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REG - Carr's Group PLC - Interim Results

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RNS Number : 0928W  Carr's Group PLC  21 April 2021

 

21 April 2021

 

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

INTERIM RESULTS

For the 26 weeks ended 27 February 2021

 

"An improved H1 performance in a challenging environment"

 

 

Carr's (CARR.L), the Agriculture and Engineering Group, announces its Interim
Results for the 26 weeks ended 27 February 2021.

 

Financial highlights

                                      Adjusted(1)  Adjusted(1)

                                      H1 2021      H1 2020      +/-

 Revenue (£m)                         201.4        200.0        +0.7%
 Adjusted(1) operating profit (£m)    10.9         10.3         +5.3%
 Adjusted(1) profit before tax (£m)   10.4         9.6          +8.1%
 Adjusted(1) EPS (p)                  8.2          8.0          +2.5%
 Net debt(2 )(£m)                     10.6         25.4         -58.5%

                                      Statutory    Statutory

                                      H1 2021      H1 2020      +/-

 Revenue (£m)                         201.4        200.0        +0.7%
 Operating profit (£m)                10.7         11.2         -5.1%
 Profit before tax (£m)               10.2         10.5         -3.2%
 Basic EPS (p)                        8.2          9.3          -11.8%
 Interim dividend (p)                 1.175        -            N/A

 

Highlights

 

 * Initial business review complete following appointment of new CEO.

 * Group now structured in three divisions: Speciality Agriculture (feed blocks,
minerals, and trace element boluses, formerly Supplements), Agricultural
Supplies (formerly UK Agriculture) and Engineering.

 * Resilient business model despite COVID-19 and Brexit uncertainty - all
agricultural stores and manufacturing facilities operational throughout.

 * Strong performance from Speciality Agriculture and Agricultural Supplies.

 * Engineering adversely impacted by low oil prices and travel restrictions in H1
but expected to be significantly better in H2.  Order book now stands at
£44m, increased by 19% since year end and order intake now improving.

 * Business improvement programme initiated to simplify, standardise, and
generate synergies between business units in each division.

 * Reportable accident frequency rate reduced compared to last year and COVID-19
controls remain effective.

 

 

1            Adjusted results are consistent with how business
performance is measured internally and are presented to aid comparability Page
1 of performance. Adjusting items are disclosed in note 8.

2             Excluding leases. Further details of net debt can be
found in note 12.

Outlook

 

A continued positive performance is forecast across the Agricultural divisions
together with an improved second half in the Engineering division as the
impact of COVID-19 begins to recede and its order intake continues to
increase.  A programme of simplification and standardisation is forecast to
improve performance over time. Trading since 27 February 2021 has been
positive and the Board's expectations for the current financial year remain
unchanged.

 

Hugh Pelham, Chief Executive Officer, commented:

 

"Despite a challenging operational environment with significant headwinds
experienced in Engineering we have delivered an improved performance compared
to the same period last year.  Our Speciality Agriculture and Agricultural
Supplies divisions have performed particularly strongly. The outlook for
Engineering is for an improved performance in the second half of the financial
year.

 

"I have been fortunate to inherit some sound foundations from my predecessor,
Tim Davies.  Carr's Group owns a portfolio of good businesses with strong
market positions.

 

"Our people have responded brilliantly to the challenge of working in a
COVID-19 environment. I would like to thank them for their commitment and
dedication in keeping all our stores, fuel depots and manufacturing operations
running in such difficult times.

"An initial operating review has been conducted and the Group is now
structured in three divisions: Speciality Agriculture, Agricultural Supplies
and Engineering to create greater operational efficiencies, market focus and
provide greater transparency for investors. The results of our Speciality
Agriculture division demonstrate the quality of our products in the feed
block, minerals and animal health markets.

 

"Actions have been taken to strengthen reporting and governance systems within
the business as part of a process to identify opportunities for improvement.

 

"Considerable opportunity exists to optimise the current portfolio through a
process of standardisation, simplification and seeking synergies between
similar businesses. Growth can be achieved through a mixture of geographic
expansion, selling all our service lines to our customer base, and acquisition
and potential industry consolidation.

 

"I am confident that the Group will continue to deliver a resilient and
improving set of results over time."

 

 

Enquiries:

 

 Carr's Group plc  Tel: +44 (0) 1228 554600

Hugh Pelham (Chief Executive Officer)

Neil Austin (Chief Financial Officer)

 

 Powerscourt  Tel: +44 (0) 20 7250 1446

Nick Dibden / Lisa Kavanagh / Sam Austrums

 

 

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 over 50 countries around
the world.  Carr's operates a decentralised business model that empowers
operating subsidiaries enabling them to be competitive, agile, and effective
in their individual markets whilst setting overall standards and goals.

 

Its Speciality Agriculture division manufactures and supplies feed blocks,
minerals and boluses containing trace metals and minerals for livestock.

 

Its Agricultural Supplies division manufactures compound animal feed,
distributes 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 pressure vessels,
manufactures precision components from specialist steel alloys, manufactures
robotic manipulators, and provides engineering design, assembly, and
installation services for the nuclear, defence and oil & gas industries.

 

 

INTERIM MANAGEMENT REPORT

 

HSE AND COVID-19

 

The health, safety and wellbeing of our employees and customers is of
paramount importance.  We continue to follow Government guidelines and
maintain rigorous social distancing controls, hygiene measures and
shift-working practices across all locations.

 

The reportable accident frequency rate compared to last year has declined and
various improvements in health, safety, and environmental management systems
across the Group have been implemented.

 

The impact of the COVID-19 pandemic on the Group remains under close review by
the Board. The Group has successfully implemented a range of measures and
planned contingencies across all our businesses which are designed to minimise
the impact of the pandemic, and as a result all our manufacturing facilities
have remained fully operational. However, we have been impacted by delays in
the progress of engineering projects and restrictions on visiting customer
sites.

 

Given the positive trading performance during the period the Group has not
utilised the Coronavirus Job Retention Scheme and currently has no plans to do
so.

 

RESULTS

 

In challenging market conditions, Carr's has delivered an improved performance
in the period.

 

During the 26 weeks ended 27 February 2021 revenues increased to £201.4m (H1
2020: £200.0m).

 

Adjusted operating profit of £10.9m (H1 2020: £10.3m) was 5.3% up on the
prior year.  Adjusted profit before tax increased by 8.1% to £10.4m (H1
2020: £9.6m). The improvement in adjusted profits is mainly attributable to
improved performances in Speciality Agriculture and Agricultural Supplies.

 

Adjusted earnings per share increased by 2.5% to 8.2p (H1 2020: 8.0p).

 

STRATEGIC AND OPERATIONAL REVIEW

The Group has commenced a strategic and operational review.  As a result of
this, its activities are now structured into three divisions:

 

1.         Speciality Agriculture

2.         Agricultural Supplies

3.         Engineering

 

Our strategy is to continue to invest in established businesses with distinct
value propositions or new companies with proven technology and strong growth
prospects.

 

We will add value by:

 

·        Differentiating - investing in innovative technology,
patented processes / products and better customer service.

·        Optimising - simplifying, standardising and seeking synergies
between related companies in our portfolio.

·        Consolidating - creating scale and critical mass by
consolidating similar businesses in a market sector.

·        Growing - expanding our geographic presence, cross selling to
our customer base and developing new products.

 

Each division has developed an initial plan in these areas, and these will be
further refined over the coming months.  The Group will continue its
strategic and operational review in the second half of this financial year.

 

SPECIALITY AGRICULTURE

 

Speciality Agriculture comprises our feed blocks, mineral supplements and
trace element boluses in the UK, Europe, North America, and New Zealand.

 

                            H1 2021  H1 2020  % Change

 Revenue                    £40.2m   £36.6m   +9.8%
 Adjusted operating profit  £8.2m    £6.5m    +24.7%

 

Our businesses have performed strongly in all geographic areas driven by
strong livestock prices and more seasonal weather patterns than prior years.
Overall, 101,000 tonnes of feed blocks and speciality minerals were sold
worldwide, an increase of 8.4% year on year.  Sales revenues recovered in our
animal health business, Animax.  Our project to automate the production
process at Animax continues with benefits expected in the next financial year.

 

Our strategy remains to focus on molasses based feed blocks and specialist
animal health products where our patented manufacturing processes deliver
differentiated products. Initiatives to improve processes, supply chain buying
and upgrade our manufacturing plants are underway. Growth opportunities to
expand our presence in the USA, Canada and Germany are the highest priority,
as well as developing more environmentally sustainable packaging for key
products lines.

 

AGRICULTURAL SUPPLIES

 

Agricultural Supplies comprises our Carr's Billington branded agricultural
stores, machinery, fuel and compound feed business and our joint venture
business Bibby Agriculture.

 

                            H1 2021   H1 2020   % Change

 Revenue                    £137.7m   £138.4m   -0.5%
 Adjusted operating profit  £3.3m     £2.5m     +33.5%

 

 

Total feed sales volumes increased to 318kt, an increase of 0.4% compared to
the prior year. Machinery revenues were also strong, increasing by 29.1% year
on year, and total retail sales also increased by 4.3% with like-for-like
sales showing an 8.1% increase.  Fuel volumes were down 2.5% versus the prior
year, with the main impact being felt in the first quarter of the financial
year.

 

Significant increases in raw material prices impacted the profitability of the
feed business in the first half, however, margins were stronger in retail,
fuel and machinery which helped offset the impact of higher raw material
costs.

 

In the UK specifically, the agreement of a trade deal with the EU in December
2020 has significantly improved farmer confidence, which has been further
buoyed by strong farmgate prices.  The UK Agriculture Bill will also provide
opportunities as farmers are incentivised by efficiency and environmental
schemes.

 

Our strategy remains to provide all a farmer needs and differentiate ourselves
through our product range, our customer and technical service levels, having a
local presence, and the quality of our compound feeds. Operationally, a number
of initiatives have been implemented to standardise product range and prices,
improve supply chain arrangements and better manage raw material buying and
pricing. Further opportunities to grow exist through the opening of new stores
and industry consolidation.

 

ENGINEERING

 

Engineering comprises our fabrication and precision engineering businesses in
the UK, robotics businesses in the UK and Europe and our engineering solutions
businesses in the UK and USA.

 

                            H1 2021  H1 2020  % Change

 Revenue                    £23.6m   £24.9m   -5.4%
 Adjusted operating profit  £0.9m    £1.2m    -24.1%

 

The profitability of our engineering solutions business in the USA and UK has
been resilient with continued work with large blue-chip customers in the
nuclear and defence sectors. Additional work has recently been secured in the
defence sector.

 

The performance of our fabrication and precision engineering businesses have
been adversely affected by low oil & gas prices. More positively, our
fabrication business has received a significant level of orders in the nuclear
sector. A turnaround plan is in place for the precision engineering business
and performance is expected to be significantly better in H2.

 

The performance of our robotics business has substantively improved compared
to H1 last year with exports to China expected to resume in H2 2021.

 

Our overall Engineering order book at £44m (H1 2020: £47m) is less than at
the equivalent point last year but £7m higher than at the end of 2020 (FY
2020: £37m).   In the second half of the prior year a significant number of
orders were subsequently cancelled following the outbreak of COVID-19.

 

Our strategy in the Engineering division is to provide specialist high margin
services primarily to the nuclear and defence sectors. Our differentiators
include patented MSIP®, Power Fluidics™ processes, the range of precision
engineering machinery, the product life and quality of our robotic
manipulators and a direct workforce with highly specialist welding
capabilities.

 

Opportunities to grow exist with our current customer base by providing our
full range of specialist services and by selectively pursuing new customers in
the nuclear and defence industries in particular.

 

FINANCE REVIEW

Adjusted results

 

Revenue increased by 0.7% to £201.4m (H1 2020: £200.0m), with an increase of
9.8% in Speciality Agriculture offset by a reduction in both Engineering and
Agricultural Supplies of 5.4% and 0.5% respectively.

 

Adjusted operating profit increased 5.3% to £10.9m (H1 2020: £10.3m).
Strong performances in Speciality Agriculture, up 24.7%, and Agricultural
Supplies, up 33.5%, were partially offset by a reduction in Engineering of
24.1%.  Central costs were higher at £1.5m (H1 2020: credit of £0.1m)
partly due to a change in provision for a non-recoverable debt, phasing,
increased costs for performance related remuneration, and CEO handover costs.

 

Net finance costs of £0.5m (H1 2020: £0.7m) reduced year on year due to
lower borrowings.  Net debt was £10.6m at the period end (H1 2020: 25.4m),
driven by a strong operating performance with EBITDA of £12.6m and a
reduction in working capital of £4.1m, offset by dividends of £4.4m, net
capital expenditure of £2.3m and tax and interest of £1.9m.  The Group's
main banking facilities run to 2023.

 

The Group's adjusted profit before tax increased by 8.1% to £10.4m (H1 2020:
£9.6m).

 

Adjusted earnings per share increased by 2.5% to 8.2p (H1 2020: 8.0p).  The
increase is proportionately lower than the increase in profit before tax
because of the higher effective tax rate, due to a higher mix of overseas
profits and the impact of minority interests.

 

Adjusting items

 

The Group provides the adjusted profit measures referred to above to present
additional useful information on business performance consistent with how
business performance is measured internally.  These measures show underlying
profits before certain adjusting items.

 

In H1 2020, adjusting items were a net credit of £0.9m related mainly to
adjustments to contingent consideration (H1 2020: £2.1m compared to H1 2021:
£0.7m) partly offset by amortisation of intangible assets.  In H1 2021, they
are a charge of £0.2m.  Full details of all adjusting items are given in
note 8.

 

Statutory results

 

Reported operating profit on a statutory basis was £10.7m (H1 2020: £11.2m)
and reported profit before tax was £10.2m (H1 2020: £10.5m).  Basic
earnings per share on a statutory basis was 8.2p (H1 2020: 9.3p).

 

Balance sheet and cash flow

 

Net cash generated from operating activities in the first half was £14.1m (H1
2020: £4.9m). Net debt, excluding leases, fell to £10.6m from £18.9m at the
financial year end (H1 2020: £25.4m). This is primarily related to strong
working capital management resulting in a working capital inflow of £4.1m
combined with improved EBITDA.

 

The Group's defined benefit pension scheme remains in surplus but at a
slightly decreased level of £7.8m compared to £8.0m at 29 August 2020.

 

Shareholder's equity

 

Shareholders' equity at 27 February 2021 was £119.0m (29 August 2020:
£117.1m), with the increase primarily due to profit retained by the Group for
the period offset by foreign exchange translation losses and dividends paid.

 

A first interim dividend of 1.175 pence per ordinary share will be paid on 8
June 2021 to shareholders on the register on 30 April 2021. The ex-dividend
date will be 29 April 2021.

 

GOVERNANCE

 

The Group announces that, with effect from today, Kristen Eshak Weldon has
been appointed as the Board's Representative for Employee Engagement.
Kristen was appointed to the Board in October 2020 and takes on the role from
Alistair Wannop who will be standing down from the Board in January 2022.
Kristen is currently Global Head of ESG and Impact Investing at Partners
Capital.  Prior to this she served on the Executive Committee of Louis
Dreyfus Company and co-headed the London office of Blackstone's Hedge Fund
Solutions business.  The Board considers that Kristen's experience of
stakeholder engagement places her well to ensure that wider views across the
workforce are fully understood and considered by the Board in its
decision-making processes.

 

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 considered to
have changed materially from those included on pages 28 to 30 of the Annual
Report and Accounts 2020 (available on the Company's website at
http://investors.carrsgroup.com (http://investors.carrsgroup.com) ), with the
exception of Brexit where the risk has reduced following the UK-EU trade
agreement which took effect from 31 December 2020.

 

OUTLOOK

 

A continued positive performance is forecast across the Agricultural divisions
together with an improved second half in the Engineering division as the
impact of COVID-19 begins to recede and its order intake continues to
increase.  A programme of simplification and standardisation is forecast to
improve performance over time. Trading since 27 February 2021 has been
positive and the Board's expectations for the current financial year remain
unchanged.

CONDENSED CONSOLIDATED INCOME STATEMENT

For the 26 weeks ended 27 February 2021

 

                                                                        26 weeks           ended                     26 weeks                         52 weeks

                                                                   27 February                                            ended                             ended

                                                                               2021                              29 February                          29 August

                                                                   (unaudited)                                              2020                              2020

                                                                                                                 (unaudited)                           (audited)
                                                            Notes             £'000                                        £'000                             £'000
 Continuing operations

 Revenue                                                    6,7    201,435                                     199,957                                  395,630
 Cost of sales                                                     (173,412)                                   (172,924)                               (343,381)

 Gross profit                                                      28,023                                      27,033                                     52,249

 Net operating expenses                                            (19,547)                                    (17,685)                                  (41,042)
 Share of post-tax results of associate and joint ventures         2,196                                       1,892                                        2,633

 Adjusted¹ operating profit                                 6      10,869                                      10,322                                     16,247
 Adjusting items                                            8      (197)                                       918                                         (2,407)
 Operating profit                                           6      10,672                                      11,240                                     13,840

 Finance income                                                    135                                         178                                             313
 Finance costs                                                     (633)                                       (905)                                       (1,656)

 Adjusted¹( )profit before taxation                         6      10,371                                      9,595                                      14,904
 Adjusting items                                            8      (197)                                       918                                         (2,407)
 Profit before taxation                                     6      10,174                                      10,513                                     12,497

 Taxation                                                          (1,714)                                     (1,382)                                     (1,575)

 Profit for the period                                             8,460                                       9,131                                      10,922

 Profit attributable to:
 Equity shareholders                                               7,574                                       8,565                                        9,533
 Non-controlling interests                                         886                                         566                                          1,389

                                                                   8,460                                       9,131                                      10,922

 Earnings per share (pence)
 Basic                                                      9      8.2                                         9.3                             10.3
 Diluted                                                    9      7.9                                         9.1                             10.2
 Adjusted¹                                                  9      8.2                                         8.0                             11.9
 Diluted adjusted¹                                          9      8.0                                         7.9                             11.8

 

1 Adjusted results are consistent with how business performance is measured
internally and is presented to aid comparability of performance. Adjusting
items are discussed in note      8. An alternative performance measures
glossary can be found in note 18.

 

 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the 26 weeks ended 27 February 2021

 

                                                                                                                             26 weeks ended                                  52 weeks

                                                                                                           26 weeks ended    29 February                2020                 Ended

                                                                                                           27 February       (unaudited)                                     29 August

                                                                                                           2021                                                              2020

                                                                                                           (unaudited)                                                       (audited)
                                                                             Notes                         £'000             £'000                                           £'000

 Profit for the period                                                                                     8,460             9,131                                           10,922

 Other comprehensive (expense)/income

 Items that may be reclassified subsequently to profit or loss:
 Foreign exchange translation losses arising on

   translation of overseas subsidiaries                                                                    (1,752)           (2,778)                                         (2,552)
 Net investment hedges                                                                                     76                210                                             (54)
 Taxation (charge)/credit on net investment hedges                                                         (14)              (40)                                            10

 Items that will not be reclassified subsequently to profit or loss:
 Actuarial (losses)/gains on retirement benefit asset:
 - Group                                                                     14                            (295)             (1,187)                                         142
 - Share of associate                                                                                      -                 -                                               408

 Taxation credit/(charge) on actuarial (losses)/gains on retirement benefit
 asset:
 - Group                                                                                                   56                202                                             (27)
 - Share of associate                                                                                      -                 -                                               (96)

 Other comprehensive expense for the period, net of tax                                                    (1,929)           (3,593)                                         (2,169)

 Total comprehensive income for the period                                                                 6,531             5,538                                           8,753

 Total comprehensive income attributable to:
 Equity shareholders                                                                                       5,645             4,972                                           7,364
 Non-controlling interests                                                                                 886               566                                             1,389

                                                                                                           6,531             5,538                                           8,753

 

 

CONDENSED CONSOLIDATED BALANCE SHEET

As at 27 February 2021

 

                                                                   As at                        As at                         As at

                                                        27 February                             29 February           29 August

                                                                   2021                         2020                          2020

                                                        (unaudited)                             (unaudited)            (audited)
                                     Notes                    £'000                              £'000                       £'000
 Non-current assets
 Goodwill                            11     31,530                                              32,070        32,041
 Other intangible assets             11     9,118                                               9,315         9,171
 Property, plant and equipment       11     35,609                                              36,767        38,259
 Right-of-use assets                 11     16,265                                              15,870        14,856
 Investment property                 11     155                                                 161           158
 Investment in associate                    14,860                                              13,846        14,307
 Interest in joint ventures                 11,492                                              10,392        10,551
 Other investments                          72                                                  74            73
 Financial assets
 - Non-current receivables                  20                                                  21            20
 Retirement benefit asset            14     7,807                                               6,643         8,037
 Deferred tax assets                        -                                                   410           -
                                            126,928                                             125,569       127,473

 Current assets
 Inventories                                43,392                                              48,915        40,961
 Contract assets                            7,885                                               8,412         8,114
 Trade and other receivables                59,496                                              60,537        51,686
 Current tax assets                         2,058                                               328           1,535
 Financial assets
 - Derivative financial instruments         -                                                   -             3
 - Cash and cash equivalents         12     24,838                                              29,318        17,571
                                            137,669                                             147,510       119,870

 Total assets                               264,597                                             273,079       247,343

 Current liabilities
 Financial liabilities
 - Borrowings                        12     (8,580)                                             (26,855)      (11,420)
 - Leases                                   (2,965)                                             (2,557)       (2,778)
 Contract liabilities                       (3,019)                                             (2,351)       (1,061)
 Trade and other payables                   (67,704)                                            (62,520)      (55,522)
 Current tax liabilities                    (494)                                               (158)         (33)
                                            (82,762)                                            (94,441)      (70,814)
 Non-current liabilities
 Financial liabilities
 - Borrowings                        12     (26,815)                                            (27,896)      (25,021)
 - Leases                                   (12,177)                                            (12,666)      (11,171)
 Deferred tax liabilities                   (4,830)                                             (4,634)       (4,783)
 Other non-current liabilities              (1,370)                                             (2,537)       (1,385)
                                            (45,192)                                            (47,733)      (42,360)

 Total liabilities                          (127,954)                                           (142,174)     (113,174)

 Net assets                                 136,643                                             130,905       134,169

 Shareholders' equity
 Share capital                       15     2,330                                               2,312         2,312
 Share premium                       15     9,613                                               9,165         9,176
 Other reserves                             2,363                                               4,379         4,436
 Retained earnings                          104,741                                             98,655        101,202
 Total shareholders' equity                 119,047                                             114,511       117,126
 Non-controlling interests                  17,596                                              16,394        17,043
 Total equity                               136,643                                             130,905       134,169

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the 26 weeks ended 27 February 2021

 

 

                                                                                                                                                                                                                                                         Foreign     Exchange  Reserve

                                                                                                                                                                                 Equity                                                                                                                                                             Total Shareholders'             Equity

                                                               Share                               Share Premium                           Treasury                                   Compensation                Reserve                                                                          Other       Reserve             Retained                                                             Non-  Controlling     Interests

                                                                     Capital                                                                      Share  Reserve                                                                                                                                                                   Earnings                                                                                                    Total Equity
                                                                        £'000                      £'000                                            £'000                                           £'000                                                £'000                                                £'000                     £'000                    £'000                                             £'000                       £'000
 At 30 August 2020

 (audited)                                                     2,312                                         9,176                                     (45)                                            734                                    3,550                                                197                             101,202          117,126                                             17,043                                 134,169
 Profit for the period                                         -                                                     -                                      -                                               -                                 -                                                    -                               7,574            7,574                                               886                                    8,460
 Other comprehensive expense

                                                               -                                                     -                                      -                                               -                                 (1,690)                                              -                               (239)            (1,929)                                             -                                      (1,929)
 Total comprehensive (expense)/income

                                                               -                                                     -                                      -                                               -                                 (1,690)                                              -                               7,335            5,645                                               886                                    6,531
 Dividends paid                                                -                                                     -                                      -                                               -                                 -                                                    -                               (4,390)          (4,390)                                             (368)                                  (4,758)
 Equity-settled share-based payment transactions

                                                               -                                                     -                                      -                                         (426)                                   -                                                    -                               646              220                                                 35                                     255
 Allotment of shares                                           18                                               437                                         -                                               -                                 -                                                    -                               -                455                                                 -                                      455
 Purchase of own shares held in trust                          -                                                     -                                     (9)                                              -                                 -                                                    -                               -                (9)                                                 -                                      (9)
 Transfer                                                      -                                                     -                                   53                                                 -                                 -                                                    (1)                             (52)             -                                                   -                                      -
 At 27 February 2021 (unaudited)

                                                               2,330                                         9,613                                        (1)                    308                                                          1,860                                                196                             104,741          119,047                                             17,596                                 136,643

 At 1 September 2019 (audited)

                                                               2,299                                         9,165                                          -                                       1,577                                     6,146                                                199                             93,771           113,157                                             16,125                                 129,282
 Profit for the period                                         -                                                     -                                      -                                               -                                 -                                                    -                               8,565            8,565                                               566                                    9,131
 Other comprehensive expense                                   -                                                     -                                      -                                               -                                 (2,608)                                              -                               (985)            (3,593)                                             -                                      (3,593)
 Total comprehensive (expense)/income                          -                                                     -                                      -                                               -                                 (2,608)                                              -                               7,580            4,972                                               566                                    5,538
 Dividends paid                                                -                                                     -                                      -                                               -                                 -                                                    -                               (3,344)          (3,344)                                             (294)                                  (3,638)
 Equity-settled share-based payment transactions               -                                                     -                                      -                                         (933)                                   -                                                    -                               659              (274)                                               (3)                                    (277)
 Allotment of shares                                           13                                                    -                                      -                                               -                                 -                                                    -                               -                13                                                  -                                      13
 Purchase of own shares held in trust                          -                                                     -                                   (13)                                               -                                 -                                                    -                               -                (13)                                                -                                      (13)
 Transfer                                                      -                                                     -                                   12                                                 -                                 -                                                    (1)                             (11)             -                                                   -                                      -
 At 29 February 2020 (unaudited)                               2,312                                         9,165                                        (1)                                          644                                    3,538                                                198                             98,655           114,511                                             16,394                                 130,905

 At 1 September 2019

 (audited)                                                     2,299                                         9,165                                          -                                       1,577                                     6,146                                                199                             93,933           113,319                                             16,229                                 129,548
 Profit for the period                                         -                                                     -                                      -                                               -                                 -                                                    -                               9,533            9,533                                               1,389                                  10,922
 Other comprehensive (expense)/income                          -                                                     -                                      -                                               -                                 (2,596)                                              -                               427              (2,169)                                             -                                      (2,169)
 Total comprehensive (expense)/income                          -                                                     -                                      -                                               -                                 (2,596)                                              -                               9,960            7,364                                               1,389                                  8,753
 Dividends paid                                                -                                                     -                                      -                                               -                                 -                                                    -                               (3,344)          (3,344)                                             (588)                                  (3,932)
 Equity-settled share-based payment transactions               -                                                     -                                      -                                         (843)                                   -                                                    -                               691              (152)                                               15                                     (137)
 Excess deferred taxation on share-based payments              -                                                     -                                      -                                               -                                 -                                                    -                               (27)             (27)                                                (2)                                    (29)
 Allotment of shares                                           13                                                 11                                        -                                               -                                 -                                                    -                               -                24                                                  -                                      24
 Purchase of own shares held in trust                          -                                                     -                                   (58)                                               -                                 -                                                    -                               -                (58)                                                -                                      (58)
 Transfer                                                      -                                                     -                                   13                                                 -                                 -                                                    (2)                             (11)             -                                                   -                                      -
 At 29 August 2020 (audited)                                            2,312                                9,176                         (45)                                  734                                                          3,550                                                              197                  101,202       117,126                                             17,043                                 134,169

( )

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the 26 weeks ended 27 February 2021

 

 

                                                                            26 weeks ended                                                          26 weeks ended                                                                             52 weeks ended

                                                                        27 February 2021                                                        29 February 2020                                                                                 29 August 2020

                                                                                       (unaudited)                                                             (unaudited)                                                                                       (audited)
                                                       Notes
                                                              £'000                                                                     £'000                                                                                   £'000
 Cash flows from operating activities
 Cash generated from continuing operations             16     15,956                                                                    7,840                                                                                   22,639
 Interest received                                            57                                                                                                                                                                176
                                                                                                                                        111
 Interest paid                                                (625)                                                                                                                                                             (1,696)
                                                                                                                                        (897)
 Tax paid                                                      (1,300)                                                                                                     (2,139)                                              (3,059)
 Net cash generated from operating activities                 14,088                                                                                                        4,915                                               18,060
 Cash flows from investing activities
 Contingent/deferred consideration paid                       (131)                                                                                                        (1,596)                                              (2,659)
 Dividends received from associate and joint ventures         368                                                                                                                                                               701
                                                                                                                                        294
 Other loans                                                  -                                                                                                                                                                 718
                                                                                                                                        382
 Purchase of intangible assets                                (780)                                                                                                                                                             (1,459)
                                                                                                                                        (845)
 Proceeds from sale of property, plant and equipment          125                                                                                                                                                               421
                                                                                                                                        141
 Purchase of property, plant and equipment                    (1,645)                                                                                                      (2,569)                                              (6,569)
 Purchase of own shares held in trust                         (9)                                                                                                                                                               (58)
                                                                                                                                        (13)
 Net cash used in investing activities                        (2,072)                                                                                                      (4,206)                                              (8,905)
 Cash flows from financing activities
 Proceeds from issue of ordinary share capital                455                                                                                                                                                               24
                                                                                                                                        13
 New financing and movement on RCF                            5,609                                                                                                         2,500                                               1,889
 Lease principal repayments                                   (1,556)                                                                                                      (1,569)                                              (3,171)
 Repayment of borrowings                                      (1,200)                                                                                                      (1,247)                                              (2,459)
 (Decrease)/increase in other borrowings                      (604)                                                                                                                                                             (14,508)
                                                                                                                                        114
 Dividends paid to shareholders                               (4,390)                                                                                                      (3,344)                                              (3,344)
 Dividends paid to related party                              (368)                                                                                                                                                             (588)
                                                                                                                                        (294)
 Net cash used in financing activities                        (2,054)                                                                                                      (3,827)                                              (22,157)
 Effects of exchange rate changes                             (373)                                                                                                                                                             (989)
                                                                                                                                        (410)
 Net increase/(decrease) in cash and cash equivalents         9,589                                                                                                        (3,528)                                              (13,991)
 Cash and cash equivalents at beginning of the period         10,304                                                                                                     24,295                                                 24,295
 Cash and cash equivalents at end of the period               19,893                                                                                                     20,767                                                 10,304

 Cash and cash equivalents consist of:
 Cash and cash equivalents per the balance sheet              24,838                                                                                                     29,318                                                 17,571
 Bank overdrafts included in borrowings                       (4,945)                                                                                                      (8,551)                                              (7,267)
                                                              19,893                                                                                                     20,767                                                 10,304

 

 

Statement of Directors' responsibilities

 

We confirm that to the best of our knowledge:

 

 * the condensed consolidated financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by the European
Union ("EU") pursuant to Regulation (EC) No 1606/2002 as it applies in the EU
and in accordance with international accounting standards in conformity with
the requirements of the Companies Act 2006; and

 * the interim management report includes a fair review of the information
required by:

 

 

(a)      DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have   occurred during the
first six months of the financial year and their impact on the condensed
consolidated financial   statements; and a description of the principal
risks and uncertainties for the remaining six months of the year; and

(b)     DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken   place in the first six months
of the current financial year and that have materially affected the financial
position or   performance of the entity during that period; and any changes
in the related party transactions described in the last   Annual Report that
could do so.

 

The Directors are listed in the Annual Report and Accounts 2020, with the
exception of the following changes in the period: Hugh Pelham was appointed on
4 January 2021, and Tim Davies resigned on 12 January 2021.  Kristen Eshak
Weldon was appointed on 1 October 2020 and was included in the list of
Directors in the Annual Report and Accounts 2020. A list of current Directors
is maintained on the website: www.carrsgroup.com (http://www.carrsgroup.com)

 

 

On behalf of the Board

 

 

Hugh
Pelham
Neil Austin

Chief Executive
Officer
Chief Financial Officer

21 April
2021
21 April 2021

 

 

 

 

Unaudited notes to condensed interim financial information

 

1.         General information

 

The Group operates across three divisions of Speciality Agriculture,
Agricultural Supplies 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 21
April 2021.

 

The comparative figures for the financial year ended 29 August 2020 are not
the Company's statutory accounts for that financial year.  Those accounts
have been reported on by the Company's auditor and delivered to the Registrar
of Companies.  The report of the auditor was (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew attention by way
of emphasis without qualifying their report, and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act 2006.

 

2.         Basis of preparation

 

These condensed interim financial statements for the 26 weeks ended 27
February 2021 have been prepared in accordance with IAS 34, 'Interim financial
reporting' as adopted by the EU pursuant to Regulation (EC) No 1606/2002 as it
applies to the EU.

 

The annual financial statements of the Group for the year ending 28 August
2021 will be prepared in accordance with International Financial Reporting
Standards (IFRSs) adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the EU and in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006. As required by the
Disclosure Guidance and Transparency Rules of the Financial Conduct Authority,
this condensed set of financial statements has been prepared applying the
accounting policies and presentation that were applied in the preparation of
the Company's published consolidated financial statements for the year ended
29 August 2020 which were prepared in accordance with IFRSs as adopted by the
EU.

 

The Group is expected to have a sufficient level of financial resources
available through operating cash flows and existing bank facilities for a
period of at least 12 months from the signing date of these condensed
consolidated interim financial statements. The Group has operated within all
its banking covenants throughout the period. In addition, the Group's main
banking facility is in place until November 2023 and an invoice discounting
facility is in place until August 2023.

 

Detailed cash forecasts continue to be updated regularly for a period of at
least 12 months from the reporting period end. These forecasts are sensitised
for various worst case scenarios including a COVID-19 outbreak resulting in a
short term closure, delays on order books, and reduced payments from
customers. The results of this stress testing showed that, due to the
stability of the core business, the Group would be able to withstand the
impact of these severe but plausible downside scenarios occurring over the
period of the forecasts.

 

In addition, several other mitigating measures remain available and within the
control of the Directors that were not included in the scenarios. These
include withholding discretionary capital expenditure and reducing or
cancelling future dividend payments.

 

Consequently, the Directors are confident that the Group will have sufficient
funds to continue to meet its liabilities as they fall due for at least 12
months from the signing date of these condensed consolidated interim financial
statements. The Group therefore continues to adopt the going concern basis in
preparing its condensed consolidated interim financial statements.

 

3.         Accounting policies

 

The accounting policies adopted are consistent with those of the previous
financial year except for:

 

Taxation

Income taxes are accrued based on management's estimate of the weighted
average annual income tax rate expected for the full financial year based on
enacted or substantively enacted tax rates at 27 February 2021. Our effective
tax rate was 21.1% (H1 2020: 19.1%) after adjusting for results from associate
and joint ventures, which are reported net of tax, and adjustments to
contingent consideration (note 8) which is treated as non-taxable. The higher
effective tax rate is due to a higher mix of overseas profits.

 

4.         Significant judgements and 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 52 weeks ended 29 August
2020, with the exception of changes in estimates that are required in
determining the provision for income taxes as explained in note 3.

 

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 29 August 2020.  The impact of COVID-19 is
discussed further in the interim management report.

 

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.
Following a strategic and operational review reportable operating segments
have been identified as Speciality Agriculture, Agricultural Supplies and
Engineering.  Central comprises the central business activities of the
Group's head office, which earns no external revenues. Performance is assessed
using operating profit.  For internal purposes the CODM assesses operating
profit before material adjusting items (note 8) consistent with the
presentation in the financial statements.  The CODM believes this measure
provides a better reflection of the Group's underlying performance. Sales
between segments are carried out at arm's length.

 

The following tables present revenue, profit, asset and liability information
regarding the Group's operating segments for the 26 weeks ended 27 February
2021 and the comparative periods.

 

 

 

 26 weeks ended 27 February 2021

                                                            Speciality Agriculture         Agricultural Supplies

                                                            £'000                          £'000                                 Engineering                             Central                                        Group

                                                                                                                                 £'000                                            £'000                                  £'000

 Total segment revenue                                              44,075                       137,687                                  23,565                                           -                         205,327
 Inter segment revenue                                               (3,888)                               (3)                                    (1)                                      -                           (3,892)
 Revenue from external customers                                    40,187                       137,684                                  23,564                                           -                         201,435

 Adjusted¹ EBITDA²                                                    7,885                          3,466                                  2,205                                (1,404)                               12,152

 Depreciation, amortisation and profit/(loss)

 on disposal of non-current assets                                      (785)                       (1,320)                                (1,283)                                    (91)                             (3,479)
 Share of post-tax results of associate and joint ventures            1,054                          1,142                                          -                                      -                             2,196
 Adjusted(¹) operating profit                                         8,154                          3,288                                     922                               (1,495)                               10,869
 Adjusting items (note 8)                                               (245)                                -                                   78                                   (30)                                (197)
 Operating profit                                                     7,909                          3,288                                  1,000                                (1,525)                               10,672
 Finance income                                                                                                                                                                                                             135
 Finance costs                                                                                                                                                                                                            (633)
 Adjusted(¹) profit before taxation                                                                                                                                                                                    10,371
 Adjusting items (note 8)                                                                                                                                                                                                  (197)

 Profit before taxation                                                                                                                                                                                                10,174

 Segment gross assets                                               49,348                       112,686                                  78,421                                 24,142                              264,597

 

 Segment gross liabilities         (11,497)               (56,126)                (28,591)               (31,740)           (127,954)

 

 

1 Adjusted results are consistent with how business performance is measured
internally and is presented to aid comparability of performance. Adjusting
items are disclosed in note 8.

(2   )Earnings before interest, tax, depreciation, amortisation,
profit/(loss) on the disposal of non-current assets and before share of
post-tax results of associate and joint ventures.

 

 

The following tables have been restated to present Speciality Agriculture and
Agricultural Supplies separately. This is to aid comparability with the
segmental information presented for the current period to 27 February 2021.

 

 26 weeks ended 29 February 2020 (restated)

                                                            Speciality Agriculture         Agricultural Supplies

                                                            £'000                          £'000                               Engineering                                    Central                                  Group

                                                                                                                               £'000                                             £'000                                  £'000

 Total segment revenue                                              39,909                       138,445                                24,919                                           -                          203,273
 Inter segment revenue                                               (3,311)                               (4)                                  (1)                                      -                            (3,316)
 Revenue from external customers                                    36,598                       138,441                                24,918                                           -                          199,957

 Adjusted¹ EBITDA²                                                    6,211                          2,840                                2,492                                      195                              11,738

 Depreciation, amortisation and profit/(loss)

 on disposal of non-current assets                                      (640)                       (1,302)                              (1,277)                                    (89)                              (3,308)
 Share of post-tax results of associate and joint ventures               967                            925                                       -                                      -                              1,892
 Adjusted¹ operating profit                                           6,538                          2,463                                1,215                                      106                              10,322
 Adjusting items (note 8)                                             1,068                              (74)                                 (76)                                       -                                 918
 Operating profit                                                     7,606                          2,389                                1,139                                      106                              11,240
 Finance income                                                                                                                                                                                                            178
 Finance costs                                                                                                                                                                                                           (905)
 Adjusted¹ profit before taxation                                                                                                                                                                                       9,595
 Adjusting items (note 8)                                                                                                                                                                                                  918

 Profit before taxation                                                                                                                                                                                               10,513

 Segment gross assets                                               49,098                       121,952                                83,786                                  18,243                              273,079

 

 Segment gross liabilities         (10,574)               (70,122)                (30,896)               (30,582)           (142,174)

( )

 52 weeks ended 29 August 2020 (restated)

                                                            Speciality Agriculture        Agricultural Supplies                                                               Central

                                                            £'000                         £'000                               Engineering                                       £'000                                Group

                                                                                                                              £'000                                                                                    £'000

 Total segment revenue                                              66,948                      280,740                                53,020                                           -                          400,708
 Inter segment revenue                                               (5,058)                              (8)                                (12)                                       -                            (5,078)
 Revenue from external customers                                    61,890                      280,732                                53,008                                           -                          395,630

 Adjusted¹ EBITDA²                                                    7,914                         6,884                                6,754                                   (781)                               20,771

 Depreciation, amortisation and profit/(loss)

 on disposal of non-current assets                                   (1,366)                       (2,665)                              (2,944)                                  (182)                               (7,157)
 Share of post-tax results of associate and joint ventures            1,061                         1,572                                        -                                      -                              2,633
 Adjusted¹ operating profit                                           7,609                         5,791                                3,810                                   (963)                               16,247
 Adjusting items (note 8)                                                730                          (688)                             (2,449)                                         -                            (2,407)
 Operating profit                                                     8,339                         5,103                                1,361                                   (963)                               13,840
 Finance income                                                                                                                                                                                                           313
 Finance costs                                                                                                                                                                                                       (1,656)
 Adjusted¹ profit before taxation                                                                                                                                                                                    14,904
 Adjusting items (note 8)                                                                                                                                                                                             (2,407)

 Profit before taxation                                                                                                                                                                                              12,497

 Segment gross assets                                               47,367                        98,046                               83,852                                  18,078                              247,343

( )

 Segment gross liabilities           (8,845)                 (44,664)                (31,156)               (28,509)           (113,174)

( )

1 Adjusted results are consistent with how business performance is measured
internally and is presented to aid comparability of performance. Adjusting
items are disclosed in note 8.

(2   )Earnings before interest, tax, depreciation, amortisation,
profit/(loss) on the disposal of non-current assets and before share of
post-tax results of associate and joint ventures.

 

 

7.         Disaggregation of revenue

 

The following table presents the Group's reported revenue disaggregated based
on the timing of revenue recognition.

 

                                26 weeks      26 weeksended   52 weeks

                                ended          29 February    ended

                                27 February   2020            29 August

                                2021                          2020
 Timing of revenue recognition  £'000         £'000           £'000
 Over time                      18,464        16,054          34,790
 At a point in time             182,971       183,903         360,840
                                201,435       199,957         395,630

 

 

8.         Adjusting items

 

                                                                                       26                                                     26 weeks                        52 weeks
                                                 weeks

                                                                                            ended                                 ended

                                                 ended                                                                                        29 February                    29 August

                                                                                   27 February                                                2020                                    2020

                                                                                                                                              £'000                                  £'000
                                                 2021

                                                 £'000
 Amortisation of acquired intangible assets (i)  621                                                                                                     687        1,380
 Adjustments to contingent consideration (ii)    (671)                                                                                             (2,147)          (937)
 Restructuring/closure costs (iii)               247                                                                                                  542           1,964
                                                 197                                                                                                (918)           2,407

 

 

(i)      Amortisation of acquired intangible assets which do not relate
to the underlying profitability of the Group but rather relate to costs
arising on acquisition of businesses.

 

(ii)     Adjustments to contingent consideration arise from the
revaluation of contingent consideration in respect of acquisitions to fair
value at the period end. Movements in fair value arise from changes to the
expected payments since the previous period end based on actual results and
updated forecasts. Any increase or decrease in fair value is recognised
through the income statement.

 

(iii)      Restructuring/closure costs include redundancy costs and
impairments of assets to recoverable amounts.

 

 

 

9.         Earnings per share

 

Adjusting items disclosed in note 8 that are charged or credited to profit do
not relate to the underlying profitability of the Group.  The Board believes
adjusted profit before these items provides a useful measure of business
performance.  Therefore, an adjusted earnings per share is presented as
follows:

 

                                                                         26 weeks                                                    26 weeks                                                          52 weeks

                                                                               ended                                                       ended                                                            ended

                                                            27 February 2021                                            29 February 2020                                                     29 August 2020
                                                                                £'000                                                       £'000                                                            £'000
 Earnings                                             7,574                                                      8,565                                                                                      9,533
 Adjusting items:
 Amortisation of acquired intangible assets           621                                                        687                                                                                        1,380
 Adjustments to contingent consideration              (671)                                                      (2,147)                                                                                      (937)
 Restructuring/closure costs                          247                                                        542                                                                                        1,964
 Taxation effect of the above                         (167)                                                      (225)                                                                                        (639)
 Non-controlling interest in the above                -                                                          (29)                                                                                         (273)

 Earnings - adjusted                                  7,604                                                      7,393                                                                                    11,028

                                                                           Number                                                      Number                                                           Number

 Weighted average number of ordinary shares in issue  92,588,219                                                 92,214,566                                                                        92,346,828
 Potentially dilutive share options                   2,813,125                                                  1,669,575                                                                           1,384,216

                                                      95,401,344                                                 93,884,141                                                                        93,731,044

 Earnings per share (pence)
 Basic                                                                           8.2p                                                         9.3p                                                         10.3p
 Diluted                                                                         7.9p                                                         9.1p                                                         10.2p
 Adjusted                                                                        8.2p                                                         8.0p                                                         11.9p
 Diluted adjusted                                                                8.0p                                                         7.9p                                                         11.8p

 

 

10.       Dividends

 

An interim dividend of £2,079,551 (H1 2020: £1,034,348) that related to the
period to 29 August 2020 was paid on 2 October 2020.  This included the
deferred first interim dividend that, under normal circumstances, would have
been paid in May 2020. This was deferred due to the uncertainty associated
with the COVID-19 pandemic. A final dividend of £2,310,612 (H1 2020:
£2,310,140) in respect of the period to 29 August 2020 was paid on 15 January
2021.

 

11.       Intangible assets, property, plant and equipment, right-of-use
assets and investment property

 

                                                                                                                                                              Property,

                                                                                        Other intangible         assets                                          plant and equipment                     Right-of-use                        Investment

                                                 Goodwill                                £'000                                                                          £'000                            assets                              property

                                                           £'000                                                                                                                                         £'000                                          £'000
 26 weeks ended 27 February 2021
 Opening net book amount at 30 August 2020               32,041                                 9,171                                                         38,259                          14,856                                 158
 Exchange differences                                       (511)                                   (52)                                                                 (570)                (17)                                        -
 Additions                                                        -                                780                                                                  1,628                 1,818                                       -
 Disposals and transfers                                          -                                     -                                                             (1,748)                 861                                         -
 Depreciation and amortisation                                    -                               (781)                                                               (1,960)                 (1,253)                                   (3)
 Closing net book amount at 27 February 2021             31,530                                 9,118                                                                 35,609                  16,265                                 155

 26 weeks ended 29 February 2020
 Opening net book amount at 1 September 2019             32,877                                                    9,318                             41,917                   -                                 164
 Transition to IFRS 16                                            -                                                        -                (4,409)                           15,903                            -
 Exchange differences                                       (807)                                                      (99)                 (911)                             (48)                              -
 Additions                                                        -                                                   845                              2,569                  1,263                             -
 Disposals                                                        -                                                        -                (90)                              -                                 -
 Depreciation, amortisation and impairment                        -                                                  (749)                  (2,309)                           (1,248)                           (3)
 Closing net book amount as at 29 February 2020          32,070                                                    9,315                             36,767                   15,870                            161

 

Transfers include assets refinanced under a lease and finance leased assets
that became owned assets on maturity of the lease term.

 

Capital commitments contracted, but not provided for, by the Group at the
period end amounts to £632,000 (2020: £1,559,000).

 

 

12.       Borrowings

                                                                       As at                                        As at                                              As at

                                                           27 February                                   29 February                                           29 August

                                                                       2021                                         2020                                               2020
                                                                      £'000                                        £'000                                              £'000

 Current                                                              8,580                    26,855                                          11,420
 Non-current                                                        26,815                     27,896                                          25,021
 Total borrowings                                                   35,395                     54,751                                          36,441
 Cash and cash equivalents as per the balance sheet                (24,838)                     (29,318)                                       (17,571)
 Net debt (excluding leases)                                        10,557                     25,433                                          18,870
 Undrawn facilities                                                 35,324                     22,412                                          35,083

 Current borrowings include bank overdrafts of £4.9m (2020: £8.6m). Undrawn
 facilities include overdraft facilities of £2.5m (2020: £2.5m) that are
 renewable on an annual basis.

 

 Movements in borrowings are analysed as follows:  26 weeks                       26 weeks

                                                   ended         ended

                                                   27 February                29 February

                                                   2021          2020
                                                   £'000                               £'000

 Balance at start of period (excluding leases)     36,441        49,519
 Exchange differences                              (235)         (362)
 New bank loans/RCF drawdown                       4,000         2,500
 Repayments of borrowings                          (1,200)       (1,247)
 (Decrease)/increase in other borrowings           (604)         114
 Loan forgiven                                     (715)         -
 Release of deferred borrowing costs               30            30
 Net increase to bank overdraft                    (2,322)       4,197
 Balance at end of period                          35,395        54,751

 

New bank loans/RCF drawdown excludes re-financing of assets under new finance
lease arrangements. The balance of £49.5m at the start of the comparative
period excludes finance leases of £2.9m which were previously included within
borrowings as at 31 August 2019 however, on transition to IFRS 16 'Leases' on
1 September 2019, these were presented separately to borrowings on the face of
the balance sheet.

 

 

13.       Financial instruments

 

IFRS 13 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

 

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.

 

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.

 

Contingent consideration is measured at fair value using Level 3 inputs. Fair
value is determined considering the expected payment, which is discounted to
present value. The expected payment is determined separately in respect of
each individual earn-out agreement taking into consideration the expected
level of profitability of each acquisition.

 

The significant unobservable inputs are the projections of future
profitability, which have been based on budget and forecast information for
the current year and future periods, and the discount rate, which has been
based on the incremental borrowing rate. A significant amount of the
contingent consideration payable is included within current liabilities and
has therefore not been discounted. A reasonable change in the discount rate
applied would not have a material impact on the balances recognised within
non-current liabilities.

 

The following table presents a reconciliation of the contingent consideration
liability measured at fair value on a recurring basis using significant
unobservable inputs (level 3).

 

 

                                                                       As at                                              As at                                         As at

                                                            27 February                                       29 February                                       29 August 2020

                                                                        2021                                              2020
                                                                       £'000                                             £'000                                         £'000
 Fair value at the start of the period             3,422                                           7,954                                               7,954
 Exchange differences                              (12)                                            (175)                                               (184)
 Payments made to vendors (including legal costs)  (131)                                           (1,473)                                             (2,513)
 Change in fair value                              (671)                                           (3,027)                                             (1,835)
 Fair value at the end of the period               2,608                                           3,279                                               3,422

 

14.       Retirement benefit asset

 

The amounts recognised in the Income Statement are as follows:

 

                                                             26 weeks              ended                                  26 weeks                                 52 weeks

                                                         27 February                                                           Ended                                     ended

                                                                    2021                                              29 February                                 29 August

                                                                                                                                 2020                                      2020
                                                                   £'000                                                        £'000                                     £'000

 Administrative expenses                        9                                                            9                                             13
 Net interest on the net defined benefit asset  (74)                                                         (70)                                          (139)
 Total income                                   (65)                                                         (61)                                          (126)

 

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

 

The amounts recognised in the Balance Sheet are as follows:

 

                                                                        As at                                       As at                                      As at

                                                             27 February                                 29 February                                   29 August

                                                                         2021                                        2020                                      2020
                                                                        £'000                                       £'000                                     £'000

 Present value of funded defined benefit obligations  (62,685)                                    (67,203)                                    (65,834)
 Fair value of scheme assets                          70,492                                      73,846                                      73,871
 Surplus in funded scheme                             7,807                                       6,643                                       8,037

 

Actuarial losses of £295,000 (2020: £1,187,000) have been reported in the
Statement of Comprehensive Income. The surplus has decreased over the period
since 29 August 2020 due to changes in market conditions contributing to an
overall reduction in the scheme surplus.

 

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.

 

 

15.       Share capital

                                                          Number of          shares           Share capital           Share  premium £'000                        Total

          £'000
                                                                                              £'000

 Allotted and fully paid ordinary shares of 2.5p each

 Opening balance as at 30 August 2020                   92,465,833                            2,312          9,176                                     11,488
 Proceeds from shares issued:
 - LTIP                                                 309,823                               7              -                                         7
 - Share save scheme                                    421,744                               11             437                                       448
 At 27 February 2021                                    93,197,400                            2,330          9,613                                     11,943

 Opening balance at 1 September 2019                    91,942,005                            2,299          9,165                                     11,464
 Proceeds from shares issued:
 - LTIP                                                 513,604                               13             -                                         13
 At 29 February 2020                                    92,455,609                            2,312          9,165                                     11,477

 

309,823 shares were issued in the period to satisfy the share awards under the
LTIP scheme which were exercised in December 2020.

 

421,744 shares were issued in the period to satisfy the share awards under the
share save scheme with exercise proceeds of £447,611.  The related weighted
average price of the shares exercised in the period was £1.061 per share. At
the period end the Company holds 50,045 of these shares in treasury.

 

As announced on 1 April 2021 the Company's issued share capital had increased
to 93,544,724 shares of which 75,955 shares were held in treasury. The
increase in issued share capital was due to the issue of 347,324 shares under
the share save scheme with exercise proceeds of £368,511 and a related
weighted average exercise price of £1.061 per share.

 

16.       Cash generated from continuing operations

 

                                                                         26 weeks                                   26 weeks                                  52 weeks

                                                                               ended                                      ended                                    ended

                                                                     27 February                                29 February                                  29 August

                                                                                 2021                                       2020                                     2020
                                                                                £'000                                      £'000                                    £'000

 Profit for the period from continuing operations              8,460                                     9,131                                       10,922
 Adjustments for:
 Tax                                                           1,714                                     1,382                                       1,575
 Tax credit in respect of R&D                                  (180)                                     (240)                                       (250)
 Depreciation and impairment of property, plant and equipment  1,960                                     2,309                                       4,567
 Depreciation and impairment of right-of-use assets            1,253                                     1,248                                       2,462
 Depreciation of investment property                           3                                         3                                           6
 Intangible asset amortisation                                 781                                       749                                         1,513
 Loss/(profit) on disposal of property, plant and equipment    103                                       (51)                                        265
 Profit on disposal of right-of-use assets                     -                                         -                                           (37)
 Adjustments to contingent consideration                       (671)                                     (2,147)                                     (937)
 Net fair value charge/(credit) on share based payments        255                                       (277)                                       (137)
 Release of loan provision                                     -                                         -                                           (783)
 Other non-cash adjustments                                    (157)                                     (618)                                       (504)
 Interest income                                               (135)                                     (178)                                       (313)
 Interest expense and borrowing costs                          663                                       935                                         1,716
 Share of results of associate and joint ventures              (2,196)                                   (1,892)                                     (2,633)
 IAS 19 income statement charge (excluding interest):
    Administrative expenses                                    9                                         9                                           13
 Changes in working capital (excluding the effects of

    acquisitions):
 (Increase)/decrease in inventories                            (2,783)                                   (3,348)                                     4,811
 (Increase)/decrease in receivables                            (7,872)                                   (4,976)                                     3,862
 Increase/(decrease) in payables                               14,749                                    5,801                                       (3,479)
 Cash generated from continuing operations                     15,956                                    7,840                                       22,639

 

17.   Related party transactions

 

The Group's significant related parties are its associate and joint ventures,
as disclosed in the Annual Report and Accounts 2020.

 

                    Sales to   Purchases from            Rent receivable from  Net management  charges                Dividends receivable                   Amounts                                      Amounts

                                                                               (from)/to                              from                                   owed from                       owed to
                    £'000      £'000                     £'000                 £'000                                  £'000                                  £'000                           £'000
 26 weeks to

 27 February 2021
 Associate          346             (60,865)             10                                     (69)                               368                                     368               (20,539)
 Joint ventures     373                  (229)           -                                       82                                     -                               1,623                (102)

 26 weeks to

 29 February 2020
 Associate          280             (55,183)             10                                     (69)                  294                                    214                             (24,334)
 Joint ventures     238                  (143)           -                                       80                   -                                      1,756                           (2)

 

 

18.       Alternative performance measures

 

The Interim Results include alternative performance measures ("APMs"), which
are not defined or specified under the requirements of IFRS. These APMs are
consistent with how business performance is measured internally and therefore
the Directors believe that these APMs provide stakeholders with additional
useful information on the Group's performance.

 

 Alternative performance measure      Definition and comments
 EBITDA                               Earnings before interest, tax, depreciation, amortisation, profit/(loss) on
                                      the disposal of non-current assets and before share of post-tax results of the
                                      associate and joint ventures. EBITDA allows the user to assess the
                                      profitability of the Group's core operations before the impact of capital
                                      structure, debt financing and non-cash items such as depreciation and
                                      amortisation.
 Adjusted EBITDA                      Earnings before interest, tax, depreciation, amortisation, profit/(loss) on
                                      the disposal of non-current assets, before share of post-tax results of the
                                      associate and joint ventures and excluding items regarded by the Directors as
                                      adjusting items. This measure is reconciled to statutory operating profit and
                                      statutory profit before taxation in note 6.  EBITDA allows the user to assess
                                      the profitability of the Group's core operations before the impact of capital
                                      structure, debt financing and non-cash items such as depreciation and
                                      amortisation.
 Adjusted operating profit            Operating profit after adding back items regarded by the Directors as
                                      adjusting items. This measure is reconciled to statutory operating profit in
                                      the income statement and note 6. Adjusted results are presented because if
                                      included, these adjusting items could distort the understanding of the Group's
                                      performance for the period and the comparability between the periods
                                      presented.
 Adjusted profit before taxation      Profit before taxation after adding back items regarded by the Directors as
                                      adjusting items. This measure is reconciled to statutory profit before
                                      taxation in the income statement and note 6. Adjusted results are presented
                                      because if included, these adjusting items could distort the understanding of
                                      the Group's performance for the period and the comparability between the
                                      periods presented.
 Adjusted earnings per share          Profit attributable to the equity holders of the Company after adding back
                                      items regarded by the Directors as adjusting items after tax divided by the
                                      weighted average number of ordinary shares in issue during the period. This is
                                      reconciled to basic earnings per share in note 9.
 Adjusted diluted earnings per share  Profit attributable to the equity holders of the Company after adding back
                                      items regarded by the Directors as adjusting items after tax divided by the
                                      weighted average number of ordinary shares in issue during the period adjusted
                                      for the effects of any potentially dilutive options. Diluted earnings per
                                      share is shown in note 9.
 Net debt                             The net position of the Group's cash at bank and borrowings. Details of the
                                      movement in borrowings is shown in note 12.

 

 

 

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