REG - Carr's Group PLC - Full Year Results
21/12/2023 07:15
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RNS Number : 5355X Carr's Group PLC 21 December 2023
21 December 2023
CARR'S GROUP PLC
FULL YEAR RESULTS
For the year ended 2 September 2023
Carr's Group plc (CARR.L), (''Carr's, the ''Company'', or the ''Group'') the
Speciality Agriculture and Engineering Group, announces its audited results
for the year ended 2 September 2023.
Financial Highlights
Adjusted (Continuing Operations) FY23 FY22 +/-%
Revenue (£'m) 143.2 124.2 +15.3
Adjusted operating profit (£'m) 8.0 11.9 -33.2
Adjusted profit before tax (£'m) 7.5 11.2 -33.2
Adjusted earnings per share (p) 6.2 10.0 -38.0
Statutory (Continuing Operations) FY23 FY22 +/-%
Revenue (£'m) 143.2 124.2 +15.3
Operating profit (£'m) 2.0 8.2 -76.3
Profit before tax (£'m) 1.5 7.6 -80.1
Basic earnings per share (p)
Continuing Operations 0.4 6.4 -93.8
Discontinued Operations* (0.7) (3.5)
Reported (0.3) 2.9 -110.3
Dividend per share (p) 5.2 5.2 -
Net cash / (debt) (£'m) 4.2 (14.0)
*FY22 restated in relation to the loss recognised on the measurement to fair
value less costs to sell (see note 10)
Continuing Operations Highlights
· Engineering Division
− Adjusted operating profit of £5.3m (FY22: £5.4m) with
strong second half performance.
− Record multi-year forward order book £60m (FY22: £41m)
reflecting favourable long term macro trends supporting the nuclear sector,
power, defence and medical segments.
· Speciality Agriculture Division
− Revenues increased 18.7% on prior year with material
selling price increases to recover input prices offsetting volume reductions.
− Adjusted operating profit of £5.6m (FY22: £9.2m).
− Trading volumes in both key markets impacted by drought
conditions in parts of the USA and continuing high farm input costs in the UK
supressing demand.
− The challenging market conditions in both markets are
continuing, however, the Board expects to return to growth in the medium to
long term.
· Central Costs
− Central costs of £3.0m (FY22: £2.6m).
− Cost reduction measures underway in FY24.
· Adjusting Items
− £6.0m of adjusting items (pre-tax) comprising:
§ £4.8m of adjusting items are non-cash items, £3.8m of which is a write
down of goodwill and other intangible assets arising primarily as a result of
discount rate movements,
§ £1.2m of restructuring and other non-recurring cash costs.
· Net Cash / Debt
− Year end Net Cash of £4.2m (FY22: Net Debt £14.0m) -
movement driven primarily by proceeds of sale of Agricultural Supplies
division and investment of £8.3m in targeted working capital and cap-ex.
− Final consideration of £4m from disposal of
Agricultural Supplies division received post period end.
· Dividends
Final dividend of 2.85p per share results in dividends for the year of 5.2p
per share (FY22: 5.2p).
Strategic Highlights
· Agricultural Supplies Division disposal completed on 26
October 2022 with total cash proceeds of £29.9m, before the deduction of
£0.8m in respect of property rental terms agreed with Billington Group, with
the final £4.0m received in October 2023.
· Sale proceeds utilised to date in:
− Net Debt reduction
− Capacity improvements within Engineering Division
− Other opportunities to increase shareholder value are
being evaluated and will form part of future updates
· Board and management transition with appointment of Tim
Jones (Non-Executive Chairman), Gillian Watson (Non-Executive Director and
Senior Independent Director), David White (Chief Executive Officer), Gavin
Manson (Chief Financial Officer) and Martin Rowland (Executive Director of
Transformation).
· Board and new Executive team are reviewing the
performance, composition and organisation of the Group's operations.
· Group Bank Facilities of £25m extended to December
2026.
Outlook
Trading conditions in agriculture remain challenging and the Board expects
this to continue through the current financial year, while retaining
confidence in prospects improving in the medium to long term. The Engineering
division delivered a strong second half performance during FY23 and the order
book levels will enable year-on-year growth during FY24, while also providing
renewed confidence beyond the current financial year. At this early stage in
the new financial year expectations for FY24 remain unchanged.
Quote: David White (Chief Executive Officer)
"Despite the headwinds impacting Speciality Agriculture we are making
significant progress on our plans to increase market penetration, integrate
our businesses to optimise performance and reduce costs; and leverage
supportive trends. We expect challenging trading conditions in Speciality
Agriculture to continue through the current financial year but are focused on
managing current performance and positioning the division for growth on market
recovery. The Engineering order book levels will help deliver year on year
growth during FY24 and beyond, with operational leverage in that division
providing attractive returns."
Quote: Tim Jones (Non-Executive Chairman)
"The Carr's brand has a deservedly strong reputation which is supported by a
leading market share in the UK, an exciting range of product innovations and
new licence approvals alongside compelling opportunities in overseas markets.
Notwithstanding the challenging conditions presently being felt across the
agricultural sector the Company is firmly focused on market penetration, the
reduction of its costs and optimising shareholder value."
Carr's Group plc +44 (0) 1228 554 600
David White, Chief Executive Officer
Gavin Manson, Chief Financial Officer
FTI Consulting +44 (0) 203 727 1340
Richard Mountain/ Ariadna Peretz
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.
Chair's Statement
Review of the year
Since I became Chair in February 2023, I have seen first hand the
professionalism, focus and dedication of the teams working hard to achieve the
Group's aims. Though I joined at a difficult time, the Company having recently
disposed of its Agricultural Supplies division and suffering a delayed audit
which had caused its shares to be suspended and a delay in payment of the
final dividend, I have a sense of renewed optimism and purpose.
The order book for the Engineering division is at an all-time high - some 47%
up on this time last year; and the pipeline of opportunities across our
portfolio is inspiring, both in home and in overseas markets. Meanwhile, the
Speciality Agriculture businesses, though facing the headwinds of drought
impacts in pasture-fed USA markets, alongside the economic downturn
particularly impacting UK markets, have strong brands, compelling intellectual
property and opportunities to penetrate new markets, to enhance productivity
and to move up the value chain. The leadership team to drive the division's
dynamism and delivery across these opportunities is coming together at pace.
I have been able to visit our Ayr site, which has established a very
successful reach particularly into Scottish markets for Scotmin Nutrition, and
our Silloth site. Our customers recognise the quality and value they get from
our products and Carr's is proud that so many of these customers see our
products as a staple to supporting their agricultural businesses. We are
particularly pleased with the progress in manufacturing our bolus,
Tracesure™, at our Animax site outside Bury St Edmunds. Automation has been
implemented, productivity gains are, therefore, significant, whilst product
licensing approval has been won for EU markets. Marketing and technical
support is now being rolled out to drive market take-up of this exciting
product across the Group's ruminant animal businesses.
I have also had the opportunity to visit the Sellafield nuclear site, and have
seen our contributions to the operations in action - specialised fluidics
pumps that deal with nuclear slurry, robotic arms to move nuclear materials
safely, precision engineered containers to store and transport nuclear waste -
allowing me to better understand the breadth and scale of Carr's applications
at this location. Similarly, I had the privilege of being invited to see the
divisions's work at BAE's submarine construction site at Barrow in Furness
and, though I cannot be specific about all that we do there, I was
extraordinarily impressed. Across at North Shields I saw the contribution the
division makes to keeping the country's North Sea assets safe - our high-speed
manufacturing site there produces the emergency shut-off devices that deploy
in the event that a well head needs to be urgently shut down.
There is much to be proud of across our businesses - not least the Engineering
division's acclaimed apprenticeship initiatives, which drive the quality and
availability of upcoming talent not just for the Carr's businesses but more
widely too. This is local stakeholder engagement of truly impactful meaning.
The complexities and diversities of our businesses are as inspiring as they
are challenging and we intend to focus, improve, and deliver optimal
shareholder value through effective leadership at both operational and Board
level and we approach the next chapter with adaptability and unity.
Sale of the Agricultural Supplies division
The year saw the completion of the sale of all of our holdings in the
Agricultural Supplies division to co-owners Edward Billington & Son Ltd.
98% of the shareholder votes at a General Meeting of the Company on 19
September 2022 were in favour of the sale, which completed on 26 October 2022,
and we received the final payment of consideration in October 2023, bringing
the total received by the Company to £29.9m, before the deduction of £0.8m
in respect of property rental terms agreed with Billington Group. Important
trading relationships have remained very positive - a gratifying outcome for
all parties involved.
FY22 year-end process
As noted in the 2022 Annual Report and Accounts there were significant
challenges during the FY22 year-end process that impacted the Carr's team and
the external auditor, Grant Thornton UK LLP. We have extensively reviewed our
internal and external processes and real progress has been made in FY23.
Dividends
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, the same as the prior year (2022: 5.20 pence).
Subject to approval by shareholders at the Annual General Meeting of the
Company to take place in February 2024, the final dividend will be paid on 1
March 2024, to shareholders on the register at close of business on 26 January
2024 and the shares will go ex-dividend on 25 January 2024.
In order to reduce administrative costs and bring the Company in-line with the
majority of the stock market, the Board is proposing to move to a twice-yearly
dividend payment - an initial interim dividend anticipated to be declared at
the time of the Group's interim results, typically in April and payable in
June, and then a final dividend anticipated to be declared at the time of the
Group's preliminary results, typically in December and payable following
approval at the Company's Annual General Meeting.
Strategy
The order book value is an encouraging sign of the Engineering division's
success and our attention will remain focused on contracts with key customers,
pipeline opportunities and on optimising our production capacity across all
locations. Efficiency, sustainability, speed, and resource allocation will
remain key considerations as we capitalise on this strong business, and drive
profitability.
The agricultural landscape requires specific focus to take advantage of
available markets, product applications, opportunities to move up the value
chain and to optimise productivity gains. We are operating in a number of
mature markets with established competitors, which means maintaining our
market share demands astuteness in branding, pricing, innovation and business
development.
Our position in the agricultural and the engineering markets aligns with our
Environmental, Social, and Governance commitments and enables the Group to
seize opportunities in areas like clean energy, global demand for sustainable
protein and emissions reduction. These imperatives guide our path forward.
Board
During FY23 new Executive and Non-Executive Directors were appointed to the
Board, bringing fresh perspectives and insights.
Shelagh Hancock and Stuart Lorimer were appointed as Non-Executive Directors
from 1 September 2022. I became Non-Executive Chair on 21 February 2023 and
took over from Peter Page who stepped down as Executive Chair and, as
announced on 5 August 2022, took the role of Chief Executive Officer. Peter
stepped down from the Board and left the Group on 17 November 2023. We thank
Peter for his commitment to the Group over his tenure and wish him all the
best in his future endeavours.
As announced on 13 November 2023, David White was appointed by the Board as
Chief Executive Officer with effect from 17 November 2023 having completed an
orderly handover from Peter Page. David joined the Group in January 2023 and
became part of the Board on 21 February 2023 as Chief Financial Officer,
taking over from Neil Austin who left the Group in February 2023 to take up a
new role. David has been succeeded in the role of Chief Financial Officer by
Gavin Manson with effect from 13 November 2023. Gavin is not a member of the
Board but will attend Board meetings by invitation. Martin Rowland, who was
appointed to the Board as Non-Executive Director on 6 March 2023 as a
representative of Harwood Capital Management Limited ("Harwood") pursuant to a
relationship agreement between the Company and Harwood, was
appointed Executive Director of Transformation with effect from 13 November
2023.
We have also recently welcomed Gillian Watson to the Board. Gillian joined
as Non-Executive Director on 9 October 2023 and has succeeded John Worby as
Senior Independent Director. John retired from the Board on 31 October 2023
after almost nine years of diligent service for which he is warmly thanked.
Company Secretary and Legal Director Matthew Ratcliffe left the Group on 22
September 2023 to take up a new role and is succeeded by Justin Richards who
joined us on 25 September 2023 as our new Company Secretary and Legal
Director.
Further details of Board and Committee membership during FY23 can be found in
the Nomination Committee Report in the 2023 Annual Report and Accounts which
will be available to shareholders shortly.
Stakeholder engagement and statement on Section 172 of the Companies Act 2006
Stakeholder engagement is an important aspect of our business. Section 172 of
the Companies Act 2006 requires the Directors to promote the success of the
Company for the benefit of the members as a whole, having regard to the
interests of stakeholders in their decision-making. Directors understand the
importance of taking into account the views of stakeholders and the impact of
the Company's activities on local communities, the environment, including
climate change, and the Group's reputation.
General Meetings of the Company provide an opportunity to engage with
shareholders in person. In FY23 we held a General Meeting in relation to the
disposal of the Agricultural Supplies division. On 27 February 2023 we held
our Annual General Meeting which was well attended by shareholders, and
another General Meeting followed on 2 May 2023 to, amongst other matters,
approve the delayed 2022 Annual Report and Accounts. Details of the voting at
the February Annual General Meeting and the General Meeting held in May can be
found on our website.
Aside from these formal meetings, during the past year we have engaged with
shareholders on matters such as changes to long term incentive plan
performance measures and the Remuneration Policy. We also consulted on
executive remuneration following our General Meeting in May. Whilst our
Remuneration Report was approved by a majority at the General Meeting, there
were several shareholders who voted against approval.
The Chair of the Remuneration Committee conducted an engagement process from
which useful feedback was received and our response has been published on our
website. 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. The Board is happy to engage with shareholders at any time on a one-to
one level and proactively engage with shareholders to keep them up to date
when appropriate to do so.
During the year, the Non-Executive Directors visited different sites around
the Group and met with members of the senior leadership team. Peter Page also
spent significant time at the operational sites during the year meeting with
employees, customers, and strategic partners. This regular engagement with
current and prospective customers ranged from farmers at UK and US trade
events and distributors at international trade shows to site visits in the UK,
USA and Japan. We also maintain contact with external research and development
organisations and educational institutions, ranging from the UK Atomic Energy
Authority, agriculture faculties of US and UK universities and local colleges
for skills training.
Environmental, Social and Governance
We continue to make good progress to capture our data to identify climate
related risks and opportunities, as well as initiatives at each of our sites
to reduce our impact on the environment. The establishment of the
Environmental Steering Group, as well as the Green Teams at each of our sites
has ensured that environmental and social matters are given focus throughout
the organisation. Our governance structure supports this approach and we
ensure that responsible policies and practices underpin our business.
Through our operations in different sectors we positively contribute to global
efforts to reduce the impact on the environment. Our involvement in the
nuclear industry contributes to the global demand for sustainable power
businesses, and our Speciality Agriculture product range complements
grass-based systems which play such a crucial role in carbon sequestration.
People
As always, the business depends on the goodwill and commitment of all
colleagues. The whole Board is very grateful for everyone's contribution
during a year of internal change following the sale of the Agricultural
Supplies division, extraordinary challenges in agricultural markets and
significant progress on several fronts in the Engineering division.
Outlook
The Group's capacity to address current challenges and to harness the
potential of our brands is strong. We understand the importance of resilience,
patience, and adaptability in navigating the ebbs and flows of the market. We
are committed to optimising the value of our assets, capitalising on
increasing global demand, and advancing our clean energy initiatives.
Chief Executive's Review
During the financial year ended 2 September 2023 revenues increased 15.3% to
£143.2m (FY22: £124.2m). Adjusted operating profit for the Group of £8.0m
(FY22: £11.9m) was 33.2% down on the prior year. Adjusted profit before tax
reduced by 33.2% to £7.5m (FY22: £11.2m). Adjusted earnings per share for
continuing operations decreased by 38.0% to 6.2p (FY22: 10.0p) for the
year. All figures and the commentary set out on the following pages relate
solely to continuing operations, except where otherwise stated.
Divisional Review: Engineering
The Engineering division comprises specialist fabrication and precision
engineering businesses in the UK, robotics businesses in the UK, Europe and
USA, and engineering solutions businesses in the UK and USA.
2023 2022 % Change
Revenue (£m) 50.6 46.2 +9.6
Adjusted operating profit (£m) 5.3 5.4 -1.5
Adjusted operating margin (%) 10.4 11.6 -1.2ppts
Forward order book (£m) 59.8 40.6 +47.0
Revenue performance in the division was ahead of the prior year with a
particularly strong H2 performance delivering a 24% increase in adjusted
operating profit, following a slower H1.
The order book strengthened during the year, with £59.8m recorded at the year
end, significantly ahead of the FY22 year-end position of £40.6m. This
improved position will support performance in FY24 and FY25.
Fabrication and precision engineering revenues were up 16% in the period,
supported by continued high activity in the nuclear sector, including an
£8.4m contract to deliver instrument cabinets and shielding blocks to one of
Sellafield's new-build major infrastructure projects, and strong order intake
from the oil and gas sector.
Revenues in the robotics business were less than last year, a reflection of
temporary lower order intake in this business during prior year, FY22. With a
significant uplift in order intake in FY23, this part of the division's order
book now stands at record levels, including a £1.5m contract in the emerging
nuclear medicine sector and a prestigious £10m contract for the UK's National
Nuclear Laboratory, the largest single contract ever signed by Wälischmiller,
ensuring a positive outlook for FY24.
Divisional Review: Speciality Agriculture
The Speciality Agriculture division manufactures livestock supplements
including branded feed blocks, essential minerals, and precision dose trace
element boluses, sold to farmers in the UK, Europe, North America, and New
Zealand through a long-established distribution network.
2023 2022 % Change
Revenue (£m) 92.6 78.1 +18.7
Adjusted operating profit (£m) 5.6 9.2 -38.5
Adjusted operating margin (%) 6.1 11.8 -5.7 ppts
The increase in revenue in the period follows an increase of 21% in average
feed block selling prices to pass through substantial raw material cost
increases, adversely impacting total volumes by 16% (excluding joint ventures)
compared to prior year.
In the UK, costs of the principal ingredient of feed blocks, sugar cane
molasses, have increased by 70% over the past three years, which, with
increases in other ingredients along with energy and labour, has necessitated
a 45% increase in selling prices over the past two years. When combined with
45% increases in other feed costs, a 180% uplift in fertiliser prices and 60%
on diesel, livestock customers limited their expenditure, particularly
impacting UK sales volumes during a mild autumn in 2022 and winter 2022-23
that supported continued grazing for longer than usual. Feed block volumes
sold in the UK were down by 18% on FY22, a situation consistent at all
distributors.
In the USA, the year-on-year increase of 24% in the selling price of feed
blocks reflected continued high raw material ingredient costs. At the same
time, the USA has been severely impacted by three years of drought. In key
market areas for feed blocks, ranch-based cow calf herd headcount has reduced
by up to 40%, in part reflecting the drought impact, but also occurring as the
US beef industry reaches the expected low point of the current production
cycle. As a result of all these factors, volumes sold (excluding joint
ventures) were 16% down on last year, limiting scope to recover fixed costs in
the business.
At the UK animal health business, revenues were down 16% compared to the prior
year, related to lower bolus volumes and lower volumes of specialist
aquaculture products manufactured under a long-standing contract.
Although current market conditions remain challenging, management maintains a
positive longer-term outlook for the Speciality Agriculture division. In the
UK and Ireland, farm input prices, particularly for feed and fertiliser, have
declined from recent peaks. Farmgate prices for beef and lamb are strong when
compared to 10-year historic averages, whereas the outlook for dairy customers
is affected by a lower milk price. In the USA, the area affected by drought
has reduced from 12 months previously, whilst the cyclical outlook for US beef
will slowly improve as herds rebuild over the next five years.
Each of the Speciality Agriculture businesses is founded on respected brands
with a track record of quality, innovation and service, that will support
sales as markets recover from recent extraordinary conditions.
Health and Safety
Health and safety continues to be a priority for management teams. Throughout
FY23, all sites have been engaged in a process of upgrading and investment to
meet the requirements of an internal base level audit, introduced in 2022.
This audit ensures that basic safety standards are in place and understood at
all locations. A second round of audits has now commenced, aiming for a higher
level that relates to developing and establishing habits of instinctively safe
behaviour, in terms of both individual attitudes and measured outcomes.
In the past 12 months there were two reportable incidents, compared to nil in
the prior year. Whilst the incident rate increased over the year, it is
encouraging to note a markedly higher level of near misses and potential risks
being reported and addressed at a local level, indicating confidence in
reporting issues and resolving them promptly.
Environment
There has been significant progress in engagement in environmental management
issues. Every site now has a Green Team, a group of colleagues who meet
regularly to bring forward ideas and suggestions for reducing the carbon
footprint, reducing waste, increasing participation in local community
initiatives and small-scale local investments to reduce consumption and
impact.
At Group level, the quality and speed of reporting statutory information has
improved, along with the capability to address shareholder and regulatory
enquiries relating to environmental matters. In 2024, there will be further
progress in this area as Scope 3 reporting develops.
Disposal of Agricultural Supplies division
As the first stage of the Group's review of strategic options, the sale of the
Agricultural Supplies division was completed on 26 October 2022, with initial
receipt of £24.7m in cash. During FY23, trading continued in the division for
a short period, until the completion date, for which the loss after tax was
£1.2m. The process to close the completion accounts for the sale was
finalised during August 2023 with a further £1.2m of cash received. Deferred
consideration of £4.0m was received in October 2023, in line with the sale
and purchase agreement. Proceeds included in the prior year loss on fair
value measurement before costs to sell include a deduction of £0.8m in
respect of property rental terms agreed with Billington Group.
Divisional Outlooks
Speciality Agriculture will continue to manage historically high input costs
in 2024, whilst also facing depressed demand for nutritional supplements as
customers limit outgoings in challenging market conditions. Longer-term
prospects remain attractive, as drought recedes and the beef cycle turns in
the USA, whilst in the UK and Europe the businesses will promote the unique
attributes of the full range of Carr's products that set them apart from
competitors.
Management is confident in the outlook for the Engineering division beyond the
current financial year, with confirmed high value contracts continuing into
FY24 and FY25, a well-balanced spread of current orders across all the
business units in the division, and a stronger market for precision
engineering. The pipeline of opportunities and prospects beyond confirmed
orders is very encouraging. The division is increasingly focused on the
specific opportunities that match its market-leading skills, technical
strengths and high-quality manufacturing assets.
Financial Review
Continuing Operations
Alternative performance measures
This preliminary announcement includes both statutory and alternative
performance measures ("APMs"). The principal APMs measure profitability
excluding items regarded by the Directors as adjusting items (note 3). These
APMs, generally referred to as 'adjusted' measures, are used in the management
and measurement of business performance on a day-to-day basis and are also
used in assessing performance under the Group's incentive plans. A glossary of
APMs is included in note 11.
Continuing operations
The Agricultural Supplies division was treated as discontinued operations in
last year's accounts, with trading disclosed separately and the net assets of
the business categorised as held for sale. This year's accounts contain the
period of trading from 4 September 2022 to the disposal date of 26 October
2022, as well as finalisation of the proceeds related to the disposal of this
business during the year. Full details are included in note 5. All commentary
in this review relates solely to continuing operations, except where otherwise
stated.
Discontinued operations
The results of discontinued operations were a loss of £1.2m reflecting losses
after tax in the year of £1.2m (2022: profit after tax of £4.0m). The
cumulative loss on the measurement to fair value, less costs to sell is
£10.3m of which £4.4m is in respect of the non-controlling interest's share
of the measurement impairment. Full details can be found in note 5.
During the process to complete the accounting treatment of the disposal of the
Agricultural Supplies division, two adjustments have been identified which
have resulted in a prior year restatement of the measurement of fair value
less costs to sell. The first was an adjustment to the book costs of the
assets disposed of, relating to the Group's interest in the joint venture,
Bibby Agriculture Ltd, held through the Group's shareholding in Carrs
Billington Agriculture (Sales) Ltd, together with consolidation adjustments to
the assets and liabilities included in the overall Group net assets being
disposed of. This adjustment totalled £2.9m, of which £2.7m was included in
the results published for the period to 4 March 2023. Of this £2.9m, £1.6m
is attributable to the Group and has no impact on cash proceeds received to
date or in future.
Subsequent to the publication of the interim statement, a further correction
was identified, which was required to reflect property rental terms agreed
with the Billington Group as part of the sale process. This increased the loss
on measurement of fair value less costs to sell by £1.2m, with £0.8m of this
being attributable to the Group. Combined, these corrections increase the loss
on measurement of fair value less costs to sell by £4.1m, which included
£1.8m in respect of the non-controlling interests share of the measurement
impairment.
The results and financial position of the Group's discontinued operations for
the year ended 3 September 2022 have been restated to reflect this, with full
details set out in note 10.
The process to close the completion accounts for the sale is finished and the
deferred consideration of £4m was paid in October 2023, meaning receipt of
gross cash proceeds of £29.9m, in line with expectations. Proceeds included
in the prior year loss on fair value measurement before costs to sell include
a deduction of £0.8m in respect of property rental terms agreed with
Billington Group. Further details for discontinued operations can be found in
note 5.
Operating profit
Adjusted Group operating profit of £8.0m is down 33.2% on last year (2022:
£11.9m). As a percentage of revenues, the Group's adjusted operating margin
is 5.6% (2022: 9.6%). This decrease in operating margin reflects the impact of
higher raw material prices in the Speciality Agriculture segment which has
driven revenue up with minimal margin improvement. Reported operating profit
was £2.0m (2022: £8.2m).
The Group's share of the adjusted post-tax result in its joint ventures was
£1.4m, up 71.5% (2022: £0.8m). The Group's share of the adjusted post-tax
result in its associate is included within discontinued operations as part of
the disposal group.
Adjusted operating profit per division and as a percentage of divisional
revenues are as follows:
Adjusted* operating profit 2023
Adjusted operating profit 2023 £m 2023 % 2022 £m 2022 %
Speciality Agriculture 5.6 6.1 9.2 11.8
Engineering 5.3 10.4 5.4 11.6
Central (3.0) (2.6)
Total 8.0 11.9
* Segmental reported profit figures can be found in note 2.
Adjusting items
The Group reported a charge for adjusting items of £6.0m (2022: £3.7m). This
year's charge includes impairment of goodwill and intangible assets of £3.8m,
amortisation of acquired intangibles of £0.9m, ERP system implementation
costs of £0.6m and restructuring costs of £0.6m. Further details are
included in note 3.
Impairment of goodwill and Intangibles
During the year end accounting and statutory audit process, the Group conducts
impairment reviews of goodwill associated with previous acquisitions. These
reviews use projected cash flows for each business, based on current
management forecasts, interest rates and associated external market data, in
accordance with International Financial
Reporting Standards ("IFRS"). Economic conditions at the year end required
higher discount rates than at the previous year end.
For FY23, this results in a non-cash impairment charge of £1.7m against
goodwill paid for Animax Limited, an animal health business which was acquired
in 2018. While action has been taken to improve the performance of the
business, the challenging conditions in agriculture mean that the Board
believes that the full remaining goodwill in the business should be written
off based on the estimated recoverable amount of the cash-generating unit. A
further £0.3m of other intangible assets of Animax were also written down. In
the Engineering division, the valuation of goodwill acquired on the
acquisition of NW Total Engineered Solutions Ltd has been written down by
£1.8m as a result of changed discount rates and other non-company specific
assumptions, despite the business's prospects improving from last year. As
these items do not relate to the underlying trading performance of each
business the impairments have been treated as adjusting items (note 3)
consistent with prior years.
Finance costs
Net finance costs of £0.4m were lower than the prior year (2022: £0.7m).
Interest cover was 4.4 times based on reported profit (17.9 times on an
adjusted profit basis) compared to 12.4 times in 2022.
Profit before tax
Adjusted profit before tax at £7.5m was 33.2% below the previous year (2022:
£11.2m). Reported profit before taxation was £1.5m (2022: £7.6m).
Taxation
The Group's effective tax charge on adjusted profit from activities after net
finance costs and excluding results from joint ventures, which are recorded
after tax was 27.5% (2022: 17.9%). The increase is driven by deferred tax,
including the impact of unrecognised deferred tax on trading losses.
Earnings per share
The profit attributable to the equity holders of the Company in respect of
continuing operations amounted to £0.4m (2022: £6.0m), and basic earnings
per share was 0.4p (2022: 6.4p).
Adjusted earnings per share of 6.2p (2022: 10.0p) is calculated by dividing
the adjusted profit attributable to equity holders for the year in respect of
continuing operations by the weighted average number of shares in issue during
the year.
Cash flow and net cash/(debt)
Cash of £2.1m was generated from operating activities for the year, compared
to cash generation of £2.9m in the previous year. The working capital outflow
in the current year of £4.7m (2022: £8.7m) was driven by a £3.2m increase
in receivables, predominantly in the Engineering division. Following the
year-end, the Group's net cash position has been supplemented by the receipt
of £4.0m of deferred consideration in October 2023, related to the disposal
of the Agricultural Supplies division. The main banking facilities were
extended in December 2023, and now expire on 20 December 2026. The previously
held invoice discounting facility was solely for the Agricultural Supplies
division and is no longer in place following the disposal on 26 October 2022.
Pensions
The Group operates its current pension arrangements on a defined benefit and
defined contribution basis. The defined benefit scheme is closed to new
members and closed to future accrual. The scheme currently has 61 deferred
members and 214 current pensioners.
The valuation on an IAS 19 accounting basis showed a surplus before the
related deferred tax liability in the scheme at 2 September 2023 of £5.3m
(2022: £6.8m). This is after an actuarial loss of £2.1m (2022: £2.6m) which
has been recognised in the Consolidated Statement of Comprehensive Income.
Following a review of the Scheme rules the Directors believe there is an
unconditional right to a refund of surplus from the defined benefit pension
plan in the event there are surplus assets during the lifetime of the plan or
when it winds up. The Group and Company have therefore recognised the surplus
in full on the balance sheet.
CONSOLIDATED INCOME STATEMENT
for the year ended 2 September 2023
2022
2023 (restated)(2)
Notes £'000 £'000
Continuing operations
Revenue 2 143,214 124,240
Cost of sales (110,924) (94,632)
Gross profit 32,290 29,608
Other operating income - 1,731
Distribution costs (7,507) (5,338)
Administrative expenses (24,273) (18,609)
Share of post-tax results of joint ventures 1,441 840
Adjusted(1) operating profit 2 7,950 11,906
Adjusting items 3 (5,999) (3,674)
Operating profit 2 1,951 8,232
Finance income 876 351
Finance costs (1,320) (1,017)
Adjusted(1) profit before taxation 2 7,506 11,240
Adjusting items 3 (5,999) (3,674)
Profit before taxation 2 1,507 7,566
Taxation 4 (1,111) (1,524)
Adjusted(1) profit for the year from continuing operations 5,836 9,374
Adjusting items 3 (5,440) (3,332)
Profit for the year from continuing operations 396 6,042
Discontinued operations
Loss for the year from discontinued operations (including held for sale)
5 (1,157) (6,335)
Loss for the year (761) (293)
(Loss)/profit attributable to:
Equity shareholders (226) 2,710
Non-controlling interests(3) (535) (3,003)
(761) (293)
Basic earnings per ordinary share (pence)
Profit from continuing operations 6 0.4 6.4
Loss from discontinued operations 6 (0.7) (3.5)
6 (0.3) 2.9
Diluted earnings per ordinary share (pence)
Profit from continuing operations 0.4 6.4
Loss from discontinued operations (0.7) (3.5)
(0.3) 2.9
(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) ( ) See note 10 for an explanation of the prior year restatements
in relation to the loss recognised on the measurement to fair value less costs
to sell in respect of discontinued operations.
(3) ( ) Non-controlling interests relate to businesses included in the
disposal group.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 2 September 2023
2022
2023 (restated)(2)
£'000 £'000
Loss for the year (761) (293)
Other comprehensive (expense)/income
Items that may be reclassified subsequently to profit or loss:
- Foreign exchange translation (losses)/gains arising on translation
of overseas subsidiaries (3,141) 4,288
- Net investment hedges - 60
- Taxation charge on net investment hedges - (11)
Items that will not be reclassified subsequently to profit or loss:
- Actuarial losses on retirement benefit asset:
- Group (2,058) (2,576)
- Share of associate (included within disposal (717) (287)
group)
- Taxation credit on actuarial losses on retirement benefit asset:
- Group 515 644
- Share of associate 179 72
(included within disposal group)
Other comprehensive (expense)/income for the year, net of tax (5,222) 2,190
Total comprehensive (expense)/income for the year (5,983) 1,897
Total comprehensive (expense)/income attributable to:
Equity shareholders (5,448) 4,900
Non-controlling interests(1) (535) (3,003)
(5,983) 1,897
Total comprehensive (expense)/income attributable to:
Continuing operations (4,288) 8,447
Discontinued operations (1,695) (6,550)
(5,983) 1,897
(1) Non-controlling interests relate to businesses included in the disposal
group.
(2) See note 10 for an explanation of the prior year restatements in relation
to the loss recognised on the measurement to fair value less costs to sell in
respect of discontinued operations.
CONSOLIDATED BALANCE SHEET
as at 2 September 2023
2022
2023 (restated)(1)
Notes £'000 £'000
Assets
Non-current assets
Goodwill 19,161 23,609
Other intangible assets 3,318 4,635
Property, plant and equipment 29,950 33,204
Right-of-use assets 7,323 8,223
Investment property 2,640 74
Interest in joint ventures 6,101 6,065
Other investments 27 32
Contract assets - 316
Financial assets
- Non-current receivables 21 23
Retirement benefit asset 5,316 6,828
Deferred tax asset 26 213
73,883 83,222
Current assets
Inventories 26,613 26,990
Contract assets 7,915 7,564
Trade and other receivables 24,592 19,015
Current tax assets 3,895 3,866
Financial assets
- Cash and cash equivalents 23,123 22,515
Assets included in disposal group classified as held for sale 5 - 144,389
86,138 224,339
Total assets 160,021 307,561
Liabilities
Current liabilities
Financial liabilities
- Borrowings (13,714) (12,734)
- Leases (1,264) (1,416)
- Derivative financial instruments (4) (62)
Contract liabilities (5,194) (2,426)
Trade and other payables (16,556) (21,000)
Current tax liabilities (131) (711)
Liabilities included in disposal group classified as held for sale 5 - (101,566)
(36,863) (139,915)
Non-current liabilities
Financial liabilities
- Borrowings (5,206) (23,805)
- Leases (5,559) (6,128)
Deferred tax liabilities (4,447) (5,048)
Other non-current liabilities (71) (336)
(15,283) (35,317)
Total liabilities (52,146) (175,232)
Net assets 107,875 132,329
Shareholders' equity
Share capital 2,354 2,350
Share premium 10,664 10,500
Other reserves 94,857 105,283
Total shareholders' equity 107,875 118,133
Non-controlling interests - 14,196
Total equity 107,875 132,329
(1) See note 10 for an explanation of the prior year restatements in relation
to the loss recognised on the measurement to fair value less costs to sell in
respect of discontinued operations
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 2 September 2023
1 Equity Foreign Total Shareholders' Non-
Share Share Compensation Exchange Other Retained Equity controlling Total
Capital Premium Reserve Reserve Reserve Earnings £'000 Interests Equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 29 August 2021 2,343 10,155 480 1,931 195 102,295 117,399 17,152 134,551
Profit/(loss) for the year (restated) (1) - - - - - 2,710 2,710 (3,003) (293)
Other comprehensive income/(expense) - - - 4,337 - (2,147) 2,190 - 2,190
Total comprehensive income/(expense) (restated)(1) - - - 4,337 - 563 4,900 (3,003) 1,897
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 (restated)(1) 2,350 10,500 528 6,268 192 98,295 118,133 14,196 132,329
As previously reported at 2,350 10,500 528 6,268 192 100,657 120,495 15,976 136,471
3 September 2022
Prior year adjustment(1) - - - - - (2,362) (2,362) (1,780) (4,142)
At 4 September 2022 (restated)(1) 2,350 10,500 528 6,268 192 98,295 118,133 14,196 132,329
Loss for the year - - - - - (226) (226) (535) (761)
Other comprehensive expense - - - (3,141) - (2,081) (5,222) - (5,222)
Total comprehensive expense - - - (3,141) - (2,307) (5,448) (535) (5,983)
Dividends paid - - - - - (4,889) (4,889) - (4,889)
Equity-settled share-based payment transactions - - (85) - - - (85) (7) (92)
Excess deferred taxation on share-based payments - - - - - (4) (4) - (4)
Allotment of shares 4 164 - - - - 168 - 168
Sale of disposal group - - - - - - - (13,654) (13,654)
Transfer - - (179) - (2) 181 - - -
At 2 September 2023 2,354 10,664 264 3,127 190 91,276 107,875 - 107,875
(1) See note 10 for an explanation of the prior year restatements in relation
to the loss recognised on the measurement to fair value less costs to sell in
respect of discontinued operations
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 2 September 2023
2023 2022
Notes £'000 £'000
Cash flows from operating activities
Cash generated from continuing operations 7 3,155 4,473
Interest received 564 179
Interest paid (1,320) (986)
Tax paid (278) (805)
Net cash generated from operating activities in continuing operations
2,121 2,861
Net cash used in operating activities in discontinued operations (3,040) (6,901)
Net cash used in operating activities (919) (4,040)
Cash flows from investing activities
Sale of disposal group (net of cash disposed and costs to sell) 25,619 -
Acquisition of subsidiaries (net of cash acquired) - (426)
Dividends received from joint ventures 1,390 2,250
Purchase of intangible assets (193) (342)
Proceeds from sale of property, plant and equipment 48 31
Purchase of property, plant and equipment (3,194) (3,696)
Proceeds from sale of investment property - 149
Net cash generated from/(used in) investing activities in continuing
operations
23,670 (2,034)
Net cash used in investing activities in discontinued operations (487) (2,749)
Net cash generated from/(used in) investing activities 23,183 (4,783)
Cash flows from financing activities
Proceeds from issue of ordinary share capital 167 352
New financing and drawdowns on RCF 5,574 10,051
Repayment of RCF drawdowns (21,741) (8,000)
Lease principal repayments (1,545) (1,550)
Repayment of borrowings (4,263) (2,840)
Dividends paid to shareholders (4,889) (4,687)
Net cash used in financing activities in continuing operations (26,697) (6,674)
Net cash (used in)/generated from financing activities in discontinued
operations
(9,599) 20,324
Net cash (used in)/generated from financing activities (36,296) 13,650
Effect of exchange rate changes (54) 332
Net (decrease)/increase in cash and cash equivalents (14,086) 5,159
Cash and cash equivalents at beginning of the year 24,855 19,696
Cash and cash equivalents at end of the year 10,769 24,855
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 2 September 2023 or 3 September 2022. Statutory accounts for 2022
have been delivered to the Registrar of Companies, and those for 2023 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 2026 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 20
December 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 2026.
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 20 December
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
two principal risks of: customer demand and reliance on key customers; and
supply chain constraints and delays impacting operations. 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 to testing these severe but plausible downside scenarios, reverse
stress testing was also applied to the sensitised forecasts, to understand
what level of downside scenario the Group would not be able to withstand. The
scenarios which created going concern uncertainty were deemed extreme and
implausible.
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 renewed 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 20 December 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
During the process to complete the accounting treatment of the disposal of the
Agricultural Supplies division, two adjustments have been identified which
have resulted in a prior year restatement of the measurement of fair value
less costs to sell. The first was an adjustment to the book costs of the
assets disposed, relating to the Group's interest in the joint venture, Bibby
Agriculture Ltd, held through the Group's shareholding in Carrs Billington
Agriculture (Sales) Ltd, together with consolidation adjustments to the assets
and liabilities included in the overall Group net assets being disposed of.
Subsequent to the publication of the interim statement, a further correction
was identified, which was required to reflect property rental terms agreed
with the Billington Group as part of the sale process.
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 2
September 2023 is as follows:
Speciality Agriculture Continuing Group Discontinued
£'000 Engineering Central £'000 operations £'000
£'000 £'000
Total segment revenue 93,960 50,609 - 144,569 53,212
Inter-segment revenue (1,320) (35) - (1,355) (1)
Revenue from external customers 92,640 50,574 - 143,214 53,211
Adjusted(1) EBITDA(2) 6,117 7,678 (2,850) 10,945 (1,821)
Depreciation, amortisation and profit/(loss) on disposal of non-current assets
(1,916) (2,394) (126) (4,436) -
Share of post-tax results of associate and joint ventures 1,441 - - 1,441 466
Adjusted(1) operating profit/(loss) 5,642 5,284 (2,976) 7,950 (1,355)
Adjusting items (note 3) (3,315) (2,283) (401) (5,999) 3
Operating profit/(loss) 2,327 3,001 (3,377) 1,951 (1,352)
Finance income 876 -
Finance costs (1,320) (186)
Adjusted(1) profit/(loss) before taxation 7,506 (1,541)
Adjusting items (note 3) (5,999) 3
Profit/(loss) before taxation 1,507 (1,538)
Taxation of discontinued operations 381
Loss for the year from discontinued operations (note 5) (1,157)
( )
( )
(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 3
September 2022 is as follows. Prior year disclosures have been restated in
respect of discontinued operations. Further details of the prior year
restatements of discontinued operations can be found in note 10.
Discontinued operations (restated)
Speciality Agriculture Continuing £'000
£'000 Engineering Central Group
£'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) (11,877)
Operating profit/(loss) 9,308 2,016 (3,092) 8,232 (4,968)
Finance income 351 -
Finance costs (1,017) (756)
Adjusted(1) profit before taxation 11,240 6,153
Adjusting items (note 3) (3,674) (11,877)
Profit/(loss) before taxation 7,566 (5,724)
Taxation of discontinued operations (611)
Loss for the year from discontinued operations (note 5) (6,335)
(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.
2023 2022
Discontinued
Continuing operations Discontinued operations Continuing Operations
operations (restated)
£'000 £'000 £'000 £'000
Amortisation of acquired intangible assets (i) 947 - 940 -
Adjustments to contingent consideration (ii) - - (1,320) -
Restructuring/closure costs (iii) 607 - - -
Strategic review costs (iv) - - 455 -
Acquisition-related costs (v) - - - 20
Gain on acquisition of Afgritech (vi) - - (733) -
(Profit)/loss on fair value measurement less costs to sell (vii) - (3) - 10,518
Cloud configuration and customisation costs - Group (viii) 602 - 113 974
Cloud configuration and customisation costs - share of associate (viii)
- - - 365
Goodwill and other intangible assets impairment (ix) 3,843 - 4,219 -
Included in profit before taxation 5,999 (3) 3,674 11,877
Taxation effect of the above adjusting items (559) - (342) (186)
Included in profit/(loss) for the year 5,440 (3) 3,332 11,691
(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 arose from the
revaluation of contingent consideration in respect of acquisitions to fair
value at the prior year end.
(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) In the prior year 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 the date of acquisition. The Group's joint venture
interest was effectively disposed of at this acquisition 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 were 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) The Group disposed of its interest in the Carr's Billington
Agricultural business on 26 October 2022. The (profit)/loss on fair value
measurement less costs to sell in this year arises from the structure of the
sale and offsets the retained earnings from discontinued operations between 3
September 2022 and completion date.
At the prior year end the carrying value of the assets and liabilities
included in the disposal group classified as held for sale exceeded the fair
value less costs sell. As a result the net assets of the disposal group were
reduced to the fair value less costs to sell resulting in a loss of
£10,518,000 (restated) being recognised. This included a loss attributable to
the non-controlling interests of £4,383,000 (restated) together with costs to
sell of £175,000 recognised within the accounts of Carrs Billington
Agriculture (Sales) Ltd. Further details of the prior year restatements can be
found in note 10.
(viii) Costs relating to material spend in relation to the
implementation of the Group's, and associate's, ERP system that have now been
expensed following the adoption of the IFRIC agenda decision.
(ix) Impairment of goodwill and other intangible assets in respect
of the Animax Ltd cash-generating unit and impairment of goodwill in respect
of the NW Total Engineered Solutions Ltd cash-generating unit. In the prior
year the impairment of goodwill was in respect of the Chirton profit centre
and Wälischmiller Engineering GmbH cash-generating units.
4. Taxation
2023 2022
Discontinued
Continuing Discontinued Continuing Operations
operations operations operations (restated)
£'000 £'000 £'000 £'000
Analysis of the charge/(credit) in the year
Current tax:
UK corporation tax
Current year - (343) 119 316
Adjustment in respect of prior years (42) 58 164 51
Foreign tax
Current year 784 - 1,607 -
Adjustment in respect of prior years (331) - (1) -
Group current tax 411 (285) 1,889 367
Deferred tax:
Origination and reversal of timing differences
Current year 228 (57) 10 224
Adjustment in respect of prior years 472 (39) (375) 20
Group deferred tax 700 (96) (365) 244
Tax charge/(credit) for the year 1,111 (381) 1,524 611
Profit/(loss) before taxation 1,507 (1,538) 7,566 (5,724)
Tax at 21.5% (2022: 19%) 324 (331) 1,438 (1,088)
Effects of:
Tax effect of share of results of associate and joint ventures (310) (100) (160) (314)
Tax effect of expenses that are not allowable in determining
taxable profit
1,114 56 1,213 2,033
Tax effect of non-taxable income
(407) (11) (1,183) (143)
Effects of different tax rates of foreign subsidiaries
7 - 149 -
Effects of deferred tax rates
(20) (14) 68 52
Unrecognised deferred tax on losses
304 - 99 -
Withholding taxes suffered
- - 112 -
Adjustment in respect of prior years
99 19 (212) 71
Total tax charge/(credit) for the year 1,111 (381) 1,524 611
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 net loss movements, other expenses disallowable
for UK corporation tax, goodwill impairment (note 3) and, in respect of
discontinued operations in the prior year, it includes the loss recognised on
the measurement to fair value less costs to sell of the disposal group (notes
3 and 5).
The tax effect of non-taxable income includes adjustments to contingent
consideration (note 3), the effect of income within the patent box regime,
disregarded foreign exchange net gain movements, 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.
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 (before
costs to sell) following certain working capital adjustments since the
announcement on 31 August 2022. Following the finalisation of the completion
accounts mechanism the Company has received a further £1.2m cash proceeds. On
26 October 2023 the Company received £4.0m of deferred consideration.
Total cash consideration was £29.9m, of which £4.0m was received post year
end 2023. The proceeds included in the calculation of loss on the measurement
to fair value less costs to sell have been reduced by £0.8m to reflect rent
free periods on properties leased by the Group to the Billington Group
post-disposal. This has been reflected in the prior year adjustment (note 10)
within total comprehensive income attributable to equity shareholders in
respect of property rental terms. Costs of disposal of £0.3m have been
deducted from disposal proceeds in the current year. The net assets of the
disposal group at the date of disposal were £42.4m, including £(0.6)m cash
and cash equivalents. Included in other comprehensive income in the year is
0.5m (2022: £0.2m) of actuarial losses net of tax in respect of the disposal
group. The net assets of the disposal group at 3 September 2022, when they
were classified as held for sale, reflected consolidation adjustments of
£1.3m.
The tables below show the results of the discontinued operations and the
profit/(loss) recognised on the remeasurement to fair value less costs to
sell, 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 (restated)
2023
£'000 £'000
Revenue 53,211 343,838
Expenses (55,218) (340,870)
(2,007) 2,968
Share of post-tax results of associate 378 1,165
Share of post-tax results of joint venture 88 486
(Loss)/profit before taxation of discontinued operations (1,541) 4,619
Taxation (note 4) 381 (611)
(Loss)/profit after taxation of discontinued operations (1,160) 4,008
Pre-taxation gain/(loss) recognised on the measurement to fair value less 3 (10,343)
costs to sell
Taxation - -
After taxation gain/(loss) recognised on the measurement to fair value less 3 (10,343)
costs to sell
Loss for the year from discontinued operations (1,157) (6,335)
In the prior year the pre-taxation loss recognised on the measurement to fair
value less costs to sell included £4,383,000 (restated) in respect of the
non-controlling interest's share of the measurement impairment.
The prior year loss recognised on the measurement to fair value less costs to
sell had previously been determined based on the difference between estimated
proceeds receivable and net assets of the two businesses where the direct
shareholding was being sold. This has been corrected, by a prior year
restatement, to also include the Group's interest in the joint venture, Bibby
Agriculture Ltd, indirectly held by the Company through its ownership of Carrs
Billington Agriculture (Sales) Ltd. A further correction has been made to
reflect
property rental terms agreed with the Billington Group as part of the sale
process. Further details of these restatements can be found in note 10.
The net assets relating to the disposal group that were classified as held for
sale at 3 September 2022 in the Group balance sheet are shown below:
£'000 (restated)
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 (8,575)
Total assets 144,389
Liabilities of the disposal group
Borrowings (24,415)
Leases (8,196)
Trade and other payables (68,955)
Total liabilities (101,566)
Net assets 42,823
Costs to sell of £1,768,000 were incurred by the parent Company in the prior
year and were therefore excluded from the loss on fair value measurement shown
above. The loss on fair value measurement before costs to sell included
£4,383,000 (restated) 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 94,058,319
(2022: 93,873,465). The calculation of diluted earnings per share is based
on 94,773,283 shares (2022: 95,133,662).
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:
2023 2022
2023 Earnings per 2022 Earnings per
Earnings share Earnings share
£'000 pence £'000 pence
Continuing operations
Earnings per share - basic 396 0.4 6,042 6.4
Adjusting items:
Amortisation of acquired intangible assets 947 1.0 940 1.0
Adjustments to contingent consideration - - (1,320) (1.4)
Restructuring/closure costs 607 0.6 - -
Strategic review costs - - 455 0.5
Gain on acquisition of Afgritech - - (733) (0.8)
Cloud configuration and customisation costs - Group 602 0.6 113 0.1
Goodwill and other intangible assets impairment 3,843 4.1 4,219 4.5
Taxation effect of the above (559) (0.5) (342) (0.3)
Earnings per share - adjusted 5,836 6.2 9,374 10.0
2022 (restated)
2023 2022 (restated) Earnings per
2023 Earnings per Earnings share
Earnings share £'000 pence
£'000 pence
Discontinued operations
Earnings per share - basic (622) (0.7) (3,332) (3.5)
Adjusting items:
Acquisition-related costs - - 20 -
(Profit)/loss on fair value measurement less costs to sell (3) - 10,518 11.2
Cloud configuration and customisation costs - Group - - 974 1.0
Cloud configuration and customisation costs - share of associate - - 365 0.4
Taxation effect of the above - - (186) (0.2)
Non-controlling interest in the above - - (4,865) (5.2)
Earnings per share - adjusted (625) (0.7) 3,494 3.7
Total (basic) (226) (0.3) 2,710 2.9
Total (adjusted) 5,211 5.5 12,868 13.7
7. Cash generated from continuing operations
2023 2022
£'000 £'000
Profit for the year from continuing operations 396 6,042
Adjustments for:
Tax 1,111 1,524
Tax credit in respect of R&D (695) (1,553)
Depreciation of property, plant and equipment 3,023 2,778
Depreciation of right-of-use assets 1,308 1,276
Depreciation of investment property 67 5
Intangible asset amortisation 1,004 988
Goodwill and other intangible assets impairment 3,843 4,219
Profit on disposal of property, plant and equipment (23) (17)
Loss/(profit) on disposal of right-of-use assets 4 (5)
Profit on disposal of investment property - (76)
Gain on acquisition of Afgritech - (764)
Adjustments to contingent consideration - (1,320)
Net fair value (credit)/charge on share-based payments (78) 148
Other non-cash adjustments (894) (119)
Finance costs:
Interest income (876) (351)
Interest expense and borrowing costs 1,376 1,077
Share of results of joint ventures (1,441) (840)
IAS19 income statement credit in respect of employer contributions (400) -
IAS19 income statement charge (excluding interest):
Administrative expenses 166 126
Changes in working capital (excluding the effects of acquisitions):
Increase in inventories (481) (6,153)
Increase in receivables (3,173) (218)
Decrease in payables (1,082) (2,294)
Cash generated from continuing operations 3,155 4,473
8. Pensions (continuing operations)
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 2 September 2023
of £5.3m (2022: £6.8m).
In the year, the retirement benefit charge, excluding interest, in respect of
the Carr's Group Pension Scheme (defined benefit section) was £166,000 (2022:
£126,000).
9. Analysis of net cash/(debt) and leases
At 4 September Other At 2 September
Cash Non-Cash Exchange
2022 Flow Changes Movements 2023
£'000 £'000 £'000 £'000 £'000
Cash and cash equivalents 22,515 662 - (54) 23,123
Bank overdrafts (9,734) (2,620) - - (12,354)
12,781 (1,958) - (54) 10,769
Loans and other borrowings:
- current (3,000) 1,698 (48) (10) (1,360)
- non-current (23,805) 18,732 (8) (125) (5,206)
Net (debt)/cash (14,024) 18,472 (56) (189) 4,203
Leases: -
- current (1,416) - 152 30 (1,264)
- non-current (6,128) 1,545 (1,006) (5,559)
Leases (7,544) 1,545 (854) 30 (6,823)
Net (debt)/cash and leases (21,568) 20,017 (910) (159) (2,620)
10. Prior year restatements
During the process to complete the accounting treatment of the disposal of the
Agricultural Supplies division, two adjustments have been identified which
have resulted in a prior year restatement of the measurement of fair value
less costs to sell. The first was an adjustment to the book costs of the
assets disposed of relating to the Group's interest in the joint venture,
Bibby Agriculture Ltd, held through the Group's shareholding in Carrs
Billington Agriculture (Sales) Ltd, together with consolidation adjustments to
the assets and liabilities included in the overall Group net assets being
disposed of. This adjustment totalled £2.9m, of which £2.7m was included in
the results published for the period to 4 March 2023. Of this £2.9m, £1.6m
is attributable to the Group and has no impact on cash proceeds received to
date or in future.
Subsequent to the publication of the interim statement, a further correction
was identified, which was required to reflect property rental terms agreed
with the Billington group as part of the sale process. This increased the loss
on measurement of fair value less costs to sell by £1.2m, with £0.8m of this
being attributable to the Group. Combined, these corrections increase the loss
on measurement of fair value less costs to sell by £4.1m, which includes
£1.8m in respect of the non-controlling interest's share of the measurement
impairment.
The results and financial position of the Group's discontinued operations for
the year ended 3 September 2022 have been restated to reflect this.
This restatement of the prior year has resulted in shareholders' equity at 3
September 2022 being reduced by £2.4m and increases the loss for the period
from discontinued operations (£4.1m) in the year to 3 September 2022.
The prior year restatements to discontinued operations are reflected in note
5.
The affected financial statement line items are as follows:
Restatement in respect of
Restatement in respect of net assets disposed property rental terms
3 September 2022 £'000 £'000 3 September 2022 (restated)
(previously reported) £'000
£'000
Income Statement
Loss for the year from discontinued operations (including held for sale)
(2,193) (2,944) (1,198) (6,335)
Profit/(loss) for the year 3,849 (2,944) (1,198) (293)
Profit attributable to:
Equity shareholders 5,072 (1,553) (809) 2,710
Non-controlling interests (1,223) (1,391) (389) (3,003)
Basic EPS (pence):
Loss from discontinued operations (1.0) (1.6) (0.9) (3.5)
Diluted EPS (pence):
Loss from discontinued operations (1.0) (1.6) (0.9) (3.5)
Restatement in respect of
Restatement in respect of net assets disposed property rental terms
3 September 2022 £'000 £'000 3 September 2022 (restated)
(previously reported) £'000
£'000
Statement of Comprehensive Income
Profit/(loss) for the year 3,849 (2,944) (1,198) (293)
Total comprehensive (expense)/income for the year 6,039 (2,944) (1,198) 1,897
Total comprehensive income attributable to:
Equity shareholders 7,262 (1,553) (809) 4,900
Non-controlling interests (1,223) (1,391) (389) (3,003)
Total comprehensive income attributable to:
Discontinued operations (2,408) (2,944) (1,198) (6,550)
3 September 2022 (previously reported) Restatement in respect of 3 September 2022 (restated)
£'000 Restatement in respect of net assets disposed property rental terms £'000
£'000 £'000
Balance Sheet
Assets included in disposal group classified as held for sale
148,531 (2,944) (1,198) 144,389
Total current assets 228,481 (2,944) (1,198) 224,339
Total assets 311,703 (2,944) (1,198) 307,561
Net assets 136,471 (2,944) (1,198) 132,329
Other reserves 100,657 (1,553) (809) 98,295
Total shareholders' equity 120,495 (1,553) (809) 118,133
Non-controlling interests 15,976 (1,391) (389) 14,196
Total equity 136,471 (2,944) (1,198) 132,329
As there is no impact to the opening balance sheet for the prior year a third
balance sheet has not been presented.
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 cash/(debt) The net position of the Group's cash at bank and borrowings per the balance
sheet. Details of the movement in net cash/(debt) is shown in note 9.
12. The Board of Directors approved the preliminary announcement on
20 December 2023.
13. The full 2023 Annual Report and Accounts will shortly be
available for inspection via the National Storage Mechanism at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://protect-eu.mimecast.com/s/bO84CvjPvi7ngWoHo37b9?domain=data.fca.org.uk)
and on the Company's website at www.carrsgroup-ir.com
(http://www.carrsgroup-ir.com) . The Company will post a copy of the 2023
Annual Report and Accounts to shareholders who have elected to receive paper
communications in January 2024. The full 2023 Annual Report and Accounts
will also be available in January 2024 upon request from the Company
Secretary, Carr's Group plc, Old Croft, Stanwix, Carlisle, CA3 9BA.
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