Final Results

Caffyns PLC 6 June 2002 Preliminary Results of Caffyns plc For the year ended 31 March 2002 Caffyns plc, the leading motor distributor covering thirteen car franchises in the South-East of England, announces its preliminary results for the year-ended 31 March 2002. Highlights 2002 2001 * Sales from continuing operations £160.2m £140.0m * Profit on ordinary activities before taxation £2,785,000 £1,092,000 * Basic earnings per share 66.5p 32.8p * Proposed final dividend 12.0p 9.5p * Total dividend for the year 18.0p 15.0p Chairman's Statement Following the difficulties of the previous year, the result for the year ended 31 March 2002 is outstanding and is a Company record. I congratulate all the staff who have made this possible. However, we must not rest on our laurels as the continuing changes within the retail motor industry make planning for the future extremely difficult. There still remains the uncertainty of what will happen when Block Exemption expires in September 2002. The loss of our two Mercedes-Benz dealerships is a disappointment, and the manner in which it came about does no credit to the Manufacturer. We have been able to negotiate good terms of compensation but it is disappointing that years of industry and investment have been taken from us in such a mandatory fashion. We say goodbye to Ed Bull and his team with regret but with every good wish for their futures. In March, we were approached by a representative of British Empire Securities enquiring whether we would be prepared to buy the majority of their shareholding in the Company. Although we obtained shareholder approval at the AGM to buy in up to 15% of the ordinary shares, it was not our intention to exercise the option. However, your Board saw this offer as advantageous to the shareholders as a whole and a tender offer was arranged giving an opportunity to all ordinary shareholders to sell their shares. We note that we have already seen an improvement in the share price and any dividend paid in the future will be paid on a reduced number of shares in issue. As with last year's report, the Chief Executive has submitted a more detailed review of the year's activities. The current year has started well and we continue to look for opportunities to invest in new businesses. Finally, an interim dividend of 6.0p per ordinary share (2001 - 5.5p) was paid on the 15 January. A final dividend of 12.0p is now being recommended which, if approved, will be payable on 24 July 2002 to shareholders on the register on 5 July 2002, giving a total of 18.0p for the year (2001 - 15.0p). A M Caffyn Chairman 6 June 2002 Chief Executive's Review Results The year ended 31 March 2002 has seen an increase in the new car market and, without the handicap of the flooding we experienced in the previous year, I am delighted to report that we have capitalised on this upswing to achieve a record profit of £3.03 million before exceptional items. The return on sales of 1.9% is amongst the industry leaders. Our policy of investing the proceeds from recent property sales in strong franchise dealerships is proving very successful with profit before taxation up to £2.785 million after deduction of exceptional items. Block Exemption and UK Car Prices The Block Exemption Regulations draft proposals are still being debated and it is not possible to predict the final outcome. However, there is a growing feeling that any changes will be largely to the benefit of the industry and, in particular, retailers. The major aim of the EU Commission appears to be the harmonisation of European pre-tax prices. We have already seen UK prices drop substantially and I expect that further convergence will come from the increase of pre-tax prices in the high taxation countries such as Denmark and Holland. This would end the benefits derived from importing cars from these countries to the UK but cause the Governments with high car tax to reorganise their taxation policies. Franchises and Premises As I mentioned at the start of my report, we continue to invest in strong franchises. We have now completed our first year with Volvo in Eastbourne and I am delighted that this business has performed so well. The speed with which the staff here responded to the change of ownership and working practices has been most impressive and they are to be congratulated on their result. We are delighted to represent Volkswagen not only in Haywards Heath and Worthing, but also in Eastbourne from January this year. We have already greatly improved the Worthing site and during this year we will be redeveloping the sites in Eastbourne and Haywards Heath. The proceeds from the sale of our Volkswagen satellite in Lewes will help towards this cost. In February this year we opened our new Peugeot showroom in Sevenoaks. The dealership is in a prime location near the railway station and we now have an excellent facility to match. Our MG Rover businesses continue to produce good results. I am encouraged not only by MG Rover's performance to date but their alliance with China Brilliance should give them good reason to be optimistic about the future. In Brighton our Audi dealership continues to generate excellent results and we would be delighted if an opportunity arose to extend our representation of this franchise. Also in Brighton we have closed our Volkswagen van operation and consolidated our Hove Rover business into Preston Road Brighton giving greater economy of scale. In Lewes and Uckfield credit must go to all of the staff who worked hard to ensure that we recovered so quickly from the disastrous flooding of October 2000. The two Rover dealerships have had very good years and Land Rover has been outstanding. Our new Jaguar showrooms in Eastbourne are proving successful and the introduction of the X-Type has increased our customer base for this franchise. Already we are seeing a steady increase in profits. In Ashford the newly developed Vauxhall and Skoda dealerships are making steady progress. Skoda is proving particularly successful and the Vauxhall business is beginning to generate encouraging results. This year our two Ford dealerships in Alton and Haslemere produced record results and we are now reaping the rewards from our move in Alton to more economic premises. Having closed our Caffyns Motor Contracts (CMC) business last year we have successfully managed the first year's disposal of vehicles at end of contract. Mercedes Following the extraordinary action by Mercedes in terminating their entire network of dealers in the UK last year, the dealers secured an agreement requiring Mercedes to give proper notice and to pay compensation to terminated dealers in the form of a territory release payment (TRP). We have chosen to exit the franchise on 30 June and, at the time of writing, we are finalising the arrangements with the incoming dealer. The agreement provides that our staff will be transferred to the incoming dealer. Since the year-end, we have sold our site in Salisbury to another party. Overall, a substantial cash inflow in the region of £5 million will result, enabling us to continue to invest in our more profitable franchises. Pensions We regularly and extensively review our pension provision and I am pleased to report that our final salary and career average schemes remain in good health. Technology During the year UCS, the American company who provide our group-wide dealer management systems, acquired one of the two leading UK software houses supplying systems to the majority of the UK dealer network. This provides us with greater security and stability in this fast changing area of the business. People and Training I began by announcing our record results, which are of course entirely due to the enthusiasm and commitment of our staff. We continue to invest heavily in staff training and development and we have recently completed a major refurbishment of our in-house training rooms. I am very grateful to all of our staff whose professional approach to customer service has helped produce such an improved result. The Future We await the final version of the new Block Exemption Regulation but the future offers great opportunities for us. We continue to develop our relationships with our manufacturer partners whilst at the same time working hard to improve our customer service through ongoing people development. With our steadily improving profit performance and our relatively low levels of borrowings we are well placed to continue our acquisition programmes should suitable opportunities arise. S G M Caffyn Chief Executive 6 June 2002 For further information: Simon Caffyn, Chief Executive Mark Harrison, Finance Director 01323 730201 Caffyns plc Preliminary Announcement For the year ended 31 March 2002 Consolidated Profit and Loss Account Note Total Total 2002 2001 £'000 £'000 restated* Turnover Continuing Operations 159,251 139,062 Acquisitions 983 938 160,234 140,000 Discontinued operations - 3,401 160,234 143,401 Cost of Sales (137,478) (124,310) Exceptional items 2 - (1,585) Total cost of sales (137,478) (125,895) Gross profit 22,756 17,506 Other operating charges (19,007) (16,753) Total Operating Profit Continuing operations before exceptional item 3,732 2,101 Acquisitions 17 - 3,749 2,101 Discontinued operations - (1,348) Operating Profit 3,749 753 Exceptional items - continuing operations 2 (244) 1,039 - discontinued operations - (100) (244) 939 Profit on ordinary activities before interest 3,505 1,692 Interest payable (720) (600) Profit on ordinary activities before taxation 2,785 1,092 Taxation 3 (423) 108 Profit on ordinary activities after taxation 2,362 1,200 Dividends (equity and non-equity) 4 (654) (611) Retained profit 1,708 589 Earnings per ordinary share 5 Basic 66.5p 32.8p Adjusted 66.5p 54.3p Diluted 66.2p 32.7p Note of Historical Cost Profits and Losses Reported profit on ordinary activities before taxation 2,785 1,092 Realisation of property revaluation surpluses 272 1,111 Historical cost profit on ordinary activities before taxation 3,057 2,203 Historical cost profit for the year retained after taxation and dividends 1,980 1,700 There were no recognised gains or losses other than the profit for the financial year. *The comparative results for the year ended 31 March 2001 have been restated following the implementation of FRS19 (Deferred tax). Caffyns plc Consolidated Balance Sheet at 31 March 2002 2002 £'000 2001 £'000 Note As restated Fixed Assets Intangible assets 34 24 Tangible assets 26,356 25,022 26,390 25,046 Current Assets Stocks 23,629 22,096 Debtors 7,800 6,262 Bank balances and cash 554 - 31,983 28,358 Creditors Amounts falling due within one year (27,302) (23,179) Net Current Assets 4,681 5,179 Total Assets Less Current Liabilities 31,071 30,225 Creditors Amounts falling due after more than one year (6,418) (4,427) Provisions for liabilities and charges (541) (1,008) 24,112 24,790 Capital and Reserves Called up share capital 6 2,686 2,935 Share premium account 167 164 Capital redemption reserve 249 - Revaluation reserve 4,036 4,308 Profit and loss account 16,974 17,383 24,112 24,790 Equity Shareholders' funds 22,875 23,553 Non-equity shareholders' funds 1,237 1,237 Total shareholders' funds 7 24,112 24,790 Caffyns plc Consolidated Cash Flow Statement for the year ended 31 March 2002 2002 2001 Note £'000 £'000 £'000 £'000 Net cash inflow from operating activities 8 4,086 1,975 Returns on investment and servicing of finance Interest paid (720) (600) Preference dividends paid (102) (102) (822) (702) Taxation UK Corporation tax refunded/(paid) 98 (353) Capital expenditure Purchase of tangible fixed assets (1,943) (3,524) Closure costs (301) (260) Sale of tangible fixed assets 626 4,024 (1,618) 240 Acquisitions (1,319) (1,590) Equity dividends paid (526) (502) Cash outflow before financing (101) (932) Financing Capital element of finance leases (129) (118) Issue of shares 3 142 Loan repayments - (500) Loan advances 4,000 1,000 Net cash inflow from financing 3,874 524 Increase/(decrease) in cash 9,10 3,773 (408) Caffyns plc Notes to the Preliminary Announcement for the year ended 31 March 2002 1. Basis of preparation This preliminary statement, which does not constitute statutory accounts as defined in section 240 of the Companies Act 1985, has been extracted from the statutory financial statements of the company for the year ended 31 March 2002 on which the auditors issued an unqualified audit opinion on 6 June 2002. These financial statements have not yet been delivered to the Registrar of Companies. The Group has adopted FRS18 (Accounting Policies), FRS19 (Deferred Tax) and the transitional provisions of FRS17 (Retirement Benefits). The change in policy as a result of adopting FRS19 has meant that the taxation figures disclosed for the year ended 31 March 2001 have been restated. The new accounting policy adopted as a result of FRS19 is as follows: Deferred tax is recognised on all timing differences where the transactions or events that give the group an obligation to pay more tax in the future, or a right to pay less tax in the future, have occurred by the balance sheet date. Deferred tax on defined benefit pension scheme surpluses or deficits is adjusted against these surpluses. Deferred tax assets are recognised when it is more likely than not that they will be recovered. Deferred tax is measured using rates of tax that have been enacted or substantively enacted by the balance date. 2. Exceptional items 2002 2001 £'000 £'000 Exceptional items - flood losses - 800 - Caffyns Motor Contracts - 785 - 1,585 The exceptional item for flood losses related to the losses arising on the flood damage at three of the company's branches. The provision of £785,000 on the cessation of Caffyns Motor Contracts ('CMC') relates to the difference between the forecast residual values of vehicles and the residual amounts that the company has guaranteed to pay for the vehicles. It is anticipated that the provision will be utilised over a period of not more than 3 years from 31 March 2001. Arising in respect of branch closures: 2002 2001 £'000 £'000 Continuing Operations Net profits on disposal of tangible fixed assets 57 1,199 Closure costs (301) (160) (244) 1,039 Discontinued operations Closure costs - (100) (244) 939 The closure costs and profit on disposal related to the surplus on and related costs incurred as a result of closing/ disposing of branches in the year. The effect on the taxation charge for the current year of the exceptional items recognised below operating profit is disclosed in note 3. 3. Taxation 2002 2001 £'000 £'000 As restated Taxation Analysis of (charge)/credit for year: Current tax: UK Corporation tax at 30% (689) 150 Advance corporation tax recovered 303 (100) Adjustment relating to prior years 8 106 (378) 156 Deferred taxation Origination and reversal of timing differences (45) (48) (423) 108 The group's UK corporation tax charge has been reduced by £90,000 (2001 - £78,000) as a result of the exceptional costs (note 2) and a further £60,000 (2001: £139,000) due to utilisation of tax losses. There is no corporation tax charge arising on the exceptional profit due to the availability of roll-over relief and indexation. 4. Dividends 2002 2001 £'000 £'000 Non equity Preference 6.5% Cumulative First Preference 25 25 6.0% Cumulative Second Preference 12 12 10% Cumulative Preference 65 65 102 102 Equity Ordinary Interim dividend paid of 6.0p (2001 - 5.5p) 204 186 Final dividend proposed of 12.0p (2001 - 9.5p) 348 323 552 509 Total 654 611 5. Earnings per ordinary share The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. Shares held in employee share schemes 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 post 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. Earnings Number of 2002 Earnings Number of 2001 £'000 shares Earnings £'000 shares Earnings '000 per share '000 per share As restated Profit on ordinary 2,260 1,098 activities after taxation and preference dividends Weighted average 3,397 3,350 number of shares Basic earnings per 66.5p 32.8p share Profit on ordinary 2,260 1,098 activities after taxation and preference dividends Add: Exceptional - 800 item (see note 2) Less: Tax relief - (80) 2,260 1,818 Weighted average 3,397 3,350 number of shares Adjusted earnings 66.5p 54.3p per share Number of shares 48 51 under option Number of shares (33) (48) that would have been issued at average market value Diluted earnings 2,260 3,412 66.2p 1,098 3,353 32.7p per share 6. Share Capital On 26 March 2002, the Company announced a tender offer to purchase its own ordinary shares up to a maximum number of 498,555 shares representing 14.7% of the ordinary share capital of the company. The tender offer was conditional upon at least 33,975 ordinary shares being offered. This condition was satisfied as at the date of offer and, consequently, the effect of the offer is reflected in these accounts. The total cost of the share purchase was £2,389,000 which has been deducted from the Profit and Loss Account reserve. A transfer from share capital to capital redemption reserve reflects the nominal value of the shares acquired. Cancellation of 498,555 ordinary shares was effected on 9 April 2002. 7. Reconciliation of movements in shareholders' funds 2002 2001 £'000 £'000 £'000 £'000 As restated Profit for the financial year 2,362 1,200 Dividends (654) (611) 1,708 589 Purchase of own shares (2,389) - Equity shares issued in year 3 142 Net (decrease)/increase in shareholders' funds (678) 731 Brought forward at 1 April (as previously stated) 24,838 24,179 Effect of adoption of FRS19 (48) (120) Brought forward at 1 April (as restated) 24,790 24,059 Carried forward at 31 March 24,112 24,790 Shareholders' Funds are attributable as follows: Equity interests 22,875 23,553 Non-equity interests 6.5% Cumulative First preference shares of £1 each 389 389 10% Cumulative Preference shares of £1 each 648 648 6% Cumulative Second Preference shares of 10p each 200 1,237 200 1,237 24,112 24,790 8. Reconciliation of operating profit to net cash inflow from operating activities 2002 2001 £'000 £'000 Operating profit 3,749 753 Depreciation charge 1,029 921 Amortisation of goodwill 15 1 (Increase)/decrease in stocks (1,228) 9 Increase in debtors (1,675) (275) Increase/(decrease) in creditors 2,708 (169) (Decrease)/increase in provisions for liabilities (512) 735 Net cash inflow from operating activities 4,086 1,975 9. Reconciliation of net cash flow to movement in net debt 2002 2001 £'000 £'000 Increase/(decrease) in cash in the year 3,773 (408) Movement in loans (4,000) (500) Cash outflow from capital repayments of finance leases 129 118 Movement in net debt in the year (98) (790) Net debt at 1 April (6,525) (5,735) Net debt at 31 March (6,623) (6,525) 10. Analysis of net debt At 31 Acquisition Cashflow At 1 March £'000 £'000 April 2002 2001 £'000 £'000 (Cash at bank)/Overdrafts (554) 1,291 (5,064) 3,219 Debt falling due within 1 year 1,500 - 500 1,000 Debt falling due after more than 1 year 5,500 - 3,500 2,000 Finance leases 177 - (129) 306 7,177 - 3,871 3,306 Total 6,623 1,291 (1,193) 6,525 11. Annual Report Copies of the Annual Report will be dispatched to shareholders by 1 July 2002. 12. Financial Calendar Final dividend to be paid on 24 July 2002 to shareholders on the register as at 5 July 2002. (Ex Dividend date - 3 July 2002). Annual General Meeting at the Hydro Hotel, Eastbourne on Wednesday 24 July 2002 at 2.30 p.m. This information is provided by RNS The company news service from the London Stock Exchange

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