Caffyns issues ‘cautious’ trading outlook after H1 profits declined by a third

Caffyns has cited stock shortages, economic uncertainty and energy concerns in a “cautious” trading outlook after a half-year trading statement revealed its profits had declined by a third.

The AM100 car retail PLC delivered a 7% uplift in turnover to £119 million (H1 2021/22: £110.8m)  during the six-month period to September 30 but pre-tax profits declined from £2.4m to £1.6m.

Chief executive Simon Caffyn said the premium and luxury car retail group’s profit was “a strong result considering the ongoing disruption to new car supply and current economic challenges”, adding: “We have a substantial new car order book and used car sales continue to perform well."

Caffyn highlighted the impact of an end to the UK Government's holiday from business rates for retail premises in its results statement. This had offered a £0.5m benefit in its previous H1 trading period.

It had also received £0.1m from the Government's Coronavirus Job Retention Scheme (CJRS) in H1 2021.

Giving his outlook for the months ahead, he added: “In the short-term new cars are expected to remain in short supply and the high level of economic uncertainty, including the price and availability of energy over the winter months, is a concern.

“Given these uncertainties, the board remains cautious for the second half of the financial year.”

Despite the uncertainty, the Caffyns board declared an unchanged interim dividend of 7.5 pence per ordinary share as it “remains confident in the prospects of the company”.

Full-year 2021/22 financial results, published in May, revealed Caffyns’ plans to open new Lotus and Volvo dealerships after post-lockdown trading delivered a 26.3% rise in revenues and 207.9% surge in pre-tax profits.

In today’s statement Caffyn described the group’s H1 car sales as having been “robust”, especially in used cars, but volumes declined 12% in used as deliveries of new vehicles rose by 6% despite OEMs’ current supply constraints.

The business’s half-year financial statement did not include a full six-months of trading for the recently-opened Lotus and MG businesses at Ashford and the Lotus business in Lewes and Caffyn said that he had been impressed by the start made by the agency model sports car franchise.

“We are encouraged by the start that the business has made and look forward to deliveries of the new Emira in in the second half of our financial year with the Eletre to follow,” he added.

Caffyn also noted that its Audi franchises had performed above expectations during the reported period, adding that its remaining brands, including our Motorstore non-franchise used car operation, had all traded “satisfactorily”.

Caffyn said that the business remains positioned to take advantage of opportunities in the sector. He said: “Our balance sheet is appropriately funded and our freehold property portfolio is a source of substantial stability.

“We continue to enhance our online presence, as well as improving our productivity and increasing the resilience of the business.

“We remain confident in the longer-term prospects for the company and are ready to explore future business opportunities as they arise.”