27509 14 August 2020 4:41 pm Proof 8Caffyns plcAnnual Report 2020Caffyns plc Annual Report 202027509-Caffyns-AR2020.indd 314/08/2020 16:44:28 27509 14 August 2020 4:41 pm Proof 8Visit us onlineContentsOur BusinessResults at a Glance01Operational and Business Review02Strategic Report07GovernanceBoard of Directors14Chairman’s Statement on Corporate Governance15Directors’ Remuneration Report21Report of the Directors33Directors’ Responsibilities statement38Report of the Independent Auditor39FinancialsIncome Statement45Statement of Comprehensive Income46Statement of Financial Position47Statement of Changes in Equity48Cash Flow Statement49Principal Accounting Policies50Notes to the Financial Statements57Other InformationFive Year Review87www.caffyns.co.uk27509-Caffyns-AR2020.indd 314/08/2020 16:44:38 www.caffyns.co.uk
Stock code CFYN
Results at a Glance
Summary
Revenue
Underlying EBITDA (see note A)
Underlying profit before tax (see note A)
Profit/(loss) before tax
Underlying (deficit)/earnings per share
Deficit per share
Proposed final dividend per ordinary share
Dividend per ordinary share for the year
2020
£’000
2019
£’000
197,854
209,246
3,428
251
103
pence
(4.9)
(9.4)
–
7.50
3,982
1,445
(428)
pence
35.3
(21.0)
15.00
22.50
Note A: Underlying results exclude items that have non-trading attributes due to their size, nature or
incidence. Non-underlying items for the period totalled a credit of £39,000 (2019: charge of £1,651,000)
and are detailed in Note 2 to these consolidated financial statements. Underlying EBITDA of £3,428,000
(2019: £3,982,000) represents Operating profit before non-underlying items of £1,633,000 (2019:
£2,626,000) adding back Depreciation and amortisation of £1,795,000 (2019: £1,356,000).
Note B: The implementation of IFRS 16 Leases decreased profits before tax for the year ended
31 March 2020 by £20,000, but increased underlying EBITDA by £236,000 in comparison to the
previous accounting treatment.
Overview
• Revenue down 5.4% to £197.9 million
• Like-for-like new car unit deliveries down by 11.0%
• Like-for-like used car unit sales down by 1.4%
• Aftersales revenues unchanged against 2019
• Underlying profit before tax of £0.3 million (2019: £1.4 million)
• No final dividend for the year ended 31 March 2020 due to the impact of the
covid-19 pandemic
• Property portfolio revaluation as at 31 March 2020 showing £11.8 million
(2019: £11.2 million) surplus to net book value (not recognised in these accounts)
Revenue
(£’000)
20
19
18
17
16
197,854
209,246
215,868
212,581
186,401
Underlying PBT
(£’000)
251
20
19
18
17
16
1,445
1,390
1,465
2,051
Underlying earnings per
ordinary share (p)
(4.9)
20
19
18
17
16
35.3
45.6
58.0
48.8
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Caffyns plc Annual Report 2020
Operational and Business Review
The year under review was defined by
two key events. Firstly, the covid-19
pandemic and the related requirement
to curtail the year early, temporarily
closing all our car showrooms and
most of our aftersales operations
on 24 March 2020. This impacted
materially on the result for the bi-annual
registration plate change month of
March, our most important trading
month of the financial year. The second
event, as highlighted at our half-year
stage, was the adverse impact on
the majority of our brands that arose
from the further implementation of the
emissions-testing regime, Real Driving
Emissions, commonly referred to as
RDE. This created some scarcity of
supply of new cars for a number of our
brands and adversely impacted on our
second most important trading month
of the year, September 2019. In the
light of these two events, the board
reports an underlying profit before tax
for the year of £0.25 million (2019:
£1.45 million). Full year turnover fell by
5.4% to £197.9 million (2019: £209.2
million), predominantly due to much
lower levels of new car deliveries in
the year. Used car unit sales, which
remained unaffected by RDE, fell by just
1.4%, whilst aftersales revenues were
unchanged, despite losing more than
a week of activity in the run up to the
year-end.
Our statutory result before tax for the
year was a profit of £0.1 million (2019:
loss of £0.4 million). Due to the tax
charge being in excess of the pre-tax
profit, basic losses per share were
9.4 pence (2019: 21.0 pence).
The underlying deficit per share for the
year was 4.9 pence (2019: earnings of
35.3 pence).
Coronavirus (“covid-19”)
The Company faced an unprecedented
situation when it was required to
temporarily close all its car showrooms
and most of its aftersales operations
on 24 March 2020, following UK
Government restrictions implemented
to deal with the nationwide covid-19
pandemic. With our showrooms
closed, only online and telephone
sales operations were able to continue,
alongside three aftersales operations,
which provided essential support for
NHS and other key workers only.
Subsequent to the year-end, in May
2020, we re-started our aftersales
operations at all sites with our
showrooms re-opening on 1 June 2020.
The temporary closure impacted the
year-end audit process and caused a
delay to our normal reporting timetable.
As a result, the Annual General Meeting
has been delayed from 28 July and is
now scheduled for 24 September 2020.
Given the exceptional circumstances,
this year’s Annual General Meeting will
need to be run as a closed meeting and
shareholders will not be able to attend
in person. Shareholders will be invited
to register questions in advance of the
meeting for the board to answer, and
answers will be made available after the
meeting via the Company’s corporate
website, www.caffynsplc.co.uk.
In response to the impact of covid-19,
the Company implemented numerous
cash preservation and cost saving
measures across many areas of the
business. These included making
extensive use of the Government’s Job
Retention Scheme, with approximately
80% of the Company’s employees
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The response from our employees to
this crisis has been outstanding and the
board would like to particularly thank
those that remained active throughout
the lockdown period to ensure that
we were able to offer an emergency
aftersales response to NHS and other
key workers, and to restart the business
quickly and effectively, first for aftersales
in May 2020 and then for car sales in
June 2020. We remain very focused on
the health and safety of our employees
and customers, and our showroom
and workshop activities continue to be
undertaken in a responsible and socially
distanced way.
Full use was also made of inventory
stocking facilities and the Company’s
manufacturer partners have been, and
continue to be, very supportive, offering
extended new vehicle funding and
reduced funding costs.
New and used car sales
Our new unit sales fell by 11.0%
on a like-for-like basis. With the key
trading months of March 2020 and
September 2019 impacted respectively
by the temporary showroom closures
highlighted above and the negative
impact of RDE. In the year, total UK new
car registrations declined by 11.7% and,
within this total, new car registrations in
the private and small business sector,
in which we principally operate, fell
by 14.3%.
Unit sales volumes of used cars fell by
1.4% on a like-for-like basis, although
unit margins remained strong. Over
the last five-year period, the Company
has recorded a 33% like-for-like growth
in the number of used cars sold, and
we continue to see this element of our
business providing a major opportunity
for further growth. The number of used
cars sold again exceeded the number of
new cars sold in the year.
Throughout the year under review,
we continued to upgrade our website
with multiple enhancements to our
customers’ online searching capabilities,
leading to an easier, more enjoyable
car-buying experience.
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furloughed in April 2020. The number
of furloughed employees reduced
in May as our aftersales operations
returned to more normal activity levels,
and then reduced further in June as
we were given permission to re-open
our showrooms. As part of our cost
savings exercise, an annual salary
ceiling of £37,500 was implemented
for all active employees, including the
executive directors and the chairman
of the Company, for the month of
April 2020. This ceiling impacted on
45 employees, approximately 10%
of the workforce. The non-executive
directors of the Company also agreed a
significant reduction to their fees. These
salary reductions have been unwound in
stages, with non-furloughed employees
(except for full time executive directors)
returning to 80% of their contractual
salary from 1 May 2020. The full-time
executive directors moved to 50% of
their contractual salary from 1 May 2020
and then to 80% of their contractual
salary from 1 June 2020. The
remuneration of the Chairman remained
at the annual ceiling of £37,500 for the
month of May and then increased to
80% of his contractual fees for June.
All employees, including the board,
returned to their full contractual salaries
from 1 July 2020.
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Caffyns plc Annual Report 2020
Operational and Business Review continued
Aftersales
Despite the loss of over a week’s
activity in late March from the
covid-19 temporary closures, we were
encouraged that our service revenues
in the year continued to rise, by 2.4%
on a like-for-like basis. We continue to
place great emphasis on our customer
retention programmes and in growing
sales of service plans. Our parts
business reported slightly lower sales,
down by 1.3% on a like-for-like basis
over the previous year.
Operations
Our Volvo business in Eastbourne
traded profitably in the year and
we were delighted to extend our
representation by signing a new dealer
agreement for a territory in Worthing,
West Sussex. The new business was
scheduled to open just as the covid-19
pandemic led to Government-mandated
temporary showroom closures, and was
therefore unable to begin trading as
planned in the year under review. Since
the year-end, we have now opened this
site for both car sales and aftersales
operations. The franchise continues to
reap the benefits of an excellent model
range of cars, which continue to be
positively received by customers.
In Tunbridge Wells, our SEAT business
continued to perform well although the
adjacent Skoda business found the year
more challenging. Our Skoda business
in Ashford performed satisfactorily, after
allowing for the dual impacts of the
covid-19 temporary closure and RDE.
Our Audi and Volkswagen businesses
both produced new car performances
in line with the national picture but both
suffered materially from the impact of
the covid-19 temporary closures and,
to a lesser extent, from RDE. We remain
confident that the strength of both
brands, their excellent model ranges,
and exciting new products, will help to
lead the recovery in their future trading
performance.
Our Vauxhall business in Ashford
continued to experience challenging
trading conditions in the year with
Vauxhall’s national new car registrations
in the year down by 26%, a much higher
level than the decline in the overall
UK market.
Trading at Caffyns Motorstore, our
used car business in Ashford, remained
depressed as the business suffered
from growing pains. However, the
concept has been very well received by
our customers who particularly value the
reassurance of the Caffyns brand, and
we expect performance to improve as
management and operational changes
have a positive impact on trading
performance.
Groupwide projects
We remain focused on generating
further improvements in used car sales,
used car finance 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 the customer-
buying experiences from their first
point of contact right through to the
showroom buying process, as well as
improving aftersales retention.
Property
We operate primarily from freehold sites
and our property portfolio provides
additional stability to our business
model. As in previous years, our
freehold premises were revalued 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
2020 was £11.8 million (2019: £11.2
million). We would, however, note that
CBRE drew attention in their valuation
report to the uncertainty that the present
covid-19 pandemic could have on
property values. In accordance with our
accounting policies (which reflect those
generally utilised throughout the motor
retail industry), this surplus has not been
incorporated into our accounts.
No impairments against the carrying
value of freehold property were required
in the year under review. In the prior
year, two properties were impaired for a
total of £0.9 million. This was charged
to administrative expenses as a non-
underlying expense.
During the year, we incurred capital
expenditure of £1.0 million (2019: £2.8
million). There were no major property
development projects in the year and
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the spend reflected a mixture of the
installation of electric charging points,
an expansion to our smart repair
offering and replacement spend on
existing assets.
The Company implemented IFRS 16
Leases with effect from 1 April 2019;
the start of its financial year. As a result,
one property lease was reclassified
as a right-of-use asset and one lease
as an interest in lease receivable. As
a result, the Company’s assets and
liabilities increased by £2.0 million and
pre-tax profits in the year under review
were reduced by £20,000 compared
to the previous accounting treatment.
During the year, one further lease was
entered into which was classified as
a right-of-use asset with a value on
inception of £0.2 million.
Our freehold premises in Lewes remain
leased until at least October 2020 to
the purchaser of our former Land Rover
business, which was sold in April 2016.
The board continues to evaluate future
opportunities for the site.
Bank facilities
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 £7.5 million, both of which will next
become renewable in March 2023.
HSBC also provides an overdraft facility
of £3.5 million, renewable annually.
The Company continues to enjoy a
supportive relationship with HSBC
and, subsequent to the year-end, the
overdraft facility limit was increased to
£6.0 million. In addition, the Company
has an overdraft facility of £7.0 million
provided by Volkswagen Bank,
renewable annually, together with a term
loan, originally of £5.0 million, which is
repayable by instalments over the ten
years to November 2023.
In order to assist in the conservation of
cash balances, HSBC granted capital
repayment holidays on our term loans,
for the March and June 2020 quarters.
Similar concessions were granted
by Volkswagen Bank for the months
of April and May. The term loan and
revolving credit facilities provided by
HSBC include certain covenant tests
that were passed at 31 March 2020.
HSBC have confirmed to the Company
their agreement to a relaxation in the
covenant tests for September 2020 and
March 2021, which provides reasonable
comfort to the directors that these tests
will be successfully passed at those
times. The failure of a covenant test
would render these facilities repayable
on demand at the option of the lender.
Bank borrowings, net of cash balances,
at 31 March 2020 were £16.2 million
(2019: £13.6 million) and as a proportion
of shareholders’ funds at 31 March
2020 were 62% (2019: 49%). Available
but undrawn facilities at 31 March
2020 were in excess of £10 million.
The increase in gearing in the year
was impacted by the early curtailment
of trading in March 2020 due to the
covid-19 pandemic.
Taxation
The year ended 31 March 2020
resulted in a tax charge of £0.4 million
(2019: £0.1 million). The effective tax
rate was significantly higher than the
standard rate of corporation tax in
force for the year of 19%, mainly due
to the impact on deferred tax from the
change of tax rate in the year, as well as
to adjustments to prior year estimates
of the tax liability on unrealised gains
charged in the current year that would
arise from the future sale of properties
and goodwill.
The Company has current outstanding
trading losses awaiting relief of
£0.1 million (2019: £Nil). There are no
capital losses awaiting relief. Capital
gains that remain unrealised, where
potentially taxable gains arising from
the sale of properties and goodwill
have been rolled over into replacement
assets, amount to £8.9 million (2019:
£7.9 million), which could equate to a
future potential tax liability of £1.7 million
(2019: £1.3 million). The Company also
has an amount of £1.1 million (2019:
£1.1 million) of recoverable Advanced
Corporation Tax (“ACT”) and £0.8
million (2019: £0.7 million) of shadow
ACT. The board remains confident in
the recoverability of the ACT although
the shadow ACT must first be fully
absorbed before the ACT balance itself
can become available to be utilised.
Pension scheme
The Company’s defined benefit scheme
was closed to future accrual in 2010.
In common with many companies,
the board has little control over the
key assumptions in the valuation
calculations as required by accounting
standards and the unprecedented low
yields of gilts and bonds continues to
have a significant impact on the net
funding position of the scheme. At
31 March 2020, the deficit had widened
to £9.4 million (2019: £8.6 million).
The deficit, net of deferred tax, was
£7.6 million (2019: £7.1 million).
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 sought.
The pension cost under IAS 19
continues to be charged as a
non-underlying cost and amounted
to £0.2 million in the year (2019:
£0.2 million). In the prior year, the
Income Statement was charged with
a non-underlying cost of £0.9 million,
which was our best estimate of
the financial impact of equalising
Guaranteed Minimum Pensions
between our male and female scheme
members. This followed the legal
guidance provided by the High Court
in November 2018. The full process
of equalisation will need to occur over
a considerable period of time, but the
estimated cost was arrived at following
advice from the Scheme’s actuary.
A formal triennial valuation of the
Scheme is currently underway,
effective for 31 March 2020. The last
completed review was carried out as at
31 March 2017 and was submitted to
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Caffyns plc Annual Report 2020
Operational and Business Review continued
Outlook
In the light of the ongoing impact of
the covid-19 pandemic, we are very
cautious about the future outlook. We
incurred substantial losses in April and
May whilst the business was in an
effective lockdown state, although we
were pleased with the levels of trading
achieved in June as we re-opened
our showrooms. However, we still
expect ongoing trading to take time to
revert to previous levels. We continue
to enjoy supportive relationships with
our banking partners, HSBC and
Volkswagen Bank, with available but
undrawn facilities in excess of £10
million at the year-end. By increasing
the use of inventory stocking facilities
since the year-end, headroom against
banking facilities has been further
increased and is currently £13 million.
Our manufacturer partners have been,
and continue to be, very supportive,
offering extended new vehicle funding
and reduced funding costs. Therefore,
the board is confident that the Company
has sufficient liquidity to allow it to
effectively navigate the post-lockdown
period and to capitalise on the trading
opportunities, which are expected to
arise as markets return to more normal
levels of activity.
S G M Caffyn
Chief Executive
17 July 2020
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 coming year to assist
the Company to grow.
Dividend
The Company has a strong balance
sheet and the board remains confident
in its future prospects. However, in
the light of the covid-19 pandemic,
the Government support of which the
Company has taken advantage, and in
order to conserve cash resources, the
board has decided not to declare a final
dividend in relation to the year ended
31 March 2020.
An interim dividend of 7.5 pence per
Ordinary share (2019: 7.5 pence) was
paid during the year. The total dividend
for the year was therefore 7.5 pence per
ordinary share (2019: 22.5 pence).
Strategy
Our continuing strategy is to focus on
representing premium and premium-
volume franchises as well as maximising
opportunities for used cars. 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 businesses.
We are concentrating on larger business
opportunities in stronger markets to
deliver higher returns on capital from
fewer but bigger sites. We continue to
deliver performance improvement, in
particular in our used car and aftersales
operations.
the Pensions Regulator prior to the 30
June 2018 deadline. A recovery plan to
deal with the Scheme deficit identified
from this triennial valuation was agreed
with the trustees and, as a result,
the Company made deficit-reduction
contributions into the Scheme in the
year of £0.5 million (2019: £0.5 million).
The annual recovery plan payment for
the coming and each subsequent year
will increase by the greater of 2.25%
or the growth in shareholder dividend
payments until superseded by a new
recovery plan to be agreed between
the Company and the trustees. The
31 March 2020 triennial valuation
is expected to be completed and
submitted to the Pensions Regulator
by June 2021.
People
I am very grateful for the dedication of
our employees and the effort they apply
to provide our customers with a first-
class experience. Across the Company,
the hard work and professional
application of our employees has
remained outstanding.
Nick Hollingworth retired from the board
in July 2019, having served eleven years
as a non-executive director. I, and the
other members of the board, would
like to thank him for his outstanding
contribution over that period. Nick’s
successor, Stephen Bellamy, was
appointed in June 2019 and has already
proved himself as a valuable addition to
the board.
The Company has a long tradition of
investing in apprenticeship programmes
and this continued alongside the new
Government apprenticeship levy that
was implemented in April 2017. 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
and become fully qualified. Due to our
apprentice numbers, we continue to
fully utilise our levy payments within the
stipulated time limits.
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Strategic Report
Business model
Caffyns is one of the leading motor retail and aftersales companies in the south-east of England. The Company’s principal
activities are the sale and maintenance of motor vehicles, including the sale of tyres, oil, parts and accessories. The Operational
and Business Review, which forms part of the Strategic Report, principally covers the development and performance of the
business and the external environment, and is set out on pages 2 to 6. The main Key Performance Indicators are:
Financial
Revenue (£ million)
Underlying EBITDA (£ million)
Profit/(loss) for the year before tax (£ million)
Underlying (deficit)/earnings per share (pence)
Deficit per share (pence)
Bank overdrafts and loans (net of cash in hand balances) (£ million)
Gearing (%)
Note: Underlying results exclude items that have non-trading attributes due to their size, nature or incidence.
Other and non-financial
UK new car market – total registrations (million)
UK new car market – retail and small business sector registrations (million)
Caffyns new car sales (‘000)
Caffyns used car sales (‘000)
Caffyns aftersales revenues (excluding internal sales) (£ million)
Company employees (full time equivalents)
Source of UK market registrations: Society of Motor Manufacturers and Traders (“SMMT”).
2020
197.85
3.43
0.10
(4.9)
(9.4)
16.24
62
2020
2.09
0.97
3.92
5.31
18.32
419
2019
209.25
3.98
(0.43)
35.3
(21.0)
13.59
49
2019
2.35
1.13
4.41
5.39
18.32
421
Business performance
New and used cars
Our new unit deliveries were down by
11.0% on a like-for-like basis. Over the
twelve-month period, total UK new car
registrations fell by 11.7% and, within
this, the private and small business
sector, in which we primarily operate,
fell by 14.3%. Deliveries in the year for
both the market and ourselves were
adversely impacted by the early stages
of the covid-19 pandemic lockdown
measures in March 2020 and by the
implementation of the second stage
of the harmonised emissions testing
regime, Real-Driving Emissions, in
September 2019.
Our used unit sales decreased by 1.4%,
also being adversely impacted by the
Government’s restrictions on businesses
to counter the covid-19 pandemic in
March 2020.
Aftersales
Further significant reductions in
new car registrations in the period,
predominantly caused by the covid-19
pandemic, in addition to reductions
in prior periods, acted to reduce the
number of one to three-year-old cars in
circulation. Mitigating this, improvements
to customer retention rates for many
of our marques resulted in unchanged
levels of like-for-like aftersales revenue
against the previous year. The actions
we have taken to enhance our aftersales
marketing and retention procedures,
together with our new and used car
sales, continue to benefit this area of the
business.
Business strategy
The Company continues to focus on the
premium and premium-volume market
where it believes that there is greater
resilience to delivering stronger sales,
profits and returns. It represents a strong
portfolio of six franchises being Audi,
SEAT, Skoda, Vauxhall, Volkswagen
and Volvo. We generally operate from
our own freehold properties, which we
believe offers better long-term returns
and greater flexibility. Proceeds from
disposals of properties are generally
reinvested in the property portfolio.
Principal risks and uncertainties
Risk is an accepted part of doing
business and the Company has a risk
assessment process that facilitates
the identification and mitigation of risk.
While the risk factors listed below could
cause our actual future results to differ
materially from expected results, other
factors could also adversely affect the
Company and they should therefore not
be considered to be a complete set of all
potential risks and uncertainties. The risk
factors should be considered alongside
the statement on internal control and risk
management included in the Statement
on Corporate Governance on page 20
and those in notes 20 and 21 to the
financial statements.
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Caffyns plc Annual Report 2020
Strategic Report continued
Principal risks
Potential impact/material risk
Key controls and mitigating factors
Business
conditions
and the UK
economy
Vehicle
manufacturer
marketing
programmes
Used car
prices
Vehicle
manufacturer
dependencies
Liquidity and
financing
Regulatory
compliance
Information
systems
The profitability of the Company could be
adversely affected by a worsening of general
economic conditions in the United Kingdom,
where all of its business is transacted, including
as a result of the UK’s departure from the
European Union. Other relevant factors would
include the ongoing covid-19 pandemic, interest
rates, unemployment, fuel prices, inflation,
indirect taxation, the availability and cost of
credit and other factors, which affect levels of
consumer confidence.
Vehicle manufacturers provide a wide variety
of marketing programmes, which are used to
promote new vehicle sales. A withdrawal or
reduction in these programmes would have an
adverse impact on our business.
Used car prices can decline significantly. A large
proportion of our business comprises used car
sales and such declines could have a material
impact through reduced profits on sales and
write-downs in the value of inventories.
Caffyns operates franchised motor dealerships.
These franchises are awarded to the Company
by the vehicle manufacturers. For ongoing
business, the Company holds franchise
agreements for its dealership operations. These
agreements can be terminated by giving two
years’ notice, or less in the event of a serious
unremedied breach including continued under-
performance. The Company is not aware of any
breach of these agreements.
Liquidity and financing risks relate to our
ability to pay for goods and services enabling
us to trade. Our principal sources of finance
are from our bankers by way of committed
borrowing facilities, from manufacturers to fund
the purchases of inventories, and trade credit
from our suppliers. A withdrawal of facilities, or
failure to renew them when due, could lead to a
significant reduction in the trading capability of
the Company.
The Company is subject to regulatory
compliance risk which could arise from a failure
to comply fully with the laws, regulations or
codes applicable. Non-compliance could lead to
fines, cessation of certain business activities or
public reprimand.
The Company is dependent upon certain
business-critical systems which, if interrupted
for any considerable length of time, could have
a material effect on the efficient running of our
businesses.
Monitoring of key macroeconomic indicators against
internal performance leads to anticipation of, and
mitigation for, expected volatilities.
By representing multiple marques, the Company
believes that this diversity reduces the potential
impact on the Company. In addition, the Company
continues to develop its own marketing initiatives.
Close monitoring of the ageing of vehicle inventories
and a firm policy of inventory management help to
mitigate this risk. Any impact is also mitigated by
revenue streams being balanced between aftersales,
new and used car sales.
Diversifying through representing multiple marques
reduces the potential dependency on any single
manufacturer. Revenue streams from other activities
(aftersales and used cars) prevent over-reliance on
new car sales.
We work closely with providers of finance to help
reduce this risk by managing expectations of trading
results and utilisation of facilities. The status of our
bank facilities is set out in note 21. These negotiated
facilities provide sufficient liquidity and funding. We do
not presently hedge against interest rate movements,
but the position is kept under regular review.
The direction of new regulatory policy is monitored
through close contact with relevant trade and
representative bodies and these are carefully
considered when developing strategy.
The board has implemented a series of contingency
plans that would enable the resumption of operations
within a short space of time, thus mitigating the
likelihood of material loss.
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Principal risks
Competition
Changes in
legislation in
relation to the
distribution
and sale of
vehicles
Pension
scheme
Political
uncertainties
Potential impact/material risk
Caffyns competes with other franchised vehicle
dealerships, private buyers and sellers, internet-
based dealers, independent service and repair
shops and manufacturers who have entered the
retail market. The sale of new and used cars,
the performance of warranty repairs, routine
maintenance business and the supply of spare
parts operate in highly competitive markets.
The principal competitive factors are price,
reputation, customer service and knowledge of
a manufacturer’s brands and models. We also
compete with funders who finance customers’
car purchases directly.
Sales agreements are granted by manufacturers
based on standards, but agreements are
restricted to areas of influence granted by
manufacturers, who also determine choice
of partner, enabling them to restrict entry into
the franchise or the number of outlets any one
dealer can hold. Aftersales agreements are
legislated by a Block Exemption, dictating that
aftersales businesses that meet a manufacturer’s
qualitative standards criteria have an entitlement
to represent that brand’s aftersales service and
parts franchise.
Caffyns operates a defined-benefit pension
scheme, which was closed to new entrants
in 2006 and closed to future accrual in 2010.
The scheme relies on achieving satisfactory
investment returns sufficient to meet the
present value of the accrued liabilities. Reduced
investment returns or higher liabilities due to
increased mortality rates and/or continuing
record low interest rates could adversely affect
the surplus or deficit of the scheme and may
result in increased cash contributions in future.
The United Kingdom’s entry into the transitional
arrangements following its departure from the
European Union, coupled with wider global
political developments, means that a degree of
uncertainty in the United Kingdom economic
outlook continues to exist. We believe the main
risks to arise from this state of affairs relate to
consumer confidence, the potential impact
that sterling/euro exchange rates may have on
vehicle pricing, the possible imposition of tariffs
and/or restrictions on the imports of cars and
parts into the United Kingdom.
Key controls and mitigating factors
To mitigate this risk, we regularly monitor our
competitors’ activities and seek to price our products
competitively, optimise customer service, efficiently
utilise our customer database and fully understand
our manufacturers’ brands and products.
By continuing to focus on providing excellent
customer facilities, excellent customer service and by
providing high-level representation for the Company’s
manufacturer partners, current business relationships
will be maintained, providing opportunities for
selective growth.
The Company reviews the position of the defined-
benefit pension scheme through regular meetings of
a Pensions sub-Committee, chaired by the Chairman
of the Audit and Risk Committee. Through this
sub-Committee, the Company has an ongoing review
of possible options to mitigate the risk of underlying
volatility causing an increase in the deficit.
We continue to focus on delivering an excellent
service to new and existing customers, giving
confidence in our operations and building a strong
loyalty base, and to maintaining our close working
relationship with our six manufacturers.
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Strategic Report continued
Corporate social responsibility, human rights
and diversity
Caffyns has a long-standing Corporate and Social
Responsibility agenda including its approach to its employees,
the environment, and health and safety. We are also
conscious of human rights issues within the Company and
the key area that would impact our business would be via our
supply chain. However, our supply chain is predominantly the
major international motor manufacturers who also take these
issues very seriously.
The UK Corporate Governance Code includes a
recommendation that boards should consider the benefits of
diversity, including gender, when making board appointments.
The board recognises the importance of gender balance
and the important requirement to ensure that there is an
appropriate range of experience, balance of skills and
background on the board. We will continue to make changes
to the composition of the board irrespective of gender or any
form of discrimination so that the best candidate is appointed.
The table below gives the total number of our employees in
each category, by gender, as at 31 March 2020.
Director
Senior management
All other employees
Female
Male
Total
1
–
118
5
11
348
6
11
466
Employees
We recognise that our people are our key asset and are
responsible for delivering our strategy. We continue to invest
in an enhanced training and development programme, with
particular support from our manufacturer partners. The
positive approach shown by our employees throughout the
Company’s businesses has been key to this success.
Employees are encouraged to discuss with management any
matters that they are concerned about and factors affecting
the Company. In addition, the board takes account of
employees’ interests when making decisions. We have a
HR director. Suggestions from employees aimed at improving
the Company’s performance are welcomed.
Good performance from employees is recognised every four
months by their peer group who nominate employees for
awards and formal company-wide recognition. A significant
number of employees are remunerated partly by profit-related
bonus schemes.
We have a dedicated company intranet which keeps
employees up to date with company developments and
activities. This platform also includes the Company’s policies
and procedures. Long service awards were made during
the year to those staff with 25 years’ continuous service. All
employment policies remain compliant with current legislation.
It is our policy to encourage career development for all
employees and to help staff achieve job satisfaction and
increase personal motivation.
We support the recruitment of disabled people wherever
possible. Priority is given to those who become disabled
during their employment. Employment by the Company is
offered on the basis of the person’s ability to work and not on
the basis of race, individual characteristics or political opinion.
We have continued to recruit to our apprenticeship
programme, and we are seeing the benefits of this investment.
We look to further recruit both apprentices and others across
the Company’s businesses as we continue to grow.
Environment
The Company is aware of its environmental responsibilities
arising from its motor retailing and aftersales activities and
recognises that some of its activities affect the environment.
Our Health, Safety and Environment Officer has received
formal training in environmental management and is
appropriately experienced in this field. Our policy is to promote
and operate processes and procedures which, so far as is
reasonably practicable, avoid or minimise the contamination of
water, air or the ground.
Licences are obtained from the relevant authorities, where
required, to operate certain elements of the Company’s
business. Waste is disposed of by authorised contractors
and is recycled where possible. Special care is taken in the
storage of fuels and oils. Through the management of these
activities, we seek to minimise any adverse effects of its
activities on the environment.
We also seek to reduce our energy and water consumption
and audit processes are in place to measure usage and
make recommendations for improvements. An electrical test
monitoring regime is in place throughout the Company’s
businesses. Use of the latest building materials is made in the
construction of new sites and the refurbishment of existing
locations.
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Mandatory carbon reporting
This section includes our mandatory reporting of greenhouse gas emissions for the period 1 January 2019 to 31 December
2019, the latest annual period for which data is available, and is pursuant to the Companies Act 2006 (Strategic Report and
Directors’ Report) Regulations 2013. We report our emissions data using an operational control approach taking data for which
we deem ourselves responsible, including both energy consumption and vehicle usage for business use. In the 2019 calendar
year, our businesses emitted 1,354 tonnes of carbon dioxide (“CO2”) (2018: 1,385 tonnes). Our emissions are principally of CO2
and are from the following sources:
Greenhouse gas emissions data
Scope 1
Gas consumption
Owned transport
Water supply
Scope 2
Purchased electricity
Generated electricity
Statutory total
Revenue (£million)
We have selected emissions £million of
revenues per tonne as our intensity ratio
as this, in our view, provides the best
comparative measure over time.
2017 intensity ratio: 6.4 tonnes of CO2
per £million of revenue
2018 intensity ratio: 6.5 tonnes of CO2
per £million of revenue
2019 intensity ratio: 6.6 tonnes of CO2
per £million of revenue
The Company’s total energy
consumption for the period 1 January
2019 to 31 December 2019 was
3.981 million kWh. The methodology
for calculating this annual energy
consumption figure was the same as
that outlined above for producing the
estimate of the Company greenhouse
gas emissions.
All of the Company’s energy
consumption arose in the UK.
Our greenhouse gas emissions
associated with waste arise from a
number of waste streams generated
from our business. For conversion to
carbon dioxide equivalent, CO2e, data is
not readily available for a number of our
waste streams, so we have chosen to
report this in weight and percentage of
waste recycled compared to waste sent
to landfill, as opposed to CO2. Waste in
2019 was 705.4 tonnes (2018: 491.6
tonnes) of which 96% was recycled
(2018: 93%).
Reducing carbon and waste
During the year, we have continued to
assess and monitor our energy use with
improved data collection and, where
practicable, we have implemented
measures to reduce the environmental
impact of our activities.
Tonnes of
CO2
2019
Tonnes of
CO2
2018
Tonnes of
CO2
2017
308.8
74.2
4.8
972.6
(6.3)
1,354.1
205.4
308.6
87.4
5.2
995.9
(12.2)
1,384.9
186.3
286.7
90.5
4.8
982.4
(1.0)
1,363.4
213.1
Climate change influences seasonal
energy usage and while, at times, we
benefit from milder weather we are aware
that any adverse change could affect
energy usage. To minimise our energy
usage we continue, where practicable,
to install LED lighting at our sites as
these use significantly less energy than
conventional lighting. In addition, we limit
the duration of periods when full lighting
is used, using sensors and timers to
further reduce the energy we use. We
continue to improve our energy use and
efficiency by replacing old equipment
with new efficient units and ensuring
workshop doors are closed when not in
use by fitting automatic closing devices.
We seek to limit our paper consumption
and waste through increasingly paperless
communications and systems. Water use
in valeting areas uses recycling facilities,
where practicable, and all sites have
appropriate water filtration systems.
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Caffyns plc Annual Report 2020
Strategic Report continued
•
•
•
Relations with key stakeholders
such as shareholders and suppliers
are considered in more detail on
page 20;
The Company’s employees are
recognised as vital to its success
and employee relations are
considered in more detail on pages
6, 10 and 35. The board intends
to further enhance its methods of
engagement with its employees
in the coming financial year with
the Chief Executive visiting the
Company’s sites regularly for
question and answer sessions with
staff. He will report to the board on
the outcome of these sessions. In
addition, the board takes account of
employees’ interests when making
decisions;
The directors are fully aware of
their responsibilities to promote
the success of the Company in
accordance with section 172 of the
Companies Act 2006. To ensure
the Company was operating in
line with good corporate practice,
all directors received refresher
training on the scope and
application of section 172 in writing.
This encouraged the board to reflect
on how the Company engages with
its stakeholders and opportunities
for enhancement in the future and
was considered at the Company’s
Audit and Risk Committee meeting
in November 2019. As required,
the Company Secretary provides
support to the board to help ensure
that sufficient consideration is given
to issues relating to the matters set
out in s172(1)(a)-(f);
The board regularly reviews the
Company’s principal stakeholders
and how it engages with them. This
is achieved through information
provided by management and
also by direct engagement with
stakeholders themselves;
We aim to work responsibly
with our stakeholders, including
suppliers. The board has recently
reviewed its anti-corruption and
anti-bribery, equal opportunities,
and whistleblowing policies.
•
•
Health and safety
The board recognises its responsibility
to members of staff and others working
or visiting our facilities to provide, so
far as is reasonably practicable, an
environment that is safe and without
risk to their health and this is always
the first agenda item at each board
meeting. The board maintains ultimate
responsibility for health and safety
issues with a full time Heath, Safety
and Environment Officer responsible
on a day-to-day basis, supported by all
levels of management. The Company’s
policy is to identify potential hazards
and assess the risks presented by its
activities and to provide systems and
procedures that allow our staff to take
responsible decisions in their work in
relation to their own, and others’, safety.
We promote awareness of potential
risks and hazards and implementation of
corresponding preventative or remedial
actions through online health and
safety systems, operations manuals
and monthly communication on topical
issues. With clear lines of operating
unit responsibility, staff are supported
by specialist guidance from the Heath,
Safety and Environment Officer. All our
staff have access to a detailed health
and safety guide.
Section 172 statement
Section 172 of the Companies Act
2006 requires directors to take
into consideration the interests of
stakeholders and other matters in
their decision making. The directors
continue to have regard to the interests
of the Company’s employees and other
stakeholders, the impact of its activities
on the community, the environment
and the Company’s reputation for
good business conduct, when making
decisions. In this context, acting in
good faith and fairly, the directors
consider what is most likely to promote
the success of the Company for its
members in the long term. We explain in
this Annual Report, and below, how the
board engages with stakeholders.
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for a new non-executive director.
Accordingly, an external recruitment
agency was appointed in February
2019 to assist in identifying suitable
candidates. Following an extensive
search and interview process, the
board appointed Mr S G Bellamy in
June 2019 and Mr N W Hollingworth
resigned from the board at the
Annual General Meeting in July
2019. A full biography for Mr S G
Bellamy is included on page 33;
• Expansion of Volvo
representation: The Company has
represented the Volvo brand for
over twenty years from its premises
in Eastbourne, East Sussex, and
has enjoyed a mutually beneficial
relationship with the manufacturer,
Volvo UK. During the year under
review, the board was advised
by Volvo UK that the operating
agreement for the dealer in
Worthing, West Sussex, had been
terminated and that the business
would be closing in March 2020. The
Company was delighted to receive
an offer to extend its representation
through the provision of a new
dealer agreement for this territory.
After giving due consideration to
factors such as the likely future
profitability of the brand, the levels
of investment required for the new
business and the attractiveness
of the territory being offered, the
board decided that it would be in
the interests of the Company, and
its shareholders, to accept this offer.
Premises were sourced in Worthing
and the dealership was scheduled
for opening in late March 2020.
A postponement to the original
opening date was required due to
the covid-19 pandemic restrictions
outlined above but, subsequent to
the year-end, the board was able to
fully open the new business.
By order of the board
S G M Caffyn
Chief Executive
17 July 2020
During the year under review, ended 31
March 2020, the key decisions taken by
the board included:
• Covid-19 pandemic: On 23 March
2020, the Government announced
restrictions on businesses as a
result of the growing impact from
the worldwide covid-19 pandemic.
Car showrooms were classified as
non-essential and were required to
close and the board reacted swiftly
with all showrooms closing in line
with this instruction. Car workshops
were classified by the Government
as essential businesses and were
permitted to remain open, but
the board was concerned that a
safe environment for our staff and
customers could not be immediately
provided and therefore took the
decision that these should also
close. Emergency response teams
in three of our twelve workshops,
comprising a skeleton staff of
volunteers, remained in post to
provide assistance to NHS and
other key workers. Over the
following weeks, social distancing
procedures, along with physical
changes such as perspex screens,
personal protective equipment
and additional hygiene measures
were put in place and, subsequent
•
to the year-end, the board was
able to reopen its workshops in a
controlled and careful way from mid-
May onwards. In late May, the UK
Government announced a relaxation
of controls over certain businesses
and, from the beginning of June,
car showrooms were allowed to
reopen. In addition to the measures
adopted for our aftersales business,
the board adopted further measures
for car sales, such as appointment-
only access to showrooms and
unaccompanied test drives and
continues to proactively review these
measures on a continuing basis;
Appointment of non-executive
director: Mr N W Hollingworth had
been a non-executive director of
the Company since March 2008
and, having served in excess of nine
years, had not been considered
independent since 2017. In April
2016 the Company had undertaken
a significant disposal, selling its
Land Rover business, and had
decided that changes to board
personnel at that time would have
had a detrimental impact on the
business. However, by 2019, these
concerns had waned and, as a
result, the board decided in the year
to commence a search process
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Board of Directors
Directors
RICHARD C WRIGHT PG DIp FIMI FCIM
Chairman
SIMON G M CAFFYN MA FIMI
Chief Executive
MICHAEL WARREN BSc ACA
Finance
SARAH J CAFFYN BSc FCIPD AICSA FIMI
Human Resources
NIGEL T GOURLAY BSc FCA
Non-executive and senior independent director
STEPHEN G BELLAMY BCom CA(NZ)
Non-executive
Bankers
Independent Auditor
Company Secretary
Registered Office
HSBC BANK PLC
1st floor, First Point, Buckingham Gate, London Gatwick Airport, West Sussex,
RH6 0NT
VOLKSWAGEN BANK
Brunswick Court, Yeomans Drive, Blakelands, Milton Keynes, MK14 5LR
BDO LLP
Statutory Auditor, Chartered Accountants
Arcadia House, Maritime Walk, Ocean Village, Southampton, SO14 3TL
SARAH J CAFFYN BSc FCIPD AICSA FIMI
4 Meads Road, Eastbourne, East Sussex, BN20 7DR
Telephone (01323) 730201
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Caffyns plc Annual Report 2020 www.caffyns.co.uk
Stock code CFYN
Chairman’s Statement on Corporate Governance
This statement explains how the
Company has applied the main and
supporting principles of corporate
governance and describes the
Company’s compliance with the
provisions of the UK Corporate
Governance Code (the “Code”), as
published in 2018 by the Financial
Reporting Council and available at
www.frc.org.uk.
The Company has complied throughout
the year ended 31 March 2020 with
the provisions set out in the Code
except that one director has a service
contract which runs for more than
twelve months, which does not comply
with Code provision D.1.5 (see the
Directors’ Remuneration Report),
which recommends that such periods
should be for one year or less. The
Remuneration Committee reviews the
position annually and has decided
that it is not in the best interests of
the Company to change the existing
contract. Additionally, less than half the
board, and half the Remuneration and
Audit and Risk Committees, are made
up of independent non-executives, which
does not comply with Code provision 11.
The composition of the Audit and Risk
Committee, where the Chairman of the
board is a member, does not comply
with provision 24. The board believes
the composition of the board and the
committees reflect the compact nature
of the board and size of the Company
as a whole, and that directors have
shown that they are able to work in a
collegiate fashion. Finally, the Company
Secretary is a member of the Company’s
defined-contribution pension scheme on
the same terms as all other employees.
Her bonus payments are therefore
pensionable, which does not comply with
provision 38.
A description of the Company’s
business model and strategy is set out
in the Strategic Report on page 7.
Structure of the board
and its key activities
The board is collectively responsible for
the long-term success of the Company
and for ensuring that it operates to a
governance standard, which serves
the best interests of the Company. The
board sets the strategy of the Company
and its individual trading businesses
and ensures that the Company has in
place the financial and human resources
it needs to meet its objectives. There
is a written schedule of matters
reserved for board decision, which is
summarised below.
Schedule of matters reserved
for decision by the board
•
Business strategy
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Approval of significant capital
projects and investments
Principal terms of agreements for
the Company’s principal banking
facilities
Annual business plan and budget
monitoring
Risk management strategy and
internal control and governance
arrangements
Approval of acquisitions and
divestments
Changes to management and
control structure
Significant changes to accounting
policies or practices
Financial reporting to shareholders
Dividend policy
Health and safety policy
Changes in employee share
incentives
Reviewing the overall corporate
governance arrangements
Appointments to the board and its
committees
Policies relating to directors’
remuneration and service
Prosecution, defence or settlement
of material litigation
Any alterations to the share capital
of the Company
Approval of all circulars and
announcements to shareholders
Major changes to the Company’s
pension schemes
Insurance cover including directors’
and officers’ liability insurance and
indemnification of the directors
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The Chairman takes responsibility for
ensuring that the directors receive
accurate, timely and clear information.
Monthly financial information is provided
to the directors. Regular and ad-hoc
reports and presentations are circulated,
with all board and committee papers
being issued in advance of meetings by
the Company Secretary. In addition to
formal board meetings, the Chairman
maintains regular contact with the Chief
Executive and other directors to discuss
specific issues. In furtherance of their
duties, the directors have full access to
the Company Secretary and may take
independent professional advice at the
Company’s expense. The board believes
that, given the experience and skills of
its directors, the identification of training
needs is best left to the individual’s
discretion. If any developmental need
is identified through the board’s formal
appraisal process or by an individual
director, the Company makes the
necessary resources available.
As part of their role, the non-executive
directors constructively challenge and
help develop proposals on strategy.
The non-executive directors scrutinise
management’s performance in meeting
agreed goals and objectives and
monitor the reporting of performance.
They satisfy themselves on the integrity
of financial information and that
financial controls and systems of risk
management are robust and defensible.
They determine appropriate levels of
remuneration of executive directors and
have a prime role in appointing and,
where necessary, removing executive
directors, and in succession planning.
Non-executive directors formally meet
without the executive directors at least
once a year.
Operating within prescribed delegated
authority, such as capital expenditure
limits, the operational running of the
Company and its businesses is carried
out by the executive directors, led by
the Chief Executive.
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Chairman’s Statement on Corporate Governance
continued
The board delegates certain of its duties
to its Audit and Risk, Nomination and
Remuneration Committees, each of
which operates within prescribed terms
of reference. These are set out on the
Company’s website. The responsibilities
of the board’s committees are set out
on pages 16 to 18 of this report and in
the Directors’ Remuneration Report.
The board has evaluated the
performance of its committees for the
year under review. The Chairman and
the respective committee chairman
take responsibility for carrying out any
actions recommended as a result of that
evaluation.
Performance evaluation
The board has established a procedure
to evaluate its performance, its
committees and individual directors.
The directors complete detailed
questionnaires and debate the matters
arising at board meetings.
Individual director evaluation has
shown that each director continues to
demonstrate commitment to the role.
The non-executive directors, led by
the senior independent director, have
carried out a performance evaluation
of the Chairman after taking account
of the views of the executive directors.
The Chairman has reviewed the
performance of the non-executive
directors and the Chief Executive.
The Chief Executive has reviewed the
other executive directors. The board
intends to carry out further performance
evaluations but will keep under review
the method and frequency.
The latest board evaluation process
concluded that the board and its
committees were operating effectively,
with clear demarcation of the respective
responsibilities of individual directors
and board committees. The board is
satisfied that all directors are each able
to devote the amount of time required
to attend to the Company’s affairs and
their duties as a board member. The
Chairman discusses the training and
development needs of each director.
Board composition and
independence
As at 17 July 2020 the board comprised
three executive directors and three
non-executive directors, one of whom
is the Chairman. Mr R C Wright is the
non-executive Chairman and Mr S G
M Caffyn is the Chief Executive. The
Chairman leads the board and the Chief
Executive manages the Company and
implements the strategy and policies
adopted by the board. There is a clear
division of responsibility between the
role of the non-executive Chairman and
the Chief Executive; this is recorded
in a written statement that is reviewed
and agreed annually by the board.
The Chairman is responsible for
leadership of the board and ensuring its
effectiveness for all aspects of its role.
The Company maintains appropriate
directors’ and officers’ insurance in
respect of legal action against its
directors.
Directors’ conflict of interest
Conflicts of interest can include
situations where a director has an
interest that directly or indirectly
conflicts, or may possibly conflict, with
the interests of the Company. The board
operates a formal system for directors
to declare at all board meetings all
conflicts of interest. The non-conflicted
directors must act in the way they
consider, in good faith, would be most
likely to promote the success of the
Company.
Balance and challenge
The non-executive directors
complement the skills and experience
of the executive directors, providing
the requisite degree of judgement
and scrutiny to the decision-making
process at board and committee
level. Mr N T Gourlay is the senior
independent director.
The board maintains and regularly
reviews a register of all interests, offices
and appointments that are material
to be considered in the assessment
of the independence of directors and
has concluded that there are not, in
relation to any director, any relationships
or circumstances regarded by the
Company as affecting their exercising
independent judgement.
Re-election of directors
All directors will seek re-election annually
in accordance with the latest corporate
governance recommendations.
Meetings and attendance
There were seven meetings of the board
in the year under review, with Mr N T
Gourlay unable to attend one of the
meetings. All other directors attended all
meetings.
Nomination Committee
Our Nomination Committee comprises
two non-executive directors, the non-
executive Chairman and the Chief
Executive. The members are:
R C Wright (Chairman)
N T Gourlay
S G Bellamy
S G M Caffyn
The Nomination Committee is
responsible for leading the process for
appointments to the board and meets
at least once a year. The Committee
is chaired by Mr R C Wright. The
Company Secretary, or alternate, also
attends meetings in her capacity as
secretary of the Committee. Where
the matters discussed relate to the
chairman, such as in the case of
selection and appointment of the
Company Chairman, the senior
independent director chairs the
Committee. New directors receive a full,
formal and tailored induction on joining
the board.
The principal responsibilities of the
Committee are as follows:
• To regularly review the structure,
size and composition of the board
and make recommendations to the
board regarding any adjustments
deemed appropriate;
• To prepare the description of the
role and capabilities required for
a particular board appointment.
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•
•
Executive search consultants may
be retained as appropriate to assist
in this process;
To identify, and nominate for the
approval by the board, candidates
to fill board vacancies as and when
they arise;
To satisfy itself, with regard to
succession planning, that processes
are in place regarding both board
and senior appointments; and
• To undertake an annual performance
evaluation to ensure that all
members of the board have devoted
sufficient time to their duties.
The Committee met three times during
the year and was responsible for leading
the search for a new non-executive
director to replace Mr N W Hollingworth.
An external recruitment company was
appointed to assist in identifying suitable
candidates. All members eligible to
attend were present at all the meetings.
Audit and Risk Committee
Our Audit and Risk Committee
comprises two non-executive directors
and the Chairman. The members are:
N T Gourlay (chairman)
R C Wright
S G Bellamy
The Committee is chaired by Mr N T
Gourlay. The Company Secretary, or
alternate, also attends meetings in her
capacity as secretary of the Committee.
The chairman of the Committee is
considered by the board as having
recent and relevant financial experience.
The board also remains satisfied that the
Committee as a whole has competence
relevant to the sectors in which the
Company operates. The chairman of
the board is on the Committee due to
his experience and the small number
of non-executive directors on the
board. The board are satisfied with
this arrangement. The Audit and Risk
Committee meets at least three times
a year. The meetings are attended by
invitation by the executive directors,
the head of the internal audit function
and representatives of the Company’s
external auditor, at the chairman’s
discretion.
The Committee’s meetings in quarters
one and three coincide with the
Company’s reporting timetable for
its audited financial statements and
unaudited interim condensed financial
statements respectively. During these
meetings, the Committee:
•
•
Reviews the drafts of the financial
statements and preliminary and
interim results announcements; and
Reviews all published accounts
(including interim reports) and
post-audit findings before their
presentation to the board, focusing
in particular on accounting
policies, compliance, management
judgement and estimates, and
considers the reports of the external
auditor on the unaudited interim
condensed financial statements
and the full year audited financial
statements.
At its second meeting, the Committee
reviews the external audit plan.
The Committee’s third meeting is
primarily concerned with:
•
•
•
•
•
•
Reviewing the Company’s systems
of control and their effectiveness;
Significant corporate governance
issues, such as those relating to the
regulation of financial services;
Reviewing the external auditor’s
performance;
Reviewing the risk register and
making recommendations to the
board on the content and relative
importance of the risks identified;
Recommending to the board
the reappointment, or not, of the
external auditor; and
Reviewing the effectiveness and
independence of the external
auditor, including monitoring the
level of audit and non-audit fees.
The Committee met three times in the
year under review with Mr N T Gourlay
unable to attend one of the meetings,
in November 2019. All other meetings
were attended by all directors eligible
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to attend. The Committee reviewed
the effectiveness of the Company’s
system of internal control and financial
risk management during the year,
including the review of the Company’s
risk register, and including consideration
of reports from both the internal and
external auditors. The Committee
reported the results of its work to the
board and the board considered these
reports when reviewing the effectiveness
of the Company’s system of internal
control which forms part of the board’s
high-level risk review performed
during the year. The effectiveness of
the internal audit function was also
monitored. The Committee approved
the adoption of IFRS 16 Leases with
effect from 1 April 2019.
The Committee provides advice to the
board on whether the annual report
is fair, balanced and provides the
necessary information shareholders
require to assess the Company’s
performance, business model and
strategy. In doing so, the following
issues have been addressed specifically:
• Review of key strategic risks: The
Committee chairman conducts an
annual review of key strategic risks
and undertakes site visits in order
to ensure that the review includes
a detailed understanding of the
business. The review highlights the
key risks based on a combination of
likelihood and impact, and then also
considers what appropriate mitigating
factors should be implemented
(highlights from this work are included
in the Strategic Report).
• Revenue recognition: The
accuracy of cut-off procedures
around the year-end date is
recognised as important for ensuring
that revenue is recognised in the
correct accounting period. The
Committee has considered the
procedures and controls in respect
of revenue recognition and has been
satisfied that they are satisfactory.
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Caffyns plc Annual Report 2020
Chairman’s Statement on Corporate Governance
continued
• Review of poorly performing
dealerships: As part of both
the interim and year-end review
processes, consideration is given to
potential impairments of property,
plant and equipment, investment
property and goodwill relating to
poorly performing locations and
that any related impairments are
provided for. Management then
follow up with detailed action
plans to either improve dealership
performance or seek an exit
solution. The Committee also
reviews progress on these plans at
the following review. As part of the
external audit, the Committee fully
discusses with the external auditor
the identification of cash generating
units (“CGUs”) for the purposes of
impairment testing. The Committee
is satisfied that no material
impairments are required in relation
to the current financial year.
• Going concern: The Finance
Director provides an assessment of
the Company’s ability to continue
to trade on a going concern
basis for at least the next twelve
months. Forecasts are based on
financial plans agreed with the
board (budgets or forecasts), the
Company’s most recent trading
results, and include a range of
possible downside scenarios
including the impact of the ongoing
covid-19 pandemic and the
restrictions placed on business
in order to combat its effects.
The assumptions that underpin
the assessments are considered
and discussed in detail when the
Committee meets. The conclusion of
that review is included in the Going
Concern section of this report.
Inventory valuation: The value
of new and used cars, as well as
the provision for slow-moving and
obsolete inventory, can have a
significant influence on the inventory
valuation in the financial statements.
The Committee has considered
the Company’s procedures and
controls, which are satisfactory, to
reduce the risk of misstatement in
relation to inventory valuation.
•
• Pensions: The Company operates
a defined-benefit pension scheme,
closed to future accrual, which has
an excess of liabilities over the value
of assets owned by the scheme.
The assessment of the valuation
of the scheme is based on several
key assumptions, which can have a
significant impact on the valuation
of the deficit. The Committee has
considered the assumptions, used
for the valuation of the liabilities of
the scheme and is satisfied that
these are reasonable.
Anti-bribery
During the year, as well as its routine
business, the Committee continued to
monitor the suitability of the Company’s
controls designed to combat bribery
so as to satisfy itself of the adequacy
of its systems and procedures for the
prevention of bribery and corruption,
particularly in the light of the Bribery Act
2010. It has reviewed the Company’s
anti-bribery policy statement which has
been adopted by the board.
Whistleblowing
The Committee has reviewed the
arrangements for its employees to
raise, in confidence, concerns about
possible improprieties in relation to
financial reporting, suspected fraud and
dishonest acts, or other similar matters,
commonly known as “whistleblowing”.
The Committee reviews any such
reported incidences and any
improvements to internal procedures
that may be required.
Non-audit services provided
by the external auditor
Non-audit services provided by the
Company’s auditor are kept under
review by the Committee. The
Company’s auditor does not provide
compliance services in the field of
taxation advice.
The Committee ensures that the
auditor’s objectivity and independence
are safeguarded by ensuring that the
level of fees is not material to either
the Company nor the auditor. The
report from BDO LLP confirming
their independence and objectivity
was reviewed by the chairman of the
Audit and Risk Committee and the
Finance Director. The level of fees paid
to BDO LLP for non-audit services is
not regarded to conflict with auditor
independence. Fees payable to the
auditor are set out in note 3 to the
financial statements.
Effectiveness and
independence of the
external auditor
Grant Thornton UK LLP had been the
external auditor since 1964 and, in
accordance with auditor independence
rules, would have had to step down
by 2021. To facilitate an orderly
transition, Grant Thornton UK LLP
resigned as external auditor at the
Annual General Meeting on 25 July
2019 and were replaced by BDO LLP.
As required by section 519 of the
Companies Act 2006, Grant Thornton
UK LLP confirmed the reason for their
resignation was that they were not
reappointed after a tender process.
There are no contractual obligations that
restrict the Audit and Risk Committee’s
choice of external auditor.
The Committee is also responsible for
advising the board on the appointment
of the auditor, assessing their
independence and formulating policy on
the award of non-audit work.
Non-audit work is only awarded to the
external auditor after due consideration
of matters of objectivity, independence,
value for money, quality of service and
efficiency.
At the conclusion of each year’s
audit, the performance of the external
auditor is reviewed by the Committee,
with the executive directors, covering
such areas as quality of audit team,
business understanding, audit approach
and process management. Where
appropriate, actions are agreed against
the points raised and subsequently
monitored for progress.
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line with the same six-month period to
December 2019, with increases into
2021, whilst the used car market has
remained stable over the past four
years. Since reopening on the 1 June
2020, demand and financial results
have both been stronger than had been
anticipated and the current new car
order take for July and beyond is ahead
of this time last year.
The directors have a reasonable
expectation that the Company has
adequate resources and headroom
against the covenant test to be able
continue in operational existence for the
foreseeable future and for at least twelve
months 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.
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
and bank overdraft, 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 £6.8
million and a revolving credit facility of
£7.5 million from HSBC, its primary
bankers, with both facilities being
renewable in March 2023. HSBC also
make available a short-term overdraft
facility of £3.5 million, which is renewed
annually in August. Subsequent to the
year-end, this facility limit was increased
to £6.0 million. The Company also has
a ten-year term loan from VW Bank
with a balance outstanding at 31 March
2020 of £1.9 million, which is repayable
to November 2023, and a short-term
overdraft facility of £7.0 million, which
is renewed annually in August. 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.
Information concerning the Company’s
liquidity and financing risk are set out
on page 8 and note 21 to the financial
statements.
Viability statement
In accordance with provision 28 of the
UK Corporate Governance Code, the
directors have assessed the viability
of the Company over a three-year
period to 31 March 2023. The directors
believe this period to be appropriate
as the Company’s strategic review
considered by the board encompasses
this period. In making their assessment,
the directors have considered the
Company’s current financial position
and performance and its cash flow
projections, including future capital
expenditure, in relation to the availability
of finance and funding facilities, and
have considered these factors in relation
to the principal risks and uncertainties
which are included in the Report of the
Directors.
During the year to 31 March 2020, the
board carried out a robust assessment
of the principal risks facing the
Company, including those that would
threaten its business model, future
performance, solvency or liquidity. The
directors believe that the Company
is well placed to manage its business
risks successfully, having considered
the principal risks and uncertainties.
Accordingly, the board believes that,
taking into account the Company’s
current position, and subject to the
principal risks faced by the business,
the Company will be able to continue
in operation and to meet its liabilities
as they fall due for the period up to 31
March 2023.
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Tax strategy and objective
As a responsible taxpayer, the
Company is committed to establishing,
maintaining and monitoring the
implementation of an appropriate tax
strategy. Our tax strategy is aligned
with our objective of paying the
correct amount of tax at the right time.
Commercial transactions are therefore
structured in the most tax efficient
way but without resorting to artificial
arrangements that we would regard as
abusive. There is an ethical dimension
to achieving this objective. The ethical
dimension reflects the need to mitigate
the risk to the Company’s reputation
that would arise from tax strategy that
entails aggressive tax planning.
A copy of the Company’s tax strategy
is available from its corporate website,
www.caffynsplc.co.uk.
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 in excess of
one year from the date of approval of
this Annual Report. This has focused
primarily on the achievement of the
banking covenants. All bank covenants
have been achieved for the year
under review. In light of covid-19, post
year-end HSBC have confirmed to the
Company the relaxation in the debt
service covenant test for September
2020 and March 2021. The new
covenants test requires the Company to
make an underlying profit before interest
for the rolling twelve-month period
to September 2020 and to March
2021. The Company have modelled
these periods and conclude that there
is headroom that would allow for a
40% reduction in expected new and
used units over this period. External
market commentary provided by the
Society of Motor Manufacturers and
Traders ("SMMT") indicate that new
car registrations will remain broadly in
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Caffyns plc Annual Report 2020
Chairman’s Statement on Corporate Governance
continued
The Annual General Meeting is used
to communicate with investors.
The chairmen of the Audit and Risk
Committee, Remuneration and
Nomination Committees are available to
answer questions. Separate resolutions
are proposed on each issue so that
they can be given proper consideration
and there is a resolution to approve the
Annual Report and financial statements.
The Company counts all proxy votes
and, after it has been dealt with by a
show of hands, indicates the level of
proxies lodged on each resolution.
Relations with suppliers
The board maintains close relationships
with its suppliers and, in particular,
with the six motor manufacturers for
which it holds franchises: namely Audi,
SEAT, Skoda, Vauxhall, Volkswagen
and Volvo. The Chief Executive holds
regular meetings with these parties
and the Company’s operations are
split into three divisions with the head
of each division specifically tasked
with maintaining a close and mutually
beneficial relationship with their
manufacturer. For its wider supplier
base, the Company ensures that it
operates in an ethical manner, ensuring
that invoices are settled within agreed
terms. The average credit period taken
for trade-related purchases in the year
under review was twenty five days.
By order of the board
R C Wright
Chairman
17 July 2020
Risk management and
internal controls
The board is responsible for
maintaining a sound system of
internal controls, including financial,
operational and compliance controls
and risk management, and reviews
the effectiveness of the system at
least annually in order to safeguard
shareholders’ investment and the
Company’s assets. The system is
designed to manage rather than
eliminate risk and can provide only
reasonable and not absolute assurance
against material misstatement or loss.
The board has completed a robust
assessment of the Company’s
emerging and principal risks, including
a description of its principal risks, the
procedures that are in place to identify
emerging risks, and an explanation of
how these risks are being managed or
mitigated.
The board has reviewed the
effectiveness of the system of internal
control. In particular, it has reviewed
and updated the process for identifying
and evaluating the significant risks
affecting the business and the policies
and procedures by which these risks are
managed.
Management are responsible for
the identification and evaluation of
significant risks applicable to their
areas of business together with the
design and operation of suitable internal
controls. These risks are assessed on
a regular basis and may be associated
with a variety of internal or external
sources, including control breakdowns,
disruption to information systems,
competition, natural catastrophe,
customer or supplier actions and
regulatory requirements.
The process used by the board is
to review the effectiveness of the
system of internal control including
a review of legal compliance, health
and safety and environmental issues
on a six-monthly basis. Insurance
and risk management and treasury
issues are reviewed annually or more
frequently if necessary. In addition, the
Audit and Risk Committee reviews the
scope of audits, the half-yearly and
annual financial statements (including
compliance with legal and regulatory
requirements) and reports to the board
on financial issues raised by both the
internal and external audit functions.
Financial control is exercised through
an organisational structure which has
clear management responsibilities with
segregation of duties, authorisation
procedures and appropriate information
systems. The system of annual
budgeting with monthly reporting and
comparisons to budget is a key control
over the business and in the preparation
of consolidated accounts.
There is an ongoing programme of
internal audit visits to monitor financial
and operational controls throughout
the Company. The executive directors
receive regular reports from the
internal audit and health and safety
monitoring functions which include
recommendations for improvement.
Financial reporting
The directors consider the annual report
and accounts, taken as a whole, to be
fair, balanced and understandable, and
provides the information necessary for
shareholders to assess the Company’s
position, performance, business model
and strategy.
Relations with shareholders
The board values the constructive views
of its shareholders and recognises
their interest in the Company’s strategy
and performance, board membership
and quality of management. The views
of major shareholders are reported
back to the board as appropriate.
The non-executive directors have
also attended meetings with major
shareholders. The principal methods of
communication with private investors
are the Interim Report, the Annual
Report and the Annual General Meeting.
Information on the Company is also
included on its corporate website
www.caffynsplc.co.uk.
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Directors’ Remuneration Report
Annual statement from
the chairman of the
Remuneration Committee
Introduction
On behalf of your board, I am pleased
to present our Directors’ Remuneration
Report for the year ended 31 March
2020. The Directors’ Remuneration
Report has been prepared on behalf
of the board by the Remuneration
Committee in accordance with the
requirements of the Companies Act
2006 and the Large and Medium-sized
Companies and Groups (Accounts and
Reports) (Amendments) Regulations
2013, and is split into two sections:
• The directors’ remuneration policy
sets out the Company’s intended
policy on remuneration, which will
be subject to a binding shareholder
vote at the Annual General Meeting
on 24 September 2020, and then
at least every subsequent third year
after that; and
•
The annual report on remuneration
sets out the payments and awards
made to the directors and details the
link between company performance
and remuneration for the 2020
financial year.
The information set out on pages 22 to
32 (the annual report on remuneration)
is subject to audit except for the
performance graph and table, the
change in remuneration of the Chief
Executive, the relative importance of
the spend on pay, the implementation
of remuneration policy in the year,
the considerations by the directors
of matters relating to directors’
remuneration and the statement of
shareholder voting at the 2019 Annual
General Meeting.
Remuneration outcomes for the
2020 financial year
Annual bonus opportunities are based
on the achievement of underlying profit
before tax targets. No bonuses have
been awarded to the executive directors
in respect of the 2020 financial year,
which reflects the financial results against
target of the Company for the year.
Key remuneration decisions for
the coming 2021 financial year
The Company’s annual salary review,
effective from 1 April, was deferred in
2020 due to the uncertainties caused
by the covid-19 pandemic. No date has
been fixed for an annual salary review
to take place and there have been
no changes to base salaries for the
executive directors. Any changes made
will not be retrospective and will be
disclosed in the 2021 Annual Report.
Conclusion
The directors’ remuneration policy
that follows this annual statement
sets out the Committee’s principles
on remuneration for the future and the
annual report on remuneration provides
details of the remuneration for the year
ended 31 March 2020.
The Committee will continue to be
mindful of shareholder views and
interests and we believe that our
directors’ remuneration policy continues
to be aligned with the achievement of
the Company’s business objectives.
By order of the board
S G Bellamy
Chairman of the
Remuneration Committee
17 July 2020
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Caffyns plc Annual Report 2020
Director’s Remuneration Report continued
Remuneration policy
The policy of the Committee is to ensure that the executive directors are fairly rewarded for their individual contributions to the
Company’s overall performance and to provide a competitive remuneration package to executive directors to attract, retain and
motivate individuals of the calibre required to ensure that the Company is managed successfully in the interests of shareholders.
In addition, the Committee’s policy is that a substantial proportion of the remuneration of the executive directors should be
performance related.
The Company’s directors’ remuneration policy is voted on every three years and was last approved by shareholders at the
Annual General Meeting held on 27 July 2017 and became effective from that date. The full policy was disclosed in the 2017
Annual Report, which is available on the Caffyns plc website located at www.caffynsplc.co.uk.
Future policy table
The new remuneration policy for the coming three financial years, effective from 1 April 2020, is set out below and will be placed
before shareholders to seek their approval at the forthcoming rescheduled Annual General Meeting on 24 September 2020.
Purpose and link
to strategy
Base salary
Provide competitive
remuneration that
will attract and
retain high-calibre
executive directors
to deliver strategy.
Benefits
Provide market
competitive benefits
consistent with the
role.
Operation
Maximum
potential value
Performance metrics
The Committee considers
individual salaries at the
appropriate Committee meeting
each year taking due account of
the factors noted in the operation
of the salary policy.
Reviewed annually effective
from 1 April to reflect role,
responsibility and performance
of the individual and the
Company, and to take account
of rates of pay for comparable
roles in similar companies.
Paid in twelve equal
monthly instalments during
the year. When selecting
comparators, the Committee
has regard to the Company’s
revenue, market worth and
business sector.
There is no prescribed
maximum increase although
the Committee would
carefully consider any
increases against those
awarded to the Company’s
employees taken as a
whole. The annual rate of
any increase is set out in the
Annual Report in the section
covering remuneration for
the current year and the
following year.
Benefits consist of the
provision of a company
car, private medical health
insurance, business-
related and certain other
subscriptions, and the
opportunity to join any
Company savings-related
share option scheme.
Not applicable.
The cost of providing benefits
varies from time to time and is
borne wholly by the Company
except for the cost of private
medical health insurance
where the Company
contributes half of the cost.
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Operation
Paid in cash after the end of
the financial year to which it
relates.
Maximum
potential value
Up to 100% of salary.
Purpose and link
to strategy
Annual bonus
Incentivises
achievement
of business
objectives by
providing a reward
for performance
against annual
targets.
Performance metrics
Targets based on the underlying
profit before tax of the Company.
The Committee sets threshold
and maximum targets on an
annual basis. In general:
•
•
A percentage of the maximum
bonus is payable for hitting the
threshold target; and
100% of the maximum
bonus is payable for
meeting or exceeding the
maximum target.
A sliding scale operates between
threshold and maximum
performance. Payment of any
bonus is subject to the discretion
of the Committee and, if deemed
appropriate, a bonus of up to
10% of salary may be paid
in exceptional circumstances
despite the threshold target not
being reached.
See page 29 for details.
Not applicable.
3% of base salary plus bonus.
Not applicable.
Long-term incentives
Alignment of
interests with
shareholders by
providing long-term
incentives delivered
in the form of
shares.
Pension
Attract and retain
executive directors
for the long term by
providing funding
for retirement.
Executive directors are
able to apply for maximum
entitlement under the rules of
any Company savings-related
share option scheme.
No other long-term incentive
scheme is considered
appropriate for the Company’s
specific circumstances.
Executive directors are
eligible to join the Company’s
defined-contribution pension
scheme on the same terms as
staff generally. In accordance
with the rules of the pension
scheme, bonuses are
pensionable.
As a result of changes in
pensions’ legislation effective
from 6 April 2006, executive
directors can choose to be
paid a salary supplement
in lieu of the employers’
contribution to the Company’s
pension scheme.
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Caffyns plc Annual Report 2020
Director’s Remuneration Report continued
Approach to recruitment
remuneration
The Committee’s approach to
recruitment remuneration is to offer
a market competitive remuneration
package sufficient to attract high calibre
candidates who are appropriate to the
role but without paying any more than is
necessary.
Any new executive director’s
remuneration package would include
the same elements and be in line with
the policy table set out earlier in the
directors’ remuneration policy, including
the same limits on performance-related
remuneration.
Were an internal candidate to be
promoted to the board, the original
grant terms and conditions of any bonus
or share awards made before that
promotion would continue to apply, as
would their membership of any of the
Company’s pension arrangements.
Reasonable relocation and other similar
expenses may be paid if appropriate.
Differences from remuneration policy
for all employees
All employees of the Company are
entitled to base salary and benefits.
The opportunity to earn commission
or a bonus is made available to a high
proportion of employees. The maximum
opportunity available is based on the
seniority and responsibility of the role.
Statement of consideration
of employment conditions of
employees elsewhere in the
Company
The Committee receives reports on an
annual basis on the level of pay rises
awarded across the Company and takes
these into account when determining
salary increases for executive directors.
In addition, the Committee receives
reports on the structure of remuneration
for senior management in the tier below
the executive directors and uses this
information to ensure a consistency of
approach for its most senior managers.
The Committee does not specifically
invite employees to comment on the
directors’ remuneration policy, but it
does take note of any comments made
by employees.
Statement of consideration
of shareholder views
The board considers shareholder
feedback received in relation to the
Annual General Meeting each year and
any action is built into the Committee’s
business for the ensuing period. This,
and any additional feedback received
from shareholders from time to time, is
considered by the Committee and as
part of the Company’s annual review of
remuneration policy.
Notes to the policy table
The remuneration policy is designed
to support the strategy and promote
long-term sustainable success.
There is no link between the levels
of remuneration earned by the
executive directors and the Company’s
share price.
The remuneration policy is also linked to
company purpose, values and culture.
Performance conditions
The Committee selected the
performance conditions as they are
central to the Company’s strategy and
are key metrics used by the executive
directors to oversee the operation of
the business. The performance targets
for the annual bonus are determined
annually by the Committee.
The performance target for the 2020/21
annual bonus is based on underlying
profit before tax as outlined on page 28.
However, in determining whether to
award a bonus the Committee would
also take into account factors such
as dividend cover and year-on-year
changes to the net asset value of
the Company. The Committee is of
the opinion that this performance
target is commercially sensitive for the
Company and that it would therefore be
detrimental to the Company to disclose
details of the target in advance. The
target will be disclosed after the end
of the financial year in the Directors’
Remuneration Report in next year’s
Annual Report.
Changes from proposed policy
operating in the year ended
31 March 2020
For 2020/21 and onwards, in
exceptional circumstances, the
Remuneration Committee is proposing
to shareholders, for their approval, that
it would have the discretion to pay a
maximum of 10% of salary as a bonus
even if performance were to be below
the threshold required.
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Stock code CFYN
Other provisions
in specific service
contracts
S G M Caffyn may
give six months’
notice but is entitled
to two years’ notice
from the Company
and an unreduced
early retirement
pension.
Termination
payment to S G M
Caffyn following a
change of control
comprises a cash
amount equal to
two years’ basic
salary, bonus and
benefits (including
Company pension
contributions).
None.
Not applicable.
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Directors’ service contracts, notice periods and termination payments
Contractual
provisions on a
change of control
of the Company
Provision
Details
Policy
Notice periods
in executive
directors’
service
contracts.
Twelve months by executive
directors and the Company.
Executive directors may
be required to work
during the notice period.
Twelve months by
executive directors
and the Company.
Compensation
for loss of
office.
No more than twelve months’
basic salary, bonus and benefits
(including Company pension
contributions).
None.
None, except
for the Chief
Executive.
Treatment of
annual bonus
on termination.
Treatment
of unvested
savings-
related share
option scheme
options.
Exercise of
discretion.
Bonuses that have already been
declared are payable in full. In
the event of termination by the
Company (except for cause) a
prorated bonus to the end of
the notice period would also be
payable.
Good leavers may exercise their
options within six months of
cessation (one year for death).
Options of leavers for fraud,
dishonesty or misconduct
lapse. Options of other leavers
may be exercised within six
months of cessation, but only
to the extent that they would
ordinarily become vested during
that time. There is no discretion
to treat any such leaver as a
“good leaver”.
Intended only to be relied upon
to provide flexibility in unusual
circumstances.
None.
None.
The number of
options that can
be exercised is
reduced pro rata
to reflect the
proportion of the
vesting period
before cessation.
Other than death, “good
leaver” circumstances
comprise: injury,
disability, redundancy,
retirement or transfer
of employing business
outside the Company.
The number of options
that can be exercised
is reduced pro rata to
reflect the proportion of
the vesting period before
cessation.
The Committee’s
determination would
consider the particular
circumstances of the
executive director’s
departure and the recent
performance of the
Company.
Not applicable.
Not applicable.
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Caffyns plc Annual Report 2020
Director’s Remuneration Report continued
Provision
Outside
appointments.
Non-executive
directors.
Policy
Subject to approval.
Appointed for three-year terms.
Details
Board approval must be
sought.
Compensation of six
months’ fees payable if
required to stand down.
Contractual
provisions on a
change of control
of the Company
Not applicable.
Other provisions
in specific service
contracts
Not applicable.
Not applicable.
Not applicable.
In the event of the negotiation of a compromise or settlement agreement between the Company and a departing director,
the Committee may make payments it considers reasonable in settlement of potential legal claims. Such payments may also
include reasonable reimbursements of professional fees in connection with such agreements.
The Committee may also include the reimbursement of repatriation costs or fees for professional or outplacement advice in the
termination package, if it considers it reasonable to do so. It may also allow the continuation of benefits for a limited period.
Service contracts
Executive directors are appointed under rolling service contracts, whereas non-executive directors each have a fixed-term
appointment of three years, renewable upon expiry at the Company’s discretion. When considering the reappointment of a non-
executive director, the board reviews their attendance at, and participation in, meetings and their overall performance, and takes
into account the balance of skills and experience of the board as a whole.
Director
R C Wright
N T Gourlay
S G Bellamy
Commencement*
27 July 2018
26 September 2019
18 June 2019
* Commencement of current renewal contract.
Expiry
26 July 2021
25 September 2022
17 June 2022
Unexpired term at
31 March 2020
(months)
16 months
30 months
27 months
N W Hollingworth resigned as a non-executive director at the Company’s Annual General Meeting on 25 July 2019. Having served
in excess of nine years on the board, he had been seeking reappointment on an annual basis at each Annual General Meeting.
Copies of directors’ service contracts and letters of appointment are available for inspection at the Company’s registered office.
Fees from external directorships
None of the executive directors holds office as a non-executive director of other companies other than in a voluntary or
honorary (that is, unpaid) capacity. Accordingly, the Company does not have a formal policy on whether an executive director
may or may not keep fees gained from holding an external non-executive directorship. This would be decided on a case-by-
case basis.
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Stock code CFYN
Total remuneration opportunity for the year ending 31 March 2021
The chart below illustrates the remuneration that would be paid to each of the executive directors under three different
performance scenarios: (i) below threshold; (ii) on target; and (iii) outperformance.
S G M Caffyn
M Warren
Outperformance
50%
50%
£580,000
Outperformance
50%
50%
£298,000
Target
80%
20% £362,000
Target
80%
20% £186,000
Below threshold
100%
£290,000
Below threshold
100%
£149,000
S J C Caffyn
Outperformance
50%
50%
£94,000
Fixed
Annual bonus
Target
80%
20% £59,000
Below threshold
100%
£47,000
The elements of remuneration have been categorised into two components: (i) fixed; and (ii) annual variable (annual bonus awards).
Element
Fixed
Description
Base salary
Annual variable
Annual bonus awards
The on-target scenario assumes that for the annual bonus, underlying profit before tax would be 116% of the threshold target.
Non-executive directors’ fee policy
The policy for the remuneration of the non-executive directors is as set out below. Non-executive directors are not entitled to a
bonus, cannot participate in the Company’s savings-related share option scheme and are not eligible for pension arrangements.
Purpose and link
to strategy
Operation
Non-executive director fees
Attract non-
executive directors
who have a broad
range of experience
and skills to oversee
the implementation
of the Company’s
strategy.
Non-executive directors’ fees
are determined by the board
within the limits set out in the
Articles of Association and are
paid in twelve equal, monthly
instalments during the year.
Maximum
potential value
Reviewed annually to reflect
the role, responsibility and
performance of the individual
and the Company. Annual
rate of increase set out
in the annual report on
remuneration for the current
year and the following year.
No prescribed maximum
annual increase.
Performance metrics
None.
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Caffyns plc Annual Report 2020
Director’s Remuneration Report continued
Annual report on remuneration
Save for the performance graph and table, the change in the remuneration of the Chief Executive, the relative importance of
the spend on pay, the implementation of remuneration policy for 2021, the consideration by the directors of matters relating to
directors’ remuneration and the statement of shareholder voting at the 2019 Annual General Meeting, the information set out in
this part of the Directors’ Remuneration Report is subject to audit.
Single total figure of remuneration for 2020
The following table shows a single total figure of remuneration in respect of qualifying services for the 2020 financial year for
each director, together with comparative figures for 2019. The information provided in this part of the Directors’ Remuneration
Report is subject to audit.
Salary and fees
£’000
Taxable
benefits
£’000
Annual bonus
£’000
In lieu of pension
contributions
£’000
Total
£’000
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Executive directors
S G M Caffyn
M Warren1
S J Caffyn
Total
Non-executive directors
R C Wright
N T Gourlay
N W Hollingworth2
S G Bellamy3
Total
Aggregate directors’
emoluments
290
140
47
477
67
30
10
23
284
145
46
475
65
29
29
–
130
123
20
12
4
36
–
–
–
–
–
17
14
4
35
–
–
–
–
–
607
598
36
35
–
–
–
–
–
–
–
–
–
–
54
28
9
91
–
–
–
–
–
9
4
1
14
–
–
–
–
–
9
4
1
14
–
–
–
–
–
319
156
52
527
67
30
10
23
364
191
60
615
65
29
29
–
130
123
91
14
14
657
738
1. The contractual salary of M Warren is £148,569. This was reduced in the year under by review by a sum equivalent to fifteen days’ unpaid leave
2. N W Hollingworth resigned at the Company’s Annual General Meeting on 25 July 2019
3. S G Bellamy was appointed as a non-executive director on 18 June 2019
Taxable benefits made available to the executive directors include the provision of a company car, a 50% contribution towards
the cost of private medical health and the cost of appropriate subscriptions.
Annual bonus
Bonuses are earned by reference to the financial year and paid in May or June following the end of the financial year. Any
bonuses accruing to the executive directors in respect of the year ended 31 March 2020 were based on the underlying profit
before tax as shown below.
Bonus value as % of salary
Threshold
Target Maximum
Actual
performance
S G M Caffyn
M Warren
S J Caffyn
Max
Actual Max
Actual Max
Actual
Underlying profit
before tax*
£1.55m £1.77m
£3.48m
£0.25m
100%
0% 100%
0% 100%
Bonus receivable
15%
25%
100%
0%
£0
£0
0%
£0
*
The underlying profit before tax is after taking account of the cost of such bonus including employer’s National Insurance charges and contributions in lieu of
pension contributions.
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Pension entitlements and cash allowances
One executive director, the Company Secretary, is a deferred member of the Company’s closed defined-benefit pension
scheme at 31 March 2020 (2019: one). The ultimate pension of the Company Secretary will be provided by the defined-benefit
pension scheme, which provides a pension of a maximum of two-thirds of final salary in respect of benefits accrued up to
31 March 2006. From 1 April 2006 until 1 April 2010 when the scheme closed to future accrual, the accrued benefits of this
director were based on a “career average” basis and based upon earnings in each financial year. Under the rules of the scheme,
the Company Secretary is eligible for a pension at normal retirement age of 65. If early retirement is taken before age 65, the
accrued pension is discounted by 5% per annum (2019: 5%) simple, except where the Company consents to early retirement
between 60 and 65, and then no discount is applied. Pensions paid increase in line with price indexation which may be limited.
On death, one-half of the spouse’s pension becomes available. Children’s allowances to a maximum, including spouse’s
pension, of 100% of the executives’ pension may be payable. Allowance is made in transfer value payments for discretionary
benefits. The total annual accrued pension excludes transferred-in benefits.
S J Caffyn
Normal
retirement
date
12 December 2033
Total annual
accrued pension
at 31 March 2020
£’000
Total annual
accrued pension
at 31 March 2019
£’000
36
35
The pension for the Company Secretary for service since 2010 has been provided on a contributory basis through the
Company’s defined-contribution pension scheme. In certain years, the Company Secretary elected not to be included in the
defined-contribution pension scheme and instead to be paid a salary supplement in lieu of the employers’ contribution to the
Company’s defined-contribution pension scheme.
In the year to 31 March 2020, one of the executive directors was a member of the Company’s defined-contribution pension
scheme (2019: none).
The non-executive directors are not members of the Company’s defined-contribution pension scheme (2019: none).
Statement of directors’ shareholdings
The directors’ shareholdings as at 31 March 2020 are summarised within the Report of the Directors.
All-employee share scheme
Details of share options held by executive directors under the Company’s savings-related share option scheme, opened in July
2017, are as follows:
Expiry
date
ShareSave 12/07/2017 01/09/2020 28/02/2021
Date of
grant
Scheme
Earliest
exercise
date
Exercise
price
£
3.99
Number at
1 April
2019
1,434
Granted
in year
–
Number at
31 March
2020
1,434
ShareSave 12/07/2017 01/09/2020 28/02/2021
3.99
1,434
–
1,434
S G M Caffyn
M Warren
The market value of the shares at the date of the grant was £4.75 giving a face value of the awards for each of the directors
listed of £1,090.
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Caffyns plc Annual Report 2020
Director’s Remuneration Report continued
Performance graph and table
The chart below shows the Company’s eight-year annual Total Shareholders Return performance against the FTSE Small-Cap
Total Return Index, which is considered an appropriate comparison to other public companies of a similar size.
250.0
200.0
150.0
100.0
50.0
0.0
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FTSE Small Cap TSR
Caffyns TSR
The table below sets out the total remuneration delivered to the Chief Executive over each of the last eight years, valued using
the same methodology as applied to the single total figure of remuneration.
Financial years ended 31 March
2013
2014
2015
2016
2017
2018
2019
2020
Chief Executive: S G M Caffyn
Total single remuneration figure
(£’000)
Annual bonus % of maximum
opportunity
280
534
389
410
388
302
364
319
5%
100%
39%
43%
31%
0%
19%
0%
Single remuneration figure for the Chief Executive
Remuneration for the Company’s remaining full time equivalent employees:
25th percentile
Median
75th percentile
30
Salary
only
£’000
290
Total
earnings
£’000
319
28
22
14
40
29
19
Ratio
%
8:1
11.1
17:1
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The pay ratio disclosure above complies with Regulation 18 of The Companies (Miscellaneous Reporting) regulations 2018.
These ratios have been prepared using Option A in the regulations by ranking the annualised earnings of those employees
of the Company in employment on 31 March 2020, the last day of the financial year under review. Earnings includes
salary, bonuses, variable elements of pay such as commissions and overtime, holiday and sickness pay, company pension
contributions and the taxable value of benefits-in-kind. The Company’s Chairman and non-executive directors have been
excluded from the calculation as they receive a fee rather than a salary. All employees on zero-hour contracts have been
included if they worked in the month of March 2020.
Change in remuneration of Chief Executive
The base salary of the Chief Executive increased between 31 March 2019 and 31 March 2020 by 2%, the same percentage
increase compared with the average change for the Company’s Regional Directors and Heads of Business. Neither the Chief
Executive nor the comparator group received any changes to their employment benefits during the year. The Chief Executive
did not receive a bonus for the year, which compared to a 19% bonus in the prior year when the Company’s underlying profit
before tax exceeded the threshold set under the bonus scheme. The bonuses for the comparator group reduced by 10%
compared to the prior year.
The comparator group comprises Regional Directors and Heads of Business and has been selected on the basis that these
managers have direct senior operational management responsibilities.
Relative importance of spend on pay
The table below sets out the total spend on pay in the two years to 31 March 2020 compared with other disbursements from profit
(i.e. the distributions to shareholders). These were the most significant outgoings for the Company in the last financial year).
Spend on staff pay (including directors)
Profit distributed by way of dividend
Spend in
2020
£’000
13,670
202
Spend in
2019
£’000
13,723
606
Decrease
%
0
-67
No final dividend has been declared for the year ended 31 March 2020. The total dividend payable in respect of the year to 31
March 2020 is therefore expected to be £202,000 (2019: £606,000).
Implementation of remuneration policy for 2020/21
The annual salaries and fees to be paid to directors in 2020/21 are set out in the table below, together with any increases
expressed as a percentage.
S G M Caffyn
M Warren
S J Caffyn
R C Wright
N T Gourlay
S G Bellamy1
2021
salary/fees
£’000
290
149
47
67
30
30
2020
salary/fees
£’000
Increase/
(decrease)
%
290
149
47
67
30
10
0
0
0
0
0
0
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1. S G Bellamy was appointed as a non-executive director on 18 June 2019 at an annual fee of £29,700
The salaries shown in the table above are the full contractual salaries and fees for the board members. In response to the
impact of covid-19, the Company implemented numerous cost saving measures across many areas of the business and, as
part of this cost savings exercise, an annual salary ceiling of £37,500 was implemented for all active employees, including the
executive directors and the chairman of the Company, for the month of April 2020. The non-executive directors of the Company
also agreed a 20% reduction to their fees. These salary and fee reductions were then unwound in stages with the full time
executive directors moving to 50% of their contractual salary from 1 May 2020 and then to 80% of their contractual salary
from 1 June 2020. The remuneration of the Chairman remained at the annual ceiling of £37,500 for the month of May and then
increased to 80% of his contractual fees for June. All board members returned to their full contractual fee and salary levels from
1 July 2020.
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Caffyns plc Annual Report 2020
Director’s Remuneration Report continued
The basis for determining annual
bonus payments for the financial year
ending 31 March 2021 is set out in
the future policy table in the directors’
remuneration report on page 23.
The profit targets are considered
commercially sensitive because of
the information that it could provide
to the Company’s competitors and
consequently these profit targets
will only be disclosed after the end
of the financial year, in the Directors’
Remuneration Report in the 2021
Annual Report.
Consideration by the
directors of matters relating
to directors’ remuneration
The Committee
The Committee is responsible for
reviewing and recommending the
framework and policy for remuneration
of the executive directors and of
senior management. The Committee’s
terms of reference are available on the
Company’s corporate website. The
members of the Committee at 31 March
2020 were Mr S G Bellamy (Chairman),
Mr R C Wright and Mr N T Gourlay.
Until his resignation as a non-executive
director on 25 July 2019, the Committee
was chaired by Mr N W Hollingworth
who had been deemed independent
until the expiry of his nine-year period of
service in January 2017. Mr N T Gourlay
was an independent non-executive
director throughout the year and Mr S
G Bellamy was an independent non-
executive director from his appointment
on 18 June 2019. The Committee
met four times during the year and all
members were present.
The primary role of the Committee is to
set the directors’ remuneration policy
and accordingly to:
•
•
•
review, recommend and monitor the
level and structure of remuneration
for the executive directors and to
review and monitor the level and
structure of remuneration of other
senior executives;
approve the remuneration package
for the executive directors;
determine the balance between
base pay and performance-related
elements of the package to align
executive directors’ interests with
those of shareholders; and
•
approve annual incentive payments
for executive directors.
Summary of activity during the
year ended 31 March 2020
During the year the Committee
conducted its annual review of all
aspects of the remuneration packages
of the executive directors to ensure that
they continue to reward and motivate
achievement of medium and long-term
objectives, and to align their interests
with those of shareholders. Accordingly,
the Committee’s activities during the
year included:
•
•
•
reviewing the basic salaries of the
executive directors and reviewing
and monitoring the level and
structure of remuneration of other
senior executives;
reviewing the basic salary of the
Company’s Chairman;
setting the annual performance
targets in line with the Company’s
plan for the 2020/21 financial year
and determining the amounts that
may potentially be payable for the
2019/20 financial year.
Statement of voting at the 2019 Annual General Meeting
At the last Annual General Meeting, votes on the Directors’ Remuneration Report were cast as follows:
Votes for
2,621,974
%
99.76
Votes against
6,176
%
0.23
Abstentions
100
%
0.01
A shareholder vote on the directors’ remuneration policy is required at least every third year and was last voted on at the 2017
Annual General Meeting and will be voted on again at the 2020 Annual General Meeting. Votes at the 2017 meeting on the
directors’ remuneration policy were cast as follows:
Votes for
2,894,212
By order of the board
S G Bellamy
Chairman of the Remuneration Committee
17 July 2020
%
99.81
Votes against
1,971
%
0.07
Abstentions
3,513
%
0.12
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Report of the Directors
The directors present their report and
the financial statements for the year
ended 31 March 2020.
Results and dividends
The results of the Company for the year
are set out in the financial statements on
pages 45 to 86. An interim dividend of
7.5p per share was paid to shareholders
on 6 January 2020. The board is not
declaring a final dividend (2019: 15.0p)
making a total of 7.5p per share (2019:
22.5p). Total ordinary dividends paid
in the year amounted to £606,000.
Dividends paid in the year to preference
shareholders amounted to £72,000
(2019: £72,000) as set out in note 10 to
the financial statements.
Future developments of the Company
are set out in the Operational and
Business Review on pages 2 to 6.
Financial risk management
Consideration of principal risks and
uncertainties is included on page 8
and 9 of the Strategic Report, including
the management of financial risks.
These are also outlined further in note
21 to the financial statements.
Appointment and
replacement of the
Company’s directors
The rules for the appointment and
replacement of the Company’s directors
are detailed in the Company’s Articles of
Association. Directors are appointed by
ordinary resolution at a general meeting
by shareholders entitled to vote or by
the board either to fill a vacancy or as
an addition to the existing board. The
appointment of non-executive directors
is on the recommendation of the
Nominations Committee; the procedure
is detailed in the Chairman’s Statement
on Corporate Governance on page 16.
Directors
Details of the directors who served
during the year and who remained in
office at 31 March 2020 are set out
below. In addition, Mr N W Hollingworth
served as a director until his resignation
on 25 July 2019, having served in
excess of a nine-year term.
Mr R C Wright PG Dip FIMI FCIM was
appointed Chairman on 26 July 2012.
He joined the board as a non-executive
director and Chairman-elect on 1
November 2011. He has previously held
senior executive roles with the Ford
Motor Company including: Director,
European Operations at Jaguar Cars
Limited; Director of Sales, Ford Motor
Company Limited; and President/
Managing Director of Ford Belgium NV.
He was Chairman of API Group plc from
2001 until 31 October 2014, and sat on
the advisory board of Warwick Business
School, University of Warwick, for
several years from 2002 onwards. He is
the former Chair of the board of National
Savings and Investments, part of HM
Treasury. He is currently an advisor to
a number of privately held companies
including being Chairman of Thames
River Moorings Limited.
Mr N T Gourlay BSc FCA, a Chartered
Accountant, joined the board as a non-
executive director on 26 September
2013. He spent more than twenty years
with the BAT plc group of companies,
leaving in 2001. In 2003 Mr Gourlay
co-founded Animos LLP, a business
consultancy of which he remains
a partner.
Mr S G Bellamy BCom CA(NZ) joined
the board on 18 June 2019 and has
been chairman and non-executive
director to a wide range of both
public and private companies and
chairman of, and advisor to, investment
committees and capital providers.
He was previously Chief Operating
Officer and Chief Financial Officer of
Sherwood International Plc. Prior to
Sherwood, he was a UK Investment
Director of Brierley Investments, an
active investor in quoted UK companies.
He is a New Zealand Chartered
Accountant and worked at Coopers
& Lybrand (now PwC), both in New
Zealand and New York. He is currently
also a non-executive director and Audit
Chair of Advanced Medical Solutions
Group plc, an AIM 30 company.
Mr S G M Caffyn MA FIMI joined
the board on 16 July 1992 and was
appointed Chief Executive on 1 May
1998. He graduated from Cambridge
in 1983 having read engineering, and
subsequently worked for Andersen
Consulting. He joined the Company
in 1990.
Mr M Warren BSc ACA joined the board
on 31 May 2016 and was appointed
Finance Director on 31 July 2016. He
is a Chartered Accountant and spent
twenty one years with H.R. Owen plc
of which the eight years until April 2015
were as Finance Director. He graduated
from Southampton in 1986 having
read civil engineering and subsequently
worked for PwC.
Ms S J Caffyn BSc FCIPD AICSA FIMI
has thirty years’ Human Resource
experience across several different
sectors. She joined the board on
28 April 2003 as Human Resources
Director, having previously been Group
Personnel Manager and Company
Secretary. A Chartered Company
Secretary, she has governance
experience from several not-for-profit
organisations.
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Caffyns plc Annual Report 2020
Report of the Directors continued
Interests in shares
The interests of the directors and their families in the shares of the Company are as follows:
As at 31 March 2020
As at 31 March 2019
Ord
7,500
51,988
5,000
39,232
4,893
5,000
11%
Pref
–
1,600
–
1,655
–
–
7%
Pref
–
200
–
–
–
–
Ord
7,500
51,988
5,000
39,232
4,893
–
11%
Pref
–
1,600
–
1,655
–
–
7%
Pref
–
200
–
–
–
–
Compensation for
loss of office
In the event of an executive director’s
employment with the Company
being terminated, Mr S G M Caffyn is
entitled to receive from the Company
a sum equivalent to twice his annual
emoluments, which applied immediately
before his termination. Ms S J
Caffyn is entitled to receive from the
Company a sum equivalent to her
annual emoluments, which applied
immediately before her termination, and
Mr M Warren is entitled to receive from
the Company a sum equivalent to six
months’ emoluments, which applied
immediately before his termination.
Emoluments include a proportion of the
available bonus, which the expired part
of the measured period for bonus, bears
to the whole of such measurement
period. The executive directors’ service
contracts commenced from the date of
their appointment to the board.
In the event of the Chairman’s or a non-
executive director’s employment with
the Company being terminated, they are
entitled to receive from the Company a
sum equivalent to six months’ fees.
Directors’ indemnity
and insurance
The Company’s Articles of Association
permit the board to grant the directors
indemnities in relation to their duties
as directors in respect of liabilities
incurred by them in connection with
any negligence, default, breach of duty
or breach of trust in relation to the
Company. In line with market practice,
each director has the benefit of a deed
of indemnity. The Company has also
purchased insurance cover for the
directors against liabilities arising in
relation to the Company, as permitted by
the Companies Act 2006. This insurance
does not cover fraudulent activity.
ShareSave scheme
The Company encourages employee
share ownership through the provision
of periodic Save As You Earn
schemes. The latest scheme, which is
administered by the Yorkshire Building
Society, was launched in July 2017
with share options for 127,969 Ordinary
shares being subscribed. The scheme
matures in September 2020 when the
share options become exercisable upon
expiry of a three-year savings contract
at a pre-determined price of £3.99 per
share. At 31 March 2020, the number of
share options outstanding was 85,372
(2019: 106,330).
R C Wright
S G M Caffyn
M Warren
S J Caffyn
N T Gourlay
S G Bellamy
Mr N W Hollingworth held 2,500 Ordinary
shares at 31 March 2019 and at the date
of his resignation on 25 July 2019.
Mr S G Bellamy was appointed as a
director on 18 June 2019 and held no
shares at the date of his appointment.
He acquired 1,000 Ordinary shares on
3 December 2019, with a further 4,000
Ordinary shares being acquired on 4
December 2019.
Subsequent to the year-end, on 6 May
2020, Mr S G M Caffyn was gifted
25,000 Ordinary shares in the Company
(“Ordinary shares”) for nil consideration
taking his holding in Ordinary shares in
the Company to 76,988. On 19 June
2020, Ms S J Caffyn was gifted 14,000
Ordinary shares for nil consideration, of
which 7,000 have been placed in trust for
her children. Following the transaction,
her holding in Ordinary shares in the
Company increased to 46,232.
Mr S G M Caffyn and Ms S J Caffyn
are directors of Caffyn Family Holdings
Limited, which owns all the 2,000,000
6% Cumulative Second Preference
shares, which have full voting rights,
except in relation to matters that under
the Listing Rules (as amended from time
to time) are required to be voted on by
premium-listed securities, being the
Ordinary shares.
The market price of the Company’s
Ordinary shares at 31 March 2020 was
£2.80 and the range of market prices
during the year was £2.80 to £4.10.
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Greenhouse gas emissions
Information on greenhouse gas emissions is set out in the Strategic Report on page 11.
Employees
Employees are encouraged to discuss with management any matters which they are concerned about and issues affecting the
Company. In the 2020/21 financial year the Chief Executive will be visiting each site regularly for a question and answer session
with staff. He will report to the board on the outcome of these sessions. In addition, the board takes account of employees’
interests when making decisions. Suggestions from employees aimed at improving the Company’s performance are welcomed.
The board reviews feedback from the employee consultation group on pay and bonuses as well as reviewing all exit interview
feedback. The board also meets with senior staff during the strategic review process. The Company has a Human Resources
director, Ms S J Caffyn. Further information on employees is set out in the Strategic Report on page 10.
Share capital and the rights and obligations attaching to shares
As at 31 March 2020, the issued share capital of the Company comprised Ordinary shares of 50p each and three classes of
preference share, namely 7% Cumulative First Preference shares of £1 each, 11% Cumulative Preference shares of £1 each,
and 6% Cumulative Second Preference shares of 10p each. Details of the share capital of the Company are set out in note 25
to the financial statements.
Subject to applicable statutes and other shareholders’ rights, shares may be issued with such rights and restrictions as the
Company may by ordinary resolution decide.
Holders of Ordinary shares are entitled to attend and speak at general meetings of the Company, to appoint one or more
proxies (and, if they are corporations, corporate representatives). Holders of Ordinary shares are entitled to receive a dividend if
one is declared and receive a copy of the Company’s annual report and accounts.
Holders of Cumulative First Preference shares are entitled, in priority to any payment of dividend on any other class of shares,
to a fixed cumulative preferential dividend at the rate of 7% per annum.
Subject to the rights of the holders of Cumulative First Preference shares, holders of 6% Cumulative Second Preference shares
of 10p each are entitled in priority to any payment of dividend on any other class of shares to a fixed cumulative preferential
dividend at the rate of 6% per annum.
Subject to the rights of the holders of Cumulative First Preference shares and 6% Cumulative Second Preference shares of 10p,
holders of 11% Cumulative Preference shares of £1 each are entitled in priority to any payment of dividend on any other class
of shares to a fixed cumulative preferential dividend at the rate of 11% per annum. The percentage of the total share capital
represented by each class of share as at 31 March 2020 is shown below.
The full rights and obligations attaching to the Company’s shares are set out in the Company’s Articles of Association, copies of
which can be obtained from Companies House or by writing to the Company Secretary.
Authorised
500,000 7% Cumulative First Preference shares of £1 each
1,250,000 11% Cumulative Preference shares of £1 each
3,000,000 6% Cumulative Second Preference shares of 10p each
4,000,000 Ordinary shares of 50p each
Allotted, called-up and fully paid
170,732 7% Cumulative First Preference shares of £1 each
441,401 11% Cumulative Preference shares of £1 each
2,000,000 6% Cumulative Second Preference shares of 10p each
Total Preference shares recognised as a financial liability
2,879,298 Ordinary shares of 50p each
£’000
500
1,250
300
2,000
4,050
171
441
200
812
1,439
2,251
%
12.35
30.86
7.41
49.38
100.00
7.58
19.60
8.88
36.06
63.94
100.00
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Report of the Directors continued
Company’s registrars no later than 48
hours before a general meeting.
There are no restrictions on the transfer
of Ordinary shares other than certain
restrictions, which may be imposed
pursuant to the Articles of Association
of the Company, certain restrictions
which may, from time to time, be
imposed by laws and regulations (for
example in relation to insider dealing),
restrictions pursuant to the Company’s
share dealing code whereby directors
and certain employees of the Company
require prior approval to deal in the
Company’s shares, and where a person
has failed to provide the Company with
information concerning the interests in
those shares.
The Company is not aware of any
arrangements or agreements between
shareholders that may result in
restrictions on the transfer of Ordinary
shares or on voting rights.
Property
The Company last valued its portfolio
of freehold premises as at 31 March
2020. The valuation was carried out by
CBRE Limited, Chartered Surveyors,
based on existing use value. The excess
of the valuation over net book value
at that date was £11.8 million (2019:
£11.2 million). In accordance with the
Company’s accounting policies, this
surplus has not been incorporated into
these financial statements. The CBRE
valuation report included a ‘material
valuation uncertainty’ statement for the
potential impact on property values
of the covid-19 pandemic and this is
explained in more detail in note 12 on
page 66.
Voting rights, restrictions on
voting rights and deadlines
for voting rights
Shareholders (other than any who,
under the provisions of the Articles of
Association or the terms of the shares
they hold, are not entitled to receive
such notices from the Company) have
the right to receive notice of, and attend,
and to vote at all general meetings of
the Company. The Company’s auditor
has similar rights except that they may
not vote. A resolution put to the vote at
any general meeting is to be decided
on a show of hands unless (before or
on the declaration of the result of the
show of hands or on the withdrawal of
any demand for a poll) a poll is properly
demanded.
Every member present in person at a
general meeting has, on the calling of a
poll, one vote for every Ordinary share
of which the member is the holder,
and one vote for every 6% Cumulative
Second Preference share of which the
member is the holder. In the case of
joint holders of a share, the vote of the
member whose name stands first in
the register of members is accepted
to the exclusion of any vote tendered
by any other joint holder. Unless the
board decides otherwise, a shareholder
may not vote at any general meeting or
class meeting or exercise any rights in
relation to meetings while any amount of
money relating to their shares remains
outstanding.
A member is entitled to appoint a proxy
to exercise all or any of their rights to
attend and speak and vote on their
behalf at a general meeting. Further
details regarding voting at the Annual
General Meeting can be found in the
notes to the Notice of the Annual
General Meeting. To be effective,
paper proxy appointments and voting
instructions must be received by the
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Significant direct or indirect shareholdings
At 16 July 2020, the directors were aware of the following interests in 3% or more of the nominal value of the Ordinary share
capital (excluding treasury shares) of the Company:
Maland Pension Fund (Pershing Nominees Ltd RKCLT)
Charles Stanley
HSBC Republic Bank Suisse SA
Caffyns Pension Fund
A W Caffyn/B Lees
K E Caffyn
M I Caffyn
Armstrong Investments (Nortrust Nominees)
GAM Exempt UK Opportunities Fund
Ordinary
shares
352,500
133,750
128,349
125,570
107,409
104,804
103,495
90,000
88,267
%
13.08
4.96
4.76
4.66
3.98
3.89
3.84
3.34
3.27
Fostering relationships
with stakeholders
Details on the Company’s engagement
with stakeholders in explained in more
detail on page 12.
Business at the Annual
General Meeting
As well as dealing with formal business,
the Company takes the opportunity
afforded at the Annual General Meeting
to provide up-to-date information
about the Company’s trading position
and to invite and answer questions
from shareholders on its policies
and business. At the Annual General
Meeting, a separate resolution is
proposed for each substantive matter.
The Company’s Annual Report and
financial statements are posted to
shareholders, together with the Notice
of Annual General Meeting summarising
the business proposed, giving the
requisite period of notice.
In light of the current covid-19 measures
adopted by the Government around
social distancing, the Annual General
Meeting on 24 September 2020
will be run as a closed meeting and
shareholders will not be able to attend
in person. Shareholders attempting
to attend the Annual General Meeting
will, with regret, be refused entry.
Shareholders will be invited to register
questions in advance of the meeting
for the board to answer and answers
will be made available after the meeting
via the Company’s corporate website,
www.caffynsplc.co.uk.
Auditor
Grant Thornton UK LLP had been
the external auditor since 1964
and, in accordance with the auditor
independence requirements of the
revised Ethical Standard effective 11
June 2016, would not have been able
to have their appointment extended
beyond the year ending 31 March 2021.
In the light of this length of tenure, the
Audit and Risk Committee instigated
an audit tender process during the
financial year, which resulted in the
appointment by the board of BDO LLP
as external auditor to the Company.
This appointment was subsequently
confirmed by shareholders at the Annual
General Meeting in July 2019.
By order of the board
S J Caffyn
Company Secretary
17 July 2020
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Caffyns plc Annual Report 2020
Directors’ Responsibilities Statement
The directors are responsible for
preparing the Report of the Directors
and financial statements in accordance
with applicable law and regulations.
Company law requires the directors
to prepare financial statements for
each financial year. Under that law the
directors are required to prepare the
group financial statements of Caffyns
plc and its subsidiaries (the “Group”)
and have elected to prepare the parent
company financial statements in
accordance with International Financial
Reporting Standards (“IFRSs”) as
adopted by the European Union. Under
company law the directors must not
approve the financial statements unless
they are satisfied that they give a true
and fair view of the state of affairs and
profit or loss of the Company and
Group for that period. In preparing these
financial statements the directors are
required to:
•
select suitable accounting policies
and then apply them consistently;
• make judgements and accounting
estimates that are reasonable
and prudent;
•
•
state whether applicable IFRSs
have been followed, subject to any
material departures disclosed and
explained in the financial statements;
and
prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
The directors are responsible for
keeping adequate accounting records
that are sufficient to show and explain
the Company’s transactions and
disclose with reasonable accuracy at
any time the financial position of the
Company and enable them to ensure
that the financial statements and the
Directors’ Remuneration Report comply
with the Companies Act 2006 and
Article 4 of the IAS Regulation. They
are also responsible for safeguarding
the assets of the Company and hence
for taking reasonable steps for the
prevention and detection of fraud and
other irregularities.
The directors confirm that:
•
•
so far as each director is aware,
there is no relevant audit information
of which the Company’s auditor is
unaware; and
the directors have taken all the
steps that they ought to have
taken as directors in order to make
themselves aware of any relevant
audit information and to establish
that the auditors are aware of that
information.
The directors are responsible for
preparing the annual report in
accordance with applicable law and
regulations. Having taken advice from
the Audit and Risk Committee, the
directors consider that the annual report
and the financial statements, taken
as a whole, provides the information
necessary to assess the Company’s
performance, business model and
strategy and is fair, balanced and
understandable.
The directors are responsible for
the maintenance and integrity of the
corporate and financial information
included on the Company’s website.
Legislation in the United Kingdom
governing the preparation and
dissemination of financial statements
may differ from legislation in other
jurisdictions.
To the best of our knowledge:
•
•
the Group financial statements,
prepared in accordance with IFRSs
as adopted by the European Union,
give a true and fair view of the
assets, liabilities, financial position
and profit or loss of the Company
and the undertakings included in the
consolidation taken as a whole; and
the annual report, including the
strategic report, includes a fair
review of the development and
performance of the business and
the position of the Company and
the undertakings included in the
consolidation taken as a whole,
together with a description of the
principal risks and uncertainties that
they face.
Approved by order of the board
S G M Caffyn
Chief Executive
17 July 2020
M Warren
Finance Director
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Report of the Independent Auditor
Opinion
We have audited the financial
statements of Caffyns plc (the “Parent
Company”) and its subsidiaries (the
“Group”) for the year ended 31 March
2020, which compromise the Group
and Company Income Statement, the
Group and Company Statement of
Comprehensive Income, the Group
and Company Statement of Financial
Position, the Group and Company
Statement of Changes in Equity, the
Group and Company Cash Flow
Statement, the Principal Accounting
Policies and notes to the financial
statements. The financial reporting
framework that has been applied in
their preparation is applicable law
and International Financial Reporting
Standards (“IFRSs”) as adopted by the
European Union.
In our opinion the financial statements:
• give a true and fair view of the state
of the Group’s and of the Parent
Company’s affairs as at 31 March
2020 and of the Group’s and
Parent Company’s loss for the year
then ended;
•
•
have been properly prepared in
accordance with IFRSs as adopted
by the European Union; and
have been prepared in accordance
with the requirements of the
Companies Act 2006; and,
as regards the Group financial
statements, Article 4 of the IAS
Regulation.
Basis for opinion
We conducted our audit in accordance
with International Standards on Auditing
(UK) (“ISAs (UK)”) and applicable
law. Our responsibilities under those
standards are further described in the
Auditor’s responsibilities for the audit of
the financial statements section of our
report. We are independent of the Group
and the Parent Company in accordance
with the ethical requirements that are
relevant to our audit of the financial
statements in the UK, including the
FRC’s Ethical Standard as applied
to listed public interest entities, and
we have fulfilled our other ethical
responsibilities in accordance with these
requirements. We believe that the audit
evidence we have obtained is sufficient
and appropriate to provide a basis for
our opinion.
Conclusions relating to principal
risks, going concern and viability
statement
We have nothing to report in respect of
the following information in the annual
report, in relation to which the ISAs (UK)
require us to report to you whether we
have anything material to add or draw
attention to:
•
•
the directors’ confirmation set
out on page 20 in the annual
report that they have carried out a
robust assessment of the Group’s
emerging and principal risks and
the disclosures in the annual report
that describe the principal risks and
the procedures in place to identify
emerging risks and explain how they
are being managed or mitigated;
the directors’ statement set
out on page 19 in the financial
statements about whether the
directors considered it appropriate
to adopt the going concern basis of
accounting in preparing the financial
statements and the directors’
•
•
identification of any material
uncertainties to the Group and the
Parent Company’s ability to continue
to do so over a period of at least
twelve months from the date of
approval of the financial statements;
whether the directors’ statement
relating to going concern
required under the Listing Rules
in accordance with Listing Rule
9.8.6R(3) is materially inconsistent
with our knowledge obtained in the
audit; or
the directors’ explanation set out
on page 19 in the annual report
as to how they have assessed the
prospects of the Group, over what
period they have done so and why
they consider that period to be
appropriate, and their statement as
to whether they have a reasonable
expectation that the Group will be
able to continue in operation and
meet its liabilities as they fall due
over the period of their assessment,
including any related disclosures
drawing attention to any necessary
qualifications or assumptions.
Key audit matters
Key audit matters are those matters
that, in our professional judgement,
were of most significance in our audit of
the financial statements of the current
period and include the most significant
assessed risks of material misstatement
(whether or not due to fraud) we
identified, including those that had the
greatest effect on: the overall audit
strategy, the allocation of resources in
the audit; and directing the efforts of the
engagement team. These matters were
addressed in the context of our audit of
the financial statements as a whole, and
in forming our opinion thereon, and we
do not provide a separate opinion on
these matters.
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Caffyns plc Annual Report 2020
Report of the Independent Auditor continued
Key audit matters
Revenue recognition
How we addressed the key audit matter in the audit
As detailed in the Principal Accounting Policies on pages 52
and 57 of the financial statements, the Group earns revenue
from the sale of new and used motor vehicles and through
the provision of aftersales services.
We performed an assessment of whether the Group’s
revenue recognition policies in place complied with IFRS 15
Revenue from Contracts with Customers and ensuring its
consistent application.
Sales of motor vehicles are recognised when control of the
vehicle has transferred to the customer, typically when the
vehicle has been fully paid for and delivered. We consider
there to be a risk that vehicle revenues are overstated, with
incentives for sales personnel to inflate revenues in order to
achieve targets.
We tested a sample of vehicle receivables to determine
whether the sale had been recorded in the correct period.
This included agreement to source documentation pertaining
to the validity and date of the sale and assessing whether
the performance obligation had been satisfied prior to the
year-end.
Defined benefit pension scheme
As detailed in the Principal Accounting Policies on page 53
of the financial statements, the Group operates a defined
benefit pension scheme, which is accounted for in
accordance with IAS 19 Employee Benefits, which requires
complex calculations and disclosures.
Management exercise a number of judgements and actuarial
assumptions, with the assistance from their actuaries, which
have a significant impact on the valuation of the pension
scheme assets and liabilities recognised on the balance
sheet.
The valuation of the defined benefit pension scheme is highly
sensitive to movements into the key inputs.
We also identified and interrogated vehicle sales transactions
during the year with profit margins that were considered
to be outside of our expectations based on a threshold
informed by industry data. Our procedures involved
obtaining an understanding of the key factors that influenced
the profit margin and obtaining source documentation in
corroborating the transactions.
Key observations: Based on the procedures performed, we
consider that revenue has been appropriately recognised.
We performed an assessment of whether the Group’s
accounting policy for the defined benefit pension scheme
complied with IAS 19 Employee Benefits and ensuring its
consistent application.
Working with our external actuarial experts, we challenged
the appropriateness of the actuarial valuation methodologies
and their inherent assumptions such as discount rates,
growth rates and mortality rates with reference to relevant
market data and industry practice. We also considered the
capabilities and competence of management’s as well as our
own actuarial experts.
We also assessed the accuracy of the underlying data
utilised in the actuarial valuation through use of source
documentation such as the pension scheme accounting
records.
The pension scheme assets were agreed to external third
party investment statements.
Key observations: Based on the procedures performed,
we considered the assumptions and judgements made by
management to be reasonable.
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Key audit matters
Impairment review
The Group’s accounting policy on impairment is shown in
the Principal Accounting Policies on pages 54 and 55 of the
financial statements.
Under IAS 36 Impairment of Assets, the directors are
required to determine whether the carrying value of the
Group’s assets, which includes the Group’s property,
plant and equipment, investment property and goodwill, is
impaired.
As at 31 March 2020, the carrying amount of the net assets
of the Group was more than the market capitalisation, being
a potential indicator of impairment.
There is judgement in assessing the ability of assets to
generate cash inflows largely independent of other assets
and therefore also in the identification of appropriate CGUs.
In addition, there is significant judgement and estimation
involved in determining the recoverable amount of each
CGU. This relates to both establishing fair value as part of
the fair value less costs to sell method and the key inputs,
such as projected future cash flows and the discount rate
applied, into the value in use model.
As described further in note 12 to the financial statements,
the exercise of judgement in respect of CGUs valued on the
basis of fair value less costs to sell was heightened due to
the surveyor’s reference to a material valuation uncertainty in
their valuation report.
Movements in the judgements and estimates could impact
the conclusion of the impairment review and we therefore
the matter as a significant audit risk.
How we addressed the key audit matter in the audit
We performed an assessment of whether the Group’s
accounting policies for impairment of assets complied with
IAS 36 Impairment of Assets and ensuring its consistent
application.
We obtained management’s assessment of relevant cash
generating units (CGUs) used in the impairment calculation
and compared those to our understanding of the business
units and operating structure of the Group. We also
performed arithmetical checks to management’s model to
provide assurance over its accuracy in comparing CGU
recoverable amounts to the relevant carrying values.
We agreed property valuations used for the purposes of
impairment testing to the valuation report and considered
the qualification and independence of the third party
surveyor engaged by management.
In relation to the property valuations, we considered the
implications of the material valuation uncertainty and sought
alternative sources of valuation data such as property
yields and consultation with internal and external real estate
specialists.
Where CGUs are valued based on value in use, we critically
assessed estimated future cash flows with reference to
past performance and the potential impact of the covid-19
pandemic and challenged the appropriateness of the inputs
and valuation methodology, including the discount rate
applied, through use of our internal valuation experts.
For both fair value less costs to sell and value in use bases
of valuation, we performed sensitivity analysis on the
assumptions.
Key observations: Based on the procedures performed,
we considered management’s impairment review to be
appropriate.
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Caffyns plc Annual Report 2020
Report of the Independent Auditor continued
Key audit matters
Going concern
In light of the covid-19 pandemic and the resultant economic
uncertainty, as described in the going concern accounting
policy, we considered the ability of the Group to operate
within its facilities and continue as a going concern in this
environment to be a key audit matter.
Management has forecast a number of scenarios, including
a downside sensitised forecast, with significant forecast
revenues removed as a stress test, to ensure that the Group
can continue to operate within its existing bank facilities. This
is described further in the going concern accounting policy.
How we addressed the key audit matter in the audit
Our procedures included reviewing management’s
assessment of going concern through analysis of the
Group’s cash flow forecast through to 31 July 2021,
including assessing and challenging the assumptions
underlying the forecasts. As part of this process, and taking
account of the covid-19 pandemic, we reviewed the reverse
stress testing to ascertain the levels of revenue decline that
would cause a cash shortage at any point in management’s
post balance sheet assessment period and considering the
likelihood that those fact patterns could occur based on
factors such as the nature of the Group’s customer base and
the visibility of contracted revenues.
We also obtained an understanding of the financing
facilities, including the nature of facilities, repayment
terms and covenants. We then assessed the facility
headroom calculations on both a base case scenario,
and management’s downside scenarios as a result of the
ongoing covid-19 pandemic.
In addition, we performed our own sensitivity calculations on
management’s downside scenarios to consider alternative
possible trading scenarios and considered the adequacy of
the disclosures in the financial statements.
Our application of
materiality
We apply the concept of materiality
both in planning and performing our
audit, and in evaluating the effect of
misstatements. We consider materiality
to be the magnitude by which
misstatements, including omissions,
could influence the economic decisions
of reasonable users that are taken on
the basis of the financial statements.
Importantly, misstatements below
these levels will not necessarily be
evaluated as immaterial as we also take
into account of the nature of identified
misstatements, and the particular
circumstances of their occurrence,
when evaluating their effect on the
financial statements as a whole.
Group and Company materiality:
£80,000
Materiality in respect of the audit of
the Group and Company was set at
£80,000 using a benchmark of 8% of
the three-year average result before
taxation, which we consider to be a key
performance measure for the Group
and its members in assessing financial
performance.
Performance materiality is the
application of materiality at the
individual account or balance level
set at an amount to reduce to an
appropriately low level the probability
that the aggregate of uncorrected and
undetected misstatements exceeds
materiality for the financial statements as
a whole.
On the basis of our risk assessment,
together with our assessment of the
Company’s control environment,
our judgement is that performance
materiality for the financial statements
should be 65% of planning materiality,
namely £52,000. Our objective in
adopting this approach is to ensure that
total detected and undetected audit
differences do not exceed our planning
materiality of £80,000 for the financial
statements as a whole.
We agreed with the Audit and Risk
Committee that we would report to
the Committee all audit differences
in excess of £1,600. We also agreed
to report differences below these
thresholds that, in our view, warranted
reporting on qualitative grounds.
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An overview of the scope
of our audit
The scope of our group audit
was established by obtaining an
understanding of the Group, including
its control environment, and assessing
the risks of material misstatement.
We obtained an understanding of the
entity-level controls of the Group as a
whole which assisted us in identifying
and assessing risks of material
misstatement due to fraud or error, as
well as assisting us in determining the
most appropriate audit strategy.
The Group’s operations are based
in the United Kingdom.
We identified four components, one of
which was considered significant and
subject to a full-scope audit by the audit
team. Three of the components identified
were dormant subsidiary undertakings
and considered to be non-significant.
The non-significant components were
subject to desktop review.
Capability of the audit in
detecting irregularities
including fraud
Based on our understanding of the
Group, we considered those laws and
regulations that have a direct impact
on the preparation of the financial
statements such as the Companies
Act 2006 and UK Listing Rules. We
evaluated management incentives and
opportunities for fraudulent manipulation
of the financial statements including
management override, and considered
that the principal risk were related to the
posting of inappropriate journal entries to
improve the result before tax for the year.
We designed audit procedures to
respond to the risk, recognising that
the risk of not detecting a material
misstatement due to fraud is higher
than the risk of not detecting one
resulting from error, as fraud may involve
deliberate concealment by, for example,
forgery, misrepresentations or through
collusion.
Procedures performed by the group
audit team included:
•
•
•
Discussions with management
regarding known or suspected
instances of non-compliance with
laws and regulations;
Evaluation of controls designed to
prevent and detect irregularities; and
Assessing journals entries as part of
our planned audit approach.
There are inherent limitations in the
audit procedures described above and
the further removed non-compliance
with laws and regulations is from the
events and transactions reflected in the
financial statements, the less likely we
would become aware of it. As in all of
our audits we also addressed the risk of
management override of internal controls,
including testing journals and evaluating
whether there was evidence of bias by
the directors that represented a risk of
material misstatement due to fraud.
Other information
The directors are responsible for the
other information. The other information
comprises the information included
in the Annual Report, other than the
financial statements and our auditor’s
report thereon. Our opinion on the
financial statements does not cover the
other information and, except to the
extent otherwise explicitly stated in our
report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the
financial statements, our responsibility
is to read the other information and, in
doing so, consider whether the other
information is materially inconsistent
with the financial statements or our
knowledge obtained in the audit or
otherwise appears to be materially
misstated. If we identify such material
inconsistencies or apparent material
misstatements, we are required to
determine whether there is a material
misstatement in the financial statements
or a material misstatement of the other
information. If, based on the work we
have performed, we conclude that there
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is a material misstatement of the other
information, we are required to report
that fact.
We have nothing to report in this regard.
In this context, we also have nothing to
report in regard to our responsibility to
specifically address the following items
in the other information and to report
as uncorrected material misstatements
of the other information where we
conclude that those items meet the
following conditions:
• Fair, balanced and
understandable (set out on
page 38) – the statement given
by the directors that they consider
the annual report and financial
statements taken as a whole is fair,
balanced and understandable and
provides the information necessary
for shareholders to assess the
Group’s position, performance,
business model and strategy, is
materially inconsistent with our
knowledge obtained in the audit; or
• Audit committee reporting (set out
on pages 17 and 18) – the section
describing the work of the Audit
Committee does not appropriately
address matters communicated by
us to the Audit Committee; or
• Directors’ statement of
compliance with the UK
Corporate Governance Code
(set out on page 15) – the parts
of the directors’ statement required
under the Listing Rules relating to
the Company’s compliance with the
UK Corporate Governance Code
containing provisions specified for
review by the auditor in accordance
with Listing Rule 9.8.10R(2) do
not properly disclose a departure
from a relevant provision of the UK
Corporate Governance Code.
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Caffyns plc Annual Report 2020
Report of the Independent Auditor continued
Opinions on other matters
prescribed by the Companies
Act 2006
In our opinion, the part of the Directors’
Remuneration Report to be audited has
been properly prepared in accordance
with the Companies Act 2006.
In our opinion, based on the work
undertaken in the course of the audit:
•
•
the information given in the Strategic
Report and the Report of the
Directors for the financial year for
which the financial statements are
prepared is consistent with the
financial statements; and
the Strategic Report and the Report
of the Directors have been prepared
in accordance with applicable legal
requirements.
Matters on which we are
required to report by
exception
In the light of the knowledge and
understanding of the Group and Parent
Company and its environment obtained
in the course of the audit, we have not
identified material misstatements in the
Strategic Report or the Report of the
Directors.
We have nothing to report in respect of
the following matters in relation to which
the Companies Act 2006 requires us to
report to you if, in our opinion:
• adequate accounting records
have not been kept by the Parent
Company, or returns adequate for
our audit have not been received
from branches not visited by us; or
•
•
•
the Parent Company financial
statements and the part of the
Directors’ Remuneration Report to
be audited are not in agreement with
the accounting records and returns;
or
certain disclosures of directors’
remuneration specified by law are
not made; or
we have not received all the
information and explanations we
require for our audit.
Responsibilities of directors
As explained more fully in the
•
Directors’ Responsibilities Statement
set out on page 38, the directors
are responsible for the preparation
of the financial statements and for
being satisfied that they give a true
and fair view, and for such internal
control as the directors determine is
necessary to enable the preparation
of financial statements that are free
from material misstatement, whether
due to fraud or error.
•
In preparing the financial statements,
the directors are responsible for
assessing the Group’s and the
Parent Company’s ability to continue
as a going concern, disclosing, as
applicable, matters related to going
concern and using the going concern
basis of accounting unless the
directors either intend to liquidate the
Group or the Parent Company or to
cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities
for the audit of the financial
statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from
material misstatement, whether due to
fraud or error, and to issue an auditor’s
report that includes our opinion.
Reasonable assurance is a high level
of assurance, but is not a guarantee
that an audit conducted in accordance
with ISAs (UK) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud
or error and are considered material
if, individually or in the aggregate,
they could reasonably be expected
to influence the economic decisions
of users taken on the basis of these
financial statements.
A further description of our
responsibilities for the audit of the
financial statements is located on the
Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities.
This description forms part of our
auditor’s report.
Other matters that we are
required to address
Following the recommendation of the
Audit Committee, we were appointed by
the board of directors on 25 July 2019 to
audit the financial statements for the year
ending 31 March 2020 and subsequent
financial periods. The period of total
uninterrupted engagement is one year,
covering the year ending 2020.
The non-audit services prohibited by
the FRC’s Ethical Standard were not
provided to the Group or the Parent
Company and we remain independent
of the Group and the Parent Company
in conducting our audit.
Our audit opinion is consistent with the
additional report to the Audit and Risk
Committee.
Use of our report
This report is made solely to the Parent
Company’s members, as a body, in
accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit
work has been undertaken so that we
might state to the Parent Company’s
members those matters we are required
to state to them in an auditor’s report
and for no other purpose. To the fullest
extent permitted by law, we do not
accept or assume responsibility to
anyone other than the Parent Company
and the Parent Company’s members
as a body, for our audit work, for this
report, or for the opinions, we have
formed.
Stephen Le Bas
(Senior Statutory Auditor)
For and on behalf of BDO LLP,
Statutory Auditor
Southampton
United Kingdom
BDO LLP is a limited liability partnership
registered in England and Wales (with
registered number OC305127).
17 July 2020
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Income Statement
for the year ended 31 March 2020
Group and Company
Revenue
Cost of sales
Gross profit
Operating expenses
Distribution costs
Administration expenses
Operating profit before other income
Other income (net)
Operating profit
Operating profit before non-underlying items
Non-underlying items within operating profit
Operating profit
Finance expense
Finance expense on pension scheme
Net finance expense
Profit/(loss) before taxation
Profit before tax and non-underlying items
Non-underlying items within operating profit
Non-underlying items within finance expense on pension scheme
Profit/(loss) before taxation
Taxation
Loss for the year
(Deficit)/earnings per share
Basic
Diluted
Underlying earnings per share
Basic
Diluted
See accompanying notes to the financial statements.
Note
1
2020
£’000
2019
£’000
197,854
209,246
(172,850)
(183,317)
25,004
25,929
(16,035)
(8,025)
(15,913)
(9,843)
944
728
1,672
1,633
39
1,672
(1,382)
(187)
(1,569)
103
251
39
(187)
103
(355)
(252)
(9.4)p
(9.4)p
(4.9)p
(4.9)p
173
802
975
2,626
(1,651)
975
(1,181)
(222)
(1,403)
(428)
1,445
(1,651)
(222)
(428)
(138)
(566)
(21.0)p
(21.0)p
35.3p
35.3p
4
2
3
6
7
2
2
8
9
9
9
9
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Caffyns plc Annual Report 2020
Statement of Comprehensive Income
for the year ended 31 March 2020
Group and Company
Loss for the year
Items that will never be reclassified to profit and loss:
Remeasurement of net defined benefit liability
Deferred tax on remeasurement
Effect of change in deferred tax rate
Total other comprehensive (expense)/income, net of taxation
Total comprehensive (expense)/income for the year
See accompanying notes to the financial statements.
Note
23
24
2020
£’000
(252)
(1,169)
222
154
(793)
(1,045)
2019
£’000
(566)
1,510
(257)
–
1,253
687
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Stock code CFYN
Statement of Financial Position
at 31 March 2020
Non-current assets
Right-of-use assets
Property, plant and equipment
Investment properties
Interest in lease
Goodwill
Deferred tax asset
Investment in subsidiary undertakings
Current assets
Inventories
Trade and other receivables
Interest in lease
Current tax recoverable
Cash and cash equivalents
Total assets
Current liabilities
Interest-bearing overdrafts and loans
Trade and other payables
Lease liabilities
Current tax payable
Net current assets
Non-current liabilities
Interest bearing loans and borrowings
Lease liabilities
Preference shares
Retirement benefit obligations
Total liabilities
Net assets
Capital and reserves
Share capital
Share premium account
Capital redemption reserve
Non-distributable reserve
Retained earnings
Total equity attributable to shareholders
Note
11
12
13
14
15
24
16
17
18
14
20
19
22
20
22
25
23
25
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s
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Group
2020
£’000
925
38,783
8,052
730
286
–
–
Group
2019
£’000
Company
2020
£’000
Company
2019
£’000
–
39,225
8,169
–
286
–
–
925
38,783
8,052
730
286
–
250
–
39,225
8,169
–
286
–
250
48,776
47,680
49,026
47,930
39,728
4,318
178
66
1,478
45,768
94,544
5,875
38,346
491
–
44,712
1,056
34,468
8,796
–
–
3,908
47,172
94,852
4,875
39,886
–
103
44,864
2,308
39,728
4,318
178
66
1,478
45,768
94,794
5,875
38,596
491
–
44,962
806
34,468
8,796
–
–
3,908
47,172
95,102
4,875
40,136
–
103
45,114
2,058
11,844
12,625
11,844
12,625
1,362
812
9,434
23,452
68,164
26,380
1,439
272
707
1,724
22,238
26,380
–
812
8,576
22,013
66,877
27,975
1,439
272
707
1,724
23,833
27,975
1,362
812
9,434
23,452
68,414
26,380
1,439
272
707
1,724
22,238
26,380
–
812
8,576
22,013
67,127
27,975
1,439
272
707
1,724
23,833
27,975
The financial statements were approved by the board of directors and authorised for issue on 17 July 2020 and were signed on
its behalf by:
R C Wright
Chairman
M Warren
Finance Director
See accompanying notes to the financial statements.
Company number: 105664
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Caffyns plc Annual Report 2020
Statement of Changes in Equity
for the year ended 31 March 2020
Group and Company
At 1 April 2019
Total comprehensive expense
Loss for the year
Other comprehensive expense
Total comprehensive expense
Transactions with owners:
Dividends
Share-based payment
At 31 March 2020
for the year ended 31 March 2019
Group and Company
At 1 April 2018, as previously stated
Correction to deferred tax liability
Change in accounting policy
At 1 April 2018, restated
Total comprehensive income
Loss for the year
Other comprehensive expense
Total comprehensive income
for the year
Transactions with owners:
Dividends
Share-based payment
At 31 March 2019
Share
capital
£’000
1,439
Share
premium
£’000
Capital
redemption
reserve
£’000
Non-
distributable
reserve
£’000
Retained
earnings
£’000
Total
£’000
272
707
1,724
23,833
27,975
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(252)
(793)
(252)
(793)
(1,045)
(1,045)
(606)
56
(606)
56
1,439
272
707
1,724
22,238
26,380
Share
capital
£’000
1,439
–
–
1,439
–
–
–
–
–
Share
premium
£’000
Capital
redemption
reserve
£’000
Non-
distributable
reserve
£’000
Retained
earnings
£’000
Total
£’000
272
–
–
272
–
–
–
–
–
707
–
–
707
–
–
–
–
–
1,724
22,981
27,123
–
–
790
(75)
790
(75)
1,724
23,696
27,838
–
–
–
–
–
(566)
1,253
687
(566)
1,253
687
(606)
56
(606)
56
1,439
272
707
1,724
23,833
27,975
The application of IFRS 15 Revenue from Contracts with Customers led to an adjustment to the opening retained earnings of a
reduction of £75,000.
In the prior year, the Company identified errors in both the calculation and methodology of its potential deferred tax liability
on held-over gains from property disposals and from accelerated capital allowances which resulted in an overstatement of its
deferred tax liability by £790,000.
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Stock code CFYN
Cash Flow Statement
for the year ended 31 March 2020
Group and Company
Net cash (outflow)/inflow from operating activities
Investing activities
Proceeds on disposal of property, plant and equipment
Purchases of property, plant and equipment
Net cash outflow from investing activities
Financing activities
Overdraft facility utilised
Secured loans repaid
Dividends paid
Repayment of lease liabilities
Net cash outflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Cash and cash equivalents
Bank overdrafts
Net cash and cash equivalents
Note
27
2020
£’000
(802)
–
(980)
(980)
Restated
2019
£’000
3,759
10
(2,755)
(2,745)
1,000
1,000
(781)
(606)
(261)
(648)
(2,430)
3,908
1,478
2020
£’000
1,478
(5,000)
(3,522)
(875)
(606)
–
(481)
533
3,375
3,908
2019
£’000
3,908
(4,000)
(92)
The cash flow statement for the prior year has been restated to disclose overdraft and cash balances separately.
See accompanying notes to the financial statements.
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Caffyns plc Annual Report 2020
Principal Accounting Policies
Basis of preparation and
statement of compliance
The financial statements have been
prepared in accordance with International
Financial Reporting Standards (“IFRSs”)
as adopted by the EU, International
Financial Reporting Interpretations
Committee (“IFRIC”) and those parts of
the Companies Act 2006 applicable to
companies reporting under IFRS.
The financial statements have been
prepared on the historical cost basis.
The principal accounting policies
adopted are set out below. The
preparation of financial statements in
conformity with IFRSs requires the use
of estimates and assumptions that
affect the reported amounts of assets
and liabilities at the date of the financial
statements and the reported amounts
of revenues and expenses during the
reporting year. Although these estimates
are based upon management’s best
knowledge of the amount, events or
actions, actual results may ultimately
differ from those estimates.
The estimated and underlying
assumptions are reviewed on an
ongoing basis. Revisions to accounting
estimates are recognised in the period
in which the estimate is revised if the
revision affects only that period or in the
period of the revision and future periods
if the revision affects both current and
future periods.
Judgements made by the directors in
the application of accounting policies
that have significant effect on the
financial statements and estimates with
a significant risk of material adjustment in
the next year are discussed in note 33.
Standard, which replaced International
Accounting Standard 17 and three
related Interpretations, has completed a
long-running project of the International
Accounting Standards Board to
overhaul lease accounting and requires
leases to be recorded on the Statement
of Financial Position in the form of a
right-of-use asset, representing the
Company’s right to use the underlying
asset, and a lease liability, representing
its obligations to make lease payments.
incremental borrowing rate. The lease
liability is subsequently increased by
the interest cost on the lease liability
and reduced by payments made. It is
remeasured when there is a change in
future lease payments arising from a
change of index or rate, a variation in
amounts payable following contractual
rent reviews and changes in the
assessment of whether an extension/
termination option is reasonably certain
to be exercised.
Under the previous accounting policy,
the Company classified leases as either
an operating lease or a finance lease
depending upon whether it was deemed
that substantially all the risks and
rewards of ownership had transferred.
Under IFRS 16 the Company recognises
a right-of-use asset for all leases with
the exception of those deemed to be
of low value or short-term in nature,
in which case lease payments are
expensed on a straight-line basis over
the lease term.
The revised accounting policy under
IFRS 16 is as follows:
Significant accounting
policies – Leases
The Company recognises a right-of-
use asset and a lease liability at the
commencement date of the lease. The
right-of-use asset is initially measured
at cost, and subsequently at cost
less accumulated depreciation and
impairment losses and is then adjusted
for certain remeasurements of the lease
liability. Depreciation is recognised on a
straight-line basis over the period of the
lease the right-of-use asset is expected
to be utilised.
Where lease contracts include renewal
and termination options, judgement is
applied to determine the lease term. The
assessment of whether the Company
is reasonably certain to exercise such
options impacts the lease term and the
subsequent recognition of the lease
liability and right-of-use asset.
Where the Company acts as a lessor,
receipts of lease payments are
recognised in the income statement on
a straight-line basis over the period of
the lease unless it is deemed that the
risks and rewards of ownership have
been substantially transferred to the
Company’s lessee. If it is deemed that
the risks and rewards of ownership have
been substantially transferred then the
Company will, rather than recognise
a right-of-use asset, recognise an
investment in the lease, this being the
present value of future lease receipts
discounted at the interest rate implicit
in the lease or, if this is not specified, at
the Company’s incremental borrowing
rate. The finance lease receivable will be
increased by the interest received less
payments made by the lessee.
Transition
The Company predominantly owns
the freeholds of the properties from
which it operates but, at the date of
implementation of the Standard, had
two properties subject to operating
leases. One of these properties was
leased on to a third party where the
terms of the sub-lease mirror those
New and revised standards
A new Standard, IFRS 16 Leases, came
into effect from 1 January 2019 and
has been adopted by the Company
with effect from the start of its current
financial year on 1 April 2019. The new
The lease liability is initially measured
at the present value of lease payments
that are not paid at the commencement
date, discounted by the interest rate
implicit in the lease or, when this is
not readily attainable, the Company’s
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of the Company’s own lease. Upon
adopting IFRS 16, one lease has been
recognised as a right-of-use asset with
a corresponding lease liability while
the Company’s interest in the second
lease, sub-let to a third party, has
been recognised as an asset with a
corresponding lease liability.
In its transition to IFRS 16 the Company
has applied the modified retrospective
approach, under which the cumulative
effect of initial application is recognised
in retained earnings at 1 April 2019.
Accordingly, the comparative information
has not been restated.
The Company’s incremental borrowing
rate has been estimated at 2.7%.
At transition, for leases classified as
operating leases under IAS 17 Leases,
lease liabilities were measured at the
present value of the remaining lease
payments, discounted at the Company’s
incremental borrowing rate as at
1 April 2019. Right-of-use assets were
measured as an amount equal to the
lease liability.
The Company has applied the following
practical expedients when applying IFRS
16 to leases previously classified as
operating leases under IAS 17:
•
•
•
to apply the exemption not to
recognise right-of-use assets and
liabilities with less than twelve
months of the lease term remaining
at 1 April 2019;
to exclude initial direct costs from
measuring the right-of-use asset at
date of initial application;
to use hindsight when determining
the lease term if the contract
contains options to extend or
terminate the lease.
Under the previous accounting
treatment, the lease rentals paid for
the two properties highlighted above
were charged against underlying
profits and no asset or liability was
recognised in the Statement of Financial
Position. The implementation of the
Standard increased the Company’s
assets and liabilities by £2,038,000
and reduced pre-tax profits in the
year under review by £20,000. During
the year, the Company recognised
£256,000 of depreciation charges,
an interest expense of £24,000 and
made payments of £260,000 in respect
of its lease liabilities. As a lessor,
the Company received payments of
£185,000 in respect of the investment in
lease receivable.
Standards, amendments and
interpretations to existing
Standards that are not yet
effective and have not been
adopted early by the Group
At the date of authorisation of these
financial statements, there are no new
Standards, or amendments to existing
Standards, that have been published by
the International Accounting Standards
Board that are not effective, and, in
some cases not yet been adopted
by the EU that would have a material
impact on the Group.
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 in excess of
one year from the date of approval of
this Annual Report. This has focused
primarily on the achievement of the
banking covenants. All bank covenants
have been achieved for the year
under review. In light of covid-19, post
year-end HSBC have confirmed to the
Company the relaxation in the debt
service covenant test for September
2020 and March 2021. The new
covenants test requires the Company
to make an underlying profit before
interest for the rolling twelve-month
period to September 2020 and to March
2021. The Company have modelled
these periods and conclude that there
is headroom that would allow for a
40% reduction in expected new and
used units over this period. External
market commentary provided by the
Society of Motor Manufacturers and
Traders (“SMMT”) indicate that new
car registrations will remain broadly in
line with the same six-month period
to December 2019 with increases into
2021, whilst the used car market has
remained stable over the past four
years. Since reopening on the 1 June
2020 demand and financial results
have both been stronger than had been
anticipated and the current new car
order take for July and beyond is ahead
of this time last year.
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
and bank overdraft 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 £6.8
million and a revolving credit facility of
£7.5 million from HSBC, its primary
bankers, with both facilities being
renewable in March 2023. HSBC also
make available a short-term overdraft
facility of £3.5 million, which is renewed
annually in August. Subsequent to the
year-end, this facility limit was increased
to £6.0 million. The Company also has
a ten-year term loan from VW Bank
with a balance outstanding at 31 March
2020 of £1.9 million, which is repayable
to November 2023, and a short-term
overdraft facility of £7.0 million, which
is renewed annually in August. In the
opinion of the directors, there is a
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Caffyns plc Annual Report 2020
Principal Accounting Policies continued
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.
Information concerning the Company’s
liquidity and financing risk are set out
on page 8 and note 21 to the financial
statements.
The directors have a reasonable
expectation that the Company has
adequate resources and headroom
against the covenant test to be able
continue in operational existence for the
foreseeable future and for at least twelve
months 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.
Basis of consolidation
The consolidated financial statements
incorporate the financial statements
of the Company and its subsidiaries
made up to 31 March each year. All
subsidiaries are currently dormant, so
the income, expenses and cash flows
are the same for the Group and the
Company.
The results of businesses and
subsidiaries acquired or disposed of
during the year are included in the
Consolidated Income Statement using
the acquisition method from the effective
date of acquisition or up to the effective
date of disposal, as appropriate.
Where necessary, adjustments are
made to the financial statements of
subsidiaries to bring the accounting
policies used into line with those used
by the Group.
All intra-group transactions, balances,
income and expenses are eliminated on
consolidation.
Acquisitions
On acquisition, the assets and liabilities
and contingent liabilities of a subsidiary
are measured at their fair values at the
date of acquisition. Any excess of the
cost of acquisition over the fair values
of the identifiable net assets acquired
is recognised as goodwill, which is
allocated to Cash Generating Units
(“CGUs”). Any deficiency of the cost
of acquisition below the fair values of
the identifiable net assets acquired
(i.e. discount on acquisition) is credited to
profit or loss in the period of acquisition.
Goodwill
Goodwill represents the excess of the
cost of an acquisition over the fair value
of the net identifiable assets acquired and
is tested annually for impairment. Any
impairment is recognised immediately
in the income statement and is not
subsequently reversed. Gains and losses
on subsequent disposal of the assets
acquired include any related goodwill.
Goodwill arising on acquisitions before
the date of transition to IFRS has been
retained at the previous UK GAAP
amounts subject to being tested for
impairment at that date, and annually
thereafter.
Revenue recognition
Revenue generated from a contract
for the sale of goods is recognised
on delivery when all promises to the
customer have been fulfilled, such as
the supply of a specific vehicle. If the
customer has added various accessory
products to their order, the Company’s
promise is fulfilled by supplying these
products onto the vehicle at the time of
its delivery. Where the Company acts
as an agent on behalf of a principal in
relation to the sale of a new car, the
associated income is recognised within
revenue in the period in which the
product is sold.
Finance commissions are earned from
the finance house that is providing a
finance arrangement to a consumer
buying the vehicle. In this regard, the
Company’s customer is considered to be
the finance house, rather than the end
user of the vehicle. Income derived from
such commissions is recognised within
revenue on completion of the arranging
of the various products (i.e. at the point
at which control passes to the customer).
For servicing work, the Company
promises to complete the work in
accordance to the contract (or job card).
This obligation is satisfied when the
customer takes collection of their vehicle
on completion of the work. If a customer
takes out a service plan, the Company
has a future obligation to complete
agreed work over a set period of time –
these obligations are only completed in
full once those elements of the service
plan have expired. Where the Company
sells a service plan alongside a vehicle,
the service element is distinct from the
vehicle sale and is subject to a fixed and
determinable transaction price. Each
individual service included within the
service plan is considered distinct and
revenue is recognised at a point in time
when the services have been carried out.
The obligation of supplying vehicle
parts to customers is satisfied when the
customer takes delivery of the goods.
Supplier income
The Company receives income from
brand partners and other suppliers.
These are generally based on achieving
certain predetermined objectives
such as specific sales volumes and
maintaining agreed operational
standards. The supplier income received
is recognised as a deduction from
cost of sales at the point when it is
reasonably certain that the targets have
been achieved for the relevant period
and when income can be measured
reliably based on the terms of each
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relevant supplier agreement. Supplier
income that has been earned but not
invoiced at the balance sheet date is
recognised in other receivables.
Manufacturer bonuses are recognised
as income to gross profit but not within
revenue.
Non-underlying items
Non-underlying items are those items
that are unusual because of their size,
nature or incidence. Management
consider that these items should be
disclosed separately to enable a full
understanding of the operating results.
Profits and losses on disposal of
property, plant and equipment are also
disclosed as non-underlying, as are
certain redundancy costs and costs
attributable to vacant properties held
pending their disposal.
The net financing return and service
cost on pension obligations in respect
of the defined benefit pension scheme,
which is closed to future accrual, are
presented as non-underlying items
due to the inability of management to
influence the underlying assumptions
from which the charges are derived.
All other activities are treated as
underlying.
Leasing
Lessee
Leases are classified as finance leases
whenever the terms of the lease transfer
substantially all the risks and rewards
of ownership to the lessee or where the
criteria of IFRS 16 requires the lease
to be capitalised. All other leases are
classified as operating leases. IFRS 16
Leases was implemented from 1 April
2019 and prior year comparatives were
not restated.
Rentals paid under operating leases are
charged to income on a straight-line
basis over the terms of the relevant lease.
Lessor
The Company leases certain properties
under operating leases. Substantially
all the risks and rewards of ownership
are retained by the Company and the
assets are stated at historical cost less
depreciation. Provision for depreciation
of all property, plant and equipment is
made in equal annual instalments over
their estimated useful lives.
Borrowing costs
All borrowing costs are recognised in
the Income Statement in the period
in which they are incurred unless the
borrowing costs are directly attributable
to the acquisition, construction or
production of a qualifying asset, in which
case they are capitalised.
Retirement benefit costs
The Company operates the Caffyns
Pension Scheme, which is a defined
benefit pension scheme. The defined
benefit scheme defines the amount of
pension benefit that an employee will
receive on retirement, dependent on
one or more factors including age, years
of service and final salary. The Scheme
was closed to new members in 2006
and to future accrual in April 2010.
Under IAS 19 (Revised) Employee
Benefits, the defined benefit deficit is
included on the Statement of Financial
Position. Liabilities are calculated
based on the current yields on high-
quality corporate bonds and on market
conditions. Surpluses are only included
to the extent that they are recoverable
through reduced contributions in
the future or through refunds from
the Scheme.
Remeasurement arising from experience
adjustments and changes in actuarial
assumptions each year are charged
or credited, net of deferred tax, to
reserves and shown in the Statement of
Comprehensive Income.
An interest expense or income is
calculated on the defined benefit liability
or asset respectively by applying the
discount rate to that defined benefit
liability or asset.
The Company also provides pension
arrangements for employees under
defined contribution schemes.
Contributions for these schemes are
charged to the Income Statement in the
year in which they are payable.
Share-based employee
compensation
The Company operates an equity settled
share-based compensation plan for
all employees through the Company’s
Save As You Earn (“SAYE”) scheme. All
employee services received in exchange
for the grant of any share-based
compensation are measured at their fair
values. These are indirectly determined
by reference to the share option
awarded. Their fair value is appraised at
the grant date. The vesting period from
the date of grant is three years.
All share-based compensation is
ultimately recognised as an expense
in the Income Statement with a
corresponding credit to retained
earnings, net of deferred tax where
applicable in the Statement of Financial
Position. If vesting periods or other
vesting conditions apply, the expense is
allocated over the vesting period, based
on the best available estimate of the
number of share options expected to
vest. Service and performance vesting
conditions are included in assumptions
about the number of options that are
expected to become exercisable.
Non-vesting conditions, such as the
employee’s requirement to continue
to save under the SAYE scheme, are
considered when determining the
fair value of the award. Estimates are
subsequently revised if there is any
indication that the number of share
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Principal Accounting Policies continued
options expected to vest differs from
previous estimates. No adjustment
to the expense recognised in prior
periods is made if fewer share options
ultimately are exercised than originally
estimated. Failure by the employee to
meet a vesting condition is treated as a
cancellation.
Fair value is measured by use of the
Black-Scholes model. The expected life
used in the model has been adjusted,
based on management’s best estimate,
for the effects of non-transferability,
exercise restrictions and behavioural
considerations.
Taxation
The tax expense represents the sum of
the tax currently payable and deferred
tax. Tax balances are not discounted.
The tax currently payable is based
on taxable profit for the year. Taxable
profit differs from net profit as reported
in the Income Statement because it
excludes items of income or expense
that are taxable or deductible in other
years and it further excludes items that
are never taxable or deductible. The
liability for current tax is calculated using
tax rates that have been enacted or
substantively enacted by the year-end
accounting date.
Deferred tax is the tax expected to be
payable or recoverable on differences
between the carrying amounts of
assets and liabilities in the financial
statements and the corresponding
tax bases used in the computation
of taxable profit and is accounted for
using the liability method. Deferred tax
liabilities are generally recognised for
all taxable temporary differences and
deferred tax assets are recognised to
the extent that it is probable that taxable
profits will be available against which
deductible temporary differences can
be utilised. Such assets and liabilities
are not recognised if the temporary
difference arises from goodwill or from
the initial recognition (other than in a
business combination) of other assets
and liabilities in a transaction that
affects neither the tax profit nor the
accounting profit.
The carrying amount of deferred tax
assets is reviewed at each financial year-
end date and reduced to the extent that
it is no longer probable that sufficient
taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is calculated at the tax
rates that are expected to apply in the
period when the liability is settled or the
asset is realised. Deferred tax is charged
or credited in the Income Statement,
except when it relates to items charged
or credited within other comprehensive
income, in which case the deferred tax
is also dealt with in other comprehensive
income. The tax base of an item
considers its intended method of
recovery by either sale or use.
Property, plant and
equipment
Land and buildings used in the business
are stated in the Statement of Financial
Position at cost. The property held at
the date of transition to IFRSs in 2007
was recognised at deemed cost, being
the carrying amount at the date of
transition to IFRSs. The date of the last
valuation undertaken under its previous
GAAP was in 1995.
Depreciation on buildings is charged
to the Income Statement. On the
subsequent sale of a property, the
attributable surplus remaining in the
non-distributable reserve is transferred
directly to accumulated profits.
Properties in the course of construction
are carried at cost, less any recognised
impairment loss. Cost includes
professional fees and attributable
borrowing costs. Depreciation of these
assets, on the same basis as other
property assets, commences when the
assets are ready for their intended use.
Properties are regarded as purchased
or sold on the date on which contracts
for the purchase or sale become
unconditional. The gain or loss
arising on the disposal of an asset is
determined as the difference between
the sales proceeds and the carrying
amount of the asset and is recognised
in the Income Statement.
Other assets are stated at cost less
accumulated depreciation and any
recognised impairment loss.
Depreciation is charged so as to write
off the cost less residual values of
assets, other than land and properties
under construction, over their estimated
useful lives using the straight-line
method, on the following basis:
Freehold buildings – 50 years
Leasehold buildings – period of lease
Plant and machinery, fixtures and fittings
– 3 to 10 years
In the prior accounting period,
leasehold land was accounted for as
an operating lease.
The residual value of all assets,
depreciation methods and useful
economic lives, if significant, are
assessed annually.
Investment property
Investment property, which is
property held to earn rentals and/
or capital appreciation, is stated at
cost less accumulated depreciation
and impairment. Rental income from
investment property is recognised on
a straight-line basis over the term of
the lease. Depreciation is charged to
write off the cost less residual values
of investment properties over their
estimated useful lives using the straight-
line method over 50 years. Any transfers
from property, plant and equipment
are made at cost less accumulated
depreciation.
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Impairment
a. Impairment of goodwill: Goodwill
is tested annually for impairment. If
an impairment provision is made, it
cannot subsequently be reversed.
b. Impairment of property, plant and
equipment: At each financial year-
end date, the Company reviews the
carrying amounts of its property,
plant and equipment to determine
whether there is any indication
that those assets have suffered an
impairment loss. If such indication
exists, the recoverable amount of the
asset is estimated to determine the
extent of the impairment loss (if any).
Where the asset does not generate
cash inflows that are independent
from other assets, the Company
estimates the recoverable amount of
the CGU to which it belongs.
The recoverable amount is the higher
of fair value less costs to sell and
value in use. In assessing value in use,
the estimated future cash inflows are
discounted to their present value using
a pre-tax discount rate that reflects
current market assessments of the time
value of money and the risks specific
to the asset for which the estimates
of future cash inflows have not been
adjusted.
If the recoverable amount of an asset
or CGU is estimated to be less than its
carrying amount, the carrying amount
of the asset (CGU) is reduced to its
recoverable amount.
An impairment loss is recognised as
an expense immediately, unless the
relevant asset is carried at a revalued
amount, in which case the impairment
loss is treated as a revaluation decrease.
Where an impairment loss subsequently
reverses, the carrying amount of the
asset (CGU) is increased to the revised
estimate of its recoverable amount, but
so that the increased carrying amount
does not exceed the carrying amount
that would have been determined had
no impairment loss been recognised for
the asset (CGU) in prior years. A reversal
of an impairment loss is recognised
as income immediately, unless the
relevant asset is carried at a revalued
amount, in which case the reversal
of the impairment loss is treated as a
revaluation increase.
For the purpose of impairment testing,
assets are grouped together into the
smallest group of assets that generates
cash inflows from continuing use that
are largely independent of the cash
inflows from other groups of assets.
Management have determined that the
CGUs are the individual dealerships for
each franchise.
Inventories
Inventories are stated at the lower of
cost and net realisable value. Cost
represents the purchase price plus any
additional costs incurred.
Vehicle inventories include owned
vehicles used for demonstration
purposes and as courtesy cars for
service customers. Consignment vehicles
are regarded as being under the effective
control of the Company and are included
within inventories on the Statement
of Financial Position as the Company
has substantially all the significant risks
and rewards of ownership even though
legal title may not yet have passed. The
corresponding liability is included in trade
and other payables. Parts inventories are
valued at cost and are written down to
net realisable value, in accordance with
normal industry practice, by providing for
obsolescence on a time in stock basis.
Net realisable value represents the
estimated selling price less all estimated
costs to completion and costs to be
incurred in marketing and selling.
Cash and cash equivalents
Cash and cash equivalents comprise
cash in hand and on demand deposits.
In the Cash Flow Statement, cash and
cash equivalents are shown net of bank
overdrafts. Bank overdrafts are shown
within interest-bearing borrowings in
current liabilities on the Statement of
Financial Position.
Investments in subsidiary
undertakings
Investments in subsidiary undertakings
are included at cost less amounts
written off if the investment is
determined to have been impaired and
are included in the Parent Company’s
separate financial statements.
Interest-bearing borrowings
Interest-bearing bank loans and
overdrafts are recorded at their fair
value on initial recognition (normally
the proceeds received less transaction
costs that are directly attributable to
the financial liability) and subsequently
at amortised cost under the effective
interest method. Finance charges,
including premiums payable on
settlement or redemption and direct
issue costs, are accounted for on an
accruals basis to profit or loss using the
effective interest method and are added
to the carrying amount of the instrument
to the extent that they are not settled in
the period in which they arise.
Trade and other payables
Trade payables are not interest-bearing
and are stated at their fair value on
initial recognition and are subsequently
carried at amortised cost.
Other payables include obligations
relating to consignment stock and
vehicle stocking loans.
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Principal Accounting Policies continued
Obligations relating to consignment
stock relate to new cars supplied by
manufacturers on consignment terms
and the full purchase price can be
funded.
Vehicle stocking loans relates to
creditors in relation to used vehicles and
is funded up to a level generally 80%
of market value of the used car based
on independent market guides. The
utilisation is recorded at fair value with
associated interest charged to profit
or loss. Cash flows relating to these
arrangements are included in operating
cash flows.
Equity
Ordinary shares are classified as equity.
Incremental costs directly attributable
to the issue of new shares are shown in
equity as a deduction, net of tax, from
the proceeds.
Share premium includes any premium
received on the sale of shares. Any
transaction costs associated with the
issuing of shares are deducted from
share premium, net of any corporation
tax benefits.
The capital redemption reserve
comprises the nominal value of ordinary
and preference share capital purchased
by the Company in prior years and
cancelled.
The non-distributable reserve within
equity is a revaluation reserve which
comprises gains and losses due to
the revaluation of property, plant and
equipment prior to 1995.
Retained earnings includes all current
and prior period retained profits.
Where any company in the Group
purchases the Company’s equity
share capital (treasury shares), the
consideration paid, including any
directly attributable incremental costs
(net of tax), is deducted from equity
attributable to the Company’s equity
holders until the shares are cancelled,
reissued or disposed of. Where such
shares are subsequently sold or
reissued any consideration received, net
of any directly attributable incremental
transactions costs and the related tax
effects, is included in equity attributable
to the Company’s equity holders.
Preference shares
Preference shares are accounted for as
non-current liabilities, as they have the
attributes of debt. Preference dividends
are accounted for as finance charges
within finance expenses.
Financial instruments
Recognition, initial measurement
and re-recognition
Financial assets and financial liabilities
are recognised when the Company
becomes a party to the contractual
provisions of the financial instrument
and are measured initially at fair value
adjusted for transaction costs, except
for those carried at fair value through
profit and loss which are measured
initially at fair value. Subsequent
measurement of financial assets and
financial liabilities is described below.
Financial assets are derecognised when
the contractual rights to the cash flows
from the financial asset expire, or when
the financial asset and substantially all
the risks and rewards are transferred.
The only types of financial assets held
by the Group are financial assets at
amortised cost.
Financial liabilities are derecognised
when the obligation specified in the
contract is discharged, cancelled
or expires.
Financial assets at
amortised cost
Trade receivables do not carry any
interest and are stated at their fair value
on initial recognition as reduced by
appropriate allowances for estimated
irrecoverable amounts and subsequently
carried at amortised cost.
The Group applies the IFRS 9 simplified
approach to measuring expected credit
losses, which uses a lifetime expected
loss allowance for all receivables. The
expected loss rates are based on the
payment profile of sales over 36 months
before the year-end date, or the first day
of the accounting period under review
respectively, and the corresponding
historical losses expected in the
period. The Company also considers
future expected credit losses due to
circumstances in addition to historical
loss rates.
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Notes to the Financial Statements
for the year ended 31 March 2020
1. General information
Caffyns plc is a company incorporated in England and Wales under the Companies Act 2006. The address of the
registered office is given on page 14. Its revenue is attributable to the sole activity of operating as a motor retailer in
the south-east of the United Kingdom and comprises revenue from:
Sale of goods
Rendering of services
Total revenue
2020
£’000
186,417
11,437
197,854
2019
£’000
197,888
11,358
209,246
Sales of motor vehicles, parts and aftersales services
The Group’s full revenue recognition policy is set out in the section on Principal Accounting Policies under the heading
Revenue Recognition. The Group generates revenue through the sale of new and used motor vehicles (together
comprising Sale of Goods as shown above), and through the provision of aftersales services in the form of vehicle
servicing, maintenance and repairs and introducing customers to finance companies (together comprising Rendering of
Services as shown above).
The Group recognises revenue from the sale of new and used motor vehicles when a customer takes possession of the
vehicle, at which point they have an obligation to pay in full and as such control is considered to transfer at this point.
The Group typically receives cash equal to the invoice amount for most direct retail sales to consumers at the time the
consumer takes possession of the vehicle. When the consumer has taken out a finance agreement to purchase the
vehicle the Group receives payment from the finance company at the time the consumer takes possession of the vehicle.
Payment terms on sales to corporate customers typically range from seven to ten days. The Company acts as an agent in
instances where it facilitates sales that have been arranged by the manufacturer.
The Group recognises revenue from the provision of aftersales services when the service has been completed, at which
point customers have an obligation to pay in full. The Group typically receives cash equal to the invoice amount for
most direct retail sales to consumers at the time the service has been completed. Payment terms on sales to corporate
customers typically range from 30 to 60 days.
All revenue recognised in the Income Statement is from contracts with customers and no other revenue has been
recognised. No impaired losses have been recognised on any receivables arising from a contract with a customer.
Due to the nature of the Group’s contractual relationships with customers and the nature of the services provided there are
no timing differences between revenue recognised in the Income Statement and trade receivables being recognised in the
Statement of Financial Position.
There have been no significant judgements regarding the timing of transactions or the associated transaction price.
The transaction price is set out in individual contractual agreements and there is a range of prices based on the types of
goods and services offered. There are no variable pricing considerations.
Contract liabilities
Where the Group receives an amount of consideration in advance of completion of performance obligations under
a contract with a customer, the value of the advance consideration is initially recognised as a contract liability within
liabilities. Revenue is subsequently recognised as the performance obligations are completed over the period of the
contract (i.e. as control is passed to the customer). Contract liabilities are presented within trade and other payables in the
Statement of Financial Position and disclosed in note 19 Trade and Other Payables. Approximately one-third of the value
of these liabilities would be anticipated to be recognised as revenue in each of the next three financial years.
Contract costs
The Group applies the practical expedient in paragraph 94 of IFRS 15 Revenue from Contracts and recognises the
incremental costs of obtaining contracts as an expense when incurred if the amortisation period of the assets that the
Group otherwise would have recognised is one year or less. The Group is satisfied that any incremental costs incurred in
obtaining contracts that extend for more than one year is immaterial.
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Notes to the Financial Statements continued
for the year ended 31 March 2020
1. General information (continued)
Transaction price allocation to remaining performance obligations
The Group applies the practical expedient in paragraph 121 if IFRS 15 and does not disclose information about remaining
performance obligations that have original expected durations of one year or less.
Segmental reporting
Based upon the management information reported to the chief operating decision maker, the Chief Executive, in the
opinion of the directors the Company has one reportable segment. The Company physically operates and is managed
from individual dealership sites although strategic and investment decisions are made based on dealership groupings or
market territories. The Company’s individual dealerships represent a range of manufacturers but are considered to have
similar economic characteristics, such as margin structures, and offer similar products and services to a similar customer
base. As such, the results of each dealership have been aggregated to form one reportable segment. There are no major
customers amounting to 10% or more of revenue. All revenue and non-current assets derive from, or are based in, the
United Kingdom.
2. Non-underlying items
Net (loss)/profit on disposal of property, plant and equipment
Other income, net
Within operating expenses:
Service cost on pension scheme
VAT claim recovery, net of professional fees
VAT compliance provision movement
Liquidation distribution received
Equalisation of Guaranteed Minimum Pensions
Property impairments
Non-underlying items within operating profit
Net finance expense on pension scheme
Non-underlying items within net finance expense
Total non-underlying items before taxation
Taxation credit on non-underlying items
Total non-underlying items after taxation
2020
£’000
(2)
(2)
(25)
–
44
22
–
–
41
39
(187)
(187)
(148)
28
(120)
2019
£’000
(6)
(6)
(27)
315
(164)
27
(851)
(945)
(1,645)
(1,651)
(222)
(222)
(1,873)
356
(1,517)
The following amounts have been presented as non-underlying items in these financial statements:
•
a periodic VAT inspection from HM Revenue & Customs carried out in a prior period identified certain items of non-
compliance with relevant legislation. In the current period, a sum of £44,000 was credited to profit to release a surplus
provision which was no longer deemed required;
• a sum of £22,000 was received from the liquidators of MG Rover Group Limited.
In the prior period, the following items were recorded as non-underlying items:
•
•
a sum of £334,000 was recovered in respect of a VAT claim submitted to HM Revenue & Customs for VAT incorrectly
accounted for on dealer contributions towards vehicle sales between 2012 and 2017. Net of costs of recovery, a credit
of £315,000 was recognised to profit;
a periodic VAT inspection from HM Revenue & Customs identified certain items of non-compliance with relevant
legislation. In the prior period, a sum of £164,000 was charged against profit to cover all items that had been resolved
but not yet settled at the year-end;
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2. Non-underlying items (continued)
•
a sum of £27,000 was received from the liquidators of MG Rover Group Limited;
•
•
following the setting of a legal precedent regarding the issue of equalisation of Guaranteed Minimum Pensions relating
to the members of the defined-benefit pension scheme, a sum of £851,000 was charged against profit as being the
best estimate of the cost of equalising pension entitlements between men and women;
the carrying values of two freehold properties were impaired by a total of £945,000 following advice from the
Company’s independent valuer, CBRE Limited (see notes 12 and 13).
3. Operating profit
Operating profit has been arrived at after charging/(crediting):
Employee benefit expense (see note 5)
Depreciation of property, plant, equipment and investment property
− owned assets
− right-of-use assets
Impairments of property, plant and equipment
Net loss on disposal of property, plant and equipment
Operating lease rentals payable – land and buildings
Operating lease rentals receivable – land and buildings
2020
£’000
15,494
1,537
256
1,356
–
83
(708)
2019
£’000
16,366
1,356
–
945
6
500
(708)
The Company applies the exemption in IFRS 16 Leases not to recognise right-of-use assets and liabilities for leases with a
duration of less than twleve months and these leases have continued to be treated as operating leases. The comparative
figures for the prior period have not been restated.
Operating profit has been arrived at after charging:
Auditor’s remuneration
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts
Fees payable to the Company’s auditor and its associates for other services:
− pursuant to legislation being review of interim financial statements
− in respect of the audit of the Caffyns plc Occupational Pension Scheme
2020
£’000
2019
£’000
69
13
–
82
76
12
11
99
During the year, the Company tendered its statutory audit and BDO LLP replaced Grant Thornton UK LLP as the Statutory
Auditor. The statutory audit of the Caffyns plc Occupational Pension Scheme continues to be performed by Grant
Thornton UK LLP.
A description of the work of the Audit and Risk Committee is set out in the Chairman’s Statement on Corporate
Governance on page 17 and includes an explanation of how auditor objectivity and independence is safeguarded when
non-audit services are provided by the Statutory Auditor.
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Notes to the Financial Statements continued
for the year ended 31 March 2020
3. Operating profit (continued)
The Company refers to underlying profit and underlying EBITDA as being key alternative performance measures when
considering the results for the year. These performance metrics can be reconciled to the Company’s result for the year as
follows:
Loss for the year
Tax charge (note 8)
Profit/(loss) before tax
Net finance expense (notes 6 and 7)
Non-underlying items within operating profit (note 2)
Depreciation charged on property, plant and equipment, right-of-use assets and investment
properties (notes 11, 12 and 13)
Underlying earnings before interest, tax, depreciation and amortisation (“EBITDA”)
4. Other income
Rent receivable
Compensation claim received
Liquidation distribution received
Loss on disposal of tangible fixed assets
Other income
2020
£’000
(252)
355
103
1,569
(39)
1,795
3,428
2020
£’000
708
–
22
(2)
728
2019
£’000
(566)
138
(428)
1,403
1,651
1,356
3,982
2019
£’000
523
285
–
(6)
802
During the prior year, the Company agreed a settlement of £300,000 regarding its claim for trading losses caused by
disruption from alterations and repairs required to one of its freehold premises. After allowing for professional fees and
costs, a credit of £285,000 was included in Other income.
5. Employee benefit expense
The average number of people (full time equivalents) employed in the following areas was:
Sales
Aftersales
Administration
Average number of full time equivalent employees
Employee benefit expense, including directors, during the year amounted to:
Wages and salaries
Social security costs
Redundancy costs
Contributions to defined contribution plans
Cost of equalisation of Guaranteed Minimum Pensions (see notes 2 and 23)
Other pension costs (see note 23)
Employee benefit expense
2020
£’000
128
208
83
419
2020
£’000
13,670
1,320
–
292
–
212
2019
£’000
130
208
83
421
2019
£’000
13,723
1,336
1
206
851
249
15,494
16,366
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5. Employee benefit expense (continued)
Directors’ emoluments were:
Salaries and short-term employee benefits
2020
£’000
657
Details of the directors’ remuneration are provided in the Directors’ Remuneration Report on pages 21 to 32.
Key management compensation:
Salaries and short-term employee benefits
Key management personnel includes the directors and other key operational employees.
6. Finance expense
Interest payable on bank borrowings
Interest payable on inventory stocking loans (see note 19)
Interest on lease liabilities
Finance costs amortised
Preference dividends (see note 10)
Finance expense
No interest was capitalised in the current period.
2019
£’000
738
2019
£’000
1,221
2019
£’000
356
648
–
105
72
2020
£’000
1,136
2020
£’000
440
741
24
105
72
1,382
1,181
Interest payable on bank borrowings for the prior period were after capitalising interest of £55,000 on additions to freehold
properties at a rate of 2.6%.
The interest charged on lease liabilities arose from the implementation of IFRS 16 Leases with effect from 1 April 2019.
7. Finance expense on pension scheme
Defined benefit pension scheme net finance expense (see note 23)
8. Tax
Current tax
UK corporation tax
Adjustments recognised in the period for current tax of prior periods
Total credit/(charge)
Deferred tax (see note 24)
Origination and reversal of temporary differences
Adjustments recognised in the period for deferred tax of prior periods
Total (charge)/credit
Tax charged in the Income Statement
2020
£’000
187
2020
£’000
–
22
22
(356)
(21)
(377)
(355)
2019
£’000
222
2019
£’000
(261)
(22)
(283)
21
124
145
(138)
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Notes to the Financial Statements continued
for the year ended 31 March 2020
8. Tax (continued)
The tax (charge)/credit arises as follows:
On normal trading
On non-underlying items (see note 2)
Tax charged in the Income Statement
The charge for the year can be reconciled to the profit per the Income Statement as follows:
Profit/(loss) before tax
Tax at the UK corporation tax rate of 19% (2019: 19%)
Tax effect of expenses that are not deductible in determining taxable profit
Difference between accounts profits and taxable profits on capital asset disposals
Other differences related primarily to the revaluation of the pension scheme and from
property impairments
Effect of change in corporation tax rate
Movement in rolled over and held over gains
Impairment of Advanced Corporation Tax asset
Adjustment to tax charge in respect of prior periods
Tax charge for the year
The total tax credit/(charge) for the year is made up as follows:
Total current tax credit/(charge)
Deferred tax charge
Charged/(credited) in the Income Statement
Credited/(charged) against other comprehensive income
Total deferred tax charge
Total tax credit/(charge) for the year
2020
£’000
(383)
28
(355)
2020
£’000
103
(20)
(23)
–
(134)
(255)
76
–
1
(355)
2020
£’000
22
(377)
376
(1)
21
2019
£’000
(494)
356
(138)
2019
£’000
(428)
81
(12)
(1)
(173)
–
166
(301)
102
(138)
2019
£’000
(283)
145
(257)
(112)
(395)
Factors affecting the future tax charge
The Company has unrelieved advance corporation tax of £1.4 million (2019: £1.4 million), which is available to be utilised
against future mainstream corporation tax liabilities and is accounted for in deferred tax (see note 24).
The tax charge is impacted by the effect of non-deductible expenses which, for the prior year, included the impairment
of property, plant and equipment, the charge for the equalisation of Guaranteed Minimum Pensions of members of the
defined benefit pension scheme and by non-qualifying depreciation.
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9. 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 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:
Underlying
Basic
Profit/(loss) before tax
Adjustments:
Non-underlying items (note 2)
Profit/(loss) before tax
Tax (note 8)
Profit/(loss) after tax
(Deficit)/earnings per share (pence)
Diluted (deficit)/earnings per share (pence)
Underlying (deficit)/earnings after tax
Underlying (deficit)/earnings per share (pence)
Underlying diluted (deficit)/earnings per share (pence)
Non-underlying losses after tax
(Losses)/earnings per share (pence)
Diluted (losses)/earnings per share (pence)
Total deficit
Deficit per share (pence)
Diluted deficit per share (pence)
2020
£’000
103
148
251
(383)
(132)
(4.9)p
(4.9)p
2019
£’000
(428)
1,873
1,445
(493)
952
35.3p
35.3p
2020
£’000
103
–
103
(355)
(252)
(9.4)p
(9.4)p
2020
£’000
(132)
(4.9)p
(4.9)p
(120)
(4.5)p
(4.5)p
(252)
(9.4)p
(9.4)p
2019
£’000
(428)
–
(428)
(138)
(566)
(21.0)p
(21.0)p
2019
£’000
952
35.3p
35.3p
(1,517)
(56.3)p
(56.3)p
(566)
(21.0)p
(21.0)p
The number of fully paid ordinary shares in circulation at the year-end was 2,694,790 (2019: 2,694,790). The weighted
average number of shares in issue for the purposes of the earnings per share calculation were 2,694,790 (2019:
2,694,790). The shares granted under the Company’s SAYE scheme have not been treated as dilutive as the market price
at 31 March 2020 of £2.80 was less than the option price of £3.99.
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Notes to the Financial Statements continued
for the year ended 31 March 2020
10. Dividends
Preference shares
7% Cumulative First Preference
11% Cumulative Preference
6% Cumulative Second Preference
Included in finance expense (see note 6)
Ordinary shares
Interim dividend paid in respect of the current year of 7.5p (2019: 7.5p)
Final dividend paid in respect of the March 2019 year end of 15.0p (2018: 7.5p)
2020
£’000
2019
£’000
12
48
12
72
202
404
606
12
48
12
72
202
404
606
No final dividend was declared in respect of the year ended 31 March 2020. In the prior year, a final dividend of 15.0
pence was declared which absorbed £404,000 of shareholders’ funds.
11. Right-of-use assets
Group and Company
Deemed cost
At 1 April 2019, on implementation
Additions in the year
At 31 March 2020
Accumulated depreciation
At 1 April 2019, on implementation
Depreciation for the year
At 31 March 2020
Net book value
At 31 March 2020
2020
£’000
947
234
1,181
–
256
256
925
The Company implemented IFRS 16 with effect from 1 April 2019 and the accounting policy adopted is set out in detail
on pages 50 and 51. In addition to one lease that was capitalised on implementation of IFRS 16, one further property was
added in the year as a result of a lease entered into by the Company in December 2019.
Depreciation and impairment charges of £256,000 (2019: £nil) in respect of right-of-use assets is recognised within
administration expenses in the Income Statement.
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12. Property, plant and equipment
Freehold
property
£’000
Assets under
construction
£’000
Leasehold
improvements
£’000
Fixtures &
fittings
£’000
Plant &
machinery
£’000
Group and Company
Cost or deemed cost
At 1 April 2018
Additions at cost
Transfer to Investment Properties
Transfers
Disposals
At 31 March 2019
Cost or deemed cost
At 1 April 2019
Additions at cost
Disposals
At 31 March 2020
Accumulated depreciation
At 1 April 2018
Depreciation charge for the year
Impairments for the year
Transfer to Investment Properties
Disposals
At 31 March 2019
Accumulated depreciation
At 1 April 2019
Depreciation charge for the year
Disposals
At 31 March 2020
Net book value
31 March 2020
31 March 2019
31 March 2018
37,410
–
(2,098)
5,436
–
40,748
40,748
4
–
40,752
4,180
544
545
(314)
–
4,955
4,955
575
–
5,530
35,222
35,793
33,230
3,869
1,567
–
(5,436)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,869
690
–
–
–
–
690
690
38
–
728
384
61
–
–
–
445
445
62
–
507
221
245
306
Total
£’000
52,440
2,755
(2,098)
–
(769)
5,595
553
–
–
(62)
6,086
52,328
6,086
52,328
477
(46)
980
(91)
4,876
635
–
–
(707)
4,804
4,804
461
(45)
5,220
6,517
53,217
3,473
391
–
–
(696)
3,168
3,168
471
(43)
3,596
1,624
1,636
1,403
4,339
12,376
252
1,248
–
–
(56)
545
(314)
(752)
4,535
13,103
4,535
13,103
312
(46)
1,420
(89)
4,801
14,434
1,716
1,551
1,256
38,783
39,225
40,064
Short-term leasehold property for both the Company and the Group comprises £221,000 at net book value in the
Statement of Financial Position (2019: £245,000).
Additions to freehold property includes interest capitalised of £nil (2019: £55,000) (see note 6).
Depreciation and impairment charges of £1,420,000 (2019: £1,248,000) in respect of property, plant and equipment is
recognised within administration expenses in the Income Statement.
In assessing the Company’s CGUs for impairment, the directors base their assessment of the recoverable amount on
the higher of fair value less selling costs and value in use. In the prior year, owing to a decline in the market value of fixed
assets at one freehold property, the fair value less selling costs of those assets declined by £545,000 to £7,963,000, and
an impairment charge of £545,000 was recognised in the Income Statement, as part of administration expenses.
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Notes to the Financial Statements continued
for the year ended 31 March 2020
12. Property, plant and equipment (continued)
The fair value measurement of the CGU in its entirety was categorised as a Level 3 within the hierarchy set out in IFRS 13
Fair Measurement. The following were key assumptions on which the directors based their determination of fair value less
costs of disposal in respect of that CGU:
•
•
•
Market value of buildings per square foot: £299
Market value of site per acre: £2,187,000
Costs of disposal: 1.5% of fair value
The freehold properties were revalued externally at 31 March 1995 by Herring Baker Harris, Chartered Surveyors, at open
market value for existing use (which is close to the then fair value). Freehold properties acquired since that date and the
other assets listed above are stated at cost in accordance with IAS 16 Property, Plant and Equipment.
The Company valued its portfolio of freehold premises and investment properties as at 31 March 2020. 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. The outbreak of the novel coronavirus (covid-19), declared
by the World Health Organisation as a “Global Pandemic” on the 11 March 2020, had a significant impact on global
financial markets and travel restrictions were implemented by many countries. Market activity was adversely impacted
in many sectors. As at the valuation date, CBRE therefore considered that they could attach less weight to previous
market evidence for comparison purposes, when informing opinions of value. Indeed, they noted in their report that the
current response to covid-19 meant that they were faced with an unprecedented set of circumstances on which to base
a judgement. Their valuations were therefore reported as being subject to a ‘material valuation uncertainty’ as set out in
VPS 3 and VPGA 10 of the RICS Valuation – Global Standards. Consequently, less certainty – and a higher degree of
caution – should be attached to their valuation than would normally be the case, given the unknown future impact that
covid-19 might have on the real estate market. CBRE noted in their report, for the avoidance of doubt, that the inclusion
of their ‘material valuation uncertainty’ declaration above did not mean that the valuation could not be relied upon. Rather,
the declaration was included to ensure transparency of the fact that – in the current extraordinary circumstances – less
certainty could be attached to the valuation than would otherwise be the case. CBRE noted that the material uncertainty
clause was to serve as a precaution and did not invalidate the valuation. Other than in relation to the caveat noted above,
management are satisfied that this valuation is materially accurate. The excess of the valuation over net book value as
at 31 March 2020 of those sites was £11.8 million (2019: £11.2 million). In accordance with the Company’s accounting
policies, this surplus has not been incorporated into these financial statements.
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13. Investment properties
Group and Company:
Cost
At 1 April 2019 and 31 March 2020
Accumulated depreciation
At 1 April 2019
Depreciation for the year
At 31 March 2020
Net book value
At 31 March 2020
Net book value
At 31 March 2019
2020
£’000
9,650
1,481
117
1,598
8,052
8,169
Depreciation and impairment charges of £117,000 (2019: £108,000) in respect of Investment properties is recognised
within administration expenses in the Income Statement.
The Company owns a freehold property that is leased out to a third party motor retail group, and accordingly accounts for
the property as an investment property. In the prior year, an impairment charge of £400,000 was recognised in the Income
Statement, as part of administration expenses. This investment property represents the only asset included in that CGU. In
assessing this property for impairment, the directors based their assessment of the recoverable amount on fair value less
selling costs.
The fair value measurement of the CGU in its entirety was categorised as a Level 3 within the hierarchy set out in IFRS 13
Fair Measurement. The valuation technique that is used to measure the fair value less costs of disposal is consistent with
that applied in respect of the Company’s property, plant and equipment, which is set out in note 12. The following are key
assumptions on which the directors based their determination of fair value less costs of disposal in respect of that CGU:
•
•
•
•
Market value of buildings per square foot: £211
Market value of site per acre: £2,670,000
Initial and reversionary yields: 6.7% and 7.0% respectively
Costs of disposal: 1.5% of fair value
As described in note 12, the total excess of the valuation over net book value as at 31 March 2020 was £11.8 million
(2019: £11.2 million). Investment properties accounted for £0.7 million (2019: £0.4 million) of this surplus.
14. Net investment in lease
Group and Company:
Due after more than one year
Due within one year
At 31 March 2020
2020
£’000
730
178
908
2019
£’000
–
–
–
The Company implemented IFRS 16 with effect from 1 April 2019 and the accounting policy adopted is set out in detail on
pages 50 and 51.
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.
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Notes to the Financial Statements continued
for the year ended 31 March 2020
15. Goodwill
Group and Company:
Cost
At 1 April 2019 and 31 March 2020
Provision for impairment
At 1 April 2019 and 31 March 2020
Carrying amounts allocated to CGUs
Volkswagen, Brighton
Audi, Eastbourne
At 31 March 2020
2020
£’000
2019
£’000
481
195
200
86
286
481
195
200
86
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 2020 and 2019.
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 12. 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.
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 2020 to 31 March 2025. 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 2021. 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 -25% (2019: -5%) to 131% (2019: 70%) have been used to forecast cash flows for a further
four years beyond the budget period, through to 31 March 2025. 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.
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% (2019: 12.4%).
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15. Goodwill (continued)
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% (2019: 0.5%). Terminal growth rates are based on
management’s estimate of future long-term average growth rates.
Conclusion
At 31 March 2020, no impairment charge in respect of goodwill was identified (2019: 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.
16. Investments in subsidiary undertakings
The Company owns the whole of the issued ordinary share capital of Caffyns Wessex Limited, Caffyns Properties Limited
and Fasthaven Limited, all of which are dormant. The amount at which the investments are stated is equivalent to the net
assets of the subsidiaries. All subsidiary undertakings are registered in England and Wales.
Company:
Cost
At 1 April 2019 and 31 March 2020
Provision
At 1 April 2019 and 31 March 2020
Net book value
At 31 March 2020
At 31 March 2019
17. Inventories
Group and Company:
Vehicles
Vehicles on consignment
Oil, spare parts and materials
Work in progress
At 31 March 2020
Group and Company:
Inventories recognised as an expense during the year
Inventories stated at fair value less costs to sell
Carrying value of inventories subject to retention of title clauses
2020
£’000
476
226
250
250
2019
£’000
21,903
11,502
1,058
5
2020
£’000
21,395
17,408
920
5
39,728
34,468
2020
£’000
2019
£’000
164,996
176,594
810
25,541
957
20,789
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Notes to the Financial Statements continued
for the year ended 31 March 2020
17. Inventories (continued)
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, £39,000 was recognised in respect of the write-down of inventories of spare parts due to general
obsolescence (2019: 43,000).
18. Trade and other receivables
Group and Company:
Trade receivables
Allowance for doubtful debts
Other receivables
At 31 March 2020
All amounts are due within one year.
2020
£’000
3,004
(7)
2,997
1,321
4,318
2019
£’000
7,517
(2)
7,515
1,281
8,796
The Group makes an impairment provision for all debts that are considered unlikely to be collected. At 31 March 2020
trade receivables were shown net of an allowance for impairment of £7,000 (2019: £2,000). The charge recognised during
the year was £5,000 (2019: £4,000).
Trade receivables have been classified as loans and receivables under IAS 39 Financial Instruments.
Group and Company:
Not impaired:
Neither past due nor impaired
Past due up to three months but not impaired
At 31 March 2020
Group and Company:
The movement in the allowance for impairment during the year was:
At 1 April 2019
Impairment recognised in the Income Statement
Utilisation
At 31 March 2020
All amounts are due within one year
2020
£’000
2,957
40
2,997
2020
£’000
2
5
–
7
2019
£’000
7,465
50
7,515
2019
£’000
4
2
(4)
2
Credit risk
The Company’s principal financial assets are trade receivables, bank balances and cash that represent the Company’s
maximum exposure to credit risk in relation to financial assets.
The Company’s credit risk is primarily attributable to its trade receivables that are due on the earlier of the presentation
of the invoice or the expiry of a credit term. The amounts presented in the Statement of Financial Position are net of
allowances for doubtful receivables, estimated by the Company’s management based on prior experience and their
assessment of the current economic environment. Consequently, the directors consider that the carrying amount of trade
and other receivables approximates to their fair value.
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18. Trade and other receivables (continued)
Before granting any new customer credit terms the Company uses external credit rating agencies to assess the
potential new customer’s credit quality and to define credit facility limits to be made available. These credit limits and
creditworthiness are regularly reviewed. The concentration of credit risk is limited due to the customer base being large
and unrelated. The Company has no customer that represents more than 5% of the total balance of trade receivables.
19. Trade and other payables
Trade payable
Obligations relating to consignment stock
Vehicle stocking loans
Social security and other taxes
Accruals
Deferred income
Other creditors
Group total
Amounts owed to Group undertakings
Company total
2020
£’000
10,918
17,408
7,315
549
1,283
592
281
38,346
250
38,596
2019
£’000
17,209
11,502
7,860
1,157
1,493
590
75
39,886
250
40,136
Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. The average
credit period taken for these trade-related purchases is 25 days (2019: 24 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
2020 were £741,000 (2019: £648,000).
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:
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At 1 April 2019
Utilisation of deferred income in the year
Income received and deferred in the year
At 31 March 2020
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£’000
590
(1,300)
1,302
592
2019
£’000
590
(1,216)
1,216
590
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Notes to the Financial Statements continued
for the year ended 31 March 2020
20. Interest-bearing loans and borrowings
Group and Company:
Current liabilities:
Secured bank loans and overdrafts
Non-current liabilities:
Secured bank loans
At 31 March 2020
2020
£’000
2019
£’000
5,875
4,875
11,844
17,719
12,625
17,500
Note 21 sets out the maturity profile of non-current liabilities.
The directors estimate that there is no material difference between the fair value of the Company’s borrowings and their
book value.
The loan and overdraft facilities provided to the Company of £26.7 million (2019: £27.5 million) are secured by a general
debenture and fixed charges over certain freehold properties.
21. Financial instruments
The Group utilises financial instruments such as bank loans and overdrafts and new and used vehicle stocking loans to
finance its operations and to manage the interest rate and liquidity risks that arise from those operations and from its
sources of finance. The disclosures below apply to the Group and the Company unless otherwise noted.
Group and Company:
Fair value of financial assets and
liabilities:
Primary financial instruments held or issued
to finance operations
Classification
2020
carrying
value &
fair value
£’000
2019
carrying
value &
fair value
£’000
Long-term bank borrowings (note 20)
Financial liability measured at amortised cost
(11,844)
(12,625)
Bank overdraft (note 20)
Financial liability measured at amortised cost
Other short-term bank borrowings (note 20)
Financial liability measured at amortised cost
(5,000)
(875)
(4,000)
(875)
Trade and other payables (note 19)
Financial liability measured at amortised cost
(37,205)
(38,139)
Trade and other receivables (note 18)
Financial asset at amortised cost
Cash and cash equivalents
Financial asset at amortised cost
Preference share capital (note 25)
Financial liability measured at amortised cost
4,318
1,478
(812)
8,796
3,908
(812)
The amounted noted in the above table are the same for the Company apart from:
Trade and other payables (note 19)
Financial liability measured at amortised cost
(37,455)
(38,389)
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21. Financial instruments (continued)
Financial risk management
The Group is exposed to the following risks from its use of financial instruments:
a. Funding and liquidity risk – the risk that the Group will not be able to meet its obligations as they fall due;
b. Credit risk – the risk of financial loss to the Group on the failure of a customer or counterparty to meet their obligations
as they fall due; and
c. Market risk – the risk that changes in market prices, such as interest rates, have on the Group’s financial performance.
The Group manages credit and liquidity risk by particularly focusing on working capital management. The Group’s
quantitative exposure to these risks is explained throughout these financial statements while the Group’s objectives and
management of these risks is set out below.
Capital management
The Group views its financial capital resources as primarily comprising share capital, bank loans and overdrafts, vehicle
stocking credit lines and operating cash flow.
The board’s policy is to maintain a strong capital base to facilitate market confidence and safeguard the Group’s ability to
continue as a going concern while maximising the return on capital to the Group’s shareholders. The Group monitors its
capital through closely scrutinising and reviewing its cash flows. The capital of the Group is £26.4 million and comprises
share capital, share premium, retained earnings and other reserve accounts: the capital redemption reserve, the non-
distributable reserve and the other reserve. In order to maintain or adjust the capital structure, the Group may adjust the
level of dividends paid to the holders of ordinary shares, return capital to shareholders, issue new shares or sell assets
to reduce debt. The Group’s ratio of net bank loans and overdrafts to equity was 62% at 31 March 2020 (2019: 49%).
Capital requirements imposed externally by HSBC are that borrowings should not exceed 70% of the current open-market
value for existing use of the Group’s freehold properties which are subject to a fixed charge.
The underlying pre-tax return as a proportion of equity for the year was 1.0% (2019: 5.2%).
The Company has occasionally repurchased its own shares in the market and cancelled them to promote growth
in earnings per share. There is no predetermined plan for doing this although the Company has permission from its
shareholders to buy back up to 15% of its equity in any one financial year. The Company may also purchase its own
shares to satisfy share incentives issued to employees and these shares are then held as treasury shares.
Treasury policy and procedures
The Company’s activities expose it primarily to the financial risks of changes in interest rates. There are no fixed rate
borrowings other than preference shares.
Funding and liquidity risk management
The Group finances its operations through a mixture of retained profits and borrowings from bank, vehicle stocking credit
lines and operating cash flow. The Group’s policy is to maintain a balance between committed and uncommitted facilities
and between term loans and overdrafts. Facilities are maintained at levels in excess of planned requirements and at 31
March 2020 the Group had undrawn floating rate borrowing facilities of £10.5 million (2019: £13.9 million) represented by
overdrafts and revolving-credit facilities which would be repayable on demand, in respect of which all conditions precedent
had been met. The Group is not directly exposed to foreign currency risk.
Interest rate management
The objective of the Group’s interest rate policy is to minimise interest costs while protecting the Group from adverse
movements in interest rates. Borrowings at variable rates expose the Group to cash flow interest rate risk whereas
borrowings at fixed rates expose the Group to fair value interest rate risk. The Group does not currently hedge any interest
rate risk.
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Notes to the Financial Statements continued
for the year ended 31 March 2020
21. Financial instruments (continued)
Interest rate risk sensitivity analysis
As all of the Group’s borrowings and vehicle stocking credit lines are floating rate instruments, they therefore have a
sensitivity to changes in market rates of interest. The effect of a 100 basis points change in interest rates for floating rate
instruments outstanding at the period end, on the assumption that the instruments at the period end were outstanding for
the entire period, would change interest charges by £236,000 (219: £215,000) before tax relief.
Credit risk management
The Group’s receivables are all denominated in sterling. The Group is exposed to credit risk primarily in respect of its trade
receivables and financial assets. Trade receivables are stated net of provision for estimated impairment losses. Exposure
to credit risk in respect of trade receivables is mitigated by the Group’s policy of only granting credit to certain customers
after an appropriate evaluation of their credit risk. Credit risk also arises in respect of amounts due from manufacturers
in relation to bonuses and warranty receivables. This risk is mitigated by the range of manufacturers dealt with, the
Group’s procedures in effecting timely collection of amounts due, and management’s belief that it does not expect any
manufacturer to fail to meet its obligations. Finance assets comprise cash balances. The counterparties are major banks
and management do not expect any counterparty to fail to meet its obligations. The maximum exposure to credit risk is
represented by the carrying amount of the financial asset in the Statement of Financial Position.
These objectives, policies and strategies are consistent with those applied in the previous year.
Group and Company:
Bank balances and cash equivalents
2020
carrying
value &
fair value
£’000
1,478
2019
carrying
value &
fair value
£’000
3,908
All borrowings are denominated in sterling. The effective interest rates for all borrowings are based on bank base rates.
Information regarding classification of balances and interest and the range of interest rates applied in the year to 31 March
2020 are set out in the following table:
Current: within one year or on demand
Overdraft
Term loan
Term loan
Trade and other payables
Not repayable within one year
Term loan
Term loan
Revolving-credit facility
Preference share capital
Carrying value
& fair value
£’000
Classification
Interest
classification
Interest rate
range
5,000 Amortised cost
500 Amortised cost
375 Amortised cost
36,123 Amortised cost
Floating
Base rate + 1.80%
Floating
Floating
VBBR* + 1.75%
LIBOR** + 1.75%
–
–
Carrying value
& fair value
£’000
Classification
Interest
classification
Interest rate
range
1,500 Amortised cost
6,344 Amortised cost
4,000 Amortised cost
812 Amortised cost
Floating
Floating
Floating
Fixed
VBBR* + 1.75%
LIBOR** + 1.75%
LIBOR** + 1.80%
–
*
*
Volkswagen Bank Base Rate, a base rate calculated by Volkswagen Bank United Kingdom Branch to replace Finance House Base Rate (FHBR), a rate
previously calculated by the Finance & Leasing Association. Publication of FHBR ceased on 31 December 2019.
London Interbank Offered Rate.
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21. Financial instruments (continued)
The maturity of non-current borrowings is as follows:
Group and Company:
Between one and two years
Between two and five years
Over five years
At 31 March 2020
2020
£’000
875
10,969
812
12,656
2019
£’000
875
2,500
10,062
13,437
Maturities include lease liabilities and amounts drawn under revolving-credit facilities. The maturities of lease liabilities
represent the undiscounted future repayments on those leases. The Company’s revolving-credit facility can continue to
be drawn in whole or part at any time under a facility which will continue until 2023. The maturities of the revolving-credit
facility represent the final payment dates for those drawn facilities as at 31 March 2023. If the amounts drawn at the year-
end were redrawn at the Group’s usual practice of three-monthly drawings, the total cash outflows, assuming interest
rates remain at the same rates as at year-end, are estimated on an undiscounted basis as follows:
Group and Company:
Within six months
Six to twelve months
More than twelve months
Contractual cash flows
2020
£’000
308
308
5,659
6,275
2019
£’000
53
53
4,317
4,423
IFRS 16 Leases was implemented with effect from 1 April 2019. The comparative figures shown for maturities for the year
ended 31 March 2019 have not been restated.
The Group has a term loan with HSBC, entered into in March 2018, originally of £7.5 million, at a rate of interest of 1.75%
above LIBOR. The loan has a five-year term and is repayable over 20 years. To assist in partially mitigating the impact of
the covid-19 pandemic, HSBC agreed to suspend capital repayments on the term loan for the first and second calendar
quarters of 2020. Therefore, the balance outstanding on this term loan at 31 March 2020 was £6.8 million (2019: £7.1
million) with capital repayments in the year of £0.28 million, rather than the usual £0.38 million. HSBC also make available
to the Group a revolving-credit facility of £7.5 million at a rate of interest of 1.8% above LIBOR. This facility has a five-year
term and expires in March 2023. The balance drawn as at 31 March 2020 was £4.0 million (2019: £4.0 million). These
facilities are subject to covenants which are tested half-yearly with respect to debt/freehold property values and interest
cover and which were passed at 31 March 2020. HSBC have confirmed to the Company their agreement to a relaxation
in the covenant tests for September 2020 and March 2021 which provides reasonable comfort to the directors that these
tests will be successfully passed at those times. The failure of a covenant test would render these facilities repayable on
demand at the option of the lender.
The Group also has a bank term loan from Volkswagen Bank United Kingdom Branch, which carries a rate of interest of
1.75% above VBBR. The loan is repayable over its ten-year term which expires in December 2024. Similarly to HSBC,
VW Bank agreed to suspend capital repayments on the term loan for the months of April and May 2020.
No reduction in term loan or revolving-credit facilities is expected to apply consequent to the trading results for the year
ended 31 March 2020.
The Group also had £10.5 million of combined annual overdraft facilities (£13.0 million during peak periods around the
bi-annual registration change months of March and September) from HSBC and Volkswagen Bank United Kingdom
Branch and these facilities are next due for renewal in August 2020. Subsequent to the year-end, HSBC agreed to an
all-year round overdraft limit of £6.0 million, from £3.5 million. The directors have every expectation that these facilities will
be renewed based on the current discussions with the relevant banks. The two overdrafts carry an interest rate of 1.85%
above bank base rate and 2.64% above VBBR, respectively.
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Caffyns plc Annual Report 2020
Notes to the Financial Statements continued
for the year ended 31 March 2020
21. Financial instruments (continued)
The Group has granted security to HSBC and Volkswagen Bank United Kingdom Branch by way of a general debenture
over its assets and a fixed charge over certain freehold property. The total value of those assets at 31 March 2020 in the
Statement of Financial Position was £66.9 million (2019: £74.1 million). The Group has also granted security to its defined-
benefit pension scheme by way of fixed charge over certain freehold property. This charge ranks in priority behind those
charges granted to HSBC and Volkswagen Bank United Kingdom Branch.
The ongoing costs associated with the bank facilities are included in finance expense (see note 6).
The preference shares in issue do not have a maturity date as they are non-redeemable.
22. Lease liabilities
Group and Company:
Deemed liability
At 1 April 2019, on implementation
Additions in the year
Interest charge for the year
Lease payments
At 31 March 2020
Due in less than one year
Due after more than one year
At 31 March 2020
2020
£’000
2,038
234
24
(443)
1,853
491
1,362
1,853
The Company implemented IFRS 16 with effect from 1 April 2019 and the accounting policy adopted is set out in detail on
pages 50 and 51. In addition to two leases that were capitalised on implementation of IFRS 16, one further property was
added in the year as a result of a lease entered into by the Company in December 2019.
Lease repayments on right-of-use assets in the period were £261,000 with £182,000 relating to interest in leases.
23. Retirement benefit scheme
Group and Company
Description of scheme
The Company operates a pension scheme, the Caffyns Pensions Scheme (“CPS”), providing benefits based on final
pensionable pay until 31 March 2006. With effect from 1 April 2006, the Scheme closed to new entrants and all members
in the final salary section were transferred to the career average section for future service and certain benefits were
reduced. Depending on the proportion of pensionable pay purchased, the Company contribution rates varied between
4% and 15%. With effect from 1 April 2010 the Scheme closed to future accrual with all members transferred to a
defined-contribution scheme for their future service. As part of the 2014 funding valuation it was agreed that the inflation
measure used to set in-deferment and in-payment increases for pensions in excess of guaranteed minimum pensions
would change from the Retail Prices Index to the Consumer Prices Index for members (or dependents of members) who
were in service on or after 1 April 1991.
The Trustees are responsible for the operation and governance of the Scheme, including making decisions regarding the
Scheme’s funding and investment strategy, in conjunction with the Company. The assets of the Caffyns Pensions Scheme,
administered by Capita Employee Solutions, are held separately from those of the Company, being held in separate funds
by the trustees of the Caffyns Pensions Scheme. The Scheme rules do not impose a restriction on the level of Scheme
asset that may be reported under IAS 19. The Scheme has been registered with the Pensions Regulator and is subject to
the scheme-specific funding requirements as outlined in UK legislation. The liabilities are determined by a qualified actuary
based on triennial valuations using the projected unit method. The most recent completed valuation was at 31 March 2017
with the next valuation in progress and effective from 31 March 2020.
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23. Retirement benefit scheme (continued)
Description of expected cash flows to and from the Scheme
As part of the 31 March 2017 funding valuation the Trustees and the Company agreed a recovery plan with a view to
eliminating the scheme-specific funding shortfall by 31 July 2028. Over the year to 31 March 2020 the Company contributed
£523,000 (2019: £511,000) to fund the existing deficit of which £491,000 (2019: £480,000) was in relation to deficit-
reduction contributions. Based on the recovery plan, over the year to 31 March 2021 the Company would be expected to
contribute £502,000 in relation to deficit-reduction contributions. In addition, the Company is expected to make contributions
towards risk benefits and to meet the cost of administrative expenses and Pension Protection Fund levies.
The liabilities of the Scheme are based on the current value of expected benefit payment cash flows to members of the
Scheme over the next 70 to 80 years. The average duration of the liabilities is approximately 16 years. Expected benefit
payments in the year to 31 March 2021 are £4,212,000.
Risks to the Scheme
The ultimate cost of the Scheme to the Company will depend upon actual future events rather than the assumptions
made. Many of the assumptions made are unlikely to be borne out in practice and as such the cost of the Scheme may
be higher, or lower, than disclosed. In general, the risk to the Company is that assumptions underlying the disclosures,
or the calculation of contribution requirements, are not borne out in practice and the cost to the Company is higher than
expected.
More specifically, the Scheme exposes the Company to actuarial risks such as:
•
•
•
•
Interest rate risk – the present value of the defined-benefit liability is calculated using a discount rate determined
by reference to market yields of corporate bonds whereas the Scheme holds a mixture of investments. A decrease
in market yield on high quality corporate bonds will increase the Company’s defined-benefit liability, although it is
expected that this would be offset partially by an increase in the fair value of certain of the Scheme’s assets;
Investment risk – the Scheme’s assets at 31 March 2020 are invested by an appointed fiduciary management
company, SEI Investments (Europe). The investment in various types of asset funds is intended to reduce risk while
maintaining planned returns;
Longevity risk – the Company is required to provide benefits for life for the members of the Caffyns Pensions Scheme.
Increases in life expectancy of the members will increase the defined-benefit liability;
Inflation risk – a significant proportion of the defined-benefit liability is linked to inflation. An increase in the inflation rate
will increase the Company’s liability. A portion of the Scheme’s assets are inflation-linked debt securities, which would
mitigate some of the effect of inflation.
The Company has applied IAS 19 Employee Benefits (Revised) to this scheme and the following disclosures relate to this
Standard. The Company recognises any remeasurement (actuarial gains and losses) in each period in the Statement of
Comprehensive Income.
Results of most recent actuarial valuation
The assumptions which have the most significant effect on the results of the valuation are those relating to rates of
mortality, the discount rate used to reflect the present value of scheme liabilities, and the rate of inflation. The last actuarial
valuation as at 31 March 2017 showed that the market value of the assets of the Caffyns Pensions Scheme were £90.4
million and that the actuarial value of those assets represented 87% of the value of the benefits that had accrued to
employees at that date. The deficit arising at 31 March 2017 of £13.5 million compared to a deficit of £9.5 million under
IAS 19 and was due to different assumptions being adopted for the triennial valuation. The payments agreed with the
trustees of the Caffyns Pensions Scheme under the recovery plan were for deficit-reduction cash payments to be made in
the year ended 31 March 2018 of £480,000 with payments increasing annually from 1 April 2019 by the greater of 2.25%
or the percentage increase in annual shareholder dividends paid until 31 July 2028.
The costs and liabilities of the Caffyns Pensions Scheme are based on actuarial valuations. The latest full actuarial
valuation carried out at 31 March 2017 was updated to 31 March 2020 by Willis Towers Watson, independent qualified
actuaries, for the requirements of IAS 19. Details of the actuarial assumptions are as follows:
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Notes to the Financial Statements continued
for the year ended 31 March 2020
23. Retirement benefit scheme (continued)
Mortality tables used: females
Mortality tables used: males
Future improvements in mortality
Discount rate
Inflation (CPI)
Pension increase for in-payment benefits (CPI max 5%)
2020
2019
97% of SAPS series 2
97% of SAPS series 2
100% of SAPS series 2
100% of SAPS series 2
CMI2018 + 1.25%
CMI2018 + 1.25%
2.20%
1.75%
1.90%
2.25%
2.20%
2.25%
The discount rate adopted is based upon the yields of high-quality corporate bonds of appropriate duration.
The sensitivities regarding the principal assumptions used to measure scheme liabilities are set out below:
Assumption
Discount rate
Rate of inflation
Pension increases
Mortality
Change in assumption
Increase/decrease by 0.1%
Impact on scheme liabilities
+/− £1.4 million
Increase/decrease by 0.1%
Increase/decrease by 0.1%
Increase/decrease by 0.1%
+/− £1.1 million
+/− £0.8 million
+/− £4.6 million
The fair value of assets of the Caffyns Pensions Scheme for each class of asset, all of which have a quoted market price in
an active market, are as follows:
LDI fund
Growth fund
Equity instruments
At 31 March 2020
Market value
2020
£’000
11,080
69,500
501
81,081
2019
£’000
18,044
68,258
543
86,845
A fiduciary manager, SEI Investments (Europe) operates with the objective of improving the performance of the assets of
the Caffyns Pensions Scheme. Assets of the Scheme (excluding cash in the trustees’ administrative bank account) at 31
March 2020 were invested 13% (2019: 21%) in LDI funds, 86% (2019: 78%) in return enhancing growth funds and 1%
(2019: 1%) in Caffyns plc shares.
In accordance with the requirements of IAS 19 Employee Benefits, the expected return on assets is based on the discount
rate noted above of 2.20% and not the return on the underlying portfolio of investments. Consequently, the charge to the
Income Statement for the year ending 31 March 2021 is expected to be approximately £226,000.
Equity instruments include shares in Caffyns plc, which are detailed in note 25.
The assumptions used by the actuary are the best estimates based on market conditions chosen from a range of
possible actuarial assumptions which, due to the timescales covered, may not necessarily be borne out in practice. The
international accounting standards assumptions have been updated at 31 March 2020 and differ from those used for the
earlier independent statutory actuarial valuation, as explained above.
Life expectancy at age 65 (in years):
Member currently aged 65
Member currently aged 45
2020
Male
21.6
22.9
2020
Female
23.8
25.3
2019
Male
21.5
22.8
2019
Female
26.6
25.1
A liability for the defined-benefit pension scheme deficit is included in the Statement of Financial Position under the
heading of non-current liabilities.
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23. Retirement benefit scheme (continued)
Analysis of the movement in the net liability for defined-benefit obligations recognised in the Statement of
Financial Position
At 1 April 2019
Expense recognised in the Income Statement
Contributions received
Net remeasurement recognised in other comprehensive income
At 31 March 2020
2020
£’000
(8,576)
(212)
523
(1,169)
(9,434)
2019
£’000
(9,497)
(1,100)
511
1,510
(8,576)
In the prior year, in October 2018, the High Court issued a judgement which requires pension schemes to equalise
members’ benefits to address the unequal effect of Guaranteed Minimum Pensions between genders. An allowance for
the liabilities to increase by 0.9% was made for the estimated cost of Guaranteed Minimum Pensions equalisation and the
resultant charge of £851,000 was included in the prior year charge to the Income Statement.
Total expense recognised in the Income Statement
Interest cost
Interest income on Scheme assets
Interest – net (see note 7)
Current service cost
Changes in the present value of the defined-benefit pension obligation
At 1 April 2019
Service cost
Past service cost – scheme amendments
Interest cost
Actuarial (gains)/losses – experience
Actuarial losses /(gains) – demographic assumptions
Actuarial (gains)/losses – financial assumptions
Benefits paid
At 31 March 2020
Movement in the fair value of scheme assets
At 1 April 2019
Interest income
Actuarial (gains)/losses – financial assumptions
Contributions paid by the Company
Benefits paid
At 31 March 2020
2020
£’000
2,100
(1,913)
187
25
212
2020
£’000
95,421
25
–
2,100
(365)
377
(2,887)
(4,156)
90,515
2020
£’000
86,845
1,913
(4,044)
523
(4,156)
81,081
2019
£’000
2,240
(2,018)
222
27
249
2019
£’000
95,480
27
851
2,240
212
(2,226)
3,180
(4,343)
95,421
2019
£’000
85,983
2,018
2,676
511
(4,343)
86,845
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Notes to the Financial Statements continued
for the year ended 31 March 2020
23. Retirement benefit scheme (continued)
Reconciliation of the impact of the asset ceiling
The Company has reviewed the implications of the guidance provided in IFRIC 14 and has concluded that it is not
necessary to make adjustments to the IAS 19 disclosures at 31 March 2020 as any scheme surplus would be available to
the Company unconditionally by way of a refund, assuming the gradual settlement of scheme liabilities over time until all
members had left the Caffyns Pensions Scheme.
24. Deferred tax
Group and Company
The following are the major deferred tax assets and liabilities recognised and the movements thereon during the current
and prior reporting period.
Accelerated
tax
depreciation
£’000
Unrealised
capital
gains
£’000
Retirement
benefit
obligations
£’000
At 1 April 2018
Transfer
Change in tax rates and
prior year adjustments
Timing differences
Recognised in other
comprehensive income
At 31 March 2019
(1,112)
–
267
(83)
–
(683)
(848)
14
160
–
(928)
(1,357)
1,613
–
–
102
(257)
1,458
At 1 April 2019
(928)
(1,357)
1,458
Change in tax rates and
prior year adjustments
Timing differences
Recognised in other
comprehensive income
At 31 March 2020
117
(131)
(409)
76
–
–
(942)
(1,690)
17
(59)
376
1,792
Sale of
business
£’000
(848)
848
–
–
–
–
–
–
28
–
28
Short-term
temporary
differences
£’000
6
–
(16)
2
–
(8)
(8)
(1)
(14)
–
(23)
Recoverable
ACT
£’000
1,136
–
–
(301)
–
835
835
–
–
–
835
Total
£’000
112
–
265
(120)
(257)
–
–
(276)
(100)
376
–
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 19% 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. The value of surplus ACT is
£1,136,000 (2019: £1,136,000) and shadow ACT is £845,000 (2019: £694,000).
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:
Deferred tax liabilities
Deferred tax assets
At 31 March 2020
2020
£’000
(2,655)
2,655
–
2019
£’000
(2,293)
2,293
–
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 of £147,000 (2019: £Nil) are available for use in future periods.
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25. Called up share capital
Authorised
500,000 7% Cumulative First Preference shares of £1 each
1,250,000 11% Cumulative Preference shares of £1 each
3,000,000 6% Cumulative Second Preference shares of 10 pence each
4,000,000 Ordinary shares of 50 pence each
At 31 March 2020
Allotted, called up and fully paid
170,732 7% Cumulative First Preference shares of £1 each
441,401 11% Cumulative Preference shares of £1 each
2,000,000 6% Cumulative Second Preference shares of 10 pence each
Total preference shares recognised as a financial liability (see note below)
2,879,298 Ordinary shares of 50 pence each
At 31 March 2020
2020
£’000
500
1,250
300
2,000
4,050
171
441
200
812
1,439
2,251
2019
£’000
500
1,250
300
2,000
4,050
171
441
200
812
1,439
2,251
At 1 April 2019, the Company held 2,879,298 Ordinary shares with 184,508 shares held in treasury. There has been
no movement in shares during the year under review, or in the prior year. The treasury shares represent shares in the
Company which are held to fulfil the requirements of any Company Save As You Earn scheme for eligible employees. The
market value of these shares at 31 March 2020 was £517,000 (2019: £729,000). Dividend income from, and voting rights
on, the shares held in treasury have been waived.
The 7% Cumulative First Preference shares have rights to a fixed dividend and, in the event of a winding-up, a priority to
the Ordinary shares for a capital repayment. The shares do not have voting rights.
The 11% Cumulative Preference shares have rights to a fixed dividend and, in the event of a winding-up, a priority to the
Ordinary shares for a capital repayment. The shares do not have voting rights.
The 6% Cumulative Second Preference shares continue to have voting rights (one vote per Second Preference share)
except in relation to matters which under the Listing Rules, as amended from time to time, are required to be voted on only
by premium-listed securities, being the Ordinary shares.
Although the Articles of Association of the Company give the directors discretion to pay the preference dividend only
if they consider there are adequate profits, such dividends are cumulative. For this reason, the directors consider that
the preference shares have the characteristic of a financial liability rather than equity, and consequently the preference
shares are included as a non-current liability. None of the preference shares have rights of conversion or rights to capital
repayment.
26. Share-based payments
Year of grant
2017
Exercise
price
£3.99
Exercise
date
2020
Number at
31 March
2019
106,330
Issued
Cancelled
Number at
31 March
2020
–
(20,958)
85,372
The fair value of the grants made under the SAYE scheme is charged to the Income Statement over the vesting period
based on the valuation derived from an adjusted Black-Scholes model.
The total expense included within operating profit relating to share-based payments for the year was £56,000 (2019:
£56,000), with an associated tax credit to the Income Statement and Equity of £11,000 (2019: £11,000).
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Caffyns plc Annual Report 2020
Notes to the Financial Statements continued
for the year ended 31 March 2020
27. Notes to the cash flow statement
Group and Company:
Profit/(loss) before tax for the year
Adjustments for net finance expense
Adjustments for:
Depreciation of property, plant and equipment, investment properties and
right-of-use assets
Impairment against property, plant and equipment and investment properties
Cash payments into the defined-benefit pension scheme
Loss on disposal of property, plant and equipment
Share-based payments
Operating cash flows before movements in working capital
Decrease/(increase) in inventories
Decrease in receivables
(Decrease)/increase in payables
Cash generated by operations
Tax paid, net of refunds
Interest paid
Net cash (absorbed)/derived from operating activities
Reconciliation of debt
2020
£’000
103
1,569
1,672
1,793
–
(523)
2
56
3,000
646
4,479
(7,422)
703
(147)
(1,358)
(802)
Group and Company:
At 1 April 2018
Movement
At 31 March 2019
Current liabilities
Non-current liabilities
At 31 March 2019
At 1 April 2019
Movement
At 31 March 2020
Current liabilities
Non-current liabilities
At 31 March 2020
Revolving
credit
facility
£’000
Bank
overdrafts,
net of cash
in hand
£’000
Lease
liabilities
£’000
Preference
shares
£’000
4,000
–
4,000
–
4,000
4,000
4,000
–
4,000
–
4,000
4,000
(375)
467
92
92
–
92
92
3,430
3,522
3,522
–
3,522
–
–
–
–
–
–
2,038
(185)
1,853
491
1,362
1,853
812
–
812
–
812
812
812
–
812
–
812
812
Bank
loans
£’000
10,375
(875)
9,500
875
8,625
9,500
9,500
(781)
8,719
875
7,844
8,719
2019
£’000
(428)
1,403
975
1,356
945
(511)
6
56
2,827
(1,662)
1,395
2,500
5,060
(120)
(1,181)
3,759
Net
debt
£’000
14,812
(408)
14,404
967
13,437
14,404
16,442
2,464
18,906
4,888
14,018
18,906
The Company implemented IFRS 16 Leases with effect from 1 April 2019 which resulted in the reclassification of two
leases with an assumed asset and liability value of £2,038,000.
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28. Related parties
The remuneration of directors, who are key management personnel, is set out in note 5 for each of the categories
specified in IAS 24 Related Party Disclosures. Further information about the remuneration of individual directors is provided
in the Directors’ Remuneration Report on pages 21 to 32.
The 2,000,000 6% Cumulative Second Preference shares have full voting rights along with the Ordinary shares, except
in relation to matters which under the Listing Rules, as amended from time to time, are required to be voted on only by
premium-listed securities, being the Ordinary shares. These Cumulative Second Preference shares are beneficially owned
by Caffyn Family Holdings Limited (“Holdings”). Mr S G M Caffyn and Ms S J Caffyn are directors of Holdings. The whole
of the issued share capital of Holdings is held by close relatives of those directors. Holdings controls directly 42.6%
(2019: 42.6%) of the voting rights of Caffyns plc. The directors and shareholders of Holdings are also beneficial holders of
540,481 (2019: 585,481) Ordinary shares in Caffyns plc representing a further 11.5% (2019: 12.5%) of the voting rights.
It is therefore considered that the Caffyn family is the ultimate controlling party. As required under the Stock Exchange
Listing Rules, the Company entered into a Relationship Agreement with Holdings on 6 November 2014 whereby Holdings
undertakes to the Company that it shall exercise its voting rights and shall exercise all its powers to ensure, so far as it
is properly able to do so, that its associates shall exercise their respective voting rights and exercise all their respective
powers to ensure, to the extent that they are able by the exercise of such rights to procure, that:
a. transactions and arrangements between any member of the Company and Holdings (and/or any of its associates) will
be conducted at arm’s length and on normal commercial terms;
b. neither holdings nor any of its associates will take any action that would have the effect of preventing the Company
from complying with its obligations under the Listing Rules; and
c. neither Holdings nor any of its associates will propose or procure the proposal of a shareholder resolution which is
intended or appears to be intended to circumvent the proper application of the Listing Rules.
Directors of the Company and their immediate relatives control 16.4% (2019: 15.7%) of the issued Ordinary share capital
of the Company. Dividends of £25,188 (2019: £24,388) were paid to directors in the year.
Caffyns Pension Scheme
Details of contributions are disclosed in note 23.
The Caffyns Pension Scheme held the following investments in the Company:
Shares held:
125,570 (2019: 125,570) Ordinary shares of 50 pence each
12,862 (2019: 12,862) 11% Cumulative Preference shares of £1 each
At 31 March 2020
Fair value
2020
£’000
352
20
372
2019
£’000
496
20
516
During the year to 31 March 2020, the Company paid management fees of £249,000 (2019: £290,000) on behalf of the
Caffyns Pension Scheme. These costs comprised the Pension Protection Fund levy, actuarial advisory fees and external
administration fees.
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Caffyns plc Annual Report 2020
Notes to the Financial Statements continued
for the year ended 31 March 2020
29. Operating leases
The Group as a lessee
The total future minimum lease payments payable under non-cancellable operating leases which fall due as follows are:
Group and Company
Within one year
In two to five years
Beyond five year
Future minimum lease payments
2020
2019
Land and
buildings
£’000
83
–
–
83
Other
£’000
–
–
–
–
Land and
buildings
£’000
494
1,497
263
2,254
Other
£’000
–
–
–
–
The total minimum lease payments for land and buildings are until the break point in the lease. All rentals are fixed until
either the termination of the lease, or in the case of land and buildings, the next break point.
The Company implemented IFRS 16 Leases with effect from 1 April 2019. As a result, significant leases with terms in
excess of twleve months are no longer treated as operating leases but have been capitalised in the current period as either
right-of-use assets or interest in lease receivables.
The Group as lessor
The Company’s gross property rental income earned during the year from sub-letting a leased property and the direct
lease of three (2019: three) investment properties owned by the Group was £893,000 (2019: £708,000). No contingent
rents were recognised in income (2019: £nil).
At 31 March 2020 there were contracts for land and buildings with tenants for the following lease rentals receivable:
Group and Company
Within one year
In two to five years
Beyond five years
At 31 March 2020
2020
£’000
701
1,559
1,585
3,845
2019
£’000
902
1,602
1,966
4,486
30. Capital commitments
Neither the Group nor the Company had any capital commitments at 31 March 2020 (2019: £nil).
31. Operating financial commitment
The Group and the Company had contingent liabilities at 31 March 2020 of £1.7 million (2019: £0.8 million).
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32. Legal contingent liability
In September 2015, Volkswagen Aktiengesellschaft announced that certain diesel vehicles manufactured by Volkswagen,
Skoda, SEAT and Audi, which contain 1.2, 1.6 and 2.0 litre EA 189 diesel engines, were fitted with software which is
thought to have operated such that when the vehicles were experiencing test conditions, the characteristics of nitrogen
oxides (“NOx”) were affected. The vehicles remain safe and roadworthy.
Technical measures have been approved by the German type approval authority, the Kraftfahrt-Bundesamt (the “KBA”) in
respect of Volkswagen and Audi branded vehicles, by the UK type approval authority, the Vehicle Certification Agency (the
“VCA”) in respect of Skoda branded vehicles, and by the Ministerio de Industria, Energía y Turismo (the “MDI”) in respect of
SEAT branded vehicles. The KBA and VCA have confirmed for all affected vehicles that the implementation of all technical
measures does not adversely impact fuel consumption figures, CO2 emissions figures, engine output, maximum torque
and noise emissions. The MDI is also content that the technical measures be applied to those SEAT vehicles for which
they are the relevant approval authority.
Notwithstanding the above, claims on behalf of multiple claimants, arising out of or in relation to their purchase or
acquisition on finance of a Volkswagen Group vehicle affected by the NOx issue, have been brought against a number
of Volkswagen entities and dealers, including Caffyns. Caffyns has been named as a Defendant on fourteen claim forms
alleging fraudulent misrepresentation, breach of contract, breach of statutory duty, breach of the Consumer Credit Act
1974 and a breach of the Consumer Protection from Unfair Trading Regulations 2008. In total, there are 313 claims being
jointly brought against Caffyns.
In December 2019, a hearing took place in the High Court of England and Wales on two preliminary issues:
(i)
“Is the High Court of England and Wales bound by the finding of the competent EU type approval authority that a
vehicle contains a defeat device in circumstances where that finding could have been, but has not been, appealed by
the manufacturer; and/or is it an abuse of process for the Defendants to seek collaterally to attack the KBA’s reasoning
or conclusions by denying that the affected vehicles contain defeat devices?”; and
(ii)
“Where a vehicle’s engine control unit is capable of identifying the New European Driving Cycle test and operates in
a different mode during the test by altering the rate of exhaust gas recirculation to reduce NOx emissions, does the
vehicle contain a “defeat device” within the meaning of Article 3(10) of Regulation 715/2007/EC?”
Judgment was received on 30 March 2020. On the first preliminary issue, the Court found that it was bound by the KBA’s
ordinance that the software was a defeat device. The same was not true in relation to the VCA. On the second preliminary
issue, the court found that the software was a prohibited defeat device. Volkswagen Group is seeking permission from the
Court of Appeal to appeal this judgment.
At present, no timetable has been set for the remainder of the case; the relevant issues of liability, loss and causation are
not yet decided. It is therefore too early to assess reliably the merit of any claim and so we cannot confirm that any future
outflow of resources is probable.
Volkswagen Group has agreed to indemnify the Company for the reasonable legal costs of defending the litigation and any
damages and adverse legal costs that the Company may be liable to pay to the claimants as a result of the litigation and
the conduct of the Volkswagen Group. The possibility, therefore, of an economic cost to the Company resulting from the
defence of the litigation is remote.
Accordingly, no provision for liability has been made in these financial statements.
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Notes to the Financial Statements continued
for the year ended 31 March 2020
33. Critical accounting judgements and estimates when applying the Company’s
accounting policies
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 23. At 31 March 2020, the net liability included in the Statement of Financial Position was £9.4 million
(2019: £8.6 million).
Impairment
The carrying value of property, plant and equipment and goodwill are tested annually for impairment as described in notes
11, 12, 13 and 15. 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 15). As a result of this review the
directors considered that no impairments were required to the carrying value of property assets (2019: impairment charges
of £1.0 million) (see notes 11, 12, 13 and 15).
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 19% of taxable profits less shadow ACT calculated at 25% of dividends.
Shadow ACT has no effect on the corporation tax payable itself but any surplus ACT on dividends must be fully absorbed
before surplus unrelieved ACT can be utilised. In prior years, the Company has partially impaired the value of the ACT by
£301,000 in order to avoid recognising an overall deferred tax asset. At 31 March 2020, the carrying value of surplus ACT
is £835,000 (2019: £835,000) and shadow ACT is £845,000 (2019: £694,000). 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 2028.
Support arrangements
On occasion, the Company can be assisted in the relocation, development and support of certain of its businesses.
On receipt of these payments the Company forms a judgement whether the payment is capital in nature, in which case
the payment is deducted from the capital cost of the development in question, or revenue in nature, in which case the
payment is amortised over a two-year period from the date or relocation.
During the prior year, the Company received a contribution of £255,000 from a brand partner towards the cost of
developing its Angmering dealership. The contribution agreement was not specific as to whether the amount contributed
was in respect of the capital expenditure incurred by the Company, or in respect of other operating activities (such as
marketing) that the Company was required to undertake as part of the relocation. Consequently, the directors needed
to apply judgement in determining the appropriate accounting treatment. Having considered all information available,
including the contribution agreement and past correspondence with the brand partner, the directors determined it
appropriate to account for the contribution as capital in nature, and deducted the amount received from the carrying
amount of property, plant and equipment assets associated with the Angmering dealership.
The directors considered an alternative treatment, including recognising the amount received over the rolling two-year
term of the franchise agreement. This would have resulted in an increase in profit of £96,000 during the prior year ended
31 March 2019 and an increase in net assets of the same amount as at 31 March 2019, with the remaining £159,000
standing to be recognised over the remaining contractual period as follows: year ended 31 March 2020: £127,500, year
ending 31 March 2021: £31,500.
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Five Year Review
(adjusted for discounted operations)
Income Statement
Revenue
Underlying operating profit
Finance expense
Underlying profit before tax
Non-underlying items
Profit before tax from discontinued operations
Profit/(loss) before tax
Profit/(loss) after tax
Basic earnings/(deficit) per ordinary share
Underlying earnings/(deficit) per ordinary share
Dividend per ordinary share payable in respect
of the year
2016
£’000
2017
£’000
Restated
2018
£’000
2019
£’000
2020
£’000
186,401
212,581
215,868
209,246
197,854
2,544
(1,079)
1,465
(222)
1,392
2,635
2,487
90.1p
48.8p
2,981
(930)
2,051
(392)
4,623
6,282
5,123
186.3p
58.0p
2,325
(935)
1,390
(225)
–
1,165
1,030
38.2p
45.6p
2,626
(1,181)
1,445
(1,873)
–
(428)
(566)
(21.0)p
35.3p
1,633
(1,382)
251
(148)
–
103
(252)
(9.4)p
(4.9)p
21.75p
22.50p
22.50p
22.50p
7.50p
These results are shown exclusive of the Land Rover business, which was sold in April 2016.
As at year-end
Shareholders’ funds
Property, plant and equipment*
Bank overdrafts and loans (net)
Bank overdrafts and loans/shareholders’ funds (gearing)
Retirement benefit liability
* Represents property, plant and equipment and investment properties
27,180
39,385
11,156
40%
4,980
28,326
42,609
8,554
30%
8,554
27,913
46,957
14,000
50%
9,497
27,975
47,394
13,592
49%
8,576
26,380
46,835
16,241
62%
9,434
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27509 14 August 2020 4:41 pm Proof 8Our dealershipsAUDI BRIGHTON: EASTBOURNE: WORTHING: 200 Dyke Road, Brighton, BN1 5AT (01273 553061) Edward Road, Eastbourne, BN23 8AS (01323 525700) Roundstone Lane, Worthing, BN16 4BD (01903 231111)SEAT TUNBRIDGE WELLS: North Farm Industrial Estate, Tunbridge Wells, TN2 3EL (01892 515700)SKODA ASHFORD: TUNBRIDGE WELLS: The Boulevard, Ashford, TN24 0GA (01233 504600) North Farm Industrial Estate, Tunbridge Wells, TN2 3EL (01892 515700)VAUXHALL ASHFORD: Monument Way, Orbital Park, Ashford, TN24 0HB (01233 504604)VOLKSWAGEN BRIGHTON: EASTBOURNE: HAYWARDS HEATH: WORTHING: Victoria Road, Portslade, BN41 1YD (01273 425600) Lottbridge Drove, Eastbourne, BN23 6PW (01323 647141) Market Place, Haywards Heath, RH16 1DN (01444 451511) Nightingale Avenue, Worthing, BN12 6FH (01903 837878)VOLVO EASTBOURNE: WORTHING: Lottbridge Drove, Eastbourne, BN23 6PJ (01323 418300) Palatine Road, Worthing, BN12 6JH (01903 507124)MOTORSTORE ASHFORD: Monument Way, Orbital Park, Ashford, TN24 0HB (01233 504624)HEAD OFFICE EASTBOURNE: Meads Road, Eastbourne, BN20 7DR (01323 730201)Caffyns plc Annual Report 2020 8827509-Caffyns-AR2020.indd 8814/08/2020 16:45:06 www.caffyns.co.uk
Stock code CFYN
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27509
14 August 2020 4:41 pm
Proof 8
14/08/2020 16:45:14
Caffyns plc
Meads Road
Eastbourne
East Sussex
BN20 7DR
www.caffyns.co.uk
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27509
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Proof 8
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