TIDMCARR
RNS Number : 0337P
Carr's Group PLC
14 November 2016
IMMEDIATE RELEASE 14 November 2016
CARR'S GROUP PLC ("Carr's" or the "Group")
FULL YEAR RESULTS
"Focusing on growth markets worldwide"
Carr's (CARR.L), the fully-listed Agriculture and Engineering
Group, announces results for the year ended 3 September 2016.
Financial highlights (continuing operations)
-- Revenue down 4.9% to GBP314.9m (2015: GBP331.3m)
-- EBITDA up 6.6% to GBP16.5m (2015: GBP15.5m)
-- Operating profit up 5.6% to GBP12.8m (2015: GBP12.1m)
-- Profit before taxation up 2.8% to GBP14.1m (2015: GBP13.7m)
-- Basic EPS up 7.0% to 10.7p (2015: 10.0p)
-- Adjusted* EPS up 6.9% to 10.9p (2015: 10.2p)
-- Proposed final dividend of 1.9p up 2.7% resulting in a total
for the year of 3.8p (2015: 3.7p), excluding the special dividend
of 17.54p
-- Capital expenditure of GBP7.3m during the year
-- Net cash of GBP8.1m at the year-end (2015: net debt of
GBP24.4m) following disposal of the Food division
Key Points
-- Agriculture operating profit (excluding contribution from
associate and JVs) up 8.6% to GBP10.3m, driven by a strong
performance in the USA feedblock business. Segmental revenue down
4.4% to GBP284.8m.
-- Engineering operating profit down 4.9% to GBP2.5m due to
contract delays, with revenue down 10.2% to GBP30.1m.
-- Strategic refocussing of the Group on its Agriculture and
Engineering divisions through the sale of its Food division and the
return of GBP16.0m to shareholders, including the recent
acquisition of STABER GmbH, a German engineering business.
-- Profit from associate and joint ventures down 9.8% to GBP2.1m (2015: GBP2.3m).
Chris Holmes, Chairman, said:
"In what has been a challenging year in the sectors in which we
operate, I am pleased to report that the Group has delivered a
solid result. At the end of the year we announced the disposal of
our Food division to Whitworths, which following a GBP16m special
dividend to shareholders enables us to focus on growing our two
remaining, higher margin, divisions.
"Subsequent to the year end we announced the acquisition of
German engineering business STABER GmbH, which will be
strategically beneficial to our existing German engineering
business and in line with our intention to invest in specialised IP
and innovative businesses.
"The current financial year has started in line with our
expectations and we will continue to review suitable acquisition
opportunities whilst investing in our existing businesses both in
the UK and overseas."
*Adjusted earnings per share is calculated after adjusting for
non-recurring items and amortisation of intangible assets.
Enquiries:
Carr's Group plc
Tim Davies (Chief Executive
Officer)
Neil Austin (Group Finance
Director) 01228 554 600
Powerscourt 020 7250 1446
Nick Dibden carrs@powerscourt-group.com
Lisa Kavanagh
Notes to Editors
Carr's is an international leader in manufacturing value added
products and solutions with market leading brands and robust market
positions in the Agriculture and Engineering sectors. The Group
offers a range of services including the manufacturing and supply
of feed blocks for livestock, farm machinery, a UK network of rural
stores, and robotic and remote handling equipment, with a facility
footprint spanning the UK, Europe and North America, supplying
customers in over 35 countries around the world.
For further information, please visit: www.carrsgroup.com
Chairman's Statement
Strategic Delivery
I am pleased to report that the Group has delivered a solid set
of results in the context of a challenging market. It has also been
a significant year in the strategic development of the Group with
the disposal of the Food division at the end of the year. As
discussed below, we believe this action by the Group enhances
shareholder value as a result of having a much stronger focus on
growing both the Agriculture and Engineering divisions.
In trading terms, the year has seen depressed farmgate milk
prices for most of the year, which has adversely impacted our
farming customers. The Engineering division also continues to be
negatively impacted by the current low oil price. In addition, the
North of England was affected by severe floods during December
2015. Despite these challenges, the Group has delivered a robust
performance ahead of last year. The Board recognises this strong
performance and thanks every one of our employees and our
management team for their expertise, dedication and support.
Revenue for the year from continuing operations fell by 4.9% to
GBP314.9m (2015: GBP331.3m). Profit before tax from continuing
operations, excluding a profit from discontinued operations of
GBP2.8m, was up 2.8% to GBP14.1m (2015: GBP13.7m). This comprised
an 8.6% increase in Agriculture operating profit to GBP10.3m (2015:
GBP9.4m), and a 4.9% reduction in Engineering operating profit to
GBP2.5m (2015: GBP2.6m). Basic earnings per share from continuing
operations were up by 7.0% to 10.7 pence per share (2015: 10.0
pence), with fully diluted earnings per share of 10.5 pence (2015:
9.7 pence) and adjusted earnings per share, excluding non-recurring
items and amortisation of intangibles, of 10.9 pence (2015: 10.2
pence). Net cash at the year end was GBP8.1m (2015: net debt of
GBP24.4m).
Strategic Refocusing
Following an approach by Whitworths Holdings Ltd for the
acquisition of Carr's Flour Mills Ltd (the Food division), the
Board undertook a strategic review of the Group's three divisions.
It concluded that the nature of the offer presented an excellent
opportunity to realise the value of the Food division, whilst
allowing the Group to further strengthen its focus on growing both
the Agriculture and Engineering divisions in a way that could
enhance shareholder value.
A decision was therefore taken by the Board to dispose of the
Food division for a gross consideration of GBP36.0m on a cash and
debt free basis (the Disposal). The sales price was subject to an
adjustment based on actual working capital at the date of sale
compared to the agreed average working capital. After adjustment
for the carrying value of net debt amounting to GBP7.9m and the
allowance for an estimated working capital adjustment of GBP3.2m,
the Group received GBP24.9m in cash.
Given the significant amount of cash realised from the Disposal,
the Board decided to return GBP16.0m of the net proceeds of the
Disposal to shareholders in the form of a special dividend, which
took place on 7 October 2016. The Group's modest debt position
after the special dividend enables it to pursue acquisition
opportunities as and when appropriate. The Board believes that
taking into account the GBP16.0m returned to shareholders and the
potential investment in growth opportunities utilising the GBP8.9m
cash retained from the net proceeds of the Disposal, the
transaction should contribute to an increase in shareholder
value.
Consistent with the above, the Group has recently acquired a
German engineering company, STABER GmbH (formerly called Städele
GmbH), a long term supplier to our German remote handling business,
for a gross consideration of EUR7.85m. This acquisition will
enhance the intellectual property and growth potential of the
existing German remote handling business.
On behalf of the Board I would like to thank the employees of
Carr's Flour Mills Ltd for all of their support and dedication over
the years. I am pleased that in joining Whitworths Holdings, they
have joined a company that is fully committed to continuing to
build on the strong foundations laid out by Jonathan Dodgson Carr
when he started the business back in 1831. I would also like to
welcome the employees of STABER to the Group.
Business Review
In Agriculture, our international feedblock business has
delivered another excellent performance, driven by a strong
performance in the USA where we have seen a significant increase in
demand. Sales volumes have increased as a result of the strength of
our branded product offering and the rebuilding of beef herds. In
accordance with our strategy, we continue to invest in our
production facilities and R&D programme, both in the UK and
internationally, to drive future growth in existing markets and
expansion into new geographies.
Our UK retail business continued to build on the momentum
established in previous years, with the expansion of the Country
Store network into new territories both organically and through
acquisitions. I am pleased that by the end of this calendar year we
will be operating from 41 locations across the UK. In the financial
year we acquired Green (Agriculture) Co in Northumberland and
Phoenix Feeds Ltd in Lancashire, expanding our customer base in
both regions. We welcome our new colleagues.
We are grateful to our customers who have continued to support
our business during this challenging year. We believe our strong
geographic presence, the relevance of our product offering, and
continued excellent customer service will be key requirements in
supporting them over the forthcoming year.
Our Engineering division has had another tough year, impacted by
the continuing downturn in the oil and gas market and several
contract delays. The division is beginning to see the benefit of
the resurgence in the UK nuclear market with several new contract
wins, in particular the largest ever contract secured by the
division awarded by Sellafield with a value of approximately GBP48m
over the next ten years. We remain confident in the medium term
prospects of the division as we continue to focus on nuclear and
adjacent markets.
Dividend
The Board is proposing a 2.7% increase in the final dividend to
1.9 pence per ordinary share, which together with the two interim
dividends of 0.95 pence per ordinary share paid on 13 May and 7
October 2016, make a total of 3.8 pence per share for the year
(2015: 3.7 pence), representing an increase of 2.7%. The final
dividend, if approved by the Shareholders, will be paid on 13
January 2017 to Shareholders on the register on close of business
16 December 2016, and the shares will go ex-dividend on 15 December
2016.
This final dividend and the two interim dividends are in
addition to the special dividend of 17.54 pence per ordinary share
paid on 7 October 2016 following the disposal of Carr's Flour Mills
Ltd.
The Board
Last year, John Worby was appointed as a Non-Executive Director
of the Board, taking over as Senior Independent Director and Audit
Committee Chairman from Alistair Wannop and Robert Heygate
respectively. The Board has been further strengthened this year
with the appointment of Non-Executive Director Ian Wood, who has
extensive experience in the engineering and energy sectors,
previously working for Centrica plc.
In addition, on 10 September 2015 it was announced that Robert
Heygate had decided to stand down from the Board after 25 years'
service, with effect from 29 April 2016. I would like to take this
opportunity to thank Bob for his contribution, dedication,
enthusiasm, and support during his time with Carr's.
Outlook
The disposal of the Food division will support the Group's
ambition to achieve further growth and development in line with its
strategic objectives across its remaining two divisions,
Agriculture and Engineering. The Board sees opportunities for
international growth of our feedblock business and to further build
on our nuclear business capability in the short and medium term, as
well as continuing to strengthen our UK Agricultural business. We
will continue to identify acquisition opportunities while investing
in our existing business for the future.
The Board's expectations for the current financial year remain
unchanged. Trading in the first quarter has started positively with
a continued stabilising of farmgate milk prices. The climate of
uncertainty relating to the UK's exit from the European Union will
continue in the short term, and there is medium term risk
associated with UK Agriculture which is dependent on future
Government policy and the terms of exit from the EU. The Board will
continue to monitor the position and believe that the Group is well
placed to respond to any challenges and opportunities that may
arise.
Chris Holmes
Chairman
Chief Executive's Review
2016 was the beginning of a transformational period for the
Group culminating at the end of the financial year with the
disposal of the Food division.
After the year end the Group acquired STABER GmbH, formerly
called Städele GmbH, a family owned engineering business located
near the Group's existing German operations in Markdorf. STABER has
designed and developed specialised intellectual property, which
will be strategically beneficial to the Group's German operations
in both the near and long term. This purchase is fully aligned with
the Engineering division's growth strategy of capitalising on the
global resurgence of nuclear decommissioning, as well as the use of
robotic technologies in highly explosive environments.
Agriculture
The Agriculture division has reported another record year,
driven by its operational and geographic diversity.
Feedblocks
Overall our global feedblock sales volumes were up 6.0% on last
year.
Sales of feedblocks in the USA were at unprecedented levels with
sales volumes, excluding joint ventures, up 5.1% on last year.
Record production levels have been driven by an increase in market
size with the continued rebuilding of the beef herds across our key
territories, in addition to market share gains. The new SmartLic(R)
feedblock plant at Silver Springs, Nevada, was commissioned in the
year with the first product being produced in January 2016. This
plant will significantly extend the market reach and penetration in
the western states of the USA, and alleviate the capacity pressure
currently experienced by the Belle Fourche plant, South Dakota,
which has been operating at capacity throughout the year. The
Silver Springs plant is expected to make a full contribution in the
current financial year, with the primary feedblock season in the
region being August to February.
Sales of feedblocks in the USA through our joint venture
operations at Shelbyville, Tennessee and Sioux City, Iowa were up
34.2% on last year. As a result of the success of the joint venture
at Shelbyville, the Board has decided to expand our operations with
the $4.6m construction of a new low moisture feedblock plant
alongside the existing high moisture feedblock facility. It is
anticipated that this will be completed within the current
financial year ahead of the main feedblock season at the start of
the 2018 financial year. This will extend our ability to supply low
moisture blocks to the significant market of the eastern states of
the USA, which cannot be reached by our existing operations.
The exportation of Horslyx(R), a product for the equine leisure
market, into the USA has continued, with the business now working
with several new distributors down the East Coast. We have
continued with our UK research into the benefits of Megastart(R)
and, following the successful conclusion of University trials, it
has been demonstrated that Megastart(R) significantly increases
production of colostrum, which will improve the profitability of
our UK dairy farm and suckler herd customers.
We continue to develop opportunities to expand geographically.
The first shipment of Crystalyx(R) into South America occurred in
the year to facilitate the commencement of trials at FAI Farms (a
commercial research institute in Brazil) and the Instituto de
Zootecnia near Ribeirao Preto, Sao Paulo State.
The opportunities for expansion in New Zealand continue to be
assessed, although progress was delayed during the year as a result
of the adverse impact of the depressed global milk market on dairy
farming in New Zealand. However, the New Zealand market continues
to be a promising expansion opportunity for the feedblock business,
and our medium term objective of building a low moisture block
plant remains unchanged.
UK Agriculture
The retail business has delivered a record performance, with the
Country Store network across Northern England and Southern Scotland
delivering a 5.0% increase in like for like sales and a 16.0%
increase in total sales following the integration of the
acquisitions of Green (Agriculture) Co and Reid and Robertson Ltd
in September 2015 and June 2015 respectively.
The strategy for the retail business has been to expand the
geographic reach into adjacent territories, redevelop existing
facilities and expand the product offering for the benefit of rural
communities. During the year the product offer at the Balloch, Oban
and Ayr stores has been extended, the Leek store has been
refurbished and a new store at Wigton, Cumbria, has been opened. A
new Country Store at Penicuik, Midlothian, is due to open on 1
December 2016 and will have a significant focus on the local equine
market in addition to supplying our normal range of products and
services. The opening of Penicuik will bring our total retail
footprint to 41 stores.
In September 2015, Green (Agriculture) Co, an agricultural
merchant business based at Morpeth, Northumberland was acquired.
This retail business is situated near the existing machinery only
Country Store and enhances the offering to the local community. It
has been successfully integrated into the network of Country Stores
and has made a positive contribution during the year.
In June 2016, Phoenix Feeds Ltd, an agricultural merchant
business specifically retailing animal feed and based in
Lancashire, was acquired and has been successfully integrated.
During the year, compound feed volumes increased by 2.1% as a
result of market share gains. This is a particularly robust
performance against a market backdrop that declined by 4%
nationally. However, due to the pressure on dairy farm incomes and
the competitive nature of the feed market, margins were
significantly reduced year on year.
Total machinery sales have been severely impacted by the
downturn in farm incomes with sales declining 8.1% year on year.
National tractor sales have declined by 14.8%.
The oil distribution business has performed well with sales
volumes increasing 7.1% year on year. This is a result of market
share gains and the corresponding increase in the truck fleet.
The flooding in December 2015 in the North of England had a
significant impact on the Lancaster feed mill and the AminoMax(R)
manufacturing facility. Global sales volumes of AminoMax(R), the
patented animal bypass protein product for dairy cows, are down
3.9% as a result of the pressure on dairy farm incomes and the
downtime at the UK manufacturing facility resulting from the
floods.
Market Conditions
Farmer confidence remained low during the year with the farmgate
milk price only stabilising towards the end of the financial year,
causing significant pressure on farm incomes which is set to
continue through the current financial year. The uncertainty
following the outcome from the EU referendum, particularly relating
to the future of the single farm payment and support for UK farmers
in general, is likely to result in volatile market conditions for
the foreseeable future. However, in the short-term UK livestock and
dairy prices have responded positively due to the devaluation of
Sterling.
The division is well placed both operationally and
geographically to adapt to future variable market conditions whilst
continuing to support our farming customers.
Engineering
This year the Engineering division has made significant progress
in its objective to reposition its focus on nuclear and adjacent
markets, such as defence. This is evidenced by a number of
significant contract wins and strengthening of the management teams
in the UK, along with increased coordination and integration of
activities within the division. Unfortunately, the benefits from
these actions have been offset in the short term by customer delays
in the awarding of some nuclear contracts and the continued
depressed oil and gas market. Nevertheless, the division's
performance for the full year was satisfactory in the context of
challenging market conditions. The overall split of nuclear and
non-nuclear work of the division in 2016 was 69% nuclear (2015: 62%
nuclear).
UK Manufacturing Business
Revenues have declined in the year following the completion of
the large BP contract in 2015 and as a result of contract delays,
however, the outlook looks more promising in the nuclear market
following a number of sizeable contact wins.
The UK manufacturing business was awarded The Sellafield Vessels
and Tanks Category Management Framework contract. This contract,
with a value of GBP48m at the time of the tender, was won through
an open European Tendering process. The Framework contract secures
a position of exclusivity to design and manufacture Sellafield's
highest complexity vessels for the next 10 years. This is a
significant milestone for the Engineering division, being the
largest ever contract secured by the business, and underpins the
growth and development of our Engineering division over the medium
term.
During 2015 the business created a new design department, to
further enhance services available to customers for the design of a
wide range of mission critical equipment, including steel
fabrications and pressure vessels. The design business is
integrated with the business' production capability to maximise
innovation and improve efficiency. During the year it concluded an
important design and build project for a skip conveyor system for
the First Generation Magnox Storage Pond (FGMSP) project in
Sellafield. This system is the first of its kind, and is
fundamental to assisting in the retrieval and removal of
radioactive waste from one of the storage ponds in Sellafield.
Despite the partial recovery of the oil price towards the end of
the 2016 financial year, the oil and gas market remains depressed,
particularly in the exploration and production sector, which has
consequently had an adverse impact on the business during the year.
The focus on the nuclear industry has continued although, as
previously reported, the transition by part of the manufacturing
business away from oil and gas to nuclear has been slower than
initially anticipated due to contract delays.
The UK nuclear industry has benefited from the Government's
commitment to both the on-going decommissioning process and nuclear
new build, and as a result the division is seeing an increase in
the number of tenders and subsequent contract wins. The Government
and international investor commitment to the Hinkley C power
station is a significant vote of confidence in new nuclear in the
UK and will have boosted the potential for the other developments,
not least with the Horizon project in North Wales and the NuGEN
project in Cumbria.
Remote Handling Business
During the year the remote handling business performed in line
with the Board's expectations with several major projects
completed. The Demo 2000 Telbot(R) project, for the inspection of
oil and gas tanks in Norway, completed successfully in December
2015. This project developed a robotic system for vessel inspection
and cleaning, the first in the world to be certified for use in the
most highly explosive of environments. Statoil, a partner in the
project, has subsequently invested further in the business to
develop a lighter weight version of the Demo 2000 Telbot(R) for use
on off-shore platforms, where there are strict machinery weight
restrictions.
The business has completed two major contracts for Sellafield,
one for the Silo Direct Encapsulation (SDP) project and the other
for the Box Encapsulation Plant (BEP) project. In early 2015,
Sellafield awarded a contract for the design and production of a
robot to assist in the removal of high-level toxic nuclear waste on
the site in the SDP project. This robot, Sally Telbot(R), was
successfully tested in Germany for 1200hrs without failure and
proved to perform the tasks 40% faster than the previously tested
hydraulic arms. Following its success, an order was placed for a
second Sally Telbot(R), which has been manufactured during the year
with successful factory testing completed before the year-end and
delivery to Sellafield in November 2016.
Completion of the contract for two A1000 power manipulators for
the nuclear facility at Dounreay in Scotland was completed in the
year. An A1000 has also been delivered to Mitsui in Japan for trial
work in a future decommissioning project to be undertaken at the
Fukushima nuclear facility, and the business was also awarded a
contract for the design and manufacture of the highly specialised
A1000 power manipulator to Sellafield for the BEP project.
Production has almost completed and factory acceptance tests will
commence in January 2017.
Following on from the development and extensive trials in Japan
and Germany of Robbie, the V1000 robot, a remote controlled
handling vehicle, the business has received its first order for
delivery in 2017. Robbie will be used in the vitrification plant on
the WAK GmbH Karlsruhe site in Germany. The plant contains high
level toxic waste and dust particles making it too hazardous for
human presence. Robbie will assist the A1000 power manipulators
already in the plant to continue with their decommissioning.
A major contract, of cGBP1.8m in value, with Cavendish Nuclear
for the supply of Master Slave Manipulators into Sellafield was
completed successfully during the year. Further progress was made
in the USA nuclear market, with two small orders for Master Slave
Manipulators received in the year, one for the USA National
Laboratory at Idaho and the other for the USA National Laboratory
at Oakridge, both due in November 2016. Although small, these
orders demonstrate further progress being made by the business in
the penetration of the US market.
The business continues to face the ongoing macroeconomic
pressures resulting from the political issues in Russia and the
delay in funding in Japan in the short term. This is offset by the
on-going resurgence in the UK nuclear market.
On 24 October 2016, the German remote handling business acquired
one of its primary suppliers, STABER GmbH, formerly called Städele
GmbH, including all of its associated intellectual property for a
total cash consideration of EUR7.85m. STABER and Wälischmiller, a
subsidiary of Carr's Engineering Ltd, have been working together
closely for over 50 years and most recently STABER has been a key
supplier of parts for the remote handling business. During 2014 and
2015 STABER was intrinsic in assisting Wälischmiller in the
development of the Demo 2000 Telbot(R), a robotic system for vessel
inspection and cleaning in the oil and gas market, and the first in
the world to be certified for use in the most highly explosive of
environments. STABER has designed and developed specialised
intellectual property ("IP") which will be strategically beneficial
to Wälischmiller in both the near and long term. This IP will
accelerate the ongoing strategic development work on the Telbot(R)
and the Demo 2000 Telbot(R) by Wälischmiller.
The Engineering division is a well-established supplier of high
integrity equipment to the nuclear industry. With agreements in
place with leading UK and Global nuclear companies, it is well
positioned to secure high value, long term contracts to build on
its existing decommissioning portfolio and potential defence
opportunities through the UK Successor and Defence programmes.
Food
The floods in December 2015 in Cumbria directly affected one of
the Food division's major customers, which had a consequential
impact on sales volumes in the year. Due to appropriate and
comprehensive insurance cover, the floods had no financial impact
on the business.
Underlying sales volumes grew 3.54%, in spite of the changes in
the consumer market, notably the decline in consumption of the
traditional sliced loaf and the concurrent increase in the
consumption of bake-off products. The division's performance has
also been supported by the investment made by the Group in the mill
at Kirkcaldy and excellent long term relationships with
customers.
The 2015 UK wheat harvest was in excess of 16 million tonnes,
although the quality was variable. The wheat price volatility in
the market has continued, with significant price falls experienced
in early 2016. Carr's approach to risk management, which seeks to
match sales contracts with raw materials commitments, served to
minimise the impact of that volatility.
The flour market continues to decline, is over supplied and is
operating in a challenging consumer environment with limited growth
opportunities for the Group. This, coupled with the need for
significant future capital investment, resulted in the Group being
exposed to an increased risk profile. At the year-end we announced
the disposal of the Food division to Whitworths Holdings Ltd.
Financial review
In addition to the financial information detailed above, further
financial information is given below.
Finance costs
Net finance costs of GBP0.8m were higher than the previous year
(2015: GBP0.7m), reflecting lower interest receivable in the
period. Interest cover was 19.2 times compared to 20.4 times in
2015.
Taxation
The Group's effective tax charge on profit from activities after
net finance costs and excluding profits from associate and joint
ventures was 24.2 per cent (2015: 26.4 per cent). A reconciliation
of the actual total tax charge to the standard rate of corporation
tax in the UK of 20 per cent will be included in the Annual Report
and Accounts.
Cash flow and net debt
Due to the disposal of the Food division and the special
dividend not being paid until post year end, the Group was in a net
cash position at 3 September 2016.
A free cash flow of GBP6.5m was generated in the year,
representing an increase of 11.9 per cent on the GBP5.8m in the
previous year.
Headroom against existing facilities was GBP23.0m at the year
end. Other than the Group's overdraft, which is renewable annually,
the majority of the Group's existing facilities are due for renewal
in July 2019.
Pensions
The Group operates its current pension arrangements on a defined
benefit and defined contribution basis. The defined benefit scheme
is closed to new members and during the year was closed to future
accrual. The closure resulted in a negative past service cost, net
of associated costs, of approximately GBP0.3m. The scheme currently
has 112 deferred members and 224 current pensioners. It received
GBP0.8m during the year in additional deficit reduction
contributions from the Group in accordance with the 2011 actuarial
valuation as agreed between the Company and the Trustees. Deficit
reduction contributions ceased on 31 December 2015 as per the
agreed recovery plan.
The valuation on an IAS 19 accounting basis showed a surplus
before the related deferred tax liability in the scheme at 3
September 2016 of GBP0.3m (2015: GBP1.8m). Actuarial losses of
GBP2.7m (2015: GBP2.8m) have been recognised in the Consolidated
Statement of Comprehensive Income.
The Group and the Trustees continue to work together to
introduce ways of de-risking the defined benefit scheme to provide
less volatility in the scheme's assets and liabilities in the
future. Several initiatives were introduced during the year.
Outlook
The disposal of the Food division leaves the Group well placed
to capitalise on the opportunity it presents by pursuing further
organic and acquisitive growth in its two remaining higher margin
divisions. The Board is keen to pursue opportunities on the
international expansion of the feedblock division into new
territories and pursue further opportunities in animal
supplementation. In Engineering, there will be a focus on expanding
the markets, territories and capabilities of the highly specialised
remote handling engineering business, both organically and
acquisitively, as well as pursuing complementary acquisitions that
are strategically aligned to that division.
The Group is operating in challenging global markets and as a
result of the decision to leave the EU, the UK faces a period of
uncertainty in the short-term. The Group is well placed to
capitalise on any opportunities this presents, and with its
inherent operational and geographical diversity is in a strong
position to deal with this uncertainty. The current financial year
has started positively and trading is in line with the Board's
expectations.
Tim Davies
Chief Executive Officer
14 November 2016
UNAUDITED CONSOLIDATED INCOME STATEMENT
for the year ended 3 September 2016
Note (Restated)
2016 2015
GBP'000 GBP'000
Continuing operations
Revenue 2 314,907 331,285
Cost of sales (273,712) (288,553)
Gross profit 41,195 42,732
Distribution costs (15,975) (15,580)
Administrative expenses (12,450) (15,062)
Group operating profit 2 12,770 12,090
Finance income 236 338
Finance costs (1,009) (1,045)
Share of post-tax profit in
associate 1,239 1,500
Share of post-tax profit in
joint ventures 842 807
Profit before taxation 2 14,078 13,690
Taxation 3 (2,907) (3,010)
Profit for the year from continuing
operations 11,171 10,680
Discontinued operations
Profit for the year from discontinued
operations 5 2,817 3,013
Profit for the year 13,988 13,693
================= ================
Profit attributable to:
Equity shareholders 12,455 11,989
Non-controlling interests 1,533 1,704
13,988 13,693
Basic earnings per ordinary
share (pence)
Profit from continuing operations 10.7 10.0
Profit from discontinued operations 3.1 3.4
----------------- ----------------
4 13.8 13.4
================= ================
Diluted earnings per ordinary
share (pence)
Profit from continuing operations 10.5 9.7
Profit from discontinued operations 3.0 3.2
----------------- ----------------
13.5 12.9
================= ================
Adjusted earnings per ordinary
share (pence)
Profit from continuing operations 10.9 10.2
Profit from discontinued operations 3.1 3.4
----------------- ----------------
4 14.0 13.6
================= ================
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 3 September 2016
2016 2015
GBP'000 GBP'000
Profit for the year 13,988 13,693
---------- ----------------
Other comprehensive income/(expense)
Items that may be reclassified
subsequently to profit or loss:
- Foreign exchange translation
gains arising on
translation of overseas subsidiaries 2,860 (249)
- Net investment hedges 687 338
- Taxation charge on net investment
hedges (137) (69)
Items that will not be reclassified
subsequently to profit or
loss:
- Actuarial (losses)/gains
on retirement benefit
asset/(obligation):
- Group (2,725) (2,848)
- Share of associate (1,216) 70
- Taxation credit/(charge)
on actuarial (losses)/gains
on retirement benefit asset/(obligation):
- Group 490 570
- Share of associate 205 (14)
Other comprehensive income/(expense)
for the
year, net of tax 164 (2,202)
---------- ----------------
Total comprehensive income
for the year 14,152 11,491
========== ================
Total comprehensive income
attributable to:
Equity shareholders 12,619 9,787
Non-controlling interests 1,533 1,704
14,152 11,491
========== ================
UNAUDITED CONSOLIDATED BALANCE SHEET
as at 3 September 2016
(Restated)
2016 2015
GBP'000 GBP'000
Assets
Non-current assets
Goodwill 11,440 10,849
Other intangible assets 286 448
Property, plant and equipment 35,811 58,385
Investment property 182 636
Investment in associate 8,667 8,439
Interest in joint ventures 6,257 5,012
Other investments 72 79
Financial assets
- Non-current receivables 50 50
Retirement benefit asset 311 1,767
Deferred tax assets - 861
--------- -----------
63,076 86,526
--------- -----------
Current assets
Inventories 33,423 35,031
Trade and other receivables 56,940 64,454
Current tax assets 303 839
Financial assets
- Derivative financial instruments - 50
- Cash and cash equivalents 48,411 20,052
--------- -----------
139,077 120,426
--------- -----------
Total assets 202,153 206,952
--------- -----------
Liabilities
Current liabilities
Financial liabilities
- Borrowings (21,642) (18,721)
- Derivative financial instruments (20) (72)
Trade and other payables (46,823) (54,496)
Current tax liabilities (470) (472)
--------- -----------
(68,955) (73,761)
--------- -----------
Non-current liabilities
Financial liabilities
- Borrowings (18,625) (25,744)
Deferred tax liabilities (1,817) (4,184)
Other non-current liabilities (2,668) (4,300)
--------- -----------
(23,110) (34,228)
--------- -----------
Total liabilities (92,065) (107,989)
--------- -----------
Net assets 110,088 98,963
========= ===========
UNAUDITED CONSOLIDATED BALANCE SHEET
as at 3 September 2016 (continued)
(Restated)
2016 2015
GBP'000 GBP'000
Shareholders' equity
Share capital 2,280 2,244
Share premium 9,111 8,615
Treasury share reserve (8) -
Equity compensation reserve 706 1,138
Foreign exchange reserve 2,895 (515)
Other reserve 207 862
Retained earnings 81,540 74,706
-------- -----------
Total shareholders' equity 96,731 87,050
Non-controlling interests 13,357 11,913
-------- -----------
Total equity 110,088 98,963
======== ===========
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 3 September 2016
Treasury Equity Foreign Total Non-
Share Share Share Compensation Exchange Other Retained Shareholders' controlling
Capital Premium Reserve Reserve Reserve Reserve Earnings Equity Interests Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- ---------- -------------- ---------- --------- ---------- --------------- ------------- ---------
At 31
August
2014 2,235 8,453 - 640 (535) 875 67,996 79,664 10,163 89,827
--------- --------- ---------- -------------- ---------- --------- ---------- --------------- ------------- ---------
Profit
for the
year - - - - - - 11,989 11,989 1,704 13,693
Other
comprehensive
income/(expense) - - - - 20 - (2,222) (2,202) - (2,202)
--------- --------- ---------- -------------- ---------- --------- ---------- --------------- ------------- ---------
Total
comprehensive
income - - - - 20 - 9,767 9,787 1,704 11,491
Dividends
paid - - - - - - (3,110) (3,110) - (3,110)
Equity-settled
share-based
payment
transactions,
net of
tax - - - 498 - - 40 538 46 584
Allotment
of shares 9 162 - - - - - 171 - 171
Transfer - - - - - (13) 13 - - -
At 29
August
2015 2,244 8,615 - 1,138 (515) 862 74,706 87,050 11,913 98,963
========= ========= ========== ============== ========== ========= ========== =============== ============= =========
At 30
August
2015 2,244 8,615 - 1,138 (515) 862 74,706 87,050 11,913 98,963
--------- --------- ---------- -------------- ---------- --------- ---------- --------------- ------------- ---------
Profit
for the
year - - - - - - 12,455 12,455 1,533 13,988
Other
comprehensive
income/(expense) - - - - 3,410 - (3,246) 164 - 164
--------- --------- ---------- -------------- ---------- --------- ---------- --------------- ------------- ---------
Total
comprehensive
income - - - - 3,410 - 9,209 12,619 1,533 14,152
Dividends
paid - - - - - - (3,347) (3,347) - (3,347)
Equity-settled
share-based
payment
transactions,
net of
tax - - - (432) - - 321 (111) 15 (96)
Allotment
of shares 36 496 - - - - - 532 - 532
Purchase
of own
shares
held in
trust - - (12) - - - - (12) - (12)
Dissolution
of dormant
subsidiaries - - - - - - - - (104) (104)
Transfer - - 4 - - (655) 651 - - -
At 3 September
2016 2,280 9,111 (8) 706 2,895 207 81,540 96,731 13,357 110,088
========= ========= ========== ============== ========== ========= ========== =============== ============= =========
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 3 September 2016
Note 2016 2015
GBP'000 GBP'000
Cash flows from operating
activities
Cash generated from continuing
operations 6 6,257 9,120
Interest received 155 194
Interest paid (673) (685)
Tax paid (1,098) (3,853)
Net cash generated from operating
activities in continuing
operations 4,641 4,776
Net cash generated from operating
activities in discontinued
operations 5,477 5,200
---------- ----------
Net cash generated from operating
activities 10,118 9,976
---------- ----------
Cash flows from investing
activities
Acquisition of subsidiaries
(net of overdraft/cash acquired) (1,258) (1,749)
Disposal of subsidiary, net
of costs (including cash 23,922 -
disposed)
Return of investment in joint
venture - 488
Dividend received from joint 113 -
venture
Loans to joint ventures 2,332 129
Loan repaid by associate 500 500
Other loans (20) 220
Purchase of intangible assets (62) (15)
Proceeds from sale of property,
plant and equipment 349 436
Purchase of property, plant
and equipment (5,788) (4,621)
Purchase of own shares held (12) -
in trust
Redemption of preference
shares in joint venture 150 150
---------- ----------
Net cash generated from/(used
in) investing activities
in continuing operations 20,226 (4,462)
Net cash used in investing
activities in discontinued
operations (449) (1,323)
Net cash generated from/(used
in) investing activities 19,777 (5,785)
Cash flows from financing
activities
Proceeds from issue of ordinary
share capital 532 171
Net proceeds from issue of
new bank loans 153 9,061
Finance lease principal repayments (925) (990)
Repayment of loan from related
party (500) (500)
Repayment of borrowings (1,614) (4,880)
Decrease in other borrowings (192) (3,638)
Dividends paid to shareholders (3,347) (3,110)
Receipt of grant income - 200
Net cash used in financing
activities in continuing
operations (5,893) (3,686)
Net cash used in financing
activities in discontinuing
operations (1,408) (1,105)
---------- ----------
Net cash used in financing
activities (7,301) (4,791)
---------- ----------
Effect of exchange rate changes 918 (150)
Net increase/(decrease) in
cash and cash equivalents 23,512 (750)
Cash and cash equivalents
at beginning of the year 16,275 17,025
---------- ----------
Cash and cash equivalents
at end of the year 39,787 16,275
========== ==========
NOTES TO THE UNAUDITED PRELIMINARY ANNOUNCEMENT
1. Basis of preparation
The Group's unaudited Preliminary Announcement does not
constitute statutory consolidated financial statements for the year
ended 3 September 2016 or the year ended 29 August 2015. The
statutory accounts for the year ended 3 September 2016 will be
finalised on the basis of the financial information presented by
the Directors in this preliminary announcement and will be
delivered to the Registrar of Companies following the Company's
Annual General Meeting.
The financial statements for the year ended 29 August 2015 were
unqualified and have been delivered to the Registrar of
Companies.
The prior year consolidated income statement has been restated
for the reclassification to interest income of the net interest on
the net defined benefit retirement asset previously recognised
within operating profit. Comparatives at 29 August 2015 have been
restated by GBP141,000, increasing finance income and reducing
operating profit with no impact to profit before tax.
The prior year balance sheet has been restated for the grossing
up of cash and cash equivalents and bank overdraft, included within
current borrowings, for accounts with right of offset within the
same banking facility. Comparatives at 29 August 2015 have been
restated by GBP3,564,000, increasing both cash and cash equivalents
and current borrowings with no impact to net assets.
2. Segmental information
The segmental information for the year ended 3 September 2016 is
as follows:
Agriculture Engineering Group
GBP'000 GBP'000 GBP'000
Total segment revenue 284,836 30,192 315,028
Inter segment revenue (63) (58) (121)
Revenue from external customers 284,773 30,134 314,907
============ ============ =========
EBITDA(1) 12,924 3,555 16,479
Depreciation of property,
plant and equipment (2,539) (1,043) (3,582)
Depreciation of investment
property (6) - (6)
Profit on the disposal of
property, plant and equipment 12 72 84
Amortisation of intangible
assets (133) (72) (205)
Operating profit 10,258 2,512 12,770
------------ ------------
Finance income 236
Finance costs (1,009)
11,997
Share of post-tax profit
of associate 1,239
Share of post-tax profit
of joint ventures 842
Profit before taxation from
continuing operations 14,078
=========
(1) Earnings before interest, tax, depreciation and amortisation
(and before profit/(loss) on the disposal of property, plant
and
equipment)
The segmental information for the year ended 29 August 2015
(restated) is as follows:
Agriculture Engineering Group
GBP'000 GBP'000 GBP'000
Total segment revenue 297,858 33,588 331,446
Inter segment revenue (115) (46) (161)
Revenue from external customers 297,743 33,542 331,285
============ ============ =========
EBITDA(1) 11,882 3,573 15,455
Depreciation of property,
plant and equipment (2,365) (815) (3,180)
Depreciation of investment
property (6) - (6)
Profit/(loss) on the disposal
of property, plant and equipment 38 (24) 14
Amortisation of intangible
assets (100) (93) (193)
Operating profit 9,449 2,641 12,090
------------ ------------
Finance income 338
Finance costs (1,045)
11,383
Share of post-tax profit
of associate 1,500
Share of post-tax profit
of joint ventures 807
Profit before taxation from
continuing operations 13,690
=========
(1) Earnings before interest, tax, depreciation and amortisation
(and before profit/(loss) on the disposal of property, plant
and
equipment)
3. Taxation
2016 2015
GBP'000 GBP'000
Continuing operations
(a) Analysis of the charge in the
year
Current tax:
UK corporation tax
Current year 952 1,104
Adjustment in respect of prior years 173 137
Foreign tax
Current year 680 621
Adjustment in respect of prior years - (33)
-------- --------
Group current tax 1,805 1,829
-------- --------
Deferred tax:
Origination and reversal of timing
differences
Current year 1,177 1,199
Adjustment in respect of prior years (75) (18)
-------- --------
Group deferred tax 1,102 1,181
-------- --------
Tax on profit from ordinary activities 2,907 3,010
======== ========
Continuing operations
(b) Factors affecting tax charge for the year
The tax assessed for the year is higher (2015:
higher) than the rate of corporation tax in the
UK of 20% (2015: 20.58%). The differences are
explained below:
2016 2015
GBP'000 GBP'000
--------- ---------
Profit before taxation 14,078 13,690
--------- ---------
2,816 2,817
Tax at 20% (2015: 20.58%) (416) (475)
Effects of: - 148
Tax effect of share of profit in
associate and joint ventures (105) (31)
Tax effect of expenses that are
not allowable in determining taxable
profit 704 478
Tax effect of non-taxable income (190) (13)
Effects of different tax rates of
foreign subsidiaries 98 86
Effects of changes in tax rates
Adjustment in respect of prior years
--------- ---------
Total tax charge for the year 2,907 3,010
========= =========
4. Earnings per share
Basic earnings per share are based on profit attributable to
shareholders and on a weighted average number of shares in issue
during the year of 90,087,357 (2015: 89,574,461). The calculation
of diluted earnings per share is based on 92,034,155 shares (2015:
92,672,538).
2016 2015
Earnings Earnings Earnings Earnings
per share per
GBP'000 pence GBP'000 share
pence
Continuing operations
Earnings per share -
basic 9,638 10.7 8,976 10.0
Amortisation and non-recurring
items:
Amortisation of intangible
assets 205 0.2 193 0.2
Taxation relief on amortisation (47) - (49) (0.1)
Acquisition related
costs(1) 7 - 58 0.1
--------- ----------- --------- ---------
Earnings per share -
adjusted 9,803 10.9 9,178 10.2
--------- ----------- --------- ---------
Discontinued operations
Earnings per share -
basic 2,817 3.1 3,013 3.4
Amortisation and non-recurring
items:
Amortisation of intangible
assets 14 - 15 -
Taxation relief on amortisation - - (3) -
Profit on disposal of
subsidiary (39) - - -
--------- ----------- --------- ---------
Earnings per share -
adjusted 2,792 3.1 3,025 3.4
--------- ----------- --------- ---------
Total earnings per share
- adjusted 12,595 14.0 12,203 13.6
--------- ----------- --------- ---------
(1) Disallowable for tax purposes
5. Discontinued operations
On 3 September 2016 Carr's Group plc disposed of its entire
shareholding in Carr's Flour Mills Ltd for a gross consideration of
GBP36m on a cash and debt free basis, less costs to sell.
An analysis of the result of discontinued operations, and the
gain recognised on the re-measurement to fair value less costs to
sell, is as follows:
2016 2015
GBP'000 GBP'000
Revenue 71,440 80,280
Expenses (67,950) (76,503)
--------- ---------
Profit before taxation of discontinued
operations 3,490 3,777
Taxation (712) (764)
--------- ---------
Profit after tax of discontinued
operations 2,778 3,013
--------- ---------
Pre-taxation gain recognised
on the measurement to fair value 39 -
less costs to sell
Taxation - -
--------- ---------
After taxation gain recognised
on the measurement to fair value 39 -
less costs to sell
Profit for the year from discontinued
operations 2,817 3,013
========= =========
6. Cash generated from continuing operations
2016 2015
GBP'000 GBP'000
Continuing operations
Profit for the year 11,171 10,680
Adjustments for:
Tax 2,907 3,010
Tax credit in respect of R&D (176) (292)
Depreciation of property, plant
and equipment 3,582 3,180
Depreciation of investment property 6 6
Intangible asset amortisation 205 193
Profit on disposal of property,
plant and equipment (84) (14)
Loss on disposal of investment 10 -
Amortisation of grants (53) (20)
Net fair value (gain)/loss on
share based payments (99) 520
Net foreign exchange differences (383) 53
Net fair value losses/(gains)
on derivative financial instruments
in
operating profit 70 (65)
Interest income (236) (338)
Interest expense and borrowing
costs 1,045 1,077
Share of profit from associate
and joint ventures (2,081) (2,307)
Pension contributions - deficit
reduction (780) (2,340)
- ongoing (108) (339)
IAS19 income statement (credit)/charge
excluding interest (287) 261
Changes in working capital (excluding
the effects of acquisitions and
disposals):
Increase in inventories (1,620) (1,886)
(Increase)/decrease in receivables (3,606) 63
Decrease in payables (3,226) (2,322)
-------- ---------
Cash generated from continuing
operations 6,257 9,120
======== =========
7. Pensions
The Group operates its current pension arrangements on a defined
benefit and defined contribution basis. The valuation of the
defined benefit scheme under the IAS19 accounting basis showed a
surplus net of the related deferred tax liability in the scheme at
3 September 2016 of GBP0.3m (2015: GBP1.4m).
In the year, the retirement benefit credit, excluding interest,
in respect of the Carr's Group Pension Scheme was GBP287,000 (2015:
charge of GBP261,000). As a result of the closure to future service
accrual on 31 December 2015 a negative past service cost, net of
associated costs, of approximately GBP350,000 has been recognised
in the income statement credit.
A Group subsidiary undertaking is a participating employer in a
defined benefit pension scheme of the associate. The IAS19
accounting basis showed a deficit, for that scheme, net of the
related deferred tax asset in the scheme at 3 September 2016 of
GBP4.2m (2015: GBP2.6m). The scheme is treated as a defined
contribution scheme by the Group, and its level of participation in
the scheme is estimated at 48.5%, which is based on its estimated
share of the buyout liabilities. Due to the fact that the
sponsoring employer is an associate company of the Group, 49% of
the deficit calculated on an IAS19 accounting basis is included in
the Group's balance sheet within its 'Investment in Associate'.
8. Analysis of changes in net (debt)/cash
At 30 Other At 3 September
August Cash Non-Cash Exchange
2015 Flow Changes Movements 2016
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash and
cash
equivalents 20,052 27,441 - 918 48,411
Bank overdrafts (3,777) (4,847) - - (8,624)
----------- --------- ---------- ----------- ---------------
16,275 22,594 - 918 39,787
Loans and
other
borrowings: (134)
- current (12,770) 1,902 (1,374) - (12,376)
- non-current (18,444) - 1,336 (17,108)
Finance leases:
- current (2,174) 2,333 (801) - (642)
- non-current (7,300) - 5,783 - (1,517)
----------- --------- ---------- ----------- ---------------
Net (debt)/cash (24,413) 26,829 4,944 784 8,144
=========== ========= ========== =========== ===============
9. The Board of Directors approved the preliminary announcement on 14 November 2016.
10. The Company intends to post a Summary Report and Accounts to
shareholders by 1 December 2016. The full Report and Accounts will
be available upon request from the Company Secretary, Carr's Group
plc, Old Croft, Stanwix, Carlisle, CA3 9BA or alternatively on the
Company's website: www.carrsgroup.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAFFDFAEKFFF
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