Caffyns VAT refund softens franchise blow

Do you want the good news or the bad news first? That was the question for analysts as Caffyns delivered its annual results to March. The group was able to provide both in near-perfect balance.

The bad news is the problem of dealing with eight MG Rover dealerships following the carmaker’s collapse, which has cost Caffyns more than £2m. The good news is that a payout from Customs and Excise for the refund of VAT on demonstrators pitched in to the same financial year and is £3.4m.

Given that fortunate timing, the 96-year-old company has been able to lift the dividend by a confident 6.6%. The share price rose a few pence on the day of announcement. In the last five years it has quadrupled to £8 and reflects persistent rumours of a bid approach.

Caffyns has been a major ally of MG Rover and still had 21 outlets in the early Nineties. Re-franchising has been going on with increasing urgency in the Eastbourne-based group’s business area of Kent and Sussex.

Two years ago, Caffyns made £888,000 doing £35.2m of MG Rover business. Last year business worth £28.5 carried an operating loss of £305,000. The loss in the second half was £750,000.

Seaford and Ramsgate dealerships are closed. Tunbridge Wells has switched to Vauxhall with Chevrolet. Brighton is also changing to Vauxhall. Eastbourne, Uckfield and Worthing are “being re-franchised” and Lewes is to become a used car operation and remain an MGR service point.

The VAT refund for the period 1973 to 1996 was £1.5m with interest compensation of £2m. That took total group turnover up a shade to £155.7m and pre-tax profits up from £3.1m to £3.3m.

Operating profits fell more than £1m to £2.8m.

Going forward, the group is majoring in Vauxhall and with VW Group brands and is adopting dominant market area strategies for Kent and Sussex.