REG - Caffyns PLC - Half-year Report
25/11/2022 07:00
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RNS Number : 5538H Caffyns PLC 25 November 2022
HALF YEAR
REPORT
for the six months ended 30 September 2022
Summary
6 months to 6 months to
30 September 30 September
2022 2021
£'000 £'000
Revenue 118,992 110,785
Profit before tax 1,558 2,295
Underlying EBITDA (see note 1 below) 3,283 3,950
Underlying profit before tax (see note 1 below) 1,566 2,396
Pence Pence
Underlying basic earnings per share 47.3 73.0
Basic earnings per share 47.0 69.9
Interim dividend per ordinary share 7.5 7.5
Financial and operational review
· Underlying profit before tax of £1.6 million (2021: £2.4 million)
· Profit before tax of £1.6 million (2021: £2.3 million)
· Total revenue increase of 7% and like-for-like revenue increase of 4%
(see note 2 below)
· Underlying basic earnings per share of 47.3 pence (2021: 73.0 pence)
· Basic earnings per share of 47.0 pence (2021: 69.9 pence)
· Interim ordinary dividend declared of 7.5 pence (2021: 7.5 pence)
· Net bank borrowings at 30 September 2022 of £9.5 million (2021:
£8.7 million)
Simon Caffyn, Chief Executive, commented:
"The underlying profit before tax of £1.6 million is a strong result
considering the ongoing disruption to new car supply and current economic
challenges. We have a substantial new car order book and used car sales
continue to perform well."
Enquiries:
Caffyns plc Simon Caffyn, Chief Executive Tel: 01323 730201
Mike Warren, Finance Director
Headland Chloe Francklin Tel: 020 3805 4855
Note 1: Underlying results exclude items that have non-trading attributes due
to their size, nature or incidence. Non-underlying items for the period
totalled £0.01 million (2021: £0.10 million) and are detailed in Note 4 to
these condensed consolidated financial statements. Underlying EBITDA of £3.28
million (2021: £3.95 million) represents Operating profit before
non-underlying items of £2.22 million (2021: £2.97 million) and Depreciation
and Amortisation of £1.06 million (2021: £0.98 million).
Note 2: Like-for-like comparisons exclude the impact of the Lotus and MG
businesses at Ashford and the Lotus business in Lewes, as these businesses did
not trade for the full six-month period in either the current or previous
financial periods. All other businesses operated throughout both the whole of
the current and prior six-month periods.
INTERIM MANAGEMENT REPORT
Summary
I am pleased to report a strong underlying profit before tax of £1.6 million
for the half-year ended 30 September 2022 ("the period"). Whilst this is
less than the £2.4 million recorded for the comparative period in 2021, the
prior period was positively impacted by the post-covid reopening of showrooms
in April 2021 and from the holiday from business rates for retail
premises. Trading in the period, especially for used cars, has been robust.
However, new car supply for the majority of the manufacturers we represent
remained muted due to the continuing effects of the global shortage in
semiconductors and battery components restraining manufacturers' production
levels. We expect this shortage to begin to dissipate during the 2023 calendar
year.
Revenue for the period increased by 7% to £119.0 million (2021 £110.8
million), primarily due to strong used car prices.
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 a reduction of £1.3 million
from 31 March 2022 year-end to £1.5 million at 30 September 2022. Financial
markets were in a state of great flux towards the end of the period under
review resulting in significant changes in the levels of both assets and
liabilities. The board was pleased that the Scheme weathered these changes
well, with the level of the deficit largely unaffected.
Profit before tax for the period was £1.6 million (2021: £2.3 million) with
basic earnings per share of 47.0 pence (2021: 69.9 pence). Underlying basic
earnings per share were 47.3 pence (2021: 73.0 pence).
The Company is maintaining its interim dividend at 7.5 pence per ordinary
share reflecting the board's confidence in the prospects for the Company.
Operating review
New and used cars
Our new car deliveries rose by 6% on a like-for-like basis from the prior year
period. Nationally, the Society of Motor Manufacturers and Traders reported a
5% reduction in new car registrations in the retail and small business market
segment in which we primarily operate. We were, therefore, pleased that the
majority of our brands performed ahead of the UK market. Our used car sales
volumes for the period fell by 12% 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.
Aftersales
Our aftersales revenues rose by 5% in the period on a like-for-like basis
despite staffing remaining challenging and adversely affecting throughput
levels. We continued to realise improvements to our customer retention
processes.
Operations
Our Audi businesses, in particular, performed very strongly in this
challenging period with our other VAG brands all trading ahead of
expectations. Our remaining brands, including our Motorstore non-franchise
used car operation, all traded satisfactorily.
During the period, we extended our representation with Lotus, opening in Lewes
on 1 June 2022 and we now cover both Kent and Sussex for the brand. We are
encouraged by the start that the business has made and look forward to
deliveries of the new Emira in in the second half of our financial year with
the Eletre to follow.
The Government's holiday from business rates for retail premises finished on 1
April 2022, the start of our current financial year. In the comparative prior
year period, the benefit from the rates holiday was £0.5 million, and the
Company also utilised the Government's Coronavirus Job Retention Scheme,
receiving £0.1 million.
Property
Capital expenditure in the period was £0.6 million (2021: £1.2 million) and
included assets in the course of construction of £0.3 million (2021: £0.7
million).
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
£13.3 million at 31 March 2022, 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
whilst 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 £2.8 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. However, the
board was pleased to note a further reduction in the assessed level of the
deficit at 30 September 2022, to £1.5 million (2021: £4.9 million). Net of
deferred tax, the net deficit at 30 September 2022 was £1.1 million (2021:
£4.0 million).
In the latter stages of the period financial markets became extremely
unsettled, with interest rates and yields on Government gilts significantly
increasing. As a result, the net present value of the Scheme's future pension
liabilities at 30 September 2022 reduced significantly by £25.6 million.
However, this reduction was only slightly greater than the fall in the value
of the Scheme's assets, leaving the net deficit position improved by £1.3
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 £46,000 (2021: £101,000).
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 £0.4
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,
originally of £7.5 million, and a revolving-credit facility of £6.0 million,
both of which will become renewable in April 2026. HSBC also provides an
overdraft facility of £3.5 million, renewable annually. In addition, there is
an overdraft facility of £4.0 million provided by Volkswagen Bank, renewable
annually, together with a term loan, originally of £5.0 million, which is
repayable over the period to March 2024.
The Company was cash generative during the period with £2.2 million (2021:
£2.7 million) generated from operating activities. Working capital levels
remained broadly unchanged in the period, compared to an improvement of £1.0
million in the prior period. Both inventories and payables showed a noticeable
increase in the period due to a combination of strong used car prices and an
easing in the shortage of new cars supplied to the Company by manufacturers
under consignment terms.
Bank borrowings, net of cash balances, at 30 September 2022 were £9.5 million
(2021: £8.7 million), down from £10.4 million at 31 March 2022. As a
proportion of shareholders' funds, bank borrowings, net of cash balances, were
26% at 30 September 2022 (2021: 27%).
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 19% (2021: 20%). The
current year effective tax rate is in line with the standard rate of
corporation tax in force for the year of 19%.
Payments of corporation tax in the period, net of refunds, were £0.2 million
(2021: £0.3 million).
At 30 September 2022 the company recognised a deferred tax liability on the
Statement of Financial Position of £1.8 million (2021: £0.4 million).
People
The response from everyone in the Company to the covid-19 pandemic and to
other marketplace challenges continues to be outstanding 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 was instrumental in our ability to deliver another
strong performance.
Dividend
Despite the uncertainty that remains over the outlook for the UK economy and
the ongoing supply chain issues the industry is facing, the board remains
confident in the prospects of the Company and has therefore declared an
unchanged interim dividend of 7.5 pence per ordinary share (2021: 7.5 pence
per ordinary share). This will be paid on 9 January 2023 to shareholders on
the register at close of business on 9 December 2022. The ordinary shares will
be marked ex-dividend on 8 December 2022.
Strategy
Our continuing strategy is to focus on representing premium and premium-volume
franchises as well as maximising opportunities for premium used cars, with an
emphasis on delivering the highest quality of customer experience. We
recognise that we operate in a rapidly changing environment and carefully
monitor the appropriateness of this strategy whilst also seeking new
opportunities to invest in the future growth of the business.
We concentrate on stronger markets so as to deliver higher returns from fewer
but larger sites. We continue to seek to deliver performance improvement, in
particular in our used car and aftersales operations.
Current trading and outlook
Customer demand for used cars remains buoyant and our forward-order bank for
new cars is at an elevated level, which is especially encouraging for 2023
when it is hoped that new car availability will improve. However, in the
short-term new cars are expected to remain in short supply and the high level
of economic uncertainty, including the price and availability of energy over
the winter months, 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 substantial 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
24 November 2022
Condensed Consolidated Statement of Financial Performance
for the half year ended 30 September 2022
Unaudited Unaudited Audited
Half year to Half year to Year ended
N o t e 30 September 2022 30 September 2021 31 March 2022
Total Total Total
£'000 £'000 £'000
Revenue 118,992 110,785 223,928
Cost of sales (102,839) (95,058) (191,982)
Gross profit 16,153 15,727 31,946
Operating expenses (14,088) (13,036) (26,669)
Operating profit before other income 2,065 2,691 5,277
Other income (net) 3 189 259 390
Operating profit 2,254 2,950 5,667
Operating profit before non-underlying items 2,227 2,966 5,690
Non-underlying items within operating profit 4 27 (16) (23)
Operating profit 2,254 2,950 5,667
Net finance expense 5 (661) (570) (1,116)
Non-underlying net finance expense on pension scheme 4 (35) (85) (166)
Net finance expense (696) (655) (1,282)
Profit before taxation 1,558 2,295 4,385
Profit before tax and non-underlying items 1,566 2,396 4,574
Non-underlying items within operating profit 4 27 (16) (23)
Non-underlying net finance expense on pension scheme 4 (35) (85) (166)
Profit before taxation 1,558 2,295 4,385
Taxation 6 (290) (410) (1,386)
Profit for the period 1,268 1,885 2,999
Earnings per share
Basic 7 47.0p 69.9p 111.3p
Diluted 7 46.4p 69.0p 109.6p
Non-GAAP measure
Underlying basic earnings per share 7 47.3p 73.0p 117.0p
Underlying diluted earnings per share 7 46.6p 72.0p 115.2p
Condensed Consolidated Statement of Comprehensive Expense
for the half year ended 30 September 2022
Note Unaudited Unaudited Audited
Half year to Half year to Year to
30 September 30 September 31 March 2022
2022 2021
£'000 £'000 £'000
Profit for the period 1,268 1,885 2,999
Items that will never be reclassified to profit and loss:
Remeasurement of net pension scheme obligation 12 958 3,224 5,045
Deferred tax on remeasurement of pension scheme obligation (239) (612) (1,261)
Effect of change in deferred tax rate - - 511
Other comprehensive income, net of tax 719 2,612 4,295
Total comprehensive income for the period 1,987 4,497 7,294
Condensed Consolidated Statement of Financial Position
at 30 September 2022
Unaudited Unaudited Audited
30 September 2022 30 September 2021 31 March
Note 2022
£'000 £'000 £'000
Non-current assets
Right-of-use assets 9 1,241 550 1,413
Property, plant and equipment 9 38,796 38,060 38,975
Investment properties 10 7,588 7,703 7,646
Interest in lease 306 473 389
Goodwill 286 286 286
Total non-current assets 48,217 47,072 48,709
Current assets
Inventories 32,937 27,703 27,546
Trade and other receivables 6,138 4,003 5,264
Interest in lease 167 171 168
Current tax recoverable - - 40
Cash and cash equivalents 3,214 4,958 2,759
Total current assets 42,456 36,835 35,777
Total assets 90,673 83,907 84,486
Current liabilities
Interest-bearing overdrafts, loans and borrowings 1,875 1,875 1,875
Trade and other payables 35,781 30,735 29,495
Lease liabilities 289 434 496
Current tax payable 76 165 236
Total current liabilities 38,021 33,209 32,102
Net current assets 4,736 3,626 3,675
Non-current liabilities
Interest-bearing loans and borrowings 10,875 11,750 11,312
Lease liabilities 1,394 695 1,434
Preference shares 812 812 812
Pension scheme obligation 12 1,482 4,920 2,797
Deferred tax liability 1,751 411 1,298
Total non-current liabilities 16,314 18,588 17,653
Total liabilities 54,335 51,797 49,755
Net assets 36,338 32,110 34,731
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 32,196 27,968 30,589
Total equity 36,338 32,110 34,731
Condensed Consolidated Statement of Changes in Equity
for the half year ended 30 September 2022 (unaudited)
Capital Non-distributable
Share Share redemption reserve Retained earnings
capital premium reserve £'000 £'000 Total
£'000 £'000 £'000 equity
£'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 half year ended 30 September 2021 (unaudited)
Capital Non-distributable
Share Share redemption reserve Retained earnings
capital premium reserve £'000 £'000 Total
£'000 £'000 £'000 equity
£'000
At 1 April 2021 1,439 272 707 1,724 23,444 27,586
Total comprehensive income
Profit for the period - - - - 1,885 1,885
Other comprehensive income - - - - 2,612 2,612
Total comprehensive income for the period 4,497 4,497
Transactions with owners:
Share-based payment - - - - 27 27
At 30 September 2021 (unaudited) 1,439 272 707 1,724 27,968 32,110
for the year ended 31 March 2022 (audited)
Capital Non-distributable
Share Share redemption reserve Retained earnings
capital premium reserve £'000 £'000 Total
£'000 £'000 £'000 equity
£'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 for the year 7,294 7,294
Transactions with owners:
Dividends - - - - (202) (202)
Issue of shares - SAYE - - - - - -
Share-based payment - - - - 53 53
At 31 March 2022 (audited) 1,439 272 707 1,724 30,589 34,731
Condensed Consolidated Cash Flow Statement
for the half year ended 30 September 2022
Unaudited Unaudited Audited
Half year to Half year to Year to
30 September 2022 30 September 2021 31 March
£'000 £'000 2022
£'000
Cash flows from operating activities
Profit before taxation 1,558 2,295 4,385
Adjustments for:
Net finance expense and pension scheme service cost 696 655 1,282
Depreciation of property, plant and equipment, investment properties and 1,056 984 2,022
right-of-use assets
Cash payments into the defined-benefit pension scheme (403) (1,391) (1,781)
Loss on disposal of property, plant and equipment - - -
Share-based payments 24 27 53
(Increase)/decrease in inventories (5,391) 8,859 9,016
(Increase)/decrease in receivables (875) 1,069 (94)
Increase/(decrease) in payables 6,367 (8,881) (9,911)
Cash generated from operations 3,032 3,617 4,972
Net tax paid (196) (307) (503)
Interest paid (645) (562) (1,079)
Net cash generated from operating activities 2,191 2,748 3,390
Investing activities
Proceeds generated on disposal of property, plant and equipment - - -
Purchases of property, plant and equipment (717) (913) (2,837)
Receipt from investment in lease 93 93 185
Net cash used in investing activities (624) (820) (2,652)
Financing activities
Bank revolving-credit facility repaid - (2,000) (2,000)
Secured loans repaid (437) (437) (875)
Bank refinancing arrangement fees - - (98)
Issue of shares - SAYE scheme - - -
Dividends paid (404) - (202)
Repayment of lease liabilities (271) (268) (539)
Net cash used in financing activities (1,112) (2,705) (3,714)
Net increase/(decrease) in cash and cash equivalents 455 (777) (2,976)
Cash and cash equivalents at beginning of period 2,759 5,735 5,735
Cash and cash equivalents at end of period 3,214 4,958 2,759
Notes to the Condensed Consolidated Financial Statements
for the half year ended 30 September 2022
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 2022 and similarly for the half year to 30 September 2021 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 2022.
The comparative financial information for the year ended 31 March 2022 in
these condensed consolidated financial statements does not constitute
statutory accounts for that year. The statutory accounts for 31 March 2022
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 24 November 2022.
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 2022.
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 the rolling twelve-month period to each calendar quarter end, which is at
least four times the level of interest payable on bank borrowings to HSBC and
Volkswagen Bank ("senior interest").
The Company's second covenant test requires total bank borrowings to HSBC and
Volkswagen Bank at each calendar quarter end not to exceed 375% of senior
EBITDA for the rolling twelve-month period to the end of that calendar
quarter.
The Company's final covenant test requires that the level of its bank
borrowings each calendar quarter end do not exceed 70% of the independently
assessed value of its charged freehold properties.
These covenant tests are conducted quarterly 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 December 2022, 31 March 2023, 30 June 2023 and 30 September 2023, with
the test on 30 September 2023 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 8%
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 2022 calendar indicate that new car registrations are forecast to
show a year-on-year reduction of 3% to 1.6 million, followed by an 18%
increase into 2023 to 1.9 million registrations as global shortages in
semiconductors 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. The
continuing shortage in new car supply has assisted the used car market and is
expected to continue to do so. The Company's financial results in the period
were 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 2022, the medium-term banking
facilities included a term loan with an outstanding balance of £6.0 million
and a revolving credit facility of £6.0 million from HSBC, its primary
bankers, with both facilities being renewable in April 2026. HSBC also make
available a short-term overdraft facility of £3.5 million, which is renewed
annually in August. At 30 September 2022 £4.5 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 2022 of £0.8 million, which is repayable
to March 2024, and a short-term revolving credit facility of £4.0 million,
which is renewed annually in October. At 30 September 2022 £3.0 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 to half year to year to
30 September 30 September 31 March
2022 2021 2022
£'000 £'000 £'000
Rent receivable 151 205 336
Local Government covid-19 support grants - 54 54
Liquidation distribution received 38 - -
Loss on disposal of tangible fixed assets - - -
Total other income 189 259 390
4. NON-UNDERLYING ITEMS
Unaudited Unaudited Audited
half year to half year to year to
30 September 30 September 31 March
2022 2021 2022
£'000 £'000 £'000
Other income:
Liquidation distribution received 38 - -
Net loss on disposal of property, plant and equipment - - -
Within operating expenses:
Service cost on pension scheme (11) (16) (23)
Total non-underlying items within operating profit 27 (16) (23)
Net finance expense on pension scheme (35) (85) (166)
Total non-underlying items within profit before taxation (8) (101) (189)
During the period the Company received a final distribution from the
liquidator to MG Rover Group Limited.
5. NET FINANCE EXPENSE
Unaudited Unaudited Audited
half year to half year to year to
30 September 30 September 31 March
2022 2021 2022
£'000 £'000 £'000
Interest in lease interest receivable (8) (5) (12)
Interest payable on bank borrowings 245 156 297
Interest payable on inventory stocking loans 312 306 581
Interest on lease liabilities 24 14 37
Financing costs amortised 52 63 141
Preference dividends 36 36 72
Finance expense 661 570 1,116
6. TAXATION
Unaudited Unaudited Audited
half year to half year to year to
30 September 30 September 31 March
2022 2021 2022
£'000 £'000 £'000
Current UK corporation tax
Charge for the period 76 239 432
Adjustments recognised in the period for current tax of prior periods - (40) (5)
Total current tax charge 76 199 427
Deferred tax
Origination and reversal of timing differences 209 211 312
Change in corporation tax rate - - 647
Adjustments recognised in the period for deferred tax 5 - -
of prior periods
Total deferred tax charge 214 211 959
Total tax charged in the Income Statement 290 410 1,386
The tax charge arises as follows:
Unaudited Unaudited Audited
half year to half year to year to
30 September 30 September 31 March
2022 2021 2022
£'000 £'000 £'000
On normal trading 291 429 1,422
Non-underlying items (1) (19) (36)
Total tax charge 290 410 1,386
Taxation of trading items for the half year has been provided at the current
rate of taxation of 19% (2021: 20%) expected to apply to the full year. This
effective rate is the same as the standard rate of corporation tax in force of
19%.
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 to half year to year to
30 September 30 September 31 March
2022 2021 2022
£'000 £'000 £'000
Basic
Profit after tax for the period 1,268 1,885 2,999
Basic earnings per share 47.0p 69.9p 111.3p
Diluted earnings per share 46.4p 69.0p 109.6p
Underlying
Profit before tax 1,558 2,295 4,385
Adjustment: Non-underlying items (note 4) 8 101 189
Underlying profit for the period 1,566 2,396 4,574
Taxation on normal trading (note 6) (291) (429) (1,422)
Underlying earnings 1,275 1,967 3,152
Underlying basic earnings per share 47.3p 73.0p 117.0p
Underlying diluted earnings per share 46.6p 72.0p 115.2p
The number of fully paid ordinary shares in issue at the period end was
2,879,298 (2021: 2,879,298). Excluding the shares held for treasury, the
weighted average shares in issue for the purposes of the earnings per share
calculation were 2,695,586 (2021: 2,695,376).
The shares granted under the Company's current SAYE scheme for the period, and
for the year ended 31 March 2021, are dilutive. The weighted average number of
shares in issue for the purposes of the diluted earnings per share calculation
were 2,732,604 (2021: 2,733,587).
The Directors consider that underlying earnings per share figures provide a
better measure of comparative performance.
8. DIVIDENDS
Ordinary shares of 50p each
An interim dividend of 7.5 pence per ordinary share has been declared and will
be paid to shareholders on 9 January 2023 to those shareholders on the
register at the close of business on 9 December 2022. The ordinary shares will
be marked ex-dividend on 8 December 2022. An interim dividend of 7.5 pence per
ordinary share was declared in respect of the half-year ended 30 September
2021 and a final dividend of 15.00 pence per ordinary share was declared in
respect of the year ended 31 March 2022.
Preference shares
Preference dividends were paid in October 2022. The next preference dividends
are payable in April 2023. 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
2022
£'000
Property, plant and equipment at 1 April 2022 38,975
Less: Depreciation charges (826)
Less: Net book value of disposals -
Add: Purchases 647
Property plant and equipment at 30 September 2022 38,796
Purchases in the period included assets in the course of construction of
£301,000 (2021: £663,000). In the prior year, £295,000 of the assets in the
course of construction had been invoiced but not settled.
Right-of-use assets:
Unaudited
half year to
30 September
2022
£'000
Right-of-use assets at 1 April 2022 1,413
Less: Amortisation of right-of-use assets (172)
Right-of-use assets at 30 September 2022 1,241
10. INVESTMENT PROPERTIES
The following is a reconciliation of changes in the balances of Investment
Properties.
Investment properties:
Unaudited
half year to
30 September
2022
£'000
Investment properties at 1 April 202 7,646
Less: Depreciation charges (58)
Investment properties at 30 September 2022 7,588
11. LOANS AND BORROWINGS
Liabilities
Revolving arising from Bank and cash balances
Bank credit Lease Preference financing £'000 Net
loans facilities liabilities shares activities debt
£'000 £'000 £'000 £'000 £'000 £'000
At 1 April 2022 (audited) 7,187 6,000 1,930 812 15,929 (2,759) 13,170
Cash movement (437) - (271) - (708) (455) (1,163)
Non-cash movement - - 24 - 24 - 24
At 30 September 2022 6,750 6,000 1,683 812 15,245 (3,214) 12,031
(unaudited)
Current liabilities/(assets) 1,875 - 289 - 2,164 (3,214) (1,050)
Non-current liabilities 4,875 6,000 1,394 812 13,081 - 13,081
At 30 September 2022 6,750 6,000 1,683 812 15,245 (3,214) 12,031
12. PENSIONS
The pension scheme deficit reflects a defined benefit obligation that has been
updated to reflect its valuation as at 30 September 2022. 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 2022 and in the period to 30 September 2021, and which complies with the
accounting requirements of IAS 19 Pensions (revised).
The net liability for defined benefit obligations decreased from £2,797,000
at 31 March 2022 to £1,482,000 at 30 September 2022. The reduction of
£1,315,000 comprised the net charge to the Condensed Consolidated Statement
of Financial Performance of £46,000, a net remeasurement surplus credited to
the Condensed Consolidated Statement of Comprehensive Income of £958,000 and
contributions of £403,000.
Asset values fell significantly in the period, by £24,235,000, including
divestments to pay pension transfers and benefits in the period of
£2,133,000. The net present value of pension liabilities also fell, by
£25,550,000, due to an increase in the rate applied to discount the scheme's
liabilities from 2.65% at 31 March 2022 to 5.15% at 30 September 2022. The
assumption on future CPI inflation assumption rate remained unchanged from 31
March 2022 at 3.30%.
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 2022, the Company had no capital commitments (2021: £0.9
million). The commitments in the prior period related to the redevelopment of
a dealership premises.
15. CONTINGENT LIABILITIES
Since 2015, the Company has been named as co-defendant in a number of legal
actions that have been initiated against certain of the vehicle manufacturers
which it represents. These actions contend that customers have been unfairly
treated as a result of their vehicles having been fitted with software which
is suggested by the claimant law firms to have operated such that when the
vehicles were experiencing test conditions, the emission levels of nitrogen
oxides ("NOx") were affected. The vehicles remain safe and roadworthy.
These claims on behalf of multiple claimants, arising out of or in relation to
their purchase or acquisition on finance of a vehicle affected by the NOx
issue, have been brought against a number of Jaguar Land Rover, Vauxhall,
Volkswagen Audi, SEAT and Skoda group entities and dealers, including the
Company. The Company has been named as a defendant on a number of claim forms
alleging fraudulent misrepresentation, breach of contract, breach of statutory
duty, breach of the Consumer Credit Act 1974 and a breach of the Consumer
Protection from Unfair Trading Regulations 2008, although not all of these
causes of action are being brought against the Company specifically.
In all cases brought to date, the relevant vehicle manufacturers listed above
have agreed to indemnify the Company for the reasonable legal costs of
defending the litigation and any damages and adverse legal costs that Caffyns
may be liable to pay to the claimants as a result of these legal actions. The
possibility, therefore, of an economic cost to the Company resulting from the
defence of these legal actions is remote.
At present, no timetable can be determined for the resolution of these
continuing cases and the relevant issues of liability, loss and causation have
not yet been decided. It is therefore too early to assess reliably the merit
of any claim and so we cannot confirm that any future outflow of resources is
probable.
Accordingly, no provision for liability has been made in these condensed
consolidated financial statements.
16. RESPONSIBILTY STATEMENT
We confirm that to the best of our knowledge:
a) these condensed consolidated financial statements
have been prepared in accordance with IAS 34 'Interim Financial Reporting';
b) these condensed consolidated financial statements
include a fair review of the information required by DTR 4.2.7R of the
disclosure guidance and transparency rules (indication of important events
during the first six months and their impact on the set of financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the year); and
c) the Half Year Report includes a fair review of the
information required by DTR 4.2.8R of the disclosure and guidance transparency
rules (disclosure of related parties' transactions and changes therein).
By order of the board
S G M Caffyn
Chief Executive
M Warren
Finance Director
24 November 2022
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 2022 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 2022 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
24 November 2022
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
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