TIDMCFYN
RNS Number : 4666A
Caffyns PLC
02 June 2021
Caffyns plc
Preliminary Results for the year ended 31 March 2021
Summary
2021 2020
GBP'000 GBP'000
-------------------------------------------- ---------- ----------
Revenue (restated, see page 8) 165,085 195,787
Underlying EBITDA (see note A) 5,124 3,428
Underlying profit before tax (see note A) 1,876 251
Profit before tax 1,424 103
-------------------------------------------- ---------- ----------
pence pence
--------------------------------------------- ------- -------
Underlying earnings/(deficit) per share 66.0 (4.9)
Earnings/(deficit) per share 52.4 (9.4)
Proposed final dividend per ordinary share - -
Dividend per ordinary share for the year - 7.50
--------------------------------------------- ------- -------
Note A: Underlying results exclude items that have non-trading
attributes due to their size, nature or incidence. Non-underlying
items for the period totalled a charge of GBP250,000 (2020: credit
of GBP39,000) and are detailed in Note 5 to this consolidated
financial information. Underlying EBITDA of GBP5,124,000 (2020:
GBP3,428,000) represents Operating profit before non-underlying
items of GBP3,142,000 (2020: GBP1,633,000) adding back Depreciation
and amortisation of GBP1,982,000 (2020: GBP1,795,000).
Overview
-- Revenue down 16% to GBP165.1 million
-- Like-for-like new car unit deliveries down by 10.0%
-- Like-for-like used car unit sales down by 19.4%
-- Like-for-like aftersales revenues down 11.5% to GBP16.2 million
-- Underlying profit before tax of GBP1.9 million (2020: GBP0.3 million)
-- No final dividend for the year ended 31 March 2021
-- Net bank borrowings at 31 March 2021 of GBP10.3 million (2020: GBP16.2 million)
-- Property portfolio revaluation as at 31 March 2021 showing an
GBP12.3 million (2020: GBP11.8 million) surplus to net book value
(not recognised in these accounts)
Like-for-like comparisons exclude from the current year the
impact of the Volvo business at Worthing and LEVC in Eastbourne,
both of which were opened during the year. All other businesses
operated for the full twelve-month period in both the current and
prior years
Commenting on the results Simon Caffyn, Chief Executive, said: "
Covid-19 had a material impact on the business with turnover
falling by 16%. However, the actions we took to improve
efficiencies, coupled with investment in online selling and support
from Government, allowed us to weather the periods of showroom
lockdown and maximise sales when possible.
I am delighted that everyone within the company adapted quickly
and rose to the challenges we faced, enabling us to deliver a
profit before tax of GBP1.9 million, a significant improvement on
the GBP0.25 million recorded last year. "
Enquiries:
Caffyns plc Simon Caffyn, Chief Executive Tel: 01323 730201
Mike Warren, Finance Director
HeadLand Chloe Francklin Tel: 0203 805 4822
Operational and Business Review
Summary
The underlying profit before tax of GBP1.88 million for the
financial year ended 31 March 2021 ("the year") was a significant
improvement on the GBP0.25 million recorded for the prior year.
However, the year was defined by the coronavirus pandemic
("covid-19") which had a material impact on the business, starting
in March 2020 and continuing, in one form or another, throughout
the entire year . Full year turnover fell by 16% to GBP165.1
million (2020: GBP195.8 million), predominantly from significantly
lower levels of new and used car deliveries. Aftersales revenues
were also adversely impacted by covid-19. Margins improved, largely
from very buoyant trading in the period from June to October 2020
as the business re-opened from the first lockdown in April and May
2020. The Company also implemented a cost-savings programme and, in
addition, received significant furlough and grant support from the
Government and from local Councils in the areas in which it
operates.
Our statutory profit before tax for the year was GBP1.4 million
(2020: GBP0.1 million). Basic earnings per share for the year were
52.4 pence (2020: loss per share of 9.4 pence due to a high tax
charge in excess of the pre-tax profit).
Underlying earnings per share for the year were 66.0 pence
(2020: loss per share of 4.9 pence).
The Company's defined-benefit pension scheme deficit, calculated
in accordance with the requirements of IAS 19 Pensions, remained
unchanged at GBP9.4 million (2020: GBP9.4 million). Investment
gains in the Scheme's investments were offset by increases to the
net present value of the Scheme's liabilities.
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.
In the light of the scale of Government support made available
to the Company in the year, and continuing uncertainty over the
future path of covid-19, t he board is not proposing a final
dividend for the year (2020: nil pence per ordinary share). No
interim dividend for the year was declared, against a 7.5 pence
interim dividend in the comparative year.
Net bank debt at 31 March 2021 was GBP10.3 million (2020:
GBP16.2 million) with the substantial improvement reflecting
actions taken by management to control both working capital and
costs, as well as the significant covid-19 support received by the
Company from the Coronavirus Job Retention Scheme and the business
rates holiday.
Covid-19
The Company faced an unprecedented situation when it was
required to temporarily close all its car showrooms and most of its
aftersales operations on 24 March 2020, following Government
restrictions implemented to deal with the nationwide covid-19
pandemic. With our showrooms closed in April and May 2020, only
online and telephone sales operations were able to continue,
alongside three aftersales operations which provided essential
support for NHS and other key workers only.
By the middle of May 2020, we were satisfied that we could
provide a safe environment for our staff and customers and
restarted our aftersales operations at all sites. Our showrooms
reopened on 1 June 2020, as Government restrictions were eased. Our
showrooms and workshops were able to continue operating throughout
the summer and into the autumn, albeit with social-distancing and
significant restrictions around access. However, Government
restrictions returned in November 2020 when we were again required
to close to customers and were able to operate only a
"click-and-collect" service. We reopened in December 2020 but our
Kent-based showrooms were required to close again before Christmas,
with the remainder of our showrooms then having to close to
customers in early January 2021. In all, our showrooms were closed
to customers for six of the twelve months in the year and were not
able to reopen again until after the end of the year, on 12 April
2021.
The first "hard" lockdown of the business in April and May 2020
resulted in a very substantial loss, despite the receipt of grants
in that period of GBP1.3 million under the Government's Coronavirus
Job Retention Scheme, which allowed us to maintain employment
levels. In response to the adverse financial impact of covid-19,
the Company implemented numerous cash preservation and cost saving
measures across many areas of the business. Approximately 80% of
the Company's employees were furloughed in April 2020, although
this number began to reduce from May 2020 as our aftersales
operations returned to more normal activity levels, and then
reduced further in June 2020 as we were given permission to reopen
our showrooms. As part of our cost savings exercise, an annual
salary ceiling of GBP37,500 was implemented for all active
employees, including the executive directors and the chairman of
the Company. The non-executive directors of the Company also agreed
a significant reduction to their fees. These salary reductions were
then reduced in stages, with all non-furloughed employees,
including the board, being returned to their full contractual
salaries from 1 July 2020. After assessing the performance of the
business over the ten months of the year post the initial lockdown,
the board decided to repay these savings to employees (excluding
the board) in recognition of their excellent efforts over that
period.
The year has presented our stakeholders with significant
challenges: many of our employees have continued to work throughout
the pandemic in difficult conditions whilst others have had to face
the implications of furlough; our shareholders have seen no
dividend income this year; and our manufacturers have seen
significantly reduced activity levels. For these reasons, the
salary repayments excluded members of the board. In addition, the
executive directors have declined their bonuses for the year that,
ordinarily, would have been payable based on the achievement of
financial targets set for the year.
Trading over the summer and autumn of 2020 was buoyant but
showroom closures returned in November 2020 and across the whole of
the first quarter of 2021. As a result, the Company was forced to
return a number of employees to furlough. However, at the year-end
in March 2021, under a fifth of employees still remained on
furlough, and this has since fallen further as we have been able to
welcome employees back to work as showrooms again reopened in April
2021. Across the year, the Company received total grants of GBP2.4
million from the Government's Coronavirus Job Retention Scheme.
Omni-channel retailing
Our omni-channel offering allows customers to interact with us
in a way that suits them best, from the traditional showroom
discussion through to a fully online sales process, and any
combination in between. We have learnt a great deal during the last
year and the new options we have introduced have significantly
advanced our on-line selling capabilities. We are now able to
provide our customers with this omni-channel approach to selling,
and we will continue to invest and develop this further in the
future.
Our People
I am very grateful for the dedication of our employees and the
effort they continue to apply to provide our customers with a
first-class experience. Their response to the covid-19 pandemic has
been outstanding and the board would like to particularly thank
those that remained active throughout the initial lockdown period.
This ensured that we were able to offer an emergency aftersales
response to NHS and other key workers. We have been, and remain,
very focused on the health and safety of our employees and
customers. Our showroom and workshop activities have been
undertaken in a responsible and socially distanced way throughout
the year. As a result of the hard work and professionalism shown by
everyone involved, we have managed the lockdown periods well and
were able to reopen our showrooms in April 2021 in a strong
position.
The Company has a long tradition of investing in apprenticeship
programmes. Despite the pressures on the business, we have kept our
apprenticeship numbers at a high level and continue to see the
benefits flow through the business as more apprentices complete
their training and become fully qualified. Due to our apprentice
numbers, we continue to fully utilise our Government apprenticeship
levy payments within the stipulated time limits.
We remain firmly committed to the long-term benefits of
apprenticeships and our recruitment programme continues with the
aim of maintaining a healthy complement in the coming year to
assist the Company to grow.
New and used car sales
Total UK new car registrations in the year declined by 25% as a
result of the covid-19 pandemic and, within this total, new car
registrations in the private and small business sector in which we
principally operate fell by 24%. However, we were very pleased that
our own new unit sales fell by only 10% on a like-for-like basis,
despite our showrooms having operated under covid-19 restrictions
for six of the twelve months in the year, with only a
click-and-collect service allowed during closure periods.
Volumes of sold used cars also fell, by 19% on a like-for-like
basis, although we were reassured by the resilience in unit
margins. Significant efforts have been made over the last twelve
months to enhance and develop our omni-channel offering for our
customers and we continue to see this element of our business
providing a major opportunity for further growth. The number of
used cars sold again exceeded the number of new cars sold in the
year.
Aftersales
Despite the impact of covid-19 on our aftersales business, we
were encouraged that our service revenues in the year fell by only
10% on a like-for-like basis. We continue to place great emphasis
on our customer retention programmes and in growing sales of
service plans. Our parts business also reported lower sales, down
by 12% on a like-for-like basis from the previous year.
Operations
Our Audi businesses produced an exceptional performance in the
year, significantly growing their new car deliveries despite the
backdrop of a falling UK market.
Our Volvo business in Eastbourne traded profitably in the year
and we were delighted to extend our representation by signing a new
dealer agreement for a territory in Worthing, West Sussex. The new
business was scheduled to open at the end of the previous financial
year, in March 2020, but the Government-mandated temporary showroom
closures meant the business was unable to begin trading until June
2020. We were extremely pleased that, once opened, the business
traded profitably in the year. It continues to reap the benefits of
an excellent model range of cars, which are being positively
received by customers.
The performance of our Volkswagen businesses improved in the
year and we remain confident that the strength of the brand, the
excellent model range, and exciting new products will help to boost
future trading performance.
In Tunbridge Wells, our SEAT business continued to perform well
although the adjacent Skoda business found the year more
challenging. Our Skoda business in Ashford performed
satisfactorily, after allowing for the impact of the covid-19
temporary closures. Our Vauxhall business in Ashford performed
satisfactorily in the year.
Trading at Caffyns Motorstore, our used car business in Ashford,
remained subdued as the business suffered from covid-19 temporary
closures. However, the performance of the business improved in the
year and we remain reassured that the concept has been very well
received by our customers, who particularly value the reassurance
of the Caffyns brand.
Groupwide projects
We remain focused on generating further improvements in used car
sales, used car finance and service labour sales. These three areas
will be key to achieving increases in profitability in the coming
years. In addition, we continue to make very good progress
utilising technology to enhance the customer-buying experiences
from their first point of contact right through to the buying
process, as well as improving aftersales retention.
New brands and models
We continue to invest in enhanced facilities to allow us to sell
and service our manufacturers' ever-increasing range of electric
and hybrid vehicles. During the year we also added three new brands
to our portfolio, all of which offer excellent electric product. In
Eastbourne we have added LEVC, based in premises adjacent to our
Volvo business. LEVC, alongside Volvo, is part of the Zhejiang
Geely group and supply battery-powered taxis and vans. In Ashford
we are adding two new franchises in Lotus, also part of the
Zhejiang Geely group, and MG, a subsidiary of SAIC. Both of these
brands have battery-powered electric products and MG offers
outstanding value for money in this field.
Property
We operate primarily from freehold sites and our property
portfolio provides additional stability to our business model. As
in previous years, our freehold premises were revalued at the
balance sheet date by chartered surveyors CBRE Limited based on an
existing use valuation. The excess of the valuation over net book
value of our freehold properties at 31 March 2021 was GBP12.3
million (2020: GBP11.8 million). This is after an impairment of the
carrying value of a single property by GBP0.2 million, which was
charged to administrative expenses as a non-underlying expense. In
accordance with our accounting policies (which reflect those
generally utilised throughout the motor retail industry), the
surplus has not been incorporated into our accounts.
During the year, we incurred capital expenditure of GBP0.4
million (2020: GBP1.0 million). There were no major property
development projects in the year and the spend reflected a mixture
of the further installation of electric charging points and
replacement spend on existing assets.
Our freehold premises in Lewes remain leased until 9 June 2021,
to the purchaser of our former Land Rover business, which was sold
in April 2016. The board continues to evaluate future opportunities
for the site.
Bank facilities
The Company's banking facilities with HSBC comprise a term loan,
originally of GBP7.5 million, repayable by instalments over a
twenty-year period to 2038 and a revolving-credit facility of
GBP7.5 million, both of which will next become renewable in March
2023. HSBC also provides an overdraft facility of GBP3.5 million,
renewable annually. The Company enjoys a supportive relationship
with HSBC and, following the outbreak of the covid-19 pandemic in
March 2020, the Company temporarily increased its overdraft
facility limit from GBP3.5 million to GBP6.0 million. In September
2020, the Company reduced its overdraft facility back down to
GBP3.5 million.
In addition to its facilities with HSBC, the Company also has an
overdraft facility of GBP7.0 million provided by Volkswagen Bank,
renewable annually, together with a term loan, originally of GBP5.0
million, which is repayable by instalments over the ten years to
November 2023.
In order to assist in the conservation of cash balances, HSBC
granted capital repayment holidays on our term loans, for the March
and June 2020 quarters, each being a repayment of GBP94,000.
Similar concessions were granted by Volkswagen Bank, for the months
of April May and June 2020, each being a repayment of
GBP42,000.
The term loan and revolving credit facilities provided by HSBC
include certain covenant tests which were comfortably passed at the
previous year-end, 31 March 2020. During the year, HSBC agreed to a
relaxation in the covenant tests for September 2020 and March 2021
although neither relaxation was ultimately required with the
original covenant tests being passed on both those dates. The
failure of a covenant test would render these facilities repayable
on demand at the option of the lender.
Bank borrowings, net of cash balances, at 31 March 2021 were
GBP10.3 million (2020: GBP16.2 million) and as a proportion of
shareholders' funds at 31 March 2021 were 37% (2020: 62%). This
substantial reduction reflected the strengthened controls over
working capital and cost savings implemented during the year, as
well as the significant covid-19 support received by the Company
from the Coronavirus Job Retention Scheme and the business rates
holiday. Gearing at the prior year-end was substantially higher
than usual as a result of the initial effects of the covid-19
pandemic. Available but undrawn facilities with HSBC and Volkswagen
Bank at 31 March 2021 were some GBP16 million (2020: GBP10
million).
Taxation
The year ended 31 March 2021 resulted in a tax charge of GBP0.01
million (2020: GBP0.36 million). The effective tax rate was lower
than the standard rate of corporation tax in force for the year of
19%, mainly due to the reversal of an impairment provision against
the carrying value of an Advanced Corporation Tax asset. This
impairment was made in the year ended 31 March 2019 at which time
management did not recognise an overall deferred tax asset due to
the inherent uncertainty at that date. This approach remained
unchanged at 31 March 2020, being immediately after the start of
the first covid-19 lockdown and at the height of the accompanying
economic uncertainty, but was altered at the half-year, in
September 2020. Management have prepared forecasts extending across
the next five years which have provided sufficient comfort to allow
the previously held view to be revised and the impairment reversed,
given management's judgement of a higher level of certainty that
the available Advanced Corporation Tax and other deferred tax
assets will be utilised in future years.
The Company has no current outstanding trading losses awaiting
relief (2020: GBP0.1 million). There are also no capital losses
awaiting relief. Capital gains which remain unrealised, where
potentially taxable gains arising from the sale of properties and
goodwill have been rolled over into replacement assets, amount to
GBP8.3 million (2020: GBP8.9 million) which could equate to a
future potential tax liability of GBP1.6 million (2020: GBP1.7
million). The Company also has an amount of GBP1.1 million (2020:
GBP1.1 million) of recoverable Advanced Corporation Tax ("ACT") and
GBP0.4 million (2020: GBP0.8 million) of shadow ACT. The board
remains confident in the recoverability of the ACT, although the
shadow ACT must first be fully absorbed before the ACT balance
itself can become available to be utilised.
Pension Scheme
The Company's defined benefit scheme was closed to future
accrual in 2010. In common with many companies, the board has
little control over the key assumptions in the valuation
calculations as required by accounting standards and the low yields
of gilts and bonds continues to have a significant impact on the
net funding position of the scheme. At 31 March 2021 the deficit
was GBP9.4 million (2020: GBP9.4 million). The deficit, net of
deferred tax, was GBP7.6 million (2020: GBP7.6 million).
The Scheme operates with a fiduciary manager and the board,
together with the independent pension fund trustees, continues to
review options to reduce the cost of operation and its deficit.
Actions that could further reduce the risk profile of the assets
and more closely match the nature of the Scheme's assets to its
liabilities continue to be considered.
The pension cost under IAS 19 is charged as a non-underlying
cost and amounted to GBP0.2 million in the year (2020: GBP0.2
million).
During the year, the Company made deficit-reduction
contributions into the Scheme under the 2017 recovery plan of
GBP0.5 million (2020: GBP0.5 million). Since the year-end, the
latest formal triennial valuation of the Scheme, effective 31 March
2020, has been completed. This valuation will be formally submitted
to the Pensions Regulator prior to the requisite deadline of 30
June 2021. A recovery plan to address the Scheme deficit identified
from this triennial valuation has been agreed with the trustees,
pending approval from the Pensions Regulator, under which the
annual recovery plan payment for the coming year will increase to
GBP0.8 million, with an additional one-off GBP1.0 million
contribution to be paid in June 2021. The recurring annual recovery
plan payment for each subsequent year will then increase by 2.25%,
until superseded by any future new recovery plan to be agreed
between the Company and the trustees.
Dividend
The Company has a strong balance sheet and the board remains
confident in its future prospects. However, in the light of the
scale of the covid-19 support received from Government by the
Company in the year, to conserve cash resources, and to be mindful
of the continued ongoing uncertainty over covid-19, the board has
decided not to declare a final dividend in relation to the year
ended 31 March 2021.
For the same reasons, no interim dividend was declared (2020:
7.5 pence per Ordinary share) during the year. The total dividend
for the year was therefore nil pence per ordinary share (2020: 7.5
pence). However, the board remains committed to restarting the
payment of dividends to shareholders as soon as it deems it is
appropriate to do so.
Strategy
Our continuing strategy is to focus on representing premium and
premium-volume franchises as well as maximising opportunities for
premium used cars. We recognise that we operate in a rapidly
changing environment and continue to carefully monitor the
appropriateness of this strategy. We continue to seek opportunities
to invest in the future growth of our businesses.
We are concentrating on business opportunities in stronger
markets to deliver higher returns from fewer but bigger sites. We
continue to seek to deliver performance improvement, in particular
in our used car and aftersales operations.
Annual General Meeting
T he Annual General Meeting will be held on 3 August 2021. It is
anticipated that social-distancing restrictions will have been
largely lifted by the date of this meeting, and therefore it is
intended that the Annual General Meeting will revert to an open
meeting, to which shareholders will be invited to attend in
person.
Outlook
Our showrooms were allowed to reopen in mid-April 2021 so we
have started the new financial year with a sense of optimism,
although we are mindful that the future course of the covid-19
pandemic remains uncertain. We continue to enjoy supportive
relationships with our banking partners, HSBC and Volkswagen Bank
with available but undrawn facilities in excess of GBP16 million at
the year-end. Our manufacturer partners also continue to be very
supportive. Therefore, the board is confident that the Company has
sufficient liquidity to allow it to effectively navigate the coming
year and to capitalise on the trading and investment opportunities
which are expected to arise as markets return to more normal levels
of activity.
S G M Caffyn
Chief Executive
1 June 2021
Group Income Statement
for the year ended 31 March 2021
Note 2021 2020
GBP'000 GBP'000
------------------------------------------------- ------- ----------- -----------
Revenue (restated) 165,085 195,787
Cost of sales (restated) (142,304) (170,783)
------------------------------------------------- ------- ----------- -----------
Gross profit 22,781 25,004
Operating expenses
Distribution costs (13,481) (16,035)
Administration expenses (7,317) (8,025)
------------------------------------------------- ------- ----------- -----------
Operating profit before other income 1,983 944
Other income (net) 909 728
------------------------------------------------- ------- ----------- -----------
Operating profit 2,892 1,672
------------------------------------------------- ------- ----------- -----------
Operating profit before non-underlying items 3,142 1,633
Non-underlying items within operating profit 5 (250) 39
------------------------------------------------- ------- ----------- -----------
Operating profit 2,892 1,672
------------------------------------------------- ------- ----------- -----------
Finance expense 6 (1,266) (1,382)
Finance expense on pension scheme (202) (187)
------------------------------------------------- ------- ----------- -----------
Net finance expense (1,468) (1,569)
------------------------------------------------- ------- ----------- -----------
Profit before taxation 1,424 103
------------------------------------------------- ------- ----------- -----------
Profit before tax and non-underlying items 1,876 251
Non-underlying items within operating profit 5 (250) 39
Non-underlying items within finance expense on
pension scheme 5 (202) (187)
------------------------------------------------- ------- ----------- -----------
Profit before taxation 1,424 103
------------------------------------------------- ------- ----------- -----------
Taxation 7 (14) (355)
------------------------------------------------- ------- ----------- -----------
Profit/(loss) for the year 1,410 (252)
------------------------------------------------- ------- ----------- -----------
Earnings/(deficit) per share
Basic 8 52.4p (9.4)p
Diluted 8 52.1p (9.4)p
Underlying earnings/(deficit) per share
Basic 8 66.0p (4.9)p
Diluted 8 65.6p (4.9)p
------------------------------------------------- ------- ----------- -----------
Group Statement of Comprehensive Income
for the year ended 31 March 2021
Note 2021 2020
GBP'000 GBP'000
-------------------------------------------------- ------- ---------- ----------
Profit/(loss) for the year 1,410 (252)
Items that will never be reclassified to profit
and loss:
Remeasurement of net defined benefit liability (301) (1,169)
Deferred tax on remeasurement 17 57 222
Effect of change in deferred tax rate 17 - 154
-------------------------------------------------- ------ ----------- ----------
Total other comprehensive expense, net of
taxation (244) (793)
-------------------------------------------------- ------ ----------- ----------
Total comprehensive income/(expense) for the
year 1,166 (1,045)
-------------------------------------------------- ------ ----------- ----------
Group Statement of Financial Position
at 31 March 2021
Note 2021 Restated
GBP'000 2020
GBP'000
-------------------------------------------- ------- ----------- ----------
Non-current assets
Right-of-use assets 10 610 925
Property, plant and equipment 11 37,624 38,783
Investment properties 12 7,751 8,052
Interest in lease 13 557 730
Goodwill 14 286 286
Deferred tax asset 17 412 -
47,240 48,776
-------------------------------------------- ------- ----------- ----------
Current assets
Inventories (restated) 15 36,562 41,459
Trade and other receivables 5,072 4,318
Interest in lease 13 173 178
Current tax recoverable 34 66
Cash and cash equivalents 5,735 1,478
-------------------------------------------- ------- ----------- ----------
47,576 47,499
-------------------------------------------- ------- ----------- ----------
Total assets 94,816 96,275
-------------------------------------------- ------- ----------- ----------
Current liabilities
Interest-bearing overdrafts and loans 3,875 5,875
Trade and other payables 16 39,338 40,077
Lease liabilities (restated) 495 491
Current tax payable 306 -
-------------------------------------------- ------- ----------- ----------
44,014 46,443
-------------------------------------------- ------- ----------- ----------
Net current assets 3,562 1,056
-------------------------------------------- ------- ----------- ----------
Non-current liabilities
Interest-bearing overdrafts and loans 12,187 11,844
Lease liabilities 783 1,362
Preference shares 812 812
Retirement benefit obligations 9,434 9,434
-------------------------------------------- ------- ----------- ----------
23,216 23,452
-------------------------------------------- ------- ----------- ----------
Total liabilities 67,230 69,895
-------------------------------------------- ------- ----------- ----------
Net assets 27,586 26,380
-------------------------------------------- ------- ----------- ----------
Capital and reserves
Share capital 1,439 1,439
Share premium account 272 272
Capital redemption reserve 707 707
Non-distributable reserve 1,724 1,724
Retained earnings 23,444 22,238
-------------------------------------------- ------- ----------- ----------
Total equity attributable to shareholders 27,586 26,380
-------------------------------------------- ------- ----------- ----------
Group Statement of Changes in Equity
for the year ended 31 March 2021
Share Share Capital Non- Retained Total
capital premium redemption distributable Earnings GBP'000
GBP'000 GBP'000 reserve reserve GBP'000
GBP'000 GBP'000
---------------------- ----------- ----------- ------------- ---------------- ------------ -----------
At 1 April 2020 1,439 272 707 1,724 22,238 26,380
Total comprehensive
expense
Profit for the
year - - - - 1,410 1,410
Other comprehensive
expense - - - - (244) (244)
---------------------- ----------- ----------- ------------- ---------------- ------------ -----------
Total comprehensive
expense - - - - 1,166 1,166
Transactions
with
owners:
Issue of shares
- SAYE - - - - 3 3
Share-based payment - - - - 37 37
---------------------- ----------- ----------- ------------- ---------------- ------------ -----------
At 31 March 2021 1,439 272 707 1,724 23,444 27,586
---------------------- ----------- ----------- ------------- ---------------- ------------ -----------
for the year ended 31 March 2020
Share Share Capital Non- Retained Total
capital premium redemption distributable Earnings GBP'000
GBP'000 GBP'000 reserve reserve GBP'000
GBP'000 GBP'000
---------------------- ----------- ----------- ------------- ---------------- ------------ -----------
At 1 April 2019 1,439 272 707 1,724 23,833 27,975
Total comprehensive
expense
Loss for the
year - - - - (252) (252)
Other comprehensive
expense - - - - (793) (793)
---------------------- ----------- ----------- ------------- ---------------- ------------ -----------
Total comprehensive
expense - - - - (1,045) (1,045)
Transactions
with
owners:
Dividends - - - - (606) (606)
Share-based payment - - - - 56 56
---------------------- ----------- ----------- ------------- ---------------- ------------ -----------
At 31 March 2020 1,439 272 707 1,724 22,238 26,380
---------------------- ----------- ----------- ------------- ---------------- ------------ -----------
Group Cash Flow Statement
for the year ended 31 March 2021
Note 2021 Restated
GBP'000 2020
GBP'000
-------------------------------------------------------- ------- ----------- -----------
Net cash inflow/(outflow) from operating activities 18 6,724 (802)
Investing activities
Proceeds on disposal of property, plant and equipment - -
Purchases of property, plant and equipment (394) (980)
Receipt from investment in lease 185 185
Net cash outflow from investing activities (209) (795)
-------------------------------------------------------- ------- ----------- -----------
Financing activities
Overdraft facility (repaid)/utilised (2,000) 1,000
Revolving-credit facility utilised 1,000 -
Secured loans repaid (657) (781)
Issue of shares - SAYE scheme 3 -
Dividends paid - (606)
Repayment of lease liabilities (604) (446)
-------------------------------------------------------- ------- ----------- -----------
Net cash outflow from financing activities (2,258) (833)
-------------------------------------------------------- ------- ----------- -----------
Net increase/(decrease) in cash and cash equivalents 4,257 (2,430)
-------------------------------------------------------- ------- ----------- -----------
Cash and cash equivalents at beginning of year 1,478 3,908
Cash and cash equivalents at end of year 5,735 1,478
-------------------------------------------------------- ------- ----------- -----------
2021 2020
GBP'000 GBP'000
---------------------------- ---------- ----------
Cash and cash equivalents 5,735 1,478
Bank overdrafts (3,000) (5,000)
----------------------------- ---------- ----------
2,735 (3,522)
---------------------------- ---------- ----------
Notes
for the year ended 31 March 2021
1. GENERAL INFORMATION
Caffyns plc is a company domiciled in the United Kingdom. The
address of the registered office is Saffrons Rooms, Meads Road,
Eastbourne BN20 7DR. The registered number of the Company is
105664.
This financial information has been extracted from the
consolidated financial statements which were approved by the
directors on 1 June 2021.
2. ACCOUNTING POLICIES
The financial statements have been prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006 and in accordance with
International Financial Reporting Standards ("IFRS") adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union.
Whilst the financial information included in this announcement
has been computed in accordance with IFRSs, this announcement does
not itself contain sufficient information to comply with IFRSs.
The financial information set out does not constitute the
Company's statutory accounts for the year ended 31 March 2021, but
is derived from those accounts. Statutory accounts for the year
ended 31 March 2020 have been delivered to the Registrar of
Companies and those for the year ended 31 March 2021 will be
delivered following the Company's annual general meeting. The
auditors have reported on those accounts: their reports were
unqualified, did not draw attention to any matters by way of
emphasis without qualifying their report and did not contain
statements under section 498(2) or (3) Companies Act 2006 or
equivalent preceding legislation.
A copy of the annual report for the year ended 31 March 2021
will be available at www.caffynsplc.co.uk and will be posted to
shareholders by 28 June 2021.
Prior year reclassifications
Revenue and cost of sales for the prior period have been
restated and each reduced by GBP2,067,000 to remove certain vehicle
sales transactions which should have been classified as leases. The
correction has no impact on either the previously stated gross
profit or the profit for the year.
Inventories and trade payables for the prior year have been
restated to increase each by GBP1,731,000, also to reflect the
reclassification of certain vehicle transactions which were
originally recorded as sales but which have now been recorded as
lease transactions. There was no impact on either cash and cash
equivalents or net assets in the prior year.
Finally, the prior year cash flow amounts have been restated to
correct an error to separately identify the receipt from the
Company's investment in a lease of GBP185,000. This receipt has now
been presented within cashflows from investing activities rather
than being offset against the repayments of lease liabilities
within financing activities.
A third balance sheet as at 31 March 2019 has not been presented
because any correction would not have impacted net current asset or
net assets. The only correction would have been to increase
inventories and trade payables at that date by GBP776,000.
3. GOING CONCERN
The financial statements have been prepared on a going concern
basis which the directors consider appropriate for the reasons set
out below.
The directors have considered the going concern basis and have
undertaken a detailed review of trading and cash flow forecasts for
a period in excess of one year from the date of approval of this
Annual Report. This has focused primarily on the achievement of the
banking covenants. Both banking covenants have been achieved for
the year under review. Under the Company's first covenant test, it
is required to make an underlying profit before interest for the
rolling twelve-month period to September 2021, and to March 2022,
which is at least double the level of interest payable on bank
borrowings to HSBC and Volkswagen Bank. The covenant test at 31
March 2022 will be the final test to be carried out within the
twelve-month period from the anniversary of the signing of these
financial statements. The Company has modelled these periods and
conclude that there is headroom that would allow for an approximate
20% reduction in expected new and used units over this period.
External market commentary provided by the Society of Motor
Manufacturers and Traders ("SMMT") indicate that new car
registrations are forecast to show a year-on-year increase of 14%
in 2021 to 1.86 million, with a further 14% increase into 2022 to
2.12 million registrations. 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 . Since showrooms reopened on the 12 April
2021, demand and financial results have both been stronger than had
been anticipated and the current new car order take for June and
beyond is at healthy levels.
The Company's second covenant test requires that the level of
its bank borrowings do not exceed 70% of the independently assessed
value of its charged freehold properties. Property values would
need to reduce by some two-thirds before this covenant test became
at risk of failure.
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 the
year-end, the medium-term banking facilities included a term loan
with an outstanding balance of GBP6.6 million and a revolving
credit facility of GBP7.5 million from HSBC, its primary bankers,
with both facilities being renewable in March 2023. HSBC also make
available a short-term overdraft facility of GBP3.5 million, which
is renewed annually in August. The Company also has a ten-year term
loan from Volkswagen Bank with a balance outstanding at 31 March
2021 of GBP1.5 million, which is repayable to November 2023, and a
short-term overdraft facility of GBP7.0 million, which is renewed
annually in August. In the opinion of the directors, there is a
reasonable expectation that all facilities will be renewed at their
scheduled expiry dates. The failure of a covenant test would render
these facilities repayable on demand at the option of the
lender.
Information concerning the Company's liquidity and financing
risk are set out in note 21 to the financial statements.
The directors have a reasonable expectation that the Company has
adequate resources and headroom against the covenant test to be
able continue in operational existence for the foreseeable future
and for at least twelve months from the date of approval of the
Annual Report. For those reasons, they continue to adopt the going
concern basis in preparing this Annual Report.
4. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of financial statements requires management to
make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of
assets and liabilities, income and expense. Actual results may
differ from these estimates.
These judgements and estimates are continually evaluated and are
based on historical experience and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances.
Certain critical accounting estimates in applying the Company's
accounting policies are listed below.
Retirement benefit obligation
The Company has a defined-benefit pension scheme. The
obligations under this scheme are recognised in the balance sheet
and represent the present value of the obligation calculated by
independent actuaries, with input from management. These actuarial
valuations include assumptions such as discount rates, return on
assets and mortality rates. These assumptions vary from time to
time depending on prevailing economic conditions. Details of the
assumptions used are provided in note 23 to the consolidated
financial statements for the year ended 31 March 2021. At 31 March
2021, the net liability included in the Statement of Financial
Position was GBP9.4 million (2020: GBP9.4 million).
Impairment
The carrying value of property, plant and equipment and goodwill
are tested annually for impairment as described in notes 10, 11,
12, and 14 to these condensed financial information. For the
purposes of the annual impairment testing, the directors recognise
Cash Generating Units ("CGUs") to be those assets attributable to
an individual dealership, which represents the smallest group of
assets which generate cash inflows that are independent from other
assets or CGUs. The recoverable amount of each CGU is based on the
higher of its fair value less costs to sell and its value in use.
The fair value less costs to sell of each CGU is based upon the
market value of any property contained within it and is determined
by an independent valuer, and its value in use is determined
through discounting future cash inflows (as described in detail in
note 12). As a result of this review the directors considered that
an impairment of GBP0.2 million was required to the carrying value
of a single property assets (2020: no impairment charges required)
(see notes 10, 11, 12 and 14).
Surplus ACT recoverable
The Company carries a balance of surplus unrelieved advanced
corporation tax ("ACT") which can be utilised to reduce corporation
tax payable subject to a restriction to 19% of taxable profits less
shadow ACT calculated at 25% of dividends. Shadow ACT has no effect
on the corporation tax payable itself but any surplus ACT on
dividends must be fully absorbed before surplus unrelieved ACT can
be utilised. At 31 March 2021, the carrying value of surplus ACT is
GBP835,000 (2020: GBP835,000) and shadow ACT is GBP376,000 (2020:
GBP845,000). Uncertainty arises due to the estimation of future
levels of profitability, levels of dividends payable and the
reversal of deferred tax liabilities in respect of accelerated
capital allowances and on unrealised capital gains. For example, a
reduction in the Company's profitability could result in a delay in
the utilisation of surplus unrelieved ACT. However, based on the
Company's current projections, the directors have a reasonable
expectation that the surplus ACT will be fully relieved against
future corporation tax liabilities by 31 March 2026.
Support arrangements
On occasion, the Company can be assisted in the relocation,
development and support of certain of its businesses. On receipt of
these payments the Company forms a judgement whether the payment is
capital in nature, in which case the payment is deducted from the
capital cost of the development in question, or revenue in nature,
in which case the payment is amortised over a two-year period from
the date or relocation.
In November 2018, the Company received a contribution of
GBP255,000 from a brand partner towards the cost of developing its
Angmering dealership. The contribution agreement was not specific
as to whether the amount contributed was in respect of the capital
expenditure incurred by the Company, or in respect of other
operating activities (such as marketing) that the Company was
required to undertake as part of the relocation. Consequently, the
directors needed to apply judgement in determining the appropriate
accounting treatment. Having considered all information available,
including the contribution agreement and past correspondence with
the brand partner, the directors determined it appropriate to
account for the contribution as capital in nature, and deducted the
amount received from the carrying amount of property, plant and
equipment assets associated with the Angmering dealership.
The directors considered an alternative treatment, including
recognising the amount received over the rolling two-year term of
the franchise agreement. This would have resulted in an increase in
profit of GBP96,000 during the year ended 31 March 2019 and an
increase in net assets of the same amount as at 31 March 2019, with
the remaining GBP159,000 standing to be recognised over the
remaining contractual period as follows: year ended 31 March 2020:
GBP127,500, year ending 31 March 2021: GBP31,500.
In December 2019, the Company separately received a contribution
of GBP225,000 from a brand partner as support for establishing a
new franchise business. In the judgement of the directors, and
having considered all information available, the directors
determined it appropriate to account for the contribution as
revenue in nature, with the support to be allocated on a
straight-line basis over the first 24 months of operation of the
new business. The launch of the new business was delayed by the
covid-19 pandemic with the business unable to commence trading
until car showrooms were allowed to re-open in June 2020. As a
result, GBP93,750 of the GBP225,000 support package has been
recognised in the Income Statement for the current year. It is
expected that a further GBP112,500 will be recognised in the Income
Statement for the year ending 31 March 2022, with the remaining
GBP18,750 to be recognised in the Income Statement for the year
ending 31 March 2023.
5. Non-underlying items
The following amounts have been presented as non-underlying
items in these financial statements:
2021 2020
GBP'000 GBP'000
----------------------------------------------------------------- ---------- ----------
Net (loss)/profit on disposal of property, plant and equipment (3) (2)
----------------------------------------------------------------- ---------- ----------
Other income, net (3) (2)
----------------------------------------------------------------- ---------- ----------
Within operating expenses:
Service cost on pension scheme (23) (25)
Redundancy and restructuring costs (40) -
VAT compliance provision movement - 44
Liquidation distribution received - 22
Property impairments (184) -
----------------------------------------------------------------- ---------- ----------
(247) 41
----------------------------------------------------------------- ---------- ----------
Non-underlying items within operating profit (250) 39
----------------------------------------------------------------- ---------- ----------
Net finance expense on pension scheme (202) (187)
----------------------------------------------------------------- ---------- ----------
Non-underlying items within net finance expense (202) (187)
----------------------------------------------------------------- ---------- ----------
Total non-underlying items before taxation (452) (148)
----------------------------------------------------------------- ---------- ----------
Taxation credit on non-underlying items 86 28
----------------------------------------------------------------- ---------- ----------
Total non-underlying items after taxation (366) (120)
----------------------------------------------------------------- ---------- ----------
The following amounts have been presented as non-underlying
items in these financial statements:
-- redundancy and restructuring costs of GBP40,000 were incurred
in the year as a result of changes necessitated by the covid-19
pandemic;
-- the carrying value of a freehold property was impaired by a
total of GBP184,000 following advice from the Company's independent
valuer, CBRE Limited (see notes 11 and 12).
In the prior period, the following items were recorded as
non-underlying items:
-- a periodic VAT inspection from HM Revenue & Customs
carried out in a prior period identified certain items of
non-compliance with relevant legislation. In the current period, a
sum of GBP44,000 was credited to profit to release a surplus
provision that was no longer deemed required;
-- a sum of GBP22,000 was received from the liquidators of MG Rover Group Limited.
6. Finance expense
2021 2020
GBP'000 GBP'000
----------------------------------------------- ---------- ----------
Interest payable on bank borrowings 367 440
Interest payable on inventory stocking loans 681 741
Interest on lease liabilities 21 24
Finance costs amortised 125 105
Preference dividends (see note 9) 72 72
----------------------------------------------- ---------- ----------
Finance expense 1,266 1,382
----------------------------------------------- ---------- ----------
No interest was capitalised in either the current or prior
period.
7. Tax
2021 2020
GBP'000 GBP'000
------------------------------------------------------------------------ ---------- ----------
Current tax
UK corporation tax (401) -
Adjustments recognised in the period for current tax of prior periods 33 22
------------------------------------------------------------------------ ---------- ----------
Total (charge)/credit (368) 22
------------------------------------------------------------------------ ---------- ----------
Deferred tax (see note 17)
Origination and reversal of temporary differences 381 (356)
Adjustments recognised in the period for deferred tax of prior
periods (27) (21)
------------------------------------------------------------------------ ---------- ----------
Total credit/(charge) 354 (377)
------------------------------------------------------------------------ ---------- ----------
Tax charged in the Income Statement (14) (355)
------------------------------------------------------------------------ ---------- ----------
The tax (charge)/credit arises as follows: 2021 2020
GBP'000 GBP'000
---------------------------------------------- ---------- ----------
On normal trading (100) (383)
On non-underlying items (see note 5) 86 28
---------------------------------------------- ---------- ----------
Tax charged in the Income Statement (14) (355)
---------------------------------------------- ---------- ----------
The charge for the year can be reconciled to the profit per the
Income Statement as follows:
2021 2020
GBP'000 GBP'000
---------------------------------------------------------------- ---------- ----------
Profit before tax 1,424 103
---------------------------------------------------------------- ---------- ----------
Tax at the UK corporation tax rate of 19% (2020: 19%) (271) (20)
Tax effect of expenses that are not deductible in determining
taxable profit (133) (23)
Other differences related primarily to the revaluation
of the pension scheme and from property impairments (34) (134)
Effect of change in corporation tax rate - (255)
Movement in rolled over and held over gains 117 76
Reversal of impairment of Advanced Corporation Tax asset 301 -
Adjustment to tax charge in respect of prior periods 6 1
---------------------------------------------------------------- ---------- ----------
Tax charge for the year (14) (355)
---------------------------------------------------------------- ---------- ----------
During the year an impairment provision against the carrying
value of an Advanced Corporation Tax asset was reversed. This
impairment was made in the year ended 31 March 2019 at which time
management did not recognise an overall deferred tax asset due to
the inherent uncertainty at that date. This approach remained
unchanged at the previous year end, with 31 March 2020 being
immediately after the start of the first covid-19 lockdown, and at
the height of the accompanying economic uncertainty, but was
altered at the half-year, at 30 September 2020. Management have
prepared forecasts extending across the next five years, which
reflect an improvement to the levels of profits. These forecasts
have allowed the previously held view to be revised and the
impairment has been reversed, given management's judgement of a
higher level of certainty that the available Advanced Corporation
Tax and other deferred tax assets will be utilised in future
years.
The total tax credit/(charge) for the year is made up as
follows:
2021 2020
GBP'000 GBP'000
---------------------------------------------- ---------- ----------
Total current tax (charge)/credit (368) 22
---------------------------------------------- ---------- ----------
Deferred tax credit/(charge)
Credited/ (charged) in the Income Statement 354 (377)
Credited against other comprehensive income 57 376
---------------------------------------------- ---------- ----------
Total deferred tax charge 411 (1)
---------------------------------------------- ---------- ----------
Total tax credit for the year 43 21
---------------------------------------------- ---------- ----------
Factors affecting the future tax charge
The Company has unrelieved advance corporation tax of GBP1.4
million (2020: GBP1.4 million) which is available to be utilised
against future mainstream corporation tax liabilities and is
accounted for in deferred tax (see note 17).
The tax charge is impacted by the effect of non-deductible
expenses which included the impairment of property, plant and
equipment and non-qualifying depreciation.
8. Earnings per ordinary share
The calculation of the basic earnings per share is based on the
earnings attributable to ordinary shareholders divided by the
weighted average number of shares in issue during the year.
Treasury shares are treated as cancelled for the purposes of
this calculation.
The calculation of diluted earnings per share is based on the
basic earnings per share, adjusted to allow for the issue of shares
and the pots-tax effect of dividends and/or interest on the assumed
conversion of all dilutive options and other dilutive potential
ordinary shares.
Reconciliations of earnings and weighted average number of
shares used in the calculations are set out below:
Underlying Basic
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------- ---------- ---------- ---------- ----------
Profit before tax 1,424 103 1,424 103
Adjustments:
Non-underlying items (note 5) 452 148 - -
----------------------------------------------- ---------- ---------- ---------- ----------
Profit before tax 1,876 251 1,424 103
Tax (note 7) (100) (383) (14) (355)
----------------------------------------------- ---------- ---------- ---------- ----------
Profit/(loss) after tax 1,776 (132) 1,410 (252)
----------------------------------------------- ---------- ---------- ---------- ----------
Earnings/(deficit) per share (pence) 66.0p (4.9)p 52.4p (9.4)p
Diluted earnings/(deficit) per share (pence) 65.6p (4.9)p 52.1p (9.4)p
----------------------------------------------- ---------- ---------- ---------- ----------
2021 2020
GBP'000 GBP'000
---------------------------------------------------------- ---------- ----------
Underlying earnings/(deficit) after tax 1,776 (132)
Underlying earnings/(deficit) per share (pence) 66.0p (4.9)p
Underlying diluted earnings/(deficit) per share (pence) 65.6p (4.9)p
---------------------------------------------------------- ---------- ----------
Non-underlying losses after tax (366) (120)
Losses per share (pence) (13.6)p (4.5)p
Diluted losses per share (pence) (13.5)p (4.5)p
---------------------------------------------------------- ---------- ----------
Total earnings/(deficit) 1,410 (252
---------------------------------------------------------- ---------- ----------
Deficit per share (pence) 52.4p (9.4)p
Diluted deficit per share (pence) 52.1p (9.4)p
---------------------------------------------------------- ---------- ----------
The number of fully paid ordinary shares in circulation at the
year-end was 2,695,376 (2020: 2,694,790). The weighted average
number of shares in issue for the purposes of the earnings per
share calculation were 2,694,846 (2020: 2,694,790). The shares
granted in the year under the Company's SAYE scheme have been
treated as dilutive. For the purposes of this calculation, the
weighted average number of shares in issue for the purposes of the
earnings per share calculation were 2,707,660 (2020:
2,694,790).
9. Dividends
2021 2020
GBP'000 GBP'000
---------------------------------------------------------------------- ---------- ----------
Preference shares
7% Cumulative First Preference 12 12
11% Cumulative Preference 48 48
6% Cumulative Second Preference 12 12
---------------------------------------------------------------------- ---------- ----------
Included in finance expense (see note 6) 72 72
---------------------------------------------------------------------- ---------- ----------
Ordinary shares
No interim dividend paid in respect of the current year (2020:
7.5p) - 202
No final dividend paid in respect of the March 2020 year end (2019:
15.0p) - 404
---------------------------------------------------------------------- ---------- ----------
- 606
---------------------------------------------------------------------- ---------- ----------
No final dividend was declared in respect of either the year
ended 31 March 2021, or the year ended 31 March 2020.
10. Right-of-use assets
2021
GBP'000
---------------------------- ----------
Deemed cost
At 1 April 2020 1,181
Additions in the year -
---------------------------- ----------
At 31 March 2021 1,181
----------------------------- ----------
Accumulated depreciation
At 1 April 2020 256
Depreciation for the year 315
----------------------------- ----------
At 31 March 2021 571
----------------------------- ----------
Net book value
At 31 March 2021 610
----------------------------- ----------
The right-of-use assets above represent two long term property
leases for premises from which the Company operates a Volkswagen
dealership in Brighton and a Volvo dealership in Worthing.
Depreciation charges of GBP315,000 (2020: GBP256,000) in respect
of right-of-use assets has been recognised within administration
expenses in the Income Statement.
The interest expense on the associated lease liability of
GBP21,000 (2020: GBP24,000) is disclosed is note 6.
Payments made in the year on the above leases were GBP335,000
(2020: GBP261,000).
11. Property, plant and equipment
Freehold Leasehold Fixtures Plant &
property improvements & machinery Total
GBP'000 GBP'000 fittings GBP'000 GBP'000
GBP'000
--------------------------- ----------- --------------- ----------- ------------ -----------
Cost or deemed cost
At 1 April 2020 40,752 728 5,220 6,517 53,217
Additions at cost - - 160 234 394
Disposals - - (30) (16) (46)
--------------------------- ----------- --------------- ----------- ------------ -----------
At 31 March 2021 40,752 728 5,350 6,735 53,565
--------------------------- ----------- --------------- ----------- ------------ -----------
Accumulated depreciation
At 1 April 2020 5,530 507 3,596 4,801 14,434
Depreciation charge
for the year 575 62 522 371 1,550
Disposals - - (27) (16) (43)
--------------------------- ----------- --------------- ----------- ------------ -----------
At 31 March 2021 5,530 507 4,091 5,156 15,941
--------------------------- ----------- --------------- ----------- ------------ -----------
Net book value
31 March 2021 34,639 147 1,259 1,579 37,624
--------------------------- ----------- --------------- ----------- ------------ -----------
Short-term leasehold property for both the Company and the Group
comprises GBP147,000 at net book value in the Statement of
Financial Position (2020: GBP221,000).
Depreciation charges of GBP1,550,000 (2020: GBP1,420,000) in
respect of Property, plant and equipment was recognised within
Administration Expenses in the Income Statement.
The Company valued its portfolio of freehold premises and
investment properties as at 31 March 2021. The valuation was
carried out by CBRE Limited, Chartered Surveyors, in accordance
with the Royal Institution of Chartered Surveyors valuation -
global and professional standards requirements. The valuation is
based on existing use value which has been calculated by applying
various assumptions as to tenure, letting, town planning, and the
condition and repair of buildings and sites including ground and
groundwater contamination. The valuation report supplied by CBRE
included a 'material valuation uncertainty' as set out in VPS 3 and
VPGA 10 of the RICS Valuation - Global Standards as it was not
possible for them to carry out physical attendance at three
properties which were due for internal inspections in 2021. As a
result, these three properties were valued remotely, relying on
physical inspections carried out in previous periods. Consequently,
CBRE noted that less certainty - and a higher degree of caution -
should be attached to their valuation than would normally be the
case. CBRE noted in their report, for the avoidance of doubt, that
the inclusion of their 'material valuation uncertainty' declaration
above did not mean that the valuation could not be relied upon.
Rather, the declaration was included to ensure transparency of the
fact that - in the current extraordinary circumstances - less
certainty could be attached to the valuation than would otherwise
be the case. CBRE noted that the material uncertainty clause was to
serve as a precaution and did not invalidate the valuation. Other
than in relation to the caveat noted above, management are
satisfied that this valuation is materially accurate. The excess of
the valuation over net book value as at 31 March 2021 of those
sites was GBP12.3 million (2020: GBP11.8 million). In accordance
with the Company's accounting policies, this surplus has not been
incorporated into these financial statements.
12. Investment properties
2021
GBP'000
------------------------------------ ----------
Cost
At 1 April 2020 and 31 March 2021 9,650
------------------------------------- ----------
Accumulated depreciation
At 1 April 2020 1,598
Depreciation for the year 117
Impairments for the year 184
------------------------------------- ----------
At 31 March 2021 1,899
------------------------------------- ----------
Net book value
At 31 March 2021 7,751
------------------------------------- ----------
Depreciation and impairment charges of GBP301,000 (2020:
GBP117,000) in respect of Investment properties have been
recognised within administration expenses in the Income
Statement.
The Company owns a freehold property that is leased out to a
third-party motor retail group, and accordingly accounts for the
property as an investment property. In the year under review, based
on an independent valuation of the property carried out by CBRE, an
impairment charge of GBP184,000 was recognised in the Income
Statement, as part of administration expenses. This investment
property represents the only asset included in that CGU. In
assessing this property for impairment, the directors based their
assessment of the recoverable amount on fair value less selling
costs.
The fair value measurement of the CGU in its entirety was
categorised as a Level 3 within the hierarchy set out in IFRS 13
Fair Measurement. The valuation technique that is used to measure
the fair value less costs of disposal is consistent with that
applied in respect of the Company's property, plant and equipment,
which is set out in note 12. The following are key assumptions on
which the directors based their determination of fair value less
costs of disposal in respect of that CGU:
-- Market value of buildings per square foot: GBP195
-- Market value of site per acre: GBP2,472,000
-- Initial and reversionary yields: 6.7% and 7.0% respectively
-- Costs of disposal: 1.5% of fair value
As described in note 12, the total excess of the valuation of
all of the Company's freehold properties over net book value as at
31 March 2021 was GBP12.3 million (2020: GBP11.8 million).
Investment properties accounted for GBP0.6 million (2020: GBP0.7
million) of this surplus.
13. Net investment in lease
2021 2020
GBP'000 GBP'000
------------------------------- ---------- ----------
Due after more than one year 557 730
Due within one year 173 178
------------------------------- ---------- ----------
At 31 March 2021 730 908
------------------------------- ---------- ----------
The premises shown above are sub-let to a third-party under a
lease which has the same terms and duration as the Company's own
lease.
14. Goodwill
Group and Company: 2021 2020
GBP'000 GBP'000
------------------------------------- ---------- ----------
Cost
At 1 April 2020 and 31 March 2021 481 481
------------------------------------- ---------- ----------
Provision for impairment
At 1 April 2020 and 31 March 2021 195 195
------------------------------------- ---------- ----------
Carrying amounts allocated to CGUs
Volkswagen, Brighton 200 200
Audi, Eastbourne 86 86
------------------------------------- ---------- ----------
At 31 March 2021 286 286
------------------------------------- ---------- ----------
For the purposes of the annual impairment testing, goodwill is
allocated to a CGU. Each CGU is allocated against the lowest level
within the entity at which goodwill is monitored for management
purposes. Consequently, the directors recognise CGUs to be those
assets attributable to individual dealerships and the table above
sets out the allocation of goodwill into the individual dealership
CGUs. The carrying amount of goodwill allocated to the Volkswagen,
Brighton CGU is the only amount considered significant in
comparison with the Group's total carrying amount of goodwill.
Goodwill impairment reviews are undertaken annually, or more
frequently if events or changes in circumstances indicate that the
carrying amount may not be recoverable and a potential impairment
may be required. Impairment reviews have been performed for all
CGUs for the years ended 31 March 2021 and 2020.
Valuation basis
The recoverable amount of each CGU is based on the higher of its
fair value less selling costs and value in use. The fair value less
selling costs of each CGU is based initially upon the market value
of any property contained within it and is determined by an
independent valuer as described in note 11. Where the fair value
less selling costs of a CGU indicates that an impairment may have
occurred, a discounted cash flow calculation is prepared in order
to assess the value in use of that CGU, involving the application
of a pre-tax discount rate to the projected, risk-adjusted pre-tax
cash inflows and terminal value.
Period of specific projected cash flows (Volkswagen, Brighton
CGU)
The recoverable amount of the Volkswagen, Brighton CGU is based
on value in use. Value in use is calculated using cash flow
projections for a five-year period from 1 April 2021 to 31 March
2026. These projections are based on the most recent budget which
has been approved by the board being the budget for the year ending
31 March 2022. The key assumptions in the most recent annual budget
on which the cash flow projections are based relate to expectations
of sales volumes and margins, and expectations around changes in
the operating cost base. These assumptions are based on past
experience, adjusted to expected changes, and on external sources
of information. The cash flows include ongoing capital expenditure
required to maintain the dealership but exclude any growth capital
expenditure projects to which the Group was not committed at the
reporting date.
Growth rates, ranging from -1% (2020: -25%) to 176% (2020: 131%)
have been used to forecast cash flows for a further four years
beyond the budget period, through to 31 March 2026. These growth
rates reflect the products and markets in which the CGU operates.
These growth rates do not give rise to an impairment. Growth rates
are internal forecasts based on a combination of internal and
external information. Based on these forecasts, the headroom
available on the total future profits is GBP2.4 million before an
impairment would be necessary.
Period of specific projected cash flows (Volvo, Worthing
CGU)
The recoverable amount of the Volvo, Worthing CGU is based on
value in use. Value in use is calculated using cash flow
projections for a five-year period from 1 April 2021 to 31 March
2026. These projections are based on the most recent budget which
has been approved by the board being the budget for the year ending
31 March 2022. The key assumptions in the most recent annual budget
on which the cash flow projections are based relate to expectations
of sales volumes and margins, and expectations around changes in
the operating cost base. These assumptions are based on past
experience, adjusted to expected changes, and on external sources
of information. The cash flows include ongoing capital expenditure
required to maintain the dealership but exclude any growth capital
expenditure projects to which the Group was not committed at the
reporting date.
Growth rates, ranging from -25% to 8% have been used to forecast
cash flows for a further four years beyond the budget period,
through to 31 March 2026. These growth rates reflect the products
and markets in which the CGU operates. These growth rates do not
give rise to an impairment. Growth rates are internal forecasts
based on a combination of internal and external information. Based
on these forecasts, the headroom available on the total future
profits is GBP1.7 million before an impairment would be
necessary.
Discount rate
The cash flow projections have been discounted using a rate
derived from the Group's pre-tax weighted average cost of capital,
adjusted for industry and market risk. The discount rate used was
12.4% (2020: 12.4%).
Terminal growth rate
The cash flows subsequent to the forecast period are
extrapolated into the future over the useful economic life of the
CGU using a steady or declining growth rate that is consistent with
that of the product and industry. These cash flows form the basis
of what is referred to as the terminal value. The growth rate to
perpetuity beyond the initial budgeted cash flows used in the value
in use calculations to arrive at a terminal value is 0.5% (2020:
0.5%). Terminal growth rates are based on management's estimate of
future long-term average growth rates.
Conclusion
At 31 March 2021, no impairment charge in respect of goodwill
was identified (2020: no impairment charge).
Sensitivity to changes in key assumptions
Impairment testing is dependent on estimates and judgements,
particularly as they relate to the forecasting of future cash
flows. The outcome of the impairment test is not sensitive to
reasonably possible changes in respect of the projected cash flows,
the discount rate applied, nor in respect of the terminal growth
rate assumed.
15. Inventories
Group and Company: 2021 Restated
GBP'000 2020
GBP'000
--------------------------------- ----------- ----------
Vehicles 19,741 23,126
Vehicles on consignment 15,995 17,408
Oil, spare parts and materials 821 920
Work in progress 5 5
--------------------------------- ----------- ----------
At 31 March 2021 36,562 41,459
--------------------------------- ----------- ----------
Group and Company: 2021 2020
GBP'000 GBP'000
------------------------------------------------------- ---------- ----------
Inventories recognised as an expense during the year 135,348 162,929
Inventories stated at fair value less costs to sell 708 810
Carrying value of inventories subject to retention
of title clauses 23,940 27,272
------------------------------------------------------- ---------- ----------
All vehicle inventories held under consignment stocking
arrangements are deemed to be assets of the Group and are included
on the Statement of Financial Position from the date of
consignment. The corresponding liabilities to the manufacturers are
included within trade and other payables. Inventories can be held
on consignment for a maximum consignment period set by the
manufacturer, which is generally between 180 and 365 days. Interest
is payable in certain cases for part of the consignment period, at
various rates indirectly linked to the Bank of England base
rate.
During the year, GBP37,000 was recognised in respect of the
write-down of inventories of spare parts due to general
obsolescence (2020: 39,000).
The value of vehicle inventories for the prior year was restated
and increased by GBP1,731,000 to reflect the reclassification of
certain vehicle transactions which were originally recorded as
sales but which have now been recorded as lease transactions.
16. Trade and other payables
2021 Restated
GBP'000 2020
GBP'000
-------------------------------------------- ----------- ----------
Trade payable 14,742 12,649
Obligations relating to consignment stock 15,995 17,408
Vehicle stocking loans 5,100 7,315
Social security and other taxes 1,173 549
Accruals 1,482 1,283
Deferred income 614 592
Other creditors 232 281
-------------------------------------------- ----------- ----------
At 31 March 2021 39,338 40,077
-------------------------------------------- ----------- ----------
Trade and other payables principally comprise amounts
outstanding for trade purchases and ongoing costs. The average
credit period taken for these trade-related purchases was 33 days
(2020: 25 days).
The directors consider that the carrying amount of trade
payables approximates to fair value.
The Group finances the purchases of new car inventory through
the use of consignment funding facilities provided by its
manufacturer partners and which are shown above as Obligations
relating to consignment stock. Vehicles are physically supplied by
the manufacturers with payment deferred until the earlier of the
registration of the vehicle or the end of the consignment period,
generally 180 days. In certain circumstances consignment periods
can be extended with the agreement of the manufacturer. The
consignment funding facilities attract interest at a commercial
rate.
The Group utilises vehicle stocking loans to assist with the
purchase of certain used car inventory. Facilities are available
from both its manufacturer partners and a third-party finance
provider and are generally available for a period of 90 days from
the date of purchase. These vehicle stocking loans attract interest
at a commercial rate.
Interest charges on consignment stocking loans and vehicle
stocking loans described above for the year ended 31 March 2020
were GBP681,000 (2020: GBP741,000).
The obligations relating to consignment stock are all subject to
retention of title clauses for the vehicles to which they relate.
Obligations for used and demonstrator cars which have been funded
are secured on the vehicles to which they relate and are shown
above as vehicle stocking loans. From a risk perspective, the
Company's funding is split between manufacturers through their
related finance arms and that funded by the Company through bank
borrowings.
The Company deferred payments of VAT of GBP440,000 under the
covid-19 payment deferral scheme operated by HMRC. This VAT is to
be settled by eleven equal monthly instalments, with payments
having commenced in April 2021. At 31 March 2021, an outstanding
balance of GBP400,000 has been included in within Social security
and other taxes.
The movements in deferred income in the year were as
follows:
2021 2020
GBP'000 GBP'000
--------------------------------------------- ---------- ----------
At 1 April 2020 592 590
Utilisation of deferred income in the year (1,136) (1,300)
Income received and deferred in the year 1,158 1,302
--------------------------------------------- ---------- ----------
At 31 March 2021 614 592
--------------------------------------------- ---------- ----------
17. Deferred tax
The following are the major deferred tax assets and liabilities
recognised and the movements thereon during the current and prior
reporting period.
Accelerated Unrealised Retirement Sale of Short-term
tax capital benefit Business/ temporary Recoverable
depreciation gains obligations tax differences ACT Total
GBP'000 GBP'000 GBP'000 losses GBP'000 GBP'000 GBP'000
GBP'000
---------------- -------------- ------------ ------------- ----------- ------------- -------------- -----------
At 1 April
2020 (942) (1,690) 1,792 28 (23) 835 -
Change in
tax rates
and prior
year
adjustments 1 - - (28) - - (27)
Timing
differences 16 118 (57) - 4 301 382
Recognised
in
other
comprehensive
income - - 57 - - - 57
---------------- -------------- ------------ ------------- ----------- ------------- -------------- -----------
At 31 March
2021 (925) (1,572) 1,792 - (19) 1,136 412
---------------- -------------- ------------ ------------- ----------- ------------- -------------- -----------
The Company carries a balance of surplus unrelieved advanced
corporation tax ("ACT") which can be utilised to reduce corporation
tax payable subject to a restriction of 19% of taxable profits less
shadow ACT calculated at 25% of shareholder ordinary dividends.
Shadow ACT has no effect on the corporation tax payable itself but
any surplus shadow ACT on dividends must be fully absorbed before
surplus unrelieved ACT can be utilised. The value of surplus ACT is
GBP1,136,000 (2019: GBP1,136,000) and shadow ACT is GBP376,000
(2020: GBP845,000).
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against
current tax liabilities and it is considered that this requirement
is fulfilled. The offset amounts are as follows:
2021 2020
GBP'000 GBP'000
--------------------------- ---------- ----------
Deferred tax liabilities (2,516) (2,655)
Deferred tax assets 2,928 2,655
--------------------------- ---------- ----------
At 31 March 2021 412 -
--------------------------- ---------- ----------
The unrealised capital gains include deferred tax on gains
recognised on revaluing the land and buildings in 1995 and where
potentially taxable gains arising from the sale of properties have
been rolled over into replacement assets. Such tax would become
payable only if such properties were sold without it being possible
to claim rollover relief.
There are no trading losses available for use in future periods
(2020: GBP147,000).
18. Notes to the cash flow statement
2021 Restated
GBP'000 2020
GBP'000
------------------------------------------------------------ ----------- ----------
Profit before tax for the year 1,424 103
Adjustments for net finance expense 1,468 1,569
------------------------------------------------------------ ----------- ----------
2,892 1,672
Adjustments for:
Depreciation of property, plant and equipment, investment
properties and
right-of-use assets 1,982 1,793
Impairment against property, plant and equipment and 184 -
investment properties
Cash payments into the defined-benefit pension scheme (526) (523)
Loss on disposal of property, plant and equipment 3 2
Share-based payments 37 56
------------------------------------------------------------ ----------- ----------
Operating cash flows before movements in working capital 4,572 3,000
Decrease in inventories 3,484 (309)
(Increase)/decrease in receivables (754) 4,479
Increase/(decrease) in payables 697 (6,467)
------------------------------------------------------------ ----------- ----------
Cash generated by operations 7,999 703
Tax paid, net of refunds (31) (147)
Interest paid (1,244) (1,358)
------------------------------------------------------------ ----------- ----------
Net cash derived from/(absorbed) operating activities 6,724 (802)
------------------------------------------------------------ ----------- ----------
All interest payments are treated as operating cash movements as
they arise from movements in working capital.
Reconciliation of debt
Group and Bank Revolving Lease Preference Liabilities Bank and Net
Company: loans credit liabilities shares arising cash debt
GBP'000 facilities GBP'000 GBP'000 from balances GBP'000
GBP'000 financing GBP'000
activities
GBP'000
-------------- ----------- -------------- -------------- ------------- ------------- -------------- -----------
At 1 April
2019 9,500 8,000 2,038 812 20,350 (3,908) 16,442
Movement (781) 1,000 (185) - 34 2,430 2,464
-------------- ----------- -------------- -------------- ------------- ------------- -------------- -----------
At 31 March
2020 8,719 9,000 1,853 812 20,384 (1,478) 18,906
-------------- ----------- -------------- -------------- ------------- ------------- -------------- -----------
Current
liabilities 875 5,000 491 - 6,366 (1,478) 4,888
Non-current
liabilities 7,844 4,000 1,362 812 14,018 - 14,018
-------------- ----------- -------------- -------------- ------------- ------------- -------------- -----------
At 31 March
2020 8,719 9,000 1,853 812 20,384 (1,478) 18,906
-------------- ----------- -------------- -------------- ------------- ------------- -------------- -----------
At 1 April
2020 8,719 9,000 1,853 812 20,384 (1,478) 18,906
Movement (657) (1,000) (575) - (2,232) (4,257) (6,489)
-------------- ----------- -------------- -------------- ------------- ------------- -------------- -----------
At 31 March
2021 8,062 8,000 1,278 812 18,152 (5,735) 12,417
-------------- ----------- -------------- -------------- ------------- ------------- -------------- -----------
Current
liabilities 875 3,000 495 - 4,370 (5,735) (1,365)
Non-current
liabilities 7,187 5,000 783 812 13,782 - 13,782
-------------- ----------- -------------- -------------- ------------- ------------- -------------- -----------
At 31 March
2021 8,062 8,000 1,278 812 18,152 (5,735) 12,417
-------------- ----------- -------------- -------------- ------------- ------------- -------------- -----------
19. Legal contingent liability
In September 2015, Volkswagen Aktiengesellschaft announced that
certain diesel vehicles manufactured by Volkswagen, Skoda, SEAT and
Audi, which contain 1.2, 1.6 and 2.0 litre EA 189 diesel engines,
were fitted with software which is thought to have operated such
that when the vehicles were experiencing test conditions, the
characteristics of nitrogen oxides ("NOx") were affected. The
vehicles remain safe and roadworthy.
Technical measures have been approved by the German type
approval authority, the Kraftfahrt-Bundesamt (the "KBA") in respect
of Volkswagen and Audi branded vehicles, by the UK type approval
authority, the Vehicle Certification Agency (the "VCA") in respect
of Skoda branded vehicles, and by the Ministerio de Industria,
Energía y Turismo (the "MDI") in respect of SEAT branded vehicles.
The KBA and VCA have confirmed for all affected vehicles that the
implementation of all technical measures does not adversely impact
fuel consumption figures, CO(2) emissions figures, engine output,
maximum torque and noise emissions. The MDI is also content that
the technical measures be applied to those SEAT vehicles for which
they are the relevant approval authority.
Notwithstanding the above, claims on behalf of multiple
claimants, arising out of or in relation to their purchase or
acquisition on finance of a Volkswagen Group vehicle affected by
the NOx issue, have been brought against a number of Volkswagen
entities and dealers, including Caffyns. Caffyns has been named as
a Defendant on fourteen 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. In total, there
are 314 claims being jointly brought against Caffyns.
In December 2019, a hearing took place in the High Court of
England and Wales on two preliminary issues:
(i) "Is the High Court of England and Wales bound by the finding
of the competent EU type approval authority that a vehicle contains
a defeat device in circumstances where that finding could have
been, but has not been, appealed by the manufacturer; and/or is it
an abuse of process for the Defendants to seek collaterally to
attack the KBA's reasoning or conclusions by denying that the
affected vehicles contain defeat devices ?"; and
(ii) "Where a vehicle's engine control unit is capable of
identifying the New European Driving Cycle test and operates in a
different mode during the test by altering the rate of exhaust gas
recirculation to reduce NOx emissions, does the vehicle contain a
"defeat device" within the meaning of Article 3(10) of Regulation
715/2007/EC ?"
Judgment was received on 30 March 2020. On the first preliminary
issue, the Court found that it was bound by the KBA's ordinance
that the software was a defeat device. The same was not true in
relation to the VCA. On the second preliminary issue, the court
found that the software was a prohibited defeat device. Permission
to appeal this judgment has been denied by the Court of Appeal.
At a case management conference on 13 November 2020, the
claimants amended their pleadings, in part to plead that the
technical measures of affected vehicles contained a prohibited
defeat device due to the presence of a "thermal window". The
claimants alleged that such a thermal window increases the level of
damages recoverable in their claim. Volkswagen Group denies that
the thermal windows in question constitute a prohibited defeat
device in the affected vehicles and filed an amended pleading in
response on 26 February 2021.
At present, no timetable has been set for the remainder of the
case; the relevant issues of liability, loss and causation are not
yet 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.
Volkswagen Group has agreed to indemnify the Company for the
reasonable legal costs of defending the litigation and any damages
and adverse legal costs that the Company may be liable to pay to
the claimants as a result of the litigation and the conduct of the
Volkswagen Group. The possibility, therefore, of an economic cost
to the Company resulting from the defence of the litigation is
remote.
Accordingly, no provision for liability has been made in these
condensed financial statements.
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END
FR XFLFBFQLEBBD
(END) Dow Jones Newswires
June 02, 2021 02:00 ET (06:00 GMT)
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