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Caffyns over the worst

Caffyns paid heavily for its support of MG Rover with operating profit down by a third despite higher sales than in the same half year period last year.

A fifth of its business then arose from the failed brand.

The figures released a week ago showed that turnover was up to £81.5m for the half year, compared with £80.1m for the same period last year, and that the operating profit was £1.2m rather than £1.8m.

Despite the chaos caused by the MG Rover collapse, East Sussex-based Caffyns published narrative suggesting the worst was over and that the refranchising was well advanced. The dividend was held at 8.0p – another sign of confidence that there will be no more significant exceptionals to pay in the final half of the financial year.

Immediately after news of the collapse, the group took a provision of £2.1m. That proved to be ample as £300,000 was written back to profit – some of it arising from the intervention of Capital Bank, which helped out on the warranty liability.

The chairman of Caffyns Brian Carte said: “The failure of Rover clearly had an effect on our trading performance in the first half. We are now well down the path of reorganizing our dealership network and we can concentrate on building businesses with their new franchise.”

The group has yet to announce what will go where in every case. What is known is that Eastbourne has Nissan, Tunbridge Wells in Kent is to be Vauxhall and Chevrolet, and Brighton will be solus Vauxhall. Properties at Hove, Hythe, Hailsham, Seaford and Ramsgate are to be sold.

Again, despite the cost of MG Rover, Caffyns has emerged from the trading period with better gearing than six months ago – down from 53% to 41% and at a level when many of the more aggressive groups now reckon that they are undergeared.

Part of the reason for the offset of the MG Rover costs was the substantial VAT repayment enjoyed last year.

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