and we are targeting an improved used car
performance in the second half. However, the high level of economic
and political uncertainty, both in the UK and abroad, is a concern.
Given these uncertainties, the board remains cautious for the
second half of the financial year.
Our balance sheet is appropriately funded, and our freehold
property portfolio is a source of great stability. We continue to
enhance our online presence, as well as improving our productivity
and increasing the resilience of the business. We remain confident
in the longer-term prospects for the Company and are ready to
explore future business opportunities as they arise .
Simon G M Caffyn
Chief Executive
30 November 2023
Condensed Consolidated Statement of Financial Performance
for the half year ended 30 September 2023
Unaudited Unaudited Audited
Half year Half year Year ended
N o to to 31 March
t e 30 September 30 September 2023
2023 2022 Total
Total Total
GBP'000 GBP'000 GBP'000
Revenue 134,252 118,992 251,426
Cost of sales (118,262) (102,839) (217,844)
---------------------------------------- ------ -------------- -------------- ------------
Gross profit 15,990 16,153 33,582
Operating expenses (14,641) (14,088) (29,085)
---------------------------------------- ------ -------------- -------------- ------------
Operating profit before other income 1,349 2,065 4,497
Other income (net) 3 153 189 344
---------------------------------------- ------ -------------- -------------- ------------
Operating profit 1,502 2,254 4,841
---------------------------------------- ------ -------------- -------------- ------------
Operating profit before non-underlying
items 1,513 2,227 4,827
Non-underlying items within operating
profit 4 (11) 27 14
---------------------------------------- ------ -------------- -------------- ------------
Operating profit 1,502 2,254 4,841
Net finance expense 5 (1,254) (661) (1,687)
Non-underlying net finance expense
on pension scheme 4 (204) (35) (64)
---------------------------------------- ------ -------------- -------------- ------------
Net finance expense (1,458) (696) (1,751)
---------------------------------------- ------ -------------- -------------- ------------
Profit before taxation 44 1,558 3,090
---------------------------------------- ------ -------------- -------------- ------------
Profit before tax and non-underlying
items 259 1,566 3,140
Non-underlying items within operating
profit 4 (11) 27 14
Non-underlying net finance expense
on pension scheme 4 (204) (35) (64)
---------------------------------------- ------ -------------- -------------- ------------
Profit before taxation 44 1,558 3,090
Taxation 6 (14) (290) (566)
---------------------------------------- ------ -------------- -------------- ------------
Profit for the period 30 1,268 2,524
---------------------------------------- ------ -------------- -------------- ------------
Earnings per share
Basic 7 1.1p 47.0p 93.6p
Diluted 7 1.1p 46.4p 92.4p
Non-GAAP measure
Underlying basic earnings per share 7 7.1p 47.3p 95.1p
Underlying diluted earnings per
share 7 7.0p 46.6p 93.9p
Condensed Consolidated Statement of Comprehensive Expense
for the half year ended 30 September 2023
Note Unaudited Unaudited Audited
Half year Half year Year to
to to
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
Profit for the period 30 1,268 2,524
--------------------------------------- ----- ------------- ------------- ---------
Items that will never be reclassified
to profit and loss:
Remeasurement of net pension
scheme obligation 12 (872) 958 (6,715)
Deferred tax on remeasurement
of pension scheme obligation 218 (239) 1,679
Other comprehensive (expense)/income,
net of tax (654) 719 (5,036)
--------------------------------------- ----- ------------- ------------- ---------
Total comprehensive (expense)/income
for the period (624) 1,987 (2,512)
--------------------------------------- ----- ------------- ------------- ---------
Condensed Consolidated Statement of Financial Position
at 30 September 2023
Unaudited Unaudited Audited
30 September 30 September 31 March
Note 2023 2022 2023
GBP'000 GBP'000 GBP'000
Non-current assets
Right-of-use assets 9 2,148 1,241 2,348
Property, plant and equipment 9 39,121 38,796 38,145
Investment properties 10 7,474 7,588 7,531
Interest in lease 145 306 225
Goodwill 286 286 286
Deferred tax asset 171 - -
Total non-current assets 49,345 48,217 48,535
--------------------------------------- ------- -------------- -------------- ----------
Current assets
Inventories 38,950 32,937 39,989
Trade and other receivables 6,903 6,138 7,121
Interest in lease 162 167 164
Current tax recoverable - - -
Cash and cash equivalents 2,739 3,214 4,226
--------------------------------------- ------- -------------- -------------- ----------
Total current assets 48,754 42,456 51,500
--------------------------------------- ------- -------------- -------------- ----------
Total assets 98,099 90,673 100,035
--------------------------------------- ------- -------------- -------------- ----------
Current liabilities
Interest-bearing overdrafts, loans
and borrowings 1,695 1,875 1,875
Trade and other payables 42,485 35,781 43,674
Lease liabilities 422 289 511
Current tax payable - 76 28
--------------------------------------- ------- -------------- -------------- ----------
Total current liabilities 44,602 38,021 46,088
--------------------------------------- ------- -------------- -------------- ----------
Net current assets 4,152 4,435 5,412
Non-current liabilities
Interest-bearing loans and borrowings 10,530 10,875 10,437
Lease liabilities 2,039 1,394 2,203
Preference shares 11 812 812 812
Pension scheme obligation 12 9,461 1,482 8,799
Deferred tax liability - 1,751 34
--------------------------------------- ------- -------------- -------------- ----------
Total non-current liabilities 22,842 16,314 22,285
--------------------------------------- ------- -------------- -------------- ----------
Total liabilities 67,444 54,335 68,373
--------------------------------------- ------- -------------- -------------- ----------
Net assets 30,655 36,338 31,662
--------------------------------------- ------- -------------- -------------- ----------
Shareholders' equity
Ordinary share capital 1,439 1,439 1,439
Share premium 272 272 272
Capital redemption reserve 707 707 707
Non-distributable reserve 1,724 1,724 1,724
Retained earnings 26,513 32,196 27,520
--------------------------------------- ------- -------------- -------------- ----------
Total equity 30,655 36,338 31,662
--------------------------------------- ------- -------------- -------------- ----------
Condensed Consolidated Statement of Changes in Equity
for the half year ended 30 September 2023 (unaudited)
Capital
Share Share redemption Non-distributable Retained Total
capital premium reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 2023
Total comprehensive expense 1,439 272 707 1,724 27,520 31,662
Profit for the period - - - - 30 30
Other comprehensive expense - - - - (654) (654)
--------------------------------- ---------- ---------- ------------ ------------------ ----------- ----------
Total comprehensive expense
for the period - - - - (624) (624)
Transactions with owners:
Dividends (404) (404)
Share-based payment - - - - 21 21
-------------------------------- ---------- ---------- ------------ ------------------ ----------- ----------
At 30 September 2023 (unaudited) 1,439 272 707 1,724 26,513 30,655
--------------------------------- ---------- ---------- ------------ ------------------ ----------- ----------
for the half year ended 30 September 2022 (unaudited)
Capital
Share Share redemption Non-distributable Retained Total
capital premium reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 2022 1,439 272 707 1,724 30,589 34,731
Total comprehensive income
Profit for the period - - - - 1,268 1,268
Other comprehensive income - - - - 719 719
--------------------------------- ---------- ---------- ------------ ------------------ ----------- ----------
Total comprehensive income
for the period 1,987 1,987
Transactions with owners:
Dividends - - - - (404) (404)
Share-based payment - - - - 24 24
-------------------------------- ---------- ---------- ------------ ------------------ ----------- ----------
At 30 September 2022 (unaudited) 1,439 272 707 1,724 32,196 36,338
--------------------------------- ---------- ---------- ------------ ------------------ ----------- ----------
for the year ended 31 March 2023 (audited)
Capital
Share Share redemption Non-distributable Retained Total
capital premium reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 2022 1,439 272 707 1,724 30,589 34,731
Total comprehensive expense
Profit for the year - - - - 2,524 2,524
Other comprehensive expense - - - - (5,036) (5,036)
------------------------------ ---------- ---------- ------------ ------------------ ----------- ----------
Total comprehensive expense
for the year (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 (audited) 1,439 272 707 1,724 27,520 31,662
------------------------------ ---------- ---------- ------------ ------------------ ----------- ----------
Condensed Consolidated Cash Flow Statement
for the half year ended 30 September 2023
Unaudited Unaudited Audited
Half year Half year Year to
to to 31 March
30 September 30 September 2023
2023 2022 GBP'000
GBP'000 GBP'000
Cash flows from operating activities
Profit before taxation 44 1,558 3,090
Adjustments for:
Net finance expense and pension scheme
service cost 1,458 696 1,751
Depreciation of property, plant and equipment,
investment properties and right-of-use
assets 1,035 1,056 2,128
Cash payments into the defined-benefit
pension scheme (425) (403) (800)
Loss on disposal of property, plant and - - -
equipment
Share-based payments 21 24 46
Decrease/(increase) in inventories 535 (5,391) (12,444)
Decrease/(increase) in receivables 218 (875) (1,857)
(Decrease)/increase in payables (676) 6,367 14,296
------------------------------------------------ --------------- --------------- -----------
Cash generated from operations 2,210 3,032 6,210
Net tax paid (28) (196) (320)
Interest paid (1,201) (645) (1,653)
------------------------------------------------ --------------- --------------- -----------
Net cash generated from operating activities 981 2,191 4,237
------------------------------------------------ --------------- --------------- -----------
Investing activities
Proceeds generated on disposal of property,
plant and equipment - - 1
Purchases of property, plant and equipment (1,754) (717) (902)
Receipt from investment in lease 93 93 185
------------------------------------------------ --------------- --------------- -----------
Net cash used in investing activities (1,661) (624) (716)
------------------------------------------------ --------------- --------------- -----------
Financing activities
Manufacturer development loan advanced 350 - -
Secured loans repaid (437) (437) (875)
Issue of shares - SAYE scheme - - 3
Dividends paid (404) (404) (606)
Repayment of lease liabilities (316) (271) (576)
------------------------------------------------ --------------- --------------- -----------
Net cash used in financing activities (807) (1,112) (2,054)
------------------------------------------------ --------------- --------------- -----------
Net (decrease)/increase in cash and
cash equivalents (1,487) 455 1,467
Cash and cash equivalents at beginning
of period 4,226 2,759 2,759
------------------------------------------------ --------------- --------------- -----------
Cash and cash equivalents at end of
period 2,739 3,214 4,226
------------------------------------------------ --------------- --------------- -----------
Notes to the Condensed Consolidated Financial Statements
for the half year ended 30 September 2023
1. GENERAL INFORMATION
Caffyns plc is a company domiciled in the United Kingdom. The
address of the registered office is Meads Road, Eastbourne, East
Sussex BN20 7DR.
These condensed consolidated financial statements for the half
year to 30 September 2023 and similarly for the half year to 30
September 2022 are unaudited. They do not include all the
information required for full annual financial statements and
should be read in conjunction with the financial statements of the
Company for the year ended 31 March 2023.
The comparative financial information for the year ended 31
March 2023 in these condensed consolidated financial statements
does not constitute statutory accounts for that year. The statutory
accounts for 31 March 2023 have been delivered to the Registrar of
Companies. The Auditor's report on those accounts was unqualified,
did not draw attention to any matters by way of emphasis, and did
not contain a statement under 498(2) or 498(3) of the Companies Act
2006.
These condensed consolidated financial statements have been
reviewed by the Company's auditor and a copy of their review report
is set out at the end of these statements.
These consolidated interim financial statements were approved by
the directors on 30 November 2023.
2. ACCOUNTING POLICIES
The annual financial statements of Caffyns plc are prepared in
accordance with UK-adopted International Accounting Standards . The
set of condensed consolidated financial statements included in this
half-yearly financial report has been prepared in accordance with
UK-adopted International Accounting Standard 34 'Interim Financial
Reporting'. As required by the disclosure guidance and transparency
rules of the Financial Conduct Authority, this set of condensed
consolidated financial statements has been prepared in accordance
with the accounting policies set out in the Annual Report for the
year ended 31 March 2023 .
Segmental reporting
Based upon the management information reported to the Group's
chief operating decision maker, the Chief Executive, in the opinion
of the directors, the Group only has one reportable segment. There
are no major customers amounting to 10% or more of the Group's
revenue. All revenue and non-current assets derive from, or are
based in, the United Kingdom.
Basis of preparation: Going concern
These condensed consolidated financial statements have been
prepared on a going concern basis, which the directors consider
appropriate for the reasons set out below.
The directors have considered the going concern basis and have
undertaken a detailed review of trading and cash flow forecasts for
a period in excess of one year from the date of approval of this
Interim Report. This has focused primarily on the achievement of
the Company's banking covenants.
Under the Company's first covenant test, it is required to make
underlying earnings before bank interest, depreciation and
amortisation ("senior EBITDA") for a rolling twelve-month period
which is at least four times the level of interest payable on bank
borrowings to HSBC and Volkswagen Bank ("senior interest"). In
November 2023, the multiple set for future tests of this covenant
was reduced from four to a multiple of three.
The Company's second covenant test requires total bank
borrowings to HSBC and Volkswagen Bank not to exceed 375% of senior
EBITDA for a rolling twelve-month period.
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.
These covenant tests are conducted biannually in March and
September and all tests were passed for the period under
review.
In the coming twelve months, each of the three covenant tests
must be passed at 31 March 2024 and 30 September 2024, with the
test on 30 September 2024 being the final test to be carried out
within the twelve-month period from the anniversary of the signing
of these condensed consolidated financial statements. The Company
has modelled this period and conclude that there is headroom that
would allow for an approximate 6% reduction in expected new and
used units over this period. External market commentary provided by
the Society of Motor Manufacturers and Traders ("SMMT") for the
2023 calendar indicate that new car registrations are forecast to
show a year-on-year increase of 17% to 1.89 million, followed by a
further 4% increase for the 2024 calendar year to 1.97 million
registrations as global supply chain pressures ease, allowing
manufacturing levels to rise. The used car market has remained
stable over the five years from 2015 to 2019, at between 7.6 and
8.2 million transactions and dropped by only 15% in 2020 due to the
effects of the covid-19 pandemic, compared to a comparable 29% fall
in new car registrations . As social-distancing regulations were
eased in 2021, demand for used cars was buoyant and transactions
grew by 12% in the calendar year, before falling back by 9% in 2022
to 6.9 million transactions. However, the continuing shortage in
new car supply has assisted the used car market and is expected to
continue to do so and indications for the quarters so far available
for 2023 is that the used market will regain what it lost in 2022,
returning the number of market transactions to that seen in 2021.
While the Company's overall financial results in the period were
disappointing, margin generation remained robust and the current
new car order take held for future delivery remains at elevated
levels.
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 and bank overdraft
and medium-term revolving credit facilities and term loans. At 30
September 2023, the medium-term banking facilities included a term
loan with an outstanding balance of GBP5.6 million and a revolving
credit facility of GBP6.0 million from HSBC, its primary bankers,
with both facilities being renewable in April 2026. HSBC also make
available a short-term overdraft facility of GBP3.5 million, which
is renewed annually in August. At 30 September 2023, GBP4.5 million
of these facilities was undrawn. The Company also has a ten-year
term loan from Volkswagen Bank with a balance outstanding at 30
September 2023 of GBP0.25 million, which is repayable to March
2024, and a short-term revolving credit facility of GBP4.0 million,
which is renewed annually in October. At 30 September 2023, GBP3.0
million of these facilities was undrawn. In the opinion of the
directors, there is a reasonable expectation that all facilities
will be renewed at their scheduled expiry dates. The failure of a
covenant test would render these facilities repayable on demand at
the option of the lender.
The directors have a reasonable expectation that the Company has
adequate resources and headroom against its covenant tests to be
able to continue in operational existence for the foreseeable
future and for at least twelve months from the date of approval of
this Interim Report. For those reasons, they continue to adopt the
going concern basis in preparing these condensed consolidated
financial statements .
Non-underlying items
Non-underlying items are those items that are unusual because of
their size, nature or incidence. Management considers that these
items should be disclosed separately to enable a full understanding
of the operating results. Profits and losses on disposal of
property, plant and equipment and property impairment charges are
disclosed as non-underlying, as are certain redundancy costs and
costs attributable to vacant properties held pending their
disposal.
The net financing return and service cost on pension obligations
in respect of the defined benefit pension scheme is presented as a
non-underlying item due to the inability of management to influence
the underlying assumptions from which the charge is derived. The
defined benefit pension scheme is closed to future accrual.
All other activities are treated as underlying.
3. OTHER INCOME (NET)
Unaudited Unaudited Audited
Half year Half year year to
to to 31 March
30 September 30 September 2023
2023 2022 GBP'000
GBP'000 GBP'000
Rent receivable 153 151 307
Liquidation distribution received - 38 37
Loss on disposal of tangible fixed - - -
assets
------------------------------------ -------------- -------------- ----------
Total other income 153 189 344
------------------------------------ -------------- -------------- ----------
4. NON-UNDERLYING ITEMS
Unaudited Unaudited Audited
Half year Half year year to
to to 31 March
30 September 30 September 2023
2023 2022
GBP'000 GBP'000 GBP'000
Other income:
Liquidation distribution received - 38 37
Net loss on disposal of property, - - -
plant and equipment
------------------------------------------ -------------- -------------- ----------
Within operating expenses:
Service cost on pension scheme (11) (11) (23)
Total non-underlying items within
operating profit (11) 27 14
------------------------------------------ -------------- -------------- ----------
Net finance expense on pension scheme (204) (35) (64)
------------------------------------------ -------------- -------------- ----------
Total non-underlying items within
profit before taxation (215) (8) (50)
------------------------------------------ -------------- -------------- ----------
During the previous financial period the Company received a
final distribution from the liquidator to MG Rover Group
Limited.
5. NET FINANCE EXPENSE
Unaudited Unaudited Audited
Half year Half year year to
to to 31 March
30 September 30 September 2023
2023 2022 GBP'000
GBP'000 GBP'000
Interest in lease interest receivable (10) (8) (17)
Interest receivable on cash deposits (17) - -
Interest payable on bank borrowings 450 245 621
Interest payable on inventory stocking
loans 687 312 856
Interest on lease liabilities 63 24 51
Financing costs amortised 45 52 104
Preference dividends 36 36 72
---------------------------------------- -------------- -------------- ----------
Finance expense 1,254 661 1,687
---------------------------------------- -------------- -------------- ----------
6. TAXATION
Unaudited Unaudited Audited
Half year Half year year to
to to 31 March
30 September 30 September 2023
2023 2022 GBP'000
GBP'000 GBP'000
Current UK corporation tax
Charge for the period - 76 152
Adjustments recognised in the period - - -
for current tax of prior periods
-------------------------------------- -------------- -------------- ----------
Total current tax charge - 76 152
-------------------------------------- -------------- -------------- ----------
Deferred tax
Origination and reversal of timing
differences 39 209 442
Change in corporation tax rate - - 10
Adjustments recognised in the period
for deferred tax
of prior periods (25) 5 (38)
-------------------------------------- -------------- -------------- ----------
Total deferred tax charge 14 214 414
-------------------------------------- -------------- -------------- ----------
Total tax charged in the Income
Statement 14 290 566
-------------------------------------- -------------- -------------- ----------
The tax charge arises as follows:
Unaudited Unaudited Audited
Half year Half year year to
to to 31 March
30 September 30 September 2023
2023 2022 GBP'000
GBP'000 GBP'000
On normal trading 68 291 576
Non-underlying items (54) (1) (10)
-------------------------------------- -------------- -------------- ----------
Total tax charge 14 290 566
-------------------------------------- -------------- -------------- ----------
Taxation of trading items for the half year has been provided at
an effective rate of taxation of 31% (2022: 19%) expected to apply
to the full year. This effective rate is higher than the standard
rate of corporation tax in force of 25% due to certain items that
are deemed disallowable for corporation tax.
7. EARNINGS PER SHARE
The calculation of basic earnings per share is based on the
earnings attributable to Ordinary shareholders divided by the
weighted average number of shares in issue during the period.
Treasury shares are treated as cancelled for the purposes of this
calculation.
The calculation of diluted earnings per share is based on the
basic earnings per share, adjusted to allow for the issue of shares
and the post-tax effect of dividends and/or interest, on the
assumed conversion of all dilutive options and other dilutive
potential Ordinary shares .
Reconciliations of the earnings and the weighted average number
of shares used in the calculations are set out below.
Unaudited Unaudited Audited
Half year Half year year to
to to
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
Basic
Profit after tax for the period 30 1,268 2,524
---------------------------------- ------------- ------------- ---------
Basic earnings per share 1.1p 47.0p 93.6p
---------------------------------- ------------- ------------- ---------
Diluted earnings per share 1.1p 46.4p 92.4p
---------------------------------- ------------- ------------- ---------
Underlying
Profit before tax 44 1,558 3,090
Adjustment: Non-underlying items
(note 4) 215 8 50
---------------------------------- ------------- ------------- ---------
Underlying profit for the period 259 1,566 3,140
Taxation on normal trading (note
6) (68) (291) (576)
---------------------------------- ------------- ------------- ---------
Underlying earnings 191 1,275 2,564
---------------------------------- ------------- ------------- ---------
Underlying basic earnings per
share 7.1p 47.3p 95.1p
---------------------------------- ------------- ------------- ---------
Underlying diluted earnings per
share 7.0p 46.6p 93.9p
---------------------------------- ------------- ------------- ---------
The number of fully paid Ordinary shares in issue at the
period-end was 2,879,298 (2022: 2,879,298). Excluding the shares
held for treasury, the weighted average shares in issue for the
purposes of the earnings per share calculation were 2,696,485
(2022: 2,695,586).
The shares granted under the Company's current SAYE scheme for
the period, and for the year ended 31 March 2023, are dilutive. The
weighted average number of shares in issue for the purposes of the
diluted earnings per share calculation were 2,730,331 (2022:
2,732,604).
The directors consider that underlying earnings per share
figures provide a better measure of comparative performance.
8. DIVIDS
Ordinary shares of 50 pence each
An interim dividend of 5.0 pence per Ordinary share has been
declared and will be paid to shareholders on 12 January 2024 to
those shareholders on the register at the close of business on 15
December 2023. The Ordinary shares will be marked ex-dividend on 14
December 2023 . An interim dividend of 7.5 pence per Ordinary share
was declared in respect of the half-year ended 30 September 2022
and a final dividend of 15.0 pence per Ordinary share was declared
in respect of the year ended 31 March 2023.
Preference shares
Preference dividends were paid in October 2023. The next
preference dividends are payable in April 2024. The cost of the
preference dividends has been included within finance costs.
9. PROPERTY, PLANT AND EQUIPMENT AND RIGHT-OF-USE ASSETS
The following is a reconciliation of changes in the balances of
Property, plant and equipment and Right-of-Use assets.
Property, plant and equipment:
Unaudited
Half year
to
30 September
2023
GBP'000
Property, plant and equipment at
1 April 2023 38,145
Less: Depreciation charges (778)
Less: Net book value of disposals -
Add: Purchases 1,754
------------------------------------- ---------------
Property plant and equipment at
30 September 2023 39,121
------------------------------------- ---------------
Purchases in the period included assets in the course of
construction of GBP1,233,000 (2022: GBP301,000).
Right-of-use assets:
Unaudited
Half year
to
30 September
2023
GBP'000
Right-of-use assets at 1 April 2023 2,348
Less: Amortisation of right-of-use
assets (200)
--------------------------------------- ---------------
Right-of-use assets at 30 September
2023 2,148
--------------------------------------- ---------------
10. INVESTMENT PROPERTIES
The following is a reconciliation of changes in the balances of
Investment properties.
Investment properties:
Unaudited
Half year
to
30 September
2023
GBP'000
Investment properties at 1 April
2023 7,531
Less: Depreciation charges (57)
----------------------------------------- ---------------
Investment properties at 30 September
2023 7,474
----------------------------------------- ---------------
11. LOANS AND BORROWINGS
Liabilities
Bank Revolving arising Bank
and credit Lease Preference from and cash Net
other facilities liabilities shares financing balances debt
loans GBP'000 GBP'000 GBP'000 activities GBP'000 GBP'000
GBP'000 GBP'000
At 1 April 2023
(audited) 6,312 6,000 2,714 812 15,838 (4,226) 11,612
Cash movement (87) - (316) - (403) 1,487 1,084
Non-cash movement - - 63 - 63 - 63
At 30 September
2023 6,225 6,000 2,461 812 15,498 (2,739) 12,759
(unaudited)
---------------------- ---------- ------------- ------------- ------------- ------------ ----------- ----------
Current
liabilities/(assets) 1,695 - 422 - 2,117 (2,739) (622)
Non-current
liabilities 4,530 6,000 2,039 812 13,381 - 13,381
---------------------- ---------- ------------- ------------- ------------- ------------ ----------- ----------
At 30 September
2023 6,225 6,000 2,461 812 15,498 (2,739) 12,759
---------------------- ---------- ------------- ------------- ------------- ------------ ----------- ----------
12. PENSIONS
The pension scheme deficit reflects a defined benefit obligation
that has been updated to reflect its valuation as at 30 September
2023. This has been calculated by a qualified actuary using a
consistent valuation method to that which was adopted in the
audited financial statements for the year ended 31 March 2023 and
in the period to 30 September 2022, and which complies with the
accounting requirements of IAS 19 Pensions (revised).
The net liability for defined benefit obligations increased from
GBP8,799,000 at 31 March 2023 to GBP9,461,000 at 30 September 2023.
The increase of GBP662,000 comprised the net charge to the
Condensed Consolidated Statement of Financial Performance of
GBP215,000, a net adverse remeasurement adjustment debited to the
Condensed Consolidated Statement of Comprehensive Income of
GBP872,000 reduced by employer contributions of GBP425,000.
Asset values fell in the period, by GBP6,138,000, including
divestments to pay pension transfers and benefits in the period of
GBP2,217,000. The net present value of pension liabilities also
fell, by GBP5,476,000, due to the combination of pensions settled
in the period and an increase in the rate applied to discount the
Scheme's liabilities from 4.75% at 31 March 2023 to 5.55% at 30
September 2023. The assumption on future CPI inflation also
increased from 2.95% applied at 31 March 2023 to 3.00% at 30
September 2023.
13. RISKS AND UNCERTAINTIES
There are a number of potential risks and uncertainties which
could have a material impact on the Group's performance over the
remaining six months of the financial year and could cause actual
results to differ materially from expected and historical results.
The board believes these risks and uncertainties to be consistent
with those disclosed in our latest Annual Report, including the
effect of increasing interest base rates on the UK economy and
their impact on the Group's defined benefit pension scheme,
liquidity and financing, the Group's dependency on its
manufacturers and their stability and ability to supply new car
product, used car prices and regulatory compliance.
14. CAPITAL COMMITMENTS
At 30 September 2023, the Company had capital commitments of
GBP0.6 million (2022: GBPNil), primarily in relation to the
redevelopment of its Volvo premises in Worthing.
15. RESPONSIBILTY STATEMENT
We confirm that to the best of our knowledge:
a) these condensed consolidated financial statements have been
prepared in accordance with IAS 34 'Interim Financial
Reporting';
b) these condensed consolidated financial statements include a
fair review of the information required by DTR 4.2.7R of the
disclosure guidance and transparency rules (indication of important
events during the first six months and their impact on the set of
financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year); and
c) the Half Year Report includes a fair review of the
information required by DTR 4.2.8R of the disclosure and guidance
transparency rules (disclosure of related parties' transactions and
changes therein).
By order of the board
S G M Caffyn
Chief Executive
M Warren
Finance Director
30 November 2023
INDEPENDENT REVIEW REPORT
to Caffyns plc
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2023 is not prepared, in all material respects, in
accordance with UK-adopted International Accounting Standard 34 and
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2023 which comprises the Statement of
Comprehensive Income, the Statement of Changes in Equity, the
Statement of Financial Position, the Statement of Cash Flows and
the related notes.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" ("ISRE (UK) 2410"). A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK-adopted International Accounting Standard 34,
Interim Financial Reporting.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410, however future events or conditions
may cause the Group to cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statement in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
Stephen Le Bas
BDO LLP
Chartered Accountants
Southampton, UK
30 November 2023
BDO LLP is a limited liability partnership registered in England
and Wales
(with registered number OC305127).
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END
IR FZMFMKGLGFZM
(END) Dow Jones Newswires
December 01, 2023 02:00 ET (07:00 GMT)
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