REG - Caffyns PLC - Half-year Report
29/11/2024 07:00
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RNS Number : 0882O Caffyns PLC 29 November 2024
HALF YEAR
REPORT
for the six months ended 30 September 2024
Summary
Unaudited Unaudited
Half year to Half year to
30 September 30 September
2024 2023
£'000 £'000
Revenue 137,740 134,252
Profit before tax 213 44
Underlying EBITDA (see note below) 3,004 2,564
Underlying profit before tax (see note below) 452 259
Pence Pence
Underlying basic earnings per share 12.2 7.1
Basic earnings per share 5.7 1.1
Interim dividend per Ordinary share 5.0 5.0
Financial and operational review
· Underlying profit before tax of £0.45 million (2023: £0.26
million), including income of £0.14 million from the sale of a personalised
numberplate
· Profit before tax of £0.21 million (2023: £0.04 million)
· Revenue increase of 3%
· Underlying basic earnings per share of 12.2 pence (2023: 7.1 pence)
· Basic earnings per share of 5.7 pence (2023: 1.1 pence)
· Interim ordinary dividend declared of 5.0 pence (2023: 5.0 pence)
· Net bank borrowings at 30 September 2024 of £11.5 million (2023:
£9.5 million)
Simon Caffyn, Chief Executive, commented:
"I am pleased that, despite increased costs and a difficult trading
environment, we have improved our underlying EBITDA and profit before tax."
Enquiries:
Caffyns plc Simon Caffyn, Chief Executive Tel: 01323 730201
Mike Warren, Finance Director
Note: Underlying results exclude items that are unrelated to the primary motor
trade business of the Company and which management therefore consider should
be disclosed separately to enable a full understanding of the operating
results. Non-underlying items comprise only profits and losses from disposal
of freehold property, gains arising from lease extensions from freehold
property, impairment charges against non-current assets, costs attributable to
vacant properties held pending their disposal, net financing return and
service cost on pension obligations in respect of the defined benefit pension
scheme, which is closed to future accrual, and companywide operational
restructuring and redundancy costs. All other activities are treated as
underlying. Non-underlying items for the period totalled £0.2 million (2023:
£0.2 million) and are detailed in Note 4 to these condensed consolidated
financial statements. Underlying EBITDA of £3.0 million (2023: £2.5 million)
represents Operating profit before non-underlying items of £1.9 million
(2023: £1.5 million) and Depreciation and Amortisation of £1.1 million
(2023: £1.0 million).
INTERIM MANAGEMENT REPORT
Summary
The underlying profit before tax of £0.5 million for the half year ended 30
September 2024 ("the period"), which included income of £0.1 million from the
sale at auction of a personalised numberplate, was an improvement on the £0.3
million profit reported last year. Given the economic backdrop and the changes
in the motor retail marketplace, the Board considers the result a good
outcome.
Our profit performance from new cars and aftersales in the period was strong
although used car profitability remained severely constrained, mainly due to
the continuing scarcity of supply of appropriately priced, one- to
four-year-old cars. Customer demand for such cars remained robust but we were
unable to fully pass on the increases to purchase prices resulting in lower
margins. Taken together, total gross margins increased from the previous
period by £1.3 million, or 8%. However, inflationary pressures on costs
remained elevated and, in particular, the increase to the National Minimum
Wage in April placed significant upward pressure on staffing costs, which
alone increased by £0.7 million in the period. Utility costs remained at
highly elevated levels in the period although our fixed term electricity and
gas contracts ended on 30 September with unit pricing on the new electricity
contract more than halving and with gas prices down by one-third. Funding
charges also remained at high levels although, in time, further reductions in
interest base rates should result in these costs receding.
Revenue for the period increased by 3% to £137.7 million (2023: £134.3
million), primarily due to the transition in the period by one manufacturer
from an agency sales model back to a traditional wholesale model, adding
approximately £4 million to revenue in comparison to the prior period.
The Company owns 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 welcome reduction of £2.4
million from the March 2024 year-end to £7.6 million at 30 September 2024.
Increased contributions from the Company along with improved trends in
membership actuarial experience from the March 2023 triannual valuation
resulted in the narrowing of the deficit in the period.
Profit before tax for the period was £0.21 million (2023: £0.04 million)
with basic earnings per share of 5.7 pence (2023: 1.1 pence). Underlying basic
earnings per share were 12.2 pence (2023: 7.1 pence).
The 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 11% from the prior year period. Nationally, the
Society of Motor Manufacturers and Traders reported a 1% increase in total new
car registrations but a 9% fall in the retail and small business market
segment in which we primarily operate. We are pleased that most of our brands
performed ahead of the UK market.
Our used car sales volumes rose by 5% from the prior year period. Although
customer demand remained buoyant, the lack of availability of appropriately
priced used cars remained challenging resulting in higher purchase prices,
which adversely affected margins. We continue to introduce innovations to
enhance our supply of used cars and to improve margin retention.
Aftersales
Our aftersales revenues rose by 8% in the period despite the recruitment of
vehicle technicians remaining challenging and adversely affecting throughput
levels. We continued to introduce improvements to our customer retention
processes.
Operations
During the period we saw further transitions by certain manufacturers towards
agency distribution models, away from their traditional wholesale agreements.
Under this new agency distribution model, the manufacturer transacts directly
with the customer for the sale of new cars whilst we retain the handover
process as an agent, for which we receive a fee. However, in June, Lotus Cars
decided that their agency distribution model had not achieved its desired
outcomes and, as a result, they transitioned back to a traditional wholesale
agreement. The impact of the reversion to a wholesale agreement was to
increase revenue in the period by some £4 million and to increase new car
inventories by some £1 million. Of the brands that we represent, Volvo
operates solely under an agency arrangement whilst the Volkswagen Audi Group
brands distribute only certain of their electric models under agency
arrangements. Lotus, MG and Vauxhall operate solely under traditional
wholesale agreements.
As mentioned above, we are putting in place actions to increase our supply of
used cars and to improve used car margins. We use market-driven data to secure
better quality used cars with higher expected margins and faster selling
times. Semi-automated systems speed up this process and improve the efficiency
of the procurement of used cars enabling us to target a better sales
performance.
Subsequent to the end of the period, in October, the Skoda brand was added
alongside our existing Volkswagen dealership in Eastbourne and we are in the
process of adding the CUPRA brand to our existing Volkswagen dealership in
Worthing. In both cases, these brand additions to existing premises should
allow for significantly enhanced throughputs with the need for only marginal
cost increases.
Property
Capital expenditure in the period was £0.5 million (2023: £1.8 million) and
included assets in the course of construction of £0.2 million (2023: £1.2
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
£10.7 million at 31 March 2024, 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.
Subsequent to the end of the period, the board exchanged contracts for the
sale of the Company's freehold premises in Lewes. Completion of the sale is
dependent on the successful outcome of ground surveys, to be carried out by
the purchaser in the coming months. Currently, the main showroom and workshop
is being utilised for our Lotus Sussex operation, while the side showroom is
let to a third-party. The terms of the sale allow us to remain in occupation
until the end of October 2025, ahead of an expected relocation of the
business. Completion of the ground surveys must occur within a four-month
period from exchange. The property has been disclosed as a Current asset in
the Statement of Financial Position as an Asset held for sale.
Pensions
The Company's defined-benefit pension scheme started the period with a net
deficit of £10.0 million. The board has little control over the key
assumptions in the valuation calculations as required by accounting standards
and movements in yields of gilts and bonds can have a significant impact on
the net funding position of the scheme. The actuary's estimate of the deficit
reduced by £2.4 million to £7.6 million at 30 September 2024 (2023: increase
of £0.7 million). Net of deferred tax, the net deficit at 30 September 2024
was £5.7 million (2023: £7.0 million).
During the period, the net present value of the Scheme's future pension
liabilities fell by £3.7 million due to a combination of the payment of £2.4
million of pensions, an increase to the discount rate and positive membership
actuarial experience from the most recent triennial actuarial valuation. This
reduction was greater than the fall in the value of the Scheme's assets,
producing the overall narrowing of the net deficit position of £2.4 million.
The pension cost under IAS 19 Pensions is recognised in the Condensed
Consolidated Statement of Financial Performance and is charged as a
non-underlying cost, amounting to £239,000 (2023: £215,000) for the period.
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 June 2024.
During the period, the Company made cash payments into the Scheme of £0.9
million (2023: £0.4 million), which included £0.5 million of an additional
£1.0 million contribution to be made only in the current financial year.
Future ongoing payments have been agreed to increase by 2.25% per annum.
Bank and other funding facilities
The Company has banking facilities with HSBC, which comprise a term loan of
£5.3 million, originally of £7.5 million, and a revolving-credit facility of
£6.0 million, both of which 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. The Company also has a loan, originally
of £0.4 million, from a manufacturer partner under their dealership
development assistance programme. The loan is repayable over a five-year
period to 2028.
The Company was cash generative during the period with £0.7 million (2023:
£1.0 million) generated from operating activities. Working capital levels
remained broadly unchanged in the period. Other than from operating
activities, the primary cash outflows in the period were from capital
expenditure, repayment of bank borrowings, lease payments and dividends.
During the period, the Company utilised an additional £2 million of its
borrowing facilities.
Bank borrowings, net of cash balances, at 30 September 2024 were £11.5
million (2023: £9.5 million), up from £11.3 million at 31 March 2024. As a
proportion of shareholders' funds, bank borrowings, net of cash balances, were
38% at 30 September 2024 (2023: 31%).
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 28% (2023: 31%). 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.
No payments of corporation tax were made in the period (2023: £28,000).
At 30 September 2024, the company recognised a deferred tax asset on the
Statement of Financial Position of £0.1 million (2023: £0.2 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
The board remains confident in the prospects of the Company and, therefore,
has declared an interim dividend of 5.0 pence per Ordinary share (2023: 5.0
pence per Ordinary share). This will be paid on 10 January 2025 to
shareholders on the register at close of business on 13 December 2024. The
Ordinary shares will be marked ex-dividend on 12 December 2024.
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 book for new cars remains at healthy levels although
concerns remain over whether manufacturers will place limits on the supply of
new internal-combustion engine cars in the final months of 2024 to assist in
achieving their Government-mandated targets for registrations of zero-emission
cars in the 2024 calendar year. The addition of the Skoda franchise in
Eastbourne and the CUPRA and SEAT franchises in Worthing will deliver
increased sales and enhance profitability. We anticipate an improved used car
performance in the second half, alongside significantly lower utility costs.
Funding costs are also expected to reduce in line with falls in interest base
rates. However, the increase to employers' National Insurance contributions
will add to costs from April 2025.
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
28 November 2024
Condensed Consolidated Statement of Financial Performance
for the half year ended 30 September 2024
Unaudited Unaudited Audited
Half year to Half year to Year ended
N o t e 30 September 2024 30 September 2023 31 March 2024
Total Total Total
£'000 £'000 £'000
Revenue 137,740 134,252 262,084
Cost of sales (120,479) (118,262) (230,389)
Gross profit 17,261 15,990 31,695
Operating expenses (15,679) (14,641) (30,518)
Operating profit before other income 1,582 1,349 1,177
Other income (net) 3 324 153 356
Operating profit 1,906 1,502 1,533
Operating profit before non-underlying items 1,915 1,513 2,114
Non-underlying items within operating profit 4 (9) (11) (581)
Operating profit 1,906 1,502 1,533
Net finance expense 5 (1,463) (1,254) (2,680)
Non-underlying net finance expense on pension scheme 4 (230) (204) (398)
Net finance expense (1,693) (1,458) (3,078)
Profit/(loss) before taxation 213 44 (1,545)
Profit/(loss) before tax and non-underlying items 452 259 (566)
Non-underlying items within operating profit 4 (9) (11) (581)
Non-underlying net finance expense on pension scheme 4 (230) (204) (398)
Profit/(loss) before taxation 213 44 (1,545)
Taxation 6 (59) (14) 341
Profit/(loss) for the period 154 30 (1,204)
Earnings/(deficit) per share
Basic 7 5.7p 1.1p (44.3)p
Diluted 7 5.7p 1.1p (44.3)p
Non-GAAP measure
Underlying basic earnings/(deficit) per share 7 12.2p 7.1p (17.3)p
Underlying diluted earnings/(deficit) per share 7 12.2p 7.0p (17.3)p
Condensed Consolidated Statement of Comprehensive Expense
for the half year ended 30 September 2024
Note Unaudited Unaudited Audited
Half year to Half year to Year to
30 September 30 September 31 March 2024
2024 2023
£'000 £'000 £'000
Profit/(loss) for the period 154 30 (1,204)
Items that will never be reclassified to profit and loss:
Remeasurement of net pension scheme obligation 12 1,717 (872) (1,652)
Deferred tax on remeasurement of pension scheme obligation (429) 218 413
Other comprehensive income/(expense), net of tax 1,288 (654) (1,239)
Total comprehensive income/(expense) for the period 1,442 (624) (2,443)
Condensed Consolidated Statement of Financial Position
at 30 September 2024
Unaudited Unaudited Audited
30 September 2024 30 September 2023 31 March
Note 2024
£'000 £'000 £'000
Non-current assets
Right-of-use assets 9 2,147 2,148 2,343
Property, plant and equipment 9 38,356 39,121 38,714
Investment properties 10 2,541 7,474 7,216
Interest in lease - 145 65
Goodwill 286 286 286
Deferred tax asset 80 171 568
Total non-current assets 43,410 49,345 49,192
Current assets
Inventories 43,644 38,950 42,251
Trade and other receivables 8,937 6,903 7,310
Interest in lease 145 162 160
Asset held for sale 11 4,620 - -
Current tax recoverable 191 - 190
Cash and cash equivalents 2,080 2,739 438
Total current assets 59,617 48,754 50,349
Total assets 103,027 98,099 99,541
Current liabilities
Interest-bearing overdrafts, loans and borrowings 12 2,445 1,695 1,445
Trade and other payables 48,635 42,485 45,597
Lease liabilities 12 423 422 501
Total current liabilities 51,503 44,602 47,543
Net current assets 8,114 4,152 2,806
Non-current liabilities
Interest-bearing loans and borrowings 12 11,085 10,530 10,308
Lease liabilities 12 1,940 2,039 2,106
Preference shares 12 812 812 812
Pension scheme obligation 13 7,643 9,461 10,036
Total non-current liabilities 21,480 22,842 23,262
Total liabilities 72,983 67,444 70,805
Net assets 30,044 30,655 28,736
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 25,902 26,513 24,594
Total equity 30,044 30,655 28,736
Condensed Consolidated Statement of Changes in Equity
for the half year ended 30 September 2024 (unaudited)
Capital Non-distributable
Share Share redemption reserve Retained earnings
capital premium reserve £'000 £'000 Total
£'000 £'000 £'000 equity
£'000
At 1 April 2024 1,439 272 707 1,724 24,594 28,736
Total comprehensive income
Profit for the period - - - - 154 154
Other comprehensive income - - - - 1,288 1,288
Total comprehensive income for the period - - - - 1,442 1,442
Transactions with owners:
Dividends (136) (136)
Issue of shares - SAYE - - - - 2 2
At 30 September 2024 (unaudited) 1,439 272 707 1,724 25,902 30,044
for the half year ended 30 September 2023 (unaudited)
Capital Non-distributable
Share Share redemption reserve Retained earnings
capital premium reserve £'000 £'000 Total
£'000 £'000 £'000 equity
£'000
At 1 April 2023 1,439 272 707 1,724 27,520 31,662
Total comprehensive income/(expense)
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 year ended 31 March 2024 (audited)
Capital Non-distributable
Share Share redemption reserve Retained earnings
capital premium reserve £'000 £'000 Total
£'000 £'000 £'000 equity
£'000
At 1 April 2023 1,439 272 707 1,724 27,520 31,662
Total comprehensive expense
Loss for the year - - - - (1,204) (1,204)
Other comprehensive expense - - - - (1,239) (1,239)
Total comprehensive expense for the year - - - - (2,443) (2,443)
Transactions with owners:
Dividends - - - - (539) (539)
Issue of shares - SAYE - - - - 220 220
Purchase of our shares - - - - (195) (195)
Share-based payment - - - - 31 31
At 31 March 2024 (audited) 1,439 272 707 1,724 24,594 28,736
Condensed Consolidated Cash Flow Statement
for the half year ended 30 September 2024
Unaudited Unaudited Audited
Half year to Half year to Year to
30 September 2024 30 September 2023 31 March
£'000 £'000 2024
£'000
Cash flows from operating activities
Profit/(loss) before taxation 213 44 (1,545)
Adjustments for:
Net finance expense and pension scheme service cost 1,693 1,458 3,078
Depreciation of property, plant and equipment, investment properties and 1,089 1,035 2,702
right-of-use assets
Cash payments into the defined-benefit pension scheme (915) (425) (831)
Profit on disposal of property, plant and equipment - - (41)
Share-based payments - 21 31
(Increase)/decrease in inventories (1,393) 535 (2,262)
(Increase)/decrease in receivables (1,627) 218 (189)
Increase/(decrease) in payables 3,046 (676) 1,944
Cash generated from operations 2,106 2,210 2,887
Net tax paid - (28) (68)
Interest paid (1,403) (1,201) (2,700)
Net cash generated from operating activities 703 981 119
Investing activities
Proceeds generated on disposal of property, plant and equipment - - 57
Purchases of property, plant and equipment (481) (1,754) (2,575)
Receipt from investment in lease 93 93 185
Net cash used in investing activities (388) (1,661) (2,333)
Financing activities
Unsecured revolving credit facility utilised 2,500 - 1,000
Unsecured revolving credit facility repaid (1,500) - (1,000)
Secured revolving credit facility received 1,000 - -
Secured loans repaid (188) (437) (875)
Unsecured loan received - 350 350
Unsecured loans repaid (35) - (35)
Issue of shares - SAYE scheme 2 - 220
Purchase of own shares for treasury - - (195)
Dividends paid (136) (404) (539)
Repayment of capital element of lease liabilities (316) (316) (500)
Net cash generated/(used) in financing activities 1,327 (807) (1,574)
Net increase/(decrease) in cash and cash equivalents 1,642 (1,487) (3,788)
Cash and cash equivalents at beginning of period 438 4,226 4,226
Cash and cash equivalents at end of period 2,080 2,739 438
Notes to the Condensed Consolidated Financial Statements
for the half year ended 30 September 2024
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 2024 and similarly for the half year to 30 September 2023 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 2024.
The comparative financial information for the year ended 31 March 2024 in
these condensed consolidated financial statements does not constitute
statutory accounts for that year. The statutory accounts for 31 March 2024
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 28 November 2024.
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 2024.
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 of one year
from the date of approval of these condensed consolidated financial
statements. This has focused primarily on the achievement of the banking
covenants associated with the term loan and revolving credit facilities
provided by HSBC, which cover levels of interest, borrowing and freehold
property security. For the period, one-year temporary covenant tests are in
place which require the Company to achieve minimum cumulative Senior EBITDA
hurdles, which are £Nil for the quarter ended 30 June 2024, £1.0 million for
the half-year ending 30 September 2024, £1.5 million for the nine months
ending 31 December 2024 and £3.0 million for the full financial year ending
31 March 2025. These covenant tests at 30 June and 30 September 2024 were
passed and the directors expect to pass the tests on 31 December 2024 and 31
March 2025.
With effect from 30 June 2025, the previous covenant tests relating to
interest and borrowing levels, which are outlined below, will then be
reapplied. Any failure of a covenant test would render the borrowing
facilities from HSBC to become repayable on demand, at the option of the
lender.
Under the Company's interest cover covenant test, it is required to make
underlying profits before senior interest (that being paid to HSBC and VW
Bank on its term loan and revolving credit facility borrowings), corporation
tax, depreciation and amortisation ("senior EBITDA") for a rolling
twelve-month period which is at least four times the level of senior interest.
Under the borrowings test, the Company's borrowings from HSBC and VW Bank on
its term loan and revolving credit facilities must be less than 375% of its
senior EBITDA. When this covenant test is reapplied on 30 June 2025 the
covenant multiple will be increased from 375% to 400%.
The Company's final covenant test over its levels of freehold property
security requires that the level of its bank borrowings do not exceed 70% of
the independently assessed value of its charged freehold properties. This test
was passed at 30 September 2024 and will remain in place throughout the
remainder of the period, and beyond. Property values would need to reduce by
some two-thirds before this covenant test became at risk of failure.
Once reapplied on 30 June 2025, these covenants will then continue to be
tested quarterly. Financial modelling for the coming twelve-month period has
allowed the directors to conclude that there is satisfactory headroom in the
Company's banking covenants.
The directors have also given consideration to the future uncertainties in the
state of the UK economy, as well as to cost pressures which might impact the
business such as future increases to staffing costs from rises in the National
Minimum Wage and employers' National Insurance, from business rates and from
increases to funding costs from higher interest base rates.
The directors have also considered the Company's working capital requirements.
The Company meets its day-to-day working capital requirements through
short-term vehicle stocking loans, a bank overdraft and revolving-credit
facility, and medium-term revolving credit facilities and term loans. At 30
September 2024, the medium-term banking facilities included a term loan with
an outstanding balance of £5.3 million and a revolving credit facility of
£6.0 million from HSBC, its primary bankers, with both facilities being next
renewable in March 2026. HSBC also makes available a short-term overdraft
facility of £3.5 million, which is renewed annually each August. The Company
also has a short-term revolving-credit facility of £4.0 million, which is
renewed annually each November, from Volkswagen Bank. In the opinion of the
directors, there is a reasonable expectation that all facilities will be
renewed at their scheduled expiry dates. The failure of a covenant test would
render these facilities repayable on demand at the option of the lender. At 30
September 2024 the Company held cash in hand balances of £2.1 million and had
undrawn borrowing facilities of £5.5 million, all of which are immediately
available.
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 comprise only profits and losses from disposal of
freehold property, gains arising from lease extensions from freehold property,
impairment charges against non-current assets, costs attributable to vacant
properties held pending their disposal, net financing return and service cost
on pension obligations in respect of the defined benefit pension scheme, which
is closed to future accrual, and companywide operational restructuring and
redundancy costs.
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
2024 2023 2024
£'000 £'000 £'000
Rent receivable 186 153 315
Gain on sale of personalised numberplate 138 - -
Gain on disposal of tangible fixed assets - - 41
Total other income 324 153 356
4. NON-UNDERLYING ITEMS
Unaudited Unaudited Audited
Half year to Half year to year to
30 September 30 September 31 March
2024 2023 2024
£'000 £'000 £'000
Other income:
Net gain on disposal of property, plant and equipment - - 41
Within operating expenses:
Service cost on pension scheme (9) (11) (18)
Property impairments - - (604)
(9) (11) (622)
Total non-underlying items within operating profit (9) (11) (581)
Net finance expense on pension scheme (230) (204) (398)
Total non-underlying items within (239) (215) (979)
profit/(loss) before taxation
5. NET FINANCE EXPENSE
Unaudited Unaudited Audited
Half year to Half year to year to
30 September 30 September 31 March
2024 2023 2024
£'000 £'000 £'000
Interest in lease interest receivable (12) (10) (21)
Interest receivable on cash deposits (7) (17) -
Interest payable on bank borrowings 509 450 920
Interest payable on inventory stocking loans 827 687 1,454
Interest on lease liabilities 60 63 133
Financing costs amortised 50 45 122
Preference dividends 36 36 72
Finance expense 1,463 1,254 2,680
6. TAXATION
Unaudited Unaudited Audited
Half year to Half year to year to
30 September 30 September 31 March
2024 2023 2024
£'000 £'000 £'000
Current UK corporation tax
Charge/(credit) for the period - - (152)
Adjustments recognised in the period for current tax of prior periods - - -
Total current tax charge/(credit) - - (152)
Deferred tax
Origination and reversal of timing differences 53 39 (201)
Change in corporation tax rate - - 36
Adjustments recognised in the period for deferred tax 6 (25) (24)
of prior periods
Total deferred tax charge/(credit) 59 14 (189)
Total tax charged/(credited) in the Income Statement 59 14 (341)
The tax charge/(credit) arises as follows:
Unaudited Unaudited Audited
Half year to Half year to year to
30 September 30 September 31 March
2024 2023 2024
£'000 £'000 £'000
On normal trading 118 68 (96)
Non-underlying items (59) (54) (245)
Total tax charge/(credit) 59 14 (341)
Taxation of trading items for the half year has been provided at an effective
rate of taxation of 28% (2023: 31%) 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 to Half year to year to
30 September 30 September 31 March
2024 2023 2024
£'000 £'000 £'000
Basic
Profit/(loss) after tax for the period 154 30 (1,204)
Basic earnings/(deficit) per share 5.7p 1.1p (44.3)p
Diluted earnings/(deficit) per share 5.7p 1.1p (44.3)p
Underlying
Profit/(loss) before tax 213 44 (1,545)
Adjustment: Non-underlying items (note 4) 239 215 979
Underlying profit/(loss) for the period 452 259 (566)
Taxation on normal trading (note 6) (118) (68) 96
Underlying earnings 334 191 (470)
Underlying basic earnings/(deficit) per share 12.2p 7.1p (17.3)p
Underlying diluted earnings/(deficit) per share 12.2p 7.0p (17.3)p
The number of fully paid Ordinary shares in issue at the period-end was
2,879,298 (2023: 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 2,726,811 (2023: 2,696,485).
The directors consider that underlying earnings per share figures provide a
better measure of comparative performance.
8. DIVIDENDS
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 10 January 2025 to those shareholders on the
register at the close of business on 13 December 2024. The Ordinary shares
will be marked ex-dividend on 12 December 2024. An interim dividend of 5.0
pence per Ordinary share was declared in respect of the half-year ended 30
September 2023. No final dividend was declared in respect of the year ended 31
March 2024.
Preference shares
Preference dividends were paid in October 2024. The next preference dividends
are payable in April 2025. The cost of the preference dividends has been
included within finance costs (see note 5).
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 Unaudited Audited
Half year to Half year to year to
30 September 30 September 31 March
2024 2023 2024
£'000 £'000 £'000
Property, plant and equipment at 1 April 38,714 38,145 38,145
Less: Depreciation charges (839) (778) (1,589)
Less: Impairment charges - - (400)
Less: Net book value of disposals - - (17)
Add: Purchases 481 1,754 2,575
Property plant and equipment at 30 September 38,356 39,121 38,714
Purchases in the period included assets in the course of construction of
£193,000 (2023: £1,233,000).
Right-of-use assets:
Unaudited Unaudited Audited
Half year to Half year to year to
30 September 30 September 31 March
2024 2023 2024
£'000 £'000 £'000
Right-of-use assets at 1 April 2,343 2,348 2,348
Less: Amortisation of right-of-use assets (196) (200) (398)
Add: Purchases - - 393
Right-of-use assets at 30 September 2,147 2,148 2,343
10. INVESTMENT PROPERTIES
The following is a reconciliation of changes in the balances of Investment
properties.
Investment properties:
Unaudited Unaudited Audited
Half year to Half year to year to
30 September 30 September 31 March
2024 2023 2024
£'000 £'000 £'000
Investment properties at 1 April 7,216 7,531 7,531
Less: Depreciation charges (55) (57) (111)
Less: Impairment charges - - (204)
Transferred to Current assets as Asset held for sale (4,620) - -
Investment properties at 30 September 2,541 7,474 7,216
11. ASSET HELD FOR SALE
Unaudited Unaudited Audited
Half year to Half year to year to
30 September 30 September 31 March
2024 2023 2024
£'000 £'000 £'000
Assets held for sale at 1 April - - -
Transferred from Investment properties 4,620 - -
Asset held for sale at 30 September 4,620 - -
On 29 October, the board exchanged contracts for the sale of the Company's
freehold premises in Lewes. Completion of the sale is dependent on the
successful outcome of ground surveys, which must be completed within a
four-month period from exchange.
Management's judgement at the balance sheet date was that the transaction was
reasonably certain to complete and would do so within a twelve-month period.
Accordingly, the property has been reclassified from Investment Properties and
shown as an Asset held for sale within Current assets. The property is shown
at the expected sale proceeds to be received less costs of disposal.
12. LOANS AND BORROWINGS
Liabilities
Bank and Revolving arising from Bank and cash balances
other credit Lease Preference financing £'000 Net
loans facilities liabilities shares activities debt
£'000 £'000 £'000 £'000 £'000 £'000
At 1 April 2024 (audited) 5,753 6,000 2,607 812 15,172 (438) 14,734
Cash movement (223) 2,000 (316) - 1,461 (1,642) (181)
Non-cash movement - - 72 - 72 - 72
At 30 September 2024 5,530 8,000 2,363 812 16,705 (2,080) 14,625
(unaudited)
Current liabilities/(assets) 445 2,000 423 - 2,868 (2,080) 788
Non-current liabilities 5,085 6,000 1,940 812 13,837 - 13,837
At 30 September 2024 5,530 8,000 2,363 812 16,705 (2,080) 14,625
13. PENSIONS
The pension scheme deficit reflects a defined benefit obligation that has been
updated to reflect its valuation as at 30 September 2024. 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 2024 and in the period to 30 September 2023, and which complies with the
accounting requirements of IAS 19 Pensions (revised).
The net liability for defined benefit obligations decreased from £10,036,000
at 31 March 2024 to £7,643,000 at 30 September 2024. The reduction of
£2,393,000 comprised the net charge to the Condensed Consolidated Statement
of Financial Performance of £239,000, a net positive remeasurement adjustment
credited to the Condensed Consolidated Statement of Comprehensive Income of
£1,717,000 and employer contributions of £915,000.
Asset values fell in the period, by £1,346,000, including divestments to pay
pension transfers and benefits in the period of £2,361,000. The net present
value of pension liabilities also fell, by £3,739,000, due to the combination
of pensions settled in the period, experience gains from the triannual
valuation in March 2023 and an increase in the rate applied to discount the
Scheme's liabilities, from 4.8% at 31 March 2024 to 5.0% at 30 September 2024.
14. 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 changes to 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.
15. CAPITAL COMMITMENTS
At 30 September 2024, the Company had capital commitments of £0.06 million
(2023: £0.6) million.
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
28 November 2024
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 2024 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 2024 which comprises the Condensed Consolidated Statement of
Financial Performance, the Condensed Consolidated Statement of Comprehensive
Income, the Condensed Consolidated Statement of Financial Position, the
Condensed Consolidated Statement of Changes in Equity, the Condensed
Consolidated Cash Flow Statement, and the related notes to the Consolidated
Unaudited interim Financial Statements.
Basis for conclusion
We conducted our review in accordance with Revised International Standard on
Review Engagements (UK) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" ("ISRE (UK) 2410
(Revised)"). 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 (Revised), 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.
BDO LLP
Chartered Accountants
London, UK
28 November 2024
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
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