REG - Caffyns PLC - Half-year Report <Origin Href="QuoteRef">CFYN.L</Origin> - Part 1

CaffynsAnnouncement

25/11/2016 07:05

RNS Number : 1148Q
Caffyns PLC
25 November 2016
HALF YEAR REPORT 
for the half year ended 30 September 2016
Summary

6 months to
30 September
2016
6 months to
30 September
2015

'000
'000



Revenue
105,188
95,481
Underlying EBITDA
2,068
2,120
Underlying profit before tax 
1,012
989
Profit for the period before tax (including discontinued businesses)
5,492
1,711

Pence
Pence



Underlying* earnings per share
30.2
29.9
Basic earnings per share (including discontinued businesses)
164.3
51.4
Interim dividend per ordinary share
7.50
7.25
Note: Underlying results exclude items that have non-trading attributes due to their size, nature or incidence. Following a business disposal that occurred in April 2016, the 2016 results have been presented between continuing and discontinued operations. In order for comparative information to be presented consistently, the 2015results have been restated.
Highlights
 Underlying profit before tax up 2.3% to 1.01 million (2015: 0.99 million)
 Profit before tax generated on business disposal of 4.68 million 
 Profit before tax up 221% to 5.49 million (2015: 1.71 million)
 Like-for-like new car unit sales up by 2.2%
 Like-for-like used car unit sales up by 11.8%
 Basic earnings per share up 220% to 164.3 pence (2015: 51.4 pence) 
 Adjusted earnings per share up 1.0% to 30.2 pence (2015: 29.9 pence)
 Net bank borrowings significantly reduced to 5.39 million (2015: 9.80 million)
 Increased interim dividend declared of 7.50 pence (2015: 7.25 pence)
Simon Caffyn, Chief Executive, commented:
"Following a solid trading performance in the first six months, the Group finished the period with cash reserves and low gearing and is now ideally placed to exploit future business opportunities. These funds will enable us to invest further in Caffyns Cars, our in-house brand of used cars, with the recent acquisition of 2.1 acres of land in Ashford and also in a new site to expand our Audi business in Worthing." 
Enquiries:
Caffyns plc
Simon Caffyn, Chief Executive
Tel:
01323 730201

Mike Warren, Finance Director






Headland 
Francesca Tuckett
Tel:
020 3805 4822



INTERIM MANAGEMENT REPORT
Summary
I am pleased to report that the Group grew its underlying profit before tax by 2.3% to 1.01 million in the six months to 30 September 2016 (2015: 0.99 million). In a challenging marketplace our businesses have continued to trade well.
Revenue from continuing operations increased by 10% to 105.19 million compared to 95.48 million in the comparative period. The Group reported like-for-like sales growth across all departments: new car unit sales, used car unit sales, service and parts.
Underlying earnings per share were 30.2 pence (2015: 29.9 pence), an increase of 1.0%.
At the beginning of this financial year, shareholders approved the sale of our Land Rover business in Lewes. We were very pleased to secure excellent terms, generating a profit on disposal, net of costs and before tax, of 4.68 million. The total cash consideration for the sale was 7.51 million.
Profit before tax for the period, which included the one-off gain on the disposal of the Land Rover business, more than trebled to 5.49 million (2015: 1.71 million) with basic earnings per share of 164.3 pence (2015: 51.4 pence). 
The Group finished the period with cash reserves and low gearing and is now ideally placed to exploit future business opportunities. These funds will enable us to invest further in Caffyns Cars, our in-house brand of used cars, with the recent acquisition of 2.1 acres of land in Ashford and also in a new site to expand our Audi business in Worthing. The Board continues to evaluate further investment opportunities.
Operating review 
New and used cars 
New car unit sales were up by 2.2% on a like-for-like basis in the half year period, which compared very favourably to the 3.9% fall in registrations in the UK retail and small business market segment in which we principally operate. For used cars, like-for-like unit sales were up 11.8% on the comparative period as our investment in this area of the business continues to yield strong returns. During the period we upgraded our website and this has significantly enhanced our customers' online searching abilities, leading to an easier, more enjoyable car-buying experience. Over a three-year period, the Group has now recorded 35% like-for-like growth in the number of used cars sold and we continue to see this part of the business as providing a major opportunity for future growth.
Aftersales 
The growth in the new car market over the last four years has led to an increase in the number of one to three-year old cars in circulation. Strong sales of both new and used cars has meant our three-year car parc has also grown considerably. It is encouraging to see service revenue has risen by 9.4% on a like-for-like basis as we continue to realise improvements to our customer retention processes. Our parts business also reported strong sales growth, up by 6.6% on a like-for-like basis from the comparative period.
Operations 
The redevelopment of our Volkswagen dealership in Eastbourne was completed in May and now comprises a twelve-car showroom with extended used car display areas as well as a state of the art new workshop. The completion of this project will now enable the site to grow in the second half of the current year. More widely for the brand, the manufacturer has commenced the roll-out of the remedial work for cars affected by the defeat-device issue and this is being carried out at authorised Volkswagen dealerships. Although this has been a carefully managed programme, the nature of the work passing through our service departments has been low margin and has involved certain added costs, such as extra courtesy cars. In the short-term it has therefore had a negative impact on service profitability. In addition, we have seen some impact on our Volkswagen sales which have fallen from last year's level, broadly similar to the manufacturer's national registrations' performance. We remain confident that the strength of the brand and the excellent model range will lead to improvements in the trading performance of our Volkswagen division.
Our Audi businesses have seen strong year-on-year growth and we have now secured planning approval to relocate our dealership in Worthing to a new, and significantly larger, site to ensure this business can better fulfil its potential. 
Our Volvo business in Eastbourne has traded very strongly, assisted by new model launches. Both the new XC90 and, more recently, the S90 and V90 have been particularly well received by customers. We are planning to invest in an expansion of our showroom facility in order to better accommodate these extra models and expect the business to continue to grow.
In Tunbridge Wells, our SEAT business has gained considerable extra traction, having almost quadrupled its new car sales from the comparative prior year period, and together with the adjacent Skoda business, the site has delivered significant improvements in profitability.
Property
Capital expenditure in the half year was 1.43 million of which 0.83 million was incurred on the purchase of freehold land at Worthing in order to facilitate the relocation of Audi Worthing. 
In April, we completed on the sale of our Land Rover business in Lewes. Under the terms of the sale, the purchaser has been granted a lease to operate from the premises for a two to three-year period after which it will revert back to the Group. The Board has commenced the process of evaluating future opportunities for the site.
In October, after the end of the six-month period under review, the purchase was completed of the remaining two parcels of freehold land at Worthing which will complete the site for the relocation of Audi Worthing. We anticipate construction will commence early next year. Also in October, we acquired some 2.1 acres of additional land adjacent to Caffyns Cars, our used car centre in Ashford. This investment will almost double the footprint of our existing operations at Ashford and will enable us to further grow the exciting used car concept as well as our Vauxhall and Skoda operations at the site. Caffyns Cars has been very well received by our customers who particularly value the Caffyns brand. The business has traded profitably since its inception in October 2014 and we are now in a position for significant expansion of this operation.
Strategy
The significant proceeds from the sale of our Land Rover business in Lewes, coupled with the Group's low gearing, has provided us with flexibility to expand upon our recent successes, particularly in the used car arena, and to evaluate and invest in future growth. In addition to investing in freehold land, in Ashford and Worthing, we are assessing a number of further opportunities.
Pensions
The unprecedented falls in gilt and bond yields in the period has had a significant adverse impact on the net funding position of the Group's defined-benefit pension, in line with most similar schemes. Despite a strong performance from the scheme's investments, the deficit at the period end had widened to 11.58 million net of tax (13.95 million gross of tax). This compared with a deficit of 4.09 million net of tax at 31 March 2016 (4.98 million gross of tax).
The scheme's recovery plan, which was agreed with the trustees following the actuarial valuation in March 2014, resulted in a total cash payment of 0.15 million being made in the first six months of this financial year. Under the terms of the recovery plan, it has been agreed that this payment will increase in future financial years by 2.25% per annum.
People 
I am very grateful for the dedication and patience shown by our employees. In particular, our front line staff who have continued to work tirelessly to address potential customer concerns regarding the Volkswagen emissions issue. Across the Group the hard work and professional application of our employees has been rewarded with strong growth in both our sales and aftersales businesses. 
As previously announced, Mark Harrison, our Finance Director, retired during the period and I would like to thank him for his outstanding contribution since his appointment to the Board in April 2001 and to wish him well for the future. In his place, we were pleased to appoint Mike Warren as Finance Director at the Annual General Meeting and to welcome him to the Board. Mike brings a wealth of experience to the position, having been Finance Director at H.R. Owen Plc between 2007 and 2015.
Dividend 
The Board has declared an interim dividend of 7.50 pence per ordinary share, an increase of 3.4% from last year. This will be paid on 6 January 2017 to shareholders on the register at close of business on 16 December 2016. The shares will be marked ex-dividend on 15 December 2016. 
Current trading and outlook 
The six months to 30 September 2016 have seen us deliver new car sales ahead of the market in addition to impressive growth in used car sales and aftersales. Low interest rates and attractive marketing offers have continued to underpin the motor retail sector with the majority of cars now sold under contracts rather than by outright purchase. In addition, the bi-annual registration plate change in September produced a stronger than anticipated trading performance. However, the Board remains cautious for the second half of the year given market consensus for a smaller new car market in 2017, coupled with the wider challenge to the UK economy from the weakness in sterling and the uncertainty surrounding the Brexit process. Following a solid trading performance in the first six months, with low gearing and cash reserves, the Group is now well placed to exploit future business opportunities.
Simon G M Caffyn 
Chief Executive 
24 November 2016


Condensed Consolidated Statement of Financial Performance
for the half year ended 30 September 2016

Note
Unaudited
Half year to 30 September 2016
Total
Unaudited
Half year to 30 September 2015
Total
Restated and Unaudited
Year ended 31 March 2016
Total 


'000
'000
'000





Continuing operations:




Revenue

105,188
95,481
186,401
Cost of sales

(93,099)
(84,231)
(162,401)
Gross profit

12,089
11,250
24,000
Operatingexpenses 

(10,918)
(9,742)
(21,846)
Operatingprofit before other income

1,171
1,508
2,154
Other income 

246
287
341
Operating profit

1,417
1,795
2,495





Operating profit before non-underlying items

1,479
1,544
2,544
Non-underlying items within operating profit
3
(62)
251
(49)





Operating profit

1,417
1,795
2,495





Financeexpense 
4
(467)
(555)
(1,079)
Non-underlying net finance expense on pension scheme
3
(81)
(87)
(173)
Net finance expense

(548)
(642)
(1,252)
Profit before taxation

869
1,153
1,243





Profit before tax and non-underlying items

1,012
989
1,465
Non-underlying items within operating profit
3
(62)
251
(49)
Non-underlying net finance expense on pension scheme
3
(81)
(87)
(173)





Profit before taxation

869
1,153
1,243





Income tax expense 
5
(148)
(198)
(70)
Profit for the period from continuing operations 

721
955
1,173





Discontinued operations:




Profit on disposal of discontinued operations
9
3,888
-
-
(Loss)/profit attributed to discontinued operations
9
(51)
463
1,314
Profit for the period from discontinued operations

3,837
463
1,314
Profit for the period

4,558
1,418
2,487





Earnings per share




Basic
6
164.3p
51.4p
90.1p
Diluted
6
164.2p
50.7p
88.7p





Non GAAP measure




Underlying basic earnings per share
6
30.2p
29.9p
48.8p
Underlying diluted earnings per share
6
30.2p
29.4p
48.0p
Condensed Consolidated Statement of Comprehensive Income
for the half year ended 30 September 2016

Unaudited
Half year to 30
Unaudited
Half year to 30
Audited
Year to 31

September 2016
September 2015
March 2016

'000
'000
'000




Profit for the period
4,558
1,418
2,487
Items that will never be reclassified to profit and loss:



Remeasurement of net pension scheme obligation
(9,055)
(661)
296
Deferred tax on remeasurement of pension scheme obligation
1,539
132
(59)
Other comprehensive (expense)/income, net of tax
(7,516)
(529)
237
Total comprehensive (expense)/income for the period
(2,958)
889
2,724
Condensed Consolidated Statement of Financial Position 
at 30 September 2016


Unaudited
30 September 2016
Unaudited
30 September 2015
Audited
31 March
2016


'000
'000
'000





Non-current assets




Property, plant and equipment

32,974
37,275
38,218
Investment property

7,032
-
1,167
Goodwill

286
286
286
Deferred tax asset

41
-
-
Total non-current assets

40,333
37,561
39,671





Current assets




Inventories

27,425
33,840
32,925
Trade and other receivables

8,048
8,399
8,449
Cash and cash equivalents

6,231
1,824
219
Total current assets

41,704
44,063
41,593





Total assets

82,037
81,624
81,264





Current liabilities




Bank overdraft

500
-
-
Interest-bearing loans and borrowings

500
500
500
Trade and other payables

31,931
36,602
36,368
Tax liabilities

469
515
416
Total current liabilities

33,400
37,617
37,284





Net current assets

8,304
6,446
4,309
Non-current liabilities




Interest-bearing loans and borrowings

10,625
11,125
10,875
Preference shares

812
1,237
812
Deferred tax liability

-
613
617
Pension scheme obligation

13,953
5,997
4,980
Total non-current liabilities

25,390
18,972
17,284





Total liabilities

58,790
56,589
54,568
Net assets

23,247
25,035
26,696





Shareholders' equity




Ordinary share capital

1,439
1,439
1,439
Share premium

272
272
272
Capital redemption reserve

707
282
707
Non-distributable reserve

1,724
1,724
1,724
Other reserve

-
106
132
Retained earnings

19,105
21,212
22,422
Total equity 

23,247
25,035
26,696






Consolidated Statement of Changes in Equity
for the half year ended 30 September 2016

Share
capital
'000
Share
premium
'000
Capital
redemption
reserve
'000
Non-distributable
reserve
'000
Other reserve
'000
Retained earnings
'000
Total
equity
'000








At 1 April 2016
1,439
272
707
1,724
132
22,422
26,696
Total comprehensive income







Profit for the period
-
-
-
-
-
4,558
4,558
Other comprehensive expense
-
-
-
-
-
(7,516)
(7,516)
Total comprehensive expense for 
the period
-
-
-
-
-
(2,958)
(2,958)
Transactions with owners:







 Dividends
-
-
-
-
-
(401)
(401)
Purchase of own shares for treasury
-
-
-
-
-
(383)
(383)
Sale of own shares
-
-
-
-
-
272
272
 Share-based payment
-
-
-
-
21
-
21
 Transfer - SAYE scheme (2013)
-
-
-
-
(153)
153
-
At 30 September 2016 (unaudited)
1,439
272
707
1,724
-
19,105
23,247
for the half year ended 30 September 2015

Share
capital
'000
Share
premium
'000
Capital
redemption
reserve
'000
Non-distributable
reserve
'000
Other reserve
'000
Retained earnings
'000
Total
equity
'000








At 1 April 2015
1,439
272
282
1,724
81
20,696
24,494
Total comprehensive income







Profit for the period
-
-
-
-
-
1,418
1,418
Other comprehensive expense
-
-
-
-
-
(529)
 (529)
Total comprehensive income for 
the period
-
-
-
-
-
889
889
Transactions with owners:







 Dividends
-
-
-
-
-
(373)
(373)
 Share-based payment
-
-
-
-
25
-
25
At 30 September 2015 (unaudited)
1,439
272
282
1,724
106
21,212
25,035
Consolidated Statement of Changes in Equity
for the year ended 31 March 2016

Share
capital
'000
Share
premium
'000
Capital
redemption
reserve
'000
Non-distributable
reserve
'000
Other reserve
'000
Retained earnings
'000
Total
equity
'000








At 1 April 2015
1,439
272
282
1,724
81
20,696
24,494
Total comprehensive income







Profit for the year
-
-
-
-
-
2,487
2,487
Other comprehensive income
-
-
-
-
-
237
237
Total comprehensive income for the year
-
-
-
-
-
2,724
2,724
Transactions with owners:








Dividends
-
-
-
-
-
(573)
(573)

Preference shares bought back
-
-
425
-
-
(425)
-

Share-based payment
-
-
-
-
51
-
51
At 31 March 2016 (audited)
1,439
272
707
1,724
132
22,422
26,696
Condensed Consolidated Cash Flow Statement 
for the half year ended 30 September 2016

Unaudited
Half year to
30 September 2016
'000
Unaudited
Half year to
30 September 2015
'000
Restated and
Unaudited
Year to
31 March 
2016
'000 




Cash flows from operating activities



Profit before taxation from continuing operations
869
1,153
1,243
Adjustments for:



Preference share redemption premium and costs
-
-
292
Net finance expense and service cost
570
691
1,350
Depreciation and amortisation
589
576
1,148
Contribution to pension scheme obligation
(182)
(163)
(324)
Gain on disposal of property, plant and equipment
-
(272)
(317)
Share-based payments
21
25
51
(Loss)/profit generated from discontinued operations before tax
(61)
558
1,392
Decrease/(increase) in inventories
3,579
(1,944)
(1,029)
Decrease/(increase) in trade and other receivables
401
(235)
(1,235)
(Decrease)/increase in payables
(4,321)
671
241
Cash generated from operations
1,465
1,060
2,812
Income taxes
-
(183)
(325)
Interest paid
(470)
(583)
(1,135)
Net cash generated from operating activities
995
294
1,352
Investing activities



Proceeds on disposal of property, plant and equipment (net of sale costs)
-
1,304
2,736
Proceeds generated on sale of Land Rover business, net of costs
6,707
-
-
Purchases of property, plant and equipment
(1,428)
(897)
(3,825)
Net cash generated from/(used in) investing activities
5,279
407
(1,089)
Financing activities



Secured loans repaid
(250)
(250)
(500)
Purchase of own preference shares
-
-
(717)
Purchase of own shares for treasury
(383)
-
-
Issue of shares - SAYE scheme
272
-
-
Dividends paid to shareholders
(401)
(373)
(573)
Net cash used in financing activities
(762)
(623)
(1,790)
Net increase/(decrease) in cash and cash equivalents
5,512
78
(1,527)
Cash and cash equivalents at beginning of period
219
1,746
1,746
Cash and cash equivalents at end of period
5,731
1,824
219
Cash and cash equivalents
6,231
1,824
219
Bank overdraft
(500)
-
-
Net cash and cash equivalents
5,731
1,824
219
Notes to the Set of Financial Information
for the half year ended 30 September 2016
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 interim financial statements for the half year to 30 September 2016 and similarly for the half year to 30 September 2015 are unaudited. They do not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 March 2016. 
The figures for the year ended 31 March 2016 have been extracted from the statutory accounts, filed with the Registrar of Companies on which the auditor gave an unqualified opinion and did not contain statements under section 498(2) or (3) of the Companies Act 2006. There has been a restatement of certain items from these audited statutory accounts in order to disclose comparative information for the amounts relating to discontinued operations.
These 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 24 November 2016. 
2. ACCOUNTING POLICIES 
The annual financial statementsof Caffyns plc are prepared in accordance with IFRSs as adopted by the European Union. The set of financial statements included in this half yearly financial report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union. This interim financial report has been prepared under the historical cost convention as modified by the fair value accounting of defined benefit schemes and share-based payment transactions. As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, this set of financial statements has been prepared in accordance with the accounting policies set out in the Annual Report for the year ended 31 March 2016.
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
The condensed financial statements have been prepared on a going concern basis which the directors consider appropriate for the reasons set out below:
The Group meets its day to day working capital requirements through short-term stocking loans and bank overdraft and medium-term revolving-credit facilities. The overdraft and revolving-credit facilities include certain covenant tests. The failure of a covenant test would render these facilities repayable on demand at the option of the lenders. 
The directors have undertaken a detailed review of trading and cash flow forecasts for a period in excess of one year from the date of this Half Year Report which projects that the facility limits are not exceeded over the duration of the forecasts. These forecasts have made assumptions in respect of future trading conditions, particularly volumes and margins of new and used car sales, aftersales and operational improvements together with the timing of capital expenditure. The forecasts take into account these factors to an extent which the directors consider to be reasonable, based on the information that is available to them at the time of approval of this financial information. These forecasts indicate that the Group will be able to operate within the financing facilities that are available to it and meet the covenant tests with sufficient margin for reasonable adverse movements in expected trading conditions. 

The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For those reasons, they continue to adopt the going concern basis in preparing this Half Year Report.
Discontinued operations
A discontinued operation represents an individually significant component of the Group that is either held for sale or has been disposed of. The Statement of Financial Performance discloses the results of a discontinued operation separately with comparative information being restated where applicable. The assets and liabilities are presented separately on the Statement of Financial Position, although comparative information is not restated. 
3. NON-UNDERLYING ITEMS

Half year to
30 September
2016
Half year to
30 September
2015
Year to
31 March
2016

'000
'000
'000




Other income:



 Net profit on disposal of property, plant and equipment 
-
272
317
Within operating expenses: 




Preference share premium paid on redemption
-
-
(156)

Preference share redemption costs
-
-
(136)

Service cost on pension scheme
(19)
(21)
(42)

Redundancy costs
(43)
-
(32)

(62)
(21)
(366)
Non-underlying items within operating profit
(62)
251
(49)
Net finance expense on pension scheme
(81)
(87)
(173)
Total non-underlying items within profit before taxation
(143)
164
(222)
The following amounts have been presented as non-underlying items in these financial statements:
There were branch specific redundancy costs of 43,000 (2015: nil).
In the prior period, the Group sold most of its freehold property in Upperton Road, Eastbourne for 1,581,000 generating gains on disposal of 281,000. In January 2016, a portion of land in Goring Road, Worthing was sold for 360,000 generating net gains of 71,000 respectively. Other losses on disposal totalled 35,000 with 9,000 of these generated in the period to 30 September 2015.
In February 2016, the Company purchased 218,268 First Preference shares for 108 pence each and 206,664 New Preference shares for 167 pence each pursuant to a redemption option offered to shareholders. Given the nature of the transaction, the associated legal and professional costs of this purchase have been treated as non-underlying together with the premium paid on redemption. 
4. FINANCE EXPENSE

Half year to
30 September
2016
'000
Half year to
30 September
2015
'000
Year to
31 March
2016
'000




Interest payable on bank borrowings
119
162
292
Vehicle stocking plan interest
269
288
596
Financing costs amortised
43
54
104
Preference dividends
36
51
87
Total finance costs
467
555
1,079




5. TAXATION

Half year to
30 September
2016
'000
Half year to
30 September
2015
'000
Year to
31 March
2016
'000
Current UK corporation tax 



Charge for the period
(53)
(252)
(415)
Adjustment in respect of prior years
-
-
121
Total current tax charge
(53)
(252)
(294)
Deferred tax 



Origination and reversal of timing differences
(979)
(90)
(87)
Adjustments recognised in the period due to change in rate of corporation tax
-
-
184
Adjustments recognised in the period for deferred 
tax of prior periods
98
49
49
Total deferred tax (charge)/credit
(881)
(41)
146
Total tax charged in the Statement of Financial Performance
(934)
(293)
(148)




The tax (charge)/credit arises as follows:



On normal trading
(173)
(165)
(119)
Non-underlying items
25
(33)
49
Continuing operations
(148)
(198)
(70)
Discontinued operations
(786)
(95)
(78)
Total tax charge
(934)
(293)
(148)




Taxation of trading items for the half year has been provided at the effective rate of taxation of 17.1% (2015: 17.1%) expected to apply to the full year on ordinary trading. Tax on disposal gain from discontinued operations items is provided at the substantially enacted rate of 17%. 
6. EARNINGS PER 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 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.

Half year to
Half year to
Year to

30 September
30 September
31 March

2016
2015
2016

'000
'000
'000
Basic



Profit for the period
4,558
1,418
2,487
Basic earnings per share
164.3p
51.4p
90.1p
Diluted earnings per share
164.2p
50.7p
88.7p




Adjusted



Profit before tax
869
1,153
1,243
Adjustment: Non-underlying items (note 3)
143
(164)
222
Underlying profit for the period
1,012
989
1,465
Taxation on normal trading (note 5)
(173)
(165)
(119)
Underlying earnings
839
824
1,346
Underlying earnings per share
30.2p
29.9p
48.8p
Diluted earnings per share
30.2p
29.4p
48.0p
 
The number of fully paid ordinary shares in issue at the period end was 2,879,298 (2015: 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 2,773,616 (2015: 2,759,678). The shares granted under the Company's SAYE scheme are dilutive. The number of dilutive shares under option at fair value was 2,011 (2015: 39,133) giving a total diluted weighted average number of shares of 2,775,627 (2015: 2,798,811).
The Directors consider that underlying earnings per share figures provide a better measure of comparative performance.
7. DIVIDENDS
Ordinary shares of 50p each
The interim dividend proposed at the rate of 7.50 pence per share (2015: 7.25 pence) is payable on 6 January 2017 to shareholders on the register at the close of business on 16 December 2016. The shares will be marked ex-dividend on 15 December 2016.
Preference shares
Preference dividends were paid in October 2016. The next preference dividends are payable in April 2017. The cost of the preference dividends has been included within finance costs.
8. PENSIONS
The pension scheme deficit reflects a defined benefit obligation that has been updated to reflect its valuation as at 30 September 2016. 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 2016 and in the period to 30 September 2015, and which complies with the accounting requirements of IAS 19 (revised). 
The net liability for defined benefit obligations has increased from 4,980,000 at 31 March 2016 to 13,953,000 at 30 September 2016. The increase of 8,973,000 comprises the net charge to the Statement of Financial Performance of 100,000 and a net remeasurement loss charged to the Statement of Comprehensive Income of 9,055,000 less contributions of 182,000. Although assets have increased, the liabilities have increased by a greater amount as a result of a decrease in the discount rate from 3.35% at 31 March 2016 to 2.20% at 30 September 2016.
9. DISCONTINUED OPERATIONS
In April, the Group sold the business and assets (excluding the freehold property) of its Land Rover business to Harwoods Limited ("Harwoods"). Cash consideration of 7.5 million comprised 5.5 million for goodwill together with 0.2 million for property, plant and equipment and 1.9 million for inventories less 0.1 million in respect of liabilities transferred. The total consideration was received at completion on 29 April 2016.
Ownership of the freehold property in Lewes from which Harwoods will continue to operate the Land Rover business remains with the Group, and is being leased to Harwoods for a period of up to three years from 29 April 2016 subject to a two-year tenant-only break clause.
As a result of this transaction, the operating activities attributed to that business have been disclosed as a discontinued operation.

Half year to
30 September
2016
'000
Half year to
30 September
2015
'000
Year to
31 March
2016
'000








Revenue
5,828
22,196
46,089
Cost of sales
(5,516)
(19,942)
(41,169)
Gross profit
312
2,254
4,920
Operatingexpenses 
(370)
(1,668)
(3,473)
Operating (loss)/profit
(58)
586
1,447
Financeexpense 
(3)
(28)
(55)
(Loss)/profit before taxation
(61)
558
1,392
Income tax credit/(expense) 
10
(95)
(78)
(Loss)/profit attributed to discontinued operations
(51)
463
1,314
Profit on sale of business net of deferred tax
3,888
-
-
Profit for the period from discontinued operations 
3,837
463
1,314
The results of the business shown above represent its trading from the start of the financial year until disposal on 29 April 2016.

Half year to
30 September
2016
'000


Proceeds generated on sale of business
7,512
Sale of property, plant and equipment
(218)
Transfer of inventories
(1,921)
Transfer of liabilities
116

5,489
Associated transaction costs:

Professional fees
(470)
Adjustments arising on completion
(230)
Provision for onerous costs
(105)
Net transaction costs 
(805)
Net gain on sale of business
4,684
Deferred tax expense
(796)
Profit on sale of business net of deferred tax
3,888


10. 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 general economic factors, their impact on the Group's defined benefit pension scheme, liquidity and financing, the Group's dependency on its manufacturers' and their stability, used car prices and regulatory compliance. Following the UK's decision to leave the EU, a degree of uncertainty in the UK economy has been created and we believe that the main risks to arise from this relate to consumer confidence and the potential impact that Sterling/Euro exchange rates may have on vehicle prices. 
11. RESPONSIBILITY STATEMENT
We confirm to the best of our knowledge:
a) the Half Year Report has been prepared in accordance with IAS34 'Interim Financial Reporting';
b) the Half Year Report includes a fair review of the information required by DTR 4.2.7R of the Disclosure 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 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
24 November 2016


INDEPENDENT REVIEW REPORT
to Caffyns plc
Introduction
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report of Caffyns plc for the six months ended 30 September 2016 which comprises the Condensed Consolidated Statement of Financial Performance, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Condensed Consolidated Cash Flow Statement and the related notes. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company, in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board. Our review work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusion we have formed.
Directors' responsibilities 
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the company are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard34, 'Interim Financial Reporting', as adopted by the European Union.
Our responsibility 
Our responsibility is to express a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review 
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion 
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2016 is not prepared, in all material respects, in accordance with International Accounting Standard34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Grant Thornton UK LLP
Auditor 
Gatwick
24 November 2016

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