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RNS
Carr's Group PLC  -  CARR   

Half-year Report

Released 07:00 12-Apr-2017

RNS Number : 2512C
Carr's Group PLC
12 April 2017
 

12 April 2017

CARR'S GROUP plc ("Carr's" or the "Group")

INTERIM RESULTS

For the six months ended 4 March 2017

"A robust half year performance, medium term outlook remains positive"

 

Carr's (CARR.L), the Agriculture and Engineering Group, announces its results for the six months ended 4 March 2017. 

 

Financial highlights

 

·        Revenue up 15.3% to £176.8m (H1 2016: £153.4m*)

·        Operating profit (before exceptional items) up 0.9% to £7.5m (H1 2016: £7.5m*)

·        Operating profit (after exceptional items) down 7.6% to £6.9m (H1 2016: £7.5m*)

·        Profit before tax (before exceptional items) up 4.8% to £8.9m (H1 2016: £8.5m*)

·        Profit before tax (after exceptional items) down 2.6% to £8.3m (H1 2016: £8.5m*)

·        Basic EPS down 3.0% to 6.4p (H1 2016: 6.6p*)

·        Adjusted EPS1 up 6.0% to 7.1p (H1 2016: 6.7p*)      

·        Interim dividend held at 0.95p (H1 2016: 0.95p)

·        Net debt of £11.5m (£8.1m net cash at 3 September 2016)

*continuing operations

_______________

1 Adjusted EPS is after adding back amortisation of intangibles and non-recurring items e.g. acquisition related costs

 

 

Commercial highlights

 

·        Strong performance in UK Agriculture, outperforming the market and continuing to grow market share. Greater confidence in UK agriculture expected to continue into H2

·        Rebound in UK machinery sales, up 43.4% on H1 2016, and retail business performed well, benefiting from store improvement programme

·        Significant pressure from falling cattle prices impacting USA feed block sales

·        Full year performance in Engineering to be impacted by previously announced contract delay in UK Manufacturing

·        Remote handling business performing ahead of expectations and bolstered by a strong order book, demonstrating the potential in this market

·        Integration of STABER acquisition progressing well, with plans to extend premises in Markdorf, Germany

 

Tim Davies, Chief Executive Officer, commented:

 

"While still at an early stage, we are seeing initial signs of improving confidence among our core UK farming customers resulting in a strong first half performance in our UK Agriculture business, which we expect to continue in the second half.  However, our USA feed block business continues to be impacted by the fall in cattle prices.

"Our Engineering business has been affected by a delay to a significant UK Manufacturing contract, which will impact our full year performance, but we have a strong pipeline in UK manufacturing and our remote handling business is performing ahead of expectations.

 

"We remain committed to delivering organic revenue growth, supported by value enhancing acquisitions and, further to the trading update released on 30 March, the Board's expectations for the full year remain unchanged."

 

Enquiries:

 

Carr's Group plc
Tim Davies (Chief Executive)
Neil Austin (Group Finance Director)

Tel: +44 (0) 1228 554 600

 

 

Powerscourt
Nick Dibden / Lisa Kavanagh

Tel: +44 (0) 20 7250 1446

 

About Carr's Group plc:

 

Carr's is an international leader in manufacturing value added products and solutions, with market leading brands and robust market positions in Agriculture and Engineering, supplying customers in 35 countries around the world.

 

Its Agriculture division manufactures and supplies feed blocks for livestock, farm machinery and runs a UK network of rural stores, providing a one-stop shop for the farming community. Its Engineering division designs and manufactures bespoke equipment for use in the nuclear, petrochemical, oil and gas, pharmaceutical, process and renewable energy industries, including robotic and remote handling equipment.

 

 

Interim Management Report

 

INTRODUCTION

 

Carr's has delivered results that are ahead of the prior year (before exceptional items), despite the continuation of tough trading conditions in some of its key markets.  The Board's expectations for the full year remain unchanged from that detailed in the Company's recent trading update published on 30 March 2017.

 

BUSINESS REVIEW

 

During the 26 weeks ended 4 March 2017 the Group delivered a resilient performance. Group revenues were £176.8m, up 15.3% from the prior year (H1 2016 continuing operations: £153.4m), primarily due to commodity price movements. Profit before tax (before exceptional items) increased by 4.8% to £8.9m (H1 2016 continuing operations: £8.5m); profit before tax after exceptional items was £8.3m (H1 2016 continuing operations: £8.5m).  Exceptional items of £0.6m (H1 2016: £nil) relate to business combination expenses and restructuring costs.

 

Group operating profit (before exceptional items) of £7.5m (H1 2016 continuing operations: £7.5m) was 0.9% ahead of the prior year, but was 7.6% behind the prior year after exceptional items at £6.9m.

The Group's share of profit after tax from associate and joint venture companies was up 20.0% on the prior year to £1.7m (H1 2016: £1.4m).

 

Basic earnings per share decreased by 3.0% from 6.6p to 6.4p, as a result of the impact of exceptional items. On an adjusted basis, earnings per share increased by 6.0% to 7.1p (H1 2016 continuing operations: 6.7p).

 

AGRICULTURE

 

The Agriculture division has reported operating profit of £7.3m (H1 2016: £7.0m), up 4.9% and ahead of the Board's expectations for the half year. This is a resilient performance driven by a strong UK result but partially offset by lower profits in the USA.

 

UK

 

UK Agriculture has continued its strong start to the year, despite the market for compound feed and blend volumes contracting by 1%-2% and margins remaining under pressure. Set against this backdrop we have continued to outperform the market increasing our volumes by 11.6% as we continue to gain market share.  

 

Feed block sales have performed particularly well in the UK, with sales volumes 6.0% ahead of the prior year.

 

Despite another relatively mild autumn and winter, the fuel distribution business has performed well, with sales volumes 0.9% ahead of the prior year and machinery sales, often regarded as a barometer of farmer confidence, 43.4% ahead of the prior year.

 

Our retail business has also performed well, with like-for-like sales 3.8% ahead of the prior year.  This reflects our continuing store improvement programme and our ever improving offer to our core farming customers. A new store in Penicuik, East Midlothian, opened in December 2016 which takes our total retail footprint to 41 locations.

 

It is pleasing to report that the challenging UK farming environment experienced in the last couple of years is showing signs of abating, helped significantly by improvements in the farmgate milk price, and while it remains at early stages we are optimistic about the year ahead for the UK farming community.

 

International

 

The strong performance in the UK market is in contrast to the performance in the USA, where the market pressure from lower cattle prices has impacted both volumes and margins of SmartLic® and Feed in a Drum®, with sales volumes down 10.1% year on year.  Despite these challenges, and in readiness for the anticipated market recovery, our plans to construct a low moisture block plant in Shelbyville, Tennessee, are progressing well.  Once operational, the plant will provide access to new markets across eastern US states.  

 

The higher level of confidence that has benefited the UK Agriculture business in H1 looks set to continue during H2, however this will only partially mitigate the full year impact of the USA cattle market pressures on the division's performance.

 

ENGINEERING

 

As previously reported, the Engineering division had a slower than expected start to the year, mainly due to a significant contract delay in the UK Manufacturing business.  Operating profit (before exceptional items) was £0.3m (H1 2016: £0.5m), down £0.2m year on year.  Overall, revenues generated from the nuclear business represented 71% of the total, against 55.4% in the prior year.

 

UK Manufacturing

 

The performance of the UK manufacturing business has been affected by a significant contract delay and, as previously announced on 30 March 2017, the Group has only been partially successful in its measures to mitigate the impact of this delay through cost cutting, winning new business and accelerating the existing order book.    

 

Management will remain focussed on continuing to maximise throughput within the production facilities.  The pipeline in the medium term is looking strong, with the benefit of the Sellafield Vessels and Tanks Framework contract awarded in 2016 expected to begin during 2018.

 

Remote Handling

 

The remote handling businesses have started well and are ahead of expectations.  Some large orders have been won for the supply of power manipulators into China, with manufacturing activity largely taking place during the second half.  This is particularly encouraging given the potential for this market.  The integration of the recently acquired STABER GmbH is progressing well, and consequently we have taken the decision to extend the premises in Markdorf, Germany, to fully integrate the two businesses and to provide additional flexibility and capacity into our production facilities in Germany.

 

BALANCE SHEET AND CASHFLOW

 

Net cash generated from operating activities was strong in the first half at £5.2m (H1 2016: £1.3m).  Net debt has risen to £11.5m from a net cash position of £8.1m at the 2016 financial year end.  In addition to seasonal working capital movements, this is primarily due to the payment of a special dividend of 17.54p per share in October 2016, totalling £16.0m, and the acquisition of STABER GmbH in October 2017, for an initial consideration of €5.85m.

 

The Group's defined benefit pension scheme remains in surplus and this increased from £0.3m at 3 September 2016 to £5.7m at 4 March 2017.

 

SHAREHOLDERS' EQUITY

 

Shareholders' equity at 4 March 2017 was £90.0m (3 September 2016: £96.7m), with the reduction primarily due to the payment of the special dividend of £16.0m in October 2016 offset by profit retained by the Group for the period.

 

DIVIDEND

 

A first interim dividend of 0.95 pence per ordinary share (2016: 0.95 pence per ordinary share) will be paid on 12 May 2017 to shareholders on the register on 21 April 2017. The ex-dividend date will be 20 April 2017.

 

PRINCIPAL RISKS AND UNCERTAINTIES

 

The Group has a process in place to identify and assess the impact of risks on its business, which is reviewed and updated quarterly. The principal risks and uncertainties for the remainder of the financial year are not expected to change materially from those included on pages 14 to 16 of the Annual Report and Accounts 2016.

 

The principal risks and uncertainties are as follows:

 

·        Safety

·        Business Continuity

·        People

·        Commodity Costs

·        Product Innovation Risk

·        Strategic Partners

·        Treasury

·        Acquisitions

·        Customer Demand

·        Reliance on Key Customers

·        Reliance on Key Ingredients

·        Defined Benefit Pension Scheme

·        Brexit

 

 

OUTLOOK

 

As previously announced, the second half performance will be affected by a combination of the contract delay in UK Manufacturing and depressed USA cattle prices impacting our USA feed block operations.

 

Despite these short-term setbacks, we are seeing recovery in the UK agricultural markets and are encouraged by the medium term outlook for our businesses operating in the nuclear sector.  Overall, the Group continues to benefit from geographic and operational diversity.

 

The Group is focused on growth, both through the organic development of its businesses and selective acquisitions, and is committed to driving innovation through research and development to ensure it remains at the forefront of all the markets in which it operates.

 

Further to the trading update released on 30 March 2017, the Board's revised expectations for the full year remain unchanged.

 

UNAUDITED CONSOLIDATED INCOME STATEMENT

For the 26 weeks ended 4 March 2017

                                   

 

 

26 weeks ended

4 March

2017

26 weeks ended

27 February 2016

53 weeks ended

 3 September

2016

 

Notes

£'000

£'000

£'000

Continuing operations

 

 

 

 

 

 

 

 

 

Revenue

6

176,758

153,356

314,907

Cost of sales

 

(153,874)

(131,495)

(273,712)

 

 

 

 

 

Gross profit

 

22,884

21,861

41,195

 

 

 

 

 

Net operating expenses

 

(15,975)

(14,382)

(28,425)

 

 

 

 

 

Operating profit (before exceptional items)

 

7,543

7,479

12,770

Exceptional items

7

(634)

-

-

Group operating profit

6

6,909

7,479

12,770

 

 

 

 

 

Finance income

 

95

119

236

Finance costs

 

(430)

(516)

(1,009)

Share of post-tax profit in associate and joint ventures

 

1,708

1,423

2,081

 

 

 

 

 

Profit before taxation (before exceptional items)

 

8,916

8,505

14,078

Exceptional items

7

(634)

-

-

Profit before taxation

6

8,282

8,505

14,078

 

 

 

 

 

Taxation

 

(1,708)

(1,792)

(2,907)

 

 

 

 

 

 

 

 

 

 

Profit for the period from continuing operations

 

6,574

6,713

11,171

 

 

 

 

 

Discontinued operations

 

 

 

 

Profit for the period from discontinued operations

 

-

2,028

2,817

 

 

 

 

 

Profit for the period

 

6,574

8,741

13,988

 

 

 

 

 

Profit attributable to:

 

 

 

 

Equity shareholders

 

5,802

7,990

12,455

Non-controlling interests

 

772

751

1,533

 

 

 

 

 

 

 

6,574

8,741

13,988

 

 

 

 

 

 

 

 

 

 

Earnings per share (pence)

 

 

 

 

Continuing operations

 

 

 

 

Basic

8

6.4

6.6

10.7

Diluted

8

       6.3

6.4

10.5

Adjusted

8

7.1

6.7

10.9

Diluted adjusted

8

7.0

6.5

10.7

 

 

 

 

 

Discontinued operations

 

 

 

 

Basic

8

-

2.3

3.1

Diluted

8

-

2.2

3.0

Adjusted

8

-

2.3

3.1

Diluted adjusted

8

-

2.2

3.0

 

 

 

 UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the 26 weeks ended 4 March 2017

 

 

 

26 weeks ended

 4 March

2017

26 weeks ended

 27 February 2016

53 weeks ended

 3 September

2016

 

Notes

£'000

£'000

£'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the period

 

6,574

8,741

13,988

 

 

 

 

 

Other comprehensive income/(expense)

 

 

 

 

 

 

 

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

 

 

Foreign exchange translation gains arising on

  translation of overseas subsidiaries

 

 

107

 

1,557

 

2,860

 

 

 

 

 

Net investment hedges

 

1,669

577

687

Taxation charge on net investment hedges

 

(327)

(115)

(137)

 

 

 

 

 

Items that will not be reclassified subsequently to profit or loss:

 

 

 

 

Actuarial gains/(losses) on retirement benefit asset:

 

 

 

 

- Group

13

5,418

879

(2,725)

- Share of associate

 

-

-

(1,216)

 

 

 

 

 

Taxation (charge)/credit on actuarial movement on

  retirement benefit asset:

 

 

 

 

- Group

 

(921)

(158)

490

- Share of associate

 

-

-

205

 

 

 

 

 

Other comprehensive income for the period, net of tax

 

5,946

2,740

164

 

 

 

 

 

Total comprehensive income for the period

 

12,520

11,481

14,152

 

 

 

 

 

Total comprehensive income attributable to:

 

 

 

 

Equity shareholders

 

11,748

10,730

12,619

Non-controlling interests

 

772

751

1,533

 

 

 

 

 

 

 

12,520

11,481

14,152

 

 

 

 

 

 

 

UNAUDITED CONSOLIDATED BALANCE SHEET

As at 4 March 2017

 

 

 

 

(Restated)¹

 

 

 

As at

4 March

2017

As at

27 February

  2016

As at

 3 September

 2016

 

Notes

£'000

 £'000

£'000

Non-current assets

 

 

 

 

Goodwill

10

16,870

10,931

11,440

Other intangible assets

10

469

413

286

Property, plant and equipment

10

37,135

60,391

35,811

Investment property

10

179

626

182

Investment in associate

 

9,570

9,196

8,667

Interest in joint ventures

 

6,768

6,082

6,257

Other investments

 

75

72

72

Financial assets

 

 

 

 

- Non-current receivables

 

50

150

50

Retirement benefit asset

13

5,732

3,927

311

Deferred tax assets

 

-

29

-

 

 

76,848

91,817

63,076

 

 

 

 

 

Current assets

 

 

 

 

Inventories

 

38,142

39,113

33,423

Trade and other receivables

 

66,326

70,736

56,940

Current tax assets

 

345

401

303

Financial assets

 

 

 

 

- Derivative financial instruments

 

-

2

-

- Cash and cash equivalents

11

21,176

13,272

48,411

 

 

125,989

123,524

139,077

 

 

 

 

 

Total assets

 

202,837

215,341

202,153

 

 

 

 

 

Current liabilities

 

 

 

 

Financial liabilities

 

 

 

 

- Borrowings

11

(19,579)

(14,839)

(21,642)

- Derivative financial instruments

 

(83)

(132)

(20)

Trade and other payables

 

(56,633)

(57,302)

(46,823)

Current tax liabilities

 

(1,789)

(980)

(470)

 

 

(78,084)

(73,253)

(68,955)

Non-current liabilities

 

 

 

 

Financial liabilities

 

 

 

 

- Borrowings

11

(13,082)

(25,447)

(18,625)

Deferred tax liabilities

 

(3,102)

(4,173)

(1,817)

Other non-current liabilities

 

(4,414)

(4,226)

(2,668)

 

 

(20,598)

(33,846)

(23,110)

 

 

 

 

 

Total liabilities

 

(98,682)

(107,099)

(92,065)

 

 

 

 

 

Net assets

 

104,155

108,242

110,088

 

 

 

 

 

Shareholders' equity

 

 

 

 

Share capital

14

2,285

2,246

2,280

Share premium

14

9,129

8,657

9,111

Treasury share reserve

 

-

-

(8)

Equity compensation reserve

 

159

1,351

706

Foreign exchange reserve

 

4,344

1,504

2,895

Other reserve

 

207

856

207

Retained earnings

 

73,887

80,946

81,540

Total shareholders' equity

 

90,011

95,560

96,731

Non-controlling interests

 

14,144

12,682

13,357

Total equity

 

104,155

108,242

110,088

           


 

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the 26 weeks ended 4 March 2017

 

 

                 

        Share

      Capital

 

Share Premium

Treasury Share Reserve

Equity Compensation Reserve

        Foreign
Exchange 
Reserve

 

          Other       Reserve

 

Retained
Earnings

Total Shareholders' Equity

Non-Controlling Interests

 

Total Equity

 

         £'000

£'000

£'000

£'000

           £'000

          £'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

 

 

 

At 4 September 2016

2,280

         9,111

           (8)

                   706

2,895

207

81,540

96,731

13,357

110,088

Profit for the period

-

                 -

               -

                        -

-

-

5,802

5,802

772

6,574

Other comprehensive income

 

-

 

                 -

 

               -

 

                        -

 

1,449

 

-

 

4,497

 

5,946

 

-

 

5,946

Total comprehensive income

      -

 

                 -

 

               -

 

                        -

 

1,449

 

-

 

10,299

 

11,748

 

772

 

12,520

Dividends paid

-

                 -

               -

                        -

-

-

(18,599)

(18,599)

-

(18,599)

Equity-settled share based payment transactions, net of tax

 

             -

 

                  -

 

               -

 

                  (547)

 

-

 

-

 

 659

 

112

 

15

 

 127

Allotment of shares

5

              18

               -

                        -

-

-

-

23

-

23

Purchase of own shares held in trust

 

-

 

                 -

 

           (4)

 

                        -

 

-

 

-

 

-

 

(4)

 

-

 

(4)

Transfer

-

             -

            12

                        -

-

-

(12)

-

-

-

At 4 March 2017

2,285

         9,129

               -

                   159

4,344

207

73,887

90,011

14,144

104,155

 

 

 

 

 

 

 

 

 

 

 

At 30 August 2015

2,244

         8,615

               -

                1,138

(515)

862

74,706

87,050

11,913

98,963

Profit for the period

-

                 -

               -

                        -

-

-

7,990

7,990

751

8,741

Other comprehensive income

      -

 

                 -

 

               -

 

                        -

 

2,019

 

-

 

721

 

2,740

 

-

 

2,740

Total comprehensive income

                       -

 

                 -

 

               -

 

                        -

 

2,019

 

-

 

8,711

 

10,730

 

751

 

11,481

Dividends paid

-

                 -

               -

                        -

-

-

(2,492)

(2,492)

-

(2,492)

Equity-settled share based payment transactions, net of tax

 

      -

 

                  -

 

               -

 

                    213

 

-

 

-

 

 15

 

228

 

18

 

 246

Allotment of shares

2

              42

               -

                        -

-

-

-

44

-

44

Transfer

-

                 -

               -

                        -

-

(6)

6

-

-

-

At 27 February 2016

2,246

         8,657

               -

                1,351

1,504

856

80,946

95,560

12,682

108,242

 

 

 

 

 

 

 

 

 

 

 

At 30 August 2015

2,244

         8,615

               -

                1,138

(515)

862

74,706

87,050

11,913

98,963

Profit for the period

-

                 -

               -

                        -

-

-

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 26 weeks ended 4 March 2017

 

 

 

26 weeks ended

 4 March 2017

26 weeks

 ended

 27 February

 2016

53 weeks

ended

3 September

2016

 

Notes

£'000

£'000

£'000

Cash flows from operating activities

 

 

 

 

Cash generated from continuing operations

16

               6,057

                       166

6,257

Interest received

 

                     93

                        77

155

Interest paid

 

                (480)

                   (332)

(673)

Tax paid

 

                (447)

                   (117)

(1,098)

Net cash generated from/(used in) operating activities in continuing operations

 

               5,223

                   (206)

4,641

Net cash generated from operating activities in discontinued operations

 

                        -

                  1,480

5,477

Net cash generated from operating activities

 

               5,223

                  1,274

10,118

Cash flows from investing activities

 

 

 

 

Acquisition of subsidiaries (net of overdraft/cash acquired)

15

            (4,698)

                    (265)

(1,258)

Disposal of subsidiary, net of costs (including cash disposed)

 

                        -

                            -

23,922

Dividend received from joint venture

 

                   627

                            -

113

Loans repaid by joint ventures

 

                        -

                  2,055

2,332

Loan repaid by associate

 

                        -

                            -

500

Other loans

 

                     74

                     (70)

(20)

Purchase of intangible assets

 

                  (67)

                     (37)

(62)

Proceeds from sale of property, plant and equipment

 

                   176

                      178

349

Purchase of property, plant and equipment

 

            (1,347)

                (3,081)

(5,788)

Purchase of own shares held in trust

 

                    (4)

                           -

(12)

Redemption of preference shares in joint venture

 

                        -

                          -

150

Net cash (used in)/generated from investing activities in continuing operations

 

            (5,239)

                (1,220)

20,226

Net cash used in investing activities in discontinued operations

 

                        -

                   (267)

(449)

Net cash (used in)/generated from investing activities

 

            (5,239)

                (1,487)

19,777

Cash flows from financing activities

 

 

 

 

Proceeds from issue of ordinary share capital

 

                     23

                        44

532

Net proceeds from issue of new bank loans

 

                       -

                      143

153

Finance lease principal repayments

 

                (394)

                   (465)

(925)

Repayment of loan from related party

 

                        -

                           -

(500)

Repayment of borrowings

 

            (5,895)

                   (544)

(1,614)

Increase/(decrease) in other borrowings

 

                   743

                (4,438)

(192)

Dividends paid to shareholders

 

          (18,599)

                (2,492)

(3,347)

Net cash used in financing activities in continuing operations

 

          (24,122)

                (7,752)

(5,893)

Net cash used in financing activities in discontinued operations

 

                        -

                   (695)

(1,408)

Net cash used in financing activities

 

          (24,122)

                (8,447)

(7,301)

Effects of exchange rate changes

 

                  (37)

                       720

918

Net (decrease)/increase in cash and cash equivalents

 

          (24,175)

                 (7,940)

23,512

Cash and cash equivalents at beginning of the period

 

            39,787

               16,275

16,275

Cash and cash equivalents at end of the period

 

            15,612

                  8,335

39,787

 

 

 

 

 

Cash and cash equivalents consist of:

 

 

 

 

Cash and cash equivalents per the balance sheet

 

            21,176

               13,272¹

48,411

Bank overdrafts included in borrowings

 

            (5,564)

                (4,937)¹

(8,624)

 

 

            15,612

                  8,335

39,787

 

¹ restated by £4,553,000 for the grossing up of cash and cash equivalents and bank overdrafts for accounts with right of offset within the same banking facility (see note 3)
 

Statement of Directors' responsibilities

 

The Directors confirm that these condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

 

·        an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·        material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

 

The Directors are listed in the Annual Report and Accounts 2016.  A list of current Directors is maintained on the website: www.carrsgroup.com

 

On behalf of the Board

 

Tim Davies                                                         Neil Austin

Chief Executive                                               Group Finance Director

12 April 2017                                                     12 April 2017

 

 

Unaudited notes to condensed interim financial information

 

1.    General information

 

The Group operates across two divisions of Agriculture and Engineering.  The Company is a public limited company, which is listed on the London Stock Exchange and is incorporated and domiciled in the UK.  The address of the registered office is Old Croft, Stanwix, Carlisle, Cumbria CA3 9BA.

 

These condensed interim financial statements were approved for issue on 12 April 2017.

 

These condensed interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006.  Statutory accounts for the 53 weeks ended 3 September 2016 were approved by the Board of Directors on 16 November 2016 and delivered to the Registrar of Companies.  The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

 

2.    Basis of preparation

 

These condensed interim financial statements for the 26 weeks ended 4 March 2017 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union.  The condensed interim financial statements should be read in conjunction with the annual financial statements for the 53 weeks ended 3 September 2016, which have been prepared in accordance with IFRSs as adopted by the European Union.

 

The Directors have made suitable enquiries, and based on financial performance to date and available banking facilities they have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.  The Group therefore continues to adopt the going concern basis in preparing its condensed interim financial statements.

 

3.    Accounting policies

 

The accounting policies adopted are consistent with those of the previous financial year.

 

Taxes on income in the interim periods are accrued based on management's estimate of the weighted average annual income tax rate expected for the full financial year.

 

Cash and cash equivalents and overdrafts, within current borrowings, as at 27 February 2016 have been restated by £4.6m to recognise overdrafts that would previously have been offset against cash balances.  This restatement ensures comparability of the three period ends presented in the interim financial statements and reflects the accounting policy adopted in the preparation of the financial statements for the 53 weeks ended 3 September 2016 and the 26 weeks ended 4 March 2017.

 

The Group continues to review the impact of IFRS 15 'Revenue from contracts with customers' and IFRS 16 'Leases' on the results and net assets of the Group.  It is not possible at this stage to quantify any financial impact arising from either of these two standards.

 

4.    Estimates

 

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense.  Actual results may differ from these estimates.

 

In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the 53 weeks ended 3 September 2016, with the exception of changes in estimates that are required in determining the provision for income taxes.

 

5.    Financial risk management

 

The Group's activities expose it to a variety of financial risks: market risk (including currency risk and price risk), credit risk and liquidity risk.

 

The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's annual financial statements as at 3 September 2016.  There have been no changes in risk management practices since the year end.

 

6.    Operating segment information

 

The Group's chief operating decision-maker ("CODM") has been identified as the Executive Directors.  Management has determined the operating segments based on the information reviewed by the CODM for the purposes of allocating resources and assessing performance.

 

The CODM considers the business from a product/services perspective.  Operating segments have been identified as Agriculture and Engineering.  The previously recognised Food operating segment was disposed on 3 September 2016.  Performance is assessed using operating profit, which is measured in a manner consistent with the financial statements.  Sales between segments are carried out at arm's length. 

 

The following tables present revenue, profit and asset information regarding the Group's operating segments for the 26 weeks ended 4 March 2017 and the comparative periods.

 

 

 

Agriculture

Engineering

Group

 

£'000

£'000

£'000

26 weeks ended 4 March 2017

 

 

 

Total segment revenue

160,517

16,301

176,818

Inter segment revenue

(4)

(56)

(60)

Revenue from external customers

160,513

16,245

176,758

 

 

 

 

EBITDA¹

8,581

980

9,561

 

 

 

 

Depreciation of property, plant and equipment

(1,317)

(660)

(1,977)

Depreciation of investment property

(3)

-

(3)

Profit/(loss) on the disposal of property, plant and

  equipment

 

34

 

(23)

 

11

Amortisation of intangible assets

(4)

(45)

(49)

Operating profit (before exceptional items)

7,291

252

7,543

Exceptional items

 

 

(634)

Operating profit

 

 

6,909

Finance income

 

 

95

Finance costs

 

 

(430)

 

 

 

6,574

Share of post-tax profit of associate

 

 

903

Share of post-tax profit of joint ventures

 

 

805

Profit before taxation (before exceptional items)

 

 

8,916

Exceptional items

 

 

(634)

 

 

 

 

Profit before taxation from continuing operations

 

 

8,282

 

 

 

 

Segment gross assets

147,908

54,929

202,837

 

¹ Earnings before interest, tax, depreciation and amortisation (and before profit/(loss) on the disposal of property, plant and equipment)

 

 

 

Agriculture

Engineering

Group

 

£'000

£'000

£'000

26 weeks ended 27 February 2016

 

 

 

Total segment revenue

139,329

14,080

153,409

Inter segment revenue

(17)

(36)

(53)

Revenue from external customers

139,312

14,044

153,356

 

 

 

 

EBITDA¹

8,141

1,062

9,203

 

 

 

 

Depreciation of property, plant and equipment

(1,218)

(500)

(1,718)

Depreciation of investment property

(3)

-

(3)

Profit on the disposal of property, plant and equipment

80

-

80

Amortisation of intangible assets

(50)

(33)

(83)

Operating profit

6,950

529

7,479

Finance income

 

 

119

Finance costs

 

 

(516)

 

 

 

7,082

Share of post-tax profit of associate

 

 

757

Share of post-tax profit of joint ventures

 

 

666

Profit before taxation from continuing operations

 

 

8,505

 

 

 

 

Segment gross assets

125,907

44,075

169,982

Food division gross assets

 

 

45,359

 

 

 

215,341

  

 

 

Agriculture

Engineering

Group

 

£'000

£'000

£'000

53 weeks ended 3 September 2016

 

 

 

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

 

 

 

 

EBITDA¹

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

 

 

 

 

Segment gross assets

149,777

52,376

202,153

 

7.    Non-recurring exceptional items

 

 

26 weeks

ended

4 March

2017

26 weeks ended

 27 February 2016

53 weeks

ended

3 September

2016

 

£'000

£'000

£'000

Non-recurring exceptional items:

 

 

 

Business combination expenses

589

-

-

Restructuring costs

45

-

-

 

634

-

-

 

Business combination expenses relate to acquisition costs incurred in the period as well as contingent consideration in relation to the prior year acquisition of Phoenix Feeds Limited which is explained further below.

 

Phoenix Feeds Limited was acquired on 1 June 2016 for cash consideration of £1,744,000 including £490,000 of contingent consideration.  The contingent consideration is linked to the continued employment of key personnel and therefore in accordance with IFRS 3 this was not recognised as consideration in the acquisition accounting in the 53 weeks ended 3 September 2016 and is instead being recognised in the income statement over a two year period.  Given the nature of the payment it has been recognised as a non-recurring item.

 

Restructuring costs comprise redundancy costs.
 

8.    Earnings per share

 

Non-recurring items and amortisation that are charged or credited to profit do not relate to the profitability of the Group on an ongoing basis.  Therefore an adjusted earnings per share is presented as follows:

 

 

26 weeks

ended

4 March

2017

26 weeks ended

 27 February 2016

53 weeks

ended

3 September

2016

 

                 £'000

£'000

£'000

Continuing operations

 

 

 

Earnings

5,802

5,962

9,638

Amortisation and non-recurring items:

 

 

 

Amortisation of intangible assets

49

83

205

Business combination expenses

589

-

7

Restructuring costs

45

-

-

Tax effect of the above

(23)

(20)

(47)

 

 

 

 

Earnings - adjusted

6,462

6,025

9,803

Discontinued operations

 

 

 

Earnings

-

2,028

2,817

Amortisation and non-recurring items:

 

 

 

Amortisation of intangible assets

-

7

14

Profit on disposal of subsidiary

-

-

(39)

Tax effect of the above

-

(1)

-

 

 

 

 

Earnings - adjusted

-

2,034

2,792

 

 

 

 

 

 

Number

Number

Number

 

 

 

 

Weighted average number of ordinary shares in issue

91,317,071

89,819,777

90,087,357

Potentially dilutive share options

636,760

3,468,339

1,946,798

 

 

 

 

 

91,953,831

93,288,116

92,034,155

 

 

 

 

Earnings per share (pence)

 

 

 

Continuing operations

 

 

 

Basic

6.4p

6.6p

10.7p

Diluted

6.3p

6.4p

10.5p

Adjusted

7.1p

6.7p

10.9p

Diluted adjusted

7.0p

6.5p

10.7p

 

 

 

 

Discontinued operations

 

 

 

Basic

-

2.3p

3.1p

Diluted

-

2.2p

3.0p

Adjusted

-

2.3p

3.1p

Diluted adjusted

-

2.2p

3.0p

 

9.    Dividends

 

An interim dividend of £866,393 that relates to the period to 3 September 2016 was paid on 7 October 2016, and a final dividend of £1,736,169 was paid on 13 January 2017.  A special dividend of £15,996,351 was paid on 7 October 2016 following the disposal of Carr's Flour Mills Limited.

 

In addition, an interim dividend of 0.95p per share (2016: 0.95p per share) has been approved by the Directors.  It is payable to shareholders on the register at 21 April 2017.  This interim dividend, amounting to £868,258 (2016: £854,968), has not been recognised as a liability in this interim financial information.  It will be recognised in shareholders' equity in the 52 weeks to 2 September 2017.

 

10.  Intangible assets, property, plant and equipment and investment property

 

 

 

 

Goodwill

Other

intangible assets

Property,

plant and equipment

 

Investment property

 

£'000

£'000

£'000

£'000

26 weeks ended 4 March 2017

 

 

 

 

Opening net book amount at 4 September 2016

11,440

286

35,811

182

Exchange differences

(144)

5

752

-

Subsidiary acquired

5,574

160

341

-

Additions

-

67

2,373

-

Disposals

-

-

(165)

-

Depreciation and amortisation

-

(49)

(1,977)

(3)

Closing net book amount at 4 March 2017

16,870

469

37,135

179

 

 

 

 

 

26 weeks ended 27 February 2016

 

 

 

 

Opening net book amount at 30 August 2015

10,849

448

58,385

636

Exchange differences

2

18

862

-

Business acquired

80

-

23

-

Additions

-

37

3,867

-

Disposals

-

-

(98)

-

Depreciation and amortisation

-

(90)

(2,648)

(10)

Closing net book amount as at 27 February 2016

10,931

413

60,391

626

 

Capital commitments contracted, but not provided for, by the Group at the period end amounts to

£687,000 (2016: £758,000).

 

11.  Borrowings and loans

 

As at

4 March

 2017

(Restated)1   

As at

27 February 2016

As at

3 September

2016

 

£'000

£'000

£'000

 

 

 

 

Current

19,579

14,839

21,642

Non-current

13,082

25,447

18,625

Total borrowings and loans

32,661

40,286

40,267

Cash and cash equivalents

(21,176)

(13,272)

(48,411)

Net debt/(cash)

11,485

27,014

(8,144)

 

 

 

 

Undrawn facilities

34,494

26,805

23,014

 

¹ Restated by £4,553,000 for the grossing up of cash and cash equivalents and bank overdrafts with right of offset within the same banking facility.

 

Movements in borrowings are analysed as follows:

 

 

 

 

 

 

 

26 weeks ended 4 March 2017

 

 

£'000

Opening amount as at 4 September 2016

 

 

40,267

Exchange differences

 

 

(132)

Subsidiary acquired

 

 

89

New finance leases

 

 

1,025

Finance lease principal repayments

 

 

(394)

Repayments of borrowings

 

 

(5,895)

Increase in other borrowings

 

 

743

Release of deferred borrowing costs

 

 

18

Net decrease to bank overdraft

 

 

(3,060)

Closing amount as at 4 March 2017

 

 

32,661

 

 

 

 

 

26 weeks ended 27 February 2016

 

 

                           £'000

Opening amount as at 30 August 2015 (restated by £3,564,000)

 

 

44,465

Exchange differences

 

 

67

New bank loans and finance leases

 

 

718

Finance lease principal repayments

 

 

(1,160)

Repayments of borrowings

 

 

(544)

Decrease in other borrowings

 

 

(4,438)

Release of deferred borrowing costs

 

 

18

Net increase to bank overdraft

 

 

1,160

Closing amount as at 27 February 2016 (restated by £4,553,000)

 

 

40,286

 

12.  Financial instruments

 

IFRS13 requires financial instruments that are measured at fair value to be classified according to the valuation technique used:

 

Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities

 

Level 2 - inputs, other than Level 1 inputs, that are observable for the asset or liability, either

                 directly (i.e., as prices) or indirectly (i.e., derived from prices)

 

Level 3 - unobservable inputs

 

All derivative financial instruments are measured at fair value using Level 2 inputs.  The Group's bankers provide the valuations for the derivative financial instruments at each reporting period end based on mark to market valuation techniques. 

 

The Group holds shares in several private limited companies.  These have been classified as unquoted investments for which fair value cannot be reliably measured and are held at cost less accumulated impairment.  Had fair value been applied this financial asset would have been Level 3.

 

Transfers between levels are deemed to have occurred at the end of the reporting period.  There were no transfers between levels in the above hierarchy in the period.

 

With the exception of those detailed above, the Group's financial instruments are measured at amortised cost.

 

13.   Retirement benefit asset

 

The amounts recognised within the Income Statement were as follows:

 

 

26 weeks  ended

4 March

2017

26 weeks

ended

 27 February 2016

53 weeks

ended

3 September

2016

 

£'000

£'000

£'000

 

 

 

 

Service cost - including current service costs, past service costs

and settlements

 

-

 

(427)

 

(426)

Service cost - administrative cost

-

80

139

Net interest on the net defined benefit asset

(3)

(46)

(94)

 

(3)

(393)

(381)

 

As a result of the closure to future accrual on 31 December 2015 a negative past service cost, net of associated costs, of approximately £350,000 has been recognised in the income statement in the 26 weeks ended 27 February 2016 and in the 53 weeks ended 3 September 2016.

 

Net interest on the defined benefit retirement asset is recognised within interest income.

 

The amounts recognised in the Balance Sheet were as follows:

 

 

As at

4 March

2017

                As at

    27 February

                2016

                  As at

   3 September

                2016

 

£'000

               £'000

               £'000

 

 

 

 

Present value of funded defined benefit obligations

(68,180)

(59,040)

(73,355)

Fair value of scheme assets

73,912

62,967

73,666

Surplus in funded scheme

5,732

3,927

311

 

Actuarial gains of £5,418,000 (2016: £879,000) have been reported in the Statement of Comprehensive Income. The surplus has increased over the period since 3 September 2016 mainly as a result of improving market conditions.

 

The Group's associate's defined benefit pension scheme is closed to future service accrual and the valuation for this scheme has not been updated for the half year as any actuarial movements are not considered to be material.

 

14.   Share Capital

 

 

 

 

Allotted and fully paid ordinary shares of 2.5p each

  Number of          shares

Share capital

£'000

         Share    premium          £'000

           Total
          £'000

 

 

 

 

 

Opening balance as at 4 September 2016

91,192,804

2,280

9,111

11,391

Proceeds from shares issued:

 

 

 

 

- Treasury/LTIP

178,027

4

-

4

- share save scheme

24,710

1

18

19

At 4 March 2017

91,395,541

2,285

9,129

11,414

 

 

 

 

 

Opening balance at 30 August 2015

89,760,090

2,244

8,615

10,859

Proceeds from shares issued:

 

 

 

 

- share option scheme

60,000

1

27

28

- share save scheme

26,584

1

15

16

At 27 February 2016

89,846,674

2,246

8,657

10,903

 

Employee share schemes: options exercised during the period to 4 March 2017 resulted in 24,710 shares being issued (2016: 26,584 shares), with exercise proceeds of £19,177 (2016: £15,765) under the share save scheme and nil shares being issued (2016: 60,000 shares), with exercise proceeds of £nil (2016: £28,560) under the approved share option scheme.  The related weighted average price of the shares exercised was £0.776 (2016: £0.593) per share and £nil (2016: £0.476) respectively.

 

In addition 178,027 shares were issued in the period and held initially as Treasury shares.  These shares were subsequently used to satisfy the share awards under the LTIP scheme which were exercisable in November 2016. 

 

15.   Acquisition

 

On 24 October 2016 Wälischmiller Engineering GmbH ("Wälischmiller") acquired the entire issued share capital of STABER GmbH ("STABER") for cash consideration of €7.85m including deferred consideration of €2.0m, which is payable by 30 June 2018 at the latest.

 

STABER and Wälischmiller have been working together closely for over 50 years and STABER has most recently been a key supplier of parts for the remote handling business.  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® and the Demo 2000 Telbot® by Wälischmiller.

 

Goodwill represented the excess of the consideration paid over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities acquired.

 

STABER has generated intra segmental revenue of £205,000 which has been eliminated on consolidation and incurred a loss before taxation of £9,000 since the date of acquisition.

 

Acquisition related costs amounted to £190,000 which have been recognised within exceptional items in the consolidated income statement.

 

The assets and liabilities provisionally recognised in the acquisition accounting are set out below:

 

 

Provisional fair value

 

£'000

 

 

Intangible assets

160

Property, plant and equipment

341

Inventories

543

Receivables

307

Cash and cash equivalents

506

Borrowings

(89)

Payables

(230)

Deferred grant income

(46)

Taxation

 

   Current tax

(39)

   Deferred tax

(43)

Net assets acquired

1,410

Goodwill

5,574

 

6,984

 

 

Satisfied by:

 

Cash consideration

5,204

Deferred consideration

1,780

Total consideration

6,984

 

Intangible assets represent the fair value of know-how within the business.

 

Had the acquisition of STABER occurred at the beginning of the accounting period the Group's revenue and profit before taxation for the period would not be materially different to the amounts actually recognised in the consolidated income statement.

 

16.   Cash generated from continuing operations

 

 

 

 

 

26 weeks ended

 4 March

2017

26 weeks ended

 27 February 2016

53 weeks

ended

3 September

2016

 

£'000

£'000

£'000

 

 

 

 

Profit for the period from continuing operations

6,574

6,713

11,171

Adjustments for:

 

 

 

Tax

1,708

1,792

2,907

Tax credit in respect of R&D

(63)

(80)

(176)

Depreciation of property, plant and equipment

1,977

1,718

3,582

Depreciation of investment property

3

3

6

Intangible asset amortisation

49

83

205

Profit on disposal of property, plant and equipment

(11)

(80)

(84)

Loss on disposal of investment

-

10

10

Amortisation of grants

(27)

(24)

(53)

Net fair value loss/(gain) on share based payments

127

222

(99)

Net foreign exchange differences

111

(108)

(383)

Net fair value losses on derivative financial instruments in operating profit

 

61

 

48

 

70

Finance costs:

 

 

 

Interest income

(95)

(119)

(236)

Interest expense and borrowing costs

448

534

1,045

Share of profit from associate and joint ventures

(1,708)

(1,423)

(2,081)

Pension contributions - deficit reduction

-

(780)

(780)

                                        - ongoing

-

(108)

(108)

IAS19 income statement credit (excluding interest)

-

(347)

(287)

Changes in working capital (excluding the effects of

   acquisitions and disposals):

 

 

 

Increase in inventories

(3,791)

(3,010)

(1,620)

Increase in receivables

(8,677)

(9,621)

(3,606)

Increase/(decrease) in payables

9,371

4,743

(3,226)

Cash generated from continuing operations

6,057

166

6,257

 

 

 

 

 

17.   Related party transactions

 

The Group's significant related parties are its associate and joint ventures, as disclosed in the Annual Report and Accounts 2016.

 

Transactions and balances with the associate and joint ventures were all undertaken on an arm's length basis in the normal course of business and are as follows:

 

 

Sales to

Purchases from

Rent receivable from

Net management charges (to)/from

Amounts owed from

Amounts owed to

 

£'000

£'000

£'000

£'000

£'000

£'000

26 weeks to 4 March 2017

 

 

 

 

 

 

Associate

485

     (51,644)

10

(18)

164

(21,804)

Joint ventures

211

          (529)

-

90

1,889

(151)

 

 

 

 

 

 

 

26 weeks to 27 February 2016

 

 

 

 

 

 

Associate

327

     (44,977)

9

(57)

616

(21,050)

Joint ventures

186

          (661)

-

84

1,952

(48)

  

18.   Post balance sheet event

 

On 17 March 2017, after the period end, the Group acquired the entire issued share capital of Horse and Pet Warehouse Limited for cash consideration of £124,577.

 

The principal activity of Horse and Pet Warehouse Limited is a retailer of animal products for the pet, equine and smallholding market.

 

The primary reason for the business combination was the expansion of the existing agriculture business.

 

Given that this has been a recent acquisition the identifiable assets and liabilities at completion and goodwill have yet to be finalised.  The Directors therefore consider it impracticable to be able to disclose this information in these financial statements.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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