Cambria Automobiles plc Annual Report 2014

Plain-text annual report

Annual report and ﬁ nancial statements Registered number 05754547 31 August 2014 Contents Chairman’s statement .............................................................. 4 Operating and ﬁ nancial review ............................................... 7 Strategic report ........................................................................16 Directors’ report ...................................................................... 17 Statement of directors’ responsibilities in respect of the Directors’ report and the ﬁ nancial statements .....................18 Independent auditor’s 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 ﬂ ow statement .........................................23 Notes ....................................................................................... 24 Company balance sheet ......................................................... 54 Company reconciliation of movements in shareholders’ funds ....................................................................................... 55 Notes ....................................................................................... 56 22 2 333 Chairman’s Statement I am very pleased to report that Cambria has delivered a good set of results for the year ended 31 August 2014, which show continued improvement in the Group’s operational and ﬁ nancial performance. The UK motor retail industry continued to strengthen during the period under review. Building on our improved ﬁ nancial performance in 2012/2013, the Group generated gross proﬁ t growth across all core elements of the business, New Vehicles, Used Vehicles and Aftersales, as well as delivering a signiﬁ cant premium brand acquisition in line with our evolving strategy for growth. Revenue increased by 14% to £450.1m (2013: £395.8m). Underlying proﬁ t before tax rose by 32% to £5.4m (2013: £4.1m). Proﬁ t before tax also improved by 32% to £5.3m (2013: £4.0m), giving earnings per share of 4.15p (2013: 3.49p) - an increase of 19%. The Group closed the year with net debt of £4.6m (2013: net cash £2.9m) and net assets of £28.3m (2013: £24.6m), underpinned by the ownership of £35.7m (2013: £25.8m) of freehold and long leasehold properties. Resources remain high with total facilities available to the Group, including cash reserves, of £19.3m (2013: £23.8 m). Group Overview Cambria was established in 2006 with a strategy to build a balanced motor retail group through close cooperation with our manufacturer partners and the self funded acquisition and turnaround of underperforming businesses. In last year’s report, I stated that the Group had worked hard to develop a strong ﬁ nancial position, which would allow us to expand our acquisition strategy to include businesses that were immediately earnings enhancing. We actively delivered on this strategy during the year, announcing the acquisition of the Jaguar and Land Rover dealership in Barnet on 8 July 2014 for a total consideration of £10.5m, including £3.75m of freehold land and property. 4 The strength of the Group’s balance sheet now allows us to pay larger premiums for the right acquisitions, using self-generated funds, to purchase earnings enhancing businesses, like Barnet, which, ﬁ t our brand balance ambitions and ﬁ nancial return criteria. Following the acquisition, and with the addition of the Jeep franchise to the Group’s existing site in Oldham, the Group now comprises 28 dealerships, representing 45 franchises and 18 brands resulting in a well balanced portfolio spanning the high luxury, premium and volume segments. The Group enhanced its freehold property portfolio during the year, securing the freehold interests of both the Warrington site, where we represent Fiat and Nissan, and our Croydon site, where we represent Ford. The management team has done an exceptional job in producing strong returns from underperforming businesses through its focus on developing and implementing industry leading digital systems, delivering a world class Guest (customer) experience and maintaining tight management of costs, coupled with lean operating procedures. During the period, the Group was awarded the Motor Trader “Dealer Group of the Year” award. This is testament to the quality of the Cambria Associates (our employees) who have helped build the Group over the last eight years. Our relationship with the manufacturers that we represent is a core pillar of our business approach. The management team continues to develop and maintain strong working relationships, in which Cambria is seen as an eﬀ ective and valued business partner. The addition of Land Rover, as well as a further Jaguar and Jeep business, has expanded our brand representation during the year and strengthened the foundations for further development. I would also like to thank the Cambria Associates, who continue to demonstrate commitment to the Group. We believe that our investment in their development, through the Cambria Academy, will increase skill levels in our Guest facing sales force and their ability to provide a world class Guest experience. 5 Chairman’s Statement (continued) Dividend The Board is pleased to announce a ﬁ nal dividend of 0.5p per share (2013: 0.4p), resulting in a total dividend for the year of 0.6p per share (2013: 0.5p) - an increase of 20%. It remains the Board’s intention to grow dividends in line with earnings. Outlook Since the industry lows experienced in Q4 2011, the UK market has enjoyed 32 consecutive months of year-on-year growth in new car registrations to October 2014. The economic pressures aﬀ ecting the mainland European new car markets remain and the UK continues to be well placed to continue with the current positive new car market for the foreseeable future. I am pleased to report that Cambria has maintained its growth momentum in the ﬁ rst two months of the new ﬁ nancial year, delivering results ahead of our business plan and substantially ahead of the comparable period of the year under review. We have a number of opportunities under review and continue to be active in our acquisition strategy, whilst maintaining our aim to produce superior returns on shareholders’ funds, which reached 15.9% in the year under review (2013: 15.5%). The Board believes that there are signiﬁ cant opportunities for further growth and is conﬁ dent of making strong progress in 2014/15. Philip Swatman Chairman 6 Operating and Financial Review Chief Executive’s Review Mark Lavery, Chief Executive I am pleased to report that the operational and ﬁ nancial performance improvements delivered in H1 2014 continued into the second half and the Group delivered a good set of results for the full year to 31 August 2014 with underlying proﬁ t before tax rising to £5.4m, a 32% increase in proﬁ ts on the previous year. The ﬁ nancial year under review coincided with another year of strong growth in the UK motor retail market. Up to and including the October 2014 registration data, the UK has enjoyed 32 consecutive months of year on year growth in new car registrations albeit from a low base in Q4 2011. 7 Operating and Financial Review In line with our revised acquisition strategy set out last year, we completed the purchase of the Jaguar and Land Rover dealership in Barnet in July 2014, adding our sixth Jaguar and ﬁ rst Land Rover dealership to the Group. The integration of this business is progressing well and the business has operated in line with our expectations during the ﬁ rst seven weeks of ownership. The table below summarises our ﬁ nancial performance, which is detailed in the Finance Director’s Report: Year ended 31 August 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 expenses Net Assets Net proﬁ t margin Underlying earnings per share* Earnings per share * These items exclude non-recurring expenses of £0.1m (2013: £0.1m) 2014 £m 450.1 7.4 5.9 5.4 1.2% 7.3 5.8 5.3 0.1 28.3 1.2% 4.22p 4.15p 2013 £m 395.8 6.1 4.6 4.1 1.0% 6.0 4.5 4.0 0.1 24.6 1.0% 3.57p 3.49p 8 Operating and Financial Review (continued) I am pleased to report that the Group has again generated strong operating cashﬂ ow during the year, which enabled us to acquire the Barnet business and enhance our operating freehold properties. The Group’s cash position remains strong and we have signiﬁ cant facilities available for continued expansion. Accordingly, we have continued to invest resource in identifying acquisition opportunities, whilst also investing in our existing franchise outlets to ensure that they remain compliant with franchise standards and secure a long term future for the Group with its respective brand partners. It is very important for Cambria to continue to strengthen the mix of its brand portfolio, maintaining a good balance of high luxury, premium and volume brands as the Group grows. Brand Partnerships In line with our buy-and-build strategy, management has continued to work with both existing and potential Brand Partners (manufacturers) with whom the Group may develop Primary Brand Partner relationships (i.e. more than three franchised dealerships). We have worked hard to improve the businesses acquired in previous years and to integrate and develop the ones acquired and established in the year under review, making signiﬁ cant investment in the management of those businesses as well as in the property infrastructure. Our current portfolio of Brand Partners and dealerships comprises: High Luxury / Premium Aston Martin Alfa Romeo Honda Jaguar Land Rover Volvo Volume Abarth Citroen Jeep Dacia Fiat Ford Mazda Nissan Renault Seat Vauxhall 3 2 2 6 1 5 19 Motorcycle Triumph 1 1 2 1 5 5 4 1 1 1 2 24 2 2 The Group acquired the Barnet Jaguar Land Rover business for a total consideration of £10.5m, which included £3.75m of freehold land and property, £0.46m of ﬁ xed assets and £1.26m of net working capital assets resulting in £5m of goodwill. We have agreed to develop the freehold land fully and build a new Jaguar Land Rover dealership at Barnet over the next 18 months at an estimated investment cost of around £5m. This facility will be a state of the art dealership, which will contribute to a signiﬁ cantly enhanced Guest experience and make the business much more eﬃ cient. When we announced our H1 results, I was able to report that we had invested £6.3m in the Group’s freehold property estate securing the freeholds of our Warrington Fiat and Nissan dealership and our Croydon Ford dealership, plus additional land for franchise enhancements in Croydon. The investment in these freeholds is in line with our strategy to secure strategic freeholds where the opportunity arises and also reduces the external rent payable by £0.3m. In addition to the major freehold purchases, we invested £0.2m in the re-development of our Oldham dealership to add the Jeep franchise and to bring the site up to current corporate standards for Fiat. We also invested £0.3m across our Ford dealerships in line with franchise standards requirements. Cambria has enjoyed the beneﬁ ts of a strategically balanced brand portfolio with a strong mix of high luxury, premium and volume businesses and we intend to continue our buy-and-build strategy acquiring businesses that further improve the brand mix and represent good value for our shareholders. When making acquisitions, the Board understands that the integration and maturing of the dealerships takes time and management investment. The integration of businesses from distressed sales typically takes longer. We continue to promote the philosophy of stand-alone autonomous business units, in which local management teams are empowered via our “Four Pillar Strategy” to run their own business units. Cambria dealerships do not trade under the “Cambria” name but focus on local branding. Our dealerships trade as “Grange”, “Doves”, “Dees”, “Invicta Motors”, “County Motor Works”, “Pure Triumph” and “Motorparks. When acquiring a business, the Board considers the geographical location of the franchise and then chooses to either adopt a new trading style or retain the existing business name. On completion of the Barnet acquisition, the business was re-branded as “Grange”. 9 Automobiles plc Locations across the UK Welwyn Garden City Brentwood Chelmsford Barnet Thanet Tunbridge Wells Canterbury Ashford Maidstone Gatwick Horsham Wimbledon Croydon Southampton Blackburn Preston Bolton Bury Oldham Warrington Wellingborough Northampton Woburn Swindon Exeter 10 Operating and Financial Review (continued) Operations 2014 Revenue 2014 Revenue mix 2014 Gross Proﬁ t 2014 Margin 2013 Revenue 2013 Revenue mix 2013 Gross Proﬁ t 2013 Margin £m 195.2 208.9 55.8 (9.8) % 43.4 46.4 12.4 (2.2) 450.1 100.0 £m 12.3 19.0 23.9 - 55.2 (49.3) 5.9 (0.1) 5.8 % 6.3 9.1 42.9 - 12.3 1.3 £m 159.8 188.8 56.6 (9.4) % 40.4 47.7 14.3 (2.4) 395.8 100.0 £m 10.6 17.5 23.1 - 51.2 (46.6) 4.6 (0.1) 4.5 % 6.7 9.3 40.8 - 12.9 1.1 2014 10,451 2013 Year on year growth 8,957 16.7% New Vehicles Used Vehicles Aftersales Internal sales Total Administrative expenses Operating proﬁ t before non- recurring expenses Non-recurring expenses Operating proﬁ t New Vehicle Sales New units New vehicle revenue increased from £159.8m to £195.2m with total new vehicle and motorcycle sales volume up 16.7%. Excluding the impact of Barnet, our new volumes rose by 16.1%, outperforming the market by 5.5%. Gross proﬁ t also increased by £1.7m with an improvement in the gross proﬁ t per retail unit sold. This strong performance was delivered against an overall year-on-year increase of 10.6% in new UK car registrations in the 12 month period to 31 August 2014. New car registrations for the rolling 12 months exceeded 2.4m in this period for the ﬁ rst time since 2007. The private registrations element of the new car market increased 12.5% year-on-year. The Group’s sale of new vehicles to private individuals was also ahead of the market - 14.1% higher year-on-year at 8,874 units. Commercial and ﬂ eet vehicle sales by the Group increased by 54.6% to 977 units and by 8.9% to 600 units respectively; these sales are transacted at lower margins hence the dilutive eﬀ ect on overall new car gross margin. Used Vehicle Sales Used units 2014 14,320 2013 Year on year growth 14,036 2% We have delivered another reasonable performance in used vehicle sales. Revenues increased from £188.8m to £208.9m and the number of units sold rose by 2%. Excluding the impact of Barnet, volumes were up 1.9%. The gross proﬁ t generated increased by £1.5m to £19.0m. Pleasingly, the average gross proﬁ t on each unit retailed increased year on year. The Group has also concentrated on tight management of its used vehicle inventories, closely monitoring stock turn and used car Return On Investment which achieved 122% in the year. 11 Operating and Financial Review (continued) Aftersales Service and Bodyshop hours 2014 2013 Year on year growth 316,963 306,611 3.4% Overall, the service and bodyshop elements of the business increased the number of hours sold by 3.4% and the total aftersales gross proﬁ t by £0.8m to £23.9m. The combined aftersales revenue decreased 1.4% year on year from £56.6m to £55.8m, as a result of a £3.5m year on year variance in the parts business which was attributable to one speciﬁ c trade customer. The other areas of aftersales increased their revenue. The aftersales margin increased from 40.8% to 42.9%, due to the reduced mix of Parts revenue relative to Service revenue. The aftersales departments contributed 43.3% of the Group’s overall gross proﬁ t. The Group continues to review its processes for ensuring that we engage with all our Guests to maximise the opportunity to interact with them through our Guest Relationship Management Programme. This is our contact strategy involving the sale of service plans and delivery of service and MOT reminders in a structured manner, utilising all forms of digital media and traditional communication methods. The 0-3 year car parc continues to be replenished, as new car sales increases year on year, and this gives the Group conﬁ dence of further progress in Guest relationship and retention. Group Strategy Since the Group’s incorporation in March 2006, we have continued to apply our focused buy-and-build strategy of acquiring motor dealership assets using internally generated funds. The earnings enhancing acquisition of the Barnet business was ﬁ rmly in line with our revised strategy and the opportunity to develop our relationship with Jaguar and begin a new one with Land Rover ﬁ ts our brand portfolio aspirations perfectly. Following any acquisition, the Cambria management team implements new ﬁ nancial, operational controls and processes in order to rationalise, restructure and develop each individual dealership. A culture of delivering a world class Guest experience is engrained into the business. 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 now completed ten separate transactions since our incorporation. We will continue with our three step approach to purchasing a new business - acquisition, integration and operation, as outlined below: Acquisition When acquiring new businesses, we are diligent in ensuring that none of the contractual obligations taken on 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 in order to avoid taking on any legacy costs. Prior to the Barnet transaction, the Group balance sheet showed that only £0.3m of goodwill had been generated across the nine acquisitions. We do not have any deﬁ ned beneﬁ t pension schemes. We have always taken the approach that Cambria will not acquire any business unless there is a strong underlying business case to do so and our acquisitions have been funded from our own cash resources and banking facilities. Maintaining the Group’s balanced brand portfolio will be fundamental to its continued success and development and this will undoubtedly mean that we acquire and develop more Premium and Luxury businesses. All acquisitions and any related funding requirements are assessed on their individual merits. For compelling acquisition targets, like Barnet, we will undoubtedly have to pay a premium but we will still focus on ensuring that the Group delivers strong and consistent returns on equity. 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 implements systems, processes and procedures to improve legislator compliance including FCA and Health & Safety. Newly acquired Associates are transferred to Cambria employment contracts with compensation and beneﬁ ts commensurate with the particular business. A training needs analysis is conducted, followed by the implementation of training programmes for all relevant Associates in the new business. Operation With any new acquisition, the standard ﬁ nancial controls are implemented immediately, ranging from individual cheque signatories to daily reporting of vehicle sales and aftersales revenues, margins and other performance ﬁ gures. We then implement our two growth strategies (i) “Cambria Digital”, which is our internet social networking strategy for vehicle sales coupled with our “Guest Connect” support centre, and (ii) in Aftersales our “Duty of Care Gearbox” and Local Contact Strategy which is designed to supply our Guests with a one stop solution for all their vehicle maintenance needs. 12 Operating and Financial Review (continued) Acknowledgments We are delighted that Cambria, in addition to the “Motorparks.co.uk” website being voted the best franchised dealer website in the industry in the Auto Retail Network report 2013, has also won the Motor Trader “Dealer Group of the Year” award for 2014. This is testament to the success of the growth and development of the Group over eight years of acquiring and improving underperforming dealerships. We were also pleased to be awarded (for the second time) the Platinum Award for Charitable Donations to the industry’s only dedicated charity, BEN, the motor trade benevolent fund. The award results from the combined support of BEN by Cambria Associates, through a payroll giving scheme, and speciﬁ c support from the Group. Cambria is one of only two motor trade organisations in the UK to be given the award and we are delighted to continue to support BEN in the outstanding work that they carry out for members of the motor trade and their families. Cambria Academy The Group has continued to develop the Cambria Academy, a training Academy for the Group’s Associates, which was established during the previous ﬁ nancial year. Whilst still in the developmental phase, this is proving to have a positive impact and it will be critically important as the Group embarks on the next exciting period of its expansion. The Academy has been established to enhance the Cambria Guest Experience with the following key strategic objective: “To deliver an outstanding experience making it easy for our Guests to buy, own and maintain their vehicle, ensuring that they will want to do so again and recommend us to others.” We will continue to enhance and reﬁ ne the Academy to help develop our own talent pool, promote Associate retention and to create our own future management with the overriding objective of enhancing the Guest Experience when interacting with Cambria. Outlook The new ﬁ nancial year has started strongly with the Group’s performance in the ﬁ rst two months being both ahead of our business plan and signiﬁ cantly ahead of the comparable period of the year under review. I am pleased with the progress that we are making across our established businesses; I am excited by the potential of the newly acquired Jaguar Land Rover business in Barnet; and I am conﬁ dent that Cambria can maintain this momentum and deliver further improved performances across all it departments in the current ﬁ nancial year. Our continued strong cash generation and available facilities leave us well positioned to develop and protect our balanced brand portfolio. We shall continue to focus upon the development of our high luxury and premium brands and Cambria continues to invest in identifying acquisition opportunities. Whilst there has been 32 consecutive months of year-on-year growth in new car registrations in the UK, we do not believe that the market is yet at its peak. Vehicle manufacturers continue to deliver strong consumer oﬀ ers, which represent attractive propositions for our Guests to acquire new cars and the level of cars sold on PCP related product has increased signiﬁ cantly over the past three years. As a result of the increased penetration of the PCP oﬀ ers, there becomes a natural change cycle where a Guest is more likely to change a car for another new one during the term of the PCP product. A larger portion of cars sold on PCP gives greater control of the Guest’s change cycle. Exchange rates also remain favourable and, whilst Sterling is strong relative to the Euro and the European car market remains relatively weak, the UK will be a natural place for the manufacturers to target registrations. Whilst maintaining double digit growth is unlikely, as prior year comparatives harden, we expect the new car market in the UK to stay buoyant, as long as vehicle availability and strong consumer oﬀ ers are readily available. Mark Lavery Chief Executive 13 Operating and Financial Review (continued) Finance Director’s Report Overview Total revenues in the period increased 13.7% to £450.1m from £395.8m in the prior year. New vehicle unit volumes were up 16.7% and new vehicle revenues were up 22.1%. Used car unit sales and revenues increased by 2% and 10.6% respectively. Revenues from the aftersales businesses reduced by 1.4%, compared with the previous year as a result of a reduction in sales to one speciﬁ c parts trade customer. Total gross proﬁ t increased by £4m (7.8%) from £51.2m to £55.2m in the year. Gross proﬁ t margin across the Group reduced from 12.9% to 12.3%, reﬂ ecting the change in revenue mix following the increase in new car sales in total and the improvement in commercial vehicles and ﬂ eet cars. The average selling price of both new and used cars increased year on year, as did the average proﬁ t per new and used unit that we sold. The aftersales operations contributed 43.3% of the total gross proﬁ t for the Group, compared to 45.1% in the previous period, at a gross proﬁ t margin of 42.9%, improved from 40.8% in the previous year. During the year, the Group incurred non-recurring expenses of £81,000 in relation to transaction and set up costs associated with the business acquisition. Underlying EBITDA increased by 21.3% in the period to £7.4m from £6.1m in the previous year. Underlying operating proﬁ t improved 28.3% to £5.9m, compared to £4.6m in the previous year, resulting in an underlying operating margin of 1.3% (2013: 1.1%). Net ﬁ nance expenses were consistent with prior year at £0.5m. The Group’s underlying proﬁ t before tax rose by 32% to £5.4m, in comparison with £4.1m in the previous year. The acquisition accounted for a loss of £20,000 in the year, in line with our budget. Underlying earnings per share were 4.22p (2013: 3.57p). Basic earnings per share were 4.15p (2013: 3.49p) and the Group’s underlying return on shareholders’ funds for the year was 15.9% (2013: 15.5%). Taxation The Group tax charge was £1.16m (2013: £0.5m) representing an eﬀ ective rate of tax of 21.8% (2013: 13.3%) on a proﬁ t before tax of £5.3m (2013: £4.0m). As outlined in last years report, it was anticipated that the tax rate would revert to a more normal eﬀ ective tax rate compared with the prior year, which had a one oﬀ beneﬁ t from a speciﬁ c capital allowances claim that impacted prior years. It is anticipated that tax charge for 2015 will continue to track the normal eﬀ ective tax rate for the Group. Financial Position The Group has a robust balance sheet with a net asset position of £28.3m underpinned by £35.7m of freehold and long leasehold property. Secured against the freehold and long leasehold property are mortgages amounting to £14.9m. Each of the loans has diﬀ erent repayment proﬁ les between ﬁ ve and thirteen years and bear interest at between base plus 1.25% and LIBOR plus 3%. During the year, the Group comfortably met the bank covenants attached to these borrowings. The net debt position of the Group as at 31 August 2014 was £4.6m (2013: net cash £2.9m), reﬂ ecting a cash position of £10.3m (2013: £14.8m). This is after the £18m investment in acquired businesses and freehold land and property in the year. The Group uses term loan facilities to fund the purchase of freehold and long leasehold properties, stocking loans to fund the acquisition of consignment, demonstrator and used vehicles and has a £4m 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 2015. The Group has a £5m Revolving Credit Facility, which is available for draw down against new business acquisitions and freehold property purchases. This additional funding facility gives us signiﬁ cant liquidity to identify and approach acquisition targets. Total facilities available including cash reserves equate to £19.3m (2013: £23.8 m). 14 Operating and Financial Review (continued) Cash Flow and Capital Expenditure The Group generated an operating cash inﬂ ow of £11.3m with working capital reducing by £4.7m through eﬃ cient management of the vehicle inventory and the stocking lines associated with that inventory. Total funds invested in business acquisitions and capital expenditure were £18m, of which £6.7m related to the acquisition of the Barnet business and £11.3m was freehold property, plant and equipment, including the Barnet freehold property. We have drawn down two new term loans totalling £4.7m against the freehold purchase of the Croydon and Barnet properties acquired. During the year, capital repayments of £1.67m were made against the total term loans outstanding. The capital repayments due in the ﬁ nancial year to 31 August 2015 total £2.02m. As a result of the net cash outﬂ ow of £4.5m, the gross cash position was £10.3m with gross debt increasing by £3m to £14.9m and overall net debt increasing from a net cash position of £2.9m in 2013 to a net debt position of £4.6m. Shareholders’ Funds There are 100,000,000 ordinary shares of 10p each with a resulting share premium of £0.8m. There were no new funds raised during the year; therefore the share capital and share premium account remain at £10.8m consistent with the 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 any such scheme. The Group made contributions amounting to £0.33m (2013: £0.15m) to deﬁ ned contributions schemes for certain employees. The Group’s staging date for Pensions Auto-Enrolment was October 2013 and this has increased the Group’s pension costs for the 2014 ﬁ nancial year by £0.18m. Financial Instruments The Group does not have any contractual obligation under any ﬁ nancial instruments with respect to the hedging of interest rate risk. Dividends The Board is pleased to announce that it will make a ﬁ nal dividend payment in respect of the ﬁ nancial year to 31 August 2014 of 0.5p per share in addition to the interim dividend of 0.1p per share paid in May 2014. If approved by the shareholders at the Annual General Meeting to be held on 15 January 2015, the dividend will be payable on 22 January 2015 to those shareholders registered on 30 December 2014. The Board aims to maintain a dividend policy that grows with the Group’s earnings but intends to ensure that the payment of dividend does not detract from its primary strategy to continue to buy-and-build and grow the Group. James Mullins Finance Director 15 Strategic report 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 aﬀ 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 its 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 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 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. By order of the board James Mullins Director 16 Dorcan Way, Swindon, SN3 3RA 24 November 2014 Directors’ report The directors present their directors’ report and ﬁ nancial statements for the year ended 31 August 2014. Principal Activities Cambria’s principal activities are the sale and servicing of motor vehicles and the provision of ancillary services. The Group operates from 28 sites with a total of 45 dealer franchises. Proposed Dividend The directors recommend the payment of a ﬁ nal dividend for 2014 of 0.5p per share which equates to £0.5m (2013: £0.4m). If approved at the Annual General Meeting to be held on 15 January 2015, the dividend will be payable on 22 January 2015 to those shareholders registered on 30 December 2014. Directors The directors who held oﬃ ce during the year were as follows: P H Swatman M J J Lavery 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 During the year, the Company made A £10,000 charitable donation to support BEN, the Motor And Allied Trades Benevolent Fund. The Group and its Associates also support BEN through a payroll giving scheme. Neither the Company nor any of its subsidiaries made any political donations or incurred any political expenditure during the year (2013: £nil). Disclosure of Information to Auditor 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 auditor is 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 auditor is aware of that information. Auditor In accordance with Section 489 of the Companies Act 2006, a resolution for the re-appointment of KPMG LLP as auditor of the Company is to be proposed at the forthcoming Annual General Meeting. By order of the board James Mullins Director Dorcan Way, Swindon, SN3 3RA 24 November 2014 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 group and parent company 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 LLP Independent auditor’s 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 2014 which comprise the Group Statement of Financial Position and Parent Company Balance Sheet, the Group Statement of Comprehensive Income, the Group Statement of Changes in Equity, the Group Statement of Cash Flow, the Parent Company Reconciliation of Movements in Shareholders’ Funds and the related notes. 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 auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the 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 auditor 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, and express an opinion on, 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 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 Financial Reporting Council’s website at www.frc.org.uk/ auditscopeukprivate 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 2014 and of the group’s 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 Operating and ﬁ nancial review, Chairman’s statement, Strategic report and 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 frombranches 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. Ian Brokenshire (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants Plym House 3 Longbridge Road Plymouth PL6 8LT 24 November 2014 19 Consolidated statement of comprehensive income for year ended 31 August 2014 Revenue Cost of sales Gross Proﬁ t Administrative expenses Results from operating activities Finance income Finance expenses Net ﬁ nance expenses Proﬁ t before tax from operations before non-recurring expenses, and acquisitions Trading (loss)/proﬁ t from branch acquired in year Non-recurring expenses Proﬁ t before tax Taxation Proﬁ t and total comprehensive income for the period Note 3 4 4 9 9 5 4 10 2014 £000 450,148 2013 £000 395,776 (394,930) (344,550) 55,218 51,226 (49,415) (46,680) 5,803 4,546 72 (564) (492) 5,412 (20) 5,392 (81) 5,311 (1,158) 4,153 60 (580) (520) 4,111 17 4,128 (102) 4,026 (534) 3,492 3.49p Basic and diluted earnings per share 8 4.15p All comprehensive income is attributable to owners of the parent company 20 Consolidated statement of changes in equity for year ended 31 August 2014 Note Share capital Share premium Retained earnings Total equity £000 £000 £000 £000 Balance at 31August 2012 10,000 799 10,742 21,541 Proﬁ t for the year Dividend paid - - - - 3,492 (400) 3,492 (400) Balance at 31 August 2013 10,000 799 13,834 24,633 Proﬁ t for the year Dividend paid 21 - - - - 4,153 (500) 4,153 (500) Balance at 31 August 2014 10,000 799 17,487 28,286 21 Consolidated statement of ﬁ nancial position at 31 August 2014 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 Note 11 12 13 14 15 16 17 18 20 17 20 13 21 2014 £000 38,571 5,370 463 2013 £000 28,353 356 618 44,404 29,327 77,100 10,358 10,251 66,248 8,038 14,754 97,709 89,040 142,113 118,367 (2,020) (97,972) (785) (11) (1,550) (81,126) (251) (41) (100,788) (82,968) (12,875) (10,317) - (164) (10) (439) (13,039) (10,766) (113,827) (93,734) 28,286 24,633 10,000 799 17,487 10,000 799 13,834 28,286 24,633 These ﬁ nancial statements were approved by the board of directors on 24 November 2014 and were signed on its behalf by: Mark Lavery Director 22 Company registered number: 05754547 Consolidated cash ﬂ ow statement for year ended 31 August 2014 Notes Cash ﬂ ows from operating activities Proﬁ t for the year Adjustments for: Depreciation, amortisation and impairment 11/12 Financial income Financial expense Loss on sale of property, plant and equipment Taxation Non recurring expenses Change in trade and other receivables Change in inventories Change in trade and other payables Change in provisions Interest paid Tax paid Non recurring expenses Net cash from operating activities Cash ﬂ ows from investing activities Interest received Acquisition of branch net of cash acquired Acquisition of land and property with branch acquired Purchase of property, plant and equipment and software Net cash from investing activities Cash ﬂ ows from ﬁ nancing activities Proceeds from new loan Interest paid Repayment of borrowings Dividend paid Net cash from ﬁ nancing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at 1 September Cash and cash equivalents at 31 August 9 9 10 5 5 2 16 16 2014 £000 4,153 1,542 (72) 564 - 1,158 81 7,426 (2,275) (9,071) 16,096 (40) 12,136 (246) (559) (81) 11,250 72 (6,721) (3,750) (7,564) (17,963) 4,700 (318) (1,672) (500) 2,210 (4,503) 14,754 10,251 2013 £000 3,492 1,429 (60) 580 1 534 102 6,078 (915) (8,806) 13,215 (44) 9,528 (287) (735) (102) 8,404 60 (1,209) (3,017) (789) (4,955) 1,980 (293) (1,485) (400) (198) 3,251 11,503 14,754 23 Notes (forming part of the ﬁ nancial statements) 1 Accounting policies Cambria Automobiles plc is a company which is 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 2014 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 54 to 63. 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. 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 Strategic report and Directors’ report on pages 16 to 17. Basis of consolidation The ﬁ nancial statements consolidate the ﬁ nancial statements of the Company together with its 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 acquired, 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. All revenue generated and non-current assets held are attributable to UK operations only. 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. Manufacturer incentives are recognised as revenue when earned. Servicing and bodyshop sales, including warranty work, are recognised on completion of the agreed work. Finance commission revenue is recognised as the related vehicles are sold. 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. Financing income and expenses Financing expenses comprise interest payable, stocking interest charge on consignment and used vehicles and ﬁ nance leases. Financing income comprises 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 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 • leasehold properties • plant and machinery • ﬁ xtures and ﬁ ttings • computer equipment 50 years over the lifetime of the lease 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 of assets excluding inventories 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. 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. 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 and payable 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. Demonstrator vehicles are held within inventories at the lower of cost and net realisable value. Vehicle funding and stocking loans form part of the Group’s working capital and are recognised at the fair value of the amount due to the facility provider. 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) 1 Accounting policies (continued) 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) IFRS not yet applied A number of new standards, amendments to standards and interpretations are eﬀ ective for annual periods beginning after 1 January 2014, and have not been applied in preparing these consolidated ﬁ nancial statements. Those which may be relevant to the Group are set out below. The Group does not plan to adopt these standards early and their adoption is not expected to have a material eﬀ ect on the ﬁ nancial statements unless otherwise indicated: • IFRS 10 Consolidated Financial Statements – IFRS 10 supersedes IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation - Special Purpose Entities. It provides a single model to be applied in the control analysis for all investees, including entities that currently are SPEs in the scope of SIC-12. An investor controls an investee when: - - - it is exposed or has rights to variable returns from its involvement with that investee; it has the ability to aﬀ ect those returns through its power over that investee; and there is a link between power and returns. • IFRS 12 Disclosure of Interests in Other Entities – Contains the disclosure requirements for entities that have interests in subsidiaries, joint arrangements (i.e. joint operations or joint ventures), associates and/or unconsolidated structured entities. • IAS 32 Oﬀ setting Financial Assets and Financial Liabilities – The amendments clarify the oﬀ setting criteria, speciﬁ cally: - when an entity currently has a legal right of set oﬀ ; and - when gross settlement is equivalent to net settlement. • IAS 36 Impairment of Assets – The amendments reverse the unintended requirement in IFRS 13 Fair Value Measurement to disclose the recoverable amount of every cash-generating unit to which signiﬁ cant goodwill or indeﬁ nite-lived intangible assets have been allocated. Under the amendments, recoverable amount is required to be disclosed only when an impairment loss has been recognised or reversed. 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 and property portfolio impairment The carrying values of goodwill and property are tested annually for impairment, for goodwill by using cash ﬂ ow projections for each cash generating unit, and for property by comparing the carrying value to the higher of value in use or market value. 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 or have not arisen. 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, if the vehicles are not sold in the consignment period the group has the obligation to purchase. 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. Non-recurring expenses Non-recurring expenses are items which derive from events or transactions that are outside the normal course of business, and do not directly relate to the on-going operations, therefore have been separately disclosed in order for the ﬁ nancial statements to present a true and fair view. 30 Notes (continued) (forming part of the ﬁ nancial statements) 2 Acquisitions of trading branches Eﬀ ect of acquisition in 2014 On 7 July 2014, the Company completed the acquisition of the Jaguar and Land Rover dealership in Barnet from Lookers PLC. Acquiree’s net assets at the acquisition date: Freehold land and buildings Plant and equipment Stocks Trade and other creditors Prepayments Net and identiﬁ able assets and liabilities Goodwill on acquisition (The goodwill arising on acquisition is attributable to expanding our geographical base for Jaguar, adding the Land Rover brand to our business, and the anticipated proﬁ tability from the sale of vehicles from the Barnet dealership) Recognised values on acquisition and Fair Value £000 3,750 461 1,781 (566) 45 5,471 5,000 Consideration paid (note that transaction and set up costs of £81k were written off to administrative expenses in 2014), satisﬁ ed in cash 10,471 It is estimated that in the year before acquisition, the business generated £46m of revenue and a pre-tax proﬁ t of £0.7m. The results attributable to the branch acquired during the ﬁ nancial year and included in the group results were as follows: Turnover Loss before tax 2014 £000 4,755 (20) 31 Notes (continued) (forming part of the ﬁ nancial statements) 2 Acquisitions and disposals of trading branches Eﬀ ect of acquisition in 2013 On 31 January 2013, the Group acquired the trade and assets of the Vauxhall, Alfa Romeo, Chrysler and Jeep dealership in Chelmsford from County Holdings (Chelmsford) Limited and its subsidiary companies. Recognised values on acquisition and Fair Value Acquiree’s net assets at the acquisition date: Freehold land & buildings Plant and equipment Stocks Trade and other creditors Net and identiﬁ able assets and liabilities Goodwill on acquisition Consideration paid (note that transaction costs of £67k were written off to administrative expenses in 2013), satisﬁ ed in cash The results attributable to the branch acquired during the 2013 ﬁ nancial year were as follows: Turnover Proﬁ t before tax £000 3,017 191 1,100 (82) 4,226 - 4,226 2013 £000 11,670 17 32 Notes (continued) (forming part of the ﬁ nancial statements) 3 Revenue Sale of goods Aftersales services Total revenues 4 Segmental reporting 2014 £000 404,129 46,019 2013 £000 348,601 47,175 450,148 395,776 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. 2014 Revenue 2014 Revenue mix 2014 Gross Proﬁ t 2014 Margin 2013 Revenue 2013 Revenue mix 2013 Gross Proﬁ t 2013 Margin £m 195.2 208.9 55.8 (9.8) % 43.4 46.4 12.4 (2.2) £m 12.3 19.0 23.9 - % 6.3 9.1 42.9 - £m 159.8 188.8 56.6 (9.4) % 40.4 47.7 14.3 (2.4) £m 10.6 17.5 23.1 - % 6.7 9.3 40.8 - 450.1 100.0 55.2 12.3 395.8 100.0 51.2 12.9 New Car Used Car Aftersales Internal sales Total Administrative expenses Operating proﬁ t before non-recurring expenses Non-recurring expenses (49.3) 5.9 (0.1) (46.6) 4.6 (0.1) Operating proﬁ t 5.8 1.3 4.5 1.1 The CODM reviews the performance of the business in terms of both net proﬁ t before tax and EBITDA, as such the following table shows a reconciliation of the Proﬁ t before tax to EBITDA.. 33 Notes (continued) (forming part of the ﬁ nancial statements) 4 Segmental reporting (continued) Proﬁ t Before Tax Non-recurring expenses (note 5)) Underlying Proﬁ t Before Tax Net ﬁ nance expense Depreciation and amortisation Underlying EBITDA Non-recurring expenses EBITDA Revenue and non-current assets are attributable to United Kingdom operations only. 5 Non-recurring expenses Transaction and new franchising costs Cost rationalisation programme 6 Expenses and auditors’ remuneration The result from operating activities is stated after (crediting)/charging the following: Impairment (gain)/loss recognised on other trade receivables and prepayments (note 22(b)) Auditor’s 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 2014 £000 5,311 81 5,392 492 1,542 7,426 (81) 7,345 2014 £000 81 - 81 2014 £000 (11) 2014 £000 25 91 29 7 2013 £000 4,026 102 4,128 520 1,429 6,077 (102) 5,975 2013 £000 67 35 102 2013 £000 126 2013 £000 25 91 29 7 The 2014 auditor’s remuneration for statutory audit and other services relates solely to amounts paid to KPMG LLP. The 2013 amounts relate solely to amounts paid to KPMG Audit Plc. 34 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 2014 343 362 109 210 1,024 2014 £000 28,545 3,128 326 31,999 2013 317 378 109 213 1,017 2013 £000 27,047 2,984 152 30,183 8 Earnings per share Basic earnings per share are calculated by dividing the earnings attributable to equity shareholders by the number of ordinary shares in issue in the year. There is one class of ordinary share with 100,000,000 shares in issue. There are no dilutive share options in issue. Proﬁ t attributable to shareholders Non-recurring expenses (Note 5) Tax on adjustments (at 22.16% (2013:23.58%)) Adjusted proﬁ t attributable to equity shareholders 2014 £000 4,153 81 (18) 4,216 2013 £000 3,492 102 (24) 3,570 Number of shares in issue (‘000) 100,000 100,000 Basic earnings per share Adjusted earnings per share 4.15p 4.22p 3.49p 3.57p 35 Notes (continued) (forming part of the ﬁ nancial statements) 9 Finance income and expense Recognised in the income statement Finance income Rent deposit interest Interest receivable Total ﬁ nance income Finance expense Interest payable on bank borrowings Consignment and vehicle 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 Adjustment in respect of prior years Adjustment in respect of prior years – capital allowances claim Deferred tax Utilisation of tax losses paid to previous owner of subsidiary undertaking Adjustment in respect of prior years Origination and reversal of temporary differences Total tax expense 36 2014 £000 2013 £000 2 70 72 318 246 564 318 246 564 2014 £000 1,013 (10) - 1,003 - 3 152 155 1,158 3 57 60 293 287 580 293 287 580 2013 £000 854 7 (335) 526 162 (257) 103 8 534 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 22.16% (2013: 23.58%) Non-deductible expenses Accounting deprecation for which no tax relief is due Utilisation of brought forward losses Tax payment due to previous owners of subsidiary in relation to utilisation of pre-acquisition losses Change in tax rate Adjustments in respect of prior years Change in deferred tax in respect of property Total tax expense 2014 £000 4,153 1,158 5,311 1,177 44 132 (92) - 6 (7) (90) 1,158 2013 £000 3,492 534 4,026 949 35 125 (162) 162 68 (585) (58) 534 The applicable tax rate for the current year is 22.16% (2013: 23.58%) following the reduction in the main rate of UK corporation tax from 23% to 21% with eﬀ ect from 1 April 2014. Reductions in the UK corporation tax rate from 23% to 21% (eﬀ ective from 1 April 2014) and 20% (eﬀ ective from 1 April 2015) were substantively enacted on 2 July 2013. This will reduce the Company’s future current tax charge accordingly. The deferred tax asset at 31 August 2014 has been calculated based on the rate of 20% substantively enacted at the balance sheet date. 37 Notes (continued) (forming part of the ﬁ nancial statements) 11 Property, plant and equipment Cost Balance at 1 September 2012 Additions Branch acquisitions Disposals Balance at 1 September 2013 Additions Branch acquisitions Disposals Transfer Freehold land & buildings Long leasehold land & buildings Short leasehold improvements Plant & equipment Fixtures, ﬁ ttings & computer equipment Total £000 £000 £000 £000 £000 £000 20,287 20 3,017 - 23,324 6,514 3,750 - 941 5,058 - - - 3,931 421 - - 5,058 4,352 - - - (941) 104 104 (8) - 2,709 114 105 (121) 2,807 159 112 (171) - 6,485 234 86 (239) 38,470 789 3,208 (360) 6,566 42,107 761 245 (482) - 7,538 4,211 (661) - Balance at 31 August 2014 34,529 4,117 4,552 2,907 7,090 53,195 Depreciation Balance at 1 September 2012 Charge for the year Disposals Balance at 1 September 2013 Depreciation charge for the year Disposals Transfer 1,613 300 - 1,913 364 - 213 557 82 - 693 71 - (213) 3,095 285 - 3,380 287 (8) - 2,300 207 (120) 2,387 223 (171) - 5,154 520 (239) 5,435 586 (482) - 12,719 1,394 (359) 13,754 1,531 (661) - Balance at 31 August 2014 2,490 497 3,659 2,439 5,539 14,624 Net book value At 31 August 2013 21,411 4,419 At 31 August 2014 32,039 3,620 972 893 420 468 1,131 28,353 1,551 38,571 As at 31 August 2014 there are no capital commitments (2013: £nil) The directors have considered the property portfolio for impairment by comparing the carrying amount to the higher of value in use or market value and have concluded that no impairment is required. Security The title of all freehold and long leasehold properties have been pledged as security to the bank loans disclosed in note 17. Property, plant and equipment under construction At 31 August 2014 there were no assets in the course of construction (2013: £nil). 38 Notes (continued) (forming part of the ﬁ nancial statements) 12 Intangible assets Cost Balance at 1 September 2012 Balance at 1 September 2013 Additions Balance at 31 August 2014 Amortisation and impairment Balance at 1 September 2012 Amortisation Balance at 1 September 2013 Amortisation for the year Balance at 31 August 2014 Net book value At 31 August 2013 and 1 September 2013 At 31 August 2014 Goodwill Software £000 £000 Other £000 346 346 5,000 5,346 - - - - - 346 5,346 720 720 25 745 675 35 710 11 721 10 24 176 176 - 176 176 - 176 - 176 - - Total £000 1,242 1,242 5,025 6,267 851 35 886 11 897 356 5,370 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 Subsidiary undertakings Cambria Automobiles Group Limited England and Wales Holding Company Cambria Automobiles Acquisitions Limited ** England and Wales Investment Company Cambria Automobiles Property Limited ** England and Wales Property Company Class and percentage of shares held 100% Ordinary 100% Ordinary 100% Ordinary Cambria Automobiles (Swindon) Limited * England and Wales Motor retailer 100% Ordinary & Preference Grange Motors (Swindon) Limited * England and Wales Motor retailer Thoranmart Limited * England and Wales Motor retailer Cambria Vehicle Services Limited* England and Wales Motor retailer Cambria Automobiles (South East) Limited* England and Wales Motor retailer Grange Motors (Brentwood) Limited*** England and Wales Motor retailer 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary Invicta Motors Limited*** England and Wales Motor retailer 100% Ordinary & Preference Invicta Motors (Maidstone) Limited* England and Wales Motor retailer Deeslease Limited*** Dove Group Limited*** Translease Vehicle Management Limited*** England and Wales England and Wales England and Wales Dormant Dormant Dormant 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 Impairment loss and subsequent reversal 2014 £000 11 2013 £000 35 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 and Cambria Automobiles (Swindon) Ltd Thoranmart Ltd Grange Barnet dealership Goodwill 2014 £000 261 85 5,000 5,346 2013 £000 261 85 346 The recoverable amount of each CGU has been calculated with reference to its value in use. The calculation for Grange Motors (Swindon), Cambria Automobiles (Swindon) and Thoranmart is performed via 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. For the Grange Barnet dealership the calculation of the value in use is performed by reviewing the EBITDA over a longer period. The key assumptions of this calculation are shown below: Period on which management approved forecasts are based Growth rate applied beyond approved forecast period Discount rate (weighted average cost of capital) 2014 3 years 7.1% 3.5% The growth rates used in value in use calculation reﬂ ect the average growth rate in operating proﬁ t experienced by the Group for the overall operations over the past 3 years. 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 a deferred tax asset is recognised is set out below, along with the movement in the balance in the year. The asset would be recovered if oﬀ set against future taxable proﬁ ts of the group. Property, plant and equipment Provisions Tax value of loss carry-forward Tax value of pre-acquisition loss carry-forward 1 September 2013 Recognised in income Net 31 August 2014 Deferred tax liabilities Deferred tax assets £000 £000 £000 £000 £000 493 5 28 92 618 (62) - (1) (92) (155) 431 5 27 - 463 (136) - - - (136) 567 5 27 - 599 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 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. Amount payable to previous owner of subsidiary Unrecognised deferred tax assets and liabilities 2014 £000 164 2013 £000 439 The deferred tax asset in relation to loss carried forward within a subsidiary has not been recognised due to uncertainty over the future proﬁ tability of the subsidiary, these losses are locked in to this particular subsidiary and cannot be utilised in the wider Group. Tax value of loss carry-forwards Unrecognised net tax assets Assets 2014 £000 657 657 2013 £000 657 657 Reductions in the UK corporation tax rate from 23% to 21% (eﬀ ective from 1 April 2014) and 20% (eﬀ ective from 1 April 2015) were substantively enacted on 2 July 2013. This will reduce the Company’s future current tax charge accordingly. The deferred tax asset at 31 August 2014 has been calculated based on the rate of 20% substantively enacted at the balance sheet date. 41 Notes (continued) (forming part of the ﬁ nancial statements) 14 Inventories Vehicle consignment stock Motor vehicles Parts and other stock 2014 £000 47,132 27,392 2,576 77,100 2013 £000 38,287 25,855 2,106 66,248 Included within inventories is £nil (2013: £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 £385 million (2013: £340 million). Details of stock held as security is given in note 18. 15 Trade and other receivables Trade receivables Prepayments and other receivables 2014 £000 7,130 3,228 10,358 2013 £000 5,790 2,248 8,038 Included within trade and other receivables is £nil (2013: £nil) expected to be recovered in more than 12 months. 16 Cash and cash equivalents Cash and cash equivalents per balance sheet 10,251 14,754 Cash and cash equivalents per cash ﬂ ow statement 10,251 14,754 2014 £000 2013 £000 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 2014 £000 2013 £000 12,875 10,317 2,020 1,550 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 Loan 01/02/2013 Loan 03/02/2014 Loan 07/07/2014 Bank of England Base Rate +1.25% Bank of England Base Rate +1.25% LIBOR +1.75% LIBOR +3.00% LIBOR +1.95% LIBOR +1.95% LIBOR +1.95% 2019 2020 2020 2017 2018 2019 2019 2014 £000 1,409 435 5,047 1,751 1,683 2,470 2,100 2013 £000 1,688 507 5,834 1,957 1,881 - - 14,895 11,867 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 2014 £000 55,419 10,537 11,306 20,710 97,972 2013 £000 44,760 7,937 9,524 18,905 81,126 Included within trade and other payables is £ nil (2013: £nil) expected to be settled in more than 12 months. Both the consignment and vehicle funding creditors are secured on the stock to which they relate. 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 £326,000 (2013: £152,000). 20 Provisions Balance at 1 September 2013 Provisions used during the year Balance at 31 August 2014 Current Non current Balance at 31 August 2013 Current Non current Balance at 31 August 2014 Onerous Leases £000 51 (40) 11 41 10 51 11 - 11 The onerous lease provision is being released against the costs incurred on the relevant lease. The provision will be fully released by 2015. 44 Notes (continued) (forming part of the ﬁ nancial statements) 21 Capital and reserves Share capital Authorised 100,000,000 Ordinary shares of 10 pence each Allotted, called up and fully paid 100,000,000 Ordinary shares of 10 pence each Shares classiﬁ ed in shareholders funds 2014 £000 10,000 10,000 10,000 10,000 10,000 10,000 2013 £000 10,000 10,000 10,000 10,000 10,000 10,000 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) Dividends The following dividends were paid by the Company in the year ended 31 August. 0.4p per ordinary share - prior year ﬁ nal (2013: 0.3p) 0.1p per ordinary share - current year interim (2013: 0.1p) 2014 £000 400 100 500 2013 £000 300 100 400 After the end of the reporting period, the following dividends were proposed by the directors. The dividends have not been provided for and there are no tax consequences. 0.5p per ordinary share - current year ﬁ nal (2013: 0.4p) 2014 £000 500 2013 £000 400 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 rates used to discount estimated cash ﬂ ows, where applicable are based on the weighted average cost of capital and were as follows: Loans and borrowings 46 2014 % 3.5 2013 % 3.0 Notes (continued) (forming part of the ﬁ nancial statements) Fair values 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: 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 Total Financial assets Financial liabilities Financial liabilities at amortised cost Other interest-bearing loans and borrowings (note 17) Trade and other payables (note 18) As at 31 August 2014 As at 31 August 2013 £000 £000 7,130 3,228 10,251 5,790 2,248 14,754 20,609 22,792 14,895 97,972 11,867 81,126 Total Financial liabilities 112,867 92,993 The Directors consider the carrying amount of the Group’s ﬁ nancial assets and ﬁ nancial liabilities, as detailed above, approximate their fair value. 47 Notes (continued) (forming part of the ﬁ nancial statements) 22 Financial instruments (continued) 22 (b) Credit risk Credit risk management The Group is exposed to credit risk primarily in respect of its trade receivables. 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 £7,130,000 (2013: £5,790,000) being the total of the carrying amount of trade receivables 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 2014 £000 7,130 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 2014 £000 3,359 2,403 1,368 7,130 2013 £000 5,790 2013 £000 2,486 2,767 537 5,790 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. Gross Impairment Gross Impairment 2014 £000 7,130 89 7,219 2014 £000 - 89 89 2013 £000 5,790 123 5,913 2013 £000 - 123 123 Trade receivables not past due Trade receivables past due 48 Notes (continued) (forming part of the ﬁ nancial statements) 22 Financial instruments (continued) 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 1 September 2013 Impairment gain recognised Allowance for Impairment utilised Balance at 31 August 2014 £000 123 (11) (23) 89 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 prime 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 £1,844,000 (2013: £2,195,000) at Bank of England base rate plus 1.25%, loans of £5,047,000 (2013: £5,834,000) at LIBOR plus 1.75%, loans of £1,751,000 (2013: £1,957,000) at LIBOR plus 3% and on loans of £6,253,000 (2013: £1,881,000) at LIBOR plus 1.95%. Carrying amount Contractual cash ﬂ ows 1 year or less 1 to <2years 2 to <5years 2013 £000 £000 £000 £000 £000 5years and over £000 Non-derivative ﬁ nancial liabilities Secured bank loans 11,867 12,835 1,818 1,782 6,868 2,367 Carrying amount Contractual cash ﬂ ows 1 year or less 1 to <2years 2 to <5years 2014 £000 £000 £000 £000 £000 5years and over £000 Non-derivative ﬁ nancial liabilities Secured bank loans 14,895 15,998 2,362 2,314 10,115 1,207 49 Notes (continued) (forming part of the ﬁ nancial statements) 22 Financial instruments (continued) 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 2014 £000 10,251 (20,710) (14,895) 2013 £000 14,754 (18,905) (11,867) (25,354) (16,018) 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 underlying earnings from 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 An increase 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. 2014 £000 176 2013 £000 149 176 149 Equity Decrease Proﬁ t or loss Decrease 50 Notes (continued) (forming part of the ﬁ nancial statements) 22 Financial instruments (continued) 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 deﬁ cit/ (surplus) 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 at 31 August 2014 As at 31 August 2013 £000 14,895 (10,251) £000 11,867 (14,754) 4,644 (2,887) 28,286 24,633 16.4% (11.7%) 2014 £000 2,394 8,775 16,153 2013 £000 2,409 7,491 20,193 27,322 30,093 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 £2,440,000 was recognised as an expense in the income statement in respect of operating leases (2013: £2,644,000). 51 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 2013 and 2014. 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 Property 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 46.96% (2013: 47.81%) per cent of the voting shares of the Company. The compensation of key management personnel is as follows: Directors’ emoluments Salaries and consultancy fees Annual bonus The emoluments consist of: Directors’ emoluments Philip Swatman James Mullins Mark Lavery Sir Peter Burt Michael Burt 2014 £000 655 473 2013 £000 530 498 1,128 1,028 Total 2014 £000 30 298 750 25 25 Total 2013 £000 30 268 680 25 25 473 1,128 1,028 Salaries Bonus 2014 £000 - 123 350 - - 2014 £000 30 175 400 25 25 655 All directors beneﬁ ted from qualifying third party indemnity provisions during the ﬁ nancial period. 52 Notes (continued) (forming part of the ﬁ nancial statements) 25 Related parties (continued) During the year Mark Lavery bought 4 vehicles from the Group and sold 4 vehicles back to the Group, James Mullins bought 4 vehicles from the Group and sold 4 vehicles back to the Group. Sir Peter Burt bought 3 vehicles from the Group and sold 3 vehicles back to the Group. Michael Burt bought 2 vehicles from the Group and sold 2 vehicles back to the Group. Philip Swatman bought 1 vehicle and sold 1 vehicle back to the Group. All transactions were carried out at arm’s length and there were no outstanding balances due to the Group at the year end, the average value of each transaction in the year was £47,805. 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 Post balance sheet events Dividend The Board is pleased to announce that it will make a ﬁ nal dividend payment in respect of the ﬁ nancial year to 31 August 2014 of 0.5p (2013: 0.4p) per share in addition to the interim payment of 0.1p per share. 53 Company Balance Sheet At 31 August 2014 Fixed assets Tangible Fixed Assets Investments Current assets Stock Debtors Cash at bank and in hand Creditors: amounts falling due within one year Net current assets Total assets less current liabilities Net assets Capital and reserves Called up share capital Share premium account Proﬁ t and loss account Shareholders’ funds Note 2014 2013 £000 £000 £000 £000 5 6 7 8 9 11 12 12 109 666 860 4,985 9,445 15,290 (2,853) 97 666 775 763 780 407 14,802 15,989 (2,509) 12,437 13,212 13,212 10,000 799 2,413 13,212 13,480 14,243 14,243 10,000 799 3,444 14,243 These ﬁ nancial statements were approved by the board of directors on 24 November 2014 and were signed on its behalf by: M J J Lavery Director Company number: 05754547 54 Company Reconciliation of movements in shareholders’ funds for the year ended 31 August 2014 (Loss)/proﬁ t for the ﬁ nancial year Dividend paid Net decrease in shareholders’ funds Opening shareholders’ funds Closing shareholders’ funds Note Company Company 12 2014 £000 (531) (500) (1,031) 14,243 13,212 2013 £000 28 (400) (372) 14,615 14,243 55 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 Strategic report on page 16. 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: • computer equipment 3 to 5 years Investments Investments in subsidiary undertakings are stated at cost less amounts written oﬀ . Where impairment indicators exist, the carrying value of investments will be reviewed against the value is use based upon the estimated future cash ﬂ ows of the subsidiary undertaking. Stocks Stocks are stated at the lower of cost and net realisable value. In determining the cost of motor vehicles, the actual amount payable 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). 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. 56 Notes (continued) Classiﬁ cation of ﬁ nancial instruments issued by the Company 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. 2 Remuneration of directors Directors’ emoluments Salaries Annual bonus Pension costs The emoluments in respect of the highest paid director were: Directors’ emoluments Salaries Annual bonus All directors beneﬁ ted from qualifying third party indemnity provisions during the ﬁ nancial period. 2014 £000 655 473 2 2013 £000 530 498 - 1,130 1,028 2014 £000 400 350 750 2013 £000 300 380 680 57 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 Other pension costs 4 Dividends The aggregate amount of dividends paid & received compromises: Aggregate amount of dividends paid in the ﬁ nancial year Aggregate amount of dividends received in the ﬁ nancial year Company 2014 Company 2013 49 48 Company Company 2014 £000 3,336 443 28 2013 £000 3,128 404 14 3,807 3,546 2014 £000 500 - 2013 £000 400 - The aggregate amount of dividends proposed but not recognised at the year end is £500,000 (2013: £400,000). 58 Notes (continued) 5 Tangible ﬁ xed assets Company Cost At 1 September 2013 Additions Disposals At 31 August 2014 Depreciation At 1 September 2013 Charge for year Disposals At 31 August 2014 Net book value At 31 August 2014 31 August 2013 Computer equipment £000 543 94 (14) 623 446 82 (14) 514 109 97 Total £000 543 94 (14) 623 446 82 (14) 514 109 97 59 Notes (continued) 6 Fixed asset investments Company Cost and net book value At 1 September 2013 and 31 August 2014 Shares in group undertakings £000 666 The directors have considered the investments in subsidiary undertakings for impairment by comparing the carrying amount to the value in use and have concluded that no impairment is required. 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 Cambria Automobiles Property Limited ** England and Wales Property Company 100% Ordinary 100% Ordinary 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 60 2014 £000 860 2013 £000 780 Notes (continued) 8 Debtors Trade debtors Amounts owed by group undertakings Prepayments and accrued income Deferred tax (note 10) Other taxation 9 Creditors: amounts falling due within one year Amounts owed to group undertakings Trade creditors Vehicle funding Other taxation and social security Accruals and deferred income Corporation tax The vehicle funding creditor is secured on the stock to which it relates. 2014 £000 18 4,458 380 38 91 4,985 2014 £000 - 339 317 251 1,946 - 2,853 2013 £000 33 - 337 37 - 407 2013 £000 121 394 493 126 1,370 5 2,509 61 Notes (continued) 10 Deferred taxation Deferred Taxation At 1 September 2013 Movement in period At 31 August 2014 The elements of deferred taxation asset are as follows: Difference between accumulated depreciation and capital allowances Other timing differences Total deferred tax 2014 £000 38 - 38 £000 Company 37 1 38 2013 £000 37 - 37 62 Notes (continued) 11 Called up share capital Authorised 2014 £000 2013 £000 100,000,000 Ordinary shares of 10 pence each 10,000 10,000 Allotted, called up and fully paid 100,000,000 Ordinary shares of 10 pence each Shares classiﬁ ed in shareholders funds 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 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. 12 Share premium and reserves At 1 September 2013 Loss for the year Dividend paid At 31 August 2014 Share premium account Proﬁ t and loss account £000 799 - - 799 £000 3,444 (531) (500) 2,413 13 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. 63

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