Cambria Automobiles plc Annual Report 2017

Plain-text annual report

Annual report and ﬁ nancial statements Registered number 05754547 31 August 2017 Contents Summary ........................................................................... 4 Chairman’s statement ....................................................... 7 Operating and ﬁ nancial review ........................................ 10 Strategic report ............................................................... 18 Directors’ report .............................................................. 20 Statement of directors’ responsibilities in respect of the Strategic report, Directors’ report and the ﬁ nancial statements .................................................. 21 Independent auditor’s report to the members of Cambria Automobiles plc ................................................ 22 Consolidated statement of comprehensive income ........ 26 Consolidated statement of changes in equity ................. 27 Consolidated statement of ﬁ nancial position .................. 28 Consolidated cash ﬂ ow statement .................................. 29 Notes ............................................................................... 30 Company balance sheet ................................................. 61 Company statement of changes in equity....................... 62 Notes ............................................................................... 63 2 3 AUDITED PRELIMINARY RESULTS 2016/17 Solid results in Group’s 11th year of trading, continued strategic progress Cambria, the franchised motor retailer, announces its audited preliminary results for the year to 31 August 2017. Financial Highlights Year ended 31 August Revenue Underlying EBITDA* Underlying operating proﬁ t* Underlying proﬁ t before tax* Underlying proﬁ t before tax margin* Net non-recurring income/ (expenses) Underlying earnings per share* Operating proﬁ t Proﬁ t before tax Earnings per share (basic) Dividend per share 2017 £m 644.3 13.7 11.8 11.3 1.8% - 9.19p 11.8 11.3 9.18p 1.0p 2016 £m 614.2 13.1 11.2 10.6 1.7% 1.16 8.33p 12.4 11.8 9.26p 0.9p Change 4.9% 4.6% 5.4% 6.6% 10bps 10.3% -4.8% -4.2% -0.9% 11.1% * These items exclude net non-recurring income / (expenses) of £nil (2016: £1.16m) ✔ Strong balance sheet – net assets £50.4m ✔ Underlying Return on Equity at 19.87% (2015/16: £42.1m) (2015/16: 21.98%) ✔ Strong operational cash ﬂ ows, cash position of ✔ Proposed ﬁ nal dividend of 0.75p, up by 11.1% £23.0m (2015/16: £19.8m) ✔ Net cash of £6.1m (2015/16: net cash £0.4m) after signiﬁ cant investment in property during year over the full year to 1.0p per share (2015/16: 0.9p) ✔ Reﬁ nancing of the Group’s existing debt facilities to provide a new £40.0m, ﬁ ve year Revolving Credit Facility arranged in November 2017 4 Summary Operational Highlights ✔ New vehicle sales down 11.7%, with the impact offset by a 25.7% increase in proﬁ t per unit ✔ Used vehicle sales down 6.1% following site closure, offset by a 5.6% improvement in proﬁ t per unit ✔ Aftersales Revenue increased 9% ✔ Signiﬁ cant development of the Group’s franchising strategy with the successful addition of two major High Luxury Segment brand partners: • McLaren dealership in Hatﬁ eld to be opened in January 2018 • Two Bentley dealerships to be opened in January 2018 ✔ Continuing investment in the Freehold portfolio; to increase operational capacity and achieve site potentials and comply with our Brand partners franchise standards ✔ Barnet Jaguar Land Rover development completed along with other Brand led corporate identity developments ✔ Swindon Motor Park, the Group’s ﬁ rst business, was closed to make way for the Swindon Jaguar Land Rover dealership development on its site. The demolition and building work began in July and is now progressing well ✔ Hatﬁ eld development site secured with works due to begin in January 2018 for Jaguar, Land Rover, Aston Martin and McLaren 5 Summary (continued) Mark Lavery, Chief Executive Oﬃ cer of Cambria said: “The Group has delivered a solid set of results for the full year, with underlying Proﬁ t Before Tax of £11.3m, up from £10.6m in the previous year, a 6.6% increase. The ﬁ rst half of the ﬁ nancial year was strong and we reported signiﬁ cant year on year growth. As ﬂ agged in our Interim Results statement on 9 May 2017 and the subsequent Trading Update on 5 September, the Board remains cautious on the overall consumer outlook. As has been well documented, the trading environment in the period post March has been more challenging, particularly in the new car arena which has been impacted by a number of factors. The weakening in the Sterling exchange rate has led to inﬂ ation in the landed cost of imported vehicles into the UK which, combined with a level of consumer uncertainty in the market, has led to the anticipated reduction of new car sales. Our strategy for the 2016/17 ﬁ nancial year was to integrate the acquired businesses from last year and progress the property investments needed to bring those businesses up to manufacturer standards. We have made good progress in this regard during the year, completing Barnet, beginning the build work at Swindon and securing the Hatﬁ eld site for development work to begin in January 2018. Moreover, I am delighted that we have been given the opportunity to develop facilities for such prestigious brands as McLaren and Bentley in addition to our already excellent portfolio of Brand partners. This is an exciting development for the Group and we are looking forward to working with our new partners. The new bank funding also gives us the required ﬂ exibility to deliver on the strategic investments that we are making in facilities and new franchise opportunities. Post the period end, trading in September and October was in line with the Board’s expectations, but behind the prior year as a result of the weaker new car market. The Board remains conﬁ dent that Cambria’s resilient business model, focus on delivering a superior Guest experience and ﬁ nancing arrangements leave it well positioned to take advantage of any opportunities that the current economic uncertainty could provide.” 6 Chairman’s statement I am pleased to report that Cambria has delivered another strong set of results for the full year ended 31 August 2017, which again shows continued improvement in the Group’s operational and ﬁ nancial performance, along with successful delivery of its stated growth strategy. Whilst the second half of the ﬁ nancial year was more challenging than the ﬁ rst with a shift in the new car market, the Group continued to focus on delivery of used car and aftersales improvements. The Group in its 11th year of trading, hit £11.3m of underlying pre-tax proﬁ t, maintaining an excellent return on shareholders’ funds. The strategic acquisitions delivered over the past three ﬁ nancial years have accelerated the Group’s growth and have proved to be shrewd investments, giving the Group a broader and enhanced franchised dealership portfolio mix and bolstering its underlying earnings capacity. The UK motor retail industry has seen a weakening since the March plate change month where it showed record registration ﬁ gures. As reported in its Interim results, the Group’s trading to the end of the half year at the end of February and into the plate change month of March was very strong. However, the period from April to August was weaker year on year as consumer demand softened across the industry and we witnessed a more diﬃ cult trading environment with some of our OEM partners being exposed to a weaker foreign exchange position as importers. The Group has reported operational improvements in the past three ﬁ nancial years and these have continued into the 2016/17 ﬁ nancial year. On a like for like basis, Cambria generated gross proﬁ t growth across the used car and aftersales departments with the new car department reducing as a result of the reductions in the second half of the year. Revenue increased by 4.9% to £644.3m (2015/16: £614.2m). Underlying proﬁ t before tax rose by 6.6% to £11.3m (2015/16: £10.6m) and the Group delivered underlying earnings per share of 9.19p (2015/16: 8.33p) - an increase of 10.3%. The Group closed the year with net cash of £6.1m (2015/16: net cash £0.4m) and net assets of £50.4m (2015/16: £42.1m), underpinned by the ownership of £45.2m (2015/16: £41.3m) of freehold and long leasehold properties. Our capacity for making acquisitions, and the property development programme, has been enhanced after the year-end with a reﬁ nancing and extension of banking facilities to £40m arranged in November 2017. These facilities reﬁ nance the existing £37m of total facilities with a £40m Revolving Credit Facility with a ﬁ ve year term available for acquisitions and property purchase and development. We have also strengthened our Board during the course of the year following the appointments of Tim Duckers as Managing Director of the motor division in September 2016 and then in February 2017 Paul McGill and William Charnley as Non-Executive Directors. Tim has worked in the Group since 2008 and has been heavily involved in its development to date. Paul was most recently Head of Projects at Lloyds Banking Group, where he was responsible for promoting the Black Horse Consumer Finance brand across the Group, leading new business initiatives and recruiting key individuals to the business. William is a solicitor specialising in mergers and acquisitions, capital markets and private equity with over 25 years experience. All three appointments bring to the Group a vast amount of experience, knowledge and expertise of the motor retail industry which will complement the existing management team. 7 Chairman’s Statement (continued) Group overview Cambria was established in 2006 with a strategy to build a balanced motor retail group to deliver the self-funded acquisition and turnaround of underperforming businesses. The strategy evolved in 2013 to encompass the acquisition of premium and high luxury businesses, located in geographically strategic locations, which would be immediately earning enhancing. In line with this strategy, in the period July 2014 to July 2016, the Group announced the acquisition of the Jaguar and Land Rover dealership in Barnet, the acquisitions of Swindon Land Rover, Welwyn Garden City Land Rover and Woodford Jaguar Land Rover. In May 2016, the Group opened a new dealership for Aston Martin in Birmingham. The Group continues to integrate and develop these businesses. To support the acquisitions and developments outlined above in the previous year, the Group agreed to divest of its Exeter Jaguar business in January 2016, to close the Exeter Aston Martin dealership which shared a facility with Jaguar and to dispose of the Croydon Jaguar franchise in March 2016 which shared a facility alongside the Group’s Volvo franchise. The Group closed its Swindon Motor Park business in January 2016 in order that the site could be cleared ready for the development of the Jaguar Land Rover Arch concept facility on the site. Following the acquisitions, disposals and the closure of the Group’s only SEAT new car sales franchise in Swindon, the Group now comprises 31 dealerships, representing 46 franchises and 16 brands, a well balanced brand portfolio spanning the high luxury, premium and volume segments. The major property development at Hatﬁ eld which is due to start in January 2018 will relocate the Group’s Jaguar, Land Rover and Aston Martin dealerships in Welwyn Garden City which currently operate in short leasehold facilities into a purpose built freehold property with the addition of the McLaren franchise which will operate on the same site. The Group will also be opening two new Bentley dealerships in January 2018 operating from existing Group freehold facilities. The dealership properties are currently undergoing refurbishments to meet the Bentley franchise standard requirements. These new franchising developments are exciting for the Group and demonstrate its commitment to developing the Premium and High Luxury segment franchises in geographically strategic locations. Dividend The Board is pleased to propose a ﬁ nal dividend of 0.75p per share (2015/16: 0.7p), subject to shareholder approval, resulting in a total dividend for the year of 1.0p per share (2015/16: 0.9p) - an increase of 11.1%. It remains the Board’s intention to maintain a progressive dividend policy. Outlook The UK economy remains in a period of uncertainty while the ramiﬁ cations of leaving the EU are worked through. There is a lack of clarity on how any free trade agreements will be negotiated and there continue to be major implications for the Sterling exchange rate and other ﬁ scal levers. As I stated in my report last year, and still at the time of writing we are unclear as to how these factors will impact the UK motor trade although we have seen an industry-wide softening in the new car market from April onwards. That said, we are continuing to invest for future growth as we consider that the Group is in a strong ﬁ nancial position. Moreover, Cambria’s robust balance sheet, industry leading return on investment and proven management team leave it well positioned to manage any uncertainty. We are actively looking to deliver on our commitments to the Brand partners that we represent with the investment programme to enhance our property portfolio, while maintaining our aim to produce superior returns on Shareholders’ funds, which reached 19.87% (note 8) in the year under review (2015/16: 21.98%). The Board is pleased with the progress that has been made over the last two ﬁ nancial years and intends to continue to exploit selective growth opportunities while driving the core operation of the existing businesses. Philip Swatman Chairman 8 9 Operating and ﬁ nancial review Chief Executive Ofﬁ cer’s review Introduction I am pleased to report that the Group has delivered a solid set of results for the 2017 ﬁ nancial year. The operational and ﬁ nancial performance improvements delivered in the 2016 ﬁ nancial year continued through to H1 2017 but declined in the second half. Overall our underlying proﬁ t before tax rose to £11.3m from £10.6m, a 6.6% increase on the previous year. The table below summarises our ﬁ nancial performance, which is detailed in the Finance Director’s Report: Year ended 31 August Revenue Underlying EBITDA* Underlying operating proﬁ t* Underlying proﬁ t before tax* Underlying proﬁ t before tax margin* Net Non-recurring income/ (expenses) Underlying earnings per share* Operating proﬁ t Proﬁ t before tax Earnings per share (basic) Dividend per share 2017 £m 644.3 13.7 11.8 11.3 1.8% - 9.19p 11.8 11.3 9.18p 1.0p 2016 £m 614.2 13.1 11.2 10.6 1.7% 1.16 8.33p 12.4 11.8 9.26p 0.9p Change 4.9% 4.6% 5.4% 6.6% 10bps 10.3% -4.8% -4.2% -0.9% 11.1% * These items exclude net non-recurring income / (expenses) of £nil (2016: £1.16m) 10 Operating and Financial Review (continued) The Group celebrated its 11th anniversary in July 2017. During those 11 years the Group has grown from one site with three new car franchises to 31 locations representing 46 new car franchises and 16 diﬀ erent Brand Partners. The Group has utilised a total of £10.8m of Share Capital to grow and has delivered an underlying Proﬁ t before Tax of £11.3m in its 11th year of trading. During the year, the Group delivered a return on shareholder funds of 19.87%. The Group has consistently delivered strong operational cash ﬂ ows and has built a net asset position of £50.4m underpinned by over £45.2m of freehold and long leasehold property. The Group has developed an exceptional franchise portfolio which will be enhanced further during 2018 through delivery of the property investments that the Group is making and the addition of the McLaren and Bentley franchises to the Group’s brand partnerships. Brand partnerships In line with our buy-and-build strategy, management has continued to work hard to improve the businesses acquired in previous years and to integrate and develop the ones acquired and established in the previous year, making signiﬁ cant investment in the management of those businesses. The core like-for-like businesses have shown continued improvements during the year and we are pleased with the performances delivered. Our current portfolio of Brand Partners and dealerships comprises: High Luxury / Premium Aston Martin Alfa Romeo Jaguar Jeep Land Rover Volvo Volume Abarth Dacia Fiat Ford Honda Mazda Nissan Renault Vauxhall 3 2 5 2 4 5 21 Motorcycle Triumph 2 1 5 5 2 4 1 1 2 23 2 2 The Group’s acquisition strategy evolved in 2013 to enhance the Group’s Premium and High Luxury mix which immediately focused on participating in the Jaguar Land Rover network restructuring. In January 2016 the Group acquired the Welwyn Garden City Land Rover business. The business currently operates from leasehold premises under a short lease agreed with the vendor of the business. The Group’s existing Jaguar and Aston Martin businesses in Welwyn Garden City are located two miles from the Land Rover dealership. In line with the strategy to combine the Jaguar and Land Rover dealerships into the new Arch concept facilities, the Group has identiﬁ ed and agreed terms to acquire a 4.3 acre freehold plot of land in Hatﬁ eld to build a new facility for JLR and Aston Martin and we are excited to conﬁ rm that McLaren will also be represented on this development. We have exchanged contracts on the development land with the only condition for completion of the purchase being the receipt of detailed planning permission which we anticipate receiving in mid-December. The tender documents for the development have been issued to contractors and we expect to begin the construction work in January 2018 with expected completion in December 2018. The anticipated capital cost of the newly developed facility for the four franchises is £17m. The acquisition and development of the land will be funded through the Group’s existing cash and new RCF facilities secured against the freehold property. In order that the Group can begin to represent McLaren in January 2018 from the Hatﬁ eld site, a temporary sales facility will be established. This will enable the Group to begin to build a database and forward orders whilst the development work is ongoing. In May 2016, the Group opened its Aston Martin dealership in Solihull. In order to secure the franchise for the territory, the Group acquired a freehold property and invested in a refurbishment of the facility to accommodate the Aston Martin franchise while the permanent location is procured and built. The temporary facility is enabling the Group to establish a representation point, build a database and serve the Aston Martin car parc for the territory. The Group has secured a new development site on the A34 in Solihull on a business park named “The Green” for a permanent facility in line with Aston Martin franchise standards. The Group has exchanged contracts and completion is subject to planning permission and the conclusion of extensive highways works to deﬁ ne the site and the new estate road. It is anticipated that the total freehold investment in the permanent facility will be c.£5m, and again will be funded through the Group’s existing cash and new RCF facility. It is anticipated that the development will be completed by the end of Q1 2019. 11 Operating and Financial Review (continued) In July 2016, the Group acquired the Jaguar and Land Rover business in Woodford, North London and continues to work towards securing a suitable facility for the relocation of the operation. During the 2015 ﬁ nancial year the Group acquired the Swindon Land Rover business. The Group is in the process of re-developing its Swindon Motor Park location to provide a new JLR facility in line with the new Arch design concept for JLR facilities. The planning process for the approval of the new JLR facility was signiﬁ cantly extended whilst we obtained Highways and Environment Agency consent for the development which was eventually received at the end of May 2017. The on-site development work began in July 2017 and will be completed by July 2018. Once the new development is complete, we will relocate the Land Rover business from the existing dealership property in Royal Wootton Bassett, and will sell that freehold property. The anticipated investment in the site is £6m, and this will be funded from the group’s existing cash and new RCF facilities. When the Group acquired the Barnet Jaguar Land Rover dealership in the 2013/14 ﬁ nancial year it committed to develop the freehold site to provide a Jaguar Land Rover Arch concept facility on that location. During the course of the 2015/16 and 2016/17 ﬁ nancial years the building work was ongoing at the site and we have operated the business through very diﬃ cult operational logistics on the site. The development was eventually completed in July 2017 with the total property investment and fees amounting to £7m. The facility now provides the basis for the Group to take advantage of the territory opportunity in Barnet, capitalising on the Jaguar Land Rover product and the strong demographics of the area. The Group has been given the opportunity to establish two new Bentley dealerships, and is in the process of refurbishing existing Group freehold premises in order that the sites can be operational in January 2018 at a cost of c£1m. Whilst the investments outlined above are signiﬁ cant, the Board Blackburn Preston Bolton Bury Oldham believes that the investment in the Warrington facilities for JLR, Aston Martin, McLaren and Bentley are core to Birmingham the future potential of the Group. Wellingborough The investment into the property portfolio in strategic, high proﬁ le locations will hold the Group in good stead to provide exceptional representation for its brand partners and a world class Guest experience. Northampton Woburn Swindon 12 Automobiles plc Locations across the UK Welwyn Garden City Brentwood Chelmsford Barnet Woodford Wimbledon Croydon Southampton Thanet Tunbridge Wells Canterbury Ashford Maidstone Gatwick Horsham Operating and Financial Review (continued) Operations New vehicles Used vehicles Aftersales Internal sales Total Administrative expenses Operating proﬁ t before non- recurring expenses Non-recurring income/ (expenses) Operating proﬁ t New Vehicle Sales New units 2017 2016 Revenue Revenue mix Gross Proﬁ t Margin Revenue Revenue mix Gross Proﬁ t Margin £m 308.7 277.3 71.4 (13.1) 644.3 % 47.9 43.0 11.1 (2.0) 100.0 £m 21.3 23.5 27.8 - 72.7 (60.9) 11.8 - 11.8 % 6.9 8.5 38.9 - 11.3 £m 297.4 264.2 65.5 (12.9) 614.2 % 48.4 43.0 10.7 (2.1) 100.0 % 6.5 9.0 40.7 - 11.3 £m 19.3 23.7 26.6 - 69.6 (58.4) 11.2 1.2 12.4 2017 11,052 2016 Year on year growth 12,516 (11.7)% New vehicle revenue increased from £297.4m to £308.7m with total new vehicle sales volumes down 11.7%. Excluding the impact of the acquisitions and disposals, our new volumes reduced by 17% on a like-for-like basis. Gross proﬁ t increased by £2m (10.4%) in total but reduced by £0.2m on a like-for-like basis. The reduced new vehicle volumes were oﬀ set by an improvement in the gross proﬁ t per unit sold which increased by 25.7%, a combination of like-for-like increase and strengthening mix from the JLR and Aston Martin businesses acquired as this product typically sells at higher price points. On a like-for-like basis, excluding the impact of the Welwyn Garden City, Woodford and Birmingham acquisitions and Swindon Motor Park closure, our new volumes reduced by 17% with gross proﬁ t reducing by £0.2m as proﬁ t per unit increased by 19%. The like-for-like volume reduction was partly attributed to the reduction in unit sales from the Barnet JLR site during the disruptive building project, and partly attributable to reductions in unit sales from certain volume manufacturer partners. The achievement of annual new car volume related bonuses for the 2016 calendar year has had a positive impact on the proﬁ t per unit and therefore overall gross proﬁ t reported in the period. The Group’s sale of new vehicles to private individuals was 10.2% lower year-on-year at 9,359 units, showing the volume reduction that we anticipated. New commercial vehicle sales reduced by 34% to 953 units in the period. New ﬂ eet unit vehicle sales increased by 14.4% to 740 units. The new vehicle registration data from the Society of Motor Manufacturers & Traders showed total registrations were down 1.0% in the rolling 12 month period to August. The registration of cars to private individuals was down 5.2% for the rolling 12 months, but in the period April to August was down 13.8%. The sale of diesel engine vehicles has been hardest hit as a result of the negative press around diesel engine emissions, and in the period from April to August, the sale of diesels was down 20.2%. The signiﬁ cant improvement in proﬁ t per unit on both a total and like-for-like basis was particularly pleasing in a very competitive new car market where each of the manufacturers are delivering compelling consumer oﬀ ers and requiring increasing levels of sales from the dealers to meet their own registration requirements. Used Vehicle Sales Used units 2017 14,765 2016 Year on year growth 15,729 (6.1)% We have delivered another good performance in used vehicle sales. Revenues increased from £264.2m to £277.3m whilst the number of units sold declined by 6.1% partly driven by the closure of Swindon Motor Park, which was a high volume used car operation. The gross proﬁ t on used vehicles decreased by 0.8% (£0.2m) to £23.5m, however the proﬁ t per unit sold increased 5.6%. On a like-for-like basis, excluding the impact of the Welwyn Garden City, Woodford and Birmingham acquisitions and Swindon Motor Park closure whilst volumes were down 2.4% the gross proﬁ t generated increased by £0.5m (2.1%) with proﬁ t per unit increasing by 4.3%. 13 Operating and Financial Review (continued) We have continued our focused strategy in the used car department to increase the eﬃ ciency with which we source, prepare and market our used vehicles in order to drive our Velocity trading principles. This has produced strong results, increasing the like-for-like proﬁ tability of the used car department. During the period, this strategy continued to deliver a strong 12 month rolling return on used car investment* of 129%. This level was reduced from the 147% achieved last year, but reﬂ ects the increase in the average carrying value of the stock resulting from the higher representation of premium vehicles that are sold through the acquired businesses and removal of the high volume, lower value product sold from the Swindon Motor Park site. The ROI performance at 129% remains signiﬁ cantly ahead of the industry average of 89.8%. * gross proﬁ t from used car operation over 12 months as a proportion of average stock levels for the year Aftersales Aftersales Revenue 2017 2016 Year on year growth £71.4m £65.5m 9% The combined aftersales revenue increased 9% year on year from £65.5m to £71.4m and related gross proﬁ t increased to £27.8m from £26.6m. Like-for-like aftersales revenues excluding the impact of the Welwyn Garden City, Woodford and Birmingham acquisitions and Swindon Motor Park closure were 2.9% higher year on year, with gross proﬁ t improving 1.7% to £24.5m, up £0.4m. The aftersales departments contributed 11.1% of the Group’s Revenue, and 38.2% of the Group’s overall gross proﬁ t. The aftersales margin was slightly diluted in the year as the parts component of the aftersales revenue increased in mix terms. The margin in the parts element is smaller than that generated by service and bodyshop labour sales. The ﬁ re that took place in October 2016 at the Group’s Jaguar and Aston Martin aftersales workshop in Welwyn Garden City had a signiﬁ cant impact on the proﬁ tability of that site, and whilst we have attempted to maintain a service level for our Guests by utilising the Welwyn Garden City Land Rover dealership, the constraint on both operations has been evident. The business interruption insurance claim has now been settled and has been included within the trading ﬁ gures for the full year. The site reinstatement took signiﬁ cantly longer than ﬁ rst anticipated as a result of the complexity around stakeholders and insurance liability allocation. Whilst this was frustrating the work is now complete and we were able to reoccupy the workshop in July 2017. Our Associates operating from the site performed incredibly well in mitigating the potentially damaging losses that could have arisen as a result of the ﬁ re and we are grateful for their commitment and eﬀ orts through a diﬃ cult set of circumstances. 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 as well as traditional communication methods. The Group continues to focus on the sale of service plans and its unique warranty-4-life product to enhance Guest retention. The 0-3 year car parc continues to be replenished, as new car sales increase year on year, and this gives the Group conﬁ dence of further progress in Guest relationship and retention and the aftersales business remaining strong. Total underlying administrative expenses remained well controlled during the year and as a percentage of revenue remained at 9.5%, demonstrating good overhead recovery and strong capital disciplines as the Group continues to grow. 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 three years of the Barnet, Swindon, Welwyn Garden City, and Woodford businesses are ﬁ rmly in line with this strategy and the opportunity to develop our relationship and representation with Jaguar Land Rover ﬁ ts our brand portfolio aspirations perfectly. The Birmingham Aston Martin business opening creates a future opportunity for the Group once it has established in a permanent facility and has developed a database. We have now completed 14 separate transactions since our incorporation. Following any acquisition, the Cambria management team implements new ﬁ nancial 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 reﬂ ect 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 deﬁ ned beneﬁ t pension schemes. We have always taken the approach that Cambria will not acquire any business unless there is a strong underlying business case to do so and our acquisitions have been funded from our own cash resources and banking facilities. Maintaining the Group’s balanced brand portfolio will be fundamental to its continued success and development and this will undoubtedly mean that we will acquire and develop more Premium and Luxury businesses. All acquisitions and 14 Operating and Financial Review (continued) any related funding requirements are assessed on their individual merits. For compelling acquisition targets, like the JLR acquisitions, 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 beneﬁ ts 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 ﬁ nancial controls are implemented immediately, ranging from individual cheque signatories to daily reporting of vehicle sales and aftersales revenues, margins and other performance ﬁ gures. We then implement our two growth strategies “Cambria Digital”, which is our internet social networking strategy for vehicle sales coupled with our “Guest Connect” support centre. Cambria Academy The Group has continued to develop the Cambria Academy, a training Academy for the Group’s Associates. 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 speciﬁ c telephone handling courses to ensure that we increase the competency of all our Associates in dealing with Guest enquiries eﬀ ectively. The Group launched its Leadership Development Programme during the year with the ﬁ rst cohort of Associates working towards achieving a Level 5 Diploma in Management. The aim of the ﬁ rst stage of the LDP is to develop high calibre managers into the Group’s future General Managers. 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 reﬁ ne the Academy to help develop our own talent pool, promote Associate retention and to create our own future management with the overriding objective of enhancing the Guest Experience when interacting with Cambria. Outlook The new car market in 2017 will see another strong year for registrations in the UK, with current SMMT forecast at 2.57m, 4.5% down on the record 2.69m registrations of 2016 but nonetheless above the mean average of 2.35m for the past 17 years. There is little doubt that market sentiment has been impacted since the EU referendum vote in 2016. With the current weakening in the sterling exchange rate, there has been some downward pressure on the number of cars registered in the UK as the manufacturer landed cost of imported cars and components increases. The SMMT is currently forecasting a 2.43m new car market in 2018, a further 5.5% reduction in new car registrations forecast for the 2017 outturn. There has been a downward shift in new car sales in the period from April 2017 onwards as the level of consumer uncertainty increases. Diesel engines have received a signiﬁ cant amount of negative press speculation over the past six months following political positioning in relation to diesel vehicle emissions. The speculation around how diesels will be taxed has impacted the sale of these cars and clarity around the strategy is needed. Whilst the 2017 ﬁ nancial year delivered a solid set of results, because of the uncertainty in the economic outlook, the Board is cautious about trading in the coming year particularly in the new car arena. Post the period end, September and October trading were in line with expectations but down on the previous year driven by new car volume and bonus achievements impacting new car margins. The achievements we have made to progress our property portfolio and franchising strategy are pleasing and we are excited about the opportunities with the new Brands that we are adding to the Group in 2018. The formative years of the Group have laid solid foundations with an extremely capable management team and high quality digitised data systems. In uncertain times, the quality of people and systems is absolutely critical and the Board is conﬁ dent that Cambria remains well placed to take advantage of any opportunities aﬀ orded to the Group. We intend to continue the process of enhancing the existing businesses and focusing on integrating and optimising the businesses acquired to reap the full potential of those acquisitions. We will continue our relentless focus on driving strong returns on shareholder funds from the foundations that we have put in place. Mark Lavery Chief Executive Oﬃ cer 15 Operating and Financial Review (continued) Finance Director’s Report Overview Total revenues in the period increased 4.9% to £644.3m from £614.2m in the prior year. New vehicle unit volumes were down 11.7% new vehicle revenues were up 3.8%. Used car unit sales reduced by 6.1% although revenues increased by 5.0%. Revenues from the aftersales businesses increased by 9%, compared with the previous year. Total gross proﬁ t increased by £3.1m (4.5%) from £69.6m to £72.7m in the year. Gross proﬁ t margin across the Group remained consistent at 11.3%, reﬂ ecting the change in revenue mix with new car margins improving, oﬀ setting the slight reductions in used cars and aftersales margins. The average selling price of both new and used cars increased year on year, as did the average proﬁ t per new and used units that we sold. The aftersales operations contributed 38.2% of the total gross proﬁ t for the Group. The gross proﬁ t contribution made by the used car and aftersales components of the business accounted for 70.6% of the Group’s total gross proﬁ t mix. During the year, the Group has non-recurring net expenses of £14,000 only relating to the accounting income and expenses associated with the insurance pay-out relating to the ﬁ re at Welwyn Garden City Jaguar. This net £14,000 expense reﬂ ects gross income of £0.4m for the replacement of ﬁ xed assets which have been capitalised, oﬀ set by £0.4m of impairment and third party expenses due to the fact that we will be relocating the Jaguar and Aston Martin dealership before January 2019 once the Hatﬁ eld development is complete. In the prior year, the Group generated a non-recurring net income of £1.16m which was a combination of £1.95m of non-recurring income from the sale of Exeter Jaguar and Croydon Jaguar and non-recurring expenses totalling £0.79m in relation to the transaction and set up costs associated with the acquisitions made in the year and the write oﬀ of certain assets as a result of the acquisitions. Underlying EBITDA increased by 4.6% in the period to £13.7m, from £13.1m in the previous year. Underlying operating proﬁ t improved 5.4% to £11.8m, compared with £11.2m in the previous year, resulting in an underlying operating margin of 1.8% (2015/16: 1.8%). Net ﬁ nance expenses reduced to £0.5m (2015/16: £0.6m) as a result of the savings in the mortgage interest following the reﬁ nancing in November 2015 and slightly reduced consignment stocking charges. The Group’s underlying proﬁ t before tax rose by 6.6% to £11.3m, compared with £10.6m in the previous year. Underlying earnings per share were 9.19p (2015/16: 8.33p). Basic earnings per share were 9.18p (2015/16: 9.26p) and the Group’s underlying return on shareholders’ funds for the year was 19.87% (2015/16: 21.98%). Taxation The Group tax charge was £2.1m (2015/16: £2.5m) representing an eﬀ ective rate of tax of 18.4% (2015/16: 21.3%) on a proﬁ t before tax of £11.3m (2015/16: £11.8m). As outlined in last year’s report, it is anticipated that the tax rate will continue at a substantially normal eﬀ ective tax rate. Financial position The Group has a robust balance sheet with a net asset position of £50.4m underpinned by £45.2m of freehold and long leasehold property which are held on a historic cost basis. Secured against the freehold and long leasehold property are mortgages and RCF amounting to £16.9m. As at the balance sheet date, and as a result of the banking facility arranged on 23 November 2015, the Group had a term loan with a ﬁ ve year term, and 15 year capital repayment proﬁ le which amounted to repayments of £1m per annum, and this is disclosed in the balance sheet as due within one year. Post year end, the Group reﬁ nanced the Banking facilities and as a result, the revised £40m Revolving Credit Facility has no ﬁ xed capital repayment proﬁ le throughout its 5 year term. The loans outstanding at the balance sheet date reﬂ ect very similar commercial terms, 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 net cash position of the Group as at 31 August 2017 was £6.1m (2015/16: net cash £0.4m), reﬂ ecting a cash position of £23m (2015/16: £19.8m). This is after the £7.9m investment in Capital Expenditure. The Group typically uses bank 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 ﬂ uctuations in working capital. The overdraft facilities are renewable annually and are next due in September 2018. 16 Operating and Financial Review (continued) Cash ﬂ ow and capital expenditure The Group generated an operating cash inﬂ ow of £14.5m with working capital reducing by £3.3m through eﬃ cient management of the vehicle inventory and the stocking lines associated with that inventory and higher levels of new vehicle deposits for new car orders for September delivery. Total funds invested in capital expenditure were £7.9m. In the year, the Barnet development incurred £4.5m of capex to complete the project, the Croydon Ford dealership was fully refurbished at a total cost of £0.7m, other smaller site refurbishments totalled £0.6m and the Welwyn Garden City Jaguar workshop is capitalised at a total cost of £0.4m. There were ﬁ xtures, ﬁ ttings plant and machinery additions of £1.5m and computer expenditure of £0.2m. During the year, and as a result of the Group banking facilities, capital repayment of £1m were made. There was a repayment of the £5m of RCF that was drawn at 31 August 2016. On completion of the Barnet development £3.5m of the property development RCF was drawn. As a result of the net cash inﬂ ow of £3.2m, the gross cash position was £23m with gross debt of £16.9m and overall net cash of £6.1m after signiﬁ cant investment, compared with net cash at 31 August 2016 of £0.4m. Capital expenditure commitments As outlined in the Chief Executive’s report, the Group has committed to delivering property solutions to facilitate the acquired businesses complying with the franchise standards for its Brand partners. Over the coming 24 months the Group intends to complete the following major freehold investments; Swindon JLR development forecast at c.£6m, Welwyn Garden City JLR, Aston Martin and McLaren at c.£17m and Solihull Aston Martin at c.£5m and Bentley site refurbishments at c.£1m, the total freehold new build investment being in the order of £29m. The developments will be funded through a drawdown of newly arranged RCF and existing cash. The Board intends to draw down against the RCF normal Loan to Value security against each development which the Board forecasts at 70% of the land purchase and development cost. The Board is committed to these investments and anticipates that by making the investments it will position the Group well for realising the full operational potential of the businesses acquired over the past three years. 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 deﬁ ned beneﬁ t pension schemes and has no liability arising from any such scheme. The Group made contributions amounting to £0.3m (2015/16: £0.4m) to deﬁ ned contributions schemes for certain employees. Financial instruments The Group does not have any contractual obligation under any ﬁ nancial instruments with respect to the hedging of interest rate risk. Dividends The Board is pleased to propose a ﬁ nal dividend payment in respect of the ﬁ nancial year to 31 August 2017 of 0.75p per share in addition to the interim dividend of 0.25p per share paid in May 2017. If approved by the shareholders at the Annual General Meeting to be held on 4 January 2018, the dividend will be payable on 22 January 2018 to those shareholders registered on 29 December 2017, with an ex-dividend date of 28 December 2017. 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 17 Strategic report Enhanced Business Review All details required are covered in the Chairman’s Statement and the Operating and Financial Review between pages 7 and 17. Cambria Business Philosophy Cambria’s culture – The Four Pillars The Group works hard to instil a group culture. This culture is built around four pillars which are: Pillar One - Associate delight The Directors believe that Associates are the Company’s most important asset and therefore members of the team are not referred to as members of staﬀ or employees, but rather as “Associates”. The Directors want all Associates to be proud to be associated with the Group and to be given the autonomy to make decisions that aﬀ ect the running of “their” business. The Directors promote internal development and foster a culture whereby Associates feel they can achieve their career aspirations with Cambria. Equally, Cambria invests in its Associates in order for them to achieve their full potential within the Group. Pillar Two - Guest delight Cambria Associates are encouraged to treat all customers at all times, in the way that they would treat a guest visiting their own home. The Directors believe that Associate empowerment is key to achieving this goal and the Directors believe that the organisation must be transparent and open at all times generating empathy with the diverse guest base of the Group. Pillar Three - Brand delight The Group’s goal is to become the retailer of choice for all of the automotive manufacturers that it represents. This pillar focuses on achieving the following goals: • brand vehicle sales objectives • brand part sales objectives • top half placing in brand customer satisfaction surveys • the development of a trusting relationship with brand personnel from the manufacturer partners Pillar Four - Stakeholder delight The Group aims to provide satisfaction to its Stakeholders. It seeks to achieve this through: • disclosing timely and accurate information providing Stakeholders with a detailed understanding of business performance; and • communicating openly and transparently. Primary Risks The primary risk to the Group is the volatility in the new and used car markets and the changes made by our manufacturer brand partners to the pricing and margin structure on the new vehicles that we sell. The Group uses a variety of ﬁ nancial 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 ﬁ nancial 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 ﬁ nancial 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 ﬁ nances its operations through a combination of bank funding and shareholders’ funds. The interest rate on bank funding is variable with the base rate. Liquidity risk The Group seeks to manage ﬁ nancial risk by ensuring suﬃ cient liquidity is available to meet foreseeable needs and to invest cash assets safely and proﬁ tably. The funding for signiﬁ cant new ventures is secured before commitments are made. Cash ﬂ ows 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 ﬁ nancial 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 ﬂ ow 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 Date: 21 November 2017 Dorcan Way, Swindon, SN3 3RA 19 Directors’ report The Directors present their Directors’ report and ﬁ nancial statements for the year ended 31 August 2017. Principal activities Cambria’s principal activities are the sale and servicing of motor vehicles and the provision of ancillary services. The Group operates from 31 sites with a total of 46 dealer franchises. Proposed dividend The Directors recommend the payment of a ﬁ nal dividend for 2017 of 0.75p per share which equates to £0.75m (2016: £0.7m). If approved at the Annual General Meeting to be held on 4 January 2018, the dividend will be payable on 22 January 2018 to those shareholders registered on 29 December 2017. Directors The Directors who held oﬃ ce during the year were as follows: P H Swatman M J J Lavery M W Burt J A Mullins Sir P A Burt T A Duckers (appointed 5 September 2016) P McGill (appointed 7 February 2017) W F Charnley (appointed 7 February 2017) All Directors beneﬁ ted from qualifying third party indemnity provisions in place during the ﬁ nancial period. On 5 September 2016 Tim Duckers was appointed to the Board of Directors as Managing Director of the motor division. Tim has been an employee of the Group since 2008, and has been heavily involved in the Group’s development. On 7 February 2017 Paul McGill and William Charnley were appointed to the Board as Non-Executive Directors. Both Paul and William have extensive knowledge of the motor industry and further strengthen the Board. Associates The Group recognises the beneﬁ t of keeping Associates informed of group aﬀ airs and the views of Associates are given full consideration at regular meetings with their representatives. Full and fair consideration is given to the employment of disabled persons, who are treated no diﬀ erently from other Associates as regards recruiting, training, career development and promotion opportunities. For people who may become disabled, in the course of employment, the Group will make every eﬀ ort to accommodate them in suitable alternative employment. Political and charitable contributions During the year, the Company made no charitable donations. Neither the Company nor any of its subsidiaries made any political donations or incurred any political expenditure during the year (2016: £nil). Disclosure of information to auditor The Directors who held oﬃ ce at the date of approval of this Directors’ Report conﬁ rm that, so far as they are each aware, there is no relevant audit information of which the Company’s auditor is unaware; and each director has taken all the steps that he ought to have taken as a director to make himself aware of any relevant audit information and to establish that the Company’s auditor is aware of that information. Auditor In accordance with Section 489 of the Companies Act 2006, a resolution for the re-appointment of KPMG LLP as auditor of the Company is to be proposed at the forthcoming Annual General Meeting. By order of the board James Mullins Director Date: 21 November 2017 20 Dorcan Way, Swindon, SN3 3RA Statement of directors’ responsibilities in respect of the Annual Report and the ﬁ nancial statements The Directors are responsible for preparing the Annual report and the Group and parent company ﬁ nancial statements in accordance with applicable law and regulations. Company law requires the directors to prepare group and parent company ﬁ nancial statements for each ﬁ nancial year. As required by the AIM rules of the London Stock Exchange they are required to prepare the group ﬁ nancial statements 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 ﬁ nancial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice), including FRS101 Reduced Disclosure Framework. Under company law the directors must not approve the ﬁ nancial statements unless they are satisﬁ ed that they give a true and fair view of the state of aﬀ airs of the Group and parent company and of their proﬁ t or loss for that period. In preparing each of the Group and parent company ﬁ nancial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgments and estimates that are reasonable and prudent; • for the Group ﬁ nancial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU • for the parent company ﬁ nancial statements, state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the parent company ﬁ nancial statements; and • prepare the ﬁ nancial statements on the going concern basis unless it is inappropriate to presume that the Group and parent company will continue in business. The Directors are responsible for keeping adequate accounting records that are suﬃ cient to show and explain the parent company’s transactions and disclose with reasonable accuracy at any time the ﬁ nancial position of the parent company and enable them to ensure that its ﬁ nancial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and ﬁ nancial information included on the company’s website. Legislation in the UK governing the preparation and dissemination of the ﬁ nancial statements may diﬀ er from legislation in other jurisdictions. 21 Independent auditor’s report to the members of Cambria Automobiles plc Materiality: group financial statements as a whole Coverage £0.57m (2016:£0.59m) 5% (2016: 5%) of group profit before tax 100% (2016:100%) of group profit before tax Risks of material misstatement vs 2017 Recurring risks Goodwill valuation Revenue recognition Recoverability of parent’s debt due from group entities ◄► ◄► ◄► 1. Our opinion is unmodified We have audited the financial statements of Cambria Automobiles plc (“the Company”) for the year ended 31 August 2017 which comprise the consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated statement of financial position, consolidated cash-flow statement, company balance sheet, company statement of changes in equity, and the related notes, including the accounting policies in note 1. 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 2017 and of the Group’s profit for the year then ended; — the group financial statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union; — the parent Company financial statements have been properly prepared in accordance with UK accounting standards, including FRS 101 Reduced Disclosure Framework; and — the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed entities. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. 2. Key audit matters: our assessment of risks of material misstatement Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit matters, in decreasing order of audit significance, were as follows (unchanged from 2016): Goodwill Forecast based valuation Our procedures included: The risk Our response £21.3 million; (2016: £21.3 million) Refer to page 30 accounting policy) and page 44 (financial disclosures). Goodwill acquired in a business combination is allocated to the Group’s Cash Generating Units (CGUs). — Benchmarking assumptions: comparing the key assumptions (discount rate, growth rate) used to externally derived data; The recoverable amounts of the CGUs are determined from value in use calculations and where the carrying value of a CGU exceeds its recoverable amount an impairment charge is required. This is a key judgement area as inaccuracies in assumptions, particularly relating to forecast cash flows and discount rates, could result in the recoverable amount being calculated incorrectly resulting in potentially material impairment charges not being recognised or too great an impairment charge being recorded. — Historical comparisons: comparing the previously forecast cash flows to actuals to assess the historical accuracy of forecasting; — Assessing transparency: considering the adequacy of Group’s disclosures in respect of Goodwill; — Sensitivity analysis: we evaluated the Group’s sensitivity analysis, by performing our own analysis to assess the sensitivity of the impairment reviews to changes in the key assumptions of the discount rate, growth rate and the forecast cash flows. Revenue 2017/2018 sales Our procedures included: £644.3 million; (2016: £614.2 million) Refer to page 29 (accounting policy) and page 37 (financial disclosures) The business is seasonal in nature, with peak revenues in the months of March and September. Trading in the motor industry continues to be competitive and there is pressure on management to achieve financial targets. These conditions give rise to an increased risk of management bias or fraud over the timing of revenue recognition. — Control design and re-performance: we tested controls relating to the sales process, assessing whether third party documentation was collated in line with Group policy; — Test of details: we assessed whether revenue had been recorded in the correct period for a sample of sales invoices raised around the year-end. We also assessed credit notes raised after the year-end to identify significant corrections relating to [We continue to perform procedures over [identify key audit matter]. However, following [explain why risk is less significant 2017. this year], we have not assessed this as one of the most significant risks in our current year audit and, therefore, it is not separately identified in our report this year.] Low risk, high value Our procedures included: Recoverability of parent’s debt due from group entities £18.8 million (2016: £19.9 million) Refer to page 64 (accounting policy) and page 70 (financial disclosures). The carrying amount of the intra-group debtor balance represents 89% of the parent company’s total assets. Their recoverability is not at a high risk of significant misstatement or subject to significant judgement. However, due to their materiality in the context of the parent company financial statements, this is considered to be the area that had the greatest effect on our overall parent company audit. — Tests of detail: Assessing 100% of group debtors to identify, with reference to the relevant debtors’ draft balance sheet whether they have a positive net asset value and therefore coverage of the debt owed, as well as assessing whether those debtor companies have historically been profit- making. , — Assessing subsidiary audits: Assessing the evidence obtained during our audit of those subsidiaries and considering the results of that work on their profits and net assets. 3. Our application of materiality and an overview of the scope of our audit Group profit before taxation £11.4m (2016: £11.8m) Group Materiality £0.57m (2016: £0.59m) Materiality for the group financial statements as a whole was set at £0.57 million (2016: £0.59 million) determined with reference to a benchmark of group profit before taxation, normalised to exclude this year’s impairment in respect of trade receivables as disclosed in note 22, of £11.4 million, of which it represents 5.0% (2016: determined with reference to a benchmark of group profit before taxation of 5.0%). Materiality for the parent company financial statements as a whole was set at £0.21 million (2016: £0.23 million), determined with reference to a benchmark of total assets, of which it represents 1.0% (2016: 1.0%). We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £0.03 million (2016: £0.04 million), in addition to other identified misstatements that warranted reporting on qualitative grounds. All of the group’s thirteen (2016: thirteen) components, including the parent company, were subject to full scope audits for group purposes, all of which were performed by the group team. These audits accounted for 100% (2016: 100%) of total group revenue, group profit before tax and total group assets and were performed to individual component materiality levels which ranged from £0.02 million to £0.40 million (2016: £0.01 million to £0.53 million), having regard to the mix of size and risk profile of the group across these components. £0.57 million Whole financial statements materiality (2016: £0.59m) £0.4 million Range of materiality at thirteen components £0.02m-£0.4m (2016: £0.02m to £0.5m) Group PBT Group materiality £0.03m Misstatements reported to the audit committee (2016: £0.04m) Group revenue Group profit before tax 100% (2016 100%) 100 100 100% (2016 100%) 100 100 Group total assets Group profit before exceptional items and tax 100% (2016 100%) 100 100 100% (2016 100%) 100 100 Key: Full scope for group audit purposes 2017 Full scope for group audit purposes 2016 4. We have nothing to report on going concern 7. Respective responsibilities We are required to report to you if we have concluded that the use of the going concern basis of accounting is inappropriate or there is an undisclosed material uncertainty that may cast significant doubt over the use of that basis for a period of at least twelve months from the date of approval of the financial statements. We have nothing to report in these respects. 5. We have nothing to report on the other information in the Annual Report The directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information. Strategic report and directors’ report Based solely on our work on the other information: — we have not identified material misstatements in the strategic report and the directors’ report; — in our opinion the information given in those reports for the financial year is consistent with the financial statements; and — in our opinion those reports have been prepared in accordance with the Companies Act 2006. 6. We have nothing to report on the other matters on which we are required to report by exception 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. We have nothing to report in these respects Directors’ responsibilities As explained more fully in their statement set out on page [A], the directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and, parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities. 8. The purpose of our audit work and to whom we owe our responsibilities 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. Ian Brokenshire (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants 66 Queen Square Bristol BS1 4BE 22 November 2017 Consolidated statement of comprehensive income for year ended 31 August 2017 Revenue Cost of sales Gross proﬁ t Administrative expenses Other operating proﬁ t Results from operating activities Finance income Finance expenses Net ﬁ nance expenses Proﬁ t before tax from operations before non-recurring income/ (expenses) Net non-recurring income and expenses Proﬁ t before tax Taxation Proﬁ t and total comprehensive income for the period Basic and diluted earnings per share Note 3 4 4 9 9 5 4 10 8 All comprehensive income is attributable to owners of the parent company. 2017 £000 644,286 (571,607) 72,679 (60,901) - 11,778 49 (576) (527) 11,265 (14) 11,251 (2,071) 9,180 9.18p 2016 £000 614,218 (544,614) 69,604 (59,158) 1,950 12,396 133 (761) (628) 10,605 1,163 11,768 (2,508) 9,260 9.26p 26 Consolidated statement of changes in equity for year ended 31 August 2017 Balance at 31 August 2015 Proﬁ t for the year Dividend paid Balance at 31 August 2016 Proﬁ t for the year Dividend paid Balance at 31 August 2017 Note Share capital Share premium Retained earnings Total equity £000 £000 £000 £000 10,000 - - 10,000 - - 10,000 799 - - 799 - - 799 22,867 9,260 (800) 31,327 9,180 (950) 33,666 9,260 (800) 42,126 9,180 (950) 39,557 50,356 21 27 Consolidated statement of ﬁ nancial position at 31 August 2017 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 Non-current liabilities Other interest-bearing loans and borrowings Provisions 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 17 20 21 2017 £000 49,321 21,365 - 2016 £000 43,949 21,391 13 70,686 65,353 105,419 12,428 23,046 95,068 13,314 19,817 140,893 128,199 211,579 193,552 (1,000) (142,539) (801) (6,000) (129,731) (1,245) (144,340) (136,976) (15,883) (1,000) (13,450) (1,000) (16,883) (14,450) (161,223) (151,426) 50,356 42,126 10,000 799 39,557 10,000 799 31,327 50,356 42,126 These ﬁ nancial statements were approved by the board of directors on 21 November 2017 and were signed on its behalf by: M J J Lavery Director 28 Company registered number: 05754547 Consolidated cash ﬂ ow statement for year ended 31 August 2017 Notes Cash ﬂ ows from operating activities Proﬁ t for the year Adjustments for: Depreciation, amortisation and impairment 11/12 Financial income Financial expense Loss on disposal of ﬁ xed assets Proﬁ t on sale of branches Taxation Non-recurring (income)/expenses Change in trade and other receivables Change in inventories Change in trade and other payables Change in provisions Interest paid Tax paid Non-recurring expenses Net cash from operating activities Cash ﬂ ows from investing activities Interest received Proceeds from sale of plant and equipment Acquisition of branch net of cash acquired Disposal of branches by trade and asset sale Receipt of insurance claim settlement Purchase of property, plant and equipment and software Net cash from investing activities Cash ﬂ ows from ﬁ nancing activities Proceeds from new loan Interest paid Repayment of borrowings Dividend paid Net cash from ﬁ nancing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 1 September 2016 Cash and cash equivalents at 31 August 2017 9 9 10 5 5 28 5 21 16 16 2017 £000 9,180 2,271 (49) 576 324 - 2,071 (411) 13,962 886 (10,351) 12,767 - 17,264 (350) (2,461) - 14,453 49 - - - 411 (7,941) (7,481) 3,433 (226) (6,000) (950) (3,743) 3,229 19,817 23,046 2016 £000 9,260 1,837 (133) 761 - (1,950) 2,508 787 13,070 (131) (6,827) 12,956 1,000 20,068 (460) (2,075) (787) 16,746 133 95 (12,946) 2,058 - (5,622) (16,282) 29,950 (301) (24,891) (800) 3,958 4,422 15,395 19,817 29 Notes (forming part of the ﬁ nancial statements) 1 Accounting policies Cambria Automobiles plc is a company which is quoted on the AIM Market of the London Stock Exchange plc and is incorporated and domiciled in the United Kingdom. The address of the registered oﬃ ce is Swindon Motor Park, Dorcan Way, Swindon, SN3 3RA. The registered number of the company is 05754547. These ﬁ nancial statements as at 31 August 2017 consolidate those of the Company and its subsidiaries (together referred to as the “Group”). The parent company ﬁ nancial statements present information about the Company as a separate entity and not about its group. The Group ﬁ nancial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU (“Adopted IFRS”). The Company has elected to prepare its parent company ﬁ nancial statements in accordance with FRS101; and these are presented on pages 61 to 71. The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in the ﬁ nancial statements. Judgements made by the directors in the application of these accounting policies that have signiﬁ cant eﬀ ect on the ﬁ nancial statements and estimates with a signiﬁ cant risk of material adjustment in the next year are discussed in note 2. Basis of preparation The ﬁ nancial statements are prepared under the historical cost convention. The directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook. At the balance sheet date, the Group had net current liabilities of £3,447,000, the Directors have a reasonable expectation that the Group has adequate resources given the cash position at year end, the banking facilities and the trading performance of the Group that it will continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis in preparing the annual ﬁ nancial statements. Further information regarding the company’s business activities together with the factors likely to aﬀ ect its future development, performance and position is set out in the Strategic report and Directors’ report on pages 18 to 20. Basis of consolidation The ﬁ nancial statements consolidate the ﬁ nancial statements of the Company together with its subsidiary companies. Subsidiaries Subsidiaries are entities controlled by the Group. Control exists when it is exposed to, or has right to, variable returns from its investment within the entity and has the ability to aﬀ ect these returns through its power over the entity. The ﬁ nancial information of subsidiaries is included from the date that control commences until the date that control ceases. All business combinations are accounted for by applying the 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 identiﬁ able assets acquired and liabilities assumed. When the excess is negative, a bargain purchase gain is recognised immediately in proﬁ t 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 classiﬁ ed 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 proﬁ t or loss. 30 Notes (continued) (forming part of the ﬁ nancial statements) 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 identiﬁ able assets, liabilities and contingent liabilities of the acquiree. When the excess was negative, a bargain purchase gain was recognised immediately in proﬁ t or loss. Transaction costs, other than those associated with the 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 identiﬁ ed as the Chief Executive Oﬃ cer. All revenue generated and non-current assets held are attributable to UK operations only. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts and VAT. Sales of motor vehicles, parts and accessories are recognised when the signiﬁ cant risks and rewards of ownership have been transferred to the buyer. In general this occurs when vehicles or parts are delivered to the customer and title has passed. Manufacturer incentives are recognised as revenue when earned. Servicing and bodyshop sales, including warranty work, are recognised on completion of the agreed work. Finance commission revenue is recognised as the related vehicles are sold. Deposits received from customers Deposits received from customers prior to the completion of a sale (delivery of vehicle) are included in the accounts as creditors falling due within one year. Financing income and expenses Financing expenses comprise interest payable, stocking interest charge on consignment and used vehicles and ﬁ nance leases. Financing income comprises interest receivable on funds invested and interest credits received from manufacturers on stock management. Borrowing costs are recognised in the period in which they are incurred. Interest income and interest payable is recognised in proﬁ t or loss as it accrues, using the eﬀ ective interest method. Operating proﬁ t Operating proﬁ t relates to proﬁ t before ﬁ nance income, ﬁ nance expense and income tax expense. 31 Notes (continued) (forming part of the ﬁ nancial statements) 1 Accounting policies (continued) Intangible assets Goodwill Goodwill represents the excess between the cost of an acquisition of a subsidiary compared to the net fair value of the identiﬁ able assets, liabilities and contingent liabilities, and recognition of identiﬁ able intangibles at the date of acquisition. Identiﬁ able intangibles are those which can be sold separately or which arise from legal rights regardless of whether those rights are separable. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units of the acquiree which represent the smallest identiﬁ able group of assets that generates cash inﬂ ows that are largely independent of the cash inﬂ ows from other assets or groups of assets. Goodwill is not amortised but is tested annually for impairment. Any impairment is recognised immediately in the statement of comprehensive income and is not subsequently reversed. Other intangible assets Expenditure on internally generated goodwill and brands is recognised as an expense as incurred. Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and accumulated impairment losses. Amortisation Amortisation is charged on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indeﬁ nite. Intangible assets with an indeﬁ nite useful life and goodwill are systematically tested for impairment at each year. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows: Computer software 3 – 5 years Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Where parts of an item of property, plant and equipment have diﬀ erent useful lives, they are accounted for as separate items of property, plant and equipment. Depreciation is charged on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated. The estimated useful lives are as follows: • freehold buildings • leasehold properties • plant and machinery • ﬁ xtures and ﬁ ttings • computer equipment 50 years over the lifetime of the lease 5 to 10 years 5 to 10 years 3 to 5 years Depreciation methods, useful lives, residual values and possible impairments have been reviewed at the year end. As a result of this review, no impairment charge has been deemed necessary for the period. 32 Notes (continued) (forming part of the ﬁ nancial statements) Impairment of assets excluding inventories The carrying amounts of the Group’s assets, are reviewed at each year end to determine whether there is any indication of impairment; an asset is considered to be impaired if objective evidence indicates that one or more events have had a negative eﬀ ect on the estimated future cash ﬂ ows of that asset. If any such indication exists, the asset’s recoverable amount is estimated. For goodwill, assets that have an indeﬁ nite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each year end. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in income. Impairment losses recognised in respect of cash-generating units are allocated ﬁ rst to reduce the carrying amount of any goodwill allocated to cash-generating units and then to reduce the carrying amount of the other assets in the unit on a pro rata basis. A cash generating unit is the smallest identiﬁ able group of assets that generates cash inﬂ ows that are largely independent of the cash inﬂ ows from other assets or groups of assets. For an asset that does not generate largely independent cash inﬂ ows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Reversals of impairment An impairment loss in respect of trade and other receivables carried at amortised cost is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised. An impairment loss in respect of goodwill is not reversed. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Inventories Inventories are stated at the lower of cost and net realisable value. In determining the cost of motor vehicles, the actual amount paid and payable to date for each vehicle is used, for spare parts and service items cost is based on the ﬁ rst-in ﬁ rst-out principle. An appropriate provision is made for obsolete or slow moving items. New vehicles on consignment from manufacturers are included in the Statement of Financial Position with a corresponding liability in creditors due within one year. This stock is considered to be under the control of the Group as it is considered that the Group bears all the risks and rewards or ownership, even though legal title has not yet passed. Consignment stock is held for a maximum period (which varies between manufacturers) before becoming due for payment. Part of the consignment period is interest free and the remaining periods are interest bearing (periods and charges vary between manufacturers but interest is generally linked to LIBOR). Used motor vehicles are stated at the lower of cost or net realisable value, by reference to Glass’s Guide or CAP data. Demonstrator vehicles are held within inventories at the lower of cost and net realisable value. Vehicle funding and stocking loans form part of the Group’s working capital and are recognised at the fair value of the amount due to the facility provider. 33 Notes (continued) (forming part of the ﬁ nancial statements) 1 Accounting policies (continued) Financial Instruments Classiﬁ cation of ﬁ nancial instruments issued by the Group Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions: a) a) they include no contractual obligations upon the group to deliver cash or other ﬁ nancial assets or to exchange ﬁ nancial assets or ﬁ nancial liabilities with another party under conditions that are potentially unfavourable to the group; and b) b) where the instrument will or may be settled in the company’s own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the company’s own equity instruments or is a derivative that will be settled by the company’s exchanging a ﬁ xed amount of cash or other ﬁ nancial assets for a ﬁ xed number of its own equity instruments. To the extent that this deﬁ nition is not met, the proceeds of issue are classiﬁ ed as a ﬁ nancial liability. Where the instrument so classiﬁ ed takes the legal form of the company’s own shares, the amounts presented in the historical ﬁ nancial information for called up share capital and share premium account exclude amounts in relation to those shares. Non-derivative ﬁ nancial instruments Non-derivative ﬁ nancial instruments comprise, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables. Trade and other receivables Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the eﬀ ective interest method, less any impairment losses. Trade and other payables Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the eﬀ ective interest method. Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose only of the cash ﬂ ow statement. Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest- bearing borrowings are stated at amortised cost using the eﬀ ective interest method. Taxation Tax on the proﬁ t or loss for the year comprises current and deferred tax. Tax is recognised except to the extent that it relates to items recognised in other comprehensive income, in which case it is recognised in other comprehensive income. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided on temporary diﬀ erences between the carrying amounts of assets and liabilities for ﬁ nancial reporting purposes and the amounts used for taxation purposes. The following temporary diﬀ erences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that aﬀ ect neither accounting nor taxable proﬁ t other than in a business combination, and diﬀ erences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable proﬁ ts will be available against which the temporary diﬀ erence can be utilised. 34 Notes (continued) (forming part of the ﬁ nancial statements) Employee beneﬁ ts Deﬁ ned contribution plans A deﬁ ned contribution plan is a post-employment beneﬁ t plan under which the company pays ﬁ xed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to deﬁ ned contribution pension plans are recognised as an expense as incurred. 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 eﬀ ect 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 eﬀ ect 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 eﬀ ects 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 classiﬁ ed as ﬁ nance leases. Where land and buildings are held under leases the accounting treatment of the land is considered separately from that of the buildings. Leased assets acquired by way of ﬁ nance lease are stated at an amount equal to the lower of their fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and less accumulated impairment losses. Lease payments are accounted for as described below. Operating lease payments Payments made under operating leases are recognised in the statement of comprehensive income on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense. Finance lease payments Minimum lease payments are apportioned between the ﬁ nance charge and the reduction of the outstanding liability. The ﬁ nance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Provisions A provision is recognised in the Statement of Financial Position when the Group has a present legal or constructive obligation as a result of a past event, that can be reliably measured and it is probable that an outﬂ ow of economic beneﬁ ts will be required to settle the obligation. 35 Accounting policies (continued) (forming part of the ﬁ nancial statements) 1 Accounting policies (continued) IFRS The following accounting standards and interpretations, issued by the IASB and endorsed by the EU or International Financial Reporting Interpretations Committee (IFRIC), are eﬀ ective for the ﬁ rst time in the current ﬁ nancial year and have been adopted by the group with no signiﬁ cant impact on the consolidated results or ﬁ nancial position: • IFRS 14 Regulatory Deferral Accounts • Accounting for Acquisitions of Interests in Joint Operations – Amendments to IFRS 11 • Clariﬁ cation of Acceptable Methods of Depreciation and Amortisation – Amendments to IAS 16 and IAS 38. • Agriculture: Bearer Plants – Amendments to IAS 16 and IAS 41 • Equity Method in Separate Financial Statements – Amendments to IAS 27 • Annual Improvements to IFRSs – 2012-2014 Cycle • Investment entities: Applying the Consolidation Exception – Amendments to IFRS 10, IFRS 12 and IAS 28 • Disclosure Initiative – Amendments to IAS 1 The IASB and the IFRIC have also issued the following standards and interpretations with an eﬀ ective date after the date of these Financial Statements: New standards and interpretations endorsed but not yet effective: • Recognition of Deferred Tax Assets for Unrealised Losses – Amendments to IAS 12 (eﬀ ective date 1 January 2017) • Disclosure Initiative – Amendments to IAS 7 (eﬀ ective date 1 January 2017) • IFRS 9 Financial Instruments (eﬀ ective date 1 January 2018) • IFRS 15 Revenue from Contracts with Customers (eﬀ ective date 1 January 2018) • Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts – Amendments to IFRS 4 (eﬀ ective date 1 January 2018) • IFRS 16 Leases (eﬀ ective date 1 January 2019) New standards and interpretations not yet endorsed and not yet effective: • Annual Improvements to IFRSs – 2014-2016 Cycle • Classiﬁ cation and Measurement of Share-based Payment Transactions – Amendments to IFRS 2 • IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration • Amendments to IAS 40 Investment Property • IFRIC 23 Uncertainty over Income Tax Treatments • Amendments to IFRS 9 Financial Instruments • Amendments to IAS 28 Investments in Associates and Joint Ventures • IFRS 17 Insurance contracts Amendments to IFRS 9 are due to take eﬀ ect from accounting periods commencing from 1 January 2018. The Directors do not anticipate that the adoption of IFRS 9, where relevant in future periods, will have a material impact. IFRS 15 is due to take eﬀ ect from accounting periods commencing from 1 January 2018. The Directors are currently assessing the impact of these changes on the accounting policies of the Group. IFRS 16 is due to take eﬀ ect from accounting periods commencing from 1 January 2019. The Directors are currently assessing the impact of these changes on the accounting policies of the Group. 36 Notes (continued) (forming part of the ﬁ nancial statements) 2 Critical accounting judgements in applying the Group’s accounting policies Estimates and judgements are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. Certain critical accounting judgements in applying the Group’s accounting policies are described below: Goodwill and property portfolio impairment The carrying values of goodwill and property are tested annually for impairment, for goodwill by using cash ﬂ ow projections for each cash generating unit, and for property by comparing the carrying value to the higher of value in use or market value. Intangible assets On Business combinations the directors consider separately identiﬁ able 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 acquisitions are immaterial or have not arisen. 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 income and expenses Non-recurring income and expenses are items which derive from events or transactions that are outside the normal course of business, and do not directly relate to the on-going operations, therefore have been separately disclosed in order for the ﬁ nancial statements to present a true and fair view. Operating segments Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identiﬁ ed as the Chief Executive Oﬃ cer. 37 Notes (continued) (forming part of the ﬁ nancial statements) 3 Revenue Sale of goods Aftersales services Total revenues 4 Segmental reporting 2017 £000 585,991 58,295 644,286 2016 £000 557,776 56,442 614,218 The Group has adopted IFRS 8 ‘Operating Segments’ which determines and presents operating segments based on information presented to the Group’s Chief Operating Decision Maker (“CODM”), the Chief Executive Oﬃ cer. The Group is operated and managed on a Dealership by Dealership basis. Dealerships operate a number of diﬀ erent business streams such as new vehicle sales, used vehicle sales and after sales operations. Management is organised based on the dealership operations as a whole rather than the speciﬁ c business streams. Dealerships are considered to have similar economic characteristics and oﬀ er similar products and services which appeal to a similar customer base. As such the results of each dealership have been aggregated to form one reportable operating segment. All segment revenue, proﬁ t before tax, assets and liabilities are attributable to the principal activity of the Group being the provision of car vehicle sales, vehicle servicing and related services. Therefore to increase transparency, the Group has included below additional voluntary disclosure analysing revenue and gross margins within the reportable segment. 2017 Revenue 2017 Revenue mix 2017 Gross Proﬁ t 2017 Margin 2016 Revenue 2016 Revenue mix 2016 Gross Proﬁ t 2016 Margin £m 308.7 277.3 71.4 (13.1) % 47.9 43.0 11.1 (2.0) £m 21.3 23.5 27.8 - % 6.9 8.5 38.9 - £m 297.4 264.2 65.5 (12.9) % 48.4 43.0 10.7 (2.1) £m 19.3 23.7 26.6 - % 6.5 9.0 40.7 - 644.3 100.0 72.7 11.3 614.2 100.0 69.6 11.3 New Car Used Car Aftersales Internal sales Total Administrative expenses Operating proﬁ t before non-recurring expenses Non-recurring income/ (expenses) Operating proﬁ t (60.9) 11.8 - 11.8 (58.4) 11.2 1.2 12.4 The CODM reviews the performance of the business in terms of both net proﬁ t before tax and EBITDA, as such the following table shows a reconciliation of the Proﬁ t before tax to EBITDA. 38 Notes (continued) (forming part of the ﬁ nancial statements) Proﬁ t Before Tax Other operating proﬁ t Non-recurring expenses (note 5) Underlying Proﬁ t Before Tax Net ﬁ nance expense Depreciation and amortisation Underlying EBITDA Other operating proﬁ t Non-recurring expenses EBITDA 2017 £000 11,251 - 14 11,265 527 1,887 13,679 - (14) 13,665 2016 £000 11,768 (1,950) 787 10,605 628 1,837 13,070 1,950 (787) 14,233 5 Non-recurring Income/ (expenses) Non-recurring income and expenses are items which derive from events or transactions that are outside the normal course of business, and do not directly relate to the on-going operations, therefore have been separately disclosed in order for the ﬁ nancial statements to present a true and fair view. Income from sale of businesses Relocation costs – relating to asset write off Restructuring costs Transaction costs Welwyn ﬁ re insurance claim - replacement of ﬁ xed assets - impairment for value in use - impairment of ﬁ xed assets destroyed - excess on insurance policy - professional fees 2017 £000 - - - - 411 (367) (20) (5) (33) (14) 2016 £000 1,950 (498) (28) (261) - - - - - 1,163 39 Notes (continued) (forming part of the ﬁ nancial statements) 6 Expenses and auditor’s remuneration The result from operating activities is stated after charging the following: Impairment loss recognised on other trade receivables and prepayments (note 22(b)) Auditor’s remuneration: Audit of these ﬁ nancial statements Audit of ﬁ nancial statements of subsidiaries pursuant to legislation Other services relating to taxation All other services 2017 £000 155 2017 £000 26 98 38 7 2016 £000 467 2016 £000 26 98 38 7 40 Notes (continued) (forming part of the ﬁ nancial statements) 7 Staff numbers and costs The average number of persons employed by the Group (including directors) during the year, analysed by category, was as follows: Number of employees Sales Service Parts Administration The aggregate payroll costs of these persons were as follows: Wages and salaries Social security costs Expenses related to deﬁ ned contribution plans Share based payments expense 2017 385 447 113 265 1,210 2017 £000 35,752 3,843 338 32 39,965 2016 374 451 105 245 1,175 2016 £000 34,639 3,685 362 32 38,718 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. The Underlying Return on Equity number has been calculated as the Adjusted proﬁ t attributable to equity shareholders divided by the unweighted average shareholder funds taking the average of the opening and closing shareholders equity from the statement of ﬁ nancial position. The calculation is therefore £9,191,000 divided by £46,241,000 giving 19.87%. Proﬁ t attributable to shareholders Non recurring (income)/ expenses (Note 5) Tax on adjustments (at 19.58% (2016: 20%)) Adjusted proﬁ t attributable to equity shareholders Number of shares in issue (‘000) Basic earnings per share Adjusted earnings per share 2017 £000 9,180 14 (3) 9,191 100,000 9.18p 9.19p 2016 £000 9,260 (1,163) 232 8,329 100,000 9.26p 8.33p 41 Notes (continued) (forming part of the ﬁ nancial statements) 9 Finance income and expense Recognised in the income statement Finance income Rent deposit interest Interest receivable Total ﬁ nance income Finance expense Interest payable on bank borrowings Consignment and vehicle stocking interest Total ﬁ nance expense Total interest expense on ﬁ nancial liabilities held at amortised cost Total other interest expense 10 Taxation Recognised in the income statement Current tax expense Current year Adjustment in respect of prior years Deferred tax Adjustment in respect of prior years Origination and reversal of temporary differences 2017 £000 2 47 49 226 350 576 226 350 576 2017 £000 2,049 (32) 2,017 (80) 134 54 2016 £000 2 131 133 301 460 761 301 460 761 2016 £000 2,373 (7) 2,366 (1) 143 142 Total tax expense 2,071 2,508 42 Notes (continued) (forming part of the ﬁ nancial statements) 10 Taxation (continued) Recognised in the income statement Proﬁ t for the year Total tax expense Proﬁ t excluding taxation Tax using the UK corporation tax rate of 19.58% (2016: 20%) 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 Other ﬁ xed asset differences Total tax expense 2017 £000 9,180 2,071 11,251 2,203 34 182 (154) (14) (112) - (68) 2,071 2016 £000 9,260 2,508 11,768 2,354 124 152 (83) 2 (8) (33) - 2,508 The applicable tax rate for the current year is 19.58% (2016: 20%) following the reduction in the main rate of UK corporation tax from 20% to 19% with eﬀ ect from 1 April 2017. Reductions in the UK corporation tax rate from 23% to 21% (eﬀ ective from 1 April 2014) and 20% (eﬀ ective from 1 April 2015) were substantively enacted on 2 July 2013. Further reductions to 19% (eﬀ ective from 1 April 2017) and to 18% (eﬀ ective from 1 April 2020) were substantively enacted on 26 October 2015. An additional reduction to 17% (eﬀ ective 1 April 2020) was substantively enacted on 6 September 2016. This will reduce the company’s future current tax charge accordingly. 43 Notes (continued) (forming part of the ﬁ nancial statements) 11 Property, plant and equipment Cost Balance at 1 September 2015 Additions Branch acquisitions Disposals Balance at 1 September 2016 Additions Branch acquisitions Disposals Reclassiﬁ cation Freehold land & buildings Long leasehold land & buildings Short leasehold improvements Plant & equipment Fixtures, ﬁ ttings & computer equipment Total £000 £000 £000 £000 £000 £000 36,923 4,396 - - 41,319 4,571 - - - 4,117 4,552 - - - 9 - (17) 4,117 4,544 - - - - - - (1,546) (514) 3,060 509 97 (505) 3,161 953 - (758) - 7,317 687 121 (1,686) 6,439 2,417 - (1,169) 514 55,969 5,601 218 (2,208) 59,580 7,941 - (3,473) - Balance at 31 August 2017 45,890 4,117 2,484 3,356 8,201 64,048 Depreciation Balance at 1 September 2015 Charge for the year Disposals Balance at 1 September 2016 Depreciation charge for the year Disposals Impairment Reclassiﬁ cation 2,901 506 - 3,407 611 - - - 602 104 - 706 105 - - - 3,946 247 (17) 4,176 120 (1,275) - (693) 2,503 305 (455) 2,353 356 (726) 269 - 5,977 651 (1,639) 4,989 668 (1,148) 116 693 15,929 1,813 (2,111) 15,631 1,860 (3,149) 385 - Balance at 31 August 2017 4,018 811 2,328 2,252 5,318 14,727 Net book value At 31 August 2016 37,912 3,411 At 31 August 2017 41,872 3,306 368 156 808 1,450 43,949 1,104 2,883 49,321 As at 31 August 2017 the Group was partially through the building project relating to its Jaguar Land Rover dealership in Swindon. There was a further £6m of contract sum payments to be made under the terms of the agreement with the main contractor (2016: £4.1m relating to Barnet). 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 with the exception of the freehold property acquired in the year for the Aston Martin dealership in Solihull. Property, plant and equipment under construction At 31 August 2017 the Swindon Jaguar Land Rover dealership was under construction, included in Freehold land and buildings is an amount of £Nil (2016: £2.8m relating to Barnet). amount of £Nil (2016: £2.8m relating to Barnet). 44 Notes (continued) (forming part of the ﬁ nancial statements) 12 Intangible assets Cost Balance at 1 September 2015 Additions Balance at 1 September 2016 Additions Balance at 31 August 2017 Amortisation and impairment Balance at 1 September 2015 Amortisation Balance at 1 September 2016 Amortisation for the year Balance at 31 August 2017 Net book value At 31 August 2016 At 31 August 2017 Goodwill Software £000 8,346 13,000 21,346 - 21,346 - - - - - 21,346 21,346 £000 778 22 800 - 800 731 24 755 26 781 45 19 Other £000 176 - 176 - 176 176 - 176 - 176 - - Total £000 9,300 13,022 22,322 - 22,322 907 24 931 26 957 21,391 21,365 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 The registered oﬃ ce of all of the Group Companies is Dorcan Way, Swindon, SN3 3RA. 45 Notes (continued) (forming part of the ﬁ nancial statements) 12 Intangible assets (continued) Amortisation charge The amortisation charge is recognised in the following line items in the income statement: Administrative expenses Impairment loss and subsequent reversal 2017 £000 26 2016 £000 24 Goodwill and indeﬁ nite life intangible assets considered signiﬁ cant in comparison to the Group’s total carrying amount of such assets have been allocated to cash generating units or Groups of cash generating units. For the purpose of impairment testing of goodwill and other indeﬁ nite life assets, the Directors recognise the Group’s cash generating units to be connected groupings of dealerships. The identiﬁ ed CGU’s are as follows: Multiple units without signiﬁ cant goodwill Goodwill 2017 £000 346 2016 £000 346 Jaguar Land Rover 21,000 21,000 21,346 21,346 The recoverable amount of the Jaguar Land Rover cash generating unit (CGU) has been calculated with reference to its value in use. These calculations use projections based on ﬁ nancial budgets approved by the board of Directors which are extrapolated using an estimated growth rate. The budgets were prepared to 31 August 2017 and then projected for a further 4 years. As the goodwill is newly acquired and the underlying expected performance of the CGU gives suﬃ cient headroom using conservative assumptions, a growth rate of 0% was applied, and a terminal value was included with a 0% growth rate in perpetuity. The discount rate used is 8%. Management has also performed 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. 46 46 Notes (continued) (forming part of the ﬁ nancial statements) 13 Deferred tax assets and liabilities Recognised deferred tax assets and liabilities The amount of temporary diﬀ erences, unused tax losses and tax credits for which a deferred tax asset is recognised is set out below, along with the movement in the balance in the year. The asset would be recovered if oﬀ set against future taxable proﬁ ts of the Group. Property, plant and equipment Provisions Tax value of loss carry-forward Share options 1 September 2016 Recognised in income Net 31 August 2016 Deferred tax liabilities Deferred tax assets £000 (29) 6 - 36 13 £000 (32) - - (22) (54) £000 (61) 6 - 14 £000 (442) - - - £000 381 6 - 14 (41) (442) 401 Unrecognised deferred tax assets and liabilities The deferred tax asset in relation to loss carried forward within a subsidiary has not been recognised due to uncertainty over the future proﬁ tability of the subsidiary, these losses are locked in to this particular subsidiary and cannot be utilised in the wider Group. Tax value of loss carry-forwards Unrecognised net tax assets Assets 2017 £000 329 329 2016 £000 490 490 47 Notes (continued) (forming part of the ﬁ nancial statements) 14 Inventories Vehicle consignment stock Motor vehicles Parts and other stock 2017 £000 74,682 27,524 3,213 105,419 2016 £000 62,702 29,297 3,069 95,068 Included within inventories is £nil (2016: £nil) expected to be recovered in more than 12 months. Raw materials, consumables and changes in ﬁ nished goods and work in progress recognised as cost of sales in the year amounted to £567million (2016: £540 million). Details of stock held as security is given in note 18. 15 Trade and other receivables Trade receivables Prepayments and other receivables 2017 £000 6,588 5,840 2016 £000 8,580 4,734 12,428 13,314 Included within trade and other receivables is £nil (2016: £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 ﬂ ow statement 2017 £000 23,046 23,046 2016 £000 19,817 19,817 48 Notes (continued) (forming part of the ﬁ nancial statements) 17 Other interest-bearing loans and borrowings This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings, which are measured at amortised cost. For more information about the Group’s exposure to interest rate risk, see note 22. Non-current liabilities Secured bank loans Current liabilities Secured bank loans Terms and debt repayment schedule All debt is in GBP currency 2017 £000 2016 £000 15,883 13,450 1,000 6,000 Nominal interest rate Year of Maturity Face Value and Carrying Amount Face Value and Carrying Amount 2017 £000 2016 £000 Loan 31/12/2015 LIBOR +1.20%* 2020 16,883 14,450 16,883 14,450 *The Facilities arranged in November 2015 have diﬀ erent margin bandings that are dependent on the net debt: EBITDA ratio for the previous quarter. The margin is 1.2% where the ratio is below 1 times, increasing to 2% where the ratio is in excess of 2.5 times. 18 Trade and other payables Current Vehicle consignment creditor Other trade payables Non-trade payables and accrued expenses Vehicle funding Deferred tax liability 2017 £000 89,024 14,021 13,539 25,914 41 2016 £000 74,308 10,313 18,303 26,807 - 142,539 129,731 Included within trade and other payables is £nil (2016: £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. 49 Notes (continued) (forming part of the ﬁ nancial statements) 19 Employee beneﬁ ts Pension plans Deﬁ ned contribution plans The Group operates a number of deﬁ ned contribution pension plans. The total expense relating to these plans in the current year was £338,000 (2016: £362,000). 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. There are certain performance criteria relating to shareholder return and the underlying proﬁ t before tax of the Group which have to be achieved for the options to be exercisable. During the year ended 31 August 2017, 250,000 share options were granted (2016: £nil). The fair values were calculated using a Black-Scholes model. The inputs into the model were as follows: Date of grant Share price at option date £ Exercise price £ Volatility Expected life (years) Risk free rate 2/3/15 1/4/15 12/12/16 0.47 0.54 0.60 0.47 0.54 0.60 17.5% 17.2% 1 year beyond vesting date 1 year beyond vesting date 39.19% 1 year beyond vesting date 0.5% 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 eﬀ ects of non-transferability, exercise restrictions and behavioural considerations. The number and weighted average exercise prices of share options are as follows: Outstanding at the beginning of the year Granted during the year Weighted average exercise price Number of options Weighted average exercise price 2017 £ 0.48 0.60 2017 4,750,000 250,000 2016 £ 0.48 - Number of options 2016 4,750,000 - Outstanding at the end of the year 0.49 5,000,000 0.48 4,750,000 Exercisable at the end of the year - - The Company recognised an expense of £32,896 (year ended 31 August 2016: £31,887) in respect of share based payments in the year. 50 Notes (continued) (forming part of the ﬁ nancial statements) 20 Provisions Balance at 1 September 2016 Provisions used during the year Provisions made in year Balance at 31 August 2017 Current Non-current Balance at 31 August 2016 Current Non-current Balance at 31 August 2017 Onerous Leases £000 1,000 - - 1,000 - 1,000 1,000 - 1,000 1,000 The provision represents a lease acquired on unfavourable terms and is being released against the costs incurred on the relevant lease. The unfavourable nature of the lease taken on as part of the acquisition of Woodford Jaguar Land Rover will be realised at the point that the Group vacates the Woodford showroom and will need to sublet the premises for uses other than its existing use. It is anticipated that at the point of vacation of the premises there will be approximately 6 years of the lease remaining. 21 Capital and reserves Share capital Authorised 100,000,000 Ordinary shares of 10 pence each Allotted, called up and fully paid 100,000,000 Ordinary shares of 10 pence each Shares classiﬁ ed in shareholders’ funds 2017 £000 10,000 10,000 10,000 2016 £000 10,000 10,000 10,000 All of the shares rank pari passu, and no shareholder enjoys diﬀ erent or enhanced voting rights from any other shareholder. All shares are eligible for dividends and rank equally for dividend payments. 51 Notes (continued) (forming part of the ﬁ nancial statements) Dividends The following dividends were paid by the company in the year ended 31 August. 0.7 p per ordinary share – prior year ﬁ nal (2016: 0.6p) 0.25p per ordinary share – current year interim (2016: 0.2p) 2017 £000 700 250 950 2016 £000 600 200 800 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. 2017 £000 750 2016 £000 700 0.75p per ordinary share – current year ﬁ nal (2016: 0.7p) 22 Financial instruments 22 (a) Fair values of ﬁ nancial instruments Trade and other receivables The fair value of trade and other receivables, is estimated as the present value of future cash ﬂ ows, discounted at the market rate of interest at the balance sheet date if the eﬀ ect is material. Trade and other payables The fair value of trade and other payables is estimated as the present value of future cash ﬂ ows, discounted at the market rate of interest at the balance sheet date if the eﬀ ect is material. Cash and cash equivalents The fair value of cash and cash equivalents is estimated as its carrying amount where the cash is repayable on demand. Where it is not repayable on demand then the fair value is estimated at the present value of future cash ﬂ ows, discounted at the market rate of interest at the balance sheet date. Interest-bearing borrowings Fair value, which after initial recognition is determined for disclosure purposes only, is calculated based on the present value of future principal and interest cash ﬂ ows, discounted at the market rate of interest at the balance sheet date. The rates used to discount estimated cash ﬂ ows, where applicable are based on the weighted average cost of capital and were as follows: Loans and borrowings 2017 % 3.5 2016 % 3.5 52 Notes (continued) (forming part of the ﬁ nancial statements) Fair values The fair values for each class of ﬁ nancial assets and ﬁ nancial liabilities together with their carrying amounts shown in the balance sheet are as follows: Financial assets Loans and receivables at amortised cost including cash and cash equivalents Trade receivables(net) (note 15) Other receivables (note 15) Cash and cash equivalents Total Financial assets Financial liabilities Financial liabilities at amortised cost Other interest-bearing loans and borrowings (note 17) Trade and other payables (note 18) Total Financial liabilities As at 31 August 2017 As at 31 August 2016 £000 £000 6,588 5,840 23,046 8,580 4,734 19,817 35,474 33,131 16,883 142,539 19,450 129,731 159,422 149,181 The Directors consider the carrying amount of the Group’s ﬁ nancial assets and ﬁ nancial liabilities, as detailed above, approximate their fair value. 53 Notes (continued) (forming part of the ﬁ nancial statements) 22 Financial instruments (continued) 22 (b) Credit risk Credit risk management The Group is exposed to credit risk primarily in respect of its trade receivables. Trade receivables are stated net of provision for estimated impairment losses. Exposure to credit risk in respect of trade receivables is mitigated by the Group’s policy of only granting credit to certain customers after an appropriate evaluation of risk coupled with the ﬁ ndings from external reference agencies. Credit risk arises in respect of amounts due from vehicle manufacturers in relation to bonuses and warranty receivables. This risk is mitigated by the number of manufacturers for which the Group holds franchises, procedures to ensure timely collection of debts and management’s belief that it does not expect any manufacturer to fail to meet its obligations. The maximum exposure to credit risk is represented by the carrying amount of each ﬁ nancial asset in the statement of ﬁ nancial position. Exposure to credit risk The carrying amount of trade receivables represents the maximum credit exposure. Therefore, the maximum exposure to credit risk at the balance sheet date was £6,588,000 (2016: £8,580,000) 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 2017 £000 6,588 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 2017 £000 4,189 1,266 1,133 6,588 2016 £000 8,580 2016 £000 3,578 3,034 1,968 8,580 Credit quality of ﬁ nancial assets and impairment losses The ageing of trade receivables at the balance sheet date is given below. The Group’s policy is to provide for all debts which are past due. The directors consider the balance to be recoverable based on credit terms and post balance sheet receipts. Gross 2017 £000 6,588 224 6,812 Impairment 2017 £000 - 224 224 Gross 2016 £000 8,580 361 8,941 Impairment 2016 £000 - 361 361 Trade receivables not past due Trade receivables past due 54 Notes (continued) (forming part of the ﬁ nancial statements) 22 Financial instruments (continued) 22 (b) Credit risk (continued) The movement in the allowance for impairment in respect of trade receivables during the year was as follows: Balance at 1 September 2016 Impairment loss recognised Allowance for impairment utilised Balance at 31 August 2017 £000 361 155 (292) 224 The allowance account for trade receivables is used to record impairment losses unless the Group is satisﬁ ed that no recovery of the amount owing is possible; at that point the amounts considered irrecoverable are written oﬀ against the trade receivables directly. 22 (c) Liquidity risk Liquidity risk management Liquidity risk is the risk that the Group will not be able to meet its ﬁ nancial obligations as they fall due. Liquidity is managed by the Group’s central treasury function within policy guidelines set by the Board with prime areas of focus being liquidity and interest rate exposure. The Group is ﬁ nanced primarily by bank loans, vehicle stocking credit lines and operating cash ﬂ ow. The directors have assessed the future funding requirements of the Group and compared them to the level of committed available borrowing facilities. These committed facilities are maintained at levels in excess of planned requirements and are in addition to short term uncommitted facilities that are also available to the Group. The assessment included a review of ﬁ nancial forecasts, ﬁ nancial instruments and cash ﬂ ow projections. These forecasts and projections show that the Group, taking account of reasonably possible scenarios, should be able to operate within the level of its borrowing facilities for the foreseeable future. The following are the contractual maturities of ﬁ nancial liabilities, including estimated interest payments and excluding the eﬀ ect of netting agreements: Interest is payable on loans of £16,883,000 (2016: £14,450,000) at LIBOR plus 1.20%. 2016 Carrying amount Contractual cash ﬂ ows £000 £000 1 year or less £000 1 to <2years £000 2 to <5years £000 5years and over £000 Non-derivative ﬁ nancial liabilities Secured bank loans Revolving Credit Facility Trade and other payables Non-derivative ﬁ nancial liabilities Secured bank loans Revolving Credit Facility Trade and other payables 15,125 1,237 1,219 12,669 14,450 5,000 - - 129,731 129,731 129,731 - - - - 2017 - - - Carrying amount Contractual cash ﬂ ows 1 year or less 1 to <2years 2 to <5years 5years and over £000 £000 £000 £000 £000 £000 16,883 17,669 1,279 1,262 15,128 - - - 142,500 142,500 142,500 - - - - - - - 55 Notes (continued) (forming part of the ﬁ nancial statements) 22 Financial instruments (continued) 22 (d) Market risk Financial risk management Market risk is the risk that changes in market prices, such as interest rates will aﬀ ect the Group’s income or the value of its holdings of ﬁ nancial instruments. Market risk - Foreign currency risk The Group does not have any exposure to foreign currency risk. Market risk – Interest rate risk Proﬁ le At the balance sheet date the interest rate proﬁ le of the Group’s interest-bearing ﬁ nancial instruments was: Variable rate instruments Cash and cash equivalents Vehicle funding Loans and overdrafts 2017 £000 23,046 (25,914) (16,883) 2016 £000 19,817 (26,807) (19,450) (19,751) (26,440) The objectives of the Group’s interest rate policy are to minimise interest costs. The Group does not actively manage cash ﬂ ow interest risk as the directors believe that the underlying earnings from the retail sector in which the Group operates provides a natural hedge against interest rate movements. Consequently, it is Group policy to borrow on a ﬂ oating rate basis. Whilst there are no hedging instruments, the Board reviews its hedging policy on a regular basis. Sensitivity analysis An increase of 0.5 basis points in interest rates at the balance sheet date would have decreased equity and proﬁ t or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant and considers the eﬀ ect of ﬁ nancial instruments with variable interest rates, ﬁ nancial instrument at fair value through proﬁ t or loss or available for sale with ﬁ xed interest rates and the ﬁ xed rate element of interest rate swaps. The analysis is performed on the same basis for comparative periods. 2017 £000 214 2016 £000 211 214 211 Equity Decrease Proﬁ t or loss Decrease 56 Notes (continued) (forming part of the ﬁ nancial statements) 22 Financial instruments (continued) 22 (e) Capital management Prior to each acquisition, the Board considers its funding options and the appropriate mix of secured debt and equity. The Group’s primary objective when managing capital is to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and beneﬁ ts to other stakeholders. The Group must ensure that suﬃ cient capital resources are available for working capital requirements and meeting principal and interest payment obligations as they fall due. Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio, which is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowings as shown in the statement of ﬁ nancial position) less cash and cash equivalents. Total capital is calculated as total shareholders’ equity. The gearing ratios for each year are as follows: Total borrowings Less: cash and cash equivalents Net (surplus)/deﬁ cit Total equity Gearing ratio 23 Operating leases Non-cancellable operating lease rentals are payable as follows: Less than one year Between one and ﬁ ve years More than ﬁ ve years As at 31 August 2017 As at 31 August 2016 16,883 (23,046) 19,450 (19,817) 6,163 (367) 50,356 42,126 0% 0% 2017 £000 2,986 9,949 13,314 2016 £000 2,824 9,426 14,465 26,249 26,715 The Group leases a number of motor dealership sites under operating leases. Land and buildings have been considered separately for lease classiﬁ cation. During the year £3,141,000 was recognised as an expense in the income statement in respect of operating leases (2016: £2,710,000). 57 Notes (continued) (forming part of the ﬁ nancial statements) 24 Contingencies The Group is jointly and severally liable in respect of value added tax liabilities arising in other group undertakings. The related fellow subsidiary undertakings and the parent company were in a repayment situation at 31 August 2016 and 2017. In recognition of the Cambria Automobiles plc group bank and used vehicle funding facilities, the following companies have entered into a joint agreement to guarantee liabilities with banks and ﬁ nance houses of the motor manufacturers that provide new and used vehicles to the Group: Cambria Automobiles plc, Cambria Automobiles Property Limited, Cambria Automobiles Group Limited, Cambria Automobiles Acquisitions Limited, Cambria Automobiles (Swindon) Limited, Grange Motors (Swindon) Limited, Thoranmart Limited, Cambria Automobiles (South East) Limited, Grange Motors (Brentwood) Limited, Invicta Motors Limited, Invicta Motors (Maidstone) Limited and Cambria Vehicle Services Limited. Intra-group guarantees are accounted for as insurance contracts. 25 Related parties Identity of related parties with which the Group has transacted Key management personnel are considered to be the board of directors for the purposes of this disclosure. Transactions with key management personnel At the year end, the Directors of the Company and their immediate relatives controlled 47.56% (2016: 47.09%) 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 2017 £000 1,001 646 24 2016 £000 677 636 12 1,671 1,325 58 Notes (continued) (forming part of the ﬁ nancial statements) 25 Related parties (continued) The emoluments consist of: Directors’ emoluments Philip Swatman James Mullins Mark Lavery Sir Peter Burt Michael Burt Tim Duckers Paul McGill William Charnley Salaries Bonus 2017 £000 2017 £000 Share related awards 2017 £000 Total Total 2017 £000 2016 £000 40 215 400 33 33 265 15 - 1,001 - 177 365 - - 104 - - 646 40 404 765 33 33 381 15 - 36 373 850 33 33 - - - 1,671 1,325 12 12 - 24 All directors beneﬁ ted from qualifying third party indemnity provisions during the ﬁ nancial period During the year Mark Lavery bought 7 vehicles from the Group and sold 5 vehicles back to the Group, James Mullins bought 5 vehicles from the Group and sold 4 vehicles back to the Group. Sir Peter Burt bought 4 vehicles from the Group and sold 4 vehicles back to the Group. Tim Duckers bought 4 vehicles from the Group and sold 3 vehicles back to the Group. Philip Swatman bought 2 vehicles from 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 £57,175. William Charnley is a partner at the law ﬁ rm King & Spalding, during the year the Group paid professional fees of £5,807 In relation to the legal services provided to the Group. 26 Ultimate parent company and parent company of larger group In the opinion of the directors, the distribution of the ordinary shares and the rights attributing themselves to them means that there is no overall controlling party of the company. 27 Post balance sheet events Dividend The Board is pleased to announce that it will make a ﬁ nal dividend payment in respect of the ﬁ nancial year to 31 August 2017 of 0.75p (2016: 0.7p) per share in addition to the interim payment of 0.25p per share (2016: 0.2p). Banking Facilities Post year end, the Group reﬁ nanced the Banking facilities and as a result, the revised £40m Revolving Credit Facility has no ﬁ xed capital repayment proﬁ le throughout its 5 year term. 59 Notes (continued) (forming part of the ﬁ nancial statements) 28 Acquisitions of trading branches On 11 January 2016, the company completed the acquisition of the Land Rover dealership in Welwyn Garden City from Jardine Motor Group. Acquiree’s net assets at the acquisition date: Plant and equipment Stocks Trade and other payables Net and identiﬁ able 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 proﬁ tability from the sale of vehicles from the Welwyn Garden City dealership) Consideration paid, in cash Pre-acquisition carrying amount and Fair Value £000 87 1,066 (331) 822 10,000 10,822 On 6 July 2016, the company completed the acquisition of the Jaguar and Land Rover dealership in Woodford, North London from Pendragon PLC. Pre-acquisition carrying amount and Fair Value Acquiree’s net assets at the acquisition date: Plant and equipment Stocks FV adjustment for lease acquired on unfavourable terms Trade and other payables Net and identiﬁ able assets and liabilities Goodwill on acquisition (The goodwill arising on acquisition is attributable to expanding our geographical base for the Jaguar Land Rover brand, and the anticipated proﬁ tability from the sale of vehicles from the Woodford dealership) Consideration paid, in cash £000 132 301 (1,000) (309) (876) 3,000 2,124 60 Company Balance Sheet At 31 August 2017 Fixed assets Tangible ﬁ xed assets Investments Current assets Stock Debtors Creditors: amounts falling due within one year Net current assets Total assets less current liabilities Net assets Capital and reserves Called up share capital Share premium account Proﬁ t and loss account Shareholders’ funds Note 2016 2015 £000 £000 £000 £000 5 6 7 8 9 11 12 12 76 666 710 19,731 20,441 (7,480) 103 666 742 769 1,073 20,858 21,931 (11,112) 12,961 13,703 13,703 10,000 799 2,904 13,703 10,819 11,588 11,588 10,000 799 789 11,588 These ﬁ nancial statements were approved by the board of directors on 21 November 2017 and were signed on its behalf by: M J J Lavery Director Company number: 05754547 61 Company Statement of changes in Equity for the year ended 31 August 2017 Balance at 31August 2015 Proﬁ t for the year Dividend paid Balance at 31 August 2016 Proﬁ t for the year Dividend paid Dividend received Note Share capital £000 £000 10,000 - - 10,000 - - - 4 Share premium £000 £000 799 - - 799 - - - Retained earnings £000 £000 1,441 148 (800) Total equity £000 £000 12,240 148 (800) 789 11,588 65 (950) 3,000 65 (950) 3,000 Balance at 31 August 2017 10,000 799 2,904 13,703 62 Notes 1 Accounting policies The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the ﬁ nancial statements. Going concern The directors believe that the company is well placed to manage its business risks successfully despite the current uncertain economic outlook. The directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis in preparing the annual ﬁ nancial statements. Further information regarding the company’s business activities together with the factors likely to aﬀ ect its future development, performance and position is set out in the Strategic report on page 16. Basis of preparation These ﬁ nancial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”). The amendments to FRS 101 (2014/15 Cycle) issued in July 2015 and eﬀ ective immediately have been applied. In preparing these ﬁ nancial statements, the Company applies the recognition, measurement and disclosure requirements of International Financial Reporting Standards as adopted by the EU (“Adopted IFRSs”), but makes amendments where necessary in order to comply with Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken. Under section 408 of the Companies Act 2006 the company is exempt from the requirement to present its own proﬁ t and loss account. IFRS 1 grants certain exemptions from the full requirements of Adopted IFRSs in the transition period. The following exemptions have been taken in these ﬁ nancial statements: - Business combinations – Business combinations that took place prior to 1 September 2015 have not been restated. - Share based payments – IFRS 2 is being applied to equity instruments that were granted after 7 November 2002 and that had not vested by 1 September 2014. In these ﬁ nancial statements, the company has applied the exemptions available under FRS 101 in respect of the following disclosures: - a Cash Flow Statement and related notes; - Comparative period reconciliations for share capital and tangible ﬁ xed assets; - Disclosures in respect of transactions with wholly owned subsidiaries; - Disclosures in respect of capital management; - The eﬀ ects of new but not yet eﬀ ective IFRSs; - Disclosures in respect of the compensation of Key Management Personnel; and - Disclosures of transactions with a management entity that provides key management personnel services to the company. As the consolidated ﬁ nancial statements include the equivalent disclosures, the Company has also taken the exemptions under FRS 101 available in respect of the following disclosures: - IFRS 2 Share Based Payments in respect of group settled share based payments - Certain disclosures required by IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7 Financial Instrument Disclosures. The Company proposes to continue to adopt the reduced disclosure framework of FRS 101 in its next ﬁ nancial statements. The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these ﬁ nancial statements and in preparing an opening FRS 101 balance sheet at 1 September 2014 for the purposes of the transition to FRS 101. Judgements made by the directors, in the application of these accounting policies that have signiﬁ cant eﬀ ect on the ﬁ nancial statements and estimates with a signiﬁ cant risk of material adjustment in the next year are discussed on page 31. 63 Notes (continued) Measurement convention The ﬁ nancial statements are prepared on the historical cost basis. Tangible ﬁ xed assets Tangible ﬁ xed assets are stated at cost less accumulated depreciation and accumulated impairment losses. Where parts of an item of tangible ﬁ xed assets have diﬀ erent useful lives, they are accounted for as separate items of tangible ﬁ xed assets. Leases in which the Company assumes substantially all the risks and rewards of ownership of the leased asset are classiﬁ ed as ﬁ nance leases. Where land and buildings are held under leases the accounting treatment of the land is considered separately from that of the buildings. Leased assets acquired by way of ﬁ nance lease are stated at an amount equal to the lower of their fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and less accumulated impairment losses. Lease payments are accounted for as described below. Depreciation is charged to the proﬁ t and loss account on a straight-line basis over the estimated useful lives of each part of an item of tangible ﬁ xed assets. Land is not depreciated. The estimated useful lives are as follows: • computer equipment 3 to 5 years Depreciation methods, useful lives and residual values are reviewed at each balance sheet date. Impairment excluding stocks and deferred tax assets Financial assets (including trade and other debtors) A ﬁ nancial asset not carried at fair value through proﬁ t or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A ﬁ nancial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative eﬀ ect on the estimated future cash ﬂ ows of that asset that can be estimated reliably. An impairment loss in respect of a ﬁ nancial asset measured at amortised cost is calculated as the diﬀ erence between its carrying amount and the present value of estimated future cash ﬂ ows discounted at the asset’s original eﬀ ective interest rate. For ﬁ nancial instruments measured at cost less impairment an impairment is calculated as the diﬀ erence between its carrying amount and the best estimate of the amount that the Company would receive for the asset if it were to be sold at the reporting date. Interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through proﬁ t or loss. Non-ﬁ nancial assets The carrying amounts of the Company’s non-ﬁ nancial assets, other than stocks and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, and intangible assets that have indeﬁ nite useful lives or that are not yet available for use, the recoverable amount is estimated each year at the same time. Leases Operating lease payments Payments (excluding costs for services and insurance) made under operating leases are recognised in the proﬁ t and loss account on a straight-line basis over the term of the lease. Lease incentives received are recognised in the proﬁ t and loss account as an integral part of the total lease expense. Employee beneﬁ ts Deﬁ ned contribution plans A deﬁ ned contribution plan is a post-employment beneﬁ t plan under which the company pays ﬁ xed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to deﬁ ned contribution pension plans are recognised as an expense in the proﬁ t and loss account in the periods during which services are rendered by employees. 64 Notes (continued) Share based payments Share-based payment arrangements in which the Company receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the Company. The grant date fair value of share-based payments awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period in which the employees become unconditionally entitled to the awards. The fair value of the awards granted is measured using an option valuation model, taking into account the terms and conditions upon which the awards were granted. The amount recognised as an expense is adjusted to reﬂ ect the actual number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reﬂ ect such conditions and there is no true-up for diﬀ erences between expected and actual outcomes. Share-based payment transactions in which the Company receives goods or services by incurring a liability to transfer cash or other assets that is based on the price of the Company’s equity instruments are accounted for as cash-settled share-based payments. The fair value of the amount payable to employees is recognised as an expense, with a corresponding increase in liabilities, over the period in which the employees become unconditionally entitled to payment. The liability is remeasured at each balance sheet date and at settlement date. Any changes in the fair value of the liability are recognised as personnel expense in proﬁ t or loss. The Company took advantage of the option available in IFRS 1 to apply IFRS 2 only to equity instruments that were granted after 7 November 2002 and that had not vested by 1 September 2014. Non-derivative ﬁ nancial instruments Non-derivative ﬁ nancial instruments comprise investments in equity and debt securities, trade and other debtors, cash and cash equivalents, loans and borrowings, and trade and other creditors. Trade and other debtors Trade and other debtors are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the eﬀ ective interest method, less any impairment losses. Trade and other creditors Trade and other creditors are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the eﬀ ective interest method. Investments in debt and equity securities Investments in subsidiaries are carried at cost less impairment. Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost using the eﬀ ective interest method, less any impairment losses. 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). 65 Notes (continued) Taxation Tax on the proﬁ t or loss for the year comprises current and deferred tax. Tax is recognised in the proﬁ t and loss account except to the extent that it relates to items recognised directly in equity or other comprehensive income, in which case it is recognised directly in equity or other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided on temporary diﬀ erences between the carrying amounts of assets and liabilities for ﬁ nancial reporting purposes and the amounts used for taxation purposes. The following temporary diﬀ erences are not provided for: the initial recognition of goodwill; the initial recognition of assets or liabilities that aﬀ ect neither accounting nor taxable proﬁ t other than in a business combination, and diﬀ erences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable proﬁ ts will be available against which the temporary diﬀ erence can be utilised. Classiﬁ cation of ﬁ nancial instruments issued by the Company Following the adoption of IAS 32, ﬁ nancial instruments issued by the Company 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 to deliver cash or other ﬁ nancial assets or to exchange ﬁ nancial assets or ﬁ nancial liabilities with another party under conditions that are potentially unfavourable to the Company; and b) where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Company’s own equity instruments or is a derivative that will be settled by the Company’s exchanging a ﬁ xed amount of cash or other ﬁ nancial assets for a ﬁ xed number of its own equity instruments. To the extent that this deﬁ nition is not met, the proceeds of issue are classiﬁ ed as a ﬁ nancial liability. Where the instrument so classiﬁ ed takes the legal form of the Company’s own shares, the amounts presented in these ﬁ nancial statements for called up share capital and share premium account exclude amounts in relation to those shares. Finance payments associated with ﬁ nancial liabilities are dealt with as part of interest payable and similar charges. Finance payments associated with ﬁ nancial instruments that are classiﬁ ed as part of shareholders’ funds (see dividends policy), are dealt with as appropriations in the reconciliation of movements in shareholders’ funds. Dividends on shares presented within equity Dividends unpaid at the balance sheet date are only recognised as a liability at that date to the extent that they are appropriately authorised and are no longer at the discretion of the Company. Unpaid dividends that do not meet these criteria are disclosed in the notes to the ﬁ nancial statements. 66 Notes (continued) 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 2017 £000 1,001 646 - 24 1,671 2017 £000 400 365 765 2016 £000 677 636 - 12 1,325 2016 £000 400 450 850 All directors beneﬁ ted from qualifying third party indemnity provisions during the ﬁ nancial period. 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 Company 2017 Company 2016 56 48 Company Company 2017 £000 4,380 529 18 32 4,959 2016 £000 4,064 512 20 32 4,628 67 Notes (continued) 4 Dividends The aggregate amount of dividends paid and received compromises: Aggregate amount of dividends paid in the ﬁ nancial year Aggregate amount of dividends received in the ﬁ nancial year 2017 £000 950 3,000 The aggregate amount of dividends proposed but not recognised at the year end is £750,000 (2016: £700,000). 5 Tangible ﬁ xed assets Company Cost At 1 September 2016 Additions At 31 August 2017 Depreciation At 1 September 2016 Charge for year At 31 August 2017 Net book value At 31 August 2017 At 31 August 2016 6 Fixed asset investments Company Cost and net book value At 1 September 2016 and 31 August 2017 Computer equipment £000 £000 749 34 783 646 61 707 76 103 2016 £000 800 - Total £000 £000 749 34 783 646 61 707 76 103 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. 68 Notes (continued) 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 * Owned directly by Cambria Automobiles Acquisitions Limited ** Owned directly by Cambria Automobiles Group Limited *** Owned directly by Cambria Automobiles (South East) Limited The registered oﬃ ce of all of the Group Companies is Dorcan Way, Swindon, SN3 3RA. 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 7 Stocks Motor vehicles 8 Debtors Trade debtors Amounts owed by group undertakings Prepayments and accrued income Deferred tax (note 11) Other taxation 2017 £000 710 2017 £000 45 18,788 726 52 120 2016 £000 1,073 2016 £000 25 19,932 662 74 165 19,731 20,858 69 Notes (continued) 9 Creditors: amounts falling due within one year Trade creditors Bank overdraft Bank loan Vehicle funding Other taxation and social security Accruals and deferred income Corporation tax 2017 £000 279 3,394 - 474 281 3,027 25 2016 £000 337 1,481 5,000 849 303 3,075 67 7,480 11,112 The vehicle funding creditor is secured on the stock to which it relates. 10 Interest-bearing loans and borrowings This note provides information about the contractual terms of the Company’s interest-bearing loans and borrowings, which are measured at amortised cost. Creditors falling due within less than one year Secured bank loans 11 Deferred taxation Deferred taxation asset At 1 September 2016 Movement in period At 31 August 2017 The elements of deferred taxation asset are as follows: Difference between accumulated depreciation and capital allowances Other timing differences Total deferred tax 70 2017 £000 - 2017 £000 52 - 52 2016 £000 5,000 £000 74 (22) 52 2016 £000 74 - 74 Notes (continued) 12 Called up share capital Authorised 2017 £000 2016 £000 100,000,000 Ordinary shares of 10 pence each 10,000 10,000 Allotted, called up and fully paid 100,000,000 Ordinary shares of 10 pence each Shares classiﬁ ed in shareholder’s funds 10,000 10,000 10,000 10,000 All of the shares rank pari passu, and no shareholder enjoys diﬀ erent or enhanced voting rights from any other shareholder. All shares are eligible for dividends and rank equally for dividend payments. 13 Share premium and reserves At 1 September 2016 Proﬁ t for the year Dividend paid Dividend received At 31 August 2017 Share premium account Proﬁ t and loss account £000 799 - - - 799 £000 789 65 (950) 3,000 2,904 14 Ultimate parent company and parent undertaking of larger group In the opinion of the directors, the distribution of the ordinary shares and the rights attributing themselves to them means that there is no overall controlling party of the Company. 71

Continue reading text version or see original annual report in PDF format above