Cambria Automobiles plc
Annual Report 2015

Plain-text annual report

Annual report and financial statements Registered number 05754547 31 August 2015 Contents Summary ........................................................................... 4 Chairman’s statement ....................................................... 7 Operating and financial review ........................................ 10 Strategic report ............................................................... 18 Directors’ report .............................................................. 20 Statement of directors’ responsibilities in respect of the Directors’ report and the financial statements .......... 21 Independent auditor’s report to the members of Cambria Automobiles plc ................................................ 22 Consolidated statement of comprehensive income ........ 24 Consolidated statement of changes in equity ................. 25 Consolidated statement of financial position .................. 26 Consolidated cash flow statement .................................. 27 Notes ............................................................................... 28 Company balance sheet ................................................. 58 Company reconciliation of movements in shareholders’ funds ......................................................... 59 Notes ............................................................................... 60 2 2 33 Financial Highlights Year ended 31 August 2015 2014 Revenue Underlying EBITDA* Underlying operating profit* Underlying profit before tax* Underlying profit before tax margin* Non-recurring expenses Underlying earnings per share* Earnings per share Dividend per share £m 523.8 10.2 8.5 7.7 1.5% 0.1 6.08p 6.03p 0.75p £m Change 450.1 7.4 5.9 5.4 1.2% 0.1 4.22p 4.15p 0.6p 16.4% 37.8% 44.1% 42.6% 30bps 44.1% 45.3% 25.0% * These items exclude non-recurring expenses of £0.1m (2014: £0.1m) 4 Strong balance sheet - net assets £33.7m 4 Return on Equity at 19.6% (2013/14: 15.9%) 4 Strong operational cash flows, cash position of £15.4m (2013/14: £10.3m) 4 Proposed final dividend of 0.6p, full year up by 25.0% to 0.75p per share (2013/14: 0.6p) 4 Net cash of £1.0m (2013/14: net debt £4.6m) after significant investment in April 2015 4 Post year-end, new £37.0m, 5 year banking facilities arranged, including an undrawn £22m revolving credit facility, providing additional funding capacity 4 Summary Operational Highlights 4 Growth in new vehicle sales of 9.0% 4 Barnet Jaguar Land Rover 4 New retail profit per unit increased by 12.6% 4 Increase in used vehicle unit sales of 4.4% 4 Used car profit per unit increased by 5.3% 4 Increase of 7.8% in service and bodyshop hours sold acquisition from June 2014 integrating well with profit contribution in line with expectations 4 Swindon Land Rover acquired on 30 April 2015 for £7.6m, integrating well and contributed in line with expectations 5 Summary (continued) Mark Lavery, Chief Executive Officer of Cambria said: “The Group has delivered a strong set of full year results, with our sales exceeding £500m for the first time. Along with the growth in our underlying profitability, this milestone reflects the continued progress that has been made across our businesses as we take advantage of the UK economic recovery by identifying the right acquisition opportunities and strengthening our position in high luxury and premium brands. The acquisitions of the Jaguar Land Rover business in Barnet and the Land Rover business in Swindon fully align with this strategy and I am pleased to report that both businesses have integrated well. “Post the period end, the Group’s growth momentum has continued in the first two months of the new financial year with results substantially ahead of the comparable period. We have also successfully agreed a new set of 5 year banking facilities, which, combined with our strong cash reserves, have boosted our acquisition capacity. The Board remains focused on strengthening its brand portfolio by actively delivering on our stated acquisition strategy to enhance shareholder value. We are well placed to continue our growth in the current financial year.” 6 Chairman’s statement I am very pleased to report that Cambria has delivered a strong set of results for the year ended 31 August 2015, which show continued improvement in the Group’s operational and financial performance and successful delivery of its stated growth strategy. The UK motor retail industry has continued to demonstrate year-on-year growth with the new car market reporting buoyant registration data supported by strong consumer offers and a favourable exchange rate environment. The Group reported significant operational improvements in the 2013/14 financial year and these have impacted positively the 2014/15 year. The Group generated gross profit growth across all core elements of the business, New Vehicles, Used Vehicles and Aftersales, as well as delivering another significant premium brand acquisition in Land Rover Swindon to add to the major acquisition in the previous year. These earnings accretive acquisitions have been delivered in line with the strategy for growth in the premium and high luxury segment and have achieved our robust investment criteria. Revenue increased by 16.4% to £523.8m (2013/14: £450.1m). Underlying profit before tax rose by 42.6% to £7.7m (2013/14: £5.4m). Profit before tax also improved by 45.2% to £7.7m (2013/14: £5.3m), giving earnings per share of 6.03p (2013/14: 4.15p) - an increase of 45.3%. The Group closed the year with net cash of £1.0m (2013/14: net debt £4.6m) and net assets of £33.7m (2013/14: £28.3m), underpinned by the ownership of £37.6m (2013/14: £35.7m) of freehold and long leasehold properties. Our capacity for making acquisitions, and the facilities development programme, have been enhanced post year end with a new set of banking facilities of £37m. These facilities refinance the existing term loans of £14.4m and make available a further £22.0m of Revolving Credit Facility. Group overview Cambria was established in 2006 with a strategy to build a balanced motor retail group through close cooperation with our manufacturer partners to deliver the self-funded acquisition and turnaround of underperforming businesses. In my previous reports, I stated that our strategy had evolved to encompass the acquisition of premium and high luxury businesses located in geographically strategic locations which would be immediately earning enhancing. In 2014 the Group, in line with this strategy was pleased to be able to announce the acquisition of the Jaguar and Land Rover dealership in Barnet. The Board has been very pleased with the manner in which this business has integrated and is confident that it will continue to deliver results in line with expectations. Following on from this successful acquisition, management has continued to identify and review acquisition opportunities that meet these criteria, and on 30 April 2015 completed the acquisition of Swindon Land Rover for a total consideration of £7.6m including £2.3m of freehold property. In the four months of ownership the Swindon Land Rover business has contributed positively to the Group and is integrating well. The strength of the Group’s balance sheet and new financing resources available allows us to continue our acquisition strategy, realise our brand balance ambitions, while meeting our financial return criteria. Following the acquisitions, and the closure of the Group’s only Citroen new car sales franchise in Swindon, the Group now comprises 29 dealerships, representing 45 franchises and 17 brands, a well balanced brand portfolio spanning the high luxury, premium and volume segments. Our relationship with the manufacturers which 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 effective and valued business partner. I would also like to thank all our 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 enhance their ability to provide a world class Guest experience. 7 Chairman’s Statement (continued) Dividend The Board is pleased to announce a final dividend of 0.6p per share (2013/14: 0.5p), subject to shareholder approval, resulting in a total dividend for the year of 0.75p per share (2013/14: 0.6p) - an increase of 25.0%. 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 43 consecutive months of year-on-year growth in new car registrations to September 2015. This continuous growth trajectory plateaued in October against a strong prior year comparative and a market which is expected to reach a record high in 2015 at over 2.6m new car registrations. We believe that the new car market will remain robust although we do not expect year-on-year growth in new car registrations to continue when the market reaches its natural mid-cycle level. I am pleased to report that Cambria has maintained its growth momentum in the first two months of the new financial year, delivering results substantially ahead of the comparable period. We are actively looking to deliver on our stated acquisition strategy to further enhance the brand portfolio in strategic areas, whilst maintaining our aim to produce superior returns on Shareholders’ funds, which reached 19.6% in the year under review (2013/14: 15.9%). The Board is pleased with the progress that has been made over the last two financial years and intends to continue to exploit growth opportunities whilst driving the core operation of the existing businesses. Philip Swatman Chairman 8 ‘ A culture of delivering a World Class Guest Experience is engrained into the business through the Cambria Academy training programme ’ 9 Operating and Financial Review Chief Executive’s review Introduction I am pleased to report that the Group has delivered a very good set of results for the 2015 financial year. The operational and financial performance improvements delivered in H1 2015 continued into the second half with underlying profit before tax rising to £7.7m, a 42.6% increase on the previous year. It is pleasing to report that the results reflect both organic growth and profit increases in the like-for-like businesses as well as delivery of the anticipated earnings from the acquisitions made in the current and previous financial year. In line with our acquisition strategy, we completed the purchase of our second Land Rover dealership in Swindon in April 2015 for £7.6m from existing cash resources and term debt. The integration of this business is progressing well and the business has operated in line with our expectations during the first four months of ownership. During the year under review, the like-for- like businesses contributed a £6.5m profit before tax, a 20.4% year on year increase, whilst the Barnet and Swindon acquisitions contributed £1.2m profit before tax. The table below summarises our financial performance, which is detailed in the Finance Director’s Report: Year ended 31 August Revenue Underlying EBITDA* Underlying operating profit* Underlying profit before tax* Underlying profit before tax margin* EBITDA Operating profit Profit before tax Non-recurring expenses Net Assets Profit before tax margin Underlying earnings per share* Earnings per share * These items exclude non-recurring expenses of £0.1m (2013/14: £0.1m) 2015 £m 523.8 10.2 8.5 7.7 1.5% 10.1 8.4 7.7 0.1 33.7 1.5% 6.08p 6.03p 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 10 Operating and Financial Review (continued) Total revenue for the Group exceeded £500m for the first time in its history, a milestone in the Group’s evolution from its inception in 2006. Through a combination of operational improvements and strategic acquisitions the Group intends to continue to deliver controlled growth and increasing profitability. The Group also continued to deliver strong operational cashflow during the year which funded the acquisition of the Swindon Land Rover business, and ensures that we have resources available to continue with our acquisition strategy to develop the Group’s profitability and franchise mix. During the year we have worked with our banking partner Lloyds Banking Group to structure a new set of banking facilities that will provide a refinancing of the existing £14.4m term loans and make available a £15.0m Revolving Credit Facility for acquisitions and a further development facility of up to £7.0m for the property projects at our Barnet and Swindon dealerships to deliver the new Jaguar Land Rover corporate standard facilities. 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 significant investment in the management of those businesses. Our current portfolio of Brand Partners and dealerships comprises: High Luxury / Premium Aston Martin Alfa Romeo Honda Jaguar Land Rover Volvo Volume Abarth Jeep Dacia Fiat Ford Mazda Nissan Renault Seat Vauxhall 3 2 2 6 2 5 20 Motorcycle Triumph 1 2 1 5 5 4 1 1 1 2 23 2 2 During the year the Group acquired the Swindon Land Rover business for a total consideration of £7.6m, which included £2.3m of freehold land and property, £0.1m of fixed assets and £2.2m of net working capital assets resulting in £3.0m of goodwill. It is our intention to fully re-develop our Swindon Motor Park location to provide a new Jaguar Land Rover (JLR) facility in line with the new Arch design concept for JLR facilities. It is anticipated that the development will be completed by summer 2017 and we are initiating the planning and design process imminently. Once the new development is complete, we will relocate the Land Rover business from the existing dealership property in Royal Wootton Bassett, and will then dispose of the Royal Wootton Bassett facility. When we acquired the Barnet Jaguar Land Rover dealership in the 2013/14 financial year we committed to develop the freehold site to provide a Jaguar Land Rover Arch concept facility on that location. At the time of writing we have now secured full planning consent and are in the process of finalising the negotiations with contractors for delivery of the site. It is our expectation that the site development will begin in calendar Q1 2016 with completion in calendar Q1 2017. We are excited about this development and are confident that once complete it will provide an exceptional facility from which we can deliver a great Guest Experience and achieve the full potential of the businesses. Cambria has enjoyed the benefits 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. 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 both the Barnet and Swindon acquisitions, the businesses were re-branded as “Grange”. 11 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 12 Operating and Financial Review (continued) Operations 2015 Revenue 2015 Revenue mix 2015 Gross Profit 2015 Margin 2014 Revenue 2014 Revenue mix 2014 Gross Profit 2014 Margin £m 238.4 235.9 60.6 (11.1) 523.8 % 45.5 45.0 11.6 (2.1) 100.0 £m 15.5 20.8 25.8 - 62.1 (53.6) 8.5 (0.1) 8.4 % 6.5 8.8 42.5 - 11.9 1.6 £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 2015 11,388 2014 Year on year growth 10,451 9.0% New Vehicles Used Vehicles Aftersales Internal sales Total Administrative expenses Operating profit before non- recurring expenses Non-recurring expenses Operating profit New Vehicle Sales New units New vehicle revenue increased from £195.2m to £238.4m with total new vehicle sales volume up 9%. Excluding the impact of Barnet and Swindon acquisitions, our new volumes rose by 1.1% on a like-for-like basis. Gross profit also increased by £3.2m (26.0%) in total and £0.3m on a like-for-like basis with an improvement in the gross profit per unit sold. This strong performance was delivered against an overall year-on-year increase of 7.2% in new UK car registrations in the 12 month period to 31 August 2015. New car registrations for the rolling 12 months exceeded 2.57m in this period for the first time since 2007, and it is anticipated that in the calendar year 2015 total registrations will exceed 2.6m for the first time. The private registrations element of the new car market increased 4.4% year-on-year. ASE industry data indicates that dealer sales are at a lower level than the SMMT registration data which also includes the impact of self/pre-registrations. The Group’s sale of new vehicles to private individuals was 9.2% higher year-on-year at 9,693 units. Commercial and fleet vehicle sales by the Group increased by 11.6% to 1,090 units and by 0.8% to 605 units respectively; these sales are transacted at lower margins hence the dilutive effect on overall new car gross margin. Used Vehicle Sales Used units 2015 14,945 2014 Year on year growth 14,320 4.4% We have delivered a strong performance in used vehicle sales. Revenues increased from £208.9m to £235.9m and the number of units sold rose by 4.4%. Like-for-like volumes were up 1.3%. The gross profit generated increased by £1.8m (9.5%) in total and £0.9m on a like-for-like basis. The Group continues to place a major focus on managing and driving the used car operation within the business, and pleasingly, the improved controls and trading style that the Group has adopted is delivering results. Over the past 24 months, the Group has adopted a “Velocity” trading strategy which involves applying consistent controls to the level of used car stock being held, the pricing and presentation of the inventory and the penetration of Finance and Insurance products to the sale of used cars. The adoption of this trading style has resulted in the average gross profit on each unit retailed increasing year on year to £1,395 per unit (up 5.3%). The adoption of the Velocity trading strategy means that the Group has also concentrated on tight management of its used vehicle inventories, closely monitoring stock turn and used car Return on Investment with an improvement to 137% in the year from 119% in 2013 and 122% in 2014. Cambria has therefore further distanced itself from the industry average used car Return on investment of 76.5% 13 Operating and Financial Review (continued) Aftersales Service and Bodyshop hours 2015 2014 Year on year growth 341,611 316,963 7.8% Overall, the service and bodyshop elements of the business increased the number of hours sold by 7.8% and the total aftersales gross profit by £1.9m (7.9%) to £25.8m. The combined aftersales revenue increased 8.6% year on year from £55.8m to £60.6m. The aftersales departments contributed 41.5% of the Group’s overall gross profit. 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 confidence of further progress in Guest relationship and retention and the aftersales business remaining strong. 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 and bank facilities. The earnings enhancing acquisitions over the past two years of the Barnet and Swindon businesses are firmly in line with this strategy and the opportunity to develop our relationship with Jaguar Land Rover fits our brand portfolio aspirations perfectly. We have now completed eleven separate transactions since our incorporation. Following any acquisition, the Cambria management team implements new financial and 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 through the Cambria Academy training. 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 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 reflect market value and that any unusual contractual obligations are addressed prior to acquisition in order to avoid taking on any legacy costs. We do not have any defined benefit 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 will 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 and Swindon, where a premium may need to be paid, we will still focus on ensuring that the Group delivers strong and consistent returns on equity. Integration The integration process of every new dealership 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 benefits commensurate with the particular business. An analysis of training needs is conducted, followed by the implementation of training programmes for all relevant Associates in the new business. Operation With any new acquisition, the standard financial controls are implemented immediately, ranging from individual cheque signatories to daily reporting of vehicle sales and aftersales revenues, margins and other performance figures. 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. 14 Operating and Financial Review (continued) Cambria Academy The Group has continued to develop the Cambria Academy, a training Academy for the Group’s Associates, which was established nearly three years ago. The Academy is evolving consistently in order to support the business and development needs of the Group. The initial training programmes for the sales teams have been supplemented with induction programmes and specific telephone handling courses to ensure that we increase the competency of all our Associates in dealing with Guest enquiries effectively. The Academy was established to enhance the Cambria Guest Experience with the 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 refine 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 financial year has started strongly. Group performance in the first two months is significantly ahead of the comparable period of the 2014/15 financial year, and is tracking ahead of current market expectations. I am pleased with the progress that we are making across our established businesses; and I am also pleased with the progress that we are making in both the Barnet and Swindon acquisitions. Whilst there is further work to do in order that those businesses achieve their potential, the opportunity to generate significant returns from these business is substantial. I am confident that through a disciplined approach to managing the used car operation and adhering to the principles of the “Velocity” trading strategy that we have adopted, that Cambria can maintain this momentum and deliver further improved performances across all its departments in the current financial year. Our continued strong cash generation and new banking facilities leave us well positioned to develop our balanced brand portfolio. We will continue to focus on the development of our high luxury and premium brands and Cambria continues to invest in identifying acquisition opportunities. Whilst there were 43 consecutive months of year-on-year growth in new car registrations in the UK to September, and a stabilising in October, we believe that at just over 2.6m registrations for the year, the new car market is now mid-cycle and will remain around this level. The UK remains an attractive place for the vehicle manufacturers to register and sell cars given the overall recovery of the economy and the exchange rate benefit that the manufacturers receive if sterling remains strong. As a result of the exchange rate benefit and the ongoing low interest rate environment, vehicle manufacturers continue to deliver strong consumer offers, which represent attractive propositions for our Guests to acquire new cars. The level of cars sold on Personal Contract Purchase “PCP” related products has increased significantly over the past four years. As a result of the increased penetration of the PCP offers, 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 and creates an opportunity for us to engage with our Guests. Cambria remains data driven, digitised and agile which puts us in a good position to capitalise on the opportunities that the market and brand partners present. We intend to continue the process of enhancing the existing businesses and acquiring businesses that fit strategically in terms of brand, location and return on investment. Mark Lavery Chief Executive 15 Operating and Financial Review (continued) Finance Director’s Report Overview Total revenues in the period increased 16.4% to £523.8m from £450.1m in the prior year. New vehicle unit volumes were up 9% and new vehicle revenues were up 22.1%. Used car unit sales and revenues increased by 4.4% and 12.9% respectively. Revenues from the aftersales businesses increased by 8.6%, compared with the previous year. Total gross profit increased by £6.9m (12.5%) from £55.2m to £62.1m in the year. Gross profit margin across the Group reduced from 12.3% to 11.9%, reflecting the change in revenue mix following the increase in new car sales and the improvement in commercial vehicles and fleet cars. The average selling price of both new and used cars increased year on year, as did the average profit per new and used unit that we sold. The aftersales operations contributed 41.5% of the total gross profit for the Group, compared to 43.3% in the previous period, at a gross profit margin of 42.5%, compared with 42.9% in the previous year. During the year, the Group incurred non-recurring expenses of £57,000 in relation to transaction and set up costs associated with the acquisition of the Swindon Land Rover business. Underlying EBITDA increased by 37.8% in the period to £10.2m from £7.4m in the previous year. Underlying operating profit improved 44% to £8.5m, compared to £5.9m in the previous year, resulting in an underlying operating margin of 1.6% (2013/14: 1.3%). Net finance expenses increased to £0.7m (2013/14: £0.5m) as a result of the additional mortgages against the Barnet and Swindon freehold properties acquired and additional consignment stocking costs relating to the higher level of consignment stock carried across the year. The Group’s underlying profit before tax rose by 42.6% to £7.7m, in comparison with £5.4m in the previous year. The acquisition accounted for a profit of £1.2m in the year, in line with our budget. Underlying earnings per share were 6.08p (2013/14: 4.22p). Basic earnings per share were 6.03p (2013/14: 4.15p) and the Group’s underlying return on shareholders’ funds for the year was 19.6% (2013/14: 15.9%). Taxation The Group tax charge was £1.6m (2013/14: £1.2m) representing an effective rate of tax of 21.2% (2013/14: 21.8%) on a profit before tax of £7.7m (2013/14: £5.3m). As outlined in last year’s report, it is anticipated that the tax rate will continue at a substantially normal effective tax rate. Financial Position The Group has a robust balance sheet with a net asset position of £33.7m underpinned by £37.5m of freehold and long leasehold property which are held on a historic cost basis. Secured against the freehold and long leasehold property are mortgages amounting to £14.4m. As at the balance sheet date, each of the loans has different repayment profiles between three and fifteen 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. Post year end, on 23 November 2015, the Group entered into revised banking arrangements with Lloyds Banking Group to refinance the existing £14.4m of term loans into one standardised facility of £15m that has a 5 year term, and 15 year capital repayment profile. The cost of the facilities is LIBOR plus a margin. The margin attributable to the term loans will be set each quarter and is dependent on the net debt: EBITDA ratio for the Group. The spread of margin chargeable against the facility ranges from 1.2% where the net debt is less than 1 times EBITDA, up to 2% where the net debt is greater than 2.5 times EBITDA. The Group has also arranged two further Revolving Credit Facilities. The first is a 5 year, £15m RCF available for the acquisition of businesses and property, the second is a 5 year property development facility to be used against the development of Barnet and Swindon properties. The maximum drawdown against this facility is £7m, and it is intended that once the developments are complete that the RCF will be converted into a standard amortising term facility. The margins attributable to these Revolving Credit Facilities mirror those attributable to the revised term loan facilities. 16 Operating and Financial Review (continued) The net cash position of the Group as at 31 August 2015 was £1.0m (2013/14: net debt £4.6m), reflecting a cash position of £15.4m (2013/14: £10.3m). This is after the £7.6m investment in acquired businesses. The Group typically 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 £5.0m overdraft facility which is used to manage seasonal fluctuations in working capital. The overdraft facilities are renewable annually and are next due in February 2016. At the balance sheet date, the Group had a £5.0m Revolving Credit Facility, (RCF) which has now been replaced with the revised facilities which give us significant liquidity to identify and approach acquisition targets. Cash Flow and Capital Expenditure The Group generated an operating cash inflow of £15.0m with working capital reducing by £6.4m through efficient management of the vehicle inventory and the stocking lines associated with that inventory, VAT inflow from increased consignment stock levels and higher levels of new vehicle deposits. Total funds invested in business acquisitions and capital expenditure were £8.4m, of which £7.6m related to the acquisition of the Swindon Land Rover business and £0.9m was fixtures and fittings, plant and equipment and computer equipment. We drew down one new term loan of £1.6m against the freehold purchase of the Swindon Land Rover Property. During the year, capital repayments of £2.1m were made against the total term loans outstanding. The capital repayments due in the financial year to 31 August 2016 under the old facilities total £2.1m, under the revised facilities will equate to £1.3m in 2016 and £1m each year thereafter. As a result of the net cash inflow of £5.1m, the gross cash position was £15.4m with gross debt decreasing by £0.5m to £14.4m, overall net debt decreased from a net debt position of £4.6m at 31 August 2014 to a net cash position of £1.0m. Shareholders’ Funds There are 100,000,000 ordinary shares of 10p each with an associated share premium account 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 defined benefit pension schemes and has no liability arising from any such scheme. The Group made contributions amounting to £0.3m (2013/14: £0.3m) to defined contributions schemes for certain employees. Financial Instruments The Group does not have any contractual obligation under any financial instruments with respect to the hedging of interest rate risk. Dividends The Board is pleased to propose a final dividend payment in respect of the financial year to 31 August 2015 of 0.6p per share in addition to the interim dividend of 0.15p per share paid in May 2015. If approved by the shareholders at the Annual General Meeting to be held on 14 January 2016, the dividend will be payable on 21 January 2016 to those shareholders registered on 29 December 2015, with an ex-dividend date of 24 December 2015. 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 23 November 2015 17 Strategic report Enhanced Business Review All details required are covered in the Chairman’s Statement and the Operating and Financial Review between pages 3 and 13. 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 affect 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. The Group uses a variety of financial instruments including cash, borrowings and various items, such as trade debtors and trade creditors that arise directly from its operations. The main purpose of these financial instruments is to provide working capital for the Group’s operations. The Directors are of the view that the main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk, price risk and credit risk. The Directors set and review policies for managing each of these risks and they are summarised below. These policies have remained unchanged from previous years. 18 Strategic report (continued) Interest rate risk The Group finances its operations through a combination of bank funding and shareholders’ funds. The interest rate on bank funding is variable with base rate. Liquidity risk The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. The funding for significant new ventures is secured before commitments are made. Cash flows are monitored on a monthly basis. Price risk The principal price risks arise from vehicle stocks which are either inappropriate for resale, or are bought at too high a price, relative to a fast moving marketplace. The Group’s purchasing staff are trained and developed to be aware of the current marketplace. They are also provided with all the latest available market data. The managers of each business unit consider their stock books and purchasing patterns on a very regular basis, with a higher level of review by the Directors. Credit risk The principal credit risk arises from trade debtors. In order to manage credit risk, the Directors set limits for customers and ensure a regular review is made of trade debtors outstanding. Credit limits are reviewed on a regular basis in conjunction with debt ageing and collection history. All potential areas of financial risk are monitored regularly and reviewed by the Directors and local management. Any preventative or corrective measures are taken as necessary. Associate involvement During the year, the policy of providing associates with information about the Group has been continued through internal media methods in which associates have also been encouraged to present their suggestions and views on the Group’s performance. Regular meetings are held between local management and associates to allow a free flow of information and ideas. Through implementing tight controls and building a strong operational Group infrastructure, the Directors believe they are taking all possible steps to protect the business. By order of the board James Mullins Director 23 November 2015 Dorcan Way, Swindon, SN3 3RA 19 Directors’ report The directors present their directors’ report and financial statements for the year ended 31 August 2015. Principal activities Cambria’s principal activities are the sale and servicing of motor vehicles and the provision of ancillary services. The Group operates from 29 sites with a total of 45 dealer franchises. Proposed dividend The directors recommend the payment of a final dividend for 2015 of 0.6p per share which equates to £0.6m (2014: £0.5m). If approved at the Annual General Meeting to be held on 14 January 2015, the dividend will be payable on 21 January 2016 to those shareholders registered on 29 December 2015. Directors The directors who held office 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 benefited from qualifying third party indemnity provisions in place during the financial period. Associates The Group recognises the benefit of keeping associates informed of group affairs 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 differently 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 effort 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 (2014: £nil). Disclosure of information to auditor The directors who held office at the date of approval of this directors’ report confirm 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 23 November 2015 20 Dorcan Way, Swindon, SN3 3RA Statement of directors’ responsibilities in respect of the Strategic Report, the Directors’ Report and the financial statements The directors are responsible for preparing the Strategic report, the Directors’ Report and the group and parent company financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare group and parent company financial statements for each financial year. As required by the AIM rules of the London Stock Exchange they are required to prepare the group financial statements and Operating and Financial Review in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the parent company financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and parent company and of their profit or loss for that period. In preparing each of the group and parent company financial 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 financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU • for the parent company financial statements, state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the parent company financial statements; and • prepare the financial 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 sufficient to show and explain the parent company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial 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 financial information included on the company’s website. Legislation in the UK governing the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions. 21 KPMG LLP Independent auditor’s report to the members of Cambria Automobiles plc We have audited the financial statements of Cambria Automobiles plc for the year ended 31 August 2015 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 financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and International Financial Reporting Standards (IFRS) as adopted by the EU. The financial reporting framework that has been applied in the preparation of the parent company financial 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 17, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial 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 financial statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/ auditscopeukprivate Opinion on financial statements In our opinion: • the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 August 2015 and of the group’s profit for the year then ended; • the group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU; • the parent company financial statements have been properly prepared in accordance with UK Generally Accepted Accounting Practice; • the financial 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 financial review, Chairman’s statement, Strategic report and Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following. Under the Companies Act 2006 we are required to report to you if, in our opinion: • adequate accounting records have not been kept, by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Ian Brokenshire (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants Plym House 3 Longbridge Road Plymouth PL6 8LT 22 23 November 2015 23 Consolidated statement of comprehensive income for year ended 31 August 2015 Revenue Cost of sales Gross profit Administrative expenses Results from operating activities Finance income Finance expenses Net finance expenses Profit before tax from operations before non-recurring expenses, and acquisitions Trading profit/(loss) from branch acquired in year Non-recurring expenses Profit before tax Taxation Profit and total comprehensive income for the period Basic and diluted earnings per share Note 3 4 4 9 9 5 4 10 8 2015 £000 523,812 (461,746) 62,066 (53,672) 8,394 66 (805) (739) 7,505 207 7,712 (57) 7,655 (1,625) 6,030 2014 £000 450,148 (394,930) 55,218 (49,415) 5,803 72 (564) (492) 5,412 (20) 5,392 (81) 5,311 (1,158) 4,153 6.03p 4.15p All comprehensive income is attributable to owners of the parent company. 24 Consolidated statement of changes in equity for year ended 31 August 2015 Balance at 31August 2013 Profit for the year Dividend paid Balance at 31 August 2014 Profit for the year Dividend paid Note Share capital Share premium Retained earnings Total equity £000 £000 £000 £000 10,000 - - 10,000 - - 799 - - 799 - - 13,834 4,153 (500) 24,633 4,153 (500) 17,487 28,286 6,030 (650) 6,030 (650) 21 Balance at 31 August 2015 10,000 799 22,867 33,666 25 Consolidated statement of financial position at 31 August 2015 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 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 13 21 2015 £000 40,040 8,393 155 2014 £000 38,571 5,370 463 48,588 44,404 87,051 13,200 15,395 77,100 10,358 10,251 115,646 97,709 164,234 142,113 (2,070) (115,227) (950) - (2,020) (97,972) (785) (11) (118,247) (100,788) (12,321) - (12,875) (164) (12,321) (13,039) (130,568) (113,827) 33,666 28,286 10,000 799 22,867 10,000 799 17,487 33,666 28,286 These financial statements were approved by the board of directors on 23 November 2015 and were signed on its behalf by: Mark Lavery Director 26 Company registered number: 05754547 Consolidated cash flow statement for year ended 31 August 2015 Notes Cash flows from operating activities Profit 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 flows 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 flows from financing activities Proceeds from new loan Interest paid Repayment of borrowings Dividend paid Net cash from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 1 September 2014 Cash and cash equivalents at 31 August 2015 9 9 10 5 5 2 2 21 16 16 2015 £000 6,030 1,715 (66) 805 - 1,625 57 10,166 (2,842) (7,469) 16,855 (11) 16,699 (444) (1,153) (57) 15,045 66 (5,311) (2,250) (891) (8,386) 1,575 (361) (2,079) (650) (1,515) 5,144 10,251 15,395 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 27 Notes (forming part of the financial 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 office is Swindon Motor Park, Dorcan Way, Swindon, SN3 3RA. The registered number of the company is 05754547. These financial statements as at 31 August 2015 consolidate those of the Company and its subsidiaries (together referred to as the “Group”). The parent company financial statements present information about the Company as a separate entity and not about its group. The Group financial 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 financial statements in accordance with UK GAAP; and these are presented on pages 54 to 62. The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in the financial statements. Judgements made by the directors in the application of these accounting policies that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed at the end of this note. Basis of preparation The financial 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 Despite the group having net current liabilities of £2,601,000, 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 financial statements. Further information regarding the company’s business activities together with the factors likely to affect its future development, performance and position is set out in the Strategic report and Directors’ report on pages 14 to 16. Basis of consolidation The financial statements consolidate the financial 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 financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account. The financial 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 acquisition method. Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. For acquisitions on or after 1 January 2010, the Group measures goodwill at the acquisition date as: - - the fair value of the consideration transferred; less the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred. Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss. For acquisitions prior to 1 January 2010, goodwill represents the excess of the cost of the acquisition over the Group’s interest in the recognised amount (generally fair value) of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess was negative, a bargain purchase gain was recognised immediately in profit or loss. Transaction costs, other than those associated with the 28 Notes (continued) (forming part of the financial statements) issue of debt or equity securities, that the Group incurred in connection with business combinations were capitalised as part of the cost of acquisition. Inter-company transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated on consolidation. 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 identified as the Chief Executive Officer. 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 significant 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 finance 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 profit or loss as it accrues, using the effective interest method. Operating profit Operating profit relates to profit before finance income, finance expense and income tax expense. Intangible assets Goodwill Goodwill represents the excess between the cost of an acquisition of a subsidiary compared to the net fair value of the identifiable assets, liabilities and contingent liabilities, and recognition of identifiable intangibles at the date of acquisition. Identifiable 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 identifiable group of assets that generates cash inflows that are largely independent of the cash inflows 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. 29 Notes (continued) (forming part of the financial statements) 1 Accounting policies (continued) 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 indefinite. Intangible assets with an indefinite 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 different 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 • fixtures and fittings • 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. 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 effect on the estimated future cash flows of that asset. If any such indication exists, the asset’s recoverable amount is estimated. For goodwill, assets that have an indefinite 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 first 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 identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. 30 Notes (continued) (forming part of the financial statements) 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 first-in first-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. 31 Notes (continued) (forming part of the financial statements) 1 Accounting policies (continued) Financial Instruments Classification of financial 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 financial assets or to exchange financial assets or financial 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 fixed amount of cash or other financial assets for a fixed number of its own equity instruments. To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of the company’s own shares, the amounts presented in the historical financial information for called up share capital and share premium account exclude amounts in relation to those shares. Non-derivative financial instruments Non-derivative financial 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 effective 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 effective 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 flow 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 effective interest method. Taxation Tax on the profit 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 differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination, and differences 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 profits will be available against which the temporary difference can be utilised. 32 Notes (continued) (forming part of the financial statements) 1 Accounting policies (continued) Employee benefits Defined contribution plans A defined contribution plan is a post-employment benefit plan under which the company pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an expense as incurred. Share Based Payments The Company issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value so determined has been expensed on a straight line basis over the vesting period, based on the Company’s estimate of the number of shares that will eventually vest and adjusted for the effect of non market-based vesting conditions. Fair value is measured using a Black-Scholes-Merton option pricing model. The key assumptions used in the model have been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. Leasing Leases in which the Group assumes substantially all the risks and rewards of ownership of the leased asset are classified as finance 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 finance 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 finance charge and the reduction of the outstanding liability. The finance 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 outflow of economic benefits will be required to settle the obligation. IFRS not yet applied A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2015, and have not been applied in preparing these consolidated financial 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 effect on the financial statements unless otherwise indicated: • IAS 36 When developing IFRS 13 Fair Value Measurement, the IASB decided to amend IAS 36 to require disclosures about the recoverable amount of impaired assets. The amendments clarify the IASB’s original intention: that the scope of those disclosures is limited to the recoverable amount of impaired assets that is based on fair value less costs to sell. 33 Accounting policies (continued) (forming part of the financial statements) IFRS not yet applied (continued) • IAS 16 and IAS 38 - The IASB has clarified that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate and that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. • IAS 32 Offsetting Financial Assets and Financial Liabilities – The amendments clarify the offsetting criteria, specifically: - when an entity currently has a legal right of set off; and - when gross settlement is equivalent to net settlement. Amendments not yet endorsed by the EU Annual improvements 2010 – 2012 and Annual improvements 2011 – 2013. The amendments to IFRSs from the two improvement cycles were issued in Q4 of 2013. The IASB effective date for these amendments is 1 July 2014. Disclosure initiative (amendments to IAS 1). Designed to further encourage companies to apply professional judgement in determining what information to disclose in their financial statements. Annual improvements 2012 – 2014. Amendments to IFRSs from the 2012 – 2014 cycle were issued in September 2014. The IASB effective date is 1 January 2016. 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 flow 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 Business combinations the directors consider separately identifiable intangible assets that are pertinent to the motor business. This includes consideration of franchise rights, brand, and other intangible assets. The directors have concluded that intangibles arising on subsequent acquisitions are immaterial or have not arisen. Consignment inventories Consignment vehicles are regarded as being effectively under the control of the Group and are included within inventories in the Statement of Financial Position as the Group has the significant 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 financial statements to present a true and fair view. 34 Notes (continued) (forming part of the financial statements) 2 Acquisitions of trading branches Effect of acquisition in 2015 On 1 May 2015, the company completed the acquisition of the Land Rover dealership in Royal Wootton Bassett from T H White Ltd. Acquiree’s net assets at the acquisition date: Freehold land and buildings Plant and equipment Stocks Trade and other creditors Net and identifiable assets and liabilities Goodwill on acquisition (The goodwill arising on acquisition is attributable to expanding our geographical base for the Land Rover brand, and the anticipated profitability from the sale of vehicles from the Swindon dealership) Consideration paid (note that transaction and set up costs of £57k were written off to administrative expenses in 2015), satisfied in cash It is estimated that in the year before acquisition, the business generated £30m of revenue and a pre-tax profit of £0.7m. The results attributable to the branch acquired during the financial year and included in the group results were as follows: Turnover Profit before tax Pre-acquisition carrying amount and Fair Value £000 2,250 71 2,482 (242) 4,561 3,000 7,561 9,045 207 35 Notes (continued) (forming part of the financial statements) 2 Acquisitions and disposals of trading branches Effect 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 Recognised values on acquisition and Fair Value Acquiree’s net assets at the acquisition date: Freehold land and buildings Plant and equipment Stocks Trade and other creditors Prepayments Net and identifiable 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 profitability from the sale of vehicles from the Barnet dealership) Consideration paid (note that transaction and set up costs of £81k were written off to administrative expenses in 2014), satisfied in cash £000 3,750 461 1,781 (566) 45 5,471 5,000 10,471 It is estimated that in the year before acquisition, the business generated £46m of revenue and a pre-tax profit of £0.7m. The results attributable to the branch acquired during the financial year and included in the group results were as follows: Effect of acquisition in 2014 (continued) 2014 £000 4,755 (20) Turnover Loss before tax 36 Notes (continued) (forming part of the financial statements) 2 Acquisitions of trading branches (continued) 3 Revenue Sale of goods Aftersales services Total revenues 4 Segmental reporting 2015 £000 474,316 49,496 523,812 2014 £000 404,129 46,019 450,148 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 Officer. 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. New Car Used Car Aftersales Internal sales Total 2015 Revenue 2015 Revenue mix 2015 Gross Profit 2015 Margin 2014 Revenue 2014 Revenue mix 2014 Gross Profit 2014 Margin £m 238.4 235.9 60.6 (11.1) % 45.5 45.0 11.6 (2.1) £m 15.5 20.8 25.8 - % 6.5 8.8 42.5 - £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 - 523.8 100.0 62.1 11.9 450.1 100.0 55.2 12.3 Administrative expenses Operating profit before non-recurring expenses Non-recurring expenses (53.6) 8.5 (0.1) (49.3) 5.9 (0.1) Operating profit 8.4 1.6 5.8 1.3 The CODM reviews the performance of the business in terms of both net profit before tax and EBITDA, as such the following table shows a reconciliation of the Profit before tax to EBITDA. 37 Notes (continued) (forming part of the financial statements) 4 Segmental reporting (continued) Profit Before Tax Non-recurring expenses (note 5) Underlying Profit Before Tax Net finance 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 costs 6 Expenses and auditor’s remuneration The result from operating activities is stated after (crediting)/charging the following: Impairment loss/(gain) recognised on other trade receivables and prepayments (note 22(b)) Auditor’s remuneration: Audit of these financial statements Audit of financial statements of subsidiaries pursuant to legislation Other services relating to taxation All other services 38 2015 £000 7,655 57 7,712 739 1,715 10,166 (57) 10,109 2015 £000 57 2015 £000 285 2015 £000 26 94 41 7 2014 £000 5,311 81 5,392 492 1,542 7,426 (81) 7,345 2014 £000 81 2014 £000 (11) 2014 £000 25 91 29 7 Notes (continued) (forming part of the financial 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 defined contribution plans Share based payments expense 2015 377 394 102 222 1,095 2015 £000 31,861 3,395 342 16 35,614 2014 343 362 109 210 1,024 2014 £000 28,545 3,128 326 - 31,999 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. The share options are not currently dilutive because the performance conditions are not yet met. Profit attributable to shareholders Non underlying costs (Note 5) Tax on adjustments (at 20.58 % (2014: 22.16%)) Adjusted profit attributable to equity shareholders 2015 £000 6,030 57 (12) 6,075 2014 £000 4,153 81 (18) 4,216 Number of shares in issue (‘000) 100,000 100,000 Basic earnings per share Adjusted earnings per share 6.03p 6.08p 4.15p 4.22p 39 Notes (continued) (forming part of the financial statements) 9 Finance income and expense Recognised in the income statement Finance income Rent deposit interest Interest receivable Total finance income Finance expense Interest payable on bank borrowings Consignment and vehicle stocking interest Total finance expense Total interest expense on financial 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 Deferred tax Adjustment in respect of prior years Origination and reversal of temporary differences 2015 £000 2 64 66 361 444 805 361 444 805 2015 £000 1,341 (24) 1,317 22 286 308 2014 £000 2 70 72 318 246 564 318 246 564 2014 £000 1,013 (10) 1,003 3 152 155 Total tax expense 1,625 1,158 40 Notes (continued) (forming part of the financial statements) 10 Taxation (continued) Reconciliation of total tax Profit for the year Total tax expense Profit excluding taxation Tax using the UK corporation tax rate of 20.58% (2014: 22.16%) Non-deductible expenses Accounting deprecation for which no tax relief is due Utilisation of brought forward losses Change in tax rate Adjustments in respect of prior years Change in deferred tax in respect of property 2015 £000 6,030 1,625 7,655 1,575 29 134 (34) (8) (2) (69) 2014 £000 4,153 1,158 5,311 1,177 44 132 (92) (6) (7) (90) Total tax expense 1,625 1,158 The applicable tax rate for the current year is 20.58% (2014: 22.16%) following the reduction in the main rate of UK corporation tax from 21% to 20% with effect from 1 April 2015. Reductions in the UK corporation tax rate from 23% to 21% (effective from 1 April 2014) and 20% (effective from 1 April 2015) were substantively enacted on 2 July 2013. Further reductions to 19% (effective from 1 April 2017) and to 18% (effective from 1 April 2020) were substantively enacted on 26 October 2015. This will reduce the company’s future current tax charge accordingly and reduce the deferred tax asset at 31 August 2015 (which has been calculated based on the rate of 20% substantively enacted at the balance sheet date). 41 Notes (continued) (forming part of the financial statements) 11 Property, plant and equipment Cost Balance at 1 September 2013 Additions Branch acquisitions Disposals Transfer Balance at 1 September 2014 Additions Branch acquisitions Disposals Freehold land & buildings Long leasehold land & buildings Short leasehold improvements Plant & equipment Fixtures, fittings & computer equipment Total £000 £000 £000 £000 £000 £000 23,324 6,514 3,750 - 941 34,529 144 2,250 - 5,058 4,352 - - - (941) 104 104 (8) - 4,117 4,552 - - - - - - 2,807 159 112 (171) - 2,907 338 20 (205) 6,566 42,107 761 245 (482) - 7,090 376 51 (200) 7,538 4,211 (661) - 53,195 858 2,321 (405) Balance at 31 August 2015 36,923 4,117 4,552 3,060 7,317 55,969 Depreciation Balance at 1 September 2013 Charge for the year Disposals Transfer Balance at 1 September 2014 Depreciation charge for the year Disposals Balance at 31 August 2015 Net book value At 31 August 2014 1,913 364 - 213 2,490 411 - 2,901 639 71 - (213) 497 105 - 602 32,039 3,620 At 31 August 2015 34,022 3,515 3,380 287 (8) - 3,659 287 - 2,387 223 (171) - 2,439 266 (202) 5,435 586 (482) - 5,539 636 (198) 13,754 1,531 (661) - 14,624 1,705 (400) 3,946 2,503 5,977 15,929 893 606 468 557 1,551 38,571 1,340 40,040 As at 31 August 2015 there are no capital commitments (2014: £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 2015 there were no assets in the course of construction (2014: £nil). 42 Balance at 1 September 2014 4,117 4,552 Balance at 31 August 2015 36,923 4,117 4,552 3,060 7,317 55,969 Freehold Long Short Plant & Total land & leasehold leasehold equipment buildings land & improvements buildings Fixtures, fittings & computer equipment £000 £000 £000 £000 £000 £000 Balance at 1 September 2013 5,058 4,352 6,566 42,107 Cost Additions Disposals Transfer Branch acquisitions Additions Disposals Branch acquisitions Depreciation Balance at 1 September 2013 Charge for the year Disposals Transfer Balance at 1 September 2014 Depreciation charge for the year Disposals Net book value At 31 August 2014 23,324 6,514 3,750 - 941 34,529 144 2,250 - 1,913 364 - 213 2,490 411 - 2,901 (941) - - - - - - 639 71 - (213) 497 105 - 602 761 245 (482) - 7,090 376 51 (200) 5,435 586 (482) - 5,539 636 (198) 7,538 4,211 (661) - 53,195 858 2,321 (405) 13,754 1,531 (661) - 14,624 1,705 (400) 104 104 (8) - - - - 3,380 287 (8) - 3,659 287 - 893 606 2,807 159 112 (171) - 2,907 338 20 (205) 2,387 223 (171) - 2,439 266 (202) 468 557 Balance at 31 August 2015 3,946 2,503 5,977 15,929 32,039 3,620 1,551 38,571 At 31 August 2015 34,022 3,515 1,340 40,040 Notes (continued) (forming part of the financial statements) 12 Intangible assets Cost Balance at 1 September 2013 Additions Balance at 1 September 2014 Additions Balance at 31 August 2015 Amortisation and impairment Balance at 1 September 2013 Amortisation Balance at 1 September 2014 Amortisation for the year Balance at 31 August 2015 Net book value At 31 August 2014 At 31 August 2015 Goodwill Software £000 346 5,000 5,346 3,000 8,346 - - - - - 5,346 8,346 £000 720 25 745 33 778 710 11 721 10 731 24 47 Other £000 176 - 176 - 176 176 - 176 - 176 - - Total £000 1,242 5,025 6,267 3,033 9,300 886 11 897 10 907 5,370 8,393 The undertakings included in the consolidated Group accounts are as follows: * Owned directly by Cambria Automobiles Acquisitions Limited ** Owned directly by Cambria Automobiles Group Limited *** Owned directly by Cambria Automobiles (South East) Limited Country of incorporation Principal activity Class and percentage of shares held Subsidiary undertakings Cambria Automobiles Group Limited England and Wales Holding Company Cambria Automobiles Acquisitions Limited ** England and Wales Investment Company Cambria Automobiles Property Limited ** England and Wales Property Company 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*** England and Wales England and Wales Translease Vehicle Management Limited*** England and Wales Dormant Dormant Dormant 100% Ordinary 100% Ordinary 100% Ordinary 100% Ordinary 43 Notes (continued) (forming part of the financial 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 2015 £000 10 2014 £000 11 Goodwill and indefinite life intangible assets considered significant 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 Grange Swindon Land Rover dealership Goodwill 2015 £000 261 85 5,000 3,000 8,346 2014 £000 261 85 5,000 - 5,346 The recoverable amount of each cash generating unit (CGU) has been calculated with reference to its value in use. The calculation for is performed via a review of forecast EBITDA for the CGU for a number of years based on the EBITDA multiples being paid for equivalent businesses in the marketplace. The board reviews transactional information and assesses the businesses earnings capacity in order to ensure that the recoverable amount is in excess of the carrying amount. The value in use exceeds the above carrying values for each CGU, therefore no impairment is considered necessary. 44 Notes (continued) (forming part of the financial statements) 13 Deferred tax assets and liabilities Recognised deferred tax assets and liabilities The amount of temporary differences, 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 offset against future taxable profits of the group. Property, plant and equipment Provisions Tax value of loss carry-forward Share options 1 September 2014 Recognised in income Net 31 August 2015 Deferred tax liabilities Deferred tax assets £000 £000 £000 £000 £000 431 5 27 - 463 (295) 9 (27) 5 (308) 136 14 - 5 155 (310) - - - (310) 446 14 - 5 465 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 benefit 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 was recognised. A liability for the contingent consideration payable to the vendors was recognised at its fair value. At the end of the 2014 financial year, the final reconciliation of amounts due to the vendors was calculated and paid over. There is no further liability arising from this agreement. Amount payable to previous owner of subsidiary Unrecognised deferred tax assets and liabilities 2015 £000 - 2014 £000 164 The deferred tax asset in relation to loss carried forward within a subsidiary has not been recognised due to uncertainty over the future profitability 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 2015 £000 624 624 2014 £000 657 657 The applicable tax rate for the current year is 20.58% (2014: 22.16%) following the reduction in the main rate of UK corporation tax from 21% to 20% with effect from 1 April 2015. Reductions in the UK corporation tax rate from 23% to 21% (effective from 1 April 2014) and 20% (effective from 1 April 2015) were substantively enacted on 2 July 2013. Further reductions to 19% (effective from 1 April 2017) and to 18% (effective from 1 April 2020) were substantively enacted on 26 October 2015. This will reduce the company’s future current tax charge accordingly and reduce the deferred tax asset at 31 August 2015 (which has been calculated based on the rate of 20% substantively enacted at the balance sheet date). 45 Notes (continued) (forming part of the financial statements) 14 Inventories Vehicle consignment stock Motor vehicles Parts and other stock 2015 £000 59,177 24,943 2,931 87,051 2014 £000 47,132 27,392 2,576 77,100 Included within inventories is £nil (2014: £nil) expected to be recovered in more than 12 months. Raw materials, consumables and changes in finished goods and work in progress recognised as cost of sales in the year amounted to £458 million (2014: £385 million). Details of stock held as security is given in note 18. 15 Trade and other receivables Trade receivables Prepayments and other receivables 2015 £000 9,183 4,017 2014 £000 7,130 3,228 13,200 10,358 Included within trade and other receivables is £nil (2014: £nil) expected to be recovered in more than 12 months. 16 Cash and cash equivalents Cash and cash equivalents per balance sheet Cash and cash equivalents per cash flow statement 2015 £000 15,395 15,395 2014 £000 10,251 10,251 46 Notes (continued) (forming part of the financial 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 2015 £000 2014 £000 12,321 12,875 2,070 2,020 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 Loan 01/05/2015 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% LIBOR + 1.95% 2019 2020 2020 2017 2018 2019 2019 2018 2015 1,122 363 4,261 1,545 1,485 2,210 1,843 1,562 2014 1,409 435 5,047 1,751 1,683 2,470 2,100 - 14,391 14,895 47 Notes (continued) (forming part of the financial statements) 18 Trade and other payables Current Vehicle consignment creditor Other trade payables Non-trade payables and accrued expenses Vehicle funding 2015 £000 69,888 10,081 13,318 21,940 115,227 2014 £000 55,419 10,537 11,306 20,710 97,972 Included within trade and other payables is £ nil (2014: £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 benefits Pension plans Defined contribution plans The Group operates a number of defined contribution pension plans. The total expense relating to these plans in the current year was £342,000 (2014: £326,000). Share-based payments The Group has a share option scheme open to certain employees at the discretion of the Board. Options are exercisable at a price equal to the higher of the nominal value or market price of the company’s shares on the date of grant. In the scheme the options vest over a ten year period, depending on the terms of the individual grant. 4,750,000 options were granted in the year ended 31 August 2015 (2014: £nil). The fair values were calculated using a Black-Scholes model. The inputs into the model were as follows: Date of grant 2/3/15 1/4/15 Share price at option date £ Exercise price £ Volatility 0.47 0.54 0.47 0.54 17.5% 17.2% Expected life (years) 1 year beyond vesting date 1 year beyond vesting date Risk free rate 0.5% 0.5% Expected volatility was determined using as a base the share price movements of the Company recorded over a 52 week period prior to the grant of the options. The expected life used in the model has been adjusted, based on management’s best estimate for the effects of non-transferability, exercise restrictions and behavioural considerations. Outstanding at the beginning of the year Forfeited during the year Exercised during the year Granted during the year Lapsed during the year Weighted average exercise price 2015 £ - - - 0.48 - Number of options 2015 - - - 4,750,000 - Outstanding at the end of the year 0.48 4,750,000 Exercisable at the end of the year - - Weighted average exercise price 2014 £ Number of options 2014 - - - - - - - - - - - - - - The Company recognised an expense of £15,668 (year ended 31 August 2014: £nil) in respect of share based payments in the year. 48 Notes (continued) (forming part of the financial statements) 20 Provisions Balance at 1 September 2014 Provisions used during the year Balance at 31 August 2015 Current Non-current Balance at 31 August 2014 Current Non-current Balance at 31 August 2015 Onerous Leases £000 11 (11) - 11 - 11 - - - The onerous lease provision is being released against the costs incurred on the relevant lease. The provision is now fully released. 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 classified in shareholders’ funds 2015 £000 10,000 10,000 10,000 2014 £000 10,000 10,000 10,000 All of the shares rank pari passu, and no shareholder enjoys different or enhanced voting rights from any other shareholder. All shares are eligible for dividends and rank equally for dividend payments. 49 Notes (continued) (forming part of the financial statements) Dividends The following dividends were paid by the company in the year ended 31 August. 0.5p per ordinary share – prior year final (2014: 0.4p) 0.15p per ordinary share – current year interim (2014: 0.1p) 2015 £000 500 150 650 2014 £000 400 100 500 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. 0.6 p per ordinary share – current year final (2014: 0.5p) 2015 £000 600 2014 £000 500 22 Financial instruments 22 (a) Fair values of financial instruments Trade and other receivables The fair value of trade and other receivables, is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect is material. Trade and other payables The fair value of trade and other payables is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect 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 flows, 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 flows, discounted at the market rate of interest at the balance sheet date. The rates used to discount estimated cash flows, where applicable are based on the weighted average cost of capital and were as follows: 2015 % 3.5 2014 % 3.5 Loans and borrowings 50 Notes (continued) (forming part of the financial statements) Fair values The fair values for each class of financial assets and financial 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) Total Financial liabilities As at 31 August 2015 As at 31 August 2014 £000 £000 9,183 4,017 15,395 7,130 3,228 10,251 28,595 20,609 14,391 115,227 14,895 97,972 129,618 112,867 The Directors consider the carrying amount of the Group’s financial assets and financial liabilities, as detailed above, approximate their fair value. 51 Notes (continued) (forming part of the financial 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 findings 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 financial asset in the statement of financial 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 £9,183,000 (2014: £7,130,000) 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 2015 £000 9,183 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 2015 £000 4,465 2,755 1,963 9,183 2014 £000 7,130 2014 £000 3,359 2,403 1,368 7,130 Credit quality of financial 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 2015 £000 9,183 156 9,339 2015 £000 - 156 156 2014 £000 7,130 89 7,219 2014 £000 - 89 89 Trade receivables not past due Trade receivables past due 52 Notes (continued) (forming part of the financial 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 2014 Impairment loss recognised Allowance for impairment utilised Balance at 31 August 2015 £000 89 285 (218) 156 The allowance account for trade receivables is used to record impairment losses unless the Group is satisfied 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 financial 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 financed primarily by bank loans, vehicle stocking credit lines and operating cash flow. 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 financial forecasts, financial instruments and cash flow 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 financial liabilities, including estimated interest payments and excluding the effect of netting agreements: Interest is payable on loans of £1,485,000 (2014: £1,844,000) at Bank of England base rate plus 1.25%, loans of £4,261,000 (2014: £5,047,000) at LIBOR plus 1.75%, loans of £1,545,000 (2014: £1,751,000) at LIBOR plus 3% and on loans of £7,100,000 (2014: £6,253,000) at LIBOR plus 1.95%. Non-derivative financial liabilities Secured bank loans Non-derivative financial liabilities Secured bank loans 2014 Carrying amount Contractual cash flows 1 year or less 1 to <2years 2 to <5years 5years and over £000 £000 £000 £000 £000 £000 14,895 15,998 2,362 2,314 10,115 1,207 2015 Carrying amount Contractual cash flows 1 year or less 1 to <2years 2 to <5years 5years and over £000 £000 £000 £000 £000 £000 14,391 15,590 2,517 3,606 9,137 330 53 Notes (continued) (forming part of the financial 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 affect the Group’s income or the value of its holdings of financial instruments. Market risk - Foreign currency risk The Group does not have any exposure to foreign currency risk. Market risk – Interest rate risk Profile At the balance sheet date the interest rate profile of the Group’s interest-bearing financial instruments was: Variable rate instruments Cash and cash equivalents Vehicle funding Loans and overdrafts 2015 £000 15,395 (21,940) (14,391) 2014 £000 10,251 (20,710) (14,895) (20,936) (25,354) The objectives of the Group’s interest rate policy are to minimise interest costs. The Group does not actively manage cash flow 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 floating 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 profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant and considers the effect of financial instruments with variable interest rates, financial instrument at fair value through profit or loss or available for sale with fixed interest rates and the fixed rate element of interest rate swaps. The analysis is performed on the same basis for comparative periods. 2015 £000 2014 £000 182 176 182 176 Equity Decrease Profit or loss Decrease 54 Notes (continued) (forming part of the financial 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 benefits to other stakeholders. The Group must ensure that sufficient 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 financial 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 (surplus)/deficit Total equity Gearing ratio 23 Operating leases Non-cancellable operating lease rentals are payable as follows: Less than one year Between one and five years More than five years As at 31 August 2015 As at 31 August 2014 £000 £000 14,391 (15,395) 14,895 (10,251) (1,004) 4,644 33,666 28,286 (3.0)% 16.4% 2015 £000 2,402 9,229 18,667 2014 £000 2,394 8,775 16,153 30,298 27,322 The Group leases a number of motor dealership sites under operating leases. Land and buildings have been considered separately for lease classification. During the year £2,620,000 was recognised as an expense in the income statement in respect of operating leases (2014: £2,440,000). 55 Notes (continued) (forming part of the financial 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 2014 and 2015. 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 finance 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 47.04 % (2014: 46.96%) 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 Share related awards The emoluments consist of: Directors’ emoluments Philip Swatman James Mullins Mark Lavery Sir Peter Burt Michael Burt 2015 £000 664 552 6 2014 £000 655 473 - 1,222 1,128 Total Total 2015 £000 33 328 805 28 28 2014 £000 30 298 750 25 25 1,222 1,128 Salaries Bonus 2015 £000 33 175 400 28 28 664 2015 £000 - 147 405 - - 552 Share related awards 2015 £000 - 6 - - - 6 All directors benefited from qualifying third party indemnity provisions during the financial period. 56 Notes (continued) (forming part of the financial statements) 25 Related parties (continued) During the year Mark Lavery bought 6 vehicles from the Group and sold 6 vehicles back to the Group, James Mullins bought 3 vehicles from the Group and sold 3 vehicles back to the Group. Sir Peter Burt bought 4 vehicles from the Group and sold 4 vehicles back to the Group. Michael Burt bought 3 vehicles from the Group and sold 3 vehicles 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 £50,472. 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 final dividend payment in respect of the financial year to 31 August 2015 of 0.6p (2014: 0.5p) per share in addition to the interim payment of 0.15p per share (2014: 0.1p). Refinancing Post year end, on 23 November 2015, the Group entered into revised banking arrangements with Lloyds Banking Group to refinance the existing £14.4m of term loans into one standardised facility of £15m that has a 5 year term, and 15 year capital repayment profile. The cost of the facilities is LIBOR plus a margin. The margin attributable to the term loans will be set each quarter and is dependant on the net debt: EBITDA ratio for the Group. The spread of margin chargeable against the facility ranges from 1.2% where the net debt is less than 1 times EBITDA, up to 2% where the net debt is greater than 2.5 times EBITDA. The Group has also arranged two further Revolving Credit Facilities. The First is a 5 year, £15m RCF available for the acquisition of businesses and property, the second is a 5 year property development facility to be used against the development of Barnet and Swindon properties. The maximum drawdown against this facility is £7m, and it is intended that once the developments are complete that the RCF will be converted into a standard amortising term facility. The margins attributable to these Revolving Credit Facilities mirror those attributable to the revised term loan facilities. 57 Company Balance Sheet At 31 August 2015 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 Profit and loss account Shareholders’ funds Note 2015 2014 £000 £000 £000 £000 5 6 7 8 9 11 12 12 98 666 919 8,499 5,533 14,951 (3,475) 109 666 764 775 860 4,985 9,445 15,290 (2,853) 11,476 12,240 12,240 10,000 799 1,441 12,240 12,437 13,212 13,212 10,000 799 2,413 13,212 These financial statements were approved by the board of directors on 23 November 2015 and were signed on its behalf by: M J J Lavery Director Company number: 05754547 58 Company Reconciliation of movements in shareholders’ funds for the year ended 31 August 2015 Loss for the financial year Dividend paid Net decrease in shareholders’ funds Opening shareholders’ funds Closing shareholders’ funds Note Company Company 12 2015 £000 (322) (650) (972) 13,212 12,240 2014 £000 (531) (500) (1,031) 14,243 13,212 59 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 financial 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 financial statements. Further information regarding the company’s business activities together with the factors likely to affect its future development, performance and position is set out in the Strategic report on page 14. Basis of preparation The financial 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 profit and loss account. Under Financial Reporting Standard 1 the Company is exempt from the requirement to prepare a cash flow statement on the grounds that the Group financial statements include the Company in its own published consolidated financial 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 fixed 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 flows 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). Notes (continued) Taxation The charge for taxation is based on the profit for the year and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. Deferred tax is recognised, without discounting, in respect of all timing differences 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. 60 Notes (continued) Classification of financial instruments issued by the Company Following the adoption of FRS 25, financial 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 financial assets or to exchange financial assets or financial 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 fixed amount of cash or other financial assets for a fixed number of its own equity instruments. To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of the Company’s own shares, the amounts presented in these financial statements for called up share capital and share premium account exclude amounts in relation to those shares. Finance payments associated with financial liabilities are dealt with as part of interest payable and similar charges. Finance payments associated with financial instruments that are classified 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 financial statements. 2 Remuneration of directors Directors’ emoluments Salaries Annual bonus Pension costs Share related awards The emoluments in respect of the highest paid director were: Salaries Annual bonus All directors benefited from qualifying third party indemnity provisions during the financial period. 2015 £000 664 552 - 6 2014 £000 655 473 2 - 1,222 1,130 2015 £000 400 405 805 2014 £000 400 350 750 61 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 Share related awards 4 Dividends The aggregate amount of dividends paid and received compromises: Aggregate amount of dividends paid in the financial year Aggregate amount of dividends received in the financial year Company 2015 Company 2014 55 49 Company Company 2015 £000 3,897 446 21 16 2014 £000 3,336 443 28 - 4,3780 3,807 2015 £000 650 - 2014 £000 500 - The aggregate amount of dividends proposed but not recognised at the year end is £600,000 (2014: £500,000). 62 Notes (continued) 5 Tangible fixed assets Company Cost At 1 September 2014 Additions At 31 August 2015 Depreciation At 1 September 2014 Charge for year At 31 August 2015 Net book value At 31 August 2015 At 31 August 2014 Computer equipment £000 623 52 675 514 63 577 98 109 Total £000 623 52 675 514 63 577 98 109 63 Notes (continued) 6 Fixed asset investments Company Cost and net book value At 1 September 2014 and 31 August 2015 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 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 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*** England and Wales Invicta Motors Limited*** Deeslease Limited*** Dove Group Limited*** 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 Class and percentage of shares held 100% Ordinary 100% Ordinary 100% Ordinary 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 64 2015 £000 919 2014 £000 860 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 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. 2015 £000 86 7,639 586 54 134 8,499 2015 £000 392 477 301 - 2014 £000 18 4,458 380 38 91 4,985 2014 £000 339 317 251 - 2,305 1,946 3,475 2,853 65 Notes (continued) 10 Deferred taxation Deferred taxation asset At 1 September 2014 Movement in period At 31 August 2015 The elements of deferred taxation asset are as follows: Difference between accumulated depreciation and capital allowances Other timing differences Total deferred tax 2015 £000 54 - 54 £000 38 16 54 2014 £000 38 - 38 66 Notes (continued) 11 Called up share capital Authorised 2015 £000 2014 £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 10,000 10,000 Shares classified in shareholder’s funds 10,000 10,000 All of the shares rank pari passu, and no shareholder enjoys different 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 2014 Loss for the year Dividend paid At 31 August 2015 Share premium account Profit and loss account £000 799 - - 799 £000 2,413 (322) (650) 1,441 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. 67 

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