3rd Jun 2015 08:05
LONDON (Alliance News) - Caffyns PLC Wednesday reported further profit growth in its last financial year as revenue was buoyed by the continued strong demand for new and used cars and servicing, and it said it was encouraged by the continued strength of the market despite some pressure on new car margins.
The motor dealership business, which has eight franchises in 12 locations in Sussex and Kent selling brands from VW Group, Jaguar Land Rover, Volvo and General Motors' Vauxhall brand, reported a pretax profit of GBP11.4 million for the year to end March, up from GBP1.6 million a year earlier, as it booked a GBP9.0 million credit related to peviously-announced changes to contributions to its pension scheme.
Excluding the credit, pretax profit rose to GBP2.5 million from GBP2.2 million, as revenue rose to GBP210.3 million from GBP193.2 million.
It raised its dividend for the year to 20.25 pence from 18.0p after paying a final dividend of 13.5p, up from 12.0p.
Caffyns said like-for-like new car unit sales rose 6.6%, compared with a 4.9% increase for the private and small business car sector as a whole. It said there was some pressure on new car margins in the first three months of 2015, but it still managed to improve gross profits.
Like-for-like used car unit sales rose 4.3%, with margins and gross profit both rising.
Strong sales of new and used cars in recent years meant that servicing sales also rose. Like-for-like servicing sales rose 8.9%, with aftersales up 5.7% and parts sales up 2.7%.
The UK's car dealership chains have enjoyed a few strong years since being hit hard during the financial crisis. New car sales in particular rebounded strongly, with some evidence emerging that consumers were spending rebates they got from banks for mis-sold loan protection insurance on big items like new cars.
The further improvement in profitability at Caffyns in the last financial year came even though it invested in redeveloping a number of its sites. Capital expenditure during the year was GBP3.0 million, down from GBP7.5 million a year earlier.
It refurbished its Vauxhall dealership in Ashford and re-opened the old Skoda showroom in Ashford as a used car centre, which is operating well as an outlet. It also re-located its VW business in Worthing to a new showroom and workshop, and refurbished and expanded its Eastbourne Audi dealership. It also built a new Seat dealership in Tunbridge Wells alongside a refurbished Soda dealership.
It intends to spend about GBP2.7 million this year on redeveloping its Eastbourne VW business, building a new 12 car showroom with increased used car display and greater workshop capacity. It also has plans to relocate its Worthing Audi business as the current space is restrictive.
Caffyns said it successfully concluded a renewal of its bank facilities with HSBC, with its three-year GBP7.5 million revolving credit facility renewed for a further four years from September 2014. Its HSBC overdraft facilities remain at GBP3.5 million, and it also has a GBP7.0 million overdraft facility with Volkswagen Bank and a 1-year term loan that expires in November 2023.
Bank borrowing net of cash balances stood at GBP10.1 million at the end of March, down from GBP11.9 million a year earlier, representing 41% of shareholder funds, down from 67%.
"We are pleased to report further profit improvement during the year under review, despite disruption from property improvements, and following on from the 78% increase achieved in the previous year," Chief Executive Simon Caffyn said.
The company expects the UK car market to remain strong thanks to the "encouraging" state of the economy and as car manufacturers continue to support the market with "strong finance-led offers".
"Though growth in the private and small business sector has slowed in 2015, and new car margins are slightly reduced, consumer confidence appears to be remaining steady. As the availability of two to three year old used cars has improved, we plan to further increase our used car sales from our larger display areas. The increase we have already seen in the size of our overall customer base, has positively affected the aftersales business and we expect this to grow further," Caffyns said.
"Having recently opened an all new Volkswagen facility in Worthing and completed the updating of other key dealerships, we are well placed for expansion," it added.
Caffyns shares were up 2.6% at 644.00 pence Wednesday morning. The stock hit a high of 660.00 earlier in the session, not far off the 670.00 pence high it hit in June last year. That was the highest price since mid-2008.
By Steve McGrath; [email protected]; @stevemcgrath1
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