REG - Carr's Group PLC - Half-year Report <Origin Href="QuoteRef">CARRC.L</Origin> - Part 1
RNS Number : 2512CCarr's Group PLC12 April 201712 April 2017
CARR'S GROUP plc ("Carr's" or the "Group")
INTERIM RESULTS
For the six months ended 4 March 2017
"A robust half year performance, medium term outlook remains positive"
Carr's (CARR.L), the Agriculture and Engineering Group, announces its results for the six months ended 4 March 2017.
Financial highlights
Revenue up 15.3% to 176.8m (H1 2016: 153.4m*)
Operating profit (before exceptional items) up 0.9% to 7.5m (H1 2016: 7.5m*)
Operating profit (after exceptional items) down 7.6% to 6.9m (H1 2016: 7.5m*)
Profit before tax (before exceptional items) up 4.8% to 8.9m (H1 2016: 8.5m*)
Profit before tax (after exceptional items) down 2.6% to 8.3m (H1 2016: 8.5m*)
Basic EPS down 3.0% to 6.4p (H1 2016: 6.6p*)
Adjusted EPS1up 6.0% to 7.1p (H1 2016: 6.7p*)
Interim dividend held at 0.95p (H1 2016: 0.95p)
Net debt of 11.5m (8.1m net cash at 3 September 2016)
*continuing operations
_______________
1Adjusted EPS is after adding back amortisation of intangibles and non-recurring items e.g. acquisition related costsCommercial highlights
Strong performance in UK Agriculture, outperforming the market and continuing to grow market share. Greater confidence in UK agriculture expected to continue into H2
Rebound in UK machinery sales, up 43.4% on H1 2016, and retail business performed well, benefiting from store improvement programme
Significant pressure from falling cattle prices impacting USA feed block sales
Full year performance in Engineering to be impacted by previously announced contract delay in UK Manufacturing
Remote handling business performing ahead of expectations and bolstered by a strong order book, demonstrating the potential in this market
Integration of STABER acquisition progressing well, with plans to extend premises in Markdorf, Germany
Tim Davies, Chief Executive Officer, commented:
"While still at an early stage, we are seeing initial signs of improving confidence among our core UK farming customers resulting in a strong first half performance in our UK Agriculture business, which we expect to continue in the second half. However, our USA feed block business continues to be impacted by the fall in cattle prices.
"Our Engineering business has been affected by a delay to a significant UK Manufacturing contract, which will impact our full year performance, but we have a strong pipeline in UK manufacturing and our remote handling business is performing ahead of expectations.
"We remain committed to delivering organic revenue growth, supported by value enhancing acquisitions and, further to the trading update released on 30 March, the Board's expectations for the full year remain unchanged."
Enquiries:
Carr's Group plc
Tim Davies (Chief Executive)
Neil Austin (Group Finance Director)Tel: +44 (0) 1228 554 600
Powerscourt
Nick Dibden / Lisa KavanaghTel: +44 (0) 20 7250 1446
About Carr's Group plc:
Carr's is an international leader in manufacturing value added products and solutions, with market leading brands and robust market positions in Agriculture and Engineering, supplying customers in 35 countries around the world.
Its Agriculture division manufactures and supplies feed blocks for livestock, farm machinery and runs a UK network of rural stores,providing a one-stop shop for the farming community. Its Engineering division designs and manufactures bespoke equipment for use in the nuclear, petrochemical, oil and gas, pharmaceutical, process and renewable energy industries, including robotic and remote handling equipment.
Interim Management Report
INTRODUCTION
Carr's has delivered results that are ahead of the prior year (before exceptional items), despite the continuation of tough trading conditions in some of its key markets. The Board's expectations for the full year remain unchanged from that detailed in the Company's recent trading update published on 30 March 2017.
BUSINESS REVIEW
During the 26 weeks ended 4 March 2017 the Group delivered a resilient performance. Group revenues were 176.8m, up 15.3% from the prior year (H1 2016 continuing operations: 153.4m), primarily due to commodity price movements. Profit before tax (before exceptional items) increased by 4.8% to 8.9m (H1 2016 continuing operations: 8.5m); profit before tax after exceptional items was 8.3m (H1 2016 continuing operations: 8.5m). Exceptional items of 0.6m (H1 2016: nil) relate to business combination expenses and restructuring costs.
Group operating profit (before exceptional items) of 7.5m (H1 2016 continuing operations: 7.5m) was 0.9% ahead of the prior year, but was 7.6% behind the prior year after exceptional items at 6.9m.
The Group's share of profit after tax from associate and joint venture companies was up 20.0% on the prior year to 1.7m (H1 2016: 1.4m).
Basic earnings per share decreased by 3.0% from 6.6p to 6.4p, as a result of the impact of exceptional items. On an adjusted basis, earnings per share increased by 6.0% to 7.1p (H1 2016 continuing operations: 6.7p).
AGRICULTURE
The Agriculture division has reported operating profit of 7.3m (H1 2016: 7.0m), up 4.9% and ahead of the Board's expectations for the half year. This is a resilient performance driven by a strong UK result but partially offset by lower profits in the USA.
UK
UK Agriculture has continued its strong start to the year, despite the market for compound feed and blend volumes contracting by 1%-2% and margins remaining under pressure. Set against this backdrop we have continued to outperform the market increasing our volumes by 11.6% as we continue to gain market share.
Feed block sales have performed particularly well in the UK, with sales volumes 6.0% ahead of the prior year.
Despite another relatively mild autumn and winter, the fuel distribution business has performed well, with sales volumes 0.9% ahead of the prior year and machinery sales, often regarded as a barometer of farmer confidence, 43.4% ahead of the prior year.
Our retail business has also performed well, with like-for-like sales 3.8% ahead of the prior year. This reflects our continuing store improvement programme and our ever improving offer to our core farming customers. A new store in Penicuik, East Midlothian, opened in December 2016 which takes our total retail footprint to 41 locations.
It is pleasing to report that the challenging UK farming environment experienced in the last couple of years is showing signs of abating, helped significantly by improvements in the farmgate milk price, and while it remains at early stages we are optimistic about the year ahead for the UK farming community.
International
The strong performance in the UK market is in contrast to the performance in the USA, where the market pressure from lower cattle prices has impacted both volumes and margins of SmartLic and Feed in a Drum, with sales volumes down 10.1% year on year. Despite these challenges, and in readiness for the anticipated market recovery, our plans to construct a low moisture block plant in Shelbyville, Tennessee, are progressing well. Once operational, the plant will provide access to new markets across eastern US states.
The higher level of confidence that has benefited the UK Agriculture business in H1 looks set to continue during H2, however this will only partially mitigate the full year impact of the USA cattle market pressures on the division's performance.
ENGINEERING
As previously reported, the Engineering division had a slower than expected start to the year, mainly due to a significant contract delay in the UK Manufacturing business. Operating profit (before exceptional items) was 0.3m (H1 2016: 0.5m), down 0.2m year on year. Overall, revenues generated from the nuclear business represented 71% of the total, against 55.4% in the prior year.
UK Manufacturing
The performance of the UK manufacturing business has been affected by a significant contract delay and, as previously announced on 30 March 2017, the Group has only been partially successful in its measures to mitigate the impact of this delay through cost cutting, winning new business and accelerating the existing order book.
Management will remain focussed on continuing to maximise throughput within the production facilities. The pipeline in the medium term is looking strong, with the benefit of the Sellafield Vessels and Tanks Framework contract awarded in 2016 expected to begin during 2018.
Remote Handling
The remote handling businesses have started well and are ahead of expectations. Some large orders have been won for the supply of power manipulators into China, with manufacturing activity largely taking place during the second half. This is particularly encouraging given the potential for this market. The integration of the recently acquired STABER GmbH is progressing well, and consequently we have taken the decision to extend the premises in Markdorf, Germany, to fully integrate the two businesses and to provide additional flexibility and capacity into our production facilities in Germany.
BALANCE SHEET AND CASHFLOW
Net cash generated from operating activities was strong in the first half at 5.2m (H1 2016: 1.3m). Net debt has risen to 11.5m from a net cash position of 8.1m at the 2016 financial year end. In addition to seasonal working capital movements, this is primarily due to the payment of a special dividend of 17.54p per share in October 2016, totalling 16.0m, and the acquisition of STABER GmbH in October 2017, for an initial consideration of 5.85m.
The Group's defined benefit pension scheme remains in surplus and this increased from 0.3m at 3 September 2016 to 5.7m at 4 March 2017.
SHAREHOLDERS' EQUITY
Shareholders' equity at 4 March 2017 was 90.0m (3 September 2016: 96.7m), with the reduction primarily due to the payment of the special dividend of 16.0m in October 2016 offset by profit retained by the Group for the period.
DIVIDEND
A first interim dividend of 0.95 pence per ordinary share (2016: 0.95 pence per ordinary share) will be paid on 12 May 2017 to shareholders on the register on 21 April 2017. The ex-dividend date will be 20 April 2017.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group has a process in place to identify and assess the impact of risks on its business, which is reviewed and updated quarterly. The principal risks and uncertainties for the remainder of the financial year are not expected to change materially from those included on pages 14 to 16 of the Annual Report and Accounts 2016.
The principal risks and uncertainties are as follows:
Safety
Business Continuity
People
Commodity Costs
Product Innovation Risk
Strategic Partners
Treasury
Acquisitions
Customer Demand
Reliance on Key Customers
Reliance on Key Ingredients
Defined Benefit Pension Scheme
Brexit
OUTLOOK
As previously announced, the second half performance will be affected by a combination of the contract delay in UK Manufacturing and depressed USA cattle prices impacting our USA feed block operations.
Despite these short-term setbacks, we are seeing recovery in the UK agricultural markets and are encouraged by the medium term outlook for our businesses operating in the nuclear sector. Overall, the Group continues to benefit from geographic and operational diversity.
The Group is focused on growth, both through the organic development of its businesses and selective acquisitions, and is committed to driving innovation through research and development to ensure it remains at the forefront of all the markets in which it operates.
Further to the trading update released on 30 March 2017, the Board's revised expectations for the full year remain unchanged.
UNAUDITED CONSOLIDATED INCOME STATEMENT
For the 26 weeks ended 4 March 2017
26 weeks ended
4 March
2017
26 weeks ended
27 February 2016
53 weeks ended
3 September
2016
Notes
'000
'000
'000
Continuing operations
Revenue
6
176,758
153,356
314,907
Cost of sales
(153,874)
(131,495)
(273,712)
Gross profit
22,884
21,861
41,195
Net operating expenses
(15,975)
(14,382)
(28,425)
Operating profit (before exceptional items)
7,543
7,479
12,770
Exceptional items
7
(634)
-
-
Group operating profit
6
6,909
7,479
12,770
Finance income
95
119
236
Finance costs
(430)
(516)
(1,009)
Share of post-tax profit in associate and joint ventures
1,708
1,423
2,081
Profit before taxation (before exceptional items)
8,916
8,505
14,078
Exceptional items
7
(634)
-
-
Profit before taxation
6
8,282
8,505
14,078
Taxation
(1,708)
(1,792)
(2,907)
Profit for the period from continuing operations
6,574
6,713
11,171
Discontinued operations
Profit for the period from discontinued operations
-
2,028
2,817
Profit for the period
6,574
8,741
13,988
Profit attributable to:
Equity shareholders
5,802
7,990
12,455
Non-controlling interests
772
751
1,533
6,574
8,741
13,988
Earnings per share (pence)
Continuing operations
Basic
8
6.4
6.6
10.7
Diluted
8
6.3
6.4
10.5
Adjusted
8
7.1
6.7
10.9
Diluted adjusted
8
7.0
6.5
10.7
Discontinued operations
Basic
8
-
2.3
3.1
Diluted
8
-
2.2
3.0
Adjusted
8
-
2.3
3.1
Diluted adjusted
8
-
2.2
3.0
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 26 weeks ended 4 March 2017
26 weeks ended
4 March
2017
26 weeks ended
27 February 2016
53 weeks ended
3 September
2016
Notes
'000
'000
'000
Profit for the period
6,574
8,741
13,988
Other comprehensive income/(expense)
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation gains arising on
translation of overseas subsidiaries
107
1,557
2,860
Net investment hedges
1,669
577
687
Taxation charge on net investment hedges
(327)
(115)
(137)
Items that will not be reclassified subsequently to profit or loss:
Actuarial gains/(losses) on retirement benefit asset:
- Group
13
5,418
879
(2,725)
- Share of associate
-
-
(1,216)
Taxation (charge)/credit on actuarial movement on
retirement benefit asset:
- Group
(921)
(158)
490
- Share of associate
-
-
205
Other comprehensive income for the period, net of tax
5,946
2,740
164
Total comprehensive income for the period
12,520
11,481
14,152
Total comprehensive income attributable to:
Equity shareholders
11,748
10,730
12,619
Non-controlling interests
772
751
1,533
12,520
11,481
14,152
UNAUDITED CONSOLIDATED BALANCE SHEET
As at 4 March 2017
(Restated)
As at
4 March
2017
As at
27 February
2016
As at
3 September
2016
Notes
'000
'000
'000
Non-current assets
Goodwill
10
16,870
10,931
11,440
Other intangible assets
10
469
413
286
Property, plant and equipment
10
37,135
60,391
35,811
Investment property
10
179
626
182
Investment in associate
9,570
9,196
8,667
Interest in joint ventures
6,768
6,082
6,257
Other investments
75
72
72
Financial assets
- Non-current receivables
50
150
50
Retirement benefit asset
13
5,732
3,927
311
Deferred tax assets
-
29
-
76,848
91,817
63,076
Current assets
Inventories
38,142
39,113
33,423
Trade and other receivables
66,326
70,736
56,940
Current tax assets
345
401
303
Financial assets
- Derivative financial instruments
-
2
-
- Cash and cash equivalents
11
21,176
13,272
48,411
125,989
123,524
139,077
Total assets
202,837
215,341
202,153
Current liabilities
Financial liabilities
- Borrowings
11
(19,579)
(14,839)
(21,642)
- Derivative financial instruments
(83)
(132)
(20)
Trade and other payables
(56,633)
(57,302)
(46,823)
Current tax liabilities
(1,789)
(980)
(470)
(78,084)
(73,253)
(68,955)
Non-current liabilities
Financial liabilities
- Borrowings
11
(13,082)
(25,447)
(18,625)
Deferred tax liabilities
(3,102)
(4,173)
(1,817)
Other non-current liabilities
(4,414)
(4,226)
(2,668)
(20,598)
(33,846)
(23,110)
Total liabilities
(98,682)
(107,099)
(92,065)
Net assets
104,155
108,242
110,088
Shareholders' equity
Share capital
14
2,285
2,246
2,280
Share premium
14
9,129
8,657
9,111
Treasury share reserve
-
-
(8)
Equity compensation reserve
159
1,351
706
Foreign exchange reserve
4,344
1,504
2,895
Other reserve
207
856
207
Retained earnings
73,887
80,946
81,540
Total shareholders' equity
90,011
95,560
96,731
Non-controlling interests
14,144
12,682
13,357
Total equity
104,155
108,242
110,088
restated by 4,553,000 for the grossing up of cash and cash equivalents and bank overdrafts for accounts with right of offset within the same banking facility (see note 3)
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the 26 weeks ended 4 March 2017
Share
Capital
Share Premium
Treasury Share Reserve
Equity Compensation Reserve
Foreign
Exchange
ReserveOther Reserve
Retained
EarningsTotal Shareholders' Equity
Non-Controlling Interests
Total Equity
'000
'000
'000
'000
'000
'000
'000
'000
'000
'000
At 4 September 2016
2,280
9,111
(8)
706
2,895
207
81,540
96,731
13,357
110,088
Profit for the period
-
-
-
-
-
-
5,802
5,802
772
6,574
Other comprehensive income
-
-
-
-
1,449
-
4,497
5,946
-
5,946
Total comprehensive income
-
-
-
-
1,449
-
10,299
11,748
772
12,520
Dividends paid
-
-
-
-
-
-
(18,599)
(18,599)
-
(18,599)
Equity-settled share based payment transactions, net of tax
-
-
-
(547)
-
-
659
112
15
127
Allotment of shares
5
18
-
-
-
-
-
23
-
23
Purchase of own shares held in trust
-
-
(4)
-
-
-
-
(4)
-
(4)
Transfer
-
-
12
-
-
-
(12)
-
-
-
At 4 March 2017
2,285
9,129
-
159
4,344
207
73,887
90,011
14,144
104,155
At 30 August 2015
2,244
8,615
-
1,138
(515)
862
74,706
87,050
11,913
98,963
Profit for the period
-
-
-
-
-
-
7,990
7,990
751
8,741
Other comprehensive income
-
-
-
-
2,019
-
721
2,740
-
2,740
Total comprehensive income
-
-
-
-
2,019
-
8,711
10,730
751
11,481
Dividends paid
-
-
-
-
-
-
(2,492)
(2,492)
-
(2,492)
Equity-settled share based payment transactions, net of tax
-
-
-
213
-
-
15
228
18
246
Allotment of shares
2
42
-
-
-
-
-
44
-
44
Transfer
-
-
-
-
-
(6)
6
-
-
-
At 27 February 2016
2,246
8,657
-
1,351
1,504
856
80,946
95,560
12,682
108,242
At 30 August 2015
2,244
8,615
-
1,138
(515)
862
74,706
87,050
11,913
98,963
Profit for the period
-
-
-
-
-
-
12,455
12,455
1,533
13,988
Other comprehensive income/(expense)
-
-
-
-
3,410
-
(3,246)
164
-
164
Total comprehensive income
-
-
-
-
3,410
-
9,209
12,619
1,533
14,152
Dividends paid
-
-
-
-
-
-
(3,347)
(3,347)
-
(3,347)
Equity-settled share based payment transactions, net of tax
-
-
-
(432)
-
-
321
(111)
15
(96)
Allotment of shares
36
496
-
-
-
-
-
532
-
532
Purchase of own shares held in trust
-
-
(12)
-
-
-
-
(12)
-
(12)
Dissolution of dormant subsidiaries
-
-
-
-
-
-
-
-
(104)
(104)
Transfer
-
-
4
-
-
(655)
651
-
-
-
At 3 September 2016
2,280
9,111
(8)
706
2,895
207
81,540
96,731
13,357
110,088
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
For the 26 weeks ended 4 March 2017
26 weeks ended
4 March 2017
26 weeks
ended
27 February
2016
53 weeks
ended
3 September
2016
Notes
'000
'000
'000
Cash flows from operating activities
Cash generated from continuing operations
16
6,057
166
6,257
Interest received
93
77
155
Interest paid
(480)
(332)
(673)
Tax paid
(447)
(117)
(1,098)
Net cash generated from/(used in) operating activities in continuing operations
5,223
(206)
4,641
Net cash generated from operating activities in discontinued operations
-
1,480
5,477
Net cash generated from operating activities
5,223
1,274
10,118
Cash flows from investing activities
Acquisition of subsidiaries (net of overdraft/cash acquired)
15
(4,698)
(265)
(1,258)
Disposal of subsidiary, net of costs (including cash disposed)
-
-
23,922
Dividend received from joint venture
627
-
113
Loans repaid by joint ventures
-
2,055
2,332
Loan repaid by associate
-
-
500
Other loans
74
(70)
(20)
Purchase of intangible assets
(67)
(37)
(62)
Proceeds from sale of property, plant and equipment
176
178
349
Purchase of property, plant and equipment
(1,347)
(3,081)
(5,788)
Purchase of own shares held in trust
(4)
-
(12)
Redemption of preference shares in joint venture
-
-
150
Net cash (used in)/generated from investing activities in continuing operations
(5,239)
(1,220)
20,226
Net cash used in investing activities in discontinued operations
-
(267)
(449)
Net cash (used in)/generated from investing activities
(5,239)
(1,487)
19,777
Cash flows from financing activities
Proceeds from issue of ordinary share capital
23
44
532
Net proceeds from issue of new bank loans
-
143
153
Finance lease principal repayments
(394)
(465)
(925)
Repayment of loan from related party
-
-
(500)
Repayment of borrowings
(5,895)
(544)
(1,614)
Increase/(decrease) in other borrowings
743
(4,438)
(192)
Dividends paid to shareholders
(18,599)
(2,492)
(3,347)
Net cash used in financing activities in continuing operations
(24,122)
(7,752)
(5,893)
Net cash used in financing activities in discontinued operations
-
(695)
(1,408)
Net cash used in financing activities
(24,122)
(8,447)
(7,301)
Effects of exchange rate changes
(37)
720
918
Net (decrease)/increase in cash and cash equivalents
(24,175)
(7,940)
23,512
Cash and cash equivalents at beginning of the period
39,787
16,275
16,275
Cash and cash equivalents at end of the period
15,612
8,335
39,787
Cash and cash equivalents consist of:
Cash and cash equivalents per the balance sheet
21,176
13,272
48,411
Bank overdrafts included in borrowings
(5,564)
(4,937)
(8,624)
15,612
8,335
39,787
restated by 4,553,000 for the grossing up of cash and cash equivalents and bank overdrafts for accounts with right of offset within the same banking facility (see note 3)
Statement of Directors' responsibilities
The Directors confirm that these condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
The Directors are listed in the Annual Report and Accounts 2016. A list of current Directors is maintained on the website: www.carrsgroup.com
On behalf of the Board
Tim DaviesNeil Austin
Chief ExecutiveGroup Finance Director
12 April 2017 12 April 2017
Unaudited notes to condensed interim financial information
1. General information
The Group operates across two divisions of Agriculture and Engineering. The Company is a public limited company, which is listed on the London Stock Exchange and is incorporated and domiciled in the UK. The address of the registered office is Old Croft, Stanwix, Carlisle, Cumbria CA3 9BA.
These condensed interim financial statements were approved for issue on 12 April 2017.
These condensed interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the 53 weeks ended 3 September 2016 were approved by the Board of Directors on 16 November 2016 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.
2. Basis of preparation
These condensed interim financial statements for the 26 weeks ended 4 March 2017 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union. The condensed interim financial statements should be read in conjunction with the annual financial statements for the 53 weeks ended 3 September 2016, which have been prepared in accordance with IFRSs as adopted by the European Union.
The Directors have made suitable enquiries, and based on financial performance to date and available banking facilities they have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its condensed interim financial statements.
3. Accounting policies
The accounting policies adopted are consistent with those of the previous financial year.
Taxes on income in the interim periods are accrued based on management's estimate of the weighted average annual income tax rate expected for the full financial year.
Cash and cash equivalents and overdrafts, within current borrowings, as at 27 February 2016 have been restated by 4.6m to recognise overdrafts that would previously have been offset against cash balances. This restatement ensures comparability of the three period ends presented in the interim financial statements and reflects the accounting policy adopted in the preparation of the financial statements for the 53 weeks ended 3 September 2016 and the 26 weeks ended 4 March 2017.
The Group continues to review the impact of IFRS 15 'Revenue from contracts with customers' and IFRS 16 'Leases' on the results and net assets of the Group. It is not possible at this stage to quantify any financial impact arising from either of these two standards.
4. Estimates
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the 53 weeks ended 3 September 2016, with the exception of changes in estimates that are required in determining the provision for income taxes.
5. Financial risk management
The Group's activities expose it to a variety of financial risks: market risk (including currency risk and price risk), credit risk and liquidity risk.
The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's annual financial statements as at 3 September 2016. There have been no changes in risk management practices since the year end.
6. Operating segment information
The Group's chief operating decision-maker ("CODM") has been identified as the Executive Directors. Management has determined the operating segments based on the information reviewed by the CODM for the purposes of allocating resources and assessing performance.
The CODM considers the business from a product/services perspective. Operating segments have been identified as Agriculture and Engineering. The previously recognised Food operating segment was disposed on 3 September 2016. Performance is assessed using operating profit, which is measured in a manner consistent with the financial statements. Sales between segments are carried out at arm's length.
The following tables present revenue, profit and asset information regarding the Group's operating segments for the 26 weeks ended 4 March 2017 and the comparative periods.
Agriculture
Engineering
Group
'000
'000
'000
26 weeks ended 4 March 2017
Total segment revenue
160,517
16,301
176,818
Inter segment revenue
(4)
(56)
(60)
Revenue from external customers
160,513
16,245
176,758
EBITDA
8,581
980
9,561
Depreciation of property, plant and equipment
(1,317)
(660)
(1,977)
Depreciation of investment property
(3)
-
(3)
Profit/(loss) on the disposal of property, plant and
equipment
34
(23)
11
Amortisation of intangible assets
(4)
(45)
(49)
Operating profit (before exceptional items)
7,291
252
7,543
Exceptional items
(634)
Operating profit
6,909
Finance income
95
Finance costs
(430)
6,574
Share of post-tax profit of associate
903
Share of post-tax profit of joint ventures
805
Profit before taxation (before exceptional items)
8,916
Exceptional items
(634)
Profit before taxation from continuing operations
8,282
Segment gross assets
147,908
54,929
202,837
Earnings before interest, tax, depreciation and amortisation (and before profit/(loss) on the disposal of property, plant and equipment)
Agriculture
Engineering
Group
'000
'000
'000
26 weeks ended 27 February 2016
Total segment revenue
139,329
14,080
153,409
Inter segment revenue
(17)
(36)
(53)
Revenue from external customers
139,312
14,044
153,356
EBITDA
8,141
1,062
9,203
Depreciation of property, plant and equipment
(1,218)
(500)
(1,718)
Depreciation of investment property
(3)
-
(3)
Profit on the disposal of property, plant and equipment
80
-
80
Amortisation of intangible assets
(50)
(33)
(83)
Operating profit
6,950
529
7,479
Finance income
119
Finance costs
(516)
7,082
Share of post-tax profit of associate
757
Share of post-tax profit of joint ventures
666
Profit before taxation from continuing operations
8,505
Segment gross assets
125,907
44,075
169,982
Food division gross assets
45,359
215,341
Agriculture
Engineering
Group
'000
'000
'000
53 weeks ended 3 September 2016
Total segment revenue
284,836
30,192
315,028
Inter segment revenue
(63)
(58)
(121)
Revenue from external customers
284,773
30,134
314,907
EBITDA
12,924
3,555
16,479
Depreciation of property, plant and equipment
(2,539)
(1,043)
(3,582)
Depreciation of investment property
(6)
-
(6)
Profit on the disposal of property, plant and
equipment
12
72
84
Amortisation of intangible assets
(133)
(72)
(205)
Operating profit
10,258
2,512
12,770
Finance income
236
Finance costs
(1,009)
11,997
Share of post-tax profit of associate
1,239
Share of post-tax profit of joint ventures
842
Profit before taxation from continuing operations
14,078
Segment gross assets
149,777
52,376
202,153
7. Non-recurring exceptional items
26 weeks
ended
4 March
2017
26 weeks ended
27 February 2016
53 weeks
ended
3 September
2016
'000
'000
'000
Non-recurring exceptional items:
Business combination expenses
589
-
-
Restructuring costs
45
-
-
634
-
-
Business combination expenses relate to acquisition costs incurred in the period as well as contingent consideration in relation to the prior year acquisition of Phoenix Feeds Limited which is explained further below.
Phoenix Feeds Limited was acquired on 1 June 2016 for cash consideration of 1,744,000 including 490,000 of contingent consideration. The contingent consideration is linked to the continued employment of key personnel and therefore in accordance with IFRS 3 this was not recognised as consideration in the acquisition accounting in the 53 weeks ended 3 September 2016 and is instead being recognised in the income statement over a two year period. Given the nature of the payment it has been recognised as a non-recurring item.
Restructuring costs comprise redundancy costs.
8. Earnings per share
Non-recurring items and amortisation that are charged or credited to profit do not relate to the profitability of the Group on an ongoing basis. Therefore an adjusted earnings per share is presented as follows:
26 weeks
ended
4 March
2017
26 weeks ended
27 February 2016
53 weeks
ended
3 September
2016
'000
'000
'000
Continuing operations
Earnings
5,802
5,962
9,638
Amortisation and non-recurring items:
Amortisation of intangible assets
49
83
205
Business combination expenses
589
-
7
Restructuring costs
45
-
-
Tax effect of the above
(23)
(20)
(47)
Earnings - adjusted
6,462
6,025
9,803
Discontinued operations
Earnings
-
2,028
2,817
Amortisation and non-recurring items:
Amortisation of intangible assets
-
7
14
Profit on disposal of subsidiary
-
-
(39)
Tax effect of the above
-
(1)
-
Earnings - adjusted
-
2,034
2,792
Number
Number
Number
Weighted average number of ordinary shares in issue
91,317,071
89,819,777
90,087,357
Potentially dilutive share options
636,760
3,468,339
1,946,798
91,953,831
93,288,116
92,034,155
Earnings per share (pence)
Continuing operations
Basic
6.4p
6.6p
10.7p
Diluted
6.3p
6.4p
10.5p
Adjusted
7.1p
6.7p
10.9p
Diluted adjusted
7.0p
6.5p
10.7p
Discontinued operations
Basic
-
2.3p
3.1p
Diluted
-
2.2p
3.0p
Adjusted
-
2.3p
3.1p
Diluted adjusted
-
2.2p
3.0p
9. Dividends
An interim dividend of 866,393 that relates to the period to 3 September 2016 was paid on 7 October 2016, and a final dividend of 1,736,169 was paid on 13 January 2017. A special dividend of 15,996,351 was paid on 7 October 2016 following the disposal of Carr's Flour Mills Limited.
In addition, an interim dividend of 0.95p per share (2016: 0.95p per share) has been approved by the Directors. It is payable to shareholders on the register at 21 April 2017. This interim dividend, amounting to 868,258 (2016: 854,968), has not been recognised as a liability in this interim financial information. It will be recognised in shareholders' equity in the 52 weeks to 2 September 2017.
10. Intangible assets, property, plant and equipment and investment property
Goodwill
Other
intangible assets
Property,
plant and equipment
Investment property
'000
'000
'000
'000
26 weeks ended 4 March 2017
Opening net book amount at 4 September 2016
11,440
286
35,811
182
Exchange differences
(144)
5
752
-
Subsidiary acquired
5,574
160
341
-
Additions
-
67
2,373
-
Disposals
-
-
(165)
-
Depreciation and amortisation
-
(49)
(1,977)
(3)
Closing net book amount at 4 March 2017
16,870
469
37,135
179
26 weeks ended 27 February 2016
Opening net book amount at 30 August 2015
10,849
448
58,385
636
Exchange differences
2
18
862
-
Business acquired
80
-
23
-
Additions
-
37
3,867
-
Disposals
-
-
(98)
-
Depreciation and amortisation
-
(90)
(2,648)
(10)
Closing net book amount as at 27 February 2016
10,931
413
60,391
626
Capital commitments contracted, but not provided for, by the Group at the period end amounts to
687,000(2016: 758,000).
11. Borrowings and loans
As at
4 March
2017
(Restated)1
As at
27 February 2016
As at
3 September
2016
'000
'000
'000
Current
19,579
14,839
21,642
Non-current
13,082
25,447
18,625
Total borrowings and loans
32,661
40,286
40,267
Cash and cash equivalents
(21,176)
(13,272)
(48,411)
Net debt/(cash)
11,485
27,014
(8,144)
Undrawn facilities
34,494
26,805
23,014
Restated by 4,553,000 for the grossing up of cash and cash equivalents and bank overdrafts with right of offset within the same banking facility.
Movements in borrowings are analysed as follows:
26 weeks ended 4 March 2017
'000
Opening amount as at 4 September 2016
40,267
Exchange differences
(132)
Subsidiary acquired
89
New finance leases
1,025
Finance lease principal repayments
(394)
Repayments of borrowings
(5,895)
Increase in other borrowings
743
Release of deferred borrowing costs
18
Net decrease to bank overdraft
(3,060)
Closing amount as at 4 March 2017
32,661
26 weeks ended 27 February 2016
'000
Opening amount as at 30 August 2015 (restated by 3,564,000)
44,465
Exchange differences
67
New bank loans and finance leases
718
Finance lease principal repayments
(1,160)
Repayments of borrowings
(544)
Decrease in other borrowings
(4,438)
Release of deferred borrowing costs
18
Net increase to bank overdraft
1,160
Closing amount as at 27 February 2016 (restated by 4,553,000)
40,286
12. Financial instruments
IFRS13 requires financial instruments that are measured at fair value to be classified according to the valuation technique used:
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 - inputs, other than Level 1 inputs, that are observable for the asset or liability, either
directly (i.e., as prices) or indirectly (i.e., derived from prices)
Level 3 - unobservable inputs
All derivative financial instruments are measured at fair value using Level 2 inputs. The Group's bankers provide the valuations for the derivative financial instruments at each reporting period end based on mark to market valuation techniques.
The Group holds shares in several private limited companies. These have been classified as unquoted investments for which fair value cannot be reliably measured and are held at cost less accumulated impairment. Had fair value been applied this financial asset would have been Level 3.
Transfers between levels are deemed to have occurred at the end of the reporting period. There were no transfers between levels in the above hierarchy in the period.
With the exception of those detailed above, the Group's financial instruments are measured at amortised cost.
13. Retirement benefit asset
The amounts recognised within the Income Statement were as follows:
26 weeks ended
4 March
2017
26 weeks
ended
27 February 2016
53 weeks
ended
3 September
2016
'000
'000
'000
Service cost - including current service costs, past service costs
and settlements
-
(427)
(426)
Service cost - administrative cost
-
80
139
Net interest on the net defined benefit asset
(3)
(46)
(94)
(3)
(393)
(381)
As a result of the closure to future accrual on 31 December 2015 a negative past service cost, net of associated costs, of approximately 350,000 has been recognised in the income statement in the 26 weeks ended 27 February 2016 and in the 53 weeks ended 3 September 2016.
Net interest on the defined benefit retirement asset is recognised within interest income.
The amounts recognised in the Balance Sheet were as follows:
As at
4 March
2017
As at
27 February
2016
As at
3 September
2016
'000
'000
'000
Present value of funded defined benefit obligations
(68,180)
(59,040)
(73,355)
Fair value of scheme assets
73,912
62,967
73,666
Surplus in funded scheme
5,732
3,927
311
Actuarial gains of 5,418,000 (2016: 879,000) have been reported in the Statement of Comprehensive Income. The surplus has increased over the period since 3 September 2016 mainly as a result of improving market conditions.
The Group's associate's defined benefit pension scheme is closed to future service accrual and the valuation for this scheme has not been updated for the half year as any actuarial movements are not considered to be material.
14. Share Capital
Allotted and fully paid ordinary shares of 2.5p each
Number of shares
Share capital
'000
Share premium '000
Total
'000Opening balance as at 4 September 2016
91,192,804
2,280
9,111
11,391
Proceeds from shares issued:
- Treasury/LTIP
178,027
4
-
4
- share save scheme
24,710
1
18
19
At 4 March 2017
91,395,541
2,285
9,129
11,414
Opening balance at 30 August 2015
89,760,090
2,244
8,615
10,859
Proceeds from shares issued:
- share option scheme
60,000
1
27
28
- share save scheme
26,584
1
15
16
At 27 February 2016
89,846,674
2,246
8,657
10,903
Employee share schemes: options exercised during the period to 4 March 2017 resulted in 24,710 shares being issued (2016: 26,584 shares), with exercise proceeds of 19,177 (2016: 15,765) under the share save scheme and nil shares being issued (2016: 60,000 shares), with exercise proceeds of nil (2016: 28,560) under the approved share option scheme. The related weighted average price of the shares exercised was 0.776 (2016: 0.593) per share and nil (2016: 0.476) respectively.
In addition 178,027 shares were issued in the period and held initially as Treasury shares. These shares were subsequently used to satisfy the share awards under the LTIP scheme which were exercisable in November 2016.
15. Acquisition
On 24 October 2016 Wlischmiller Engineering GmbH ("Wlischmiller") acquired the entire issued share capital of STABER GmbH ("STABER") for cash consideration of 7.85m including deferred consideration of 2.0m, which is payable by 30 June 2018 at the latest.
STABER and Wlischmiller have been working together closely for over 50 years and STABER has most recently been a key supplier of parts for the remote handling business. STABER has designed and developed specialised intellectual property ("IP") which will be strategically beneficial to Wlischmiller in both the near and long term. This IP will accelerate the ongoing strategic development work on the Telbot and the Demo 2000 Telbot by Wlischmiller.
Goodwill represented the excess of the consideration paid over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities acquired.
STABER has generated intra segmental revenue of 205,000 which has been eliminated on consolidation and incurred a loss before taxation of 9,000 since the date of acquisition.
Acquisition related costs amounted to 190,000 which have been recognised within exceptional items in the consolidated income statement.
The assets and liabilities provisionally recognised in the acquisition accounting are set out below:
Provisional fair value
'000
Intangible assets
160
Property, plant and equipment
341
Inventories
543
Receivables
307
Cash and cash equivalents
506
Borrowings
(89)
Payables
(230)
Deferred grant income
(46)
Taxation
Current tax
(39)
Deferred tax
(43)
Net assets acquired
1,410
Goodwill
5,574
6,984
Satisfied by:
Cash consideration
5,204
Deferred consideration
1,780
Total consideration
6,984
Intangible assets represent the fair value of know-how within the business.
Had the acquisition of STABER occurred at the beginning of the accounting period the Group's revenue and profit before taxation for the period would not be materially different to the amounts actually recognised in the consolidated income statement.
16. Cash generated from continuing operations
26 weeks ended
4 March
2017
26 weeks ended
27 February 2016
53 weeks
ended
3 September
2016
'000
'000
'000
Profit for the period from continuing operations
6,574
6,713
11,171
Adjustments for:
Tax
1,708
1,792
2,907
Tax credit in respect of R&D
(63)
(80)
(176)
Depreciation of property, plant and equipment
1,977
1,718
3,582
Depreciation of investment property
3
3
6
Intangible asset amortisation
49
83
205
Profit on disposal of property, plant and equipment
(11)
(80)
(84)
Loss on disposal of investment
-
10
10
Amortisation of grants
(27)
(24)
(53)
Net fair value loss/(gain) on share based payments
127
222
(99)
Net foreign exchange differences
111
(108)
(383)
Net fair value losses on derivative financial instruments in operating profit
61
48
70
Finance costs:
Interest income
(95)
(119)
(236)
Interest expense and borrowing costs
448
534
1,045
Share of profit from associate and joint ventures
(1,708)
(1,423)
(2,081)
Pension contributions - deficit reduction
-
(780)
(780)
- ongoing
-
(108)
(108)
IAS19 income statement credit (excluding interest)
-
(347)
(287)
Changes in working capital (excluding the effects of
acquisitions and disposals):
Increase in inventories
(3,791)
(3,010)
(1,620)
Increase in receivables
(8,677)
(9,621)
(3,606)
Increase/(decrease) in payables
9,371
4,743
(3,226)
Cash generated from continuing operations
6,057
166
6,257
17. Related party transactions
The Group's significant related parties are its associate and joint ventures, as disclosed in the Annual Report and Accounts 2016.
Transactions and balances with the associate and joint ventures were all undertaken on an arm's length basis in the normal course of business and are as follows:
Sales to
Purchases from
Rent receivable from
Net management charges (to)/from
Amounts owed from
Amounts owed to
'000
'000
'000
'000
'000
'000
26 weeks to 4 March 2017
Associate
485
(51,644)
10
(18)
164
(21,804)
Joint ventures
211
(529)
-
90
1,889
(151)
26 weeks to 27 February 2016
Associate
327
(44,977)
9
(57)
616
(21,050)
Joint ventures
186
(661)
-
84
1,952
(48)
18. Post balance sheet event
On 17 March 2017, after the period end, the Group acquired the entire issued share capital of Horse and Pet Warehouse Limited for cash consideration of 124,577.
The principal activity of Horse and Pet Warehouse Limited is a retailer of animal products for the pet, equine and smallholding market.
The primary reason for the business combination was the expansion of the existing agriculture business.
Given that this has been a recent acquisition the identifiable assets and liabilities at completion and goodwill have yet to be finalised. The Directors therefore consider it impracticable to be able to disclose this information in these financial statements.
This information is provided by RNSThe company news service from the London Stock ExchangeENDIR OKDDBABKDCQD
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