Preliminary Results
Caffyns PLC
02 June 2006
Preliminary results of Caffyns plc
for the year ended 31 March 2006
Caffyns plc, the leading motor distributor covering fourteen car franchises in
the south-east of England, announces its preliminary results for the year ended
31 March 2006.
2006 2005
£'000 £'000
• Sales 160,076 155,684
• Operating profit before exceptional items 1,172 2,473
• Operating profit after exceptional items 2,144 2,063
• Profit before tax 1,030 2,860
• Earnings per share - basic 26.3p 68.4p
• Proposed final dividend 16.0p 16.0p
• Dividend per ordinary share 24.0p 24.0p
Profits for year affected by business reorganisation caused by failure of MG
Rover
Non-recurring VAT rebate in previous year's result further affected comparative
profit before tax and earnings per share
Full year dividend maintained at 24.0p
Physical restructuring of the business near completion
Commenting on these results, Chief Executive Simon Caffyn said:
'Although the profits for the year ended March 2006 were significantly affected
by our refranchising and redevelopment programme, we have now largely completed
the physical restructuring of the business. After a difficult period adversely
affecting profits, we have advanced our strategy and grown our representation
with our most successful franchises. Subject to a stable economy, profits will
recover steadily over the next two years.'
Enquiries: Tel: 01323 730201
Simon Caffyn Chief Executive
Mark Harrison Finance Director
Chairman's Statement
The year to March 2006 has been a challenging one following the demise of MG
Rover in April 2005. I am pleased to be able to report that despite reduced
profits before tax for the year of £1,030,000, we start our new trading year in
good health with a strong cash flow and a very promising portfolio of
franchises.
The management team have worked hard to minimise the damage caused by the MG
Rover closures and they have been successful in securing new franchises. We have
nearly completed the redevelopment work and can now concentrate on building the
businesses to the expected levels of profitability from these refranchised
locations.
After several years of growth, the new car market has been in decline for over a
year now. However, with our stronger franchise portfolio and with increased
efficiencies throughout the Company we should continue to make progress.
An interim dividend of 8.0p per ordinary share (2005 - 8.0p) was paid on 11
January 2006. An unchanged final dividend of 16.0p (2005 - 16.0p) is now being
recommended which, if approved, will be payable on 27 July 2006 to shareholders
on the register on 23 June 2006, giving a total of 24.0p for the year (2005 -
24.0p).
B A Carte
Chairman
2 June 2006
Chief Executive's Operating Review
Results
The year ended March 2006 has been the most challenging year for the Company in
recent times. Before the year began we had already planned a relocation of a
major business together with the refurbishment of one of our largest
dealerships. In April 2005 MG Rover went into administration and we initiated a
major reorganisation and refranchising programme for our eight affected
dealerships. In addition, the new car markets in the private and business
sectors in which we operate fell 14.8% in the year to December 2005 and at March
2006 was down a further 5.3%.
Against this background we believe the profit before tax of £1,030,000 achieved
in the year represents a good result.
We have emerged not only with a profit for the year together with a strong cash
inflow of £2,163,000 from operating activities but also with a far stronger
portfolio of franchised dealerships.
Reorganisation and Refranchising
Immediately after the failure of MG Rover we quickly traded out of remaining
vehicle stocks to minimise exposure. At the same time we began the major
refranchising programme, referred to above, which involved considerable
redevelopment work at a number of dealerships. As a result all but two sites,
Seaford and Ramsgate, were awarded new franchises.
Ramsgate has been sold and the proceeds have been reinvested in new facilities.
We exchanged contracts for the sale of our site at Seaford in March 2006 and the
proceeds of £1.478m were received in May.
For Vauxhall we have refranchised the dealerships in Tonbridge and Brighton and
completed a major redevelopment of the facilities in Tunbridge Wells, also
adding the Chevrolet franchise. In Uckfield we have refranchised to Citroen, in
Eastbourne to Nissan and in Lewes we have amalgamated the MG Rover business into
our expanding Land Rover operation.
In Worthing we are scheduled to complete the refranchising works for an Audi
centre in July.
The costs of this exercise both in redevelopment and in disruption to profit
stream have been substantial but the positive attitudes shown by our staff has
enabled us to lay strong foundations for the future of these businesses.
Another major project saw the relocation of our Audi business from Hailsham to a
greenfield site in a highly visible location in Eastbourne. The old site has now
been sold. These vastly improved facilities will enable us to achieve the full
potential of our Audi market area which now covers Eastbourne, Brighton and
Worthing.
IT
During the year we have made a radical improvement to our IT and
telecommunications infrastructure substantially improving our capability to
communicate with customers, our manufacturer partners and internally. The
changes made, combined with other initiatives, will provide the company with a
robust and expandable platform.
Property
I have already mentioned the sale of our properties in Seaford, Ramsgate and
Hailsham but planning issues continue to delay the sale of our sites in Hythe
and Hove, which have been sold subject to planning permission. It is possible
that decisions on these will be made during the first half of our current
financial year. The premises at Burgess Hill were also sold during the year.
Since the year end, the company has purchased the freehold interest of a long
leasehold property already owned by the company for a cash consideration of
£900,000.
Pensions
Following a review of our pension provisions, and after extensive consultations
with staff, we have implemented a change for existing members from a final
salary scheme to a career average for contributions post 1 April 2006. New
entrants can join a defined contributions scheme. These changes have
strengthened the scheme going forward to the benefit of both members and the
company.
People and Training
During the year we have run our own highly successful management training
courses for departmental managers. In addition, many of our staff benefit from
additional training courses run by our manufacturers.
As well as running operational and management courses we have also developed and
run courses in the essential areas of health and safety, IT and all areas of
personal development.
This year has been particularly challenging and I would like to thank all our
employees, our advisors and our suppliers for their hard work and assistance
that has ensured we start the new year in a far stronger position.
The Future
Although the profits for the year ended March 2006 were significantly affected
by our refranchising and redevelopment programme, we have largely completed the
physical restructuring of the business. We have started on the process of
rebuilding and already some of our new franchises are already contributing
positively to operating performance. To fully deliver the potential of these
dealerships can take up to three years and whilst I am very encouraged by early
signs, our current potential will not be reached before 2008.
Overall, after a difficult period adversely affecting profitability, we have
advanced our strategy and grown our representation with our most successful
franchises. Subject to a stable economy, profits should recover steadily over
the next two years.
S G M Caffyn
Chief Executive
2 June 2006
CONSOLIDATED INCOME STATEMENT
for the year ended 31 March 2006
Note 2006 2005
£'000 £'000
Continuing operations
Revenue 160,076 155,684
Cost of sales
-------- ---------
Exceptional VAT refund - 1,489
Exceptional MG Rover Group items 2 317 (2,012)
Other costs of sales (135,658) (130,509)
-------- ---------
Total cost of sales (135,341) (131,032)
-------- ---------
Gross profit 24,735 24,652
Distribution costs (16,464) (16,123)
Administrative expenses
-------- ---------
Exceptional items 2 858 342
Other costs (6,782) (6,579)
-------- ---------
Total administrative expenses (5,924) (6,237)
Restructuring costs (203) (229)
-------- ---------
Operating profit
-------- ---------
Arising from exceptional items 2 972 (410)
On normal trading 1,172 2,473
-------- ---------
Total operating profit 2,144 2.063
Interest receivable - 1,914
Finance costs (1,114) (1,117)
-------- ---------
Profit before tax
-------- ---------
Arising from exceptional items 2 972 1,504
On normal trading 58 1,356
-------- ---------
Total profit before tax 1,030 2,860
Tax 3 (274) (890)
-------- ---------
Profit for the year attributable to the
shareholders of 756 1,970
Caffyns plc
-------- ---------
Earnings per share
Basic and diluted earnings per ordinary share from
continuing operations
and for the profit for the year 5 26.3p 68.4p
CONSOLIDATED BALANCE SHEET
at 31 March 2006
2006 2005
£'000 £'000
Non-current assets
Goodwill 481 481
Intangible assets 54 76
Property, plant and equipment 31,203 30,929
Deferred tax asset 1,939 1,941
------- --------
33,677 33,427
------- --------
Current assets
Inventories 22,694 24,441
Trade and other receivables 8,897 7,487
Current tax assets 186 132
Cash and cash equivalents 39 46
------- --------
31,816 32,106
------- --------
Non current assets classified as held for sale - 611
------- --------
Total assets 65,493 66,144
======= ========
Current liabilities
Bank and overdrafts and loans 7,981 7,868
Trade and other payables 21,057 21,857
Obligations under finance leases 28 41
Short-term provisions 341 609
------- --------
29,407 30,375
------- --------
Net current assets 2,409 2,342
------- --------
Non current liabilities
Bank loans 3,000 3,000
Preference shares 1,237 1,237
Retirement benefit obligation 3,190 3,294
Deferred tax liabilities 2,140 1,774
Obligations under finance leases 78 106
------- --------
9,645 9,411
------- --------
Liabilities directly associated with non-current assets
classified as
held for sale - 59
------- --------
Total liabilities 39,052 39,845
======= ========
Net assets 26,441 26,299
======= ========
EQUITY
Share capital 1,439 1,439
Share premium account 272 272
Capital redemption reserve 282 282
Revaluation reserve 3,971 4,837
Retained earnings 20,477 19,469
------- --------
Total equity attributable to shareholders of Caffyns plc 26,441 26,299
======= ========
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 March 2006
Note 2006 2005
£'000 £'000
Net cash from operating activities 6 2,163 4,772
------- --------
Investing activities
Proceeds on disposal of property, plant
and equipment 1,959 801
Purchases of property, plant and equipment (3,510) (3,496)
Acquisitions - (826)
------- --------
Net cash used in investing activities (1,551) (3,521)
------- --------
Financing activities
Dividends paid (691) (662)
Repayments of obligations under finance
leases (41) (29)
------- --------
Net cash used in financing activities (732) (691)
------- --------
Net (decrease)/ increase in cash and cash
equivalents (120) 560
Cash and cash equivalents at beginning of
year (7,822) (8,382)
------- --------
Cash and cash equivalents at end of year (7,942) (7,822)
------- --------
31 March 31 March 31 March
2006 2005 2004
£'000 £'000 £'000
Cash and cash equivalents 39 46 62
Overdrafts (7,981) (7,868) (8,444)
-------- ------- --------
Net cash and cash equivalents (7,942) (7,822) (8,382)
-------- ------- --------
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
for the year ended 31 March 2006
2006 2005
£'000 £'000
Profit for the year 756 1,970
Actuarial gains/(losses) recognised 108 (355)
Deferred tax on actuarial gains or losses (31) 106
------- --------
Total recognised income and expense for the year 833 1,721
======= ========
Notes to the Preliminary results
For the year ended 31 March 2006
1. Basis of Preparation
The financial information in this statement contains extracts from the 2006
Annual Report, which will be issued in June 2006 and prepared in accordance
with International Financial Reporting Standards ('IFRS') as adopted for
use by the European Union for accounting periods commencing on or after 1
January 2005. Prior to 2005 the group has reported its results under UK
Generally Accepted Accounting Practice ('UK GAAP'). The results in this
preliminary results statement have been prepared in accordance with IFRS
for the first time. There is a requirement to include at least one year of
comparative information in the financial statements for the year ended 31
March 2006 and therefore the transition date to IFRS for the group is 31
March 2004. The results for the year ended 31 March 2005 in this
preliminary results statement have been restated in accordance with IFRS.
On 25 November 2005 the group published its Interim Results for the half
year to 30 September 2006 which explained the impact of IFRS. This report
detailed the key differences between UK GAAP and IFRS that impact the
group. The report also included reconciliations of the balance sheet as at
31 March 2004, 30 September 2004 and the year ended 31 March 2005. The
Interim Results referred to above sets out the group's principal accounting
policies as they have been modified to comply with IFRS. The principal
differences which impact the group are summarised below:
i Goodwill - amortisation of goodwill is no longer permitted, it is instead
tested at least annually for impairment. Goodwill previously written off to
reserves is no longer required to be adjusted through the income statement
on disposal of a business.
ii Pensions - the deficit in the pension scheme is incorporated in the balance
sheet, operating and financing costs are charged to the income statement and
actuarial gains and losses are taken directly to equity.
iii Deferred tax - deferred tax is recognised on revaluations of property, on
gains on assets rolled over and on recoverable advance corporation tax.
iv Dividends - the recognition of dividends is on a declared rather than a
proposed basis.
The application of IFRS also changes the terminology and presentation of the
financial statements as reflected in this preliminary results statement.
This preliminary results statement has been prepared on the basis of the
accounting policies which the group has adopted in its financial statements for
the year ended 31 March 2006.
IFRS comprise a significant amount of accounting and financial reporting
regulation, much of which has been originated or revised very recently.
Interpretation of this regulation is expected to be refined throughout the
financial community, both in the UK and the rest of the European Union, as IFRS
are implemented for the first time by many listed companies.
2. Exceptional items 2006 2005
£'000 £'000
In cost of sales
Refund of VAT overpaid on demonstrator vehicles in - 1,489
the period 1973 to 1996
Credit/(cost) associated with the failure of the MG
Rover Group
Stock write downs 317 (1,412)
Warranty provision - (600)
------- ------
317 (523)
------- ------
In administrative expenses
Net profit on disposal of property, plant and 858 455
equipment
Bad debt and impairment review associated with the - (113)
failure of the MG Rover Group
------- ------
858 342
------- ------
Restructuring costs arising from branch closures (203) (229)
------- ------
Total exceptional items before interest 972 (410)
Interest received on VAT refund - 1,914
------- ------
Total before tax 972 1,504
Less tax thereon (294) (451)
------- ------
678 1,053
======= ======
MG Rover
Following the appointment of administrators to MG Rover Group Limited on 8
April 2005, an exceptional charge was made in the financial statements for
the year ended 31 March 2005. This comprised a charge to cost of sales of
£1,412,000 and represented provisions against the realisation of stocks of
MG Rover cars owned by the company at the year end and a provision of
£600,000 against potential warranty claims from customers who purchased MG
Rover cars which were registered after 1 April 2002, as the company has no
recourse to the manufacturer in respect of warranty claims by customers. In
2006 part of the provision was recovered. Also, £113,000 was charged to
other operating charges in respect of irrecoverable debts due from MG Rover
and an impairment review of MG Rover related fixtures and fittings.
3. Tax 2006 2005
£'000 £'000
Current tax
UK corporation tax 22 645
Advance corporation tax recovered - (239)
Adjustment relating to prior years' corporation tax (26) (24)
------ ------
Total (4) 382
------ ------
Deferred tax
Current year 307 369
Prior year adjustment (29) 139
------ ------
Total 278 508
------ ------
Total tax charged in the income statement 274 890
====== ======
4. Dividends
The directors recommend a final dividend of 16.0p (2005 - 16.0p) per
ordinary share, to be paid on 27 July 2006 to shareholders on the register
at 23 June 2006. An interim dividend of 8.0p (2005 - 8.0p) per share was
paid during the year, making a total for the year of 24.0p (2005 - 24.0p).
The ex-dividend date is 21 June 2005.
5. Earnings per ordinary share
The calculation of the basic earnings per share is based on the earnings
attributable to ordinary shareholders divided by the weighted average
number of shares in issue during the year.
The calculation of diluted earnings per share would be based on the basic
earnings per share, adjusted to allow for the issue of shares and the post
tax effect of dividends and/or interest, on the assumed conversion of all
dilutive options and other dilutive potential ordinary shares. At both year
ends there we no unissued shares, so the diluted earnings per share are the
same as the basic earnings.
Reconciliations of earnings and weighted average number of shares used in
the calculations are set out below:
Adjusted Basic
2006 2005 2006 2005
£'000 £'000 £'000 £'000
Profit before tax 1,030 2,860 1,030 2,860
Adjustments:
Exceptional items: - -
- Property profit and closure costs (655) (226)
- VAT - (3,403) - -
- MG Rover (317) 2,125 - -
------- ------ ------- ------
Adjusted profit before tax 58 1,356 1,030 2,860
Taxation 20 (439) (274) (890)
------- ------ ------- ------
Earnings 78 917 756 1,970
------- ------ ------- ------
Adjusted earnings per share 2.7p 31.8p
------- ------
Basic earnings per share 26.3p 68.4p
======= ======
The weighted average number of fully paid ordinary shares in issue during the
year was 2,879,298 (2005 - 2,879,298)
6. Notes to the cash flow statement
2006 2005
£'000 £'000
Profit from operations 2,144 2,063
Adjustments for:
Depreciation of property, plant and equipment 1,268 1,167
Amortisation of intangible assets 22 14
Gain on disposal of property, plant and equipment (858) (434)
(Decrease) / increase in provisions (268) 477
------- -------
Operating cash flows before movements in working 2,308 3,287
capital
Decrease / (increase) in inventories 1,747 (2,175)
Decrease in receivables 68 1,099
(Decrease) / increase in payables (800) 2,337
Increase in pensions 4 71
------- -------
Cash generated by operations 3,327 4,619
Income taxes paid (50) (644)
Interest paid (1,114) (1,117)
Interest received - 1,914
------- -------
Net cash from operating activities 2,163 4,772
------- -------
7. The financial information in this statement is not audited and does not
constitute statutory accounts within the meaning of s.240 of the Companies
act 1985 (as amended). This preliminary statement was approved by the board
of directors on 2 June 2006. The above results for the year ended 31 March
2006 have been abridged from the full group accounts for that year, which
received an unqualified auditors' report.
8. Annual Report
Copies of the Annual Report will be despatched to shareholders by 1 July
2006.
9. Financial Calendar
Annual General Meeting at the Hydro Hotel, Eastbourne on Thursday 27 July
2006 at 11.30am.
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