REG - Caffyns PLC - Final Results
07/06/2024 07:00
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RNS Number : 4771R Caffyns PLC 07 June 2024
Caffyns plc
Preliminary Results for the year ended 31 March 2024
Summary
2024 2023
£'000 £'000
Revenue 262,084 251,426
Underlying EBITDA (see note A) 4,212 6,955
Underlying (loss)/profit before tax (see note A) (566) 3,140
(Loss)/profit before tax (1,545) 3,090
pence pence
Underlying (deficit)/earnings per share (17.3) 95.1
(Deficit)/earnings per share (44.3) 93.6
Proposed final dividend per Ordinary share 5.0 15.0
Dividend per ordinary share for the year 7.5 22.5
Note A: Underlying results exclude items that have non-trading attributes due
to their size, nature or incidence. Non-underlying items for the year totalled
a charge of £979,000 (2023: £50,000) and are detailed in Note 2 to these
consolidated financial statements. Underlying EBITDA of £4,212,000 (2023:
£6,955,000) represents Operating profit before non-underlying items of
£2,114,000 (2023: £4,827,000) adding back Depreciation and Amortisation of
£2,098,000 (2023: £2,128,000).
Overview
· Revenue up 4% to £262.1 million (2023: 251.4 million)
· New car unit deliveries up by 5%
· Used car unit sales up by 2%
· Aftersales revenues up by 5% to £28.5 million (2023: £27.0 million)
· Underlying loss before tax of £0.6 million (2023: profit of £3.1
million)
· Final dividend of 5.0 pence per Ordinary share (2023: 15.0 pence per
Ordinary share)
· Net bank borrowings at 31 March 2024 were £11.3 million (2023: £8.1
million)
· Property portfolio valuation at 31 March 2024 showed a reduced
surplus to net book value of £10.7 million (2023: £11.5 million) due to a
general softening in the commercial property market. This surplus is not
recognised in these accounts).
Commenting on the results Simon Caffyn, Chief Executive, said: "'Turnover in
the year increased by 4% to £262 million as trading for new cars and
aftersales remained robust. However, the used car market suffered a
significant price correction in the final calendar quarter of 2023 which,
along with interest rates and energy costs at elevated levels and inflationary
pressures on the cost base, had a detrimental impact on our second half
performance."
Enquiries:
Caffyns
plc Simon Caffyn, Chief
Executive
Tel: 01323 730201
Mike Warren, Finance Director
Tel: 01323 730201
Operational and Business Review
Summary
Turnover in the financial year ended 31 March 2024 (the "year") increased by
4% to £262.1 million (2023: £251.4 million) as trading for new cars and
aftersales remained robust. However, the used car market suffered a
significant price correction in the final calendar quarter of 2023, which had
a very detrimental impact on our second half performance. The challenges to
profitability faced by the Company, and indeed the wider motor retail sector,
from an overall weakening in the trading environment resulted in a reduction
of £1.9 million in gross profits. With interest rates and energy costs at
elevated levels and with inflationary pressures on the cost base remaining
high, the Company recorded a loss for the year.
Underlying operating profits reduced to £2.1 million (2023: £4.8 million).
The underlying loss before tax of £0.6 million for the year compared to an
underlying profit of £3.1 million in the prior year.
Statutory losses before tax for the year were £1.5 million (2023: profits of
£3.1 million). In addition to the trading losses incurred in the year, the
Company incurred certain non-underlying costs, primarily associated with the
financing and service costs of its defined-benefit pension scheme and from
property impairment charges. Actuarial adjustments arising on its
defined-benefit pension scheme have been taken direct to reserves. Basic
losses per share for the year were 44.3 pence (2023: earnings of 93.6 pence).
Underlying losses per share for the year were 17.3 pence (2023: earnings of
95.1 pence).
The Company's defined benefit pension scheme deficit, calculated in accordance
with the requirements of IAS 19 Pensions, increased to £10.0 million at 31
March 2024 (2023: £8.8 million). The investment performance of the scheme's
investments was adversely affected during the year by volatile market
movements.
The Company continues to own all but two of the freeholds of the dealership
premises from which it operates, and this provides the dual strengths of a
strong asset base and minimal exposure to rent reviews.
The board declared an interim dividend of 5.0 pence per Ordinary share (2023:
7.5 pence), which was paid in January 2024. Although the financial performance
of the Company in the second half of the financial year worsened and was
loss-making, the board remains confident in the prospects of the Company and
declared a final dividend for the year of 5.0 pence per Ordinary share (2023:
15.0 pence).
Net bank borrowings at 31 March 2024 were £11.3 million (2023: £8.1
million), which equated to gearing of 39% (2023: 26%).
New and used car sales
The Company's total revenues increased by £10.7 million over the previous
year, of which £9.4 million arose from the sale of new and used cars.
Total UK new car registrations in the year increased by 16% to 1.95 million as
the major car manufacturers were able to lift new car production levels.
However, the conflict in Ukraine continued to place strains on supply chains
and the growing cost-of-living pressures have made customers more careful of
discretionary spending. Within this total, new car registrations in the
private and small business sector, in which we principally operate, actually
fell by 3%. Our own retail new car deliveries rose by 5%, a better outcome
than for the comparable motor retail sector.
Our volume of used cars sales rose in the year by 2%. Although not a perfect
match, used car data from the Society of Motor Manufacturers and Traders
showed the number of used cars being transacted in the UK rose by 5% in the
2023 calendar year. Our performance in the year was held back by falling
volumes at our Motorstore non-franchised businesses in Ashford and Lewes. The
used car market suffered a significant price correction in the final quarter
of 2023 and, as a result, our unit margins in the year fell significantly from
their level in the prior year. Lower volumes of new car registrations over the
last four years have also reduced the number of less than 3-year-old used cars
available in the market. In recognition of this scarcity, procedures have been
strengthened to broaden our sources for replenishing inventory but the
sourcing of good quality, well-priced used cars remains very challenging.
Great efforts have been made over the last twelve months to further enhance
and develop our omni-channel used car offering for our customers, which allows
customers to interact with us in the way that suits them best, from the
traditional showroom discussion through to a fully online sales process, and
any combination in between. We continue to see our used car offering providing
a major opportunity for stronger growth. With market conditions volatile we
continue to actively monitor and control used car stock turn and yield. The
number of used cars sold in the year again exceeded the number of new cars
sold, although by a reduced multiple than in the prior year.
Aftersales
Our aftersales business performed well during the year with service revenues
rising by 4%. We continue to place great emphasis on our customer retention
programmes and in growing sales of service plans. Our parts business also
reported higher sales, up by 6% from the previous year.
Our people
I am very grateful for the dedication of our employees and their efforts
throughout the year to provide our customers with a first-class experience.
The Company benefits from a dedicated workforce with more than a quarter of
employees having more than ten years' service. As a result of their hard work
and professionalism, the business remains in a strong position in the
competitive retail environment in which we operate, and we continue to be an
employer of choice in Kent and Sussex.
The Company has a long tradition of investing in apprenticeship programmes.
Despite the pressures on the business, we have kept our apprenticeship numbers
at a high level and continue to see the benefits flow through the business as
more apprentices complete their training. Due to our apprentice numbers, we
continued to fully utilise our apprenticeship levy payments within the
stipulated time limits. We remain firmly committed to the long-term benefits
of apprenticeships and our recruitment programme continues with the aim of
maintaining a healthy complement in the current year, which will assist the
Company to continue to grow.
Operations
Our Audi businesses produced a satisfactory financial performance in the year,
although with profits much reduced from the prior year. The franchise
continues to be boosted by the strength of the brand, the excellent model
range, and exciting new products.
Our Volkswagen businesses underperformed in the year, partly as a result of
operational issues at one of our four dealerships, but also due to supply
constraints on certain new car model ranges. However, the manufacturer is the
market leader in the UK and we expect a markedly improved financial
performance in the coming year.
Our Volvo businesses had a transitional year, with our Worthing business being
redeveloped and the manufacturer moving from supplying cars to its dealer
network under the traditional wholesale transactional model to an agency model
where the manufacturer sells direct to the consumer whilst the dealer
facilitates delivery of the car. This transition has presented a number of
challenges to both the manufacturer and the dealer network, many of which
remain as work in progress. However, the brand enjoys an excellent model range
of cars, which continue to be positively received by customers.
Our combined SEAT/Skoda businesses continued to perform satisfactorily,
despite a lack of availability of new car product, and will be boosted in the
coming year by the addition of the CUPRA brand to our dealership in Tunbridge
Wells.
Our MG business in Ashford, which opened in the summer of 2021, moved into its
third year of operation. The business was able to generate significant growth
in the year, reflecting the increasing market share of the brand, and
performed well.
Our Vauxhall business in Ashford under-performed in the year. However,
Stellantis, its parent company, have publicly announced plans to restructure
and slim down their dealer networks, of which we will be a part, so we
anticipate a brighter future for this brand.
The performance of our two Lotus businesses, in Ashford and Lewes, continued
to be constrained by a lack of new car product in the year, although recent
delivery levels of the Emera and Eletre models have shown signs of
improvement.
Trading at Caffyns Motorstore, our used car businesses in Ashford and Lewes,
remained subdued as the business struggled to source high-quality used cars.
However, the concept continues to be well received by our customers, who
particularly value the Caffyns brand.
Groupwide projects
We remain focused on generating further improvements in the levels of used car
sales, used car finance income and service labour sales. These three areas
will be key to achieving increases in profitability in the coming years. In
addition, we continue to make very good progress utilising technology to
enhance customers' experience throughout their buying journey, as well as
improving our aftersales retention.
Zero-emission vehicle ("ZEV") targets
With effect from 1 January 2024 the Government announced that vehicle
manufacturers will be required to meet annual minimum registration targets for
ZEV cars, with the target for the 2024 calendar year set at 22% of
registrations. Failure to achieve the set target would result in potential
financial penalties being levied on the manufacturer. Registrations of ZEV
cars in the first calendar quarter of 2024 amounted to 16% of the market, some
way below the stipulated minimum of 22%. However, the manufacturers that we
represent are placed to meet the challenges of the transition to zero-emission
vehicles.
Climate-related emissions
The board is acutely aware of the impact that the Company's operations have on
the environment, its responsibility to minimise these wherever possible, and
to supporting the Government's efforts to transition towards net-zero carbon
emissions. To assist with this process an Environmental, Sustainability and
Efficiency Committee, headed by a senior operational manager who reports
directly to the Chief Executive, operated during the year, with the remit of
scrutinising and reducing the Company's energy usage. The Committee was able
to achieve year-on-year savings in electricity and gas usage of some 5% in the
2023 calendar year. Investments were made in the year to improve the
efficiency of lighting and heating equipment, and further energy savings are
expected in future periods.
Property
We operate primarily from freehold sites, which provides additional stability
to our business model. As in previous years, our freehold premises were valued
at the balance sheet date by chartered surveyors CBRE Limited, based on an
existing use valuation. The excess of the valuation over net book value of our
freehold properties at 31 March 2024 was £10.7 million (2023: £11.5
million). The reduction in the valuation in the year reflected the general
softening of the commercial property market, which also necessitated
impairment charges in the year of £0.6 million (2023: £Nil). In accordance
with our accounting policies, this surplus of £10.7 million has not been
incorporated into our accounts.
During the year, we incurred capital expenditure of £2.6 million (2023: £0.9
million). This primarily reflected the redevelopment of our Volvo premises in
Worthing to the manufacturer's latest standards, along with replacement spend
on existing assets and further installations of electric charging points.
The board is progressing the sale process of our freehold premises in Lewes
which is currently being utilised for Lotus Sussex and Motorstore Performance,
as well as being partially tenanted. Completion of this process will be
dependent, among other matters, on the agreement of mutually acceptable terms
with certain prospective purchasers. The board expects further progress
towards a sale in the coming year. Due to the uncertainty of a successful
outcome the property has continued to be shown as an investment property on
the Company's balance sheet.
The Company operates two of its franchised businesses from leased premises as
well as having two leased vehicle storage compounds, which are shown on the
balance sheet as right of use assets. During the year, the lease for one of
those premises was extended for a further five years. As a result, the
valuation of that lease increased by £0.4 million, equal and opposite to an
increase in its lease liability.
Bank facilities and borrowings
The Company's banking facilities with HSBC comprise a term loan, originally of
£7.5 million, repayable by instalments over a twenty-year period to 2038 and
a revolving credit facility of £6.0 million, both of which will next come up
for their periodic review in March 2026. HSBC also provides an overdraft
facility of £3.5 million, reviewed annually. The Company continues to enjoy a
supportive relationship with HSBC.
In addition to its facilities with HSBC, the Company also has a revolving
credit facility of £4.0 million provided by Volkswagen Bank, reviewed
annually. During the year, the final repayment instalment was made to clear a
term loan with Volkswagen Bank, originally of £5.0 million.
The term loan and revolving credit facilities provided by HSBC include certain
covenant tests covering interest, borrowing and security levels. The covenant
test relating to security levels were passed at 31 March 2024. In the light of
the underlying trading losses incurred in the year and, prior to the year-end,
HSBC agreed to waive the covenant tests covering interest and borrowing
levels. For the coming year a new covenant test has been introduced, which
will require the Company to achieve certain EBITDA hurdles in the coming
financial year. The existing covenant tests relating to interest and borrowing
levels will then be reapplied with effect from 30 June 2025. Any failure of a
covenant test could result, at the option of HSBC, in the borrowing becoming
repayable on demand.
During the year, cash generated by operating activities was £0.1 million
(2023: £4.2 million), reflecting the challenging trading conditions in the
year. Changes in net working capital were minimal, although inventories and
payables both increased as levels of new cars held on consignment from
manufacturers continued to return to more normal levels. Other significant
cash movements in the year included capital expenditure of £2.6 million
(2023: £0.9 million), repayment of bank term loans of £0.9 million (2023:
£0.9 million) and dividends paid to shareholders of £0.5 million (2023:
£0.6 million). Cash balances held at 31 March 2024 were £0.4 million, a
reduction of £3.8 million from the previous year-end.
Bank borrowings, net of cash balances, at 31 March 2024 were £11.3 million
(2023: £8.1 million) and as a proportion of shareholders' funds at 31 March
2024 were 39% (2023: 26%). This increase in gearing level reflected cash
absorbed by operating activities combined with a high requirement for capital
expenditure in the year and an adverse movement in the deficit for the
Company's defined-benefit pension scheme. In addition to the year-end cash
balances available, but undrawn, banking facilities with HSBC and Volkswagen
Bank at 31 March 2024 were £7.5 million (2023: £7.5 million).
Taxation
The year produced a tax credit of £0.3 million against losses incurred (2023:
charge of £0.6 million). The effective tax rate for the year was higher than
the standard rate of corporation tax in force for the year of 25% due to the
effect of items disallowable for corporation tax and from the change to the
rate of corporation tax in the prior year.
The Company has outstanding trading losses of £1.3 million (2023: £Nil)
available for relief against profits in in future accounting periods. There
are no capital losses awaiting relief. Capital gains which remain unrealised,
where potentially taxable gains arising from the sale of properties and
goodwill have been rolled over into replacement assets, amounted to £5.9
million (2023: £6.8 million) which could equate to a future potential tax
liability of £1.5 million (2023: £1.7 million). The Company was unable to
utilise any of its Advanced Corporation Tax in the year, leaving an unchanged
amount carried forward to future trading periods of £0.3 million (2023: £0.3
million).
Pension scheme
The Company's defined benefit scheme was closed to future accrual in 2010. The
board has little control over the key assumptions in the valuation
calculations as required by accounting standards and movements in yields of
gilts and bonds can have a significant impact on the net funding position of
the scheme. At 31 March 2024, the deficit of the scheme was £10.0 million
(2023: £8.8 million). The deficit, net of deferred tax, was £7.5 million
(2023: £6.6 million). The investment performance of the scheme's asset was
adversely affected during the year by volatile market movements.
The Scheme operates with a fiduciary manager and the board, together with the
independent pension fund trustees, continues to review options to reduce the
cost of operation and its deficit. Actions that could further reduce the risk
profile of the assets and more closely match the nature of the Scheme's assets
to its liabilities continue to be considered.
The pension cost under IAS 19 is charged as a non-underlying cost and amounted
to £0.4 million in the year (2023: £0.1 million).
The latest triennial valuation as at 31 March 2023 remains ongoing. Therefore,
the most recent completed triennial valuation of the Scheme was as at 31 March
2020, which was formally submitted to the Pensions Regulator in June 2021. A
recovery plan to address the Scheme deficit identified from this triennial
valuation was agreed with the trustees under which the annual recovery plan
payment was set at a base level of £0.75 million for the year ended 31 March
2022, along with an additional one-off contribution of £1.0 million which was
paid in the prior year. The recurring annual recovery plan payment for each
subsequent year thereafter would then increase by 2.25%, until superseded by
any future new recovery plan to be agreed between the Company and the
trustees. In accordance with the recovery plan, the Company made deficit
reduction contributions into the Scheme during the year of £0.8 million
(2023: £1.8 million).
A revised recovery plan to deal with the Scheme's deficit position is being
negotiated with the Scheme's trustees and this, and the formal triennial
actuarial valuation of the Scheme as at 31 March 2023, need to be agreed with
the trustees and submitted to the Pensions Regulator by 30 June 2024. The
Board remains confident of meeting this submission deadline.
Dividend
The board declared an interim dividend of 5.0 pence per Ordinary share (2023:
7.5 pence), which was paid in January 2024. Although the financial performance
of the Company in the second half of the financial year worsened and was
loss-making, the board remains confident in the prospects of the Company and
declared a final dividend for the year of 5.0 pence per Ordinary share (2023:
15.0 pence). This will be paid on 9 August 2024 to shareholders on the
register at close of business on 12 July 2024. The Ordinary shares will be
marked ex-dividend on 11 July 2024.
Strategy
Our continuing strategy is to focus on growing our loyal customer base through
representing premium and premium-volume franchises, maximising opportunities
for premium used cars and delivering an excellent after sales service. We
recognise that we operate in a rapidly changing environment and continue to
carefully monitor the appropriateness of this strategy. We continue to seek
opportunities to invest in the future growth of our business.
We are concentrating on business opportunities in stronger sectors to deliver
higher returns from fewer but bigger sites. We continue to seek to deliver
performance improvement, in particular in our used car and aftersales
operations, and to enhance both the purchasing and aftersales experience for
our customers.
Annual General Meeting
The Annual General Meeting will be held on 1 August 2024 and will be an open
meeting, to which shareholders will be invited to attend in person.
Outlook
The Company has a strong new car forward-order book but trading conditions in
the early part of the current financial year have remained challenging, with
inflationary pressures and high interest rates continuing to impact on our
cost base, and on our customers' confidence levels.
The current financial year will see certain manufacturers continue their
transition to new agency arrangements for their dealer networks, which may
result in some short-term disruption to the market. Enquiry rates from
retail customers for electric cars continue to remain subdued. However, our
manufacturers are well placed for the future with a pipeline of market-leading
electric new car products due to come to market over the next few years.
Our businesses enjoy an exceptional workforce who represent excellent brands.
We also continue to enjoy supportive relationships with our banking partners,
HSBC and Volkswagen Bank, with undrawn facilities of £7.5 million. The
balance sheet is appropriately funded and our freehold property portfolio is a
source of stability. We remain confident in the prospects of the Company and
are ready to benefit from future business opportunities.
S G M Caffyn
Chief Executive
6 June 2024
Group Income Statement
for the year ended 31 March 2024
2024 2023
Note £'000 £'000
Revenue 262,084 251,426
Cost of sales (230,389) (217,844)
Gross profit 31,695 33,582
Operating expenses
Distribution costs (19,913) (19,009)
Administration expenses (10,605) (10,076)
Operating profit before other income 1,177 4,497
Other income (net) 356 344
Operating profit 1,533 4,841
Operating profit before non-underlying items 2,114 4,827
Non-underlying items within operating profit 5 (581) 14
Operating profit 1,533 4,841
Finance expense 6 (2,680) (1,687)
Finance expense on pension scheme (398) (64)
Net finance expense (3,078) (1,751)
(Loss)/profit before taxation (1,545) 3,090
(Loss)/profit before tax and non-underlying items (566) 3,140
Non-underlying items within operating profit 5 (581) 14
Non-underlying items within finance expense on pension scheme 5 (398) (64)
(Loss)/profit before taxation (1,545) 3,090
Taxation 7 341 (566)
(Loss)/profit for the year (1,204) 2,524
(Deficit)/earnings per share
Basic 8 (44.3)p 93.6p
Diluted 8 (44.3)p 92.4p
Underlying (deficit)/earnings per share
Basic 8 (17.3)p 95.1p
Diluted 8 (17.3)p 93.9p
Group Statement of Comprehensive Income
for the year ended 31 March 2024
2024 2023
Note £'000 £'000
(Loss)/profit for the year (1,204) 2,524
Items that will never be reclassified to profit and loss:
Remeasurement of net defined benefit liability (1,652) (6,715)
Deferred tax on remeasurement 17 413 1,679
Total other comprehensive expense, net of taxation (1,239) (5,036)
Total comprehensive expense for the year (2,443) (2,512)
Group Statement of Financial Position
at 31 March 2024
2024 2023
Note £'000 £'000
Non-current assets
Right-of-use assets 10 2,343 2,348
Property, plant and equipment 11 38,714 38,145
Investment properties 12 7,216 7,531
Interest in lease 13 65 225
Goodwill 14 286 286
Deferred tax asset 17 568 -
49,192 48,535
Current assets
Inventories 15 42,251 39,989
Trade and other receivables 7,310 7,121
Interest in lease 13 160 164
Current tax recoverable 190 -
Cash and cash equivalents 438 4,226
50,349 51,500
Total assets 99,541 100,035
Current liabilities
Interest-bearing bank overdrafts and loans 1,445 1,875
Trade and other payables 16 45,597 43,674
Lease liabilities 501 511
Current tax payable - 28
47,543 46,088
Net current assets 2,806 5,412
Non-current liabilities
Interest-bearing bank loans 10,308 10,437
Lease liabilities 2,106 2,203
Deferred tax liability 17 - 34
Preference shares 812 812
Retirement benefit obligations 10,036 8,799
23,262 22,285
Total liabilities 70,805 68,373
Net assets 28,736 31,662
Capital and reserves
Share capital 1,439 1,439
Share premium account 272 272
Capital redemption reserve 707 707
Non-distributable reserve 1,724 1,724
Retained earnings 24,594 27,520
Total equity attributable to shareholders 28,736 31,662
Group Statement of Changes in Equity
for the year ended 31 March 2024
Capital Non-
Share Share redemption distributable Retained
capital premium reserve reserve Earnings Total
£'000 £'000 £'000 £'000 £'000 £'000
At 1 April 2023 1,439 272 707 1,724 27,520 31,662
Total comprehensive
expense
Loss for the year - - - - (1,204) (1,204)
Other comprehensive - - - - (1,239) (1,239)
expense
Total comprehensive - - - - (2,443) (2,443)
expense
Transactions with
owners:
Dividends - - - - (539) (539)
Issue of shares - SAYE - - - - 220 220
Purchase of own
shares - - - - (195) (195)
Share-based payment - - - - 31 31
At 31 March 2024 1,439 272 707 1,724 24,594 28,736
for the year ended 31 March 2023
Capital Non-
Share Share redemption distributable Retained
capital premium reserve reserve Earnings Total
£'000 £'000 £'000 £'000 £'000 £'000
At 1 April 2022 1,439 272 707 1,724 30,589 34,731
Total comprehensive
Income/(expense)
Profit for the year - - - - 2,524 2,524
Other comprehensive - - - - (5,036) (5,036)
expense
Total comprehensive - - - - (2,512) (2,512)
expense
Transactions with
owners:
Dividends - - - - (606) (606)
Issue of shares - SAYE - - - - 3 3
Share-based payment - - - - 46 46
At 31 March 2023 1,439 272 707 1,724 27,520 31,662
Group Cash Flow Statement
for the year ended 31 March 2024
2024 2023
Note £'000 £'000
Net cash inflow from operating activities 18 119 4,237
Investing activities
Proceeds on disposal of property, plant and equipment 57 1
Purchases of property, plant and equipment (2,575) (902)
Receipt from investment in lease 185 185
Net cash outflow from investing activities (2,333) (716)
Financing activities
Revolving-credit facility utilised 1,000 -
Revolving-credit facility repaid (1,000) -
Secured loans repaid (875) (875)
Unsecured loan received 350 -
Unsecured loan repaid (35) -
Issue of shares - SAYE scheme 220 3
Purchase of own shares for treasury (195) -
Dividends paid (539) (606)
Repayment of lease liabilities (500) (576)
Net cash outflow from financing activities (1,574) (2,054)
Net (decrease)/increase in cash and cash equivalents (3,788) 1,467
Cash and cash equivalents at beginning of year 4,226 2,759
Cash and cash equivalents at end of year 438 4,226
Notes
for the year ended 31 March 2024
1. GENERAL INFORMATION
Caffyns plc is a company domiciled in the United Kingdom. The address of the
registered office is Saffrons Rooms, Meads Road, Eastbourne BN20 7DR. The
registered number of the Company is 105664.
This financial information has been extracted from the consolidated financial
statements which were approved by the directors on 6 June 2024.
2. ACCOUNTING POLICIES
The financial statements have been prepared in accordance with UK adopted
international accounting standards in conformity with the requirements of the
Companies Act 2006 and in accordance with International Financial Reporting
Standards ("IFRS") as adopted in the United Kingdom.
Whilst the financial information included in this announcement has been
computed in accordance with IFRSs, this announcement does not itself contain
sufficient information to comply with IFRSs.
The financial information set out does not constitute the Company's statutory
accounts for the year ended 31 March 2024, but is derived from those accounts.
Statutory accounts for the year ended 31 March 2023 have been delivered to the
Registrar of Companies and those for the year ended 31 March 2024 will be
delivered following the Company's annual general meeting. The auditors have
reported on those accounts: their reports were unqualified, did not draw
attention to any matters by way of emphasis without qualifying their report
and did not contain statements under section 498(2) or (3) Companies Act 2006
or equivalent preceding legislation.
A copy of the annual report for the year ended 31 March 2024 will be available
at www.caffynsplc.co.uk and will be posted to shareholders by 8 July 2024.
3. GOING CONCERN
The financial statements have been prepared on a going concern basis, which
the directors consider appropriate for the reasons set out below.
The directors have considered the going concern basis and have undertaken a
detailed review of trading and cash flow forecasts for a period of one year
from the date of approval of this Annual Report. This has focused primarily
on the achievement of the banking covenants associated with the term loan and
revolving credit facilities provided by HSBC, which cover levels of interest,
borrowing and freehold property security. The covenant tests relating to
security levels were easily passed at 31 March 2024 and, prior to the
year-end, HSBC agreed to waive the tests covering interest and borrowing
levels. For the coming year agreement was reached to implement a new covenant
test which will require the Company to achieve minimum cumulative Senior
EBITDA hurdles, which are £Nil for the quarter ending 30 June 2024, £1.0
million for the half-year ending 30 September, £1.5 million for the nine
months ending 31 December 2024 and £3.0 million for the full financial year
ending 31 March 2025. The test on 31 March 2025 will be the final test to be
carried out within the twelve-month period from the anniversary of the signing
of these financial statements. Based on expected borrowing levels and levels
of interest rates in the coming twelve months, the covenant hurdle for the
full financial year ending 31 March 2025 equates broadly to an underlying
break-even position for the Company. The existing covenant tests relating to
interest and borrowing levels will then be reapplied with effect from 30 June
2025. Any failure of a covenant test would render the borrowing facilities
from HSBC to become repayable on demand, at the option of the lender.
Under the Company's interest cover covenant test, to be reapplied from 30 June
2025, it will be required to make underlying profits before senior
interest (that being paid to HSBC and VW Bank on its term loan and revolving
credit facility borrowings), corporation tax, depreciation and amortisation
("senior EBITDA") for a rolling twelve-month period which is at least four
times the level of senior interest. Under the borrowings test, the Company's
borrowings from HSBC and VW Bank on its term loan and revolving credit
facilities must be less than 375% of its senior EBITDA. When this covenant
test is reapplied on 30 June 2025 the covenant multiple will be increased from
375% to 400%.
The Company's final covenant test over its levels of freehold property
security requires that the level of its bank borrowings do not exceed 70% of
the independently assessed value of its charged freehold properties. This test
was passed at 31 March 2024 and will remain in place throughout the coming
financial year. Property values would need to reduce by some two-thirds before
this covenant test became at risk of failure.
Once reapplied on 30 June 2025, these covenants will then continue to be
tested quarterly. Financial modelling for the coming twelve-month period has
allowed the directors to conclude that there is satisfactory headroom in the
Company's banking covenants.
The directors have also given consideration to the current uncertainties in
the state of the UK economy, as well as to cost pressures which have impacted
businesses such as increases to staffing costs from the rise in the National
Minimum and National Living Wages, from business rates and from increases to
funding costs from high interest base rates.
The directors have also considered the Company's working capital requirements.
The Company meets its day-to-day working capital requirements through
short-term stocking loans, bank overdraft and revolving-credit facility, and
medium-term revolving credit facilities and term loans. At the year-end, the
medium-term banking facilities included a term loan with an outstanding
balance of £5.4 million and a revolving credit facility of £6.0 million from
HSBC, its primary bankers, with both facilities being next renewable in March
2026. HSBC also makes available a short-term overdraft facility of £3.5
million, which is renewed annually each August. The Company also has a
short-term revolving-credit facility of £4.0 million, which is renewed
annually each August, from Volkswagen Bank. In the opinion of the directors,
there is a reasonable expectation that all facilities will be renewed at their
scheduled expiry dates. The failure of a covenant test would render these
facilities repayable on demand at the option of the lender. At 31 March 2024
the Company held cash in hand balances of £0.4 million and had undrawn
borrowing facilities of £7.5 million, all of which would be immediately
available.
The directors have a reasonable expectation that the Company has adequate
resources and headroom against the covenant tests to be able to continue in
operational existence for the foreseeable future and for a period of one year
from the date of approval of the Annual Report. For those reasons, they
continue to adopt the going concern basis in preparing this Annual Report.
4. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expense. Actual results may differ from these estimates.
These judgements and estimates are continually evaluated and are based on
historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
Certain critical accounting estimates in applying the Company's accounting
policies are listed below.
Retirement benefit obligation
The Company has a defined benefit pension scheme. The obligations under this
scheme are recognised in the balance sheet and represent the present value of
the obligation calculated by independent actuaries, with input from
management. These actuarial valuations include assumptions such as discount
rates, return on assets and mortality rates. These assumptions vary from time
to time depending on prevailing economic conditions. Details of the
assumptions used are provided in note 24 to the 2024 Annual Report. At 31
March 2024, the net liability of the scheme included in the Statement of
Financial Position was £10.0 million (2023: £8.8 million).
Impairment
The carrying value of property, plant and equipment and goodwill are tested
annually for impairment as described in notes 12, 13, 14 and 16 to the 2024
Annual Report. For the purposes of the annual impairment testing, the
directors recognise Cash Generating Units (CGUs) to be those assets
attributable to an individual dealership, which represents the smallest group
of assets which generate cash inflows that are independent from other assets
or CGUs. The recoverable amount of each CGU is based on the higher of its fair
value less costs to sell and its value in use. The fair value less costs to
sell of each CGU is based upon the market value of any property contained
within it and is determined by an independent valuer, and its value in use is
determined through discounting future cash inflows (as described in detail in
note 16 to the 2024 Annual Report). As a result of this review, the directors
considered that two impairments totalling £0.6 million were required to the
carrying value of its property assets (2023: no impairments).
Inventory provisions
The Company carries significant inventories of new and used cars, as well as
operating its own fleet of sales demonstrators and courtesy cars for service
customers. These cars are valued at the lower of cost and net realisable value
by reference to trade valuation guides, after adjusting for the mileage and
condition of the cars. At the year-end, the Company held a provision against
the cost of its used inventory of £0.3 million (2023: £0.2 million). The
directors considered that this provision was sufficient to ensure that
inventories were shown at the lower of cost and net realisable value.
Surplus ACT recoverable
The Company carries a balance of surplus unrelieved advanced corporation tax
("ACT") which can be utilised to reduce corporation tax payable subject to a
restriction to 25% of taxable profits less shadow ACT calculated at 25% of
dividends. Uncertainty arises due to the estimation of future levels of
profitability, levels of dividends payable and the reversal of deferred tax
liabilities in respect of accelerated capital allowances and on unrealised
capital gains. For example, a reduction in the Company's profitability could
result in a delay in the utilisation of surplus unrelieved ACT. However, based
on the Company's current projections, the directors have a reasonable
expectation that the surplus ACT will be fully relieved against future
corporation tax liabilities by 31 March 2027.
Corporation tax losses
The Company has unrelieved trading losses of £1.3 million (2023: £Nil) which
will be available for offset against profits made in future periods. based on
the Company's current projections, the directors have a reasonable expectation
that these losses will be fully relieved against future corporation tax
liabilities by 31 March 2026.
5. Non-underlying items
The following amounts have been presented as non-underlying items in these
financial statements:
2024 2023
£'000 £'000
Net loss on disposal of property, plant and equipment 41 -
Other income, net - 37
Within operating expenses:
Service cost on pension scheme (18) (23)
Property impairments (604) -
(622) (23)
Non-underlying items within operating profit (581) 14
Net finance expense on pension scheme (398) (64)
Non-underlying items within net finance expense (398) (64)
Total non-underlying items before taxation (979) (50)
Taxation credit on non-underlying items 245 10
Total non-underlying items after taxation (734) (40)
Underlying results exclude items that in the judgement of the directors have
non-trading attributes due to their size, nature or incidence. These include
disposals of fixed assets, receipts of non-trading income, impairments to
freehold properties and the service and finance costs of the Company's
defined-benefit pension scheme.
In the prior financial year, the Company received a final distribution of
£37,000 from the liquidators of MG Rover Group Limited.
6. Finance expense
2024 2023
£'000 £'000
Interest payable on bank borrowings 920 621
Interest payable on inventory stocking loans 1,454 856
Interest on lease liabilities 133 51
Finance costs amortised 122 104
Preference dividends (see note 9) 72 72
Finance income on interest in lease (21) (17)
Finance expense 2,680 1,687
7. Tax
2024 2023
£'000 £'000
Current tax
UK corporation tax (152) 152
Adjustments recognised in the period for current tax of prior periods - -
Total (credit)/charge (152) 152
Deferred tax (see note 17)
Origination and reversal of temporary differences (201) 442
Change in corporation tax rate 36 10
Adjustments recognised in the period for deferred tax of prior periods (24) (38)
Total (credit)/charge (189) 414
Tax (credited)/charged in the Income Statement (341) 566
2024 2023
The tax (credit)/charge arises as follows: £'000 £'000
On normal trading (96) 576
On non-underlying items (see note 5) (245) (10)
Tax (credited)/charged in the Income Statement (341) 566
The (credit)/charge for the year can be reconciled to the profit per the
Income Statement as follows:
2024 2023
£'000 £'000
(Loss)/profit before tax (1,545) 3,090
Tax at the UK corporation tax rate of 25% (2023: 19%) (386) 587
Tax effect of expenses that are not deductible in determining taxable profit 232 106
Movement in rolled over and held over gains (226) (93)
Effect of change in corporation tax rate 36 10
Other differences 27 (6)
Adjustment to tax charge in respect of prior periods (24) (38)
Tax (credit)/charge for the year (341) 566
The current year total tax credit is impacted by the effect of non-deductible
expenses, which includes non-qualifying depreciation.
The total tax credit for the year is made up as follows:
2024 2023
£'000 £'000
Total current tax (credit)/charge (152) 152
Deferred tax (credit)/charge
(Credited)/charged in the Income Statement (189) 414
Credited against other comprehensive income (413) (1,679)
Total deferred tax credit (602) (1,265)
Total tax credit for the year (754) (1,113)
Factors affecting the future tax charge
The Company has unrelieved trading losses of £1.3 million (2023: £Nil) which
will be available for offset against profits made in future periods. A
deferred tax asset totalling £0.3m (2023: £Nil) has been accounted for in
deferred tax (see note 17).
The Company also has unrelieved advance corporation tax of £0.3 million
(2023: £0.3 million), which is available to be utilised against future
mainstream corporation tax liabilities and is accounted for in deferred tax.
8. Earnings per ordinary share
The calculation of the basic earnings per share is based on the earnings
attributable to ordinary shareholders divided by the weighted average number
of shares in issue during the year.
Treasury shares are treated as cancelled for the purposes of this calculation.
The calculation of diluted earnings per share is based on the basic earnings
per share, adjusted to allow for the issue of shares and the pots-tax effect
of dividends and/or interest on the assumed conversion of all dilutive options
and other dilutive potential ordinary shares.
Reconciliations of earnings and weighted average number of shares used in the
calculations are set out below:
Underlying Basic
2024 2023 2024 2023
£'000 £'000 £'000 £'000
(Loss)/profit before tax (1,545) 3,090 (1,545) 3,090
Adjustments:
Non-underlying items (note 5) 979 50 - -
(Loss)/profit before tax (566) 3,140 (1,545) 3,090
Tax (note 7) 96 (576) 341 (566)
(Loss)/profit after tax (470) 2,564 (1,204) 2,524
(Deficit)/earnings per share (pence) (17.3)p 95.1p (44.3)p 93.6p
Diluted (deficit)/earnings per share (pence) (17.3)p 93.9p (44.3)p 92.4p
2024 2023
£'000 £'000
Underlying (deficit)/earnings after tax (470) 2,564
Underlying (deficit)/earnings per share (pence) (17.3)p 95.1p
Underlying diluted (deficit)/earnings per share (pence) (17.3)p 93.9p
Non-underlying losses after tax (734) (40)
Losses per share (pence) (27.0)p (1.5)p
Diluted losses per share (pence) (27.0)p (1.5)p
Total (deficit)/earnings (1,204) 2,524
(Deficit)/earnings per share (pence) (44.3)p 93.6p
Diluted (deficit)/earnings per share (pence) (44.3)p 92.4p
The number of fully paid Ordinary shares in circulation at the year-end was
2,726,306 (2023: 2,696,343). The weighted average number of shares in issue
for the purposes of the earnings per share calculation were 2,717,861 (2023:
2,695,678). The shares granted under the Company's SAYE scheme have been
treated as dilutive. For the purposes of this calculation, the weighted
average number of shares in issue for the purposes of the earnings per share
calculation were 2,718,023 (2023: 2,730,313).
9. Dividends
2024 2023
£'000 £'000
Preference shares
7% Cumulative First Preference 12 12
11% Cumulative Preference 48 48
6% Cumulative Second Preference 12 12
Included in finance expense (see note 6) 72 72
Ordinary shares
Interim dividend of 5.0 pence per ordinary share paid in respect 135 202
of the current year (2023: 7.5 pence)
Final dividend paid of 15.0 pence per Ordinary share in respect of the 404 404
March 2023 year end (2022: 15.0 pence)
539 606
A final dividend of 5.0 pence per ordinary share has been declared in respect
of the year ended 31 March 2024.
10. Right-of-use assets
£'000
Deemed cost
At 1 April 2023 3,631
Additions in the year 393
At 31 March 2024 4,024
Accumulated depreciation
At 1 April 2023 1,283
Depreciation for the year 398
At 31 March 2024 1,681
Net book value
At 31 March 2024 2,343
The right-of-use assets above represent four long-term property leases for
premises from which the Company operates a Volkswagen dealership in Brighton,
a Volvo dealership in Worthing and two car storage compounds in Eastbourne and
Tunbridge Wells.
Depreciation charges of £398,000 (2023: £373,000) in respect of right-of-use
assets were recognised within Administration Expenses in the Income Statement.
The interest expense on the associated lease liability of £133,000 (2023:
£51,000) is disclosed in note 6. Payments made in the year on the above
leases were £448,000 (2023: £391,000).
11. Property, plant and equipment
Freehold Leasehold Fixtures & Plant &
property improvements fittings machinery Total
£'000 £'000 £'000 £'000 £'000
Cost or deemed cost
At 1 April 2023 43,024 728 5,495 4,740 53,987
Additions at cost 240 1,267 719 349 2,575
Disposals (14) - (479) (348) (841)
At 31 March 2024 43,250 1,995 5,735 4,741 55,721
Accumulated depreciation
At 1 April 2023 7,402 728 4,420 3,292 15,842
Depreciation charge 698 25 459 407 1,589
Impairment charge 400 - - - 400
Disposals - - (479) (345) (824)
At 31 March 2024 8,500 753 4,400 3,354 17,007
Net book value
31 March 2024 34,750 1,242 1,335 1,387 38,714
Short-term leasehold property for both the Company and the Group comprises net
book value of £1,242,000 in the Statement of Financial Position (2023:
£Nil).
Depreciation charges of £1,589,000 (2023: £1,640,000) in respect of
property, plant and equipment was recognised within Administration Expenses in
the Income Statement. In addition, based on the valuation of the Company's
freehold properties undertaken by CBRE, an impairment charge of £400,000
(2023: £Nil) was taken against the cost of one freehold property to ensure
that the related cash generating unit ("CGU") remained disclosed at its fair
value less costs of disposal.
The Company valued its portfolio of freehold premises and investment
properties as at 31 March 2024. The valuation was carried out by CBRE Limited,
Chartered Surveyors, in accordance with the Royal Institution of Chartered
Surveyors valuation - global and professional standards requirements. The
valuation is based on existing use value which has been calculated by applying
various assumptions as to tenure, letting, town planning, and the condition
and repair of buildings and sites including ground and groundwater
contamination. Management are satisfied that this valuation is materially
accurate. The excess of the valuation over net book value as at 31 March 2024
of those sites was £10.7 million (2023: £11.5 million). In accordance with
the Company's accounting policies, this surplus has not been incorporated into
these financial statements.
12. Investment properties
£'000
Cost
At 1 April 2023 and 31 March 2024 9,650
Accumulated depreciation
At 1 April 2023 2,119
Depreciation charge 111
Impairment charge 204
At 31 March 2024 2,434
Net book value
At 31 March 2024 7,216
Depreciation charges of £111,000 (2023: £115,000) in respect of Investment
properties were recognised within Administration Expenses in the Income
Statement. In addition, based on the valuation of the Company's freehold
properties undertaken by CBRE, an impairment charge of £204,000 (2023: £Nil)
was taken against the cost of one freehold property to ensure that the related
cash generating unit ("CGU") remained disclosed at its fair value less costs
of disposal.
As described in note 11, the total excess of the valuation of all of the
Company's freehold properties over net book value as at 31 March 2024 was
£10.7 million (2023: £11.5 million). Investment properties accounted for
£0.6 million (2023: £0.7 million) of this surplus.
13. Net investment in lease
2024 2023
£'000 £'000
Due after more than one year 65 225
Due within one year 160 164
At 31 March 225 389
The premises shown above are sub-let to a third-party under a lease which has
the same terms and duration as the Company's own lease.
14. Goodwill
Group and Company: £'000
Cost
At 1 April 2023 and 31 March 2024 481
Provision for impairment
At 1 April 2023 and 31 March 2024 195
Carrying amounts allocated to CGUs
Volkswagen, Brighton 200
Audi, Eastbourne 86
At 31 March 2024 286
For the purposes of the annual impairment testing, goodwill is allocated to a
CGU. Each CGU is allocated against the lowest level within the entity at which
goodwill is monitored for management purposes. Consequently, the directors
recognise CGUs to be those assets attributable to individual dealerships and
the table above sets out the allocation of goodwill into the individual
dealership CGUs. The carrying amount of goodwill allocated to the Volkswagen,
Brighton CGU is the only amount considered significant in comparison with the
Group's total carrying amount of goodwill.
Goodwill impairment reviews are undertaken annually, or more frequently if
events or changes in circumstances indicate that the carrying amount may not
be recoverable and a potential impairment may be required. Impairment reviews
have been performed for all CGUs for the years ended 31 March 2023 and 2024.
Valuation basis
The recoverable amount of each CGU is based on the higher of its fair value
less selling costs and value in use. The fair value less selling costs of each
CGU is based initially upon the market value of any property contained within
it and is determined by an independent valuer as described in note 13. Where
the fair value less selling costs of a CGU indicates that an impairment may
have occurred, a discounted cash flow calculation is prepared in order to
assess the value in use of that CGU, involving the application of a pre-tax
discount rate to the projected, risk-adjusted pre-tax cash inflows and
terminal value.
The two CGUs noted below both relate to leasehold premises and therefore only
the value-in-use calculation is appropriate.
Period of specific projected cash flows (Volkswagen, Brighton CGU)
The recoverable amount of the Volkswagen, Brighton CGU is based on value in
use. Value in use is calculated using cash flow projections for a five-year
period from 1 April 2024 to 31 March 2029. These projections are based on the
most recent budget which has been approved by the board being the budget for
the year ending 31 March 2025. The key assumptions in the most recent annual
budget on which the cash flow projections are based relate to expectations of
sales volumes and margins, and expectations around changes in the operating
cost base. These assumptions are based on past experience, adjusted to
expected changes, and on external sources of information. The cash flows
include ongoing capital expenditure required to maintain the dealership but
exclude any growth capital expenditure projects to which the Group was not
committed at the reporting date.
Growth rates, ranging from -189% (2023: 1%) to 34% (2023: 12%) have been used
to forecast cash flows for a further four years beyond the budget period,
through to 31 March 2029. These growth rates reflect the products and markets
in which the CGU operates. These growth rates do not give rise to an
impairment. Growth rates are internal forecasts based on a combination of
internal and external information. Based on these forecasts, the headroom
available on the total future profits is £1.4 million (2023: £1.4 million)
before an impairment would be necessary.
Period of specific projected cash flows (Volvo, Worthing CGU)
The recoverable amount of the Volvo, Worthing CGU is based on value in use.
Value in use is calculated using cash flow projections for a five-year period
from 1 April 2024 to 31 March 2029. These projections are based on the most
recent budget which has been approved by the board being the budget for the
year ending 31 March 2025. The key assumptions in the most recent annual
budget on which the cash flow projections are based relate to expectations of
sales volumes and margins, and expectations around changes in the operating
cost base. These assumptions are based on past experience, adjusted to
expected changes, and on external sources of information. The cash flows
include ongoing capital expenditure required to maintain the dealership but
exclude any growth capital expenditure projects to which the Group was not
committed at the reporting date.
Growth rates, ranging from -940% (2023: -25%) to 8% (2023: 9%) have been used
to forecast cash flows for a further four years beyond the budget period,
through to 31 March 2029. These growth rates reflect the products and markets
in which the CGU operates. These growth rates do not give rise to an
impairment. Growth rates are internal forecasts based on a combination of
internal and external information. Based on these forecasts, the headroom
available on the total future profits is £0.5 million (2023: £2.4 million)
before an impairment would be necessary.
Discount rate
The cash flow projections have been discounted using a rate derived from the
Group's pre-tax weighted average cost of capital, adjusted for industry and
market risk. The discount rate used was 12.4% (2023: 12.4%).
Terminal growth rate
The cash flows subsequent to the forecast period are extrapolated into the
future over the useful economic life of the CGU using a steady or declining
growth rate that is consistent with that of the product and industry. These
cash flows form the basis of what is referred to as the terminal value. The
growth rate to perpetuity beyond the initial budgeted cash flows used in the
value in use calculations to arrive at a terminal value is 0.5% (2023: 0.5%).
Terminal growth rates are based on management's estimate of future long-term
average growth rates.
Conclusion
At 31 March 2024, no impairment charge in respect of goodwill was identified
(2023: no impairment charge).
Sensitivity to changes in key assumptions
Impairment testing is dependent on estimates and judgements, particularly as
they relate to the forecasting of future cash flows. The outcome of the
impairment test is not sensitive to reasonably possible changes in respect of
the projected cash flows, the discount rate applied, nor in respect of the
terminal growth rate assumed.
15. Inventories
Group and Company: 2024 2023
£'000 £'000
Vehicles 28,547 28,651
Vehicles on consignment 12,569 10,229
Oil, spare parts and materials 1,125 1,100
Work in progress 10 9
At 31 March 42,251 39,989
2024 2023
Group and Company: £'000 £'000
Inventories recognised as an expense during the year 227,959 216,265
Inventories stated at net realisable value 985 976
Carrying value of inventories subject to retention of title clauses 25,384 22,519
All vehicle inventories held under consignment stocking arrangements are
deemed to be assets of the Group and are included on the Statement of
Financial Position from the date of consignment. The corresponding liabilities
to the manufacturers are included within trade and other payables. Inventories
can be held on consignment for a maximum consignment period set by the
manufacturer, which is generally between 180 and 365 days. Interest is payable
in certain cases for part of the consignment period, at various rates
indirectly linked to the Bank of England base rate.
During the year, £7,000 (2023: 24,000) was recognised in respect of the
write-down of inventories of spare parts due to general obsolescence.
16. Trade and other payables
2024 2023
£'000 £'000
Trade payable 21,718 21,810
Obligations relating to consignment stock 12,569 10,229
Vehicle stocking loans 8,058 7,511
Social security and other taxes 856 1,204
Accruals 1,838 2,342
Deferred income 452 493
Other creditors 106 85
At 31 March 45,597 43,674
Trade and other payables principally comprise amounts outstanding for trade
purchases and ongoing costs. The average credit period taken for these
trade-related purchases was 27 days (2023: 27 days).
The directors consider that the carrying amount of trade payables approximates
to fair value.
The Group finances the purchases of new car inventory through the use of
consignment funding facilities provided by its manufacturer partners and which
are shown above as Obligations relating to consignment stock. Vehicles are
physically supplied by the manufacturers with payment deferred until the
earlier of the registration of the vehicle or the end of the consignment
period, generally 180 days. In certain circumstances consignment periods can
be extended with the agreement of the manufacturer. The consignment funding
facilities attract interest at a commercial rate.
The Group utilises vehicle stocking loans to assist with the purchase of
certain used car inventory. Facilities are available from both its
manufacturer partners and a third-party finance provider and are generally
available for a period of 90 days from the date of purchase. These vehicle
stocking loans attract interest at a commercial rate.
Interest charges on consignment stocking loans and vehicle stocking loans
described above for the year ended 31 March 2024 were £1,454,000 (2023:
£856,000).
The obligations relating to consignment stock are all subject to retention of
title clauses for the vehicles to which they relate. Obligations for used and
demonstrator cars which have been funded are secured on the vehicles to which
they relate and are shown above as vehicle stocking loans. From a risk
perspective, the Company's funding is split between manufacturers through
their related finance arms and that funded by the Company through bank
borrowings.
The movements in deferred income in the year were as follows:
2024 2023
£'000 £'000
At 1 April 493 532
Utilisation of deferred income in the year (865) (1,021)
Income received and deferred in the year 824 982
At 31 March 452 493
17. Deferred tax
The following are the major deferred tax assets and liabilities recognised and
the movements thereon during the current and prior reporting period.
Accelerated tax Unrealised capital gains Retirement benefit obligations Short-term Trading
depreciation £'000 £'000 temporary differences Losses Recoverable
£'000 £'000 £'000 ACT Total
£'000 £'000
At 1 April 2023 (990) (1,690) 2,200 104 - 342 (34)
Change in tax rates and
prior year adjustments 23 - - - - 1 24
Timing differences (157) 225 (104) (125) 326 - 165
Recognised in other -
comprehensive income - - 413 - - 413
At 31 March 2024 (1,124) (1,465) 2,509 (21) 326 343 568
The Finance Act 2021 introduced an increase in the main corporation tax rate
to 25% from 1 April 2023.
The Company carries a balance of surplus unrelieved advanced corporation tax
("ACT") which can be utilised to reduce corporation tax payable subject to a
restriction of 25% of taxable profits less shadow ACT calculated at 25% of
shareholder Ordinary dividends. Shadow ACT has no effect on the corporation
tax payable itself but any surplus shadow ACT on dividends must be fully
absorbed before surplus unrelieved ACT can be utilised. At the commencement of
the financial year under review on 1 April 2023 there was no Shadow ACT
outstanding. During the year Shadow ACT generated by the payment of dividends
was unable to utilised so no surplus ACT could be utilised in the year. The
remaining value of surplus ACT available for utilisation in future periods at
31 March 2024 was £343,000 (2023: £342,000). Shadow ACT carried forward at
31 March 2024 was £135,000 (2023: £Nil).
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets against current tax liabilities
and it is considered that this requirement is fulfilled. The offset amounts
are as follows:
2024 2023
£'000 £'000
Deferred tax liabilities (2,610) (2,680)
Deferred tax assets 3,178 2,646
At 31 March 568 (34)
The unrealised capital gains include deferred tax on gains recognised on
revaluing the land and buildings in 1995 and where potentially taxable gains
arising from the sale of properties have been rolled over into replacement
assets. Such tax would become payable only if such properties were sold
without it being possible to claim rollover relief.
Trading losses available for use in future periods amounted to £1.3 million
(2023: £Nil). Based on forecasts prepared the Directors conclude that these
losses will reverse against future profitability.
18. Notes to the cash flow statement
2024 2023
£'000 £'000
(Loss)/profit before tax for the year (1,545) 3,090
Adjustments for net finance expense 3,078 1,751
1,533 4,841
Adjustments for:
Depreciation of property, plant and equipment, investment properties and
right-of-use assets 2,702 2,128
Cash payments into the defined-benefit pension scheme (831) (800)
Gains on disposal of property, plant and equipment (41) -
Share-based payments 31 46
Operating cash flows before movements in working capital 3,394 6,215
Increase in inventories (2,262) (12,444)
Increase in receivables (189) (1,857)
Increase in payables 1,944 14,296
Cash generated by operations 2,887 6,210
Tax paid, net of refunds (68) (320)
Interest paid (2,700) (1,653)
Net cash derived from operating activities 119 4,237
All interest payments are treated as operating cash movements as they arise
from movements in working capital.
Reconciliation of debt
Liabilities
Bank Revolving arising from Bank
and other credit Lease Preference financing and cash balances Net
Group and loans facilities liabilities shares activities £'000 debt
Company: £'000 £'000 £'000 £'000 £'000 £'000
At 1 April 2023 6,312 6,000 2,714 812 15,838 (4,226) 11,612
Cash movement (559) - (633) - (1,192) 3,788 2,596
Non-cash movement - - 526 - 526 - 526
At 31 March 2024 5,753 6,000 2,607 812 15,172 (438) 14,734
Current liabilities 445 1,000 501 - 1,946 (438) 1,508
Non-current liabilities 5,308 5,000 2,106 812 13,226 - 13,226
At 31 March 2024 5,753 6,000 2,607 812 15,172 (438) 14,734
Non-cash movements in lease liabilities relate to an extension in the year of
an existing lease and the interest charge.
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