Cambria Automobiles plc Annual Report 2010

Plain-text annual report

Directors’ report and ﬁ nancial statements for the year ended 31 August 2010 Registered number 05754547 Contents Chairman’s Statement ............................................................. 4 Operating and Financial Review ............................................. 7 Directors’ report ......................................................................16 Statement of directors’ responsibilities in respect of the Directors’ report and the ﬁ nancial statements ..........18 Independent auditors’ report to the members of Cambria Automobiles plc ..................................19 Consolidated Statement of comprehensive income ............ 20 Consolidated Statement of changes in equity ....................... 21 Consolidated Statement of ﬁ nancial position ..................... 22 Consolidated Cash Flow Statement .......................................23 Notes ....................................................................................... 24 Company Balance Sheet ........................................................ 56 Company Reconciliation of movements in shareholders’ funds ........................................................... 57 Notes ....................................................................................... 58 2 3 Chairman’s Statement I am pleased to report another record year for Cambria with the Group achieving revenues of £392 million and a proﬁ t before tax prior to the deduction of non-recurring listing and transaction costs of £4.2 million. Since the formation of Cambria in 2006 when we made our ﬁ rst acquisition, we have built the business into a top 20 UK motor dealership Group. For a signiﬁ cant proportion of this period the UK economy has been in recession and it is testament to the quality of the Cambria operating team that they have not only taken advantage of opportunities to acquire businesses but have signiﬁ cantly improved the operational performance of those businesses acquired. Delivering operational improvement is key to the Board’s objective of providing superior returns on shareholder’s funds. Cambria was established in 2006 with a plan to build a top 10 UK dealership group through the acquisition of attractive individual or groups of dealerships. The attractiveness of an underperforming business is determined partly by geography and manufacturer brand but focuses on the opportunity to fundamentally improve the operational performance of the dealership. Such improvements are delivered by our highly experienced management in combination with the implementation of our common operational approach. The Board has recruited an exceptional management team who have the skills and experience to deliver the required improvements on both a national and local level. Retaining and growing this management team is fundamental to our strategy going forward. In the year to 31 August 2010 the Group made 3 separate acquisitions adding 10 dealerships generating £31.8 million in revenues during the year and £61 million on an annualised basis. The speed of operational transformation varies from business to business but we are conﬁ dent these dealerships will contribute positively to the Group in the next ﬁ nancial year and help drive the ﬁ nancial performance of the Group in the future. The Board has always been mindful of the need to manage Cambria’s ﬁ nances prudently. We have refrained from paying excessive goodwill on the acquisitions we have made and total equity raised and invested to date amounts to only £10.8 million. The Group has a strong balance sheet which is underpinned by the ownership of freehold properties at a number of the dealerships we operate, together with an overall prudent level of debt. We have over the last two very challenging years maintained a high degree of liquidity both through our banking facilities with Lloyds Banking Group and our stock ﬁ nance facilities. This liquidity has enabled us to take advantage of acquisition opportunities as they have arisen, as well as make operational decisions to maximise proﬁ tability. This dynamic management approach is a key element to ensuring the returns we have been able to achieve. In 2010 Cambria achieved a key milestone when its shares were admitted to trading on AIM in April. The decision was taken by the Board to secure admission to AIM in order to raise the public proﬁ le of the Company, facilitate access to development capital in the future (should the need arise) and to attract over time a wider shareholder base. We did not raise new funds at the time of the admission as the Board believes it has suﬃ cient capital to continue to expand the Group for the foreseeable future in a manner which enhances shareholder value. Clearly our AIM quotation gives us the option of raising share capital to ﬁ nance further acquisitions but the Board will seek only to do this if it believes such opportunities are in the best interest of shareholders, and where the transaction transforms the scale of the business. We recognise the challenges of having a relatively limited free ﬂ oat and the impact of the 2 year lock in period for many existing shareholders. The Board is working on broadening the institutional shareholder base and attracting shareholders who will support the Group in its future development. However, the primary goal of the Board is to deliver strong future ﬁ nancial performance based on our business model. We believe this will deliver the best shareholder returns. The UK new car market increased by 18% in the year compared to the previous year. However, the outlook for the next 12 months in the UK is at best uncertain. The general concern that the UK economy may suﬀ er a double dip recession over the coming 12 months as Government spending cuts take eﬀ ect, has created a very challenging background for the UK dealership sector. The speciﬁ c sector challenges such as the expiry of the scrappage scheme, the introduction of a new show room car tax and the impending second increase in VAT in 12 months will challenge all operators in the UK. The British consumer is also faced with higher general inﬂ ation in addition to these eﬀ ective price increases on new cars. The Board is cognisant of the impact these factors will have and as part of the 2010/2011 budget process implemented a cost review programme to ensure the Group is appropriately shaped to continue to grow proﬁ ts. We anticipate more diﬃ cult trading conditions but believe we are well prepared for this environment. Most importantly the Board believes our business model will enable us to continue to be successful notwithstanding these operating challenges. The real opportunity for Cambria in such market conditions will be a growing number of attractive acquisition opportunities which will arise as other operators struggle with these challenges. The Board is already in discussion with a number of parties which may generate appropriate add-on acquisitions and believes that the continuing economic diﬃ culties may help accelerate the growth of Cambria. The Board recognises the importance of our diﬀ erent stakeholders beyond the Group’s shareholders. Our lending bank Lloyds Banking Group and our other credit institutions have continued to support the Group and in particular have been responsive to our continued acquisition programme recognising our strategy of prudent ﬁ nancial management. This continued strong support will be important in capitalising on future opportunities. 4 Chairman’s Statement (continued) Our relationship with the manufacturers that we represent is a core pillar of our business approach. The management team is committed to developing and maintaining a strong working relationship where Cambria is seen as an eﬀ ective and valued business partner. We were pleased to add Mazda, Honda and Triumph as brand partners in the ﬁ nancial year and are currently in discussion with a number of other manufactures with a view to representing them in the future. Finally the Board would like to thank the Cambria associates for their energy and commitment to the Group over the last 12 months. Acquiring and integrating businesses generates signiﬁ cant challenges and our associates regularly make exceptional commitments to achieve success for the Group. In the last year we welcomed 188 additional personnel and we extend a warm welcome to these new Cambria associates. An important goal of the Board is to create a challenging and enjoyable environment where our associates have the opportunity to develop rewarding careers. We are conﬁ dent our new associates will embrace this diﬀ erentiated approach within the auto dealership sector and together with our existing team help us deliver the Cambria strategy in the future. Warren Scott Non-executive Chairman 6 Operating and Financial Review Chief Executive’s Review “ 2010 has been an important year for Cambria with our admission to trading on the London Stock Exchange AIM in April. It is the third year in succession that we have doubled underlying pre-tax proﬁ ts and produced a record underlying 22% return on shareholders’ funds. We have continued to deliver on our original “buy and build strategy” with the addition of another ten franchised outlets from seven diﬀ erent locations. Cambria has continued to demonstrate its ability to purchase and transform underperforming dealerships so as to generate returns for shareholders. Cambria has an extremely strong balance sheet containing minimal intangible assets, a strong freehold/long leasehold portfolio and good liquidity. In what have been without doubt very challenging economic times, Cambria has demonstrated that it continues to drive excellent growth whilst at the same time integrating new businesses into the Group. Current trading is resilient and in line with the Board’s expectations. The Board believes that the uncertain economic climate will continue to provide acquisition opportunities from which Cambria will beneﬁ t and the Board believes Cambria has suﬃ cient available cash resource to take advantage of these opportunities ”. Operating and Financial Review Cambria Automobiles plc announces its maiden results as a public company for the ﬁ nancial year ending 31st August 2010. Cambria is a franchised motor retail group that was formed in 2006 and through a buy and build strategy encompassing 7 corporate acquisitions to date, has grown to represent 13 diﬀ erent brands from 25 locations with 37 new car and motorcycle franchises. The Group focuses on acquiring and improving under-performing businesses where it believes the best shareholder returns can be achieved. Revenue Underlying EBITDA* Underlying operating proﬁ t* Underlying proﬁ t before tax* Underlying net proﬁ t margin* EBITDA Operating proﬁ t Proﬁ t before tax Non-recurring listing and transaction costs Net Assets Net proﬁ t margin Underlying earnings per share* Earnings per share * these items are excluding the non-recurring listing and transaction costs of £1.54m 12 months ended 31-Aug 2010 £m 12 months ended 31-Aug 2009 £m 392.1 6.1 4.7 4.2 255.5 4.6 3.4 2.0 1.06% 0.80% 4.5 3.2 2.6 1.54 16.0 0.66% 3.06p 1.95p 4.6 3.4 2.0 0 14.1 0.80% 1.61p 1.61p 8 Operating and Financial Review (continued) I am pleased to announce that for the third year in succession we have doubled our underlying pre tax proﬁ ts (before non-recurring listing and transaction costs). 2010 has produced an underlying pre tax proﬁ t of £4.2m against a previous year of £2m. These results have been achieved in a period of signiﬁ cant economic uncertainty. The business has shown signiﬁ cant growth in turnover in all departments from continuing operations. The acquisitions have also added incremental turnover during the course of the year. Financial Highlights • Third successive year that the Group has doubled underlying proﬁ t before tax achieving £4.2m compared with the previous year’s £2.04m • Total revenue for the 12 months increased by 53% year on year (like-for-like revenue increase of 41%) to £392.1m from £255.5m in 2009 • Gross proﬁ t increased 29% year on year, underlying EBITDA increased to £6.1m from £4.6m • Underlying earnings per share increased to 3.06p from 1.61p • Group net assets at £16.0m under-pinned by £22.5m of freehold and long lease-hold property • Robust balance sheet position with only £0.3m of goodwill • Net debt reduced to £4.4m from £5.7m in previous year • Net cash inﬂ ow of £3.5m after £5.1m of acquisition spend, £1.4m of capital expenditure and £1.5m of non-recurring listing and transaction costs • Underlying return on shareholders’ funds of 21.7% Operational Highlights • New Car Unit Volumes increased 58% year on year against a market increase of 18% year on year. 37% new car volume increase on a like-for-like basis • Used Car Volumes increased 34% year on year and 19% on a like-for-like basis • Service Hours increased 18% year on year and 4% on a like-for-like basis • Acquisition of 7 new locations and 10 new franchised outlets • Addition of Honda, Mazda and Triumph Motorcycles to the Group’s brand partnerships • Continued robust approach to the management of the Group’s working capital and cash generation Operating Review Group Strategy Since our incorporation in March 2006, we have continued to apply our focused “buy and build” strategy acquiring under-performing motor dealership assets. Following any acquisition, the Cambria management team implement new ﬁ nancial controls, operational controls and processes in order to rationalise, restructure and develop each individual dealership. This tailored approach ensures the changes made to each dealership are sustainable and create shareholder value through achieving an appropriate contribution for the level of investment. We have completed 7 separate transactions since our incorporation, 3 of which were in the period under review. The 3 corporate acquisitions in the period have added 4 Mazda, 2 Honda, 3 Triumph motorcycle and 1 Fiat dealerships to the Cambria portfolio, the new dealerships operate from 7 diﬀ erent geographical locations. Pursuant to one of these acquisitions, Cambria acquired 2 further freehold properties resulting in Cambria now owning 11 freehold or long leasehold properties out of our total of 25 locations. We have a 3 step approach to purchasing a new business – acquisition, integration, operation. Acquisition When acquiring new businesses we are diligent in ensuring that none of the contractual obligations that are taken on pursuant to the acquisition upset the integrity of our balance sheet, this includes ensuring that leases reﬂ ect market value and that any unusual contractual obligations are addressed prior to acquisition. Our Group balance sheet shows that on consolidation we have only £0.3m of goodwill which has been generated across the 7 acquisitions. None of our lease arrangements have any ﬁ xed compound rent reviews, and we do not have any deﬁ ned beneﬁ t pension schemes. Integration The integration process starts with an Associate engagement evening where our senior management present the Cambria “Four Pillar” culture change programme. After this meeting, the Group integration team implement systems, processes and procedures to improve legislator compliance i.e. FSA, Health & Safety etc. Newly acquired Associates are transferred to Cambria employment contracts with the compensation and beneﬁ ts commensurate of the particular business. A training needs analysis is conducted followed by the implementation of training programmes for all relevant Associates in the new business. 9 Operating and Financial Review (continued) Operation With any new acquisition, the standard ﬁ nancial controls are implemented immediately ranging from branch bank accounts to daily reporting of vehicle sales and aftersales revenues, margins and other performance ﬁ gures. We then implement our two growth strategies which are (1) “Cambria Digital”, which is our internet social networking strategy for vehicle sales, and (2) in aftersales we implement the “Duty of Care Gearbox” which is designed to supply our guests with a one stop solution for all their vehicle maintenance needs. We believe our 3 step approach gives us a signiﬁ cant advantage particularly in diﬃ cult economic times. Brand Partnerships In line with our “buy and build” strategy, we have exercised 3 corporate acquisitions adding 7 locations and 10 franchises during the reporting period. Our Invicta business in Kent has seen the addition of a Honda and Mazda dual franchise site in Maidstone and likewise a Honda and Mazda dual franchise site in Tunbridge Wells. We have also added the iconic Triumph motorcycle brand and in doing so have become the single biggest Triumph motorcycle dealer in the world. Pure Triumph Birmingham is the single biggest Triumph motorcycle dealership in the world. Triumph ﬁ ts extremely well with our Grange British prestige and high luxury businesses. A signiﬁ cant number of our Aston Martin, Jaguar and Lotus guests are also motorcycle enthusiasts. As part of the same transaction that added the Pure Triumph businesses, we also added Northampton Motors Mazda which establishes representation in the Midlands for the Cambria Group. Bolton Motor Park was a perfect strategic ﬁ t for our North West businesses adding the dual franchised Fiat and Mazda dealership on Manchester Road in Bolton. Cambria has enjoyed the beneﬁ ts of a strategically balanced brand portfolio with a strong mix of prestige/high luxury and volume businesses. Prestige Continuing Businesses Aston Martin Jaguar Lotus Volvo Acquisitions in Year Honda Volume Citroen Fiat Ford Nissan Renault Seat 3 5 1 5 14 2 Mazda Fiat 16 Motorcycle Triumph 1 4 5 1 1 1 13 4 1 18 0 3 3 Cambria’s balanced brand portfolio has seen us beneﬁ t from the rebound of the prestige/high luxury market. The government’s scrappage scheme has ﬁ nished and this has certainly had an impact on volume operations in both vehicle volumes and retained margins with a reduction in potential target related bonuses. 10 Blackburn Preston Bolton Bury Oldham Warrington Birmingham Wellingborough Northampton Woburn Swindon Exeter Automobiles plc Locations across the UK Welwyn Garden City Brentwood Wimbledon Croydon Thanet Tunbridge Wells Canterbury Ashford Maidstone Gatwick Horsham 11 Operating and Financial Review (continued) When making acquisitions, the Board understands that the integration and maturing of the dealerships takes time and management investment. Where we acquire businesses from distressed sales, the integration process typically takes longer. We continue to promote the philosophy of stand alone autonomous business units where a local management team are empowered via our “four pillar strategy” to run a local business unit. Cambria dealerships do not trade under the “Cambria” name but prefer to focus on local branding. Cambria’s dealerships trade as “Grange”, “Doves”, “Dees”, “Invicta Motors”, “Pure Triumph” or “Motorparks” depending on the franchise and the name in the local area. When acquiring a business, the Board consider the geographical location of the franchise and then chooses to either adopt a new trading style or retain the existing business name. New Car Sales The new car market in the period increased by 18% assisted signiﬁ cantly by the government’s scrappage scheme. Our new car volumes for the period were 9,163 units against a previous year of 5,805 units, an increase of 58% year on year. On a like-for-like basis, 7,972 against a previous year of 5,805, an increase of 37% year on year. Gross margins for new cars reduced from 7.7% to 6.9% following prices increases on new vehicles enforced by the respective brands following currency ﬂ uctuations and dilution of margins on vehicles sold under the scrappage scheme. Used Car Sales 2010 saw Cambria grow used car volumes to 14,034 units against a previous year of 10,465 an increase of 34%. On a like-for-like basis, 12,466 against a previous year of 10,465, an increase of 19%. Gross margins on used cars reduced from 9.4% to 8.1%, reﬂ ecting a return to a more normal used car market. Our used car strategy continues to be a core part of Cambria’s activity and with the continued success of the Cambria Digital strategy we believe this is an area where Cambria can continue to improve performance. We continue to pay particular attention to stock proﬁ le, price alignment and brand oﬀ erings in all our retail outlets. We have a small central buying team and continue to work with our re-marketing partner and local management to increase their knowledge and understanding of local market conditions. We continue to demonstrate that local management should purchase stock proﬁ led by price and model for their local market. Aftersales Notwithstanding the decrease in the one to three year car parc, we saw our aftersales revenue increase by 23%, and on a like-for-like basis by 10%. Gross margins in the period showed a minor reduction from 43.2% to 42.3% in the current year. The Aftersales departments contributed £21.8m of gross proﬁ t which represents 45.3% of total gross proﬁ t for the year. We continue with our “Duty of Care Gearbox” that is intended to provide all guests with a one stop maintenance solution for their vehicle. Outlook The Board is pleased to report that September trading has been strong, with proﬁ ts ahead of the Board’s business plan and ahead of the previous year’s trading. The Group is well placed to take advantage of opportunities aﬀ orded in these diﬃ cult economic times. In the last 12 months, we have acquired 10 new franchises operating from 7 diﬀ erent geographical locations, admitted the business to the AIM market whilst at the same time reducing our net debt position. The Group continues to be cash generative and the costs of admission are non-recurring, accordingly the Board anticipate an even stronger ﬁ nancial position will be attained next year. 12 Operating and Financial Review (continued) Outlook (continued) As set out in the Strategy section of the Company’s admission document, we are in discussions with a number of vendors which have the potential to lead to a positive outcome. We hope to be able to make announcements in due course. We have continued to invest in our premises, and a full redevelopment of our Maidstone Honda and Mazda dealerships began in October. Whilst these economic times remain uncertain and UK consumer conﬁ dence remains fragile, the Board is pleased with the start to the current ﬁ nancial year. There are still opportunities to improve performance in our existing and newly acquired businesses. The Guest Connect Programme encompassing Cambria Digital and Service & MOT Reminder, Electronic Vehicle Health Check and Service Plans launched this year, and we believe it has the potential to be an industry leading GRM process (Guest Relationship Management). We continue to strive to provide world class service within our individual business units and continue the progress made in improving customer satisfaction scores. In summary, we have started the ﬁ nancial year well and we are in a strong position to take advantage of what is still a very fragmented franchised dealer market. New Car Used Car Aftersales Internal sales Total Operating expenses Operating proﬁ t before ﬂ otation and transaction expenses Flotation and transaction expenses Operating proﬁ t 2010 Revenue 2010 Revenue mix £m 158.6 190.4 51.5 (8.4) 392.1 % 40.4 48.6 13.1 (2.1) 2010 Gross Proﬁ t £m 10.9 15.4 21.8 48.1 (43.4 ) 4.7 (1.5) 3.2 2010 Margin 2009 Revenue 2009 Revenue mix % 6.9 8.1 42.3 12.3 £m 98.5 121.2 41.9 (6.1) 255.5 % 38.6 47.5 16.4 (2.4) 2009 Margin % 7.7 9.4 43.2 14.5 2009 Gross Proﬁ t £m 7.6 11.4 18.1 37.1 (33.7) 3.4 - 3.4 2009 total Year on year growth Like-for-like growth 2010 Existing businesses 2010 Acquisitions in year 7,972 (1,629) 6,343 1,191 (37) 1,154 2010 total 9,163 (1,666) 7,497 New units Scrappage units New units excluding Scrappage 5,805 (486) 5,319 Used units 12,466 1,568 14,034 10,465 Service hours 241,119 32,226 273,345 230,938 58% 37% 41% 19% 34% 18% 19% 4% 13 Operating and Financial Review (continued) Finance Director’s Report Overview Total revenues in the period increased 53% to £392.1m from £255.5m in the prior year. The new acquisitions accounted for £31.8m of the increased revenue. The Group achieved an organic increase in revenue of 41% which was shared across all areas of the business. Gross proﬁ t increased by £11m (29.4%) from £37.1m to £48.1m in the year reﬂ ecting a signiﬁ cant increase in revenue from each of the departments. Gross proﬁ t margin across the Group declined from 14.5% to 12.3% reﬂ ecting the change in revenue mix with the increase in new car sales at lower margins. The aftersales operations contributed 45% of the total gross proﬁ t for the Group compared to 48% in the previous period, again reﬂ ecting the signiﬁ cant increases in Gross proﬁ t contribution from the new and used car departments. In April 2010 the Company was admitted to AIM, the one oﬀ expenses associated with that listing were £1.47m, and the transaction costs associated to the acquisition of new businesses were £0.07m resulting in a total of £1.54m of non recurring costs. The underlying EBITDA in the period rose to £6.1m from £4.6m in the previous year. Underlying operating proﬁ t was £4.7m compared to £3.4m in the previous year, resulting in an operating margin of 1.2% (2009: 1.3%). Following the conversion to IFRS there are no amortisation charges relating to goodwill in the year or prior year. Underlying operating expenses rose in line with the increased Gross Proﬁ t, increasing 29% to £43.3m from £33.8m. Net ﬁ nance expenses reduced to £0.6m from £1.3m in the previous year for two main reasons: ﬁ rstly, mortgage interest reduced to £0.3m in comparison with £0.5m in the previous year as a consequence of the fall in Bank base rate and LIBOR; secondly (due to a much stronger new vehicle market in the year) there was a reduction in net consignment stock charges and credits of £0.5m. The Group’s underlying proﬁ t before tax was £4.2m in comparison with £2.0m in the previous year. Continuing operations contributed £4.4m of underlying proﬁ t before tax compared with £2.0m in the previous year. The Group’s acquisitions made a loss before tax of £0.3m which was in line with the Board’s expectation at the time of acquisition. The underlying earnings per share were 3.06p (2009: 1.61p). Taxation The Group tax charge was £0.66m in the period (2009: £0.4m) representing an eﬀ ective rate of tax of 25% on the proﬁ t before tax of £2.6m. The reduced tax rate was aided by the utilisation of some brought forward tax losses and the reversal of an over accrual in the prior year. Financial Position The Group has a robust balance sheet with a net asset position of £16.0m under-pinned by £22.5m of freehold and long leasehold property. Reﬂ ecting our prudent approach to ﬁ nancial management the Group has only £0.3m of goodwill within the balance sheet. Secured against the freehold and long leasehold property are mortgages amounting to £13.7m, each of the loans have diﬀ erent repayment proﬁ les between 7 and 10 years, and bear interest at between base plus 1.25% and for those loans taken out more recently, LIBOR plus 3%. During the ﬁ nancial year the Group comfortably met the bank covenants attaching to these borrowings. The net debt of the Group as at 31 August 2010 was £4.4m (2009: £5.7m), reﬂ ecting the Group’s cash position of £9.3m (2009: £5.8m). The Group’s gearing at 31 August 2010 was 27.5%, reduced from 40% in 2009. The Group uses term loan facilities to fund the purchase of freehold and long leasehold properties, it utilises stocking loans to fund the acquisition of consignment, demonstrator and used vehicles and has a £7.75m overdraft facility which is used to manage seasonal ﬂ uctuations in working capital. The overdraft facilities are renewable annually and are next due in February 2011. 14 Operating and Financial Review (continued) Cashﬂ ow and Capital Expenditure The Group generated an operating cash inﬂ ow of £8.1m after paying the £1.544m of ﬂ otation expenses and transaction fees. The Group reduced working capital by £3.8m in the year due mainly to stock funding eﬃ ciencies. The Group invested £5.1m in acquisitions and related property and £1.4m in capital expenditure. Other capital expenditure included a signiﬁ cant refurbishment of our Preston dealership which represents Fiat Volvo and Lotus, minor corporate identity refurbishments at some of our other dealerships and further investment in our IT infrastructure. To ﬁ nance the purchase of the Maidstone and Tunbridge Wells freehold premises which cost £3.7m, the Group raised a term loan of £2.7m at LIBOR plus 3%. During the year capital repayments of £0.4m were made against the total term loans outstanding. The capital repayments due in the ﬁ nancial year to 31 August 2011 are £1.0m. As a result of the net cash increase of £3.5m to £9.3m and gross debt increasing by £2.3m to £13.7m, overall net debt reduced from £5.7m to £4.4m. Shareholders’ Funds Prior to admission to AIM, and in order to standardise the share capital of the Company, the share capital and share premium accounts were restructured to convert the historic A,B,C,D and E shares (with diﬀ erent nominal values) and the share premium account into a single class of ordinary share with a nominal value of 10p each. There are now 100,000,000 ordinary shares of 10p each in issue with a resulting share premium of £0.8m. There were no new funds raised at admission to AIM therefore the share capital and share premium account remain at £10.8m consistent with prior year. All ordinary shares rank pari passu for both voting and dividend rights. Pension Schemes The Group does not operate any deﬁ ned beneﬁ t pension schemes, and has no liability arising from a scheme. The Group made contributions amounting to £0.2m to deﬁ ned contributions schemes for certain employees. Financial Instruments The Group does not have any contractual obligation under any ﬁ nancial instruments for the management of interest rate risk. Dividends In its admission document the Company stated that it did not intend to pay a dividend in respect of the year ended 31 August 2010. Should the strong performance of the business experienced in the last year, be repeated in the coming year the Board would consider a ﬁ rst dividend in respect of the ﬁ nancial year ending 31st August 2011. 15 Directors’ report The directors present their directors’ report and ﬁ nancial statements for the year ended 31 August 2010. Principal activities Cambria’s principal activities are the sale and servicing of motor vehicles and the provision of ancilliary services. The Group operates from 25 sites with a total of 37 dealer franchises. Enhanced Business Review All details required are covered in the Chairman’s Statement and the Operating and Financial Review between pages 4 and 15. Cambria Business Philosophy Cambria’s culture – The Four Pillars The Group works hard to instil a group culture. This culture is built around four pillars which are: Pillar One - associate delight The Directors believe that associates are the Company’s most important asset and therefore members of the team are not referred to as members of staﬀ or employees, but rather as “associates”. The Directors want all associates to be proud to be associated with the Group and to be given the autonomy to make decisions that eﬀ ect the running of “their” business. The Directors promote internal development and foster a culture whereby associates feel they can achieve their career aspirations with Cambria. Equally, Cambria invests in it’s associates in order for them to achieve their full potential within the Group. Pillar Two - guest delight Cambria associates are encouraged to treat all customers at all times, in the way that they would treat a guest visiting their own home. The Directors believe that associate empowerment is key to achieving this goal and the Directors believe that the organisation must be transparent and open at all times generating empathy with the diverse guest base of the Group. Pillar Three - brand delight The Group’s goal is to become the retailer of choice for all of the automotive manufacturers that it represents. This pillar focuses on achieving the following goals: • brand vehicle sales objectives • brand part sales objectives • top half placing in brand customer satisfaction surveys • the development of a trusting relationship with brand personnel from the manufacturer partners Pillar Four - stakeholder delight The Group’s aims to provide satisfaction to its Stakeholders. It seeks to achieve this through: • disclosing timely and accurate information providing Stakeholders with a detailed understanding of business performance; and • communicating openly and transparently. Primary Risks The primary risk to the Group is the continuing decline in the UK economy and volatility in the new and used car markets and the changes made by our manufacturer brand partners to the pricing and margin structure on the new vehicles that we sell. Through implementing tight controls and building a strong operational Group infrastructure, the Directors believe they are taking all possible steps to protect the business. The Group also has exposure to movements in interest rate due to the variable nature of the term loans. 16 Directors’ report (continued) Proposed dividend The directors do not recommend the payment of a dividend for 2010 (2009: £nil) Directors The directors who held oﬃ ce during the year were as follows: W Scott M J J Lavery R P Smith M W Burt J A Mullins Sir P A Burt All directors beneﬁ ted from qualifying third party indemnity provisions in place during the ﬁ nancial period. Associates The Group recognises the beneﬁ t of keeping associates informed of group aﬀ airs and the views of associates are given full consideration at regular meetings with their representatives. Full and fair consideration is given to the employment of disabled persons, who are treated no diﬀ erently from other associates as regards recruiting, training, career development and promotion opportunities. For people who may become disabled, in the course of employment, the group will make every eﬀ ort to accommodate them in suitable alternative employment. Political and charitable contributions Neither the Company nor any of its subsidiaries made any political or charitable donations or incurred any political expenditure during the year (2009: £10,000). Disclosure of information to auditors The directors who held oﬃ ce at the date of approval of this directors’ report conﬁ rm that, so far as they are each aware, there is no relevant audit information of which the Company’s auditors are unaware; and each director has taken all the steps that he ought to have taken as a director to make himself aware of any relevant audit information and to establish that the company’s auditors are aware of that information. Auditors In accordance with Section 489 of the Companies Act 2006, a resolution for the re-appointment of KPMG Audit Plc as auditors of the Company is to be proposed at the forthcoming Annual General Meeting. By order of the board J A Mullins Director Dorcan Way, Swindon, SN3 3RA 26 November 2010 17 Statement of directors’ responsibilities in respect of the Directors’ Report and the ﬁ nancial statements The directors are responsible for preparing the Directors’ Report and the ﬁ nancial statements in accordance with applicable law and regulations. Company law requires the directors to prepare ﬁ nancial statements for each ﬁ nancial year. As required by the AIM rules of the London Stock Exchange they are required to prepare the group ﬁ nancial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the parent company ﬁ nancial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice). Under company law the directors must not approve the ﬁ nancial statements unless they give a true and fair view of the state of aﬀ airs of the group and parent company and of their proﬁ t or loss for that period. In preparing each of the group and parent company ﬁ nancial statements, the directors are required to: • select suitable accounting policies and then apply them consistently • make judgments and estimates that are reasonable and prudent • for the group ﬁ nancial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU • for the parent company ﬁ nancial statements state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the parent company ﬁ nancial statements • prepare the ﬁ nancial statements on the going concern basis unless it is inappropriate to presume that the group and parent company will continue in business The directors are responsible for keeping adequate accounting records that are suﬃ cient to show and explain the parent company’s transactions and disclose with reasonable accuracy at any time the ﬁ nancial position of the parent company and enable them to ensure that its ﬁ nancial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and ﬁ nancial information included on the company’s website. Legislation in the UK governing the preparation and dissemination of the ﬁ nancial statements may diﬀ er from legislation in other jurisdictions. 18 KPMG Audit plc Arlington Business Park Reading Berkshire RG7 4SD Independent auditors’ report to the members of Cambria Automobiles plc We have audited the ﬁ nancial statements of Cambria Automobiles plc for the year ended 31 August 2010 set out on pages 20 to 67. The ﬁ nancial reporting framework that has been applied in the preparation of the group ﬁ nancial statements is applicable law and International Financial Reporting Standards (IFRS) as adopted by the EU. The ﬁ nancial reporting framework that has been applied in the preparation of the parent company ﬁ nancial statements is applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice). This report is made solely to the 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 company’s members those matters we are required to state to them in an auditors’ 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 company and the company’s members, as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the Directors’ Responsibilities Statement set out on page 18, the directors are responsible for the preparation of the ﬁ nancial statements and for being satisﬁ ed that they give a true and fair view. Our responsibility is to audit the ﬁ nancial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors. Scope of the audit of the ﬁ nancial statements A description of the scope of an audit of ﬁ nancial statements is provided on the APB’s web-site at www.frc.org.uk/apb/scope/UKNP. Opinion on ﬁ nancial statements In our opinion: • the ﬁ nancial statements give a true and fair view of the state of the group’s and of the parent company’s aﬀ airs as at 31 August 2010 and of the groups’ proﬁ t for the year then ended; • the group ﬁ nancial statements have been properly prepared in accordance with IFRSs as adopted by the EU; • the parent company ﬁ nancial statements have been properly prepared in accordance with UK Generally Accepted Accounting Practice; • the ﬁ nancial statements have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Directors’ Report for the ﬁ nancial year for which the ﬁ nancial statements are prepared is consistent with the ﬁ nancial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following. Under the Companies Act 2006 we are required 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 ﬁ nancial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration speciﬁ ed by law are not made; or • we have not received all the information and explanations we require for our audit. Derek McAllan (Senior Statutory Auditor) 26 November 2010 for and on behalf of KPMG Audit plc, Statutory Auditor Chartered Accountants Arlington Business Park Reading Berkshire RG7 4SD 19 Consolidated Statement of comprehensive income for year ended 31 August 2010 Revenue Continuing operations Acquisitions Cost of sales Continuing operations Acquisitions Gross Proﬁ t Continuing Operations Acquisitions Other operating income Administrative expenses Continuing operations Acquisitions Results from operating activities Finance income Finance expenses Net ﬁ nance expenses Proﬁ t before tax from continuing operations before ﬂ otation and transaction costs Loss before tax – acquisitions Flotation expenses Transaction costs on business combinations Proﬁ t before tax Taxation Proﬁ t and total comprehensive income for the period Note 3 2010 £000 2009 Re-presented* £000 360,307 31,810 392,117 (316,792) (27,264) 255,466 - 255,466 (218,331) - (344,056) (218,331) 4 5 4 9 9 4 4 4 10 43,515 4,546 48,061 - (40,211) (4,667) 3,183 12 (588) (576) 4,417 (266) 4,151 (1,474) (70) 2,607 (657) 1,950 37,135 - 37,135 3 (33,767) - 3,371 41 (1,370) (1,329) 2,042 - 2,042 - - 2,042 (432) 1,610 1.61p Basic and diluted earnings per share 8 1.95p * see note 27 All comprehensive income is attributable to owners of the parent company 20 Consolidated Statement of changes in equity for year ended 31 August 2010 Share capital Share premium Retained earnings Total equity £000 £000 £000 £000 Balance at 31August 2008 Proﬁ t for the year Balance at 31 August 2009 Restructuring of share capital Proﬁ t for the year 318 - 318 9,682 - 10,481 - 10,481 (9,682) - Balance at 31 August 2010 10,000 799 1,676 1,610 3,286 - 1,950 5,236 12,475 1,610 14,085 - 1,950 16,035 21 Consolidated Statement of ﬁ nancial position at 31 August 2010 Non-current assets Property, plant and equipment Intangible assets Deferred tax asset Current assets Inventories Trade and other receivables Cash and cash equivalents Total assets Current liabilities Other interest-bearing loans and borrowings Trade and other payables Taxation Provisions Non-current liabilities Other interest-bearing loans and borrowings Provisions Other payables Total liabilities Net assets Equity attributable to equity holders of the parent Share capital Share premium Retained earnings Total equity * see note 27 Note 11 12 13 14 15 16 17 18 20 17 20 13 21 2010 £000 25,520 480 508 26,508 62,435 7,938 9,266 79,639 106,147 (1,024) (74,896) (519) (342) (76,781) (12,672) (151) (508) (13,331) (90,112) 16,035 10,000 799 5,236 16,035 2009 Re-presented* £000 21,466 478 645 22,589 43,523 7,200 5,777 56,500 79,089 (294) (52,239) - (452) (52,985) (11,138) (236) (645) (12,019) (65,004) 14,085 318 10,481 3,286 14,085 These ﬁ nancial statements were approved by the board of directors on 26 November 2010 and were signed on its behalf by: Mark Lavery Director Company registered number: 05754547 22 Consolidated Cash Flow Statement for year ended 31 August 2010 Note Cash ﬂ ows from operating activities Proﬁ t for the year Adjustments for: Depreciation, amortisation and impairment 11/12 Financial income Financial expense (Gain)/loss on sale of property, plant and equipment Taxation Transaction and ﬂ otation expenses 9 9 10 4 (Increase)/decrease in trade and other receivables (Increase)/decrease in inventories (Decrease)/increase in trade and other payables (Decrease)/increase in provisions Interest paid Tax received Transaction and ﬂ otation expenses Net cash from operating activities Cash ﬂ ows from investing activities Proceeds from sale of property, plant and equipment Interest received Acquisition of subsidiary Acquisition of property, plant and equipment Acquisition of other intangible assets Net cash from investing activities Cash ﬂ ows from ﬁ nancing activities Proceeds from new loan Interest paid Repayment of borrowings Net cash from ﬁ nancing activities Net increase in cash and cash equivalents Cash and cash equivalents at 1 September 2009 Cash and cash equivalents at 31 August 2010 4 2 16 16 2010 £000 1,950 1,338 (12) 588 1 657 1,544 6,066 (738) (17,609) 22,388 (195) 9,912 (233) - (1,544) 8,135 - 12 (5,082) (1,429) (57) (6,556) 2,655 (355) (390) 1,910 3,489 5,777 9,266 2009 £000 1,610 1,192 (41) 1,370 (3) 432 - 4,560 1,102 (1,657) 2,542 (910) 5,637 (821) 33 - 4,849 7 41 - (873) (133) (958) - (533) (24) (557) 3,334 2,443 5,777 23 Notes (forming part of the ﬁ nancial statements) 1 Accounting policies Cambria Automobiles plc is a company which quoted on the AIM market of the London Stock Exchange Plc and is incorporated and domiciled in the United Kingdom. The address of the registered oﬃ ce is Swindon Motor Park, Dorcan Way, Swindon, SN3 3RA. The registered number of the company is 05754547. These ﬁ nancial statements as at 31 August 2010 consolidate those of the Company and its subsidiaries (together referred to as the “Group”). The parent company ﬁ nancial statements present information about the Company as a separate entity and not about its group. The Group ﬁ nancial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU (“Adopted IFRS”). The Company has elected to prepare its parent company ﬁ nancial statements in accordance with UK GAAP; and these are presented on pages 56 to 67. The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in the ﬁ nancial statements. Judgements made by the directors in the application of these accounting policies that have signiﬁ cant eﬀ ect on the ﬁ nancial statements and estimates with a signiﬁ cant risk of material adjustment in the next year are discussed at the end of this note. The consolidated ﬁ nancial statements for the year ended 31 August 2009 were prepared under UK GAAP. In addition to those consolidated ﬁ nancial statements, an AIM admission document was issued that was prepared in accordance with Adopted IFRS for the period from the date of the AIM admission which was 1 April 2009 to 31 August 2009. As a result, this set of statutory ﬁ nancial statements is the Group’s second set of ﬁ nancial statements prepared in accordance with Adopted IFRS. However, since this is the ﬁ rst set of statutory ﬁ nancial statements published in accordance with Adopted IFRS an illustrative explanation of the diﬀ erences between UK GAAP and Adopted IFRS is set out in Note 27. Basis of preparation The ﬁ nancial statements are prepared under the historical cost convention. The directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis in preparing the annual ﬁ nancial statements. Further information regarding the company’s business activities together with the factors likely to aﬀ ect its future development, performance and position is set out in the Directors’ Report on page 16. Basis of consolidation The ﬁ nancial statements consolidate the ﬁ nancial statements of the Company together with its trading subsidiary companies. Subsidiaries Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the ﬁ nancial and operating policies of an entity so as to obtain beneﬁ ts from its activities. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account. The ﬁ nancial information of subsidiaries is included from the date that control commences until the date that control ceases. All business combinations are accounted for by applying the purchase method. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identiﬁ able assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at fair value at the acquisition date irrespective of the extent of any minority interest. Any contingent consideration payable is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration are recognised in proﬁ t or loss. The excess of the cost of an acquisition over the fair values of the Group’s share of identiﬁ able assets and liabilities acquired is recognised as goodwill. If the fair value of identiﬁ able assets and liabilities acquired (i.e. discount on acquisition) exceeds the cost of the business combination, the diﬀ erence is recognised directly in proﬁ t or loss. Inter-company transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated on consolidation. 24 Notes (continued) (forming part of the ﬁ nancial statements) Operating segments Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identiﬁ ed as the Chief Executive Oﬃ cer. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts and VAT. Sales of motor vehicles, parts and accessories are recognised when the signiﬁ cant risks and rewards of ownership have been transferred to the buyer. In general this occurs when vehicles or parts are delivered to the customer and title has passed. Servicing and bodyshop sales are recognised on completion of the agreed work. Deposits received from customers Deposits received from customers prior to the completion of a sale (delivery of vehicle) are included in the accounts as creditors falling due within one year. Expenses Financing income and expenses Financing expenses comprise interest payable, ﬁ nance charges on shares classiﬁ ed as liabilities, stocking interest charge on consignment and used vehicles and ﬁ nance leases. Financing income comprise interest receivable on funds invested and interest credits received from manufacturers on stock management. Borrowing costs are recognised in the period in which they are incurred. Interest income and interest payable is recognised in proﬁ t or loss as it accrues, using the eﬀ ective interest method. Operating proﬁ t Operating proﬁ t relates to proﬁ t before ﬁ nance income, ﬁ nance expense and income tax expense. 25 Notes (continued) (forming part of the ﬁ nancial statements) 1 Accounting policies (continued) Intangible assets Goodwill Goodwill represents the excess between the cost of an acquisition of a subsidiary compared to the net fair value of the identiﬁ able assets, liabilities and contingent liabilities, and recognition of identiﬁ able intangibles at the date of acquisition. Identiﬁ able intangibles are those which can be sold separately or which arise from legal rights regardless of whether those rights are separable. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units of the acquiree which represent the smallest identiﬁ able group of assets that generates cash inﬂ ows that are largely independent of the cash inﬂ ows from other assets or groups of assets. Goodwill is not amortised but is tested annually for impairment. Any impairment is recognised immediately in the statement of comprehensive income and is not subsequently reversed. Other intangible assets Expenditure on internally generated goodwill and brands is recognised as an expense as incurred. Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and accumulated impairment losses. Amortisation Amortisation is charged on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indeﬁ nite. Intangible assets with an indeﬁ nite useful life and goodwill are systematically tested for impairment at each year. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows: Computer software 3 – 5 years Order book Customer list 6 months following date of acquisition 3 years following date of acquisition The fair value of customer lists on acquisition have been calculated using discounted cash ﬂ ows. The fair value of the order book on acquisition has been calculated based on post acquisition margins associated with deposits for future sales held at the date of acquisition. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Where parts of an item of property, plant and equipment have diﬀ erent useful lives, they are accounted for as separate items of property, plant and equipment. Depreciation is charged on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated. The estimated useful lives are as follows: • freehold buildings 50 years • leasehold properties over the lifetime of the lease • plant and machinery • ﬁ xtures and ﬁ ttings • computer equipment 5 to 10 years 5 to 10 years 3 to 5 years Depreciation methods, useful lives, residual values and possible impairments have been reviewed at the year end. As a result of this review, no impairment charge has been deemed necessary for the period. 26 Notes (continued) (forming part of the ﬁ nancial statements) Impairment excluding inventories and deferred tax assets The carrying amounts of the Group’s assets, are reviewed at each year end to determine whether there is any indication of impairment; an asset is considered to be impaired if objective evidence indicates that one or more events have had a negative eﬀ ect on the estimated future cash ﬂ ows of that asset. If any such indication exists, the asset’s recoverable amount is estimated. For goodwill, assets that have an indeﬁ nite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each year end. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in income. Impairment losses recognised in respect of cash-generating units are allocated ﬁ rst to reduce the carrying amount of any goodwill allocated to cash- generating units and then to reduce the carrying amount of the other assets in the unit on a pro rata basis. A cash generating unit is the smallest identiﬁ able group of assets that generates cash inﬂ ows that are largely independent of the cash inﬂ ows from other assets or groups of assets. The recoverable amount of other assets is the greater of their fair values less costs to sell and value in use. In assessing value in use, the estimated future cash ﬂ ows are discounted to their present value using a pre-tax discount rate that reﬂ ects current market assessments of the time value of money and the risks speciﬁ c to the asset. For an asset that does not generate largely independent cash inﬂ ows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Reversals of impairment An impairment loss in respect of trade and other receivables carried at amortised cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised. An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed when there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Inventories Inventories are stated at the lower of cost and net realisable value. In determining the cost of motor vehicles, the actual amount paid to date for each vehicle is used, for spare parts and service items cost is based on the ﬁ rst-in ﬁ rst-out principle. An appropriate provision is made for obsolete or slow moving items. New vehicles on consignment from manufacturers are included in the Statement of Financial Position with a corresponding liability in creditors due within one year. This stock is considered to be under the control of the Group as it is considered that the Group bears all the risks and rewards or ownership, even though legal title has not yet passed. Consignment stock is held for a maximum period (which varies between manufacturers) before becoming due for payment. Part of the consignment period is interest free and the remaining periods are interest bearing (periods and charges vary between manufacturers but interest is generally linked to LIBOR). Used motor vehicles are stated at the lower of cost or net realisable value, by reference to Glass’s Guide or CAP data. 27 Notes (continued) (forming part of the ﬁ nancial statements) 1 Accounting policies (continued) Financial Instruments Classiﬁ cation of ﬁ nancial instruments issued by the Group Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions: a) they include no contractual obligations upon the group to deliver cash or other ﬁ nancial assets or to exchange ﬁ nancial assets or ﬁ nancial liabilities with another party under conditions that are potentially unfavourable to the group; and b) where the instrument will or may be settled in the company’s own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the company’s own equity instruments or is a derivative that will be settled by the company’s exchanging a ﬁ xed amount of cash or other ﬁ nancial assets for a ﬁ xed number of its own equity instruments. To the extent that this deﬁ nition is not met, the proceeds of issue are classiﬁ ed as a ﬁ nancial liability. Where the instrument so classiﬁ ed takes the legal form of the company’s own shares, the amounts presented in the historical ﬁ nancial information for called up share capital and share premium account exclude amounts in relation to those shares. Non-derivative ﬁ nancial instruments Non-derivative ﬁ nancial instruments comprise, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables. Trade and other receivables Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the eﬀ ective interest method, less any impairment losses. Trade and other payables Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the eﬀ ective interest method. Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose only of the cash ﬂ ow statement. Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest- bearing borrowings are stated at amortised cost using the eﬀ ective interest method. 28 Notes (continued) (forming part of the ﬁ nancial statements) Taxation Tax on the proﬁ t or loss for the year comprises current and deferred tax. Tax is recognised except to the extent that it relates to items recognised in other comprehensive income, in which case it is recognised in other comprehensive income. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided on temporary diﬀ erences between the carrying amounts of assets and liabilities for ﬁ nancial reporting purposes and the amounts used for taxation purposes. The following temporary diﬀ erences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that aﬀ ect neither accounting nor taxable proﬁ t other than in a business combination, and diﬀ erences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable proﬁ ts will be available against which the temporary diﬀ erence can be utilised. Employee beneﬁ ts Deﬁ ned contribution plans A deﬁ ned contribution plan is a post-employment beneﬁ t plan under which the company pays ﬁ xed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to deﬁ ned contribution pension plans are recognised as an expense as incurred. Leasing Leases in which the Group assumes substantially all the risks and rewards of ownership of the leased asset are classiﬁ ed as ﬁ nance leases. Where land and buildings are held under leases the accounting treatment of the land is considered separately from that of the buildings. Leased assets acquired by way of ﬁ nance lease are stated at an amount equal to the lower of their fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and less accumulated impairment losses. Lease payments are accounted for as described below. Operating lease payments Payments made under operating leases are recognised in the statement of comprehensive income on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense. Finance lease payments Minimum lease payments are apportioned between the ﬁ nance charge and the reduction of the outstanding liability. The ﬁ nance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Provisions A provision is recognised in the Statement of Financial Position when the Group has a present legal or constructive obligation as a result of a past event, that can be reliably measured and it is probable that an outﬂ ow of economic beneﬁ ts will be required to settle the obligation. 29 Notes (continued) (forming part of the ﬁ nancial statements) 1 Accounting policies (continued) Adopted IFRS not yet applied The following Adopted IFRSs have been issued but have not been applied by the Group in these ﬁ nancial statements. Their adoption is not expected to have a material eﬀ ect on the ﬁ nancial statements unless otherwise indicated: • IFRS 8 amended clariﬁ es that segment information for total assets is only required if such information is regularly reported to the chief operating decision maker • IAS 17 has been amended to clarify that a lease of land with an indeﬁ nite economic life need not be classiﬁ ed as an operating lease Critical accounting judgements in applying the Group’s accounting policies Estimates and judgements 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 judgements in applying the Group’s accounting policies are described below: Goodwill impairment The carrying value of goodwill is tested annually for impairment by using cash ﬂ ow projections for each cash generating unit. Intangible assets On the acquisition of Grange Motors (Swindon) Limited in the period ended 31 August 2007, a third party valuation has been carried out on the intangible assets that are pertinent to the motor business. This included consideration of franchise rights, brand, and other intangible assets. The directors apply the principles of the external valuation of the intangibles on the Swindon acquisition to subsequent acquisitions and have concluded that intangibles arising on subsequent acquisitions are immaterial. Consignment inventories Consignment vehicles are regarded as being eﬀ ectively under the control of the Group and are included within inventories in the Statement of Financial Position as the Group has the signiﬁ cant risks and rewards of ownership even though legal title has not yet passed. The corresponding liability is included in trade and other payables. Deferred tax Deferred tax assets and liabilities require management judgement in determining the amounts to be recognised. In particular judgement is used when assessing the extent to which deferred tax assets should be recognised with consideration given to the timing and level of future taxable income. 30 Notes (continued) (forming part of the ﬁ nancial statements) 2 Acquisition of subsidiaries Eﬀ ect of acquisitions in 2009 There were no acquisitions in 2009. Eﬀ ect of acquisitions 2010 On 31 October 2009 the Group acquired the trade and assets of certain dealerships from the Administrators of Autohaus Limited for a cash consideration of £369,000. Transaction fees of £30,000 have been charged to operating expenses in the year. No goodwill arose on this transaction. In the 10 months to 31 August 2010 the businesses contributed a net loss of £161,000 to the consolidated net proﬁ t for the year. No further disclosures have been made in respect of this acquisition as the directors consider the amounts to be immaterial. On 4 January 2010 the Group began trading as a Fiat and Mazda dealer in Bolton following the acquisition of certain assets from the Administrator of Lythgoe Motors Limited for £22,500 on 23 December 2009. No goodwill arose on this transaction. In the 8 months to 31 August 2010 the business contributed a net loss of £170,000 to the consolidated net proﬁ t for the year. No further disclosures have been made in respect of this acquisition as the directors consider the amounts to be immaterial. On 25 February 2010, the Group acquired all of the ordinary shares in D & F Trading Limited (renamed Invicta Motors (Maidstone) Limited post acquisition) and two freehold properties from Drake and Fletcher Limited. The company was a motor dealership group based in Kent. In the 6 months to 31 August 2010 the subsidiary contributed net proﬁ t of £65,000 to the consolidated net proﬁ t for the year. If the acquisition had occurred on 1 September 2009, it would have contributed a further £17 million to Group revenue however we do not expect that it would have added further proﬁ tability to the Group. The reason for the acquisition was to expand the Group’s representation in the Kent area with Mazda and the addition of the Honda franchise to the Group. The acquisition had the following eﬀ ect on the Group’s assets and liabilities. Acquiree’s net assets at the acquisition date: Freehold property Plant and equipment Inventories Trade and other payables Net and identiﬁ able assets and liabilities Goodwill on acquisition Consideration paid (note that transaction costs of £39,500 have been written off to operating expenses), satisﬁ ed in cash Pre-acquisition carrying amount and Fair Value £000 3,738 150 1,303 (109) 5,082 - 5,082 32 Notes (continued) (forming part of the ﬁ nancial statements) 3 Revenue Sale of goods Aftersales services Total revenues 4 Segmental reporting 2010 £000 349,096 43,021 2009 £000 219,724 35,742 392,117 255,466 The Group has adopted IFRS 8 ‘Operating Segments’ which determines and presents operating segments based on information presented to the Group’s Chief Operating Decision Maker (“CODM”), the Chief Executive Oﬃ cer. The Group is operated and managed on a Dealership by Dealership basis. The CODM receives information both on a dealership basis and by revenue stream (New, Used, Aftersales). Given the number of dealerships, it was deemed most appropriate to present the information by revenue stream for the purposes of segmental analysis. 2010 Revenue 2010 Revenue mix % 40.4 48.6 13.1 (2.1) £m 158.6 190.4 51.5 (8.4) 392.1 2010 Gross Proﬁ t £m 10.9 15.4 21.8 2010 Margin 2009 Revenue 2009 Revenue mix % 6.9 8.1 42.3 £m 98.5 121.2 41.9 (6.1) % 38.6 47.5 16.4 (2.4) 2009 Gross Proﬁ t £m 7.6 11.4 18.1 2009 Margin % 7.7 9.4 43.2 48.1 12.3 255.5 37.1 14.5 (43.4) 4.7 (1.5) 3.2 (33.7) 3.4 - 3.4 New Car Used Car Aftersales Internal sales Total Operating expenses Operating proﬁ t before ﬂ otation and transaction expenses Flotation and transaction expenses Operating proﬁ t The Board reviews the performance of the business in terms of both net proﬁ t before tax and EBITDA, as such the Board has included a reconciliation of EBITDA to the Proﬁ t before tax. 33 Notes (continued) (forming part of the ﬁ nancial statements) 4 Segmental reporting (continued) Proﬁ t Before Tax Transaction and ﬂ otation costs Underlying Proﬁ t Before Tax Net ﬁ nance expense Depreciation Net loss/(gain) on disposal of property, plant and equipment EBITDA Transaction and ﬂ otation costs Underlying EBITDA 5 Other operating income Gain on disposal of property, plant and equipment 6 Expenses and auditors’ remuneration Included in proﬁ t/(loss) are the following: Impairment loss (reversed)/recognised on other trade receivables and prepayments Auditors’ remuneration: Audit of these ﬁ nancial statements Audit of ﬁ nancial statements of subsidiaries pursuant to legislation Other services relating to taxation All other services 34 2010 £000 2,607 1,544 4,151 576 1,338 1 4,522 1,544 6,066 2010 £000 - 2010 £000 (261) 2010 £000 20 90 25 30 2009 £000 2,042 - 2,042 1,329 1,192 (3) 4,560 - 4,560 2009 £000 3 2009 £000 205 2009 £000 10 78 24 - Notes (continued) (forming part of the ﬁ nancial statements) 7 Staff numbers and costs The average number of persons employed by the group (including directors) during the year, analysed by category, was as follows: Number of employees Sales Service Parts Administration The aggregate payroll costs of these persons were as follows: Wages and salaries Social security costs Expenses related to deﬁ ned contribution plans 2010 281 339 165 161 946 2010 £000 26,761 2,860 161 2009 217 311 98 132 758 2009 £000 19,598 2,087 161 29,782 21,846 8 Earnings per share Basic earnings per share is calculated by dividing the earnings attributable to equity shareholders by the number of ordinary shares in issue in the year. Prior to admission to AIM on 1 April 2010 the shareholder structure of the Group’s parent company was composed of ﬁ ve diﬀ erent share classes with varying rights attributing to them. The share structure was reorganised prior to admission to AIM resulting in the conversion of the various classes of share into one class of ordinary share with 100,000,000 shares in issue. The analysis of earnings per share has been prepared on the basis of the revised ordinary share structure, not on the basis of the shares at the balance sheet date. There are no dilutive share options in issue. Proﬁ t attributable to shareholders Expense of transaction and ﬂ otation costs Tax on adjustments (at 28%) Adjusted proﬁ t attributable to equity shareholders 2010 £000 1,950 1,544 (432) 3,062 2009 £000 1,610 - - 1,610 Adjusted number of shares in issue (£000) 100,000 100,000 Basic earnings per share Adjusted earnings per share 1.95p 3.06p 1.61p 1.61p 35 Notes (continued) (forming part of the ﬁ nancial statements) 9 Finance income and expense Recognised in proﬁ t or loss Finance income Rent deposit interest Interest receivable Total ﬁ nance income Finance expense Interest payable on bank borrowings Consignment and used stocking interest Total ﬁ nance expense Total interest expense on ﬁ nancial liabilities held at amortised cost Total other interest expense 10 Taxation Recognised in the income statement Current tax expense Current year Deferred tax Utilisation of tax losses paid to previous owner of subsidiary undertaking Adjustment in respect of prior years Total tax expense 36 2010 £000 - 12 12 355 233 588 355 233 588 2010 £000 519 519 215 (77) 138 657 2009 £000 2 39 41 549 821 1,370 549 821 1,370 2009 £000 - - 432 - 432 432 Notes (continued) (forming part of the ﬁ nancial statements) 10 Taxation (continued) Reconciliation of total tax Proﬁ t for the year Total tax expense Proﬁ t excluding taxation Tax using the UK corporation tax rate of 28% (2009:28%) Non-deductible expenses Tax exempt income Accounting deprecation for which no tax relief is due Utilisation of tax losses Tax payment due to previous owners of subsidiary in relation to utilisation of pre- acquisition losses Adjustment in respect of prior years Total tax expense 2010 £000 1,950 657 2,607 730 168 - 144 (523) 215 (77) 657 2009 £000 1,610 432 2,042 572 - (30) - (542) 432 - 432 37 Notes (continued) (forming part of the ﬁ nancial statements) 11 Property, plant and equipment Freehold land & buildings Long leasehold land & buildings Short leasehold land & buildings Plant & equipment Fixtures, ﬁ ttings & computer equipment Total £000 £000 £000 £000 £000 £000 Cost Balance at 1 September 2008 14,594 5,032 Additions Disposals Transfer 12 - - 26 - - 3,372 282 - - 8,041 92 (34) 596 461 (2) (5,274) 5,274 31,635 873 (36) - Balance at 1 September 2009 14,606 5,058 3,654 Additions Acquired through business combinations Disposals 580 3,738 - - - - 82 - - 2,825 169 150 (445) 6,329 32,472 622 - (837) 1,453 3,888 (1,282) Balance at 31 August 2010 18,924 5,058 3,736 2,699 6,114 36,531 Depreciation Balance at 1 September 2008 Charge for the year Disposals Transfer Balance at 1 September 2009 Depreciation charge for the year Disposals 647 189 - - 836 256 - 237 81 - - 318 83 - 2,362 168 - - 2,530 184 - 6,143 254 (32) 486 471 - (4,006) 4,006 2,359 280 (444) 4,963 481 (835) 9,875 1,163 (32) - 11,006 1,284 (1,279) Balance at 31 August 2010 1,092 401 2,714 2,195 4,609 11,011 Net book value At 31 August 2009 13,770 4,740 1,124 466 1,366 21,466 At 31 August 2010 17,832 4,657 1,022 504 1,505 25,520 Security The title of all freehold and long leasehold properties except for the property located at Bottom O’th Moor, Huddersﬁ eld Road, Oldham, OL1 3HQ and the property located at Port Way, Ashton on Ribble, Preston, Lancs, PR2 2YQ have been pledged as security to the bank loans disclosed in note 17. Property, plant and equipment under construction At 31 August 2010 there were no assets in the course of construction (2009: £nil). 38 Notes (continued) (forming part of the ﬁ nancial statements) 12 Intangible assets Cost Balance at 1 September 2008 Other acquisitions – externally purchased Balance at 1 September 2009 Other acquisitions – externally purchased Balance at 31 August 2010 Amortisation and impairment Balance at 1 September 2008 Amortisation Balance at 1 September 2009 Amortisation for the year Balance at 31 August 2010 At 31 August 2009 and 1 September 2009 At 31 August 2010 Goodwill £000 Software £000 Other £000 346 - 346 - 346 - - - - - 346 346 456 133 589 57 646 443 15 458 54 512 132 134 176 - 176 - 176 161 15 176 - 176 - - Total £000 978 133 1,111 57 1,168 604 30 634 54 688 478 480 The undertakings included in the consolidated Group accounts are as follows: * Owned directly by Cambria Automobiles Acquisitions Limited ** Owned directly by Cambria Automobiles Group Limited *** Owned directly by Cambria Automobiles (South East) Limited Country of incorporation Principal activity Class and percentage of shares held Subsidiary undertakings Cambria Automobiles Group Limited England and Wales Holding Company Cambria Automobiles Acquisitions Limited ** England and Wales Investment Company 100% Ordinary 100% Ordinary Cambria Automobiles Property Limited ** England and Wales Property Company 100% Ordinary Cambria Automobiles (Swindon) Limited * England and Wales Grange Motors (Swindon) Limited * Thoranmart Limited * Cambria Vehicle Services Limited* England and Wales England and Wales England and Wales Cambria Automobiles (South East) Limited* England and Wales Grange Motors (Brentwood) Limited*** Invicta Motors Limited*** Deeslease Limited Dove Group Limited Translease Vehicle Management Limited Invicta Motors (Maidstone) Limited* England and Wales England and Wales England and Wales England and Wales England and Wales England and Wales Motor retailer Motor retailer Motor retailer Motor retailer Motor retailer Motor retailer Motor retailer Dormant Dormant Dormant Motor retailer 100% Ordinary & Preference 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary & Preference 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary 39 Notes (continued) (forming part of the ﬁ nancial statements) 12 Intangible assets (continued) Amortisation charge The amortisation charge is recognised in the following line items in the income statement: Administrative expenses 2010 £000 54 2009 £000 29 Impairment loss and subsequent reversal Goodwill and indeﬁ nite life intangible assets considered signiﬁ cant in comparison to the Group’s total carrying amount of such assets have been allocated to cash generating units or groups of cash generating units as follows: Grange Motors (Swindon) Ltd Thoranmart Ltd Goodwill 2010 £000 261 85 346 2009 £000 261 85 346 The recoverable amount of each CGU has been calculated with reference to its value in use. The key assumptions of this calculation are a review of one year’s EBITDA. The value in use exceeds the above carrying values for each CGU, therefore no impairment is considered necessary. 40 Notes (continued) (forming part of the ﬁ nancial statements) 13 Deferred tax assets and liabilities Recognised deferred tax assets and liabilities The amount of temporary diﬀ erences, unused tax losses and tax credits for which no deferred tax asset is recognised is set out below. The asset would be recovered if oﬀ set against future taxable proﬁ ts of the group. The Group has an arrangement with the vendors of Cambria Automobiles (South East) Limited, which was acquired in the year ended 31 August 2008, under which an amount equal to any tax beneﬁ t received by the Group in relation to tax losses that existed at the date of acquisition must be paid to the vendors as additional consideration. At the date of acquisition, the utilisation of tax losses was not probable and therefore no deferred tax asset was recognised as part of the acquisition accounting, and the fair value of the liability for contingent consideration was immaterial. Subsequent to the acquisition, in the period to 31 August 2009, the utilisation of pre-acquisition losses became probable and, as a result, a deferred tax asset has been recognised. A liability for the contingent consideration payable to the vendors has been recognised at its fair value. Comparative amounts have been represented in accordance with IAS 1. Tax value of loss carry-forwards Tax assets Net of tax liabilities Recognised net tax assets Assets 2010 £000 508 508 - 508 2009 £000 645 645 - 645 Unrecognised deferred tax assets and liabilities In the current year, the deferred tax liability relating to plant, property and equipment and provisions has not been recognised as it is not material. In prior year, this was a deferred tax asset, however it was also unrecognised as it will reverse after the utilisation of losses which is anticipated to be beyond the Group’s future forecasts. Property, plant and equipment Provisions Tax value of loss carry-forwards Tax (liabilities)/assets Net of tax liabilities Unrecognised net tax (liabilities)/assets Assets 2010 £000 (407) 132 261 (14) - (14) 2009 £000 (450) 176 649 375 - 375 41 Notes (continued) (forming part of the ﬁ nancial statements) 14 Inventories Vehicle consignment stock Motor vehicles Parts and other stock 2010 £000 40,040 20,044 2,351 62,435 2009 £000 24,090 17,879 1,554 43,523 Included within inventories is £nil (2009: £nil) expected to be recovered in more than 12 months. Raw materials, consumables and changes in ﬁ nished goods and work in progress recognised as cost of sales in the year amounted to £341 million (2009: £215 million). 15 Trade and other receivables Trade receivables Prepayments and other debtors 2010 £000 5,443 2,495 7,938 Included within trade and other receivables is £nil (2009: £nil) expected to be recovered in more than 12 months. 16 Cash and cash equivalents/ bank overdrafts Cash and cash equivalents per balance sheet 2010 £000 9,266 2009 £000 5,428 1,772 7,200 2009 £000 5,777 Cash and cash equivalents per cash ﬂ ow statement 9,266 5,777 42 Notes (continued) (forming part of the ﬁ nancial statements) 17 Other interest-bearing loans and borrowings This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings, which are measured at amortised cost. For more information about the Group’s exposure to interest rate risk, see note 22. Non-current liabilities Secured bank loans Current liabilities Secured bank loans Terms and debt repayment schedule All debt is in GBP currency 2010 £000 2009 £000 12,672 11,138 1,024 294 Nominal interest rate Year of Maturity Face Value and Carrying Amount Face Value and Carrying Amount Loan 31/07/2006 Loan 01/08/2007 Loan 31/12/2007 Loan 01/03/2010 Base +1.25% Base +1.25% LIBOR +1.75% LIBOR +3.00% 2019 2020 2020 2017 Finance lease liabilities There were no ﬁ nance lease liabilities at 31 August 2009 or 2010. 2010 £000 2,530 725 7,866 2,575 2009 £000 2,841 725 7,866 - 13,696 11,432 43 Notes (continued) (forming part of the ﬁ nancial statements) 18 Trade and other payables Current Vehicle consignment creditor Other trade payables Non-trade payables and accrued expenses Vehicle funding 2010 £000 46,148 8,881 7,820 12,047 74,896 2009 £000 27,303 8,263 7,572 9,101 52,239 Included within trade and other payables is £ nil (2009: £nil) expected to be settled in more than 12 months. 19 Employee beneﬁ ts Pension plans Deﬁ ned contribution plans The Group operates a number of deﬁ ned contribution pension plans. The total expense relating to these plans in the current year was £161,000 (2009: £161,000). 20 Provisions Restructuring provision Balance at 1 September 2009 Provisions used during the year Balance at 31 August 2010 Current Non current Balance at 31 August 2009 Current Non current Balance at 31 August 2010 Onerous leases/ contracts Staff costs £000 £000 236 (44) 192 - 236 236 41 151 192 344 (43) 301 344 - 344 301 - 301 IT £000 108 (108) - 108 - 108 - - - Total £000 688 (195) 493 452 236 688 342 151 493 The onerous lease provision is being released against the costs incurred on the relevant lease. The provision will be fully released by 2015. All other provisions are expected to be utilised by 31 August 2011. 44 Notes (continued) (forming part of the ﬁ nancial statements) 21 Capital and reserves Share capital Authorised ‘A’ Ordinary shares of 10 pence each ‘B’ Ordinary shares of £1 each ‘C’ Ordinary shares of 1 pence each ‘D’ Ordinary shares of 1 pence each ‘E’ Ordinary shares of 1 pence each Ordinary shares of 10 pence each Allotted, called up and fully paid ‘A’ Ordinary shares of 10 pence each ‘B’ Ordinary shares of £1 each ‘C’ Ordinary shares of 1 pence each ‘D’ Ordinary shares of 1 pence each ‘E’ Ordinary shares of 1 pence each Ordinary shares of 10 pence each Shares classiﬁ ed in shareholders funds 2010 £000 - - - - - 10,000 10,000 - - - - - 10,000 10,000 10,000 10,000 2009 £000 17 166 135 - - - 318 17 166 135 - - - 318 318 318 Prior to the admission to AIM, on 26 March 2010, the A, B, C, D and E shares and the Share Premium attached to them were all converted into 100,000,000 Ordinary Shares of 10p each giving the Company an issued share capital of £10,000,000 and a share premium of £799,000. All of the shares rank pari passu, and no shareholder enjoys diﬀ erent or enhanced voting rights from any other shareholder. All shares are eligible for dividends and rank equally for dividend payments. 45 Notes (continued) (forming part of the ﬁ nancial statements) 22 Financial instruments 22 (a) Fair values of ﬁ nancial instruments Trade and other receivables The fair value of trade and other receivables, is estimated as the present value of future cash ﬂ ows, discounted at the market rate of interest at the balance sheet date if the eﬀ ect is material. Trade and other payables The fair value of trade and other payables is estimated as the present value of future cash ﬂ ows, discounted at the market rate of interest at the balance sheet date if the eﬀ ect is material. Cash and cash equivalents The fair value of cash and cash equivalents is estimated as its carrying amount where the cash is repayable on demand. Where it is not repayable on demand then the fair value is estimated at the present value of future cash ﬂ ows, discounted at the market rate of interest at the balance sheet date. Interest-bearing borrowings Fair value, which after initial recognition is determined for disclosure purposes only, is calculated based on the present value of future principal and interest cash ﬂ ows, discounted at the market rate of interest at the balance sheet date. The interest rates used to discount estimated cash ﬂ ows, where applicable are based on the weighted cost of capital and were as follows: Loans and borrowings Fair values 2010 % 2.2 2009 % 2.1 The fair values for each class of ﬁ nancial assets and ﬁ nancial liabilities together with their carrying amounts shown in the balance sheet are as follows: As at 31 August 2010 As at 31 August 2009 £000 £000 Financial assets Loans and receivables at amortised cost including cash and cash equivalents Trade receivables(net) (note 15) Other receivables (note 15) Cash and cash equivalents 5,443 2,495 9,266 5,428 1,772 5,777 Total Financial assets 17,204 12,977 Financial liabilities Financial liabilities at amortised cost Other interest-bearing loans and borrowings (note 17) Trade and other payables (note 18) Total ﬁ nancial liabilities 13,696 74,824 88,520 11,432 52,239 63,671 The Directors consider the carrying amount of the Group’s ﬁ nancial assets and ﬁ nancial liabilities, as detailed above, approximate their fair value. 46 Notes (continued) (forming part of the ﬁ nancial statements) 22 (b) Credit risk Credit risk management The Group is exposed to credit risk primarily in respect of its trade receivables and ﬁ nancial 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 risk coupled with the ﬁ ndings from external reference agencies. Credit risk arises in respect of amounts due from vehicle manufacturers in relation to bonuses and warranty receivables. This risk is mitigated by the number of manufacturers for which the group holds franchises, procedures to ensure timely collection of debts and management’s belief that it does not expect any manufacturer to fail to meet its obligations. The maximum exposure to credit risk is represented by the carrying amount of each ﬁ nancial asset in the statement of ﬁ nancial position. Exposure to credit risk The carrying amount of trade receivables represents the maximum credit exposure. Therefore, the maximum exposure to credit risk at the balance sheet date was £5,443,000 (2009: £5,428,000) being the total of the carrying amount of ﬁ nancial assets, excluding equity investments, shown in the table below. The maximum exposure to credit risk for trade receivables at the balance sheet date by geographic region was: United Kingdom 2010 £000 5,443 The maximum exposure to credit risk for trade receivables at the balance sheet date by type of counterparty was: Vehicle debtors Non vehicle debtors Manufacturer debtors 2010 £000 2,475 2,029 939 5,443 2009 £000 5,428 2009 £000 3,247 1,699 482 5,428 Credit quality of ﬁ nancial assets and impairment losses The ageing of trade receivables at the balance sheet date is given below. The Group’s policy is to provide for all debts which are past due. The directors consider the balance to be recoverable based on credit terms and post balance sheet receipts. Current 0-30 days 31-60 days 61-120 days More than 120 days Gross 2010 £000 4,751 663 141 23 5,578 Impairment 2010 £000 35 8 73 19 135 Gross 2009 £000 4,668 974 182 - 5,824 Impairment 2009 £000 21 193 182 - 396 47 Notes (continued) (forming part of the ﬁ nancial statements) 22 (b) Credit risk (continued) The movement in the allowance for impairment in respect of trade receivables during the year was as follows: Balance at 31 August 2009 Impairment loss reversed Balance at 31 August 2010 £000 396 (261) 135 The allowance account for trade receivables is used to record impairment losses unless the Group is satisﬁ ed that no recovery of the amount owing is possible; at that point the amounts considered irrecoverable are written oﬀ against the trade receivables directly. 22 (c) Liquidity risk Liquidity risk management Liquidity risk is the risk that the Group will not be able to meet its ﬁ nancial obligations as they fall due. Liquidity is managed by the Group’s central treasury function within policy guidelines set by the Board with primes areas of focus being liquidity and interest rate exposure. The group is ﬁ nanced primarily by bank loans, vehicle stocking credit lines and operating cash ﬂ ow. The directors have assessed the future funding requirements of the Group and compared them to the level of committed available borrowing facilities. These committed facilities are maintained at levels in excess of planned requirements and are in addition to short term uncommitted facilities that are also available to the Group. The assessment included a review of ﬁ nancial forecasts, ﬁ nancial instruments and cash ﬂ ow projections. These forecasts and projections show that the Group, taking account of reasonably possible scenarios, should be able to operate within the level of its borrowing facilities for the foreseeable future. The following are the contractual maturities of ﬁ nancial liabilities, including estimated interest payments and excluding the eﬀ ect of netting agreements: Interest is payable on loans of £3,255,000 (2009: £3,566,000) at bank base rate plus 1.25%, loans of £7,866,000 (2009: £7,866,000) at LIBOR plus 1.75% and on loans of £2,576,000 (2009: £nil) at LIBOR plus 3%. 2009 Carrying amount Contractual cash ﬂ ows 1 year or less 1 to <2 years 2 to <5 years 5 years and over £000 £000 £000 £000 £000 £000 Non-derivative ﬁ nancial liabilities Secured bank loans 11,432 12,831 590 1,105 3,814 7,322 2010 Carrying amount Contractual cash ﬂ ows 1 year or less 1 to <2 years 2 to <5 years 5 years and over £000 £000 £000 £000 £000 £000 Non-derivative ﬁ nancial liabilities Secured bank loans 13,696 15,267 1,384 1,619 2,902 9,362 48 Notes (continued) (forming part of the ﬁ nancial statements) 22 (d) Market risk Financial risk management Market risk is the risk that changes in market prices, such as interest rates will aﬀ ect the Group’s income or the value of its holdings of ﬁ nancial instruments Market risk - Foreign currency risk The Group does not have any exposure to foreign currency risk Market risk – Interest rate risk Proﬁ le At the balance sheet date the interest rate proﬁ le of the Group’s interest-bearing ﬁ nancial instruments was: Variable rate instruments Cash and cash equivalents Vehicle funding Loans and overdrafts 2010 £000 9,266 (12,047) (13,696) 2009 £000 5,777 (9,101) (11,432) (16,477) (14,756) The objectives of the Group’s interest rate policy are to minimise interest costs. The Group does not actively manage cash ﬂ ow interest risk as the directors believe that the retail sector in which the Group operates provides a natural hedge against interest rate movements. Consequently, it is Group policy to borrow on a ﬂ oating rate basis. Whilst there are no hedging instruments, the Board reviews its hedging policy on a regular basis. Sensitivity analysis A change of 0.5 basis points in interest rates at the balance sheet date would have decreased equity and proﬁ t or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant and considers the eﬀ ect of ﬁ nancial instruments with variable interest rates, ﬁ nancial instrument at fair value through proﬁ t or loss or available for sale with ﬁ xed interest rates and the ﬁ xed rate element of interest rate swaps. The analysis is performed on the same basis for comparative periods. Equity Decrease Proﬁ t or loss Decrease 2010 £000 130 130 2009 £000 93 93 49 Notes (continued) (forming part of the ﬁ nancial statements) 22 (e) Capital management Prior to each acquisition, the Board considers its funding options and the appropriate mix of secured debt and equity. The Group’s primary objective when managing capital is to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and beneﬁ ts to other stakeholders. The Group must ensure that suﬃ cient capital resources are available for working capital requirements and meeting principal and interest payment obligations as they fall due. Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio, which is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowings as shown in the statement of ﬁ nancial position) less cash and cash equivalents. Total capital is calculated as total shareholders’ equity. The gearing ratios for each year are as follows: Total borrowings Less: cash and cash equivalents Net debt Total equity Gearing ratio 23 Operating leases Non-cancellable operating lease rentals are payable as follows: Less than one year Between one and ﬁ ve years More than ﬁ ve years As of 31 August 2010 As of 31 August 2009 £000 13,696 (9,266) 4,430 16,107 £000 11,432 (5,777) 5,655 14,085 27.5% 40.1% 2010 £000 2,434 8,197 25,617 36,248 2009 £000 2,105 8,421 22,653 33,179 The Group leases a number of motor dealership sites under operating leases. Land and buildings have been considered separately for lease classiﬁ cation. During the year £2,394,000 was recognised as an expense in the income statement in respect of operating leases (2009: £2,178,000). 50 Notes (continued) (forming part of the ﬁ nancial statements) 24 Contingencies The Group is jointly and severally liable in respect of value added tax liabilities arising in other group undertakings. The related fellow subsidiary undertakings and the parent company were is a repayment situation at 31 August 2009 and 2010. In recognition of the Cambria Automobiles plc group bank and used vehicle funding facilities, the following companies have entered into a joint agreement to guarantee liabilities with banks and ﬁ nance houses of the motor manufacturers that provide new and used vehicles to the group: Cambria Automobiles plc, Cambria Automobiles Properties Limited, Cambria Automobiles Group Limited, Cambria Automobiles Acquisitions Limited, Cambria Automobiles (Swindon) Limited, Grange Motors (Swindon) Limited, Thoranmart Limited, Cambria Automobiles (South East) Limited, Grange Motors (Brentwood) Limited, Invicta Motors Limited, Invicta Motors (Maidstone) Limited and Cambria Vehicle Services Limited. Intra-group guarantees are accounted for as insurance contracts. 25 Related parties Identity of related parties with which the Group has transacted Key management personnel are considered to be the board of directors for the purposes of this disclosure. Transactions with key management personnel At the year end, the Directors of the Company and their immediate relatives controlled 49.1% per cent of the voting shares of the Company. The compensation of key management personnel is as follows: Directors’ emoluments Salaries Annual bonus Non-contractual bonuses The emoluments consist of: Directors’ emoluments James Mullins Rodney Smith Mark Lavery Warren Scott Sir Peter Burt Michael Burt Salaries 2010 £000 111 81 270 25 10 10 507 2010 £000 507 525 910 1,942 Total 2010 £000 319 288 1,290 25 10 10 Contractual Bonus Non-Contractual Bonus 2010 £000 125 125 660 - - - 2010 £000 83 82 360 - - - 525 910 1,942 2009 £000 417 255 - 672 Total 2009 £000 155 117 400 - - - 672 All directors beneﬁ ted from qualifying third party indemnity provisions during the ﬁ nancial period. During the year Mark Lavery and James Mullins each bought 4 vehicles from the Group and each sold 4 vehicles back to the Group. There were no outstanding balances due to the Group at the year end. 51 Notes (continued) (forming part of the ﬁ nancial statements) 25 Related parties (continued) Other related party transactions The Company is quoted on the AIM Market. Promethean own 33% of the company. During the year the company paid £44,000 (2009: £15,000) in management fees to Promethean prior to admission. 26 Ultimate parent company and parent company of larger group In the opinion of the directors, the distribution of the ordinary shares and the rights attributing themselves to them means that there is no overall controlling party of the company. 27 Illustrative explanation of differences between UK GAAP and Adopted IFRS As stated in note 1, these are the Group’s second consolidated ﬁ nancial statements prepared in accordance with Adopted IFRS. The Group has adjusted amounts reported previously in ﬁ nancial statements prepared in accordance with its old basis of accounting (UK GAAP). An illustration of the diﬀ erences between UK GAAP to Adopted IFRS in respect of the Group’s ﬁ nancial position, ﬁ nancial performance and cash ﬂ ows is set out in the following tables and the notes that accompany the tables. Note 13 explains the change in comparative information from that disclosed in the admission document. 52 Notes (continued) (forming part of the ﬁ nancial statements) 27 Illustrative explanation of differences between UK GAAP and Adopted IFRS (continued) 1 September 2008 31 August 2009 UK GAAP Effect of transition to Adopted IFRS Adopted IFRS UK GAAP Adopted IFRS Effect of transition to Adopted IFRS Note £000 £000 £000 £000 £000 £000 a c c c b b c Non-current assets Property, plant and equipment Goodwill Other intangibles Deferred tax asset Current assets Inventories Trade and other receivables Cash and cash equivalents Total assets Current liabilities Other interest-bearing loans and borrowings Trade and other payables Provisions Non-current liabilities Other interest-bearing loans and borrowings Provisions Other payables Total liabilities Net assets Equity attributable to equity holders of the parent Share capital Share premium Retained earnings Total equity 21,773 (53) - - (13) 21,760 21,598 (132) 21,466 399 28 - 346 28 - 221 - - 125 132 645 346 132 645 21,720 414 22,134 21,819 770 22,589 41,866 8,335 2,443 52,644 - - - - 41,866 43,523 - 43,523 8,335 2,443 7,845 5,777 (645) - 7,200 5,777 52,644 57,145 (645) 56,500 74,364 414 74,778 78,964 125 79,089 (26) (49,247) - - (26) (294) (49,247) (52,884) - (1,598) (1,598) - - 645 (452) (294) (52,239) (452) (49,273) (1,598) (50,871) (53,178) 193 (52,985) (26) (1,598) - - 1,598 - (26) - - (294) (688) - - 452 (645) (294) (236) (645) (13,030) 1,598 (11,432) (11,826) (193) (12,019) (62,303) - (62,303) (65,004) - (65,004) 12,061 414 12,475 13,960 125 14,085 318 10,481 1,262 - - 414 318 318 10,481 1,676 10,481 3,161 - - 125 318 10,481 3,286 12,061 414 12,475 13,960 125 14,085 53 Notes (continued) (forming part of the ﬁ nancial statements) 27 Illustrative explanation of differences between UK GAAP and Adopted IFRS (continued) Notes to the reconciliation of equity a) Goodwill and intangibles Goodwill UK GAAP Reverse amortisation on positive goodwill Reverse amortisation on negative goodwill Transaction costs written off under IFRS 3 (2008) Reclassiﬁ ed as intangibles Negative goodwill written back to retained earnings Adopted IFRS Other intangible assets UK GAAP Reclassify software from property, plant, & equipment Goodwill reclassiﬁ ed as intangible Amortisation Note i i ii Iii Iv v iii iii 2009 £000 221 571 (881) (1,652) (176) 2,263 346 132 176 (176) 132 2008 £000 (53) 316 (352) (1,652) (176) 2,263 346 13 176 (161) 28 i) Under adopted IFRS goodwill is not amortised but is tested annually for impairment. ii) On ﬁ rst time adoption IFRS 1 allows the group to apply IFRS 3 (2008) to all previous acquisitions. The impact of this is to write oﬀ all transaction costs arising on business combinations. iii) IAS 38 and IFRS 3 require intangible assets acquired as part of an acquisition to be separately identiﬁ ed on the balance sheet. Intangibles reclassiﬁ ed represent the fair value of orders existing at the date of acquisition and customer lists. Amortisation has been charged on these assets. iv) Under adopted IFRS, if the cost of acquisition is less than the fair value of the identiﬁ able assets and liabilities acquired, the diﬀ erence is recognised directly in the income statement. v) Under IAS 38 software is classiﬁ ed as an intangible ﬁ xed asset. b) Under adopted IFRS provisions are classiﬁ ed as current and non-current provisions. c) Under UK GAAP a deferred tax asset was recognised in the year ended 31 August 2009 in respect of a contingent consideration on a business combination in the prior year in relation to payment for tax losses to the vendor. Under IFRS 12, the deferred tax assets are classiﬁ ed as non- current assets rather than current assets. 54 Notes (continued) (forming part of the ﬁ nancial statements) 27 Illustrative explanation of differences between UK GAAP and Adopted IFRS (continued) Reconciliation of proﬁ t/loss for the year ended 31 August 2009 Note UK GAAP Revenue Cost of sales Gross proﬁ t Other operating income Operating expenses d Operating proﬁ t before net ﬁ nancing costs Proﬁ t on sale of ﬁ xed assets Financial income Financial expenses Net ﬁ nancing expense Proﬁ t before tax Taxation Proﬁ t for the year Notes to the reconciliation of proﬁ t/loss e) Operating expenses £000 255,466 (212,675) 42,791 - (39,134) 3,657 3 41 (1,370) (1,326) 2,331 (432) 1,899 2009 Effect of transition to Adopted IFRS £000 - - - 3 (289) (286) (3) - - (3) (289) - (289) Operating expenses UK GAAP Reverse amortisation on positive goodwill Reverse amortisation on negative goodwill Amortisation of intangibles Reclassiﬁ cation of Cost of Sales in line with segmental reporting Adopted IFRS * * ** *** Reclassiﬁ cation Adopted IFRS £000 255,466 (5,656) (218,331) (5,656) 5,656 37,135 3 (33,767) 3,371 - 41 (1,370) (1,329) 2,042 (432) 1,610 2009 £000 39,134 (255) 529 15 (5,656) 33,767 * Under adopted IFRS goodwill is not amortised but is tested annually for impairment. ** IAS 38 and IFRS 3 require intangible assets acquired as part of an acquisition to be separately identiﬁ ed on the balance sheet. Intangibles reclassiﬁ ed represent the fair value of orders existing at the date of acquisition and customer lists. Amortisation has been charged on these assets. *** The Board has reclassiﬁ ed certain costs that were historically shown as administrative expenses into cost of sales. Explanation of material adjustments to the cash ﬂ ow statement There are no material diﬀ erences between the cash ﬂ ow statement presented under Adopted IFRSs and the cash ﬂ ow statement presented under UK GAAP. 55 Company Balance Sheet At 31 August 2010 Note 2010 2009 £000 £000 £000 £000 Fixed assets Tangible Fixed Assets Investments Current assets Stock Debtors Cash at bank and in hand 5 6 7 8 Creditors: amounts falling due within one year 9 Net current assets Total assets less current liabilities Provisions for liabilities Net assets Capital and reserves Called up share capital Share premium account Proﬁ t and loss account Shareholders’ funds 10 11 12 12 202 666 339 290 11,987 12,616 (1,623) 163 666 868 829 263 853 9,921 11,037 (1,272) 10,993 11,861 - 11,861 10,000 799 1,062 11,861 9,765 10,594 - 10,594 318 10,481 (205) 10,594 These ﬁ nancial statements were approved by the board of directors on 26 November 2010 and were signed on its behalf by: M J J Lavery Director Company number: 05754547 56 Company Reconciliation of movements in shareholders’ funds for the year ended 31 August 2010 Note Company Company Proﬁ t/(loss) for the ﬁ nancial year 12 Net increase/(decrease) to shareholders’ funds Opening shareholders’ funds Closing shareholders’ funds 2010 £000 1,267 1,267 10,594 11,861 2009 £000 (126) (126) 10,720 10,594 57 Notes (continued) 1 Accounting policies The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the ﬁ nancial statements. Going Concern The directors believe that the company is well placed to manage its business risks successfully despite the current uncertain economic outlook The directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis in preparing the annual ﬁ nancial statements Further information regarding the company’s business activities together with the factors likely to aﬀ ect its future development, performance and position is set out in the Directors Report on page 11. Basis of preparation The ﬁ nancial statements have been prepared in accordance with applicable accounting standards and under the historical cost accounting rules. Under section 408 of the Companies Act 2006 the company is exempt from the requirement to present its own proﬁ t and loss account. Under Financial Reporting Standard 1 the Company is exempt from the requirement to prepare a cash ﬂ ow statement on the grounds that the Group ﬁ nancial statements include the Company in its own published consolidated ﬁ nancial statements. The Company has taken advantage of the exemption contained in FRS 8 and has therefore not disclosed transactions or balances with entities which form part of the group. Fixed assets and depreciation Depreciation is provided to write oﬀ the cost less the estimated residual value of tangible ﬁ xed assets by instalments over their estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated. The estimated useful lives are as follows: • freehold buildings 50 years • plant and machinery 5 to 10 years • ﬁ xtures and ﬁ ttings 5 to 10 years • computer equipment 3 to 5 years No depreciation is provided on freehold land. Investments Investments in subsidiary undertakings are stated at cost less amounts written oﬀ . Stocks Stocks are stated at the lower of cost and net realisable value. In determining the cost of motor vehicles, the actual amount paid to date for each car is used, for spare parts and service items stocks are valued at invoiced cost on a FIFO basis. An appropriate provision is made for obsolete or slow moving items. New vehicles on consignment from manufacturers are included in the balance sheet where it is considered that the company bears the risks and rewards or ownership. Consignment stock is held for a maximum period (which varies between manufacturers) before becoming due for payment. Part of the consignment period is interest free and the remaining period are interest bearing (periods varies between manufacturers). 58 Notes (continued) Taxation The charge for taxation is based on the proﬁ t for the year and takes into account taxation deferred because of timing diﬀ erences between the treatment of certain items for taxation and accounting purposes. Deferred tax is recognised, without discounting, in respect of all timing diﬀ erences between the treatment of certain items for taxation and accounting purposes which have arisen but not reversed by the balance sheet date, except as otherwise required by FRS 19. Classiﬁ cation of ﬁ nancial instruments issued by the Group Following the adoption of FRS 25, ﬁ nancial instruments issued by the Group are treated as equity (i.e. forming part of shareholders’ funds) only to the extent that they meet the following two conditions: a) they include no contractual obligations upon the Company (or Group as the case may be) to deliver cash or other ﬁ nancial assets or to exchange ﬁ nancial assets or ﬁ nancial liabilities with another party under conditions that are potentially unfavourable to the Company (or Group); and b) where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Company’s own equity instruments or is a derivative that will be settled by the Company’s exchanging a ﬁ xed amount of cash or other ﬁ nancial assets for a ﬁ xed number of its own equity instruments. To the extent that this deﬁ nition is not met, the proceeds of issue are classiﬁ ed as a ﬁ nancial liability. Where the instrument so classiﬁ ed takes the legal form of the Company’s own shares, the amounts presented in these ﬁ nancial statements for called up share capital and share premium account exclude amounts in relation to those shares. Finance payments associated with ﬁ nancial liabilities are dealt with as part of interest payable and similar charges. Finance payments associated with ﬁ nancial instruments that are classiﬁ ed as part of shareholders’ funds (see dividends policy), are dealt with as appropriations in the reconciliation of movements in shareholders’ funds. Dividends on shares presented within equity Dividends unpaid at the balance sheet date are only recognised as a liability at that date to the extent that they are appropriately authorised and are no longer at the discretion of the Company. Unpaid dividends that do not meet these criteria are disclosed in the notes to the ﬁ nancial statements. 59 Notes (continued) 2 Remuneration of directors Directors’ emoluments Salaries Annual bonus Non-contractual bonuses The emoluments in respect of the highest paid director were: Directors’ emoluments Salaries Annual bonus Non-contractual bonuses All directors beneﬁ ted from qualifying third party indemnity provisions during the ﬁ nancial period 2010 £000 507 525 910 1,942 2010 £000 270 360 660 1,290 2009 £000 417 255 - 672 2009 £000 250 150 - 400 60 Notes (continued) 3 Staff numbers and costs The average number of persons employed by the Company (including directors) during the period, analysed by category, was as follows: Number of employees Administration The aggregate payroll costs of these persons were as follows: Wages and salaries Social security costs Non-recurring listing bonuses Non-recurring social security costs Other pension costs 4 Dividends The aggregate amount of dividends received compromises: Aggregate amount of dividends received in the ﬁ nancial year Company 2010 Company 2009 35 17 Company 2010 £000 2,724 291 1,025 131 10 Company 2009 £000 1,209 244 - - 1 4,181 1,454 2010 2,610 2009 The aggregate amount of dividends proposed and not recognised as income at the year end is £nil (2009: £nil ). 61 Computer equipment £000 Total £000 178 109 287 15 70 85 202 163 178 109 287 15 70 85 202 163 Notes (continued) 5 Tangible ﬁ xed assets Company Cost At 1 September 2009 Additions At 31 August 2010 Depreciation At 1 September 2009 Charge for year At end of year Net book value At 31 August 2010 31 August 2009 62 Notes (continued) 6 Fixed asset investments Company Cost and net book value At 1 September 2008 and 31 August 2010 Shares in group undertakings £000 666 The undertakings in which the Company’s interest at the year end is more than 20% are as follows: Country of incorporation Principal activity Class and percentage of shares held Subsidiary undertakings Cambria Automobiles Group Limited England and Wales Holding Company Cambria Automobiles Acquisitions Limited ** England and Wales Investment Company 100% Ordinary 100% Ordinary Cambria Automobiles Properties Limited ** England and Wales Property Company 100% Ordinary Cambria Automobiles (Swindon) Limited * England and Wales Grange Motors (Swindon) Limited * Thoranmart Limited * Cambria Vehicle Services Limited* England and Wales England and Wales England and Wales Cambria Automobiles (South East) Limited* England and Wales Grange Motors (Brentwood) Limited*** Invicta Motors Limited*** Deeslease Limited*** Dove Group Limited*** England and Wales England and Wales England and Wales England and Wales Translease Vehicle Management Limited*** England and Wales Motor retailer Motor retailer Motor retailer Motor retailer Motor retailer Motor retailer Motor retailer Dormant Dormant Dormant Invicta Motors (Maidstone) Limited* England and Wales Motor retailer 100% Ordinary & Preference 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary & Preference 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary * Owned directly by Cambria Automobiles Acquisitions Limited ** Owned directly by Cambria Automobiles Group Limited *** Owned directly by Cambria Automobiles (South East) Limited 7 Stocks Motor vehicles 2010 £000 339 2009 £000 263 63 Notes (continued) 8 Debtors Trade debtors Amounts owed by group undertakings Prepayments and accrued income 9 Creditors: amounts falling due within one year Amounts owed to group undertakings Trade creditors Accruals and deferred income 2010 £000 77 40 173 290 2010 £000 306 494 823 1,623 2009 £000 256 519 78 853 2009 £000 77 486 709 1,272 64 Notes (continued) 10 Provisions for liabilities Deferred Taxation At 1 September 2009 Movement in period At 31 August 2010 The elements of deferred taxation are as follows: Difference between accumulated depreciation and capital allowances Total deferred tax Unrecognised deferred tax asset Recognised deferred tax asset 2010 £000 11 11 (11) - £000 Company - - - 2009 £000 13 13 (13) - The deferred tax asset not recognised, which consists primarily of tax losses carried forward, would be recovered if set oﬀ against future proﬁ ts of the company. 65 Notes (continued) 11 Called up share capital Authorised ‘A’ Ordinary shares of 10 pence each ‘B’ Ordinary shares of £1 each ‘C’ Ordinary shares of 1 pence each ‘D’ Ordinary shares of 1 pence each ‘E’ Ordinary shares of 1 pence each Ordinary shares of 10 pence each Allotted, called up and fully paid ‘A’ Ordinary shares of 10 pence each ‘B’ Ordinary shares of £1 each ‘C’ Ordinary shares of 1 pence each ‘D’ Ordinary shares of 1 pence each ‘E’ Ordinary shares of 1 pence each Ordinary shares of 10 pence each Shares classiﬁ ed as liabilities Shares classiﬁ ed in shareholders funds 2010 £000 - - - - - 10,000 10,000 - - - - - 10,000 10,000 - 10,000 10,000 2009 £000 17 166 135 - - - 318 17 166 135 - - - 318 - 318 318 Prior to the admission to trading on AIM, on 26 March 2010, the A, B, C, D and E shares and the Share Premium attached to them were all converted into 100,000,000 Ordinary Shares of 10p each giving the Company an issued share capital of £10,000,000 and a share premium of £799,000. All of the shares rank pari passu, and no shareholder enjoys diﬀ erent or enhanced voting rights from any other shareholder. All shares are eligible for dividends and rank equally for dividend payments. 66 Notes (continued) 12 Share premium and reserves At 1 September 2009 Converted into ordinary share capital Proﬁ t for the year At 31 August 2010 13 Related party disclosures Share premium account Proﬁ t and loss account £000 10,481 (9,682) - 799 £000 (205) - 1,267 1,062 The Company is quoted on the AIM Market. Promethean own 33% of the Company. During the year the Company paid £44,000 (2009: £15,000) in management fees to Promethean prior to admission. 14 Ultimate parent company and parent undertaking of larger group In the opinion of the directors, the distribution of the ordinary shares and the rights attributing themselves to them means that there is no overall controlling party of the Company. 67

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