REG - Carr's Group PLC - Full Year Results
23/03/2023 07:15
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230323:nRSW9300Ta&default-theme=true
RNS Number : 9300T Carr's Group PLC 23 March 2023
23 March 2023
CARR'S GROUP PLC
("Carr's" or the "Group")
FULL YEAR RESULTS
For the year ended 3 September 2022
"A strong performance in a transformational year for the Group"
Carr's (CARR.L), the Speciality Agriculture and Engineering Group, announces
its full year results for the year ended 3 September 2022.
Financials (continuing operations)
Adjusted(1) FY22 FY21 +/-
(restated)(3)
Revenue (£m) 124.2 120.3 +3.3%
Adjusted(1) operating profit (£m) 11.9 11.1 +7.5%
Adjusted(1) profit before tax (£m) 11.2 10.4 +8.0%
Adjusted(1) EPS (p) 10.0 10.1 -1.0%
Dividend (p per share) 5.20 5.00 +4.0%
Net debt(2) (£m) 14.0 10.0 -40.8%
Statutory FY22 FY21 +/-
(restated)(3)
Revenue (£m) 124.2 120.3 +3.3%
Operating profit (£m) 8.2 8.2 +0.4%
Profit before tax (£m) 7.6 7.5 +0.4%
Basic EPS (p) 6.4 6.2 +3.2%
Highlights
· Revenue from continuing operations increased 3.3%
· Adjusted profit before tax from continuing operations increased
8.0%
· Reported operating profit from continuing operations in line with
prior year at £8.2m
· Agricultural Supplies business sold at market comparable 6.4 x
FY21 EBITDA
· Post year-end disposal leads to net cash on balance sheet
· Refreshed Board for 2023
· Group now focused on higher margin, differentiated, international
businesses
Peter Page, Chief Executive Officer, commented:
"2022 was a year of significant change for Carr's Group. With a clear
direction and strategy, the business is now focused on higher-margin,
differentiated, international Speciality Agriculture and Engineering
businesses with strong growth prospects."
(1) Adjusted results are consistent with how business performance is
measured internally and are presented to aid comparability of performance.
Adjusting items are disclosed in note 3
(2) Excluding leases. Further details of net debt can be found in note 9
(3) Prior year restatement recognised in relation to the recognition of
revenue from customer contracts within the Engineering division. Details
are disclosed in note 10
Enquiries:
Carr's Group plc Tel: +44 (0) 1228 554 600
Peter Page (Chief Executive Officer)
David White (Chief Financial Officer)
FTI Consulting Tel: +44 (0) 20 3727 1340
Richard Mountain/Ariadna Peretz
Investec Bank plc Tel: +44 (0) 20 7597 4000
Carlton Nelson/David Anderson/William Brinkley
An online briefing for analysts will be held today at 09:00 GMT. Analysts and
investors wishing to attend the call are asked to contact FTI Consulting at
FTI_Carrs@fticonsulting.com (mailto:FTI_Carrs@fticonsulting.com) .
Shareholders or investors wishing to make an appointment to meet with Senior
Management should contact the Company directly at reception@carrsgroup.com
(mailto:reception@carrsgroup.com) .
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 around the world. Carr's
operates a business model that empowers operating subsidiaries, enabling them
to be competitive, agile, and effective in their individual markets whilst
setting overall standards and goals.
The Speciality Agriculture division manufactures and supplies feed blocks,
minerals and boluses containing trace elements and minerals for livestock.
The Engineering division manufactures vessels, precision components and remote
handling systems, and provides specialist engineering services, for the
nuclear, defence and oil & gas industries.
Update
Please note that some of the commentary below was included in the Group's
trading update announced on 21 February 2023. Such commentary has been
updated, where appropriate.
Overview
2022 was a transformational year for Carr's Group. The Board addressed
strategic priorities and made changes that will enable growth in shareholder
value by developing the Group's market leading businesses in Speciality
Agriculture and Engineering. The Group will focus on higher margin,
differentiated, international businesses, following the disposal of the
Agricultural Supplies division in October 2022.
The future development of the Speciality Agriculture division will be through
organic growth opportunities and carefully targeted acquisitions. The
Engineering division will focus on the unique qualities and strengths of the
current businesses to realise their full potential at a time when the nuclear
sector is expanding capacity and capability.
The Board has been refreshed, bringing considerable experience to lead the
Group at a time of change and renewal for businesses that have strong
prospects for the future.
Financial Performance
The review of financial performance focuses primarily on revenue and profits
from continuing operations in Speciality Agriculture and Engineering,
following the disposal of the Agricultural Supplies division after the year
end.
Revenue for the year from continuing operations increased to £124.2m (2021
restated: £120.3m).
Adjusted operating profit from continuing operations increased to £11.9m
(2021 restated: £11.1m), with Speciality Agriculture contributing £9.2m
(2021: £9.5m), and Engineering contributing £5.4m (2021 restated: £3.9m).
Reported operating profit was in line with last year at £8.2m (2021 restated:
£8.2m).
Adjusted profit before tax from continuing operations increased to £11.2m
(2021 restated: £10.4m) whilst reported profit before tax increased 0.4% to
£7.6m (2021 restated: £7.5m).
Basic earnings per share from continuing operations increased to 6.4p (2021
restated: 6.2p) and adjusted earnings per share reduced to 10.0p (2021
restated: 10.1p).
Net debt at 3 September 2022, excluding leases, was higher at £14.0m (2021:
£10.0m), funding increases in working capital driven by inflationary cost
increases. Since year end, with completion of the disposal of the Agricultural
Supplies division and the receipt of the initial proceeds, the balance sheet
is cash positive.
The profit numbers referenced in this document exclude the impact of
discontinued operations. The net loss for the year after tax from discontinued
operations of £2.2m (2021: £3.8m profit) consists of the loss recognised
relating to the disposal of the Carr's Billington Agricultural business, net
of profit from the Agricultural Supplies division.
Dividend
The Board is proposing a final dividend of 2.85 pence per share which,
together with the two interim dividends, makes a total dividend of 5.20 pence
per share for the full year, up 4% on the prior year (2021: 5.00 pence).
Subject to approval by shareholders at the forthcoming General Meeting of the
Company, the final dividend will be paid on 12 May 2023 to shareholders on the
register at close of business on 14 April 2023 and the shares will go
ex-dividend on 13 April 2023.
Strategy
Since April 2021, business performance has been reported in three divisions:
Speciality Agriculture, Agricultural Supplies, and Engineering. This provided
clearer information on the profitability of each division and more detail on
how each contributes to earnings per share.
In January 2022, a review of the strategic options for long-term growth in
shareholder value in each of the three divisions was announced. Following
careful evaluation of all options, supported by external advisers, the Board
determined that the Group will most successfully create long-term shareholder
value by focusing on the higher margin, differentiated, international
businesses in Speciality Agriculture and Engineering.
The Speciality Agriculture division, which delivers measurable productivity
benefits to livestock farmers through patented products sold under
market-leading brands, will grow with investment in the existing businesses
and, over time, by carefully targeted acquisitions. Opportunities include
demand for nutritional supplements generated by increasing use of low
intensity pasture-based grazing, the rise in sustainability-related nutrition
programmes, and growing interest in welfare-centred management systems.
The Engineering division will develop the current portfolio of businesses,
which include patented and differentiated products and services, to achieve
their full potential in specialist markets at a time when totally dependable
engineering solutions and services, fit for the nuclear industry, are in
demand. Opportunities include increasing capacity through small modular
reactor technology development, extending installed asset life to maintain
capacity, and supporting high levels of investment in long-term fundamental
research.
In August 2022, we reached agreement with co-owners Edward Billington &
Son Limited for the sale of all our holdings in the Agricultural Supplies
division. Following a general meeting on 19 September 2022 at which 98% of
shareholder votes were in favour, the sale was completed on 26 October 2022,
with the Group's holding valued at £44.5m (on a debt-free basis), a market
comparable multiple of 6.4 x FY21 EBITDA, leading to anticipated net proceeds
of £29.0m, after accounting for all transaction costs, debt and working
capital adjustments.
Whilst the Agricultural Supplies division generated approximately 75% of
historic Group revenues, the market environment and ownership structure meant
that it contributed approximately 25% to adjusted earnings per share
attributable to shareholders. The split ownership structure meant that Carr's
Group did not have full control of the strategy or direction of the combined
business, whilst it consumed a substantial proportion of management time. It
required up to £10m of replacement capital expenditure, and the rise in
commodity prices led to a substantial increase in working capital during 2022.
The disposal addresses a fundamental challenge to growing shareholder value.
The decision to focus on high margin, differentiated, international
businesses, and the disposal of the lower margin UK-only division, are the
first steps in an ongoing process of strategic change for the Group. The
receipt of sale proceeds puts the balance sheet in a strong net cash position.
The Board will carefully consider the appropriate allocation of capital to
achieve a balance between investment for growth in long-term value of the
Group and returns to shareholders, including options to secure a fully-funded,
risk-free position for the legacy defined benefit pension scheme.
Board
Carr's Group has a refreshed Board of new Executive and Non-Executive members
bringing considerable experience for the benefit of all shareholders.
In line with Board succession plans, Shelagh Hancock and Stuart Lorimer were
appointed as Non-Executive Directors from 1 September 2022. Shelagh, CEO of
First Milk, the leading UK farmer owned dairy co-operative, has considerable
experience relevant to the Speciality Agriculture division. Stuart, Finance
Director of FTSE listed AG Barr plc, will become Audit Committee Chair in
succession to John Worby following the forthcoming General Meeting of the
Company. Both Shelagh and Stuart have already brought fresh insight to Board
meetings and provide constructive challenge to the Executive Directors.
As part of the Board's succession plan, John Worby, who has been on the Board
since 2015, will complete his time as Audit Committee Chair following the
forthcoming General Meeting of the Company, and will retire from the Board in
mid-2023 following a period of handover and support to the new Board members.
John has provided wise counsel and shared a lifetime's experience in finance
and public companies, which has been of great value to the Group.
In August 2022, Neil Austin indicated his intention to leave Carr's Group to
take up a new role at Westmorland Family, headquartered at Penrith in Cumbria.
Neil had been on the Board for over ten years and was central to many of the
improvements and developments at Carr's Group in recent times. Neil made a
significant contribution to the work of the Board. His detailed understanding
of the workings of the Group combined with a sharp intellect has been a real
help to Board members and senior managers throughout his tenure. Neil stood
down as Chief Financial Officer and from the Board on 21 February 2023, and
left with all the Board wishing him success in his new role, and gratitude for
his legacy at Carr's Group.
David White joined the Board on 21 February 2023 as Chief Financial Officer,
in succession to Neil Austin, bringing extensive finance and operational
experience gained at Aggreko plc, Weir Group and in professional services.
David was appointed following an external search process and has made a very
positive impact since joining the Group on 3 January 2023.
In November 2022, following an extensive search process, it was announced that
Tim Jones would be joining the Board and would become Non-Executive Chair.
Tim's appointment took effect on 21 February 2023. Tim brings substantial
experience to the role, having been Non-Executive Chair of Treatt plc, a FTSE
listed business whose market capitalisation increased eight-fold in the 11
years of his tenure. Tim has a deep understanding of equity markets, is an FCA
approved person and a member of the Chartered Institute of Securities and
Investment, and is well placed to engage with, and reflect the interests of,
all shareholders.
Since October 2021 Peter Page has worked in the business full-time as
Executive Chair, following agreement with the incumbent Chief Executive
Officer, Hugh Pelham, that he would leave the business and step down from the
Board. Further to an extensive internal and external search process, it was
announced in August 2022 by the Board that Peter Page would be appointed Chief
Executive upon the appointment of a new Non-Executive Chair, which took effect
on 21 February 2023 with the appointment of Tim Jones.
As separately announced on 21 February 2023, Martin Rowland joined the Board
as a Non-Executive Director of the Company on 6 March 2023 in accordance with
a relationship agreement entered into between Harwood Capital Management
Limited and the Company on 20 February 2023.
Stakeholder Engagement
The January 2022 Annual General Meeting was the first opportunity to meet with
shareholders in person following the lifting of COVID-19 restrictions.
Throughout the year we have met with shareholders, in person, online and
through telephone calls. It is important that the Chair and other Directors
are accessible to shareholders so we can benefit from the dialogue, challenge,
and exchange of views.
Around the time of the Annual General Meeting in January 2022, we consulted
with shareholders in some detail to address the issue of Board composition and
diversity, taking the opportunity to discuss and explain the changes to the
Board as part of the succession plans. The feedback received and our response
has been published on the Group's website, with more detail in the Nomination
Committee Report on pages 58 to 60 of the 2022 Annual Report and Accounts.
Members of the Board meet regularly with senior managers to review business
performance and progress in non-financial areas including Health and Safety
and Environmental issues. Ian Wood, as the Board's nominee for employee
engagement, actively participates in specific topics on behalf of the whole
Board.
There is regular engagement with current and prospective customers, ranging
from farmers at UK and US trade events and distributors at international trade
shows, to site visits in the UK, USA and Japan. First hand contact with the
market is critical to understanding challenges and opportunities for the
future.
It is valuable to maintain contact with related external educational, research
and development organisations, for example the UK Atomic Energy Authority,
agriculture faculties of US universities and local colleges for skills
training, and new developments and opportunities.
Environment, Social and Governance
ESG is about the way that we do things, more than words and statements. With
ever increasing focus on sustainability, business impact on the climate and
society, all the Group's activities are taking more direct responsibility for
monitoring and reducing emissions and waste. An experienced Environment and
Sustainability Manager was appointed in 2022, who has undertaken a critical
review of the systems and practices currently in place and is developing a
comprehensive plan for changes and actions to be addressed over the coming
year. The establishment of Green Teams that involve a range of colleagues to
lead relevant activities will ensure engagement across the Group in a way that
is appropriate for the circumstances of each business. Further details can be
found in our Responsible Business Report on pages 28 to 36 and our TCFD
Disclosures on pages 37 to 39 of the 2022 Annual Report and Accounts.
The Speciality Agriculture division offers customers nutrition products which
can reduce carbon impact. The Engineering division supplies services that
support low carbon sources of energy in the nuclear sector. Following the sale
of the Agricultural Supplies division, the Group's environmental and
sustainability priorities have changed, ceasing involvement in the
energy-intensive fertiliser, fuels and farm machinery markets, and reducing
dependence on commodities.
High standards of Corporate Governance are a priority, with an annual
evaluation of the Board's performance in this area, to ensure compliance with
the UK Corporate Governance Code 2018 and adapting our practices accordingly.
Our Statement of Compliance can be found on page 57 of the 2022 Annual
Report and Accounts.
FY22 Year-End Process
In November 2022 a delay was announced to the completion of the year-end
process that had several consequences including a temporary suspension of
trading in the Company's ordinary shares, delayed release of the Annual
Report, audited results and payment of the final dividend later than usual.
Whilst the delay primarily related to a part of the business in which Carr's
Group had a minority shareholding and that has now been sold, the Company will
carefully review the audit process to seek opportunities for the timely
completion of the current financial year.
People
All colleagues have contributed to a positive outturn for the Group in a year
of challenge and change. I am very grateful for everyone's commitment to the
business, and I wish all success to our former colleagues in the Agricultural
Supplies division. A third of the Group's employees are now located outside
the UK, in Germany, USA, Ireland and New Zealand, an indication of the more
international outlook for the Group in the future.
GROUP PERFORMANCE REVIEW
Overview
The Group performed well during the financial year ended 3 September 2022
("FY22"). Continuing operations, comprising Speciality Agriculture and
Engineering, delivered 8.0% growth in adjusted profit before tax compared to
the prior year, from a 3.3% revenue increase. FY22 was challenging due to
supply chain delays, raw material cost increases and energy price rises, as
the effects of the Covid pandemic receded and global business activity started
to return to higher levels.
Health and Safety performance reflects increased awareness of risks, and
changing habits. Reportable Incidents declined from 9 in 2020 to 4 in each of
2021 and 2022. Lost Time Incidents reduced from 19 in 2020 to 9 in 2021 to 4
in 2022. Leading indicators, such as identification of hazards and reporting
near misses, reflect a greater awareness of safety-related issues and more
confidence in reporting them as a preventative measure.
Operational review for Continuing Operations
Speciality Agriculture
The Speciality Agriculture businesses have patented and well-recognised
brands, differentiated products and strong customer relationships. Sales teams
worked hard throughout the year to bring sales prices in line with
extraordinary raw material cost increases, enabling the businesses to finish
FY22 ahead of initial expectations.
Adjusted operating profit for the division, at £9.2m, was marginally below
prior year (2021: £9.5m), whilst revenues rose 14.0%, to £78.1m (2021:
£68.5m), as inflation in raw material costs was necessarily passed on to the
market.
USA
Adjusted operating profit in the US feed blocks business held up well, due to
strong margin discipline and a focus on addressing the time lag between cost
increases and sales. At the start of the year, a significant increase in raw
material costs impacted margins, due to timing differences in the receipt of
orders, manufacturing, and deliveries, but was promptly addressed in the first
quarter to bring costs and pricing into line for the full year. US feed block
volumes were lower than prior year, adversely affected by drought, in several
regions of the market, causing a reduction in the number of livestock out on
grass, an impact that lasted throughout the year and will continue into 2023.
Market forecasts are for a recovery in stock numbers in the medium-term, once
rainfall increases and forage availability improves.
For 2023, the US blocks management team has been expanded with the appointment
of a Vice-President of Sales and Marketing to lead activity for revenue growth
that will include recruitment of additional distributors and providing strong
product support. HorsLic®, the equine feed block, is a priority for
additional volumes, with a recently appointed account manager and new
distributor in Texas enabling the business to increase activity in the region
with the largest horse population in the USA.
Substantial movements in the relative prices of canola and soy meal adversely
impacted the bypass protein business in the north-eastern US. New supply
contracts and opportunities for product diversification are being developed.
UK and Europe
Strong farmgate prices for dairy, beef and lamb in the UK in 2022 enabled the
market to absorb price increases for feed blocks, as the business passed on
substantial rises in raw material costs. Volumes were stable, with the UK
slightly ahead of the prior year, whilst Europe was marginally behind.
Escalating costs and shortages of key raw materials impacted margins in the
first half of the year but these were back on track by the year end. The
launch of the new Crystalyx® dairy range in 2021 was well received and
remains an opportunity for growth. A period of 3-shift working at the UK
manufacturing operation helped maintain inventories.
Bolus volumes were stable, with strong demand in the UK. Ireland is a
significant market for grass-fed stock, and now accounts for a third of bolus
revenues. Increases in raw material costs, from copper to packaging, impacted
margins in view of the need to maintain competitive prices. During 2022, all
bolus products were brought under one brand, Tracesure®, which has been
refreshed in the USA, New Zealand and Europe, to help extend our global reach.
New Zealand
Logistics issues, due to reduced global freight capacity after Covid, and
associated increases in shipping costs, impacted short term profitability of
the business in New Zealand, but sales volumes of both feed blocks and boluses
were stable. A full evaluation of the long-term opportunity for growth through
investment will be completed in 2023.
Outlook
The Speciality Agriculture division enables farmers to optimise forage and
grass-based nutrition systems, supporting their objectives to raise healthy
animals efficiently, in a welfare friendly and environmentally responsible
way, by providing appropriate nutritional supplements that are released in the
required quantities at the right time. Investment in product development will
ensure a pipeline for future growth.
In 2022, the Speciality Agriculture division responded well to supply chain
and market challenges, maintaining margins and ensuring product availability
for customers. In 2023, costs of energy and raw materials, whilst still much
higher than in previous years, are plateauing.
Engineering
The Engineering division reported a strong recovery in adjusted operating
profit during the year, up 38.2% to £5.4m, as a result of closer control of
projects and improving utilisation as the interruptions of COVID-19 receded
(2021 restated: £3.9m). Adjusted operating margins rose to 11.6% (2021
restated: 7.5%) on lower revenues of £46.2m (2021 restated: £51.9m). Several
important projects were awarded in the nuclear industry, reflecting the
specialist expertise of the companies in the Engineering division, with the
order book closing the year at £40.6m, 2.4% ahead of the prior year (2021
restated: £39.7m).
Fabrication and Precision Engineering
The specialist fabrication business generated a strong result in 2022, due to
a positive flow of orders from the nuclear reprocessing and decommissioning
sector, together with enhanced utilisation. In September 2022, the specialist
fabrication business was accredited to the joint supply chain accreditation
register (JOSCAR) which enables the business to bid for work in the UK
defence, aerospace and security sectors.
The precision engineering business performed well, ahead of the prior year,
rebuilding the order book following disruption during Covid, due to its close
involvement with the oil and gas sector, which has now recovered strongly. The
business is currently focusing on enhanced operating efficiencies and new
business opportunities to support growth in profitability. In late 2022, the
precision engineering business achieved the demanding Fit For Nuclear quality
accreditation.
To ensure availability of relevant skills in the future, the fabrication and
precision engineering businesses have well-established apprentice programmes,
with an intake of nine in 2022. Bendalls Engineering opened a dedicated Skills
Academy in Carlisle, in conjunction with Lakes College, that is open to other
manufacturers in the area. The Skills Academy is home to the apprentice
programmes and provides short courses to upskill employees for specific
projects.
Robotics
The Global Robotics business performed in line with expectations, maintaining
a strong presence in the nuclear market. New contract wins include the first
supply of an A1000 power manipulator in the USA to an internationally renowned
research laboratory, the first order for an A100 master slave manipulator to
the US Navy, and powered manipulators to Posiva Solutions in Finland for the
world's first final deep storage solution for nuclear waste.
The HWM double arm Telbot was selected by RACE, (part of the UK Atomic Energy
Authority focussed on remote applications in challenging environments) for the
UK-Japanese jointly funded LongOps project to develop capabilities for
removing and handling waste debris at damaged nuclear sites such as Fukushima.
The European Spallation Source (ESS) in Sweden, one of the largest science and
technology infrastructure projects in Europe, ordered a double arm robotic
manipulator for the world's most advanced neutron source.
Wälischmiller is the leading specialist robotics supplier in the civil
nuclear market, with a full range of manipulators, including the recently
launched A150, a lightweight, highly flexible, small-scale telescopic
manipulator for isotopes, and the unique 100% stainless steel manipulator,
both designed for the growing nuclear medicine market.
Engineering Solutions
The Engineering Solutions business in the USA provides unique services in the
maintenance of nuclear facilities worldwide. It performed well in 2022, ahead
of the Board's expectations. The business completed two MSIP® projects in the
USA during FY22, with another in Slovenia closing out after year end. Further
MSIP projects are progressing in 2023.
During 2022, the business achieved 1,000,000 working hours (equating to almost
12 years) without a lost-time injury, a significant milestone as we continue
to focus on safety.
Performance in the UK Engineering Solutions business was impacted by delays
and higher costs than expected on one long-running defence contract. All plant
has been successfully installed and commissioned, and final handover was
completed in early 2023.
In November 2022, the US Government's Department of Energy announced the award
of a multimillion-dollar research contract to NuVision Engineering, to develop
processes for recycling nuclear waste, opening up the prospect of further
unique capabilities and business opportunities in the future.
Outlook
The engineering companies are well regarded in the growing nuclear market, as
governments seek to improve energy security and reduce dependence on fossil
fuels. Each business is developing a pipeline of long and short-term projects
to strengthen order books for 2023 and beyond.
Central Costs
In 2022, central costs at adjusted operating profit level were £2.6m,
slightly higher than the prior year (2021: £2.3m). With the changing
structure of the Group's businesses, central costs will be reviewed to ensure
that they remain in line with the future strategy.
Discontinued Operations
Agricultural Supplies
Agricultural Supplies coped with an extraordinary increase in costs affecting
a large volume of raw material and commodities, reflected in a 21.0% increase
in revenues as these costs were necessarily passed on to customers. Adjusted
operating profit for the division grew 6.8% to £6.9m, albeit with a
substantial increase in working capital.
Trading in the year was mixed, with stronger performances in the retail and
machinery businesses partially offsetting reduced trading volumes in fuels and
feeds. Whilst livestock and milk prices remained high, rising input costs
presented a significant challenge for farmers. In the second half, the
business saw a reduction in beef and sheep feed volumes as customers extended
grazing to limit cash expenditure.
On 31 August 2022, the Group announced an agreement to dispose of all its
interests in the Agricultural Supplies division to Edward Billington & Son
Limited. Following shareholder approval at a general meeting which took place
on 19 September 2022, the disposal was completed on 26 October 2022.
Outlook
With considerable strategic progress made during 2022, the Group is now more
focused. The unique know how and customer relations embedded in the Speciality
Agriculture and Engineering divisions have considerable value as markets seek
technical solutions to long term sustainability challenges.
The Board is confident that both divisions will generate value for
shareholders in the long term. A detailed update on trading will be provided
at the time of the half year results.
Peter Page
Chief Executive Officer
22 March 2023
CONSOLIDATED INCOME STATEMENT
for the year ended 3 September 2022
2021
2022 (restated)(2,3)
Notes £'000 £'000
Continuing operations
Revenue 2 124,240 120,319
Cost of sales (94,632) (89,195)
Gross profit 29,608 31,124
Other operating income 1,731 -
Distribution costs (5,338) (5,213)
Administrative expenses (18,609) (16,612)
Share of post-tax results of joint ventures 840 991
Impairment of joint venture (adjusting item) 3 - (2,090)
Adjusted(1) operating profit 2 11,906 11,077
Adjusting items 3 (3,674) (2,877)
Operating profit 2 8,232 8,200
Finance income 351 260
Finance costs (1,017) (925)
Adjusted(1) profit before taxation 2 11,240 10,412
Adjusting items 3 (3,674) (2,877)
Profit before taxation 2 7,566 7,535
Taxation 4 (1,524) (1,788)
Adjusted(1) profit for the year from continuing operations 9,374 9,357
Adjusting items 3 (3,332) (3,610)
Profit for the year from continuing operations 6,042 5,747
Discontinued operations
(Loss)/profit for the year from discontinued operations (including held for
sale)
5 (2,193) 3,849
Profit for the year 3,849 9,596
Profit attributable to:
Equity shareholders 5,072 7,656
Non-controlling interests(4) (1,223) 1,940
3,849 9,596
Basic earnings per share (pence)
Profit from continuing operations 6.4 6.2
(Loss)/profit from discontinued operations (1.0) 2.1
6 5.4 8.3
Diluted earnings per share (pence)
Profit from continuing operations 6.4 6.1
(Loss)/profit from discontinued operations (1.0) 2.0
5.4 8.1
( )
(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 3. An alternative performance measures
glossary can be found in note 11.
(2) ( ) Restated to provide comparable information for continuing and
discontinued operations following the classification of the Carr's Billington
Agricultural business as a disposal group in the current year. Further details
of results from discontinued operations and net assets relating to the
disposal group can be found in note 5.
(3 ) See note 10 for an explanation of the prior year restatement in
relation to the recognition of revenue from customer contracts within the
Engineering division.
(4) ( ) Non-controlling interests relate to businesses included in the
disposal group.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 3 September 2022
2021
2022 (restated)(2)
£'000 £'000
Profit for the year 3,849 9,596
Other comprehensive income/(expense)
Items that may be reclassified subsequently to profit or loss:
- Foreign exchange translation gains/(losses) arising on translation
of overseas subsidiaries 4,288 (1,762)
- Net investment hedges 60 165
- Taxation charge on net investment hedges (11) (31)
Items that will not be reclassified subsequently to profit or loss:
- Actuarial (losses)/gains on retirement benefit asset:
- Group (2,576) 1,205
- Share of associate (2022: included within disposal group) (287) 578
- Taxation credit/(charge) actuarial (losses)/gains on retirement benefit
asset:
-Group
644 (301)
-Share of associate (2022: included within disposal
group) 72 (144)
Other comprehensive income/(expense) for the year, net of tax 2,190 (290)
Total comprehensive income for the year 6,039 9,306
Total comprehensive income attributable to:
Equity shareholders 7,262 7,366
Non-controlling interests(1) (1,223) 1,940
6,039 9,306
Total comprehensive income attributable to:
Continuing operations 8,447 5,023
Discontinued operations (2,408) 4,283
6,039 9,306
(1) Non-controlling interests relate to businesses included in the disposal
group.
(2) See note 10 for an explanation of the prior year restatement in relation
to the recognition of revenue from customer contracts within the Engineering
division.
CONSOLIDATED BALANCE SHEET
as at 3 September 2022
2021 2020
2022 (restated)(1) (restated)(1)
Notes £'000 £'000 £'000
Assets
Non-current assets
Goodwill 23,609 31,560 32,041
Other intangible assets 4,635 5,151 6,365
Property, plant and equipment 33,204 36,198 38,259
Right-of-use assets 8,223 16,777 14,856
Investment property 74 152 158
Investment in associate - 14,268 14,042
Interest in joint ventures 6,065 9,482 10,551
Other investments 32 72 73
Contract assets 316 312 -
Financial assets
- Non-current receivables 23 20 20
Retirement benefit asset 6,828 9,371 8,037
Deferred tax asset 213 182 -
83,222 123,545 124,402
Current assets
Inventories 26,990 43,226 41,579
Contract assets 7,564 7,202 7,765
Trade and other receivables 19,015 61,735 51,686
Current tax assets 3,866 2,669 2,068
Financial assets
- Cash and cash equivalents 22,515 24,309 17,571
- Derivative financial instruments - - 3
Assets included in disposal group classified as held for sale 5 148,531 - -
228,481 139,141 120,672
Total assets 311,703 262,686 245,074
Liabilities
Current liabilities
Financial liabilities
- Borrowings (12,734) (11,113) (11,420)
- Leases (1,416) (2,967) (2,778)
- Derivative financial instruments (62) - -
Contract liabilities (2,426) (3,312) (2,179)
Trade and other payables (21,000) (69,526) (55,522)
Current tax liabilities (711) (42) (33)
Liabilities included in disposal group classified as held for sale 5 (101,566) - -
(139,915) (86,960) (71,932)
Non-current liabilities
Financial liabilities
- Borrowings (23,805) (23,159) (25,021)
- Leases (6,128) (12,458) (11,171)
Deferred tax liabilities (5,048) (5,503) (4,580)
Other non-current liabilities (336) (55) (1,385)
(35,317) (41,175) (42,157)
Total liabilities (175,232) (128,135) (114,089)
Net assets 136,471 134,551 130,985
Shareholders' equity
Share capital 2,350 2,343 2,312
Share premium 10,500 10,155 9,176
Other reserves 107,645 104,901 102,697
Total shareholders' equity 120,495 117,399 114,185
Non-controlling interests 15,976 17,152 16,800
Total equity 136,471 134,551 130,985
(1) See note 10 for an explanation of the prior year restatement in relation
to the recognition of revenue from customer contracts within the Engineering
division.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 3 September 2022
1 Treasury Share Reserve Equity Foreign Total Shareholders' Non-
Share Share £'000 Compensation Exchange Other Retained Equity controlling Total
Capital Premium Reserve Reserve Reserve Earnings £'000 Interests Equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
As previously reported at 29 August 2020 2,312 9,176 (45) 734 3,550 197 98,907 114,831 16,800 131,631
Prior year adjustment(1) - - - - 9 - (655) (646) - (646)
At 30 August 2020 (restated)(1) 2,312 9,176 (45) 734 3,559 197 98,252 114,185 16,800 130,985
Profit for the year - - - - - - 7,656 7,656 1,940 9,596
Other comprehensive (expense)/income - - - (1,628) - 1,338 (290) - (290)
-
Total comprehensive (expense)/income - - - - (1,628) - 8,994 7,366 1,940 9,306
Dividends paid - - - - - - (5,490) (5,490) (1,647) (7,137)
Equity-settled share-based payment transactions - - 406 - - - 406 58 464
-
Excess deferred taxation on share-based payments - - - - - 32 32 1 33
-
Allotment of shares 31 979 - - - - - 1,010 - 1,010
Purchase of own shares held in trust - - - - - - (110) - (110)
(110)
Transfer - - 155 (660) - (2) 507 - - -
At 28 August 2021 2,343 10,155 - 480 1,931 195 102,295 117,399 17,152 134,551
As previously reported at 28 August 2021 2,343 10,155 - 480 1,903 195 103,006 118,082 17,152 135,234
Prior year adjustment(1) - - - - 28 - (711) (683) - (683)
At 29 August 2021 (restated)(1) 2,343 10,155 - 480 1,931 195 102,295 117,399 17,152 134,551
Profit/(loss) for the year - - - - - 5,072 5,072 (1,223) 3,849
-
Other comprehensive income/(expense) - - - 4,337 - (2,147) 2,190 - 2,190
-
Total comprehensive income/(expense) - - - 4,337 - 2,925 7,262 (1,223) 6,039
-
Dividends paid - - - - - - (4,687) (4,687) - (4,687)
Equity-settled share-based payment transactions - - 199 - - - 199 50 249
-
Excess deferred taxation on share-based payments - - - - - (30) (30) (3) (33)
-
Allotment of shares 7 345 - - - - - 352 - 352
Transfer - - - (151) - (3) 154 - - -
At 3 September 2022 2,350 10,500 528 6,268 192 100,657 120,495 15,976 136,471
-
(1) See note 10 for an explanation of the prior year restatement in relation
to the recognition of revenue from customer contracts within the Engineering
division
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 3 September 2022
2022 2021
Notes £'000 £'000
Cash flows from operating activities
Cash generated from continuing operations 7 4,473 18,131
Interest received 179 109
Interest paid (986) (936)
Tax paid (805) (1,278)
Net cash generated from operating activities in continuing operations
2,861 16,026
Net cash (used in)/generated from operating activities in discontinued
operations
(6,901) 2,871
Net cash (used in)/generated from operating activities (4,040) 18,897
Cash flows from investing activities
Acquisition of subsidiaries (net of cash acquired) (426) -
Contingent consideration paid - (1,077)
Dividend received from associate and joint ventures 2,250 1,148
Purchase of intangible assets (342) (107)
Proceeds from sale of property, plant and equipment 31 167
Purchase of property, plant and equipment (3,696) (3,026)
Proceed from sale of investment property 149 -
Net cash used in investing activities in continuing operations (2,034) (2,895)
Net cash (used in)/generated from investing activities in discontinued
operations
(2,749) 155
Net cash used in investing activities (4,783) (2,740)
Cash flows from financing activities
Proceeds from issue of ordinary share capital 352 1,010
Purchase of own shares held in trust - (110)
New financing and draw downs on RCF 10,051 11,526
Repayment of RCF draw downs (8,000) (8,500)
Lease principal repayments (1,550) (1,778)
Repayment of borrowings (2,840) (2,400)
Dividends paid to shareholders (4,687) (5,490)
Net cash used in financing activities in continuing operations (6,674) (5,742)
Net cash generated from/(used in) financing activities in discontinued
operations
20,324 (727)
Net cash generated from/(used in) financing activities 13,650 (6,469)
Effect of exchange rate changes 332 (296)
Net increase in cash and cash equivalents 5,159 9,392
Cash and cash equivalents at beginning of the year 19,696 10,304
Cash and cash equivalents at end of the year 24,855 19,696
NOTES TO THE PRELIMINARY ANNOUNCEMENT
1. Basis of preparation and going concern
The financial information in this preliminary
announcement does not constitute the Company's statutory accounts for the
years ended 3 September 2022 or 28 August 2021. Statutory accounts for 2021
have been delivered to the Registrar of Companies, and those for 2022 will be
delivered in due course. The auditor has reported on those accounts; their
reports were (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.
Going concern
The financial information in this preliminary announcement has been prepared
on a going concern basis which the Directors consider to be appropriate for
the following reasons.
The Directors have reviewed the Group's operational forecasts and projections
for the three years to 31 August 2025 as used for the viability assessment,
taking account of reasonably possible changes in trading performance, together
with the planned capital investment over that same period. The Group is
expected to have a sufficient level of financial resources available through
operating cash flows and existing bank facilities for the period to 31 March
2024 ("the going concern period"). The Group has operated within all its
banking covenants throughout the year. In addition, the Group's main banking
facility is in place until December 2024.
For the purpose of assessing the appropriateness of the preparation of the
Group's accounts on a going concern basis, the Directors have prepared
financial forecasts for the Group, comprising profit before and after
taxation, balance sheets and cash flows covering the period to 31 March 2024.
The forecasts consider the current cash position, the availability of banking
facilities and an assessment of the principal areas of risk and uncertainty.
These forecasts have been sensitised on a combined basis for severe but
plausible downside scenarios. The scenarios tested included significant
reductions in profitability and associated cashflows linked to the four
principal risks of customer demand, supply chain, strategic partners and
reliance on key 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 financial 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.
In all the scenarios, the Group complies with its financial bank covenants,
operates within its existing bank facilities, and meets its liabilities as
they fall due.
Consequently, the Directors are confident that the Group and the Company will
have sufficient funds to continue to meet their liabilities as they fall due
until 31 March 2024 and therefore have prepared the financial information in
this preliminary announcement on a going concern basis.
Accounting policies
The accounting policies are consistent with those of the prior year.
Prior year restatements
The Board has made two prior year restatements to continuing operations, both
related to revenue recognised under IFRS15 (Revenue from Contracts with
Customers). The first restatement relates to the timing of revenue recognition
for a small number of contracts with a single customer in China, where an
adjustment to correct the approach taken in previous years has been made, to
adhere to IFRS15 requirements on enforceable rights to payment in the event of
termination of contract by the customer.
The second case relates to contracts directly related to Mechanical Stress
Improvement Process technology and specifically whether these contracts
contained two performance obligations (the conclusion reached in prior years)
or one. This is an area which requires significant judgement and after careful
consideration, the Board decided to account for the contracts as having one
rather than two performance obligations. The impact of this change has been
reflected on previous years' results as a prior year restatement.
The Board has also made two prior year restatements to discontinued
operations, both related to revenue recognition. Firstly, in prior years the
Group had incorrectly identified itself as acting as a principal when
recognising revenue related to fertiliser sales, made through one specific
supplier. A review of this transaction highlighted that the Group was acting
as an agent, rather than principal, under IFRS 15 guidance, which means the
net proceeds from the transaction, rather than gross sales, should be
recognised as revenue. A correction to reduce both revenue and cost of sales
in the prior year has been made. A further correction to reduce both revenue
and cost of sales has also been made in respect of intra-company transactions
which had not been netted off in prior years. In both cases there is no impact
on profit.
Further details of the effect of the prior year restatements can be found in
note 10.
2. Segmental information
The segmental information for the year ended 3
September 2022 is as follows:
Speciality Agriculture Continuing Group Discontinued
£'000 Engineering Central £'000 operations £'000
£'000 £'000
Total segment revenue 84,321 46,347 - 130,668 343,844
Inter segment revenue (6,244) (184) - (6,428) (6)
Revenue from external customers 78,077 46,163 - 124,240 343,838
Adjusted(1) EBITDA(2) 9,869 7,693 (2,487) 15,075 7,586
Depreciation, amortisation and profit/(loss) on disposal of non-current assets
(1,532) (2,326) (151) (4,009) (2,693)
Share of post-tax results of associate (adjusted(1)) and joint ventures
840 - - 840 2,016
Adjusted(1) operating profit/(loss) 9,177 5,367 (2,638) 11,906 6,909
Adjusting items (note 3) 131 (3,351) (454) (3,674) (7,735)
Operating profit/(loss) 9,308 2,016 (3,092) 8,232 (826)
Finance income 351 -
Finance costs (1,017) (756)
Adjusted(1) profit before taxation 11,240 6,153
Adjusting items (note 3) (3,674) (7,735)
Profit/(loss) before taxation 7,566 (1,582)
Taxation of discontinued operations (611)
Loss for the year from discontinued operations (note 5) (2,193)
( )
( )
(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 3
(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 segmental information for the year ended 28
August 2021 is as follows. This has been restated to present continuing
operations and discontinued operations separately. This is to aid
comparability with the segmental information presented for the current year.
Prior year disclosures have also been restated in respect of the recognition
of revenue from customer contracts within the Engineering division and
discontinued operations. Further details of the prior year restatements can be
found in note 10.
Speciality Agriculture Continuing Discontinued operations
Restated: £'000 Engineering Central Group £'000
£'000 £'000 £'000
Total segment revenue 74,395 51,864 - 126,259 284,240
Inter segment revenue (5,934) (6) - (5,940) (6)
Revenue from external customers 68,461 51,858 - 120,319 284,234
Adjusted(1) EBITDA(2) 9,858 6,092 (2,094) 13,856 7,025
Depreciation, amortisation and profit/(loss) on disposal of non-current assets
(1,335) (2,208) (227) (3,770) (2,513)
Share of post-tax results of associate (adjusted(1)) and joint ventures
991 - - 991 1,955
Adjusted(1) operating profit/(loss) 9,514 3,884 (2,321) 11,077 6,467
Adjusting items (note 3) (2,847) 97 (127) (2,877) (1,684)
Operating profit/(loss) 6,667 3,981 (2,448) 8,200 4,783
Finance income 260 -
Finance costs (925) (307)
Adjusted(1) profit before taxation 10,412 6,160
Adjusting items (note 3) (2,877) (1,684)
Profit before taxation 7,535 4,476
Taxation of discontinued operations (627)
Profit for the year from discontinued operations (note 5) 3,849
(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 3
(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
3. Adjusting items
In reporting financial information, the Group presents 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 Group believes that these APMs provide
stakeholders with additional useful information on the performance of the
business. The following adjusting items have been added back to reported
profit measures.
2022 2021
Continuing operations Discontinued operations Continuing Discontinued
operations operations
£'000 £'000 £'000 £'000
Amortisation of acquired intangible assets (i) 940 - 1,186 -
Adjustments to contingent consideration (ii) (1,320) - (1,013) -
Restructuring/closure costs (iii) - - 248 -
Strategic review costs (iv) 455 - - -
Acquisition-related costs (v) - 20 - -
Gain on acquisition of Afgritech (vi) (733) - - -
Loss on fair value measurement less costs to sell (vii) - 6,376 - -
Cloud configuration and customisation costs - Group (viii) 113 974 366 990
Cloud configuration and customisation costs - share of associate (viii)
- 365 - 515
Goodwill impairment (ix) 4,219 - - -
Impairment of joint venture (x) - - 2,090 -
Effect of deferred tax rate change - share of associate (xi) - - - 179
Included in profit before taxation 3,674 7,735 2,877 1,684
Effect of deferred tax rate change - Group (xi) - - 1,073 (83)
Taxation effect of the above adjusting items (342) (186) (340) (188)
Included in profit for the year 3,332 7,549 3,610 1,413
(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 year end. Movements in fair value arise from changes to the
expected payments since the previous year 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.
(iv) Strategic review costs include external adviser fees incurred
in the development of the Group's strategy.
(v) Acquisition-related costs relate to legal fees incurred in
respect of an aborted acquisition.
(vi) On 6 June 2022 the Group acquired the remaining 50%
shareholding in Afgritech Ltd and the financial position and performance of
the business, together with that of its 100% owned subsidiary Afgritech LLC,
was fully consolidated from this date. The Group's joint venture interest was
effectively disposed of at this date with a gain of £197,000, being the
difference between the carrying value and the fair value of the joint venture
interest, recognised. Also included in the amount in the table above are
foreign exchange gains of £559,000 that have been recycled from the foreign
exchange reserve to the income statement on disposal, acquisition-related
costs of £27,000 and negative goodwill of £4,000.
(vii) At 3 September 2022 the carrying value of the assets and
liabilities included in the disposal group classified as held for sale exceeds
the fair value less costs sell. As a result the net assets of the disposal
group have been reduced to the fair value less costs to sell resulting in a
loss of £6,376,000 being recognised. This includes a loss attributable to the
non-controlling interests of £2,603,000 together with costs to sell of
£175,000 recognised within the accounts of Carrs Billington Agriculture
(Sales) Ltd.
(viii) Costs relating to material spend in relation to the
implementation of the Group's, and associate's, ERP system that are expensed
in accordance with the IFRIC agenda decision.
(ix) Impairment of goodwill in respect of the Chirton profit
centre and Wälischmiller Engineering GmbH cash-generating units.
(x) During the prior year the joint venture Afgritech LLC
reported a loss and was expected to continue to underperform against budgeted
information in the short to medium term. An impairment review was undertaken
which resulted in an impairment charge of £1,314,000 against the carrying
amount of interest in joint venture and an impairment charge of £776,000
against the carrying amount of a loan receivable.
(xi) During the prior year legislation was substantively enacted
in the UK to increase the corporate tax rate to 25% with effect from 1 April
2023. As a result of the change, a tax charge of £179,000 was recognised in
the prior year in the Group's share of associate results and £990,000 was
recognised in the Group's prior year tax charge in relation to the
remeasurement of deferred assets and liabilities. This does not relate to the
underlying performance of the associate or Group and was therefore included as
an adjusting item.
4. Taxation
2022 2021
(restated)
Continuing Discontinued Continuing Discontinued
operations operations operations operations
£'000 £'000 £'000 £'000
Analysis of the charge in the year
Current tax:
UK corporation tax
Current year 119 316 259 578
Adjustment in respect of prior years 164 51 (205) 223
Foreign tax
Current year 1,607 - 1,130 -
Adjustment in respect of prior years (1) - (84) -
Group current tax 1,889 367 1,100 801
Deferred tax:
Origination and reversal of timing differences
Current year 10 224 764 18
Adjustment in respect of prior years (375) 20 (76) (192)
Group deferred tax (365) 244 688 (174)
Tax on profit 1,524 611 1,788 627
Profit/(loss) before taxation 7,566 (1,582) 7,535 4,476
Tax at 19% (2021: 19%) 1,438 (301) 1,432 850
Effects of:
Tax effect of share of results
of associate and joint ventures
(160) (314) (188) (240)
Tax effect of expenses that are
not allowable in determining taxable profit
Tax effect of non-taxable 1,213 1,246 436 53
income
(1,183) (143) (778) -
Effects of different tax rates
of foreign subsidiaries 149 - 99 -
Effects of deferred tax rates 68 52 1,057 (67)
Unrecognised deferred tax on 99 - 95 -
losses
112 - - -
Withholding taxes suffered
(212) 71 (365) 31
Adjustment in respect of prior years
Total tax charge for the year 1,524 611 1,788 627
The tax effect of expenses that are not allowable in determining taxable
profit includes share-based payments, depreciation of non-qualifying assets,
disregarded foreign exchange movements and other expenses disallowable for UK
corporation tax. In addition, for current year continuing operations, it
includes the goodwill impairment (note 3) and, in respect of discontinued
operations, it includes the loss recognised on the measurement to fair value
less costs to sell of the disposal group (notes 3 and 5). Prior year
continuing operations includes adjustments for impairment of joint venture
(note 3).
The tax effect of non-taxable income includes adjustments to contingent
consideration (note 3), the effect of income within the patent box regime,
adjustments to profit before taxation for research and development expenditure
credits in respect of prior years and the 30% benefit of the super deduction
for capital allowances.
In the prior year legislation was substantively enacted in the UK to increase
the corporate tax rate to 25% with effect from 1 April 2023. As a result of
the change, a tax charge of £990,000 was recognised in the prior year for the
parent Company and UK tax resident subsidiaries in relation to the
remeasurement of deferred tax assets and liabilities. UK deferred tax balances
at 3 September 2022 and 28 August 2021 are provided at 25%. In the prior year
the charge of £990,000 does not relate to the underlying profitability of the
Group and has been treated as an adjusting item (note 3).
5. Discontinued operations and non-current assets held for sale
On 31 August 2022, the Group entered into a conditional agreement to dispose
of its interests in the Carr's Billington Agricultural business to Edward
Billington & Son Limited. In accordance with IFRS 5 'Non-current assets
held for sale and discontinued operations', the assets and liabilities related
to the business were classified as a disposal group held for sale at 3
September 2022. The sale was conditional on approval by the Group's
shareholders which was given at a General Meeting held on 19 September 2022.
The disposal completed on 26 October 2022.
On completion, the Company received £24.7m initial cash proceeds following
certain working capital adjustments since the announcement on 31 August 2022.
The consideration receivable remains subject to any final adjustments once the
completion accounts mechanism is finalised. Current estimates of fair value
less costs to sell is lower than the carrying value of the disposal group's
net assets, and accordingly a loss of £6.2m has been recognised in the loss
for the year from discontinued operations.
The tables below show the results of the discontinued operations and the loss
recognised on the remeasurement to fair value less costs to sell for the year
ended 3 September 2022, together with the classes of assets and liabilities
comprising the operations held for sale in the Group balance sheet as at 3
September 2022.
2022 2021
£'000 £'000
Revenue (2021: restated) 343,838 284,234
Expenses (2021: restated) (340,870) (281,019)
2,968 3,215
Share of post-tax results of associate 1,165 831
Share of post-tax results of joint venture 486 430
Profit before taxation of discontinued operations 4,619 4,476
Taxation (note 4) (611) (627)
Profit after taxation of discontinued operations 4,008 3,849
Pre-taxation loss recognised on the measurement to fair value less costs to (6,201) -
sell
Taxation - -
After taxation loss recognised on the measurement to fair value less costs to (6,201) -
sell
(Loss)/profit for the year from discontinued operations (2,193) 3,849
Revenue and expenses in the table above in respect of the prior year have been
reduced by £10,497,000 to remove revenues where Carrs Billington Agriculture
(Sales) Ltd acts as agent rather than principal together with £2,769,000 in
respect of intra-company transactions which had not been netted off in prior
years. There is no impact on profit in respect of either of these.
The pre-taxation loss recognised on the measurement to fair value less costs
to sell includes £2,603,000 in respect of the non-controlling interest's
share of the measurement impairment.
The net assets relating to the disposal group at 3 September 2022 in the Group
balance sheet is shown below:
£'000
Assets of the disposal group
Goodwill 5,285
Property, plant and equipment 8,539
Right-of-use assets 8,267
investment in associate 15,218
Interest in joint ventures 2,870
Other investments 45
Deferred tax asset 177
Inventories 34,442
Trade and other receivables 65,946
Current tax assets 101
Cash and cash equivalents 12,074
Loss on fair value measurement before costs to sell (4,433)
Total assets 148,531
Liabilities of the disposal group
Borrowings (24,415)
Leases (8,196)
Trade and other payables (68,955)
Total liabilities (101,566)
Net assets 46,965
Costs to sell of £1,768,000 have been incurred by the parent Company and are
therefore excluded from the loss on fair value measurement shown above. The
loss on fair value measurement before costs to sell includes £2,603,000 in
respect of the non-controlling interest's share of the measurement impairment.
6. Earnings per ordinary share
Basic earnings per share are based on profit attributable to shareholders and
on a weighted average number of shares in issue during the year of 93,873,465
(2021: 93,123,043). The calculation of diluted earnings per share is based
on 95,133,662 shares (2021: 94,690,182).
Adjusting items disclosed in note 3 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:
2021 2021
2022 2022 (restated) (restated)
Earnings Earnings per Earnings Earnings per
£'000 share pence £'000 share pence
Continuing operations
Earnings per share - basic 6,042 6.4 5,747 6.2
Adjusting items:
Amortisation of acquired intangible assets 940 1.0 1,186 1.3
Adjustments to contingent consideration (1,320) (1.4) (1,013) (1.1)
Restructuring/closure costs - - 248 0.3
Strategic review costs 455 0.5 - -
Gain on acquisition of Afgritech (733) (0.8) - -
Cloud configuration and customisation costs - Group 113 0.1 366 0.4
Goodwill impairment 4,219 4.5 - -
Impairment of joint venture - - 2,090 2.2
Taxation effect of the above (342) (0.3) (340) (0.4)
Effect of increase to UK deferred tax rate - Group - - 1,073 1.2
Earnings per share - adjusted 9,374 10.0 9,357 10.1
2021 (restated) 2021 (restated)
2022 2022 Earnings Earnings per
Earnings Earnings per £'000 Share pence
£'000 Share pence
Discontinued operations
Earnings per share - basic (970) (1.0) 1,909 2.1
Adjusting items:
Acquisition-related costs 20 - - -
Loss on fair value measurement less costs to sell 6,376 6.8 - -
Cloud configuration and customisation costs - Group 974 1.0 990 1.1
Cloud configuration and customisation costs - share of associate 365 0.4 515 0.6
Taxation effect of the above (186) (0.2) (188) (0.3)
Effect of increase to UK deferred tax rate - Group - - (83) (0.1)
Effect of increase to UK deferred tax rate - share of associate - - 179 0.2
Non-controlling interest in the above (3,085) (3.3) (433) (0.5)
Earnings per share - adjusted 3,494 3.7 2,889 3.1
Total (basic) 5,072 5.4 7,656 8.3
Total (adjusted) 12,868 13.7 12,246 13.2
7. Cash generated from continuing operations
2021
2022 (restated)
£'000 £'000
Continuing operations
Profit for the year 6,042 5,747
Adjustments for:
Tax 1,524 1,788
Tax credit in respect of R&D (1,553) (260)
Depreciation of property, plant and equipment 2,778 2,576
Depreciation on right-of-use assets 1,276 1,219
Depreciation of investment property 5 6
Intangible asset amortisation 988 1,228
Goodwill impairment 4,219 -
Profit on disposal of property, plant and equipment (17) (73)
Profit on disposal of right-of-use assets (5) -
Profit on disposal of investment property (76) -
Gain on acquisition of Afgritech (764) -
Adjustments to contingent consideration (1,320) (1,013)
Net fair value charge on share-based payments 148 345
Other non-cash adjustments (119) (606)
Interest income (351) (260)
Interest expense and borrowing costs 1,077 985
Share of results of joint ventures (840) (991)
Impairment of joint venture - 2,090
IAS19 income statement charge (excluding interest):
Administrative expenses 126 18
Changes in working capital (excluding the effects of acquisitions):
(Increase)/decrease in inventories (6,153) 568
Increase in receivables (218) (1,509)
(Decrease)/increase in payables (2,294) 6,273
Cash generated from continuing operations 4,473 18,131
8. Pensions
The Group operates its current pension arrangements on a defined benefit and
defined contribution basis. The valuation of the defined benefit scheme under
the IAS19 accounting basis showed a surplus in the scheme at 3 September 2022
of £6.8m (2021: £9.4m).
In the year, the retirement benefit charge, excluding interest, in respect of
the Carr's Group Pension Scheme was £126,000 (2021: £18,000).
A Group subsidiary undertaking is a participating employer in a defined
benefit pension scheme of the associate, Carrs Billington Agriculture
(Operations) Ltd. The IAS19 accounting basis showed a surplus for that scheme
at 3 September 2022 of £5.6m (2021: £5.4m). The scheme is treated as a
defined contribution scheme by the Group, and its level of participation in
the scheme is estimated at 48.5%, which is based on its estimated share of the
buy-out liabilities. Due to the fact that the sponsoring employer is an
associate company of the Group, 49% of the surplus calculated on an IAS19
accounting basis is included in the Group's balance sheet within its
'Investment in associate'.
At 3 September 2022 the investment in associate is included within assets of a
disposal group held for sale (note 5).
9. Analysis of net debt and leases
At Other Acquired with Transferred to liabilities of At 3 September
29 August Cash Non-Cash Subsidiaries Exchange disposal group 2022
2021 Flow Changes £'000 Movements £'000 £'000
£'000 £'000 £'000 £'000
Cash and cash equivalents 24,309 9,354 - 594 332 (12,074) 22,515
Bank overdrafts (4,613) (5,121) - - - - (9,734)
19,696 4,233 - 594 332 (12,074) 12,781
Loans and other borrowings:
- current (6,500) (20,849) 77 (117) (26) 24,415 (3,000)
- non-current (23,159) (322) (48) (214) (62) - (23,805)
Net debt (9,963) (16,938) 29 263 244 12,341 (14,024)
Leases: -
- current (2,967) - (181) - (108) 1,732 (1,416)
- non-current (12,458) 3,186 (3,212) - 6,464 (6,128)
Leases (15,425) 3,186 (3,393) - (108) 8,196 (7,544)
Net debt and leases (25,388) (13,752) (3,364) 263 136 20,537 (21,568)
. Prior year restatements
The Board has made two prior year restatements to continuing operations, both
related to revenue recognised under IFRS15 (Revenue from Contracts with
Customers). The first restatement relates to the timing of revenue recognition
for a small number of contracts with a single customer in China, where an
adjustment to correct the accounting treatment in previous years has been
made, to adhere to IFRS15 requirements on enforceable rights to payment in the
event of termination of contract by the customer. This restatement of prior
years has resulted in shareholders' equity at 30 August 2020 being reduced by
£254,000 and increases to revenue (£951,000) and adjusted profit after tax
(£249,000) in the year to 28 August 2021.
The second case relates to contracts directly related to Mechanical Stress
Improvement Process technology and specifically whether these contracts
contained two performance obligations (the conclusion reached in prior years)
or one. This is an area which requires significant judgement and after careful
consideration, the Board decided to account for the contracts as having one
rather than two performance obligations. The impact of this change has been
reflected on previous years' results as a prior year restatement.
Shareholders' equity at 30 August 2020 was reduced by £392,000 as a result of
this change. For the year to 28 August 2021, revenue was reduced by £386,000
and adjusted profit after tax decreased by £305,000 as a result of this
change.
The Board has also made two prior year restatements to discontinued
operations, both related to revenue recognition. Firstly, in prior years the
Group had incorrectly identified itself as acting as a principal when
recognising revenue related to fertilisers sales, made through one specific
supplier. A review of this transaction highlighted that the Group was acting
as an agent, rather than principal, under IFRS 15 guidance, which means the
net proceeds from the transaction, rather than gross sales, should be
recognised as revenue. A correction to reduce both revenue and cost of sales
in the year to 28 August 2021 by £10,497,000 has been made. There is no
impact on profit.
A further correction to reduce both revenue and cost of sales of £2,769,000
has also been made in respect of intra-company transactions which had not been
netted off on prior years. There is no impact to profit.
The prior year restatements to discontinued operations are reflected in note
5.
The affected financial statement line items for the continuing operations of
the Group are as follows.
28 August 2021 (previously reported - Group) 28 August 2021 (previously reported - continuing operations only) Restatement in respect of enforceable rights to payment Restatement in respect of performance obligations £'000 28 August 2021 (restated -continuing operations only)
£'000 £'000 £'000 £'000
Income Statement
Revenue 417,254 119,754 951 (386) 120,319
Cost of sales (365,174) (88,589) (606) - (89,195)
Gross profit 52,080 31,165 345 (386) 31,124
Adjusted operating profit 17,585 11,118 345 (386) 11,077
Reported operating profit 13,024 8,241 345 (386) 8,200
Adjusted profit before taxation 16,613 10,453 345 (386) 10,412
Reported profit before taxation 12,052 7,576 345 (386) 7,535
Taxation (2,400) (1,773) (96) (81) (1,788)
Adjusted profit for the year 14,675 9,413 249 (305) 9,357
Reported profit for the year 9,652 5,803 249 (305) 5,747
Basic EPS (pence) 8.3 6.2 0.3 (0.3) 6.2
Diluted EPS (pence) 8.1 6.1 0.3 (0.3) 6.1
Restatement in respect of enforceable rights to payment
28 August 2021 (previously reported) £'000 Restatement in respect of performance obligations £'000
£'000 28 August 2021 (restated)
£'000
Balance Sheet
Deferred tax asset - 182 182
Total non-current assets 123,363 - 182 123,545
Total assets 262,504 - 182 262,686
Contract liabilities (2,447) - (865) (3,312)
Total current liabilities (86,095) - (865) (86,960)
Total liabilities (127,270) - (865) (128,135)
Net assets 135,234 - (683) 134,551
Other reserves 105,584 - (683) 104,901
Total shareholders' equity 118,082 - (683) 117,399
Total equity 135,234 - (683) 134,551
In accordance with IAS 1, a third balance sheet has been presented to show the
impact to the opening balance sheet for the prior year.
The affected financial statement line items are as follows.
Restatement in respect of enforceable rights to payment
£'000 Restatement in respect of performance obligations
30 August 2020 (previously reported) £'000
£'000 30 August 2020 (restated)
£'000
Balance Sheet
Inventories 40,961 618 - 41,579
Contract assets 8,114 (349) - 7,765
Total current assets 120,403 269 - 120,672
Total assets 244,805 269 - 245,074
Contract liabilities (1,061) (622) (496) (2,179)
Total current liabilities (70,814) (622) (496) (71,932)
Deferred tax liabilities (4,783) 99 104 (4,580)
Total non-current liabilities (42,360) 99 104 (42,157)
Total liabilities (113,174) (523) (392) (114,089)
Net assets 131,631 (254) (392) 130,985
Other reserves 103,343 (254) (392) 102,697
Total shareholders' equity 114,831 (254) (392) 114,185
Total equity 131,631 (254) (392) 130,985
11. Alternative performance measures glossary
The Preliminary Announcement includes 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 are also used in assessing performance under the Group's incentive plans.
Therefore the Directors believe that these APMs provide stakeholders with
additional useful information on the Group's performance.
Alternative performance measure Definition and comments
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 2. 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 2. Adjusted results are presented because if
included, these adjusting items could distort the understanding of the Group's
performance for the year and the comparability between the years 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 2. Adjusted results are presented
because if included, these adjusting items could distort the understanding of
the Group's performance for the year and the comparability between the years
presented.
Adjusted profit for the year Profit after taxation after adding back items regarded by the Directors as
adjusting items. This measure is reconciled to statutory profit after taxation
in the income statement. Adjusted results are presented because if included,
these adjusting items could distort the understanding of the Group's
performance for the year and the comparability between the years 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 year. This is
reconciled to basic earnings per share in note 6.
Net debt The net position of the Group's cash at bank and borrowings per the balance
sheet. Details of the movement in net debt is shown in note 9.
12. The Board of Directors approved the preliminary announcement on
22 March 2023.
13. The Company intends to post a copy of the Report and Accounts to
shareholders on or around 6 April 2023. The full Report and Accounts will
also be available upon request from the Company Secretary, Carr's Group plc,
Old Croft, Stanwix, Carlisle, CA3 9BA or alternatively on the Company's
website: carrsgroup-ir.com
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR SEIESEEDSESDRecent news on Carr's
See all newsREG - Carr's Group PLC - Strategic Update and Interim Results
AnnouncementREG - Carr's Group PLC - Appointment of Joint Corporate Broker
AnnouncementREG - Carr's Group PLC - Total Voting Rights
AnnouncementREG - Carr's Group PLC - Total Voting Rights
AnnouncementREG - Carr's Group PLC - Total Voting Rights
Announcement