Interim Results
Caffyns PLC
25 November 2005
Interim Results
for the half year ended 30 September 2005
Summary
2005 2004
£'000 £'000
----------------------------- -------------- ---------
Turnover 81,503 80,117
Operating profit before exceptional items 1,188 1,795
Profit before tax and exceptional items 637 1,266
Arising from exceptional items 285 3,711
Profit before tax 922 4,977
p p
Basic earnings per share 22.3 123.9
Interim dividend 8.0 8.0
* Profits in the first half affected by business reorganisation caused
by failure of MG Rover
* Much lower exceptional items compared to the same period last year with
corresponding effect on comparative profits before tax and EPS
* Interim dividend held at 8.0p
* Good progress made in refranchising branches and in refurbishment
programme
'The failure of MG Rover clearly had an effect on our trading performance in the
first half. We are now well down the path of reorganising our dealership network
and we can concentrate on building businesses with their new franchises:'
commented Brian Carte, Chairman of Caffyns.
Enquiries:
Simon Caffyn Chief Executive
Mark Harrison Finance Director
Tel: 01323 730201
Chairman's Statement
In the six months to 30 September 2005, the affect on our business of the
failure of MG Rover became apparent. We have nearly completed the process of
managing the business away from MG Rover, a process that commenced prior to its
fall into administration. Inevitably, the reorganisation has led to some
disruption, with an influence on sales at the branches concerned. Trading at
these branches should gradually improve once this reorganisation has been
finally concluded.
Turnover increased from £80.1 million to £81.5 million but operating profit
before exceptional items has reduced from £1,795,000 to £1,188,000. The accounts
have been presented in accordance with International Financial Reporting
Standards for the first time. Prior years' figures have been restated to reflect
the changes to our accounting policies. It is worth noting that the exceptional
benefit we enjoyed last year from the substantial VAT rebate, has significantly
affected like for like comparisons between profit before tax and earnings per
share in the period under review.
Management actions over the period included the successful trading out of our MG
Rover vehicle stocks, and the full refurbishment and refranchising of the
dealerships in Tunbridge Wells, Brighton and Eastbourne. The dealerships in
Tonbridge, Worthing and Uckfield have also been refranchised and are scheduled
to be refurbished over the coming months. This has been a major task. The Lewes
dealership has been amalgamated with our neighbouring Land Rover business and
the sites in Seaford and Ramsgate have been sold, subject to contract. The costs
of the refranchising of these dealerships impacted on the results in the first
half of the year whilst the benefits will be seen in future financial periods.
I am pleased that we have managed this difficult event so well and, although we
still have three sites to develop, the remaining dealerships can concentrate on
building businesses with their new franchises. This will take a period of time
but our core business is now stronger and our franchise representation is in
line with our strategic plan.
Elsewhere in the Company we have successfully launched our new greenfield
development Audi Centre in Eastbourne and the opportunity here is very
encouraging. Our Volkswagen dealership covering Brighton and Hove, acquired in
June 2004, is now making a strong contribution to profits.
Planning considerations continue to delay the sale of various freehold sites but
we are making progress and are working to complete sales on property in Hove,
Hythe, Hailsham, Seaford and Ramsgate by the end of our financial year or soon
thereafter. The proceeds of these sales will be used to reduce borrowings and to
reinvest in the business.
As noted above, our results are now presented in accordance with International
Financial Reporting Standards. While the affect on the profit before tax in our
Income Statement for this half year has not been material, a full tax charge now
arises following changes to deferred taxation. The balance sheet now
incorporates the impact of the deficit on our defined benefit pension scheme,
reducing net assets.
Whilst it is disappointing to report a fall in operating profit before tax and
exceptionals, it is encouraging to see that we have made substantial progress on
our refranchising and refurbishment programme. The retail economy is tough, as
reported by many others in the market, and the outlook remains challenging. We
have restructured the business and, when the final redevelopment work is
complete, we believe we shall be in a considerably stronger position.
With this in mind, your Directors have agreed to an unchanged interim dividend
of 8.0p per ordinary share amounting to £230,000. This will be paid on 11
January 2006 to shareholders on the register at 5.00pm on 7 December 2005.
Brian A Carte
Chairman
25 November 2005
Consolidated Income Statement
for the half year ended 30 September 2005
Note Half year to Half year to Year to
30 September 30 September 31 March
2005 2004 2005
as restated as restated
£'000 £'000 £'000 £'000 £'000 £'000
----------------- ------ ------ ------ ------ ------- ------ -------
Revenue 81,503 80,117 155,684
----------------- ------ ------ ------ ------ ------- ------ -------
Operating profit /
(loss)
Before exceptional 1,188 1,795 2,473
items
Exceptional items 2 285 1,811 (410)
----------------- ------ ------ ------ ------ ------- ------ -------
Total operating 1,473 3,606 2,063
profit
Interest receivable 2 - 1,900 1,914
on exceptional
items
Finance costs (551) (529) (1,117)
----------------- ------ ------ ------ ------ ------- ------ -------
Profit before tax
From normal trading 637 1,266 1,356
operations
Arising from 2 285 3,711 1,504
exceptional
items
----------------- ------ ------ ------ ------ ------- ------ -------
Total 922 4,977 2,860
----------------- ------ ------ ------ ------ ------- ------ -------
Tax
On normal trading (194) (297) (439)
operations
On exceptional items (85) (1,113) (451)
----------------- ------ ------ ------ ------ ------- ------ -------
Total 3 (279) (1,410) (890)
----------------- ------ ------ ------ ------ ------- ------ -------
Profit for the 643 3,567 1,970
period
----------------- ------ ------ ------ ------ ------- ------ -------
Earnings per share 4
Basic and diluted 22.3p 123.9p 68.4p
earnings per
ordinary share
from continuing
operations
----------------- ------ ------ ------ ------ ------- ------ -------
Dividend per 5 8.0p 8.0p 24.0p
ordinary share
----------------- ------ ------ ------ ------ ------- ------ -------
Consolidated Statement of Recognised Income and Expense
for the half year ended 30 September 2005
Half year to Half year to Year to
30 September 30 September 31 March
2005 2004 2005
as restated as restated
£'000 £'000 £'000
------------------------- --------- ---------- ----------
Profit for the period 643 3,567 1,970
Actuarial (losses)/gains recognised
in defined benefit pension scheme (1,058) 242 (355)
Deferred tax on actuarial
(losses)/gains 317 (73) 106
------------------------- --------- ---------- ----------
Total recognised income and expense
for the period (98) 3,736 1,721
------------------------- --------- ---------- ----------
Consolidated Balance Sheet
at 30 September 2005
30 September 30 September 31 March
2005 2004 2005
as restated as restated
Note £'000 £'000 £'000
---------------- ------ ----------- ---------- ----------
Non-current assets
Goodwill 481 361 481
Intangible assets 65 47 76
Property, plant and equipment 32,243 29,528 30,929
Deferred tax asset 2,222 1,153 1,941
---------------- ------ ----------- ---------- ----------
35,011 31,089 33,427
---------------- ------ ----------- ---------- ----------
Current assets
Inventories 22,880 25,416 24,441
Trade and other receivables 8,311 11,687 7,487
Current tax assets - - 132
Cash and cash equivalents 45 54 46
---------------- ------ ----------- ---------- ----------
31,236 37,157 32,106
---------------- ------ ----------- ---------- ----------
Non current assets - - 611
classified as
held for sale
---------------- ------ ----------- ---------- ----------
Total assets 66,247 68,246 66,144
---------------- ------ ----------- ---------- ----------
Current liabilities
Bank overdrafts and loans 10,582 8,252 7,868
Trade and other payables 18,814 22,194 21,857
Tax liabilities 85 596 -
Obligations under finance leases 34 33 41
Short-term provisions 423 50 609
---------------- ------ ----------- ---------- ----------
29,938 31,125 30,375
---------------- ------ ----------- ---------- ----------
Net current assets 1,298 6,032 1,731
---------------- ------ ----------- ---------- ----------
Non-current liabilities
Bank loans 3,000 3,000 3,000
Preference shares 1,237 1,237 1,237
Retirement benefit obligation 4,381 2,661 3,294
Deferred tax liabilities 1,858 1,564 1,774
Obligations under finance leases 93 115 106
---------------- ------ ----------- ---------- ----------
10,569 8,577 9,411
---------------- ------ ----------- ---------- ----------
Liabilities directly associated
with non-current assets - - 59
Classified as held for sale
---------------- ------ ----------- ---------- ----------
Total liabilities 40,507 39,702 39,845
---------------- ------ ----------- ---------- ----------
Net assets 25,740 28,544 26,299
---------------- ------ ----------- ---------- ----------
EQUITY
Share capital 1,439 1,439 1,439
Share premium account 272 272 272
Capital redemption reserve 282 282 282
Revaluation reserve 4,698 4,845 4,837
Retained earnings 6 19,049 21,706 19,469
---------------- ------ ----------- ---------- ----------
Total equity attributable to
shareholders of Caffyns plc 25,740 28,544 26,299
---------------- ------ ----------- ---------- ----------
Consolidated Cash Flow Statement
for the half year ended 30 September 2005
Half year ended Half year ended Year ended
30 September 30 September 31 March
2005 2004 2005
as restated as restated
£'000 £'000 £'000
--------------------- ----------- ---------- ---------
Cash flows from operating
activies
Profit from operations 1,473 3,606 2,063
Non cash adjustments 280 (46) 1,224
--------------------- ----------- ---------- ---------
Operating cash flows before
movements in working capital 1,753 3,560 3,287
Movements in working capital (2,252) (3,607) 1,332
--------------------- ----------- ---------- ---------
Cash (absorbed)/generated by
operations (499) (47) 4,619
Net interest (551) 1,371 797
Income taxes paid - (96) (644)
--------------------- ----------- ---------- ---------
Net cash (used in)/ from
operating activities (1,050) 1,228 4,772
--------------------- ----------- ---------- ---------
Investing activities
Proceeds on disposal of
property, plant and equipment 783 801 801
Purchases of property, plant
and equipment (1,967) (879) (3,496)
Acquisitions - (526) (826)
--------------------- ----------- ---------- ---------
Net cash used in investing
activities (1,184) (604) (3,521)
--------------------- ----------- ---------- ---------
Financing activities
Dividends paid (461) (432) (662)
Repayments of obligations
under finance leases (20) (8) (29)
--------------------- ----------- ---------- ---------
Net cash used in financing
activities (481) (440) (691)
--------------------- ----------- ---------- ---------
Net (decrease)/increase in
cash and cash equivalents (2,715) 184 560
--------------------- ----------- ---------- ---------
Cash and cash equivalents at
beginning of period (7,822) (8,382) (8,382)
--------------------- ----------- ---------- ---------
Cash and cash equivalents at
end of period (10,537) (8,198) (7,822)
--------------------- ----------- ---------- ---------
Principal Accounting Policies
for the half year ended 30 September 2005
Basis of Accounting
The accounting policies are consistent with those that the directors intend to
use in the next annual financial statements. There is, however, a possibility
that the directors may determine that some changes to those policies are
necessary when preparing the full annual financial statements for the first time
in accordance with those International Financial Reporting Standards (IFRS)
adopted for use by the European Union (EU). This is because the directors have
anticipated that the revised IAS 19 Employee Benefits, which has yet to be
formally adopted for use in the EU, will be so adopted in time to be applicable
to the next annual financial statements.
This interim financial information has been prepared on the basis of the
recognition and measurement requirements of IFRS in issue that either are
endorsed by the EU and effective (or available for early adoption) at 31 March
2006 or are expected to be endorsed and effective (or available for early
adoption) at 31 March 2006, the Group's first annual reporting date at which it
is required to use adopted IFRS. Based on these adopted and unadopted IFRS, the
directors have made assumptions about the accounting policies expected to be
applied when the first annual IFRS financial statements are prepared for the
year ending 31 March 2006.
Basis of Consolidation
The consolidated financial statements incorporate the financial statements of
the company and its subsidiaries made up to 31 March each year. All subsidiaries
are currently dormant so the income, expenses and cash flows are the same for
the group and the company.
Acquisitions
The results of businesses acquired or disposed of during the period are included
in the consolidated income statement from the effective date of acquisition or
up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the businesses to bring the accounting
policies used into line with those used by the group.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
On acquisition, the assets and liabilities and contingent liabilities of a
business are measured at their fair values at the date of acquisition. Any
excess of the cost of acquisition over the fair values of the identifiable net
assets acquired is recognised as goodwill. Any deficiency of the cost of
acquisition below the fair values of the identifiable net assets acquired (i.e.
discount on acquisition) is credited to profit and loss in the period of
acquisition.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value
of the net identifiable assets acquired, and is tested annually for impairment.
Gains and losses on subsequent disposal of the assets acquired include any
related goodwill.
Intangible assets
Intangible assets comprise benefits arising from the contractual rights acquired
with businesses upon acquisition.
Amortisation is provided on a straight line basis over the expected useful
lives. This is normally 4 years being the minimum period that the company
expects to benefit from those rights.
Revenue Recognition
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods and services provided in
the normal course of business, net of discounts, VAT and other sales related
taxes.
Sales of motor vehicles, parts and accessories are recognised when goods are
delivered to the customer and title has passed. Servicing and bodyshop sales are
recognised on completion of the agreed work.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee. All other
leases are classified as operating leases.
Assets held under finance leases are recognised as assets at their fair value
or, if lower, at the present value of the minimum lease payments, each
determined at the inception of the lease. The corresponding liability to the
lessor is included in the balance sheet as a finance lease obligation. Lease
payments are apportioned between finance charges and reduction of the lease
obligation so as to achieve a constant rate of interest on the remaining balance
of the liability. Finance charges are charged directly against income.
Rentals payable under operating leases are charged to income on a straight-line
basis over the terms of the relevant lease.
Borrowing Costs
All borrowing costs are recognised in profit or loss in the period in which they
are incurred.
Profit from Operations
Profit from operations is stated after charging restructuring costs but before
finance costs.
Retirement Benefit Costs
The company operates a defined benefit pension scheme for its employees funded
jointly by contributions from the company and employees.
The cost of providing benefits is determined using the Projected Unit Credit
Method, with actuarial valuations being carried out at each balance sheet date.
Actuarial gains and losses are recognised in full in the period in which they
occur. They are recognised outside profit or loss and presented in the statement
of recognised income and expense.
Past service cost is recognised immediately to the extent that the benefits are
already vested, and otherwise is amortised on a straight-line basis over the
average period until the benefits become vested.
The retirement benefit obligation recognised in the balance sheet represents the
present value of the defined benefit obligation as adjusted for unrecognised
past service cost, and as reduced by the fair value of scheme assets. Any asset
resulting from this calculation is limited to past service cost, plus the
present value of available refunds and reductions in future contributions to the
plan.
Actuarial gains and losses have been recognised in full in the Statement of
Recognised Income and Expense.
Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the income statement because it
excludes items of income or expense that are taxable for deductible in other
years and it further excludes items that are never taxable or deductible. The
liability for current tax is calculated using tax rates that have been enacted
or substantively enacted by the balance sheet date.
Taxation (continued)
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the temporary
difference arises from goodwill or from the initial recognition (other than in a
business combination) of other assets and liabilities in a transaction that
affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the income statement, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also
dealt with in equity. The tax base of an item takes into account its intended
method of recovery by either sale or use.
Property, Plant and Equipment
Land and buildings used in the business are stated in the balance sheet at cost,
or deemed cost, being the open market value at 31 March 1995, for those
properties acquired before that date.
Depreciation on revalued buildings is charged to income. On the subsequent sale
of a revalued property, the attributable revaluation surplus remaining in the
revaluation reserve is transferred directly to accumulated profits.
Properties in the course of construction are carried at cost, less any
recognised impairment loss. Cost includes professional fees but excludes
borrowing costs. Depreciation of these assets, on the same basis as other
property assets, commences when the assets are ready for their intended use.
Other assets are stated at cost less accumulated depreciation and any recognised
impairment loss.
Depreciation is charged so as to write off the cost or valuation of assets,
other than land and properties under construction, over their estimated useful
lives, using the straight-line method, on the following basis:
Freehold buildings - 50 years
Leasehold buildings - Period of lease
Plant and machinery, fixtures and fittings - 3 to 10 years
The leasehold land is accounted for as an operating lease.
Assets held under finance leases are depreciated over their expected useful
lives on the same basis as owned assets or, where shorter, over the term of the
relevant lease.
The gain or loss arising on the disposal of an asset is determined as the
difference between the sales proceeds and the carrying amount of the asset and
is recognised in income.
Non-current assets held for sale
Non-current assets classified as held for sale are measured at the lower of
carrying amount and fair value costs to sell.
Non-current assets are classified as held for sale if their carrying amount will
be recovered through a sale transaction rather than through continuing use. This
condition is regarded as met only when the sale is highly probable and the asset
is available for immediate sale in its present condition. Management must be
committed to the sale which should be expected to qualify for recognition as a
completed sale within one year from the date of classification. No further
depreciation is provided once assets are classified as held for sale.
Impairment
a) Impairment of goodwill
Goodwill is tested annually for impairment. If an impairment provision is made,
it cannot subsequently be reversed.
b) Impairment of property, plant and equipment
At each balance sheet date the company reviews the carrying amounts of its
intangible assets and property, plant and equipment to determine whether there
is any indication that those assets have suffered an impairment loss. If any
such indication exists, the recoverable amount of the asset is estimated in
order to determine the extent of the impairment loss (if any). Where the asset
does not generate cash flows that are independent from other assets, the company
estimates the recoverable amount of the cash-generating unit to which the asset
belongs. An intangible asset with an indefinite useful life is tested for
impairment annually and whenever there is an indication that the asset may be
impaired.
Recoverable amount is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the
asset for which the estimates of future cash flows have been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to
be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised as an expense immediately, unless the relevant asset is carried at
a revalued amount, in which case the impairment loss is treated as a revaluation
decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset
(cash-generating unit) is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior years. A reversal of an impairment
loss is recognised as income immediately, unless the relevant asset is carried
at a revalued amount, in which case the reversal of the impairment loss is
treated as a revaluation increase.
Inventories
Inventories are stated at the lower of cost and net realisable value.
Vehicle stock includes service vehicles. Vehicles on consignment from
manufacturers that are the subject of interest charges or where the group
carries commercially significant rights relating to the vehicles are included at
cost. Vehicles that are the subject of repurchase agreements are included at the
agreed repurchase price less provisions made. In both cases the associated
liabilities are recorded in creditors. Costs of parts is calculated using the
replacement cost method, which approximates to a FIFO basis.
Net realisable value represents the estimated selling price less all estimated
costs of completion and costs to be incurred in marketing and selling.
Financial instruments
Financial assets and financial liabilities are recognised on the balance sheet
when the company becomes a party to the contractual provisions of the
instrument.
Trade receivables
Trade receivables do not carry any interest and are stated at their nominal
value as reduced by appropriate allowances for estimated irrecoverable amounts.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument is
any contract that evidences a residual interest in the assets of the company
after deducting all of its liabilities.
Bank borrowings
Interest-bearing bank loans and overdrafts are recorded at their fair value
(normally the proceeds received less transaction costs that are directly
attributable to the financial liability). Finance charges, including premiums
payable on settlement or redemption and direct issue costs, are accounted for on
an accrual basis to the profit and loss account using effective interest method
and are added to the carrying amount of the instrument to the extent that they
are not settled in the period in which they arise.
Trade payables
Trade payables are not interest bearing and are stated at their nominal value.
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received,
net of direct issue costs.
Preference shares
All the preference shares are accounted for as non-current liabilities, as they
have more of the attributes of debt than equity. Preference dividends are
accounted for as finance charges within interest payable.
Derivative financial instruments and hedge accounting
The company's activities expose it primarily to the financial risks of changes
in interest rates. The company does not use derivative financial instruments to
hedge its exposure to interest rate movements.
Derivatives embedded in other financial instruments or other host contracts are
treated as separate derivatives when their risks and characteristics are not
closely related to those of host contracts and the host contracts are not
carried at fair value with unrealised gains or losses reported in the income
statement.
Provisions
Warranty costs on new and used vehicles are normally paid for by the motor
manufacturers. Warranties have been issued by the company to honour the
unexpired term of the MG Rover warranties, after that group went into
administration.
Provisions for restructuring costs are recognised when the company has a
detailed formal plan for the restructuring that has been communicated to
affected parties.
Notes to the Interim Results
for the half-year ended 30 September 2005
1. Basis of preparation
The directors approved this interim statement on 25 November 2005.
The interim accounts comprise the results for the half year ended 30 September
2005, the half year ended 30 September 2004 and the year ended 31 March 2005.
All of these results have been prepared in accordance with International
Financial Reporting Standards and are unaudited.
The statutory accounts for the year ended 31 March 2005 prepared under UK GAAP,
and on which the auditors have given an unqualified audit opinion, have been
filed with the Registrar of Companies.
The interim accounts have been reviewed by the company's auditors. A copy of the
auditor's review report is set out at the end of this statement.
2. Exceptional items
Half-year to Half-year to Year to
30 September 30 September 31 March
2005 2004 2005
£'000 £'000 £'000
Net profit on disposal of property,
plant and equipment 155 499 455
VAT refund - 1,489 1,489
(Credit)/cost associated with
failure of MG Rover Group 319 - (2,125)
Other restructuring costs (189) (177) (229)
--------- --------- --------
Impact on operating profit 285 1,811 (410)
Interest received on VAT refund - 1,900 1,914
--------- --------- --------
Total before tax 285 3,711 1,504
Less: tax thereon (85) (1,113) (451)
--------- --------- --------
Total 200 2,598 1,053
--------- --------- --------
3. Taxation
Half year to Half year to Year to
30 September 30 September 31 March
2005 2004 2005
£'000 £'000 £'000
Current UK corporation tax at 30%
Charge for the period 245 1,363 645
Advance corporation tax recovered (31) (801) (239)
Over-provision in respect of prior
years (5) - (24)
--------- --------- --------
Total corporation tax 209 562 382
Deferred tax at 30%
Origination and reversal of timing
differences 70 848 508
--------- --------- --------
279 1,410 890
--------- --------- --------
Taxation for each half year has been provided at the effective rate of taxation
expected to apply to the whole year on ordinary trading. Tax on exceptional
items is provided at the actual rate applicable.
4. Earnings per share
Basic Half year to Half year to Year to
30 September 30 September 31 March
2005 2004 2005
£'000 £'000 £'000
Profit before tax 922 4,977 2,860
Taxation (279) (1,410) (890)
--------- --------- --------
Earnings 643 3,567 1,970
--------- --------- --------
Basic earnings per share 22.3p 123.9p 68.4p
--------- --------- --------
Adjusted
Profit before tax 922 4,977 2,860
Adjustments:
Exceptional items (note 2) (285) (3,711) (1,504)
---------- --------- --------
Adjusted profit before tax 637 1,266 1,356
Taxation (194) (297) (439)
---------- --------- --------
Earnings 443 969 917
---------- --------- --------
Adjusted earnings per share 15.4p 33.7p 31.8p
---------- --------- --------
The weighted average number of ordinary shares in issue during each period was
2,879,298.
5. Dividends
Ordinary shares of 50p each
The interim dividend proposed at the rate of 8.0p per share (2004 : 8.0p) is
payable on 11 January 2006 to shareholders on the register at the close of
business on 7 December 2005. The shares will be marked ex-dividend on 9 December
2005.
Preference shares
Preference dividends have been paid in October 2005. The next preference
dividends are payable in April 2006. The cost of the preference dividends has
been included within finance costs.
6. Retained Earnings
Half year to Half year to Year to
30 September 30 September 31 March
2005 2004 2005
£'000 £'000 £'000
--------------------- --------- --------- --------
At the beginning of period 19,469 18,166 18,166
Total recognised income and expense
for the period (98) 3,736 1,721
Transfer from revaluation reserve 139 236 244
Dividends paid (461) (432) (662)
--------------------- --------- --------- --------
At end of period 19,049 21,706 19,469
--------------------- --------- --------- --------
Appendices
1. Restatement of the Income Statement for the half year ended 30 September 2004
UK Dividends Deferred tax Pension Goodwill Reclassification IFRS
GAAP (note 1) (note 2) (note 3) (note 7) (note 8) 2004
2004
£'000 £'000 £'000 £'000 £'000 £'000 £'000
----------- ------ ------- ------- ------ ------ -------- -------
Revenue 80,117 - - - - - 80,117
Operating
Costs (76,645) - - (233) 45 - (76,833)
Surplus on
property
disposal 499 - - - - - 499
Restructuring
costs (177) - - - - - (177)
----------- ------ ------- ------- ------ ------ -------- -------
Operating
profit 3,794 - - (233) 45 - 3,606
Finance 1,422 (51) - - - - 1,371
costs
----------- ------ ------- ------- ------ ------ -------- -------
Profit before
tax 5,216 (51) - (233) 45 - 4,977
Tax (829) - (639) 71 (13) - (1,410)
----------- ------ ------- ------- ------ ------ -------- -------
Net profit 4,387 (51) (639) (162) 32 - 3,567
Actuarial
gains charged
to Statement
of Recognised
Income and
Expense - - - 242 - - 242
Deferred tax
on actuarial
gains - - - (73) - - (73)
----------- ------ ------- ------- ------ ------ -------- -------
Total
recognised
income and
expense for
the period 4,387 (51) (639) 7 32 - 3,736
Dividends (281) (151) - - - - (432)
----------- ------ ------- ------- ------ ------ -------- -------
Net additions
to
shareholders'
funds for the
period 4,106 (202) (639) 7 32 - 3,304
Shareholders'
funds at 1
April 2004 29,406 432 (461) (2,900) - (1,237) 25,240
----------- ------ ------- ------- ------ ------ -------- -------
Shareholders'
funds at 30
September 33,512 230 (1,100) (2,893) 32 (1,237) 28,544
2004
----------- ------ ------- ------- ------ ------ -------- -------
2. Restatement of the Income Statement for the year ended 31 March 2005
UK GAAP Dividends Deferred Pension Goodwill Reclassification IFRS
2005 tax 2005
(note 1) (note 2) (note 3) (note 7) (note 8)
£'000 £'000 £'000 £'000 £'000 £'000 £'000
----------- ------- ------- ------- ------ ------ -------- -------
Revenue 155,684 - - - - - 155,684
Operating
costs (153,506) - - (447) 106 - (153,847)
Surplus on
property
disposal 455 - - - - - 455
Restructuring
costs (229) - - - - - (229)
----------- ------- ------- ------- ------ ------ -------- -------
Operating
profit 2,404 - - (447) 106 - 2,063
Finance 899 (102) - - - - 797
costs
----------- ------- ------- ------- ------ ------ -------- -------
Profit before
tax 3,303 (102) - (447) 106 - 2,860
Tax (525) - (468) 135 (32) - (890)
----------- ------- ------- ------- ------ ------ -------- -------
Net profit 2,778 (102) (468) (312) 74 - 1,970
Actuarial
losses
charged
to Statement
of Recognised
Income and - - - (355) - - (355)
Expense
Deferred tax
on actuarial
losses - - - 106 - - 106
----------- ------- ------- ------- ------ ------ -------- -------
Total
recognised
income and
expenses for
the year 2,778 (102) (468) (561) 74 - 1,721
Dividends (793) 131 - - - - (662)
----------- ------- ------- ------- ------ ------ -------- -------
Net additions
to
shareholders'
funds for the
year 1,985 29 (468) (561) 74 - 1,059
Shareholders'
funds at 1
April 2004 29,406 432 (461) (2,900) - (1,237) 25,240
----------- ------- ------- ------- ------ ------ -------- -------
Shareholders'
funds at 31
March 2005 31,391 461 (929) (3,461) 74 (1,237) 26,299
----------- ------- ------- ------- ------ ------ -------- -------
3. Reconciliation of Equity at 1 April 2004 (date of transition to IFRS)
UK GAAP Dividends Pension Deferred Reclassification IFRS
1/4/04 tax 1/4/04
(note 4) (note 5) (note 6) (note 8)
£'000 £'000 £'000 £'000 £'000 £'000
----------- ------- ------- ------- ------- --------- -------
Goodwill 161 - - - - 161
Property,
plant and
equipment 29,229 - - - - 29,229
Deferred tax
asset - - - 1,960 - 1,960
----------- ------- ------- ------- ------- --------- -------
Total
non-current
assets 29,390 - - 1,960 - 31,350
----------- ------- ------- ------- ------- --------- -------
Inventories 22,011 - - - - 22,011
Trade and
other
receivables 9,860 - (1,274) - - 8,586
Cash and cash
equivalents 62 - - - - 62
----------- ------- ------- ------- ------- --------- -------
Total current
assets 31,933 - (1,274) - - 30,659
----------- ------- ------- ------- ------- --------- -------
Total 61,323 - (1,274) 1,960 - 62,009
assets
----------- ------- ------- ------- ------- --------- -------
Bank
overdrafts
and 8,444 - - - - 8,444
loans
Trade and
other 19,444 51 - - - 19,495
payables
Tax
liabilities 130 - - - - 130
Proposed
dividends 483 (483) - - - -
Provisions - - - - 132 132
----------- ------- ------- ------- ------- --------- -------
Current
liabilities 28,501 (432) - - 132 28,201
----------- ------- ------- ------- ------- --------- -------
Net current
assets 3,432 432 (1,274) - (132) 2,458
----------- ------- ------- ------- ------- --------- -------
Non-current
liabilities
Bank loans 3,000 - - - - 3,000
Preference
shares - - - - 1,237 1,237
Retirement
benefit
obligation - - 2,868 - - 2,868
Deferred tax
liabilities 271 - - 1,179 - 1,450
Trade and
other 13 - - - - 13
payables
Long term
provisions 132 - - - (132) -
----------- ------- ------- ------- ------- --------- -------
3,416 - 2,868 1,179 1,105 8,568
----------- ------- ------- ------- ------- --------- -------
Total
liabilities 31,917 (432) 2,868 1,179 1,237 36,769
----------- ------- ------- ------- ------- --------- -------
Net assets 29,406 432 (4,142) 781 (1,237) 25,240
----------- ------- ------- ------- ------- --------- -------
Share 2,676 - - - (1,237) 1,439
capital
Share premium
account 272 - - - - 272
Capital
redemption
reserve 282 - - - - 282
Revaluation
reserve 4,500 - - (423) 1,004 5,081
Retained
earnings 21,676 432 (4,142) 1,204 (1,004) 18,166
----------- ------- ------- ------- ------- --------- -------
Total 29,406 432 (4,142) 781 (1,237) 25,240
equity
----------- ------- ------- ------- ------- --------- -------
4. Reconciliation of Equity at 30 September 2004
UK GAAP Dividends Pension Deferred Goodwill Reclassification IFRS
30/9/04 tax 30/9/04
(note 4) (note 5) (note 6) (note 7) (note 8)
£'000 £'000 £'000 £'000 £'000 £'000 £'000
----------- ------ ------- ------ ------- ------ -------- -------
Goodwill 363 - - - (2) - 361
Intangible
assets - - - - 47 - 47
Property,
plant and
equipment 29,528 - - - - - 29,528
Deferred tax
asset - - - 1,153 - - 1,153
----------- ------ ------- ------ ------- ------ -------- -------
Total
non-current
assets 29,891 - - 1,153 45 - 31,089
----------- ------ ------- ------ ------- ------ -------- -------
Inventories 25,416 - - - - - 25,416
Trade and
other
receivables 13,159 - (1,472) - - - 11,687
Cash and cash
equivalents 54 - - - - - 54
----------- ------ ------- ------ ------- ------ -------- -------
Total current
assets 38,629 - (1,472) - - - 37,157
----------- ------ ------- ------ ------- ------ -------- -------
Total 68,520 - (1,472) 1,153 45 - 68,246
assets
----------- ------ ------- ------ ------- ------ -------- -------
Bank
overdrafts
and 8,252 - - - - - 8,252
loans
Trade and
other 22,772 51 - - - - 22,823
payables
Proposed
dividends 281 (281) - - - - -
Short term
provisions - - - - - 50 50
----------- ------ ------- ------ ------- ------ -------- -------
Current
liabilities 31,305 (230) - - - 50 31,125
----------- ------ ------- ------ ------- ------ -------- -------
Net current
assets 7,324 230 (1,472) - - (50) 6,032
----------- ------ ------- ------ ------- ------ -------- -------
Non-current -
liabilities
Bank loans 3,000 - - - - - 3,000
Preference
shares - - - - - 1,237 1,237
Retirement
benefit
obligation - - 2,661 - - - 2,661
Deferred tax
liabilities 538 - - 1,026 - - 1,564
Obligations
under finance
leases 115 - - - - - 115
Long term
provisions 50 - - - - (50) -
----------- ------ ------- ------ ------- ------ -------- -------
3,703 - 2,661 1,026 - 1,187 8,577
----------- ------ ------- ------ ------- ------ -------- -------
Total
liabilities 35,008 (230) 2,661 1,026 - 1,237 39,702
----------- ------ ------- ------ ------- ------ -------- -------
Net assets 33,512 230 (4,133) 127 45 (1,237) 28,544
----------- ------ ------- ------ ------- ------ -------- -------
Share 2,676 - - - (1,237) 1,439
capital
Share premium
account 272 - - - - 272
Capital
redemption
reserve 282 - - - - 282
Revaluation
reserve 4,239 - - (398) 1,004 4,845
Retained
earnings 26,043 230 (4,133) 525 45 (1,004) 21,706
----------- ------ ------- ------ ------- ------ -------- -------
Total 33,512 230 (4,133) 127 45 (1,237) 28,544
equity
----------- ------ ------- ------ ------- ------ -------- -------
5. Reconciliation of Equity at 31 March 2005 (date of last UK GAAP financial
statements)
UK Dividends Pensions Deferred Goodwill Reclassification Assets IFRS
GAAP tax held 31/3/05
31/3/05 for sale
(note 4) (note 5) (note 6) (note 7) (note 8) (note 8)
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
------ ------- ------ ------ ------ -------- ------ ------
Goodwill 451 - - - 30 - - 481
Intangible
assets - - - - 76 - - 76
Property,
plant and
equipment 31,540 - - - - - (611) 30,929
Deferred tax
asset - - - 1,941 - - - 1,941
---------- ------ ------- ------ ------ ------ -------- ------ ------
Total
non-current
assets 31,991 - - 1,941 106 - (611) 33,427
---------- ------ ------- ------ ------ ------ -------- ------ ------
Inventories 24,441 - - - - - - 24,441
Trade and
other
receivables 9,137 - (1,650) - - - - 7,487
Current tax
assets 132 - - - - - - 132
Cash and cash
equivalents 46 - - - - - - 46
---------- ------ ------- ------ ------ ------ -------- ------ ------
Total current
assets 33,756 - (1,650) - - - - 32,106
---------- ------ ------- ------ ------ ------ -------- ------ ------
Non current
assets
classified as
held for sale - - - - - - 611 611
---------- ------ ------- ------ ------ ------ -------- ------ ------
Total 65,747 - (1,650) 1,941 106 - - 66,144
assets
---------- ------ ------- ------ ------ ------ -------- ------ ------
Bank
overdrafts
and 7,868 - - - - - - 7,868
loans
Trade and
other 21,806 51 - - - - - 21,857
payables
Obligations
under finance
leases 41 - - - - - - 41
Proposed
dividends 512 (512) - - - - - -
Short term
provisions - - - - - 609 - 609
---------- ------ ------- ------ ------ ------ -------- ------ ------
Current
liabilities 30,227 (461) - - - 609 - 30,375
---------- ------ ------- ------ ------ ------ -------- ------ ------
Net current
assets 3,529 461 (1,650) - - (609) - 1,731
---------- ------ ------- ------ ------ ------ -------- ------ ------
Non-current -
liabilities
Bank loans 3,000 - - - - - - 3,000
Preference
shares - - - - - 1,237 - 1.237
Retirement
benefit
obligation - - 3,294 - - - - 3,294
Deferred tax
liabilities 414 - - 1,419 - - (59) 1,774
Obligations
under finance
leases 106 - - - - - - 106
Long term
provisions 609 - - - - (609) - -
---------- ------ ------- ------ ------ ------ -------- ------ ------
4,129 - 3,294 1,419 - 628 (59) 9,411
---------- ------ ------- ------ ------ ------ -------- ------ ------
Liabilities
associated
with assets
held for sale - - - - - - 59 59
---------- ------ ------- ------ ------ ------ -------- ------ ------
Total
liabilities 34,356 (461) 3,294 1,419 - 1,237 - 39,845
---------- ------ ------- ------ ------ ------ -------- ------ ------
Net assets 31,391 461 (4,944) 522 106 (1,237) - 26,299
---------- ------ ------- ------ ------ ------ -------- ------ ------
Share 2,676 - - - - (1,237) - 1,439
capital
Share premium
account 272 - - - - - - 272
Capital
redemption
reserve 282 - - - - - - 282
Revaluation
reserve 4,345 - - (423) - 915 - 4,837
Retained
earnings 23,816 461 (4,944) 945 106 (915) - 19,469
---------- ------ ------- ------ ------ ------ -------- ------ ------
Total 31,391 461 (4,944) 522 106 (1,237) - 26,299
equity
---------- ------ ------- ------ ------ ------ -------- ------ ------
6. Explanatory Notes
1. IAS32 Financial Instruments disclosure and presentation requires preference
shares to be reclassified as liabilities, and it follows that the preference
dividends are reclassified as finance costs. Also under IAS10 events after the
balance sheet date, only dividends paid or declared are reflected in the
accounts, so the proposed ordinary dividends have been reversed.
2. IAS12 Income Taxes requires deferred tax to be provided on all temporary
differences and this adjustment reflects the impact of including deferred tax
not previously provided. The detailed changes on deferred tax are explained in
more detail in note 6 below.
3. Under IAS19 Employee Benefits, the SSAP24 debtor is no longer recognised and
provision is made for the deficit on the defined benefit pension scheme, with
the actuarial gains and losses being charged to the Statement of Recognised
Income and Expense. Deferred tax relief at 30% has been recognised on these
adjustments.
4. Under IAS10, Events after the Balance Sheet Date, proposed dividends are not
recognised as a liability, so the ordinary dividends have been reversed (1 April
2004 : £432,000; 30 September 2004 : £230,000; 31 March 2005 : £461,000). Also
the declared preference dividends of £51,000 have been reclassified within trade
and other payables at each balance sheet date.
5. IAS19 Employee Benefits requires the elimination of the SSAP24 debtor (1
April 2004 : £1,274,000; 30 September 2004 : £1,472,000, 31 March 2005 :
£1,650,000) and full provision for the net deficit on the defined benefit
pension scheme (1 April 2004 : £2,868,000; 30 September 2004 : £2,661,000; 31
March 2005 : £3,294,000) with deferred tax at 30% being provided on each amount
(see note 3 above).
6. Under IAS12 Income Taxes, deferred tax adjustments are required in respect
of:
a) Provide in full on unrealised capital gains (with the charge to revaluation
reserve) and on gains rolled over (charged to profit and loss account).
b) All the recoverable advance corporation tax, as the directors expect there
to be adequate future profits for the purpose in future.
c) The elimination of the SSAP24 debtor and inclusion of the net deficit on
the defined benefit pension scheme creates a deferred tax asset.
1 Apr 2004 30 Sep 2004 31 Mar 2005
£'000 £'000 £'000
a) Provide for unrealised capital
gains and gains rolled over
Charged to revaluation (423) (423) (373)
reserve
Charged to retained profits (597) (677) (659)
--------- -------- -----------
(1,020) (1,100) (1,032)
b) Additional recoverable ACT now
recognised 559 - 103
--------- -------- -----------
Balances arising from note 2 (461) (1,100) (929)
c) On pensions adjustments 1,242 1,240 1,483
c) On goodwill (note 7) - (13) (32)
--------- -------- -----------
781 127 522
--------- -------- -----------
Included in:
Deferred tax assets 1,960 1,153 1,941
Deferred tax liabilities (1,179) (1,026) (1,419)
--------- -------- -----------
Net as above 781 127 522
--------- -------- -----------
7. IFRS 1 First time adoption of IFRS, the carrying value of goodwill at the
transaction date has not been subject to subsequent amortisation as no
impairment has been identified.
Subsequent additions arising from business combinations have been split between
goodwill and intangible assets as appropriate.
This split of additions is:
Period ended Year ended
30 September 31 March
2004 2005
£'000 £'000
Goodwill 200 320
Intangible assets 51 90
----------- ---------
Total 251 410
----------- ---------
Amortisation provided on intangible assets 4 14
Reduction in previously provided amortisation 45 106
Net book value of intangible assets 47 76
----------- ---------
Deferred tax at 30% has been provided on the adjustments to the income statement
(30 September 2004 period : £13,000; 31 March 2005 year : £32,000) as
corporation tax relief has been available on the amortisation provided under UK
GAAP.
8. The reclassifications required under IFRS are:
a) Provisions are now disclosed within current liabilities (1 April 2004 :
£132,000; 30 September 2004 : £50,000; 31 March 2005 : £609,000).
b) The £1,237,000 of preference shares fulfil the definitions within IAS32
Financial Instruments - disclosure and presentation to be reclassified as a
liability.
c) IAS16 Property, plant and equipment required revaluation deficits to below
cost to be charged to profit and loss account, whereas previously the net
surplus was taken to revaluation reserve. The adjustment grosses up to eliminate
the deficits from revaluation reserve and charges them to retained earnings
(1 April 2004 and 30 September 2004 : £1,004,000; 31 March 2005 : £915,000).
9. IAS16 Property, plant and equipment, a property awaiting disposal fulfilled
the requirements to be classified as available for sale at 31 March 2005 and so
has been reclassified together with its associated tax liability.
Independent Review Report
to Caffyns plc
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 September 2005 which comprises the consolidated interim
balance sheet at 30 September 2005, the consolidated profit and loss account,
consolidated cash flow statement and, the statement of recognised income and
expense for the six months then ended and the related notes 1 to 6 and
appendices 1 to 6. We have read the other information contained in the interim
report which comprises only the chairman's statement and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.
This report is made solely to the company's members, as a body, in accordance
with guidance contained in APB Bulletin 1999/4 'Review of Interim Financial
Information'. Our review work has been undertaken so that we might state to the
company's members those matters we are required to state to them in a review
report and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the company and the
company's members as a body, for our review work, for this report, or for the
conclusion we have formed.
Directors' responsibilities
The interim report including the financial information contained therein is the
responsibility of, and has been approved by, the directors. The directors are
responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority.
As disclosed in the accounting policies the next annual financial statements of
the group will be prepared in accordance with those International Financial
Reporting Standards adopted for use by the European Union. This interim report
has been prepared on the basis of the recognition and measurement requirements
of International Financial Reporting Standards as explained in the basis of
accounting on page 7.
The accounting policies are consistent with those that the directors intend to
use in the next annual financial statements. There is, however, a possibility
that the directors may determine that some changes to these policies are
necessary when preparing the full annual financial statements for the first time
in accordance with those IFRS adopted for use by the European Union. This is
because, as disclosed in the basis of accounting on page 7 the directors have
anticipated that revised IAS 19, which has yet to be formally adopted for use in
the European Union will be so adopted in time to be applicable to the next
annual financial statements.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of Interim Financial Information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making enquiries
of management and applying analytical procedures to the financial information
and underlying financial data and, based thereon, assessing whether the
accounting policies and presentation have been consistently applied unless
otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with United
Kingdom auditing standards and therefore provides a lower level of assurance
than an audit. Accordingly, we do not express an audit opinion on the financial
information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 September 2005.
Grant Thornton UK LLP
Chartered Accountants
London
25 November 2005
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