Caffyns Plc – Final Results

DJ Caffyns PLC Final Results

Preliminary Results for the year ended 31 March 2016
  Summary

                                          2016      2015
                                       GBP'000   GBP'000
 
Revenue                               232,492   210,314
 
Underlying* profit before
  tax                                    2,857     2,472
 
Underlying* EBITDA                      5,140     4,797
 
Net non-underlying (charge)/credit
  before tax                             (222)     8,966
 
Profit before tax                       2,635    11,438
 
                                            p         p
 
Underlying* earnings per share           96.4      78.1
 
Earnings per share                       90.1     335.5
 
Proposed final dividend per
  share                                  14.50     13.50
 
Dividend per share for the
  year                                   21.75     20.25
 
  * Underlying results exclude items that have
   non-trading attributes due to their size, nature
   or incidence.
 

 Highlights

   —     Like for like new car unit sales up 6.2% against 3.3% in our market sector
   —     Like for like used car unit sales up 9.3%
   —     Revenue up by 10.6% to GBP232m
   —     Underlying profit before tax up 15.6% to GBP2,857,000 (2015: GBP2,472,000)
   —     Underlying earnings per share up 23.4% to 96.4p (2015: 78.1p)
   —     Recommended dividend per ordinary share for year increased by 7.4% to 21.75p
   —     Property portfolio revalued at 31 March 2016: GBP9.5m surplus (not included in accounts)

 —     Disposal of Land Rover business in Lewes, retaining the freehold premises, for cash consideration of GBP7.5m post year-end.
  Commenting on the results, Simon Caffyn, Chief Executive said:
  “I am delighted to announce that the underlying profit before tax for last year increased by 15.6% and we now have significant financial flexibility to take advantage of opportunities to expand.”
  Enquiries:

              Simon Caffyn, Chief
Caffyns plc    Executive               Tel:   01323 730201
 Mark Harrison, Finance
  Director
HeadLand      Howard Lee               Tel:   020 3805 4822
 

 Operational and Business Review
  Summary of results
  I am pleased to report further profit improvement during the year under review and an underlying profit before tax for the year of GBP2.86m up 15.6% from GBP2.47m last year.
  Profit before tax was GBP2.64m compared to GBP11.44m last year. The results for the year to 31 March 2016 include a cost for the redemption of 425,000 preference shares whilst the year to March 2015  included an GBP8.86m gain on the past service cost of the defined benefit pension liabilities.
  Revenue for the year was up 10.6% to GBP232.5m (2015: GBP210.3m).
  Underlying earnings per share for the year were up 23.4% to 96.4p (2015: 78.1p).
  New and used cars
  Our new unit sales were up by 6.2% on a like for like basis in the twelve month period, while total UK new car registrations rose by 5.9%. Within this, the private and small business sector in which we operate rose by 3.3% so we again outperformed our specific sector. We experienced some pressure on new car margins, particularly in the first three months of 2016 but, despite this, new car gross profits were up on last year.
  Used car unit sales were up 9.3% on a like for like basis building further on this key area of the business. Used car margins remained steady and gross profits improved.
  Aftersales
  Our strong new and used sales in recent years have helped to grow our potential aftersales market and we have placed great emphasis on our customer retention programmes. As a result we have seen our like for like service sales increase 6.5%. Overall aftersales were up 6.7% with parts sales growing at 6.9% like for like.
  Operations and redevelopment
  The improved profits were delivered despite ongoing disruption from redevelopment work at our Eastbourne Volkswagen site which was finally completed in April 2016. Our new 12 car showroom with increased used car display, together with the greater workshop capacity built in 2014, establishes this dealership as a major presence in the area. The work was completed on schedule and budget at a total cost of GBP2.7m.
  After a very strong first half to the year, we began the second half just as the news broke of the Volkswagen emission test results in the United States. While this affected enquiry rates and sales, the recent announcements and customer loyalty support programmes from Volkswagen have helped confidence.
  After the year-end, in April 2016, we sold our Land Rover business in Lewes to Harwoods for a cash consideration of GBP7.5m which included a payment for goodwill of GBP5.5m.  We have also retained the freehold premises and let them to Harwoods at market value.  The sale was fully outlined in a circular sent to shareholders on 17 March 2016 and approved by ordinary shareholders at a General Meeting on 21 April 2016.
  The new car market continues to be driven by manufacturer offers which are having a positive impact on our retail sales. Personal contract plans are helping consumers to change into new vehicles at very competitive monthly payment rates, often combined with similarly competitive service plans helping consumers budget their vehicle costs more effectively. As a result, growth in new car sales has continued in the current year to date. Recent investment has also placed further emphasis on increasing our levels of used car sales and customer retention for aftersales business.
  Groupwide projects
  We remain focused on generating further improvements in the three key areas of used car sales, used car finance and aftersales. All of these contributed towards the increase in profits in the year under review, with strong growth in used car sales and labour sales. In addition, we continue to make very good progress utilising technology to enhance the customer-buying experiences from their first point of contact right through the showroom buying process, as well as improving aftersales retention.
  Property
  We operate primarily from freehold properties and our property portfolio provides additional stability to our business model. During the year, we incurred capital expenditure of GBP3.83m (2015: GBP3.03m). This included a significant upgrade to our Volkswagen dealership in Eastbourne (GBP2.56m spent in the year) and expenditure on a vacant freehold property in Goring-by-Sea of GBP0.4m.
  We sold two freehold sites which were surplus to requirements. In July 2015, we completed on the sale of our vacant freehold site in Upperton Road, Eastbourne for GBP1.58m. In January 2016, we sold part of our vacant freehold site in Goring-by-Sea for GBP0.36m. The building on the rest of this site has been let to Sainsbury's at a rent of GBP80,000 p.a. with effect from 25 April 2016.
  In April 2015, we received the GBP0.95m cash proceeds on the sale of an investment property in Uckfield, which had been sold and reported in the previous financial year.
  As announced on 27 April 2016, we exercised options to acquire three parcels of land, approximately 3.7 acres in aggregate, in Angmering, West Sussex for a total consideration of GBP2.3m. Consideration of GBP1.5m is payable on 27 October 2016 and consideration of GBP0.8m is due between 27 July 2016 and 27 October 2016 at the option of the vendor. The Company has plans to develop the site and relocate an existing business.
  The Company's portfolio of freehold premises was revalued as at 31 March 2016 by chartered surveyors CBRE Limited on the basis of existing use value. The excess of the valuation over net book value of freehold properties was GBP9.5m. In accordance with the Group's accounting policies (which reflect those generally utilised throughout the industry), this surplus has not been incorporated into the Company's accounts.
  Bank facilities
  The Company's banking facilities with HSBC Bank comprise a four year revolving credit facility of GBP7.5m entered into in September 2014 and overdraft facilities of GBP3.5m.  In addition, we have an overdraft facility of GBP7.0m provided by Volkswagen Bank together with a 10 year Term Loan of GBP5.0m expiring in November 2023. Bank borrowings, net of cash balances, at 31 March 2016 were GBP11.16m (2015: GBP10.13m) and as a proportion of shareholders' funds at 31 March 2016 were 42% (2015: 41%).
  Pension Scheme
  The Company's defined benefit scheme was closed to future accrual in 2010. In common with many companies, the directors have little control over the key assumptions required by the accounting standards in the valuation calculations. The deficit as at 31 March 2016 reduced to GBP5.0m (31 March 2015: GBP5.4m). The deficit, net of deferred tax, at 31 March 2016 was GBP4.1m (31 March 2015: GBP4.3m).
  The pension cost under IAS 19 continues to be charged as a non-underlying cost and in 2016 amounted to GBP215,000 (2015: GBP502,000).
  In line with the Recovery Plan agreed with the trustees following the actuarial valuation as at 31 March 2014, a cash payment of GBP300,000 was made in the in the year to 31 March 2016 (2014-15: GBP358,000) and will increase by 2.25% per annum.
  The Board continues to review options, together with the independent pension fund trustees, to reduce the cost of operating the scheme. Any additional actions that could further reduce the deficit over the medium and longer term will be considered.

 

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