Caffyns has recovered profitability this year despite its car showrooms being closed for 10 weeks.
Underlying pre-tax profits have rocketed up by 830% year-on-year to £1.5 million, the South of England motor retailer’s report for the six months to September 30 shows.
Profit before tax rose from £56,000 in H1 2019 to £1.4m in H1 2020, while turnover declined 14% year-on-year from £99m to £85.4m.
“Pent-up customer demand and improved operational efficiencies resulted in a strong performance for the four months to September, more than outweighing the negative impact of the lockdown of the business in April and May,” said chief executive Simon Caffyn.
Caffyn’s half-year results in 2019 had been badly affected by Volkswagen Group’s new vehicle supply issues arising from the implementation of the Real Driving Emissions testing regime, and it closed its prior financial year with a 83% fall in profits.
Caffyn said that, given the disturbance to trading in April and May by the lockdown, “it was extremely pleasing that all six of our franchise businesses reported improved profitability” year-on-year.
The Audi and Volkswagen businesses, in particular, performed very strongly, he said, and Caffyns’ Motorstore used car operation also improved its profitability in the period.
Group new car deliveries fell by 5% and used car sales volumes dropped 17% in the six month period.
In 2020 Caffyns opened its took on its second Volvo dealership, in Worthing where Dinnages previously held the Volvo franchise since buying it from Caffyns in 2012 and developing a new VRE style dealership in 2015.
The AM100 motor retailer said in its interim results the new Volvo operation performed “ahead of expectations” and profitably.
The group’s other Volvo site, in Eastbourne, is due to be upgraded and extended.
“The response from our employees to this crisis has been outstanding and the board would like to particularly thank those who remained active throughout the lockdown period in April and May to ensure that we were able to offer an emergency aftersales response to NHS and other key workers, and to restart the business quickly and effectively, first for aftersales in May 2020 and then for car sales in June 2020,” said Caffyn.
“The hard work and professional application by our employees has been very much appreciated by the board and has ensured our delivery of a strong performance for the four-month period of June to September.”
The chief executive said Caffyns’ board “remains cautious of the outcome for the full financial year”.
In the latest four-week lockdown Caffyns has maintained a digital car sales offering for customers and kept workshops open, but has also put some staff on furlough.
With the issue of Brexit still unresolved, Caffyns fears the final quarter of its financial year may be impacted adversely by new car supply and customer demand.
HSBC, with which Caffyns has banking facilities including a £7.5m term loan and a £7.5m revolving credit facility, both renewable in 2023, granted capital repayment holidays in March and June, and Caffyns reports HSBC has agreed to a relaxation in certain covenant tests in March 2021, which has “provided reasonable comfort to the board that covenant tests will also be successfully passed at the March 2021 year-end.”
Chief executive Simon Caffyn concluded: “Our balance sheet is appropriately funded and our freehold property portfolio is a source of stability. We remain confident in the longer-term prospects for the company and ready to exploit future business opportunities as they may arise.