Final Results

RNS Number : 4600V

Caffyns PLC

29 May 2008

 



Preliminary results of Caffyns plc

for the year ended 31 March 2008

29 May 2008

Caffyns plc, the leading motor distributor covering 15 car franchises in the south-east of England, announces its preliminary results for the year ended 31 March 2008.

Financial highlights

	2008	2007
	£'000	£'000
Revenue	182,029	176,238
Profit before tax	2,579	1,443
Earnings per share - basic	73.9p	40.4p
Proposed final dividend	17.0p	17.0p
Dividend per ordinary share	25.0p	25.0p

Enquiries:         Tel: [phone] 

Simon Caffyn        Chief Executive        

Mark Harrison        Finance Director

Chairman's Statement

During the first half, we made steady progress with pre-exceptional profit up 18% from £643,000 to £759,000. The second half saw a worsening in the economic environment with prices of essential goods such as food, transport and energy rising above inflation. This, coupled with the effects of tax increases in April 2007 and the developing credit crunch, had a significant effect on our margins caused by reducing customer confidence and competitive pressures.

Profit before tax for the year improved to £2.579m (2007 - £1.443m) after exceptional credits of £2.776m (2007 - £0.16m) with the underlying trading result a loss of £197,000 (2007 - profit £1.283m). Earnings per share increased from 40.4p to 73.9p.

Encouragingly, our turnover improved from £176.2m to £182.0m creating a broader customer base to service.

An interim dividend of 8.0p per ordinary share (2007 - 8.0p) was paid on 9 January 2008. An unchanged final dividend of 17.0p (2007 - 17.0p) is now being recommended which, if approved, will be payable on 23 July 2008 to shareholders on the register on 13 June 2008, giving a total dividend of 25.0p for the year (2007 - 25.0p).

As we finally emerge from the extensive redevelopment work of the last three years, I would like to again thank all Caffyns employees for their hard work and dedication to ensure we are stronger and better placed to take advantage of improvements in trading conditions.

In March 2008 we appointed Nicholas Hollingworth as a non-executive director. He brings considerable experience and expertise, particularly of the retail sector, and we welcome him to the board.

The year ahead promises to be difficult for all retailers. Attention to costs and basic trading principles will continue to be the focus for us this year. Whilst progress against plan in April is encouraging, the outlook for the six months to 30 September 2008 remains uncertain.

Brian A Carte

Chairman

29 May 2008

Chief Executive's Operating Review    

Results and Key Performance Indicators

The year ended 31 March 2008 has seen the Company continue to make progress with turnover of £182m up from £176m in 2007. Our new franchise developments are now all complete and at various stages of progress in their individual business plans ranging from their first full year of operations to their third.

During the second half of the year we experienced increased pressure on gross profit margins and, whilst we have been able to establish our new franchise operations with improved sales, the expected early costs combined with lower margins have led to a full year trading loss of £197,000. However, profits from exceptional items of £2.776m, principally VAT refunds, give a final profit before tax of £2.579m, up from £1.443m last year.

As indicated in the announcement of our interim result, trading conditions in the second half of the year became difficult following the worsening crisis in the banking system, coupled with increasing prices of basic commodities and car tax costs. These events have given rise to challenging market conditions in our sector.

With net cash outflow in the year of £4.373m (2007 - inflow £1.180m) the proportion of total bank borrowings to shareholder funds at 31 March 2008 increased to 47% (2007-35%). While stocks temporarily peaked at the end of our financial year, they have now returned to more normal, lower levels. 

Operational Developments

It is very unfortunate that the downturn in the economy coincided with the third year of our recovery plan. However, we continue to make good progress in establishing these new businesses and expect significant progress this year. While trading in April in line with plan, trading performance in the year ahead is dependent on consumer confidence.

A number of redevelopments are underway to reinvest the proceeds from earlier property sales and the VAT refund.  

In Brighton, we are fully refurbishing our Audi dealership to the latest corporate standards. This has involved closing the onsite bodyshop and expanding the workshop and showroom facilities.

In our Lewes Land Rover dealership, we have relocated our valeting and service parking off site to allow improvements to the showroom and servicing facilities.

In Hailsham we are installing advanced bodyshop facilities to allow us to expand this profitable business and take on the authorised repairer status for the Volkswagen Audi Group, previously held in our Brighton Audi dealership.

Property

In May 2008 we completed on the sale of our former site in Worthing and the cash proceeds of £1.075m have now been received. We are making progress towards the sale of our site in East Grinstead although this remains dependent on a satisfactory planning permission being achieved.  

The proposed development of our land in Hove has yet to achieve planning approval. An amended scheme is currently under consideration with the developer.

The company valued its portfolio of freehold premises as at 31 March 2008 but excluding three sites which were for sale as at that date and one further site undergoing a major refurbishment. The valuation was carried out on the basis of existing use value. The excess of the valuation over net book value as at 31 March 2008 was £6.9 million. In accordance with the company's accounting policies, this surplus has not been incorporated into the accounts. 

Pensions

Against the backdrop of a difficult period for the stock market in general, it is encouraging to see that the pension scheme continues to show a small surplus.

IT

Developments include an upgrading of our current website to take advantage of the continued rapid growth in the use of this marketing medium. The new site will be launched later this year.  

Similarly we are using the internet to enhance significantly our operational reporting, enabling easy comparison of best practice across the dealership network.

People & Training

During a difficult year we have seen high levels of commitment and professionalism across the Group for which I am most grateful. Much effort has been extended on improving processes across the Company which should deliver benefits during the coming year.

Training continues across all functional areas, fully supported by our Internal Auditing process reporting on best practice.

I am delighted to announce that Robert Bradbury has been promoted to Regional Director with responsibility for our Volkswagen dealerships.

VAT

As the Chairman stated in his half year report, HM Revenue & Customs confirmed in July 2007 that the VAT monies, paid to the Company in respect of a claim relating to VAT overpaid on demonstrator vehicle bonuses in March 2007, could be retained.

The monies received (less professional costs incurred) amounting to £2.9m, have been treated as exceptional income in the Company's Income Statement for the year ended 31 March 2008.

The Future

Trading conditions remain challenging but, through improved working practices, we started the year profitably despite stricter controls on vehicle stocks to counter falling used car values.

The economy is under pressure and consumers are assailed by increasing inflation on essentials such as fuel and food, whilst borrowing costs remain higher. Cost control and the maximising of gross profits will be essential if we are to realise our potential in uncertain market conditions in the forthcoming year.

Simon G M Caffyn

Chief Executive

29 May 2008

CONSOLIDATED INCOME STATEMENT

for the year ended 31 March 2008

	Note	2008 £'000	2007 £'000
Revenue		182,029	176,238
Cost of sales
Exceptional item - VAT refund	2	1,310	-
Other costs of sales		(158,351)	(151,566)
Total cost of sales		(157,041)	(151,566)
Gross profit		24,988	24,672
Distribution costs		(16,191)	(15,755)
Administrative expenses
Exceptional items	2	-	786
Other costs		(7,094)	(7,059)
Total administrative expenses		(7,094)	(6,273)
Exceptional items	2	(134)	(626)
Operating profit analysed as:
Before exceptional items		393	1,858
Arising from exceptional items	2	1,176	160
Finance expense		(1,310)	(1,232)
Finance income (net)		720	657
Finance income - exceptional interest on VAT refund		1,600	-
Net finance income / (expense)		1,010	(575)
Profit /(loss) before tax
Before exceptional items		(197)	1,283
Arising from exceptional items	2	2,776	160
Total profit before tax		2,579	1,443
Tax	3	(451)	(280)
Profit for the year attributable to equity shareholders of Caffyns plc		2,128	1,163

Earnings per share

5

73.9p

40.4p

CONSOLIDATED BALANCE SHEET

at 31 March 2008

	2008 £'000	2007 £'000
Non-current assets
Property, plant and equipment	32,141	31,610
Goodwill	481	481
Intangible assets	9	31
Retirement benefit scheme	1,864	344
	34,495	32,466
Current assets
Inventories	27,238	23,846
Trade and other receivables	8,837	9,047
Cash and cash equivalents	29	35
Non current assets classified as held for sale	990	990
	37,094	33,918
Total assets	71,589	66,384
Current liabilities
Interest bearing loans and borrowings	11,196	6,826
Trade and other payables	22,801	21,575
Current tax payable	626	230
Provisions	27	3,203
	34,650	31,834
Net current assets	2,444	2,084
Non-current liabilities
Interest bearing loans and borrowings	3,017	3,050
Preference shares	1,237	1,237
Deferred tax liabilities	2,542	2,218
	6,796	6,505
Total liabilities	41,446	38,339
Net assets	30,143	28,045
Capital and reserves
Share capital	1,439	1,439
Share premium account	272	272
Capital redemption reserve	282	282
Non-distributable reserve	3,892	3,915
Retained earnings	24,258	22,137
Total equity attributable to shareholders of Caffyns plc	30,143	28,045

CONSOLIDATED CASH FLOW STATEMENT

for the year ended 31 March 2008

	Note	2008	2007
		£'000	£'000
Net cash from operating activities	6	(1,597)	4,202
Investing activities
Proceeds on disposal of property, plant and equipment		-	1,351
Purchases of property, plant and equipment		(2,023)	(3,479)
Acquisitions		-	(176)
Net cash used in investing activities		(2,023)	(2,304)
Financing activities
Dividends paid		(720)	(691)
Repayments of obligations under finance leases		(33)	(27)
Net cash used in financing activities		(753)	(718)
Net (decrease) / increase in cash and cash equivalents		(4,373)	1,180
Cash and cash equivalents at beginning of year		(6,762)	(7,942)
Cash and cash equivalents at end of year		(11,135)	(6,762)
	31 March	31 March	31 March
	2008	2007	2006
	£'000	£'000	£'000
Cash and cash equivalents	29	35	39
Overdrafts	(11,164)	(6,797)	(7,981)
Net cash and cash equivalents	(11,135)	(6,762)	(7,942)

CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE

for the year ended 31 March 2008

	2008	2007
	£'000	£'000
Profit for the year	2,128	1,163
Actuarial gains recognised	960	3,134
Deferred tax on actuarial gains	(270)	(940)
Total recognised income and expense for the year	2,818	3,357

  NOTES TO THE PRELIMINARY RESULTS

For the year ended 31 March 2008

1.

Basis of Preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by the European Union and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS. The financial information presented does not constitute statutory financial statements for the years ended 31 March 2008 or 2007 as defined in Section 240 of the Companies Act 1985. The financial information for the year ended 31 March 2008 and the comparative information have been extracted from the audited financial statements for the year ended 31 March 2008 prepared under IFRS, which have not yet been approved by shareholders and have not yet been delivered to the Registrar. This preliminary statement was approved by the board of directors on 29 May 2008.

2.	Exceptional items		2008	2007
			£'000	£'000
	In cost of sales
		VAT refund (net of costs) on demonstrator vehicle bonuses in the period 1973 to 1997	1,310	-
	In administrative expenses
		Net profit on disposal of property, plant and equipment	-	600
		Negative goodwill received on purchase of business, net of costs	-	186
			1,310	786
	Restructuring costs arising from branch closures		(134)	(626)
			1,176	160
	In finance income
	Interest received on VAT refund		1,600	-
	Total exceptional items before taxation		2,776	160
	Less tax thereon		(457)	(48)
	Total after tax		2,319	112

3.	Tax		2008	2007
			£'000	£'000
	Current tax
		UK corporation tax	650	85
		Advance corporation tax recovered	(253)	-
		Adjustments recognised in the period for current tax of prior periods	-	180
		Total	397	265
	Deferred tax
		Origination and reversal of timing differences	408	136
		Adjustment recognised in the period due to change in rate of corporation tax	(219)	-
		Adjustments recognised in the period for deferred tax of prior periods	(135)	(121)
		Total	54	15
	Total tax charged in the income statement		451	280
	The tax charge arises as follows:
		On normal trading	(6)	232
		On exceptional items (see note 2)	457	48
			451	280

4.	Dividends
The directors propose a final dividend of 17.0p (2007 - 17.0p) per ordinary share, to be paid on 23 July 2008 to shareholders on the register at 13 June 2008. An interim dividend of 8.0p (2007 - 8.0p) per share was paid during the year, making a total for the year of 25.0p (2007 - 25.0p). The ex-dividend date is 11 June 2007.

5.

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.   The calculation of diluted earnings per share would be 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. At both year ends there were no unissued shares, so the diluted earnings per share are the same as the basic earnings.   Reconciliations of earnings and weighted average number of shares used in the calculations are set out below:

	Adjusted		Basic
	2008 £'000	2007 £'000	2008 £'000	2007 £'000
Profit before tax	2,579	1,443	2,579	1,443
Adjustments:
Exceptional items (note 2)	(2,776)	(160)	-	-
Adjusted profit before tax	(197)	1,283	2,579	1,443
Taxation	6	(232)	(451)	(280)
Earnings	(191)	1,051	2,128	1,163
Adjusted (loss) / earnings per share	(6.7p)	36.5p
Basic earnings per share			73.9p	40.4p

The weighted average number of fully paid ordinary shares in issue during the year was 2,879,298 (2007 - 2,879,298)

6.	Notes to the cash flow statement
		2008 £'000	2007 £'000
	Profit before taxation	2,579	1,443
	Adjustment for net finance expense	590	575
		3,169	2,018
	Adjustments for:
	Depreciation of property, plant and equipment	1,464	1,427
	Amortisation of intangible assets	22	23
	Negative goodwill received	-	(186)
	Change in retirement benefit obligations	160	257
	Loss / (gain) on disposal of property, plant and equipment	28	(600)
	Increase / (decrease) in provisions	(3,108)	2,862
	Operating cash flows before movements in working capital	1,735	5,801
	Increase in inventories	(3,392)	(871)
	Decrease / (increase) in receivables	210	(150)
	Increase in payables	1,160	496
	Cash generated by operations	(287)	5,276
	Income taxes received	-	151
	Interest paid	(1,310)	(1,225)
	Net cash from operating activities	(1,597)	4,202

7.	Annual Report
	Copies of the Annual Report will be despatched to shareholders by 27 June 2008.

 

8.	Financial Calendar
	Annual General Meeting at the Hydro Hotel, Eastbourne on Wednesday 23 July 2008 at 11.30am.

 

END

 

 

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