Interim Results

Caffyns PLC 25 November 2005 Interim Results for the half year ended 30 September 2005 Summary 2005 2004 Â£'000 Â£'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 Â£80.1 million to Â£81.5 million but operating profit before exceptional items has reduced from Â£1,795,000 to Â£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 Â£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 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'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) Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'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) Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'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) Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'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) Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'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 : Â£432,000; 30 September 2004 : Â£230,000; 31 March 2005 : Â£461,000). Also the declared preference dividends of Â£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 : Â£1,274,000; 30 September 2004 : Â£1,472,000, 31 March 2005 : Â£1,650,000) and full provision for the net deficit on the defined benefit pension scheme (1 April 2004 : Â£2,868,000; 30 September 2004 : Â£2,661,000; 31 March 2005 : Â£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 Â£'000 Â£'000 Â£'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 Â£'000 Â£'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 : Â£13,000; 31 March 2005 year : Â£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 : Â£132,000; 30 September 2004 : Â£50,000; 31 March 2005 : Â£609,000). b) The Â£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 : Â£1,004,000; 31 March 2005 : Â£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 This information is provided by RNS The company news service from the London Stock Exchange

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