Final Results
Caffyns PLC
25 May 2007
Preliminary results of Caffyns plc
for the year ended 31 March 2007
25 May 2007
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 2007.
2007 2006
£'000 £'000
Sales 176,238 160,076
Operating profit before exceptional items 2,515 1,172
Profit before tax 1,443 1,030
Earnings per share - basic 40.4p 26.3p
Proposed final dividend 17.0p 16.0p
Dividend per ordinary share 25.0p 24.0p
Highlights
•Recovery plan post MG Rover collapse on track
•Sales up 10% to £176.2m
•Operating profit before exceptionals more than doubled to £2.5m
•Pre-tax profit improved by 40% to £1.44m
•Earnings per share up by 54% to 40.4p
•Balance sheet and cash flow significantly improved
•Increased dividend
Commenting on these results, Chief Executive Simon Caffyn said:
'The first stage of our recovery plan, subsequent to the collapse of MG Rover in
2005, has now been completed. But there is still more to be done. Our business
has been re-shaped with some outlets now operating under new and more attractive
franchises while other less profitable sites have been closed. The market for
new car sales remains very competitive but Caffyns is now in a stronger
financial and commercial position in which to compete more effectively.'
Enquiries: Tel: 01323 730201
Simon Caffyn Chief Executive
Mark Harrison Finance Director
Chairman's Statement
The early part of the year saw us complete the first stage of our MG Rover
recovery plan and all affected sites are now refranchised, refurbished or sold.
Since the half year we have been working steadily to rebuild each business and
it is satisfying to see our operating profit increase to £2,515,000 from
£1,172,000 and the profit before tax for the year recover to £1,443,000 (2006 :
£1,030,00). Earnings per share increased from 26.3p to 40.4p.
We expect to complete on two property sales during the current year. As a
result, the strengthened balance sheet will leave us well placed to take
advantage of any suitable acquisition opportunities that may arise.
The new car market remains at a historically high level and we continue to make
steady progress.
An interim dividend of 8.0p per ordinary share (2006 - 8.0p) was paid on 10
January 2007. An increased final dividend of 17.0p (2006 - 16.0p) is now being
recommended which, if approved, will be payable on 26 July 2007 to shareholders
on the register on 22 June 2007, giving a total dividend of 25.0p for the year
(2006 - 24.0p).
The events of the past two years have posed significant challenges for the
business. I would like to take this opportunity to thank all Caffyns employees
for their hard work and dedication in making a considerable contribution to the
changes we have made. While markets remain competitive, we are taking steps both
to reposition our business and to train and motivate our team, so that Caffyns
can compete effectively in the future. We look forward to the current year with
cautious optimism.
Brian A Carte
Chairman
25 May 2007
Chief Executive's Operating Review
Results and key performance indicators
The year ended 31 March 2007 has seen the company make steady progress along our
three year recovery plan, which commenced immediately after the collapse of MG
Rover in April 2005.
I am very encouraged to see the dealerships that were refranchised in the early
stages of the recovery plan begin to make contributions. I can also report that
the final two dealership refurbishments were successfully finished during the
year, enabling us to complete the first stage of our recovery plan on schedule.
Financial and operating performance has improved. Operating profit before
exceptional items has risen from £1,172,000 to £2,515,000 on turnover up 10%
from £160.1m to £176.2m.
Most encouragingly, underlying profit from normal trading before exceptional
items has risen from £58,000 to £1,283,000. Profit before taxation increased
from £1,030,000 to £1,443,000 and earnings per share increased from 26.3p to
40.4p.
With a net cash inflow of £1,180,000 in the year (2006 - outflow of £120,000)
reducing bank borrowings from £7.942m to £6.762m, the proportion of total bank
borrowings to shareholders funds at 31 March 2007 reduced to 35% (2006 - 44%).
Recovery and development
As I reported at the half year, the first stage of our recovery plan, the
physical restructuring of our refranchised properties, is now complete. We can
now concentrate on building strong businesses in these dealerships to deliver
their full potential.
In September we opened our new Audi Centre in Worthing to complement our other
two centres in Brighton and Eastbourne. Plans are in place to refurbish the
Brighton facility during the current financial year to incorporate the latest
Audi specifications.
In Tonbridge we have refurbished the site following the introduction of the
Vauxhall franchise to provide the current specification showroom layout and
improved servicing facilities.
In October we took action to consolidate three underperforming operations into
more successful businesses. Our wholesale parts warehouse in Hove was closed and
the business largely transferred to our wholesale operation in Hailsham, adding
to the potential of this site.
Our East Grinstead Vauxhall satellite was closed and the Vauxhall business
redirected to our neighbouring dealerships in Brighton and Tunbridge Wells with
beneficial effect.
The third closure was our bodyshop business in Worthing and all our internal
business processed by this site is now directed through our other bodyshops.
Acquisition
In August we acquired the Volvo dealership in Brighton to complement our
successful Volvo operation in neighbouring Eastbourne. This business had been
running at a loss and the negative goodwill that we received appears under
exceptional items along with the closure costs of East Grinstead, Hove and
Worthing. The benefits of running adjoining territories will deliver stronger
results in the future.
Property
Planning issues have caused further delays to the sale of our property in Hove
but we are progressing towards a sale conditional upon a satisfactory planning
approval.
Our empty freehold sites in Worthing and East Grinstead have generated
considerable interest and are also progressing to sale.
Pensions
I am pleased to report that the Board and Trustees have made some changes to our
defined benefit scheme which, together with favourable market conditions, have
produced a small surplus compared to last year's deficit.
IT
Successful negotiations with the supplier of our dealer management system have
resulted in us signing a contract for the supply of improved systems. During the
year we shall be looking to take advantage of this greater functionality and
also to develop further our internet capabilities.
People and Training
During the last twelve months we have continued to develop our training
programmes and have run a highly successful in-house course on Best Practices
for staff in dealership management positions.
Much time and effort has also been devoted to training for ever more stringent
regulatory requirements and other legislative issues. Our dedicated in-house
teams are to be congratulated on implementing their comprehensive programmes to
meet these enhanced standards.
During a year of recovery I would like to recognise the contributions made by
all our employees throughout the Company who have worked tirelessly to deliver
the encouraging results achieved.
VAT
In March this year we announced that we had received £2.978m from HM Revenue and
Customs ('HMRC'). In common with other motor dealers, we had made a claim in
respect of VAT overpaid on demonstrator vehicle bonuses in the period 1973-1997.
As a result of ongoing legal action by HMRC in relation to another unrelated
company, we have not been able to take credit for this amount through our Income
Statement due to the uncertainty over our retention of the sum involved. We hope
that this matter will be satisfactorily resolved in our financial year 2007-08.
The Future
The economy, and in particular our market place, remains steady but concerns
over rising levels of personal debt may continue to temper optimism. The
political scene is also in a period of change and this may or may not have an
impact on economic stability.
We are now making good progress along our recovery path as we enter the second
year of our programme to return to historic profitability. With further proceeds
expected from property sales we shall be in a good position to take advantage of
suitably attractive business opportunities as and when they arise. We anticipate
making further progress in the forthcoming year.
Simon G M Caffyn
Chief Executive
25 May 2007
CONSOLIDATED INCOME STATEMENT
for the year ended 31 March 2007
Note 2007 2006
£'000 £'000
Continuing operations
Revenue 176,238 160,076
Cost of sales
-------- ---------
Exceptional MG Rover Group items 2 - 317
Other costs of sales (151,566) (135,658)
-------- ---------
Total cost of sales (151,566) (135,341)
-------- ---------
Gross profit 24,672 24,735
Distribution costs (15,098) (16,464)
Administrative expenses
-------- ---------
Exceptional items 2 786 858
Other costs (7,059) (6,782)
-------- ---------
Total administrative expenses (6,273) (5,924)
Restructuring costs (626) (203)
-------- ---------
Operating profit
-------- ---------
Arising from exceptional items 2 160 972
On normal trading 2,515 1,172
-------- ---------
Total operating profit 2,675 2,144
Finance costs (1,232) (1,114)
-------- ---------
Profit before tax
-------- ---------
Arising from exceptional items 2 160 972
On normal trading 1,283 58
-------- ---------
Total profit before tax 1,443 1,030
-------- ---------
Tax 3 (280) (274)
-------- ---------
Profit for the year attributable to the
shareholders of 1,163 756
Caffyns plc
-------- ---------
Earnings per share
Basic and diluted earnings per ordinary share from
continuing operations
and for the profit for the year 5 40.4p 26.3p
CONSOLIDATED BALANCE SHEET
at 31 March 2007
2007 2006
As restated*
£'000 £'000
Non-current assets
Goodwill 481 481
Intangible assets 31 54
Property, plant and equipment 31,610 31,203
Retirement benefit scheme 344 -
Deferred tax asset 1,160 1,923
------- -------
33,626 33,661
------- -------
Current assets
Inventories 23,846 22,694
Trade and other receivables 9,047 8,897
Current tax assets - 186
Cash and cash equivalents 35 39
Non current assets classified as held for sale 990 -
------- -------
33,918 31,816
------- -------
Total assets 67,544 65,477
======= =======
Current liabilities
Bank and overdrafts and loans 6,797 7,981
Trade and other payables 21,575 21,057
Current tax payable 230 -
Obligations under finance leases 29 28
Short-term provisions 3,203 341
------- -------
31,834 29,407
------- -------
Net current assets 2,084 2,409
------- -------
Non current liabilities
Bank loans 3,000 3,000
Preference shares 1,237 1,237
Retirement benefit obligation - 3,190
Deferred tax liabilities 3,378 3,186
Obligations under finance leases 50 78
------- -------
7,665 10,691
------- -------
Total liabilities 39,499 40,098
======= =======
Net assets 28,045 25,379
======= =======
EQUITY
Share capital 1,439 1,439
Share premium account 272 272
Capital redemption reserve 282 282
Revaluation reserve 3,915 3,971
Retained earnings 22,137 19,415
------- -------
Total equity attributable to shareholders of Caffyns plc 28,045 25,379
======= =======
* See note 6
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 March 2007
Note 2007 2006
£'000 £'000
--- -------- -------
Net cash from operating activities 7 4,202 2,163
--- -------- -------
Investing activities
Proceeds on disposal of property, plant and
equipment 1,351 1,959
Purchases of property, plant and equipment (3,479) (3,510)
--- -------- -------
Acquisitions (176) -
--- -------- -------
Net cash used in investing activities (2,304) (1,551)
--- -------- -------
Financing activities
Dividends paid (691) (691)
Repayments of obligations under finance
leases (27) (41)
--- -------- -------
Net cash used in financing activities (718) (732)
-------- -------
Net increase/(decrease) in cash and cash
equivalents 1,180 (120)
Cash and cash equivalents at beginning of
year (7,942) (7,822)
-------- -------
Cash and cash equivalents at end of year (6,762) (7,942)
-------- -------
31 March 31 March 31 March
2007 2006 2005
£'000 £'000 £'000
Cash and cash equivalents 35 39 46
Overdrafts (6,797) (7,981) (7,868)
-------- -------- -------
Net cash and cash equivalents (6,762) (7,942) (7,822)
-------- -------- -------
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
for the year ended 31 March 2007
2007 2006
£'000 £'000
-------- -------
Profit for the year 1,163 756
Actuarial gains recognised 3,134 108
Deferred tax on actuarial gains (940) (31)
-------- -------
Total recognised income and expense for the year 3,357 833
======== =======
NOTES TO THE PRELIMINARY RESULTS
For the year ended 31 March 2007
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 2007 or 2006 as defined in Section
240 of the Companies Act 1985. The financial information for the year ended
31 March 2007 and the comparative information have been extracted from the
audited financial statements for the year ended 31 March 2007 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 25 May
2007.
2. Exceptional items 2007 2006
£'000 £'000
In cost of sales
Credit associated with the failure of the MG Rover Group
Stock write downs - 317
In administrative expenses
Net profit on disposal of property, plant and equipment 600 858
Negative goodwill received on purchase of business, net 186 -
of costs
------- -------
786 1,175
Restructuring costs arising from branch closures (626) (203)
------- -------
Total exceptional items before taxation 160 972
Less tax thereon (48) (294)
------- -------
Total after tax 112 678
======= =======
3. Tax 2007 2006
£'000 £'000
--- ---
Current tax
UK corporation tax 85 22
Adjustments recognised in the period for current tax of 180 (26)
prior periods
------ ------
Total 265 (4)
------ ------
Deferred tax
Current year 136 307
Adjustments recognised in the period for deferred tax of (121) (29)
prior periods
------ ------
Total 15 278
------ ------
Total tax charged in the income statement 280 274
====== ======
4. Dividends
The directors recommend a final dividend of 17.0p (2006 - 16.0p) per ordinary
share, to be paid on 26 July 2007 to shareholders on the register at 22 June
2007. An interim dividend of 8.0p (2006 - 8.0p) per share was paid during the
year, making a total for the year of 25.0p (2006 - 24.0p). The ex-dividend date
is 20 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 we
no unissued shares, so the diluted earnings per share are the same as the basic
earnings per share.
Adjusted earnings (which exclude exceptional items) is adopted to assist the
reader in understanding the underlying performance of the group.
Reconciliations of earnings and weighted average number of shares used in the
calculations are set out below:
Adjusted Basic
2007 2006 2007 2006
£'000 £'000 £'000 £'000
Profit before tax 1,443 1,030 1,443 1,030
Adjustments:
Exceptional items:
- Property profit and restructuring costs 26 (655) - -
- Negative goodwill received on purchase of
business (186) - - -
- MG Rover - (317) - -
------ ------ ------ -------
Adjusted profit before tax 1,283 58 1,443 1,030
Taxation (232) 20 (280) (274)
------ ------ ------ -------
Earnings 1,051 78 1,163 756
------ ------ ------ -------
Adjusted earnings per share 36.5p 2.7p
------ ------
Basic earnings per share 40.4p 26.3p
====== =======
The weighted average number of fully paid ordinary shares in issue during the
year was 2,879,298 (2006 - 2,879,298)
6. Prior year adjustment
£'000
Retained earnings
Balance at 31 March 2006 as previously reported 20,477
Prior year adjustment - deferred tax (1,062)
-------
Balance at 31 March 2006, as restated 19,415
-------
Deferred tax asset
Balance at 31 March 2006, as previously reported 1,939
Prior year adjustment (16)
-------
Balance at 31 March 2006, as restated 1,923
-------
Deferred tax liability
Balance at 31 March 2006, as previously reported 2,140
Prior year adjustment 1,046
-------
Balance at 31 March 2006, as restated 3,186
-------
The restatement of the opening balances arises following a reassessment of
the taxation position relating to the rollover relief claimed in respect of
realisations of capital assets in prior years. The current tax charge for
the two years ended 31 March 2007 is not materially affected.
7. Notes to the cash flow statement
2007 2006
£'000 £'000
Profit before taxation 1,443 1,030
Adjustment for finance costs 1,232 1,114
------- -------
Profit from operations 2,675 2,144
Adjustments for:
Depreciation of property, plant and equipment 1,427 1,268
Amortisation of intangible assets 23 22
Negative goodwill received (186) -
Gain on disposal of property, plant and equipment (600) (858)
Increase / (decrease) in provisions 2,862 (268)
------- -------
Operating cash flows before movements in working 6,201 2,308
capital
(Increase) / decrease in inventories (871) 1,747
(Increase) / decrease in receivables (150) 68
Increase / (decrease) in payables 496 (800)
(Decrease) / increase in pensions (400) 4
------- -------
Cash generated by operations 5,276 3,327
Income taxes received/(paid) 151 (50)
Interest paid (1,225) (1,114)
------- -------
Net cash from operating activities 4,202 2,163
------- -------
8. Annual Report
Copies of the Annual Report will be despatched to shareholders by 2 July
2007.
9. Financial Calendar
Annual General Meeting at the Hydro Hotel, Eastbourne on Thursday 26 July
2007 at 11.30am.
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