REG - Carr's Group PLC - Half-year Report
20/04/2022 07:00
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RNS Number : 6697I Carr's Group PLC 20 April 2022
20 April 2022
CARR'S GROUP PLC ("Carr's" or the "Group")
INTERIM RESULTS
For the 26 weeks ended 26 February 2022
"A robust performance in the period with full year expectations unchanged"
Carr's (CARR.L), the Agriculture and Engineering Group, announces its Interim
Results for the 26 weeks ended 26 February 2022.
Financial highlights
Adjusted(1)
Adjusted(1) H1 2021
H1 2022 (restated)(2) +/-
Revenue (£m) 222.7 201.4 +10.6%
Adjusted(1) operating profit (£m) 10.8 11.0 -1.9%
Adjusted(1) profit before tax (£m) 10.3 10.5 -2.3%
Adjusted(1) EPS (p) 7.6 8.3 -8.4%
Net debt(3 )(£m) 29.9 10.6 +182.8%
Statutory
Statutory H1 2021
H1 2022 (restated)(2) +/-
Revenue (£m) 222.7 201.4 +10.6%
Operating profit (£m) 10.0 10.0 +0.2%
Profit before tax (£m) 9.5 9.5 -0.1%
Basic EPS (p) 7.6 7.8 -2.6%
Interim dividend (p) 1.175 1.175 -
(1) Adjusted results are consistent with how business performance is
measured internally and are presented to aid comparability of performance.
Adjusting items are disclosed in note 8
(2) Prior period restatement recognised in relation to the adoption of the
IFRIC agenda decision on cloud configuration and customisation costs in April
2021. Further details can be found in note 18
(3 )Excluding leases. Further details of net debt can be found in note 12
Highlights
· Strong performance in Agricultural Supplies despite significant raw
material cost increases
· Engineering order book value increased 14% during H1 with improved
utilisation and stronger margins
· Speciality Agriculture margins impacted by timing difference between
input cost increases and sale price movements
· Full year outlook in line with Board's expectations
Outlook
During the second half, an improved performance in Engineering, where order
books stand at record levels, together with continued positive trading in
Agricultural Supplies are expected to offset volume and pricing challenges in
Speciality Agriculture. The Board is confident in the prospects of all three
divisions in the medium term and its full year expectations are unchanged.
Peter Page, Executive Chairman, commented:
"Carr's Group has performed well in the first half, with a strong performance
in Agricultural Supplies at a time of extraordinary raw material cost
increases and a marked recovery in Engineering offsetting input cost impact on
margins in Speciality Agriculture. The outlook for the second half remains
positive with the group on track to meet the Board's expectations for the full
year."
Enquiries:
Carr's Group plc Tel: +44 (0) 1228 554 600
Peter Page (Executive Chairman)
Neil Austin (Chief Financial Officer)
Powerscourt Tel: +44 (0) 20 7250 1446
Nick Dibden / Nick Hayns / Sam Austrums
About Carr's Group plc:
Carr's is an international leader in manufacturing value added products and
solutions, with market leading brands and robust market positions in
Agriculture and Engineering, supplying customers in over 50 countries around
the world. Carr's operates a decentralised business model that empowers
operating subsidiaries enabling them to be competitive, agile, and effective
in their individual markets whilst setting overall standards and goals.
Its Speciality Agriculture division manufactures and supplies feed blocks,
minerals and boluses containing trace elements and minerals for livestock.
Its Agricultural Supplies division manufactures compound animal feed,
distributes farm machinery and fuels, 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, including
robotic and remote handling equipment, and provides technical services
primarily into nuclear, oil and gas, and defence industries.
INTERIM MANAGEMENT REPORT
RESULTS
The Group has delivered a half year result broadly in line with the prior
year, but behind the Board's expectations for the period. With a stronger
performance anticipated in Engineering in H2, full year expectations are
unchanged.
During the 26 weeks ended 26 February 2022 revenues increased to £222.7m (H1
2021: £201.4m). Adjusted operating profit of £10.8m (H1 2021: restated
£11.0m) was 1.9% down on the prior year. Adjusted profit before tax reduced
by 2.3% to £10.3m (H1 2021: restated £10.5m).
Adjusted earnings per share decreased by 8.4% to 7.6p (H1 2021: restated
8.3p).
MARKET INFORMATION
During the period, significant raw material cost inflation has affected all
parts of the business.
The Engineering division successfully managed the impact of steel and
component cost increases through existing contract arrangements.
Management is confident that pricing in all parts of the UK-based Agricultural
Supplies division correctly reflects the rapidly changing raw material cost
base, so far with limited impact on volumes.
In Speciality Agriculture changes to selling prices lagged cost increases in
the early part of the year due to the time gap between orders received and
delivery in a period of rapid cost movement, but costs and prices have since
been brought into line and the situation has stabilised at higher levels.
Volume demand has been relatively strong in the first half. Second half
volumes may be adversely impacted by higher prices and drought in some parts
of the USA. Management will closely monitor UK volumes through the summer
months when customers may decide to limit outgoings by more intensive use of
grazing and pasture.
SPECIALITY AGRICULTURE
The Speciality Agriculture division manufactures livestock supplements
including feed blocks, minerals, and trace element boluses, which are
distributed to farmers across the UK, Europe, North America, and New Zealand.
H1 2022 H1 2021 (restated) % Change
Revenue £42.7m £40.2m +6.2%
Adjusted operating profit £6.5m £8.3m -21.1%
Adjusted operating margin 15.3% 20.5%
In the UK and Ireland, feed blocks sales remained strong where volumes
increased on the prior year by 2.5%. Feed block volumes in Europe also
increased by 4.5% and continued to grow in New Zealand. Performance in the
USA, where volumes (excluding JVs) were 5.9% down on the prior year, was
impacted by lower livestock numbers in certain areas due to a reduction in
forage availability resulting from drought, reducing demand for feed blocks.
Animal health revenues were down compared to the prior year, which had
benefitted from increased sales in advance of the UK:EU trade deal in December
2020.
As reported in the Group's January trading update, margin erosion was seen
across the division due to a lag in passing through increases in raw material
prices. Inflationary costs have now been fully passed through into selling
prices.
AGRICULTURAL SUPPLIES
The Agricultural Supplies division includes our UK network of country stores,
fuel depots, machinery franchises, and compound feed business.
H1 2022 H1 2021 % Change
Revenue £158.7m £137.7m +15.3%
Adjusted operating profit £3.9m £3.3m +19.1%
Adjusted operating margin 2.5% 2.4%
The division performed well overall in the period. Livestock and milk prices
remain high, although rising input costs continue to present a significant
challenge for farmers.
Total feed sales volumes were 2.5% lower compared to the prior year, although
selling prices were 26.3% higher in the period primarily due to the pass
through of rising input costs.
Machinery revenues remained strong and 0.4% ahead of the prior year. In the
period a new machinery branch opened in Stranraer, and another will be opening
in Thirsk later this financial year.
Total retail sales were up 4.1%, with like-for-like sales showing the same
level of increase. In the period an e-commerce site was launched in part of
the business, which is expected to be rolled out more broadly in this calendar
year.
As previously reported, milder weather seen over the winter period led to fuel
volumes being down 8.5% versus the prior year.
ENGINEERING
The Engineering division includes 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.
H1 2022 H1 2021 % Change
Revenue £21.3m £23.6m -9.6%
Adjusted operating profit £1.5m £0.9m +58.2%
Adjusted operating margin 6.8% 3.9%
Performance across the division improved significantly against the prior year
but remained behind the Board's expectations for the period. The order book
continues to be strong with £44.2m recorded at the period end, being 8.6%
higher than at the half year in the prior year and 13.8% higher than the year
end position of £38.8m.
The fabrication and precision engineering business performed well in the
period, benefitting from high activity levels and a recovery in the oil and
gas market. Work continues to progress well through the Cumbrian
Manufacturing Alliance, which was formed in 2021 to secure larger projects in
the UK nuclear sector.
The robotics business performed as expected. During the period the business
achieved a significant milestone, securing its first contract to supply a
power manipulator in the USA to an internationally renowned research
institution. The business also completed development of the A150, which is a
new, small-scale telescopic manipulator for the growing nuclear medicine
market.
The engineering solutions business experienced challenges in the period,
largely due to delays and higher costs than anticipated on one defence
project, where installation work is complete and commissioning is expected
this calendar year, and technical faults on a service contract where work will
be completed at a later date.
REVIEW OF STRATEGIC OPTIONS
In January the Board announced it would undertake a review of the strategic
options for each of the three divisions to evaluate potential to grow
shareholder value. This work has progressed well with an assessment of
internal and external market information nearing completion. The Board will
provide an update during the second half of the financial year.
FINANCE REVIEW
Adjusted results
Revenue increased by 10.6% to £222.7m (H1 2021: £201.4m), with increases of
6.2% in Speciality Agriculture and 15.3% in Agricultural Supplies offset by a
reduction in Engineering of 9.6%.
Adjusted operating profit fell 1.9% to £10.8m (H1 2021: restated £11.0m).
Strong performances in Agricultural Supplies, up 19.1%, and Engineering, up
58.2%, offsetting a reduction in Speciality Agriculture of 21.1%.
Central costs were 24.6% lower at £1.1m (H1 2021: restated £1.5m), primarily
due to lower performance-based remuneration under current interim executive
arrangements.
Net finance costs of £0.5m (H1 2021: £0.5m) were slightly higher due to a
higher level of borrowings compared to the same period in the prior year.
The Group's adjusted profit before tax decreased by 2.3% to £10.3m (H1 2021:
restated £10.5m). Adjusted earnings per share, which was impacted by a higher
non-controlling interest from Agricultural Supplies, decreased by 8.4% to 7.6p
(H1 2021: restated 8.3p).
Adjusting items
The Group provides the adjusted profit measures referred to above to present
additional useful information on business performance consistent with how
business performance is measured internally. These measures show underlying
profits before certain adjusting items. Adjusting items during the period were
a net charge of £0.8m (H1 2021: restated £1.0m), consisting of cloud
computing costs of £1.2m (H1 2021: restated £0.8m), amortisation of acquired
intangible assets of £0.5m (H1 2021: £0.6m), and strategic review costs of
£0.4m (H1 2021: nil), offset by the release of contingent consideration of
£1.3m (H1 2021: £0.7m). The prior period also included restructuring costs
of £0.2m.
Statutory results
Reported operating profit on a statutory basis was £10.0m (H1 2021: restated
£10.0m) and reported profit before tax was £9.5m (H1 2021: restated £9.5m).
Basic earnings per share on a statutory basis was 7.6p (H1 2021: restated
7.8p).
Balance sheet and cash flow
Net cash used in operating activities in the first half was £15.2m (H1 2021:
restated: cash generated of £13.4m).
Net debt, excluding leases, increased to £29.9m from £10.0m at the financial
year end (H1 2021: £10.6m). This is primarily related to cash absorbed into
working capital, particularly receivables and inventories of £19.7m and
£8.9m respectively. The majority of this relates to Agricultural Supplies,
where receivables are higher due to a combination of higher selling prices and
some slower collections. Inventories are higher due to a combination of higher
prices and a decision to hold more machinery inventory. This is expected to
reverse in the second half.
The Group's defined benefit pension scheme remains in surplus, with a balance
of £10.0m compared to £9.4m at 28 August 2021.
Shareholder's equity
Shareholders' equity at 26 February 2022 was £122.7m (28 August 2021:
£118.1m).
A first interim dividend of 1.175 pence per ordinary share will be paid on 7
June 2022 to shareholders on the register on 29 April 2022. The ex-dividend
date will be 28 April 2022.
BOARD SUCCESSION
The Board has recruitment processes running for a CEO and an additional
Non-Executive Director. These are progressing to plan and the Board will
update shareholders in due course.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group has a process in place to identify and assess the impact of risks on
its business, which is reviewed and updated quarterly. The principal risks and
uncertainties for the remainder of the financial year are not considered to
have changed materially from those included on pages 33 to 36 of the Annual
Report and Accounts 2021 (available on the Company's website at
http://investors.carrsgroup.com).
OUTLOOK
During the second half, an improved performance in Engineering, where order
books stand at record levels, together with continued positive trading in
Agricultural Supplies are expected to offset volume and pricing challenges in
Speciality Agriculture. The Board is confident in the prospects of all three
divisions in the medium term, and its full year expectations are
unchanged.
CONDENSED CONSOLIDATED INCOME STATEMENT
For the 26 weeks ended 26 February 2022
26 weeks ended 26 weeks
26 February ended 52 weeks
2022 27 February ended
(unaudited) 2021 28 August
(unaudited) (restated)(2) 2021
(audited)
Notes £'000 £'000 £'000
Continuing operations
Revenue 6,7 222,706 201,435 417,254
Cost of sales (198,972) (173,412) (365,174)
Gross profit 23,734 28,023 52,080
Net operating expenses (15,135) (20,154) (39,218)
Adjusted¹ share of post-tax results of associate 678 920 1,525
Adjusting items 8 (261) (73) (694)
Share of post-tax results of associate 417 847 831
Share of post-tax results of joint ventures 998 1,276 1,421
Impairment of joint venture (adjusting item) 8 - - (2,090)
Adjusted¹ operating profit 6 10,781 10,993 17,585
Adjusting items 8 (767) (1,001) (4,561)
Operating profit 6 10,014 9,992 13,024
Finance income 161 135 260
Finance costs (691) (633) (1,232)
Adjusted¹( )profit before taxation 6 10,251 10,495 16,613
Adjusting items 8 (767) (1,001) (4,561)
Profit before taxation 6 9,484 9,494 12,052
Taxation (1,573) (1,600) (2,400)
Adjusted¹ profit for the period 6 8,305 8,589 14,675
Adjusting items 8 (394) (695) (5,023)
Profit for the period 7,911 7,894 9,652
Profit attributable to:
Equity shareholders 7,127 7,199 7,712
Non-controlling interests 784 695 1,940
7,911 7,894 9,652
Earnings per share (pence)
Basic 9 7.6 7.8 8.3
Diluted 9 7.5 7.5 8.1
Adjusted¹ 9 7.6 8.3 13.2
Diluted adjusted¹ 9 7.5 8.1 13.0
1 Adjusted results are consistent with how business performance is measured
internally and is presented to aid comparability of performance. Adjusting
items are discussed in note 8. Adjustments made to calculate adjusted earnings
per share can be found in note 9. An alternative performance measures glossary
can be found in note 19.
(2) See note 18 for an explanation of the prior period restatement recognised
in relation to the adoption of the IFRIC agenda decision on cloud
configuration and customisation costs.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 26 weeks ended 26 February 2022
26 weeks ended
26 weeks) ended 27 February 2021 52 weeks
26 February) (unaudited) (restated) 1 Ended
2022 28 August
(unaudited) 2021
(audited)
Notes £'000 £'000 £'000
Profit for the period 7,911 7,894 9,652
Other comprehensive income/(expense)
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation gains/(losses) arising on
translation of overseas subsidiaries 123 (1,752) (1,781)
Net investment hedges 133 76 165
Taxation charge on net investment hedges (25) (14) (31)
Items that will not be reclassified subsequently to profit or loss:
Actuarial gains/(losses) on retirement benefit asset:
- Group 14 530 (295) 1,205
- Share of associate - - 578
Taxation (charge)/credit on actuarial gains/(losses) on retirement benefit
asset:
- Group (133) 56 (301)
- Share of associate - - (144)
Other comprehensive income/(expense) for the period, net of tax 628 (1,929) (309)
Total comprehensive income for the period 8,539 5,965 9,343
Total comprehensive income attributable to:
Equity shareholders 7,755 5,270 7,403
Non-controlling interests 784 695 1,940
8,539 5,965 9,343
1 See note 18 for an explanation of the prior period restatement recognised
in relation to the adoption of the IFRIC agenda decision on cloud
configuration and customisation costs.
CONDENSED CONSOLIDATED BALANCE SHEET
As at 26 February 2022
As at
As at 27 February As at
26 February 2021 28 August
2022 (unaudited) (restated) 1 2021
(unaudited) (audited)
Notes £'000 £'000 £'000
Non-current assets
Goodwill 11 31,634 31,530 31,560
Other intangible assets 11 4,656 5,705 5,151
Property, plant and equipment 11 37,155 35,609 36,198
Right-of-use assets 11 15,816 16,265 16,777
Investment property 11 149 155 152
Investment in associate 14,687 14,522 14,268
Interest in joint ventures 8,445 11,492 9,482
Other investments 72 72 72
Contract assets 310 - 312
Financial assets
- Non-current receivables 20 20 20
Retirement benefit asset 14 9,964 7,807 9,371
122,908 123,177 123,363
Current assets
Inventories 51,926 43,392 43,226
Contract assets 6,623 7,885 7,202
Trade and other receivables 82,356 59,496 61,735
Current tax assets 3,216 2,705 2,669
Financial assets
- Cash and cash equivalents 12 28,457 24,838 24,309
172,578 138,316 139,141
Total assets 295,486 261,493 262,504
Current liabilities
Financial liabilities
- Borrowings 12 (37,069) (8,580) (11,113)
- Leases (3,301) (2,965) (2,967)
Contract liabilities (1,372) (3,019) (2,447)
Trade and other payables (74,054) (67,704) (69,526)
Current tax liabilities (254) (494) (42)
(116,050) (82,762) (86,095)
Non-current liabilities
Financial liabilities
- Borrowings 12 (21,246) (26,815) (23,159)
- Leases (11,982) (12,177) (12,458)
Deferred tax liabilities (5,560) (4,830) (5,503)
Other non-current liabilities (28) (1,370) (55)
(38,816) (45,192) (41,175)
Total liabilities (154,866) (127,954) (127,270)
Net assets 140,620 133,539 135,234
Shareholders' equity
Share capital 15 2,349 2,330 2,343
Share premium 15 10,465 9,613 10,155
Other reserves 2,825 2,363 2,578
Retained earnings 107,017 102,071 103,006
Total shareholders' equity 122,656 116,377 118,082
Non-controlling interests 17,964 17,162 17,152
Total equity 140,620 133,539 135,234
1See note 18 for an explanation of the prior period restatement recognised in
relation to the adoption of the IFRIC agenda decision on cloud configuration
and customisation costs.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the 26 weeks ended 26 February 2022
Treasury Equity Foreign Exchange Total Shareholders' Equity Non- Controlling Interests
Share Share Share Compensation Reserve Reserve Other Reserve Retained Total
Capital Premium Reserve Earnings Equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 29 August 2021
(audited) 2,343 10,155 - 480 1,903 195 103,006 118,082 17,152 135,234
Profit for the period - - - - - - 7,127 7,127 784 7,911
Other comprehensive income - - - - 231 - 397 628 - 628
Total comprehensive income - - - - 231 - 7,524 7,755 784 8,539
Dividends paid - - - - - - (3,583) (3,583) - (3,583)
Equity-settled share-based payment transactions
- - - 18 - - 68 86 28 114
Allotment of shares 6 310 - - - - - 316 - 316
Transfer - - - - - (2) 2 - - -
At 26 February 2022 (unaudited)
2,349 10,465 - 498 2,134 193 107,017 122,656 17,964 140,620
As previously reported at 29 August 2020 (audited)
2,312 9,176 (45) 734 3,550 197 101,202 117,126 17,043 134,169
Prior period adjustment¹ - - - - - - (2,295) (2,295) (243) (2,538)
At 30 August 2020 (restated)¹ 2,312 9,176 (45) 734 3,550 197 98,907 114,831 16,800 131,631
Profit for the period - - - - - - 7,199 7,199 695 7,894
Other comprehensive expense - - - - (1,690) - (239) (1,929) - (1,929)
Total comprehensive (expense)/income - - - - (1,690) - 6,960 5,270 695 5,965
Dividends paid - - - - - - (4,390) (4,390) (368) (4,758)
Equity-settled share-based payment transactions - - - (426) - - 646 220 35 255
Allotment of shares 18 437 - - - - - 455 - 455
Purchase of own shares held in trust - - (9) - - - - (9) - (9)
Transfer - - 53 - - (1) (52) - - -
At 27 February 2021 (unaudited) 2,330 9,613 (1) 308 1,860 196 102,071 116,377 17,162 133,539
As previously reported at 29 August 2020 (audited)
2,312 9,176 (45) 734 3,550 197 101,202 117,126 17,043 134,169
Prior period adjustment¹ - - - - - - (2,295) (2,295) (243) (2,538)
At 30 August 2020 (restated)¹ 2,312 9,176 (45) 734 3,550 197 98,907 114,831 16,800 131,631
Profit for the period - - - - - - 7,712 7,712 1,940 9,652
Other comprehensive (expense)/income - - - - (1,647) - 1,338 (309) - (309)
Total comprehensive (expense)/income - - - - (1,647) - 9,050 7,403 1,940 9,343
Dividends paid - - - - - - (5,490) (5,490) (1,647) (7,137)
Equity-settled share-based payment transactions - - - (254) - - 660 406 58 464
Excess deferred taxation on share-based payments - - - - - - 32 32 1 33
Allotment of shares 31 979 - - - - - 1,010 - 1,010
Purchase of own shares held in trust - - (110) - - - - (110) - (110)
Transfer - - 155 - - (2) (153) - - -
At 28 August 2021 (audited) 2,343 10,155 - 480 1,903 195 103,006 118,082 17,152 135,234
( )
1See note 18 for an explanation of the prior period restatement recognised in
relation to the adoption of the IFRIC agenda decision on cloud configuration
and customisation costs.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the 26 weeks ended 26 February 2022
26 weeks ended 26 weeks ended
26 February 2022 27 February 2021 52 weeks ended
(unaudited) (unaudited) (restated) 1 28 August 2021
(audited)
Notes £'000
£'000 £'000
Cash flows from operating activities
Cash (used in)/generated from continuing operations 16 (13,965) 15,225 22,163
Interest received 74 109
57
Interest paid (702) (1,244)
(625)
Tax paid (579) (1,300) (2,131)
Net cash (used in)/generated from operating activities (15,172) 13,357 18,897
Cash flows from investing activities
Contingent consideration paid - (1,077)
(131)
Dividends received from associate and joint ventures 1,626 1,898
368
Purchase of intangible assets (1) (107)
(49)
Proceeds from sale of property, plant and equipment 41 396
125
Purchase of property, plant and equipment and right-of-use assets (2,034) (1,645) (3,850)
Purchase of own shares held in trust - -
(9)
Net cash used in investing activities (368) (1,341) (2,740)
Cash flows from financing activities
Proceeds from issue of ordinary share capital 316 1,010
455
Purchase of own shares held in trust - (110)
-
New financing and draw downs on RCF 5,311 5,609 11,526
Repayment of RCF draw downs (6,000) (8,500)
-
Lease principal repayments (1,354) (1,556) (3,252)
Repayment of borrowings (1,406) (1,200) (2,400)
Increase/(decrease) in other borrowings 22,989 2,394
(604)
Dividends paid to shareholders (3,583) (4,390) (5,490)
Dividends paid to related party - (1,647)
(368)
Net cash generated from/(used in) financing activities 16,273 (2,054) (6,469)
Effects of exchange rate changes 39 (296)
(373)
Net increase in cash and cash equivalents 772 9,589 9,392
Cash and cash equivalents at beginning of the period 19,696 10,304 10,304
Cash and cash equivalents at end of the period 20,468 19,893 19,696
Cash and cash equivalents consist of:
Cash and cash equivalents per the balance sheet 28,457 24,838 24,309
Bank overdrafts included in borrowings (7,989) (4,945) (4,613)
20,468 19,893 19,696
1 See note 18 for an explanation of the prior period restatement recognised
in relation to the adoption of the IFRIC agenda decision on cloud
configuration and customisation costs.
Statement of Directors' responsibilities
We confirm that to the best of our knowledge:
• the condensed consolidated financial statements have been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by the
European Union ("EU") pursuant to Regulation (EC) No 1606/2002 as it applies
in the EU and in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006; and
• the interim management report includes a fair review of
the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
consolidated financial statements; and a description of the principal risks
and uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first six months
of the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last Annual Report that could
do so.
The Directors are listed in the Annual Report and Accounts 2021, with the
exception of the following changes in the period: Alistair Wannop and Kristen
Eshak Weldon both resigned on 18 January 2022. As previously disclosed in the
Annual Report and Accounts 2021, Hugh Pelham resigned on 11 October 2021. A
list of current Directors is maintained on the website: www.carrsgroup.com
(http://www.carrsgroup.com)
On behalf of the Board
Peter Page
Neil Austin
Chairman
Chief Financial Officer
20 April
2022
20 April 2022
Unaudited notes to condensed interim financial information
1. General information
The Group operates across three divisions of Speciality Agriculture,
Agricultural Supplies and Engineering. The Company is a public limited
company, which is listed on the London Stock Exchange and is incorporated and
domiciled in the UK. The address of the registered office is Old Croft,
Stanwix, Carlisle, Cumbria CA3 9BA.
These condensed interim financial statements were approved for issue on 20
April 2022.
The comparative figures for the financial year ended 28 August 2021 are not
the Company's statutory accounts for that financial year. Those accounts
have been reported on by the Company's auditor and delivered to the Registrar
of Companies. The report of the auditor was (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew attention by way
of emphasis without qualifying their report, and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act 2006.
2. Basis of preparation
These condensed interim financial statements for the 26 weeks ended 26
February 2022 have been prepared in accordance with IAS 34, 'Interim financial
reporting' as adopted by the EU pursuant to Regulation (EC) No 1606/2002 as it
applies to the EU.
The annual financial statements of the Group for the year ending 3 September
2022 will be prepared in accordance with International Financial Reporting
Standards (IFRSs) adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the EU and in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006. As required by the
Disclosure Guidance and Transparency Rules of the Financial Conduct Authority,
this condensed set of financial statements has been prepared applying the
accounting policies and presentation that were applied in the preparation of
the Company's published consolidated financial statements for the year ended
28 August 2021 which were prepared in accordance with IFRSs as adopted by the
EU.
The Group is expected to have a sufficient level of financial resources
available through operating cash flows and existing bank facilities for a
period of at least 12 months from the signing date of these condensed
consolidated interim financial statements. The Group has operated within all
its banking covenants throughout the period. In addition, the Group's main
banking facility is in place until November 2023 and an invoice discounting
facility is in place until August 2023. It is the intention to renew these
facilities in advance of the approval of the Report & Accounts for the
year ending 3 September 2022.
Detailed cash forecasts continue to be updated regularly for a period of at
least 12 months from the reporting period end. These forecasts are sensitised
for various worst case scenarios including increases in costs, reduction in
revenues, increases to customer payment terms and delays on order books. The
results of this stress testing showed that, due to the stability of the core
business, the Group would be able to withstand the impact of these severe but
plausible downside scenarios occurring over the period of the forecasts.
In addition, several other mitigating measures remain available and within the
control of the Directors that were not included in the scenarios. These
include withholding discretionary capital expenditure and reducing or
cancelling future dividend payments.
Consequently, the Directors are confident that the Group will have sufficient
funds to continue to meet its liabilities as they fall due for at least 12
months from the signing date of these condensed consolidated interim financial
statements. The Group therefore continues to adopt the going concern basis in
preparing its condensed consolidated interim financial statements.
3. Accounting policies and prior period restatement
The accounting policies adopted are consistent with those of the previous
financial year except for:
Taxation
Income taxes are accrued based on management's estimate of the weighted
average annual income tax rate expected for the full financial year based on
enacted or substantively enacted tax rates as at 26 February 2022. Our
effective tax rate was 20.7% (H1 2021: restated 21.3%) after adjusting for
results from associate and joint ventures, which are reported net of tax,
adjustments to contingent consideration (note 8) which is treated as
non-taxable, and for irrecoverable withholding tax on dividends received from
overseas joint ventures. The lower effective tax rate is due to a lower mix of
overseas profits.
Prior period restatement
In April 2021, the IFRS Interpretations Committee (IFRIC) published an agenda
decision of the clarification of accounting in relation to the configuration
and customisation costs incurred in implementing Software-as-a-Service (SaaS)
as follows:
· Amounts paid to the cloud vendor for configuration and
customisation that are not distinct from access to the cloud software are
expensed over the SaaS contract term.
· In limited circumstances, other configuration and
customisation costs incurred in implementing SaaS arrangements may give rise
to an identifiable intangible asset, for example, where code is created that
is controlled by the entity.
· In all other instances, configuration and customisation costs
will be expensed as the customisation and configuration services are received.
Following the publication of this agenda decision the Group reviewed and
changed its accounting policy for the capitalisation of costs incurred in
respect of the configuration and customisation of its cloud hosted ERP system
to align with the IFRIC guidance. This revision has been accounted for
retrospectively resulting in a prior period restatement.
This change in accounting policy has also been reflected in these condensed
interim financial statements resulting in a restatement of the primary
financial statements for the comparative period ended 27 February 2021.
See notes 8, 11 and 18 for further details.
4. Significant judgements and estimates
The preparation of interim financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expense. Actual results may differ from these estimates.
In preparing these condensed interim financial statements, the significant
judgements made by management in applying the Group's accounting policies and
the key sources of estimation uncertainty were the same as those that applied
to the consolidated financial statements for the 52 weeks ended 28 August
2021, with the exception of changes in estimates that are required in
determining the provision for income taxes as explained in note 3.
5. Financial risk management
The Group's activities expose it to a variety of financial risks: market risk
(including currency risk and price risk), credit risk and liquidity risk.
The condensed interim financial statements do not include all financial risk
management information and disclosures required in the annual financial
statements; they should be read in conjunction with the Group's annual
financial statements as at 28 August 2021.
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.
Reportable operating segments have been identified as Speciality Agriculture,
Agricultural Supplies and Engineering. Central comprises the central
business activities of the Group's head office, which earns no external
revenues. Performance is assessed using operating profit. For internal
purposes the CODM assesses operating profit before material adjusting items
(note 8) consistent with the presentation in the financial statements. The
CODM believes this measure provides a better reflection of the Group's
underlying performance. Sales between segments are carried out at arm's
length.
The following tables present revenue, profit, asset and liability information
regarding the Group's operating segments for the 26 weeks ended 26 February
2022 and the comparative periods.
26 weeks ended 26 February 2022
Speciality Agriculture Agricultural Supplies
£'000 £'000 Engineering Central Group
£'000 £'000 £'000
Total segment revenue 46,953 158,721 21,351 - 227,025
Inter segment revenue (4,267) (2) (50) - (4,319)
Revenue from external customers 42,686 158,719 21,301 - 222,706
Adjusted¹ EBITDA² 6,463 4,387 2,587 (1,048) 12,389
Depreciation, amortisation and profit/(loss)
on disposal of non-current assets (738) (1,355) (1,128) (63) (3,284)
Share of post-tax results of associate (adjusted¹) and joint ventures
793 883 - - 1,676
Adjusted(¹) operating profit 6,518 3,915 1,459 (1,111) 10,781
Adjusting items (note 8) (244) (1,244) 1,096 (375) (767)
Operating profit 6,274 2,671 2,555 (1,486) 10,014
Finance income 161
Finance costs (691)
Adjusted(¹) profit before taxation 10,251
Adjusting items (note 8) (767)
Profit before taxation 9,484
Segment gross assets 49,940 151,764 75,094 18,688 295,486
Segment gross liabilities (13,803) (91,537) (23,156) (26,370) (154,866)
1 Adjusted results are consistent with how business performance is measured
internally and is presented to aid comparability of performance. Adjusting
items are disclosed in note 8.
(2 )Earnings before interest, tax, depreciation, amortisation,
profit/(loss) on the disposal of non-current assets and before share of
post-tax results of associate and joint ventures.
The segmental information for the 26 weeks ended 27 February 2021 has been
restated following the change in accounting policy for cloud configuration and
customisation costs.
26 weeks ended 27 February 2021 (restated)
Speciality Agriculture Agricultural Supplies
£'000 £'000 Engineering Central Group
£'000 £'000 £'000
Total segment revenue 44,075 137,687 23,565 - 205,327
Inter segment revenue (3,888) (3) (1) - (3,892)
Revenue from external customers 40,187 137,684 23,564 - 201,435
Adjusted¹ EBITDA² 7,885 3,466 2,205 (1,404) 12,152
Depreciation, amortisation and profit/(loss)
on disposal of non-current assets (682) (1,320) (1,283) (70) (3,355)
Share of post-tax results of associate (adjusted¹) and joint ventures 2,196
1,054 1,142 - -
Adjusted¹ operating profit 8,257 3,288 922 (1,474) 10,993
Adjusting items (note 8) (482) (554) 78 (43) (1,001)
Operating profit 7,775 2,734 1,000 (1,517) 9,992
Finance income 135
Finance costs (633)
Adjusted¹ profit before taxation 10,495
Adjusting items (note 8) (1,001)
Profit before taxation 9,494
Segment gross assets 47,731 111,464 78,421 23,877 261,493
Segment gross liabilities (11,497) (56,126) (28,591) (31,740) (127,954)
( )
52 weeks ended 28 August 2021
Speciality Agriculture Agricultural Supplies Central
£'000 £'000 Engineering £'000 Group
£'000 £'000
Total segment revenue 74,395 297,506 51,299 - 423,200
Inter segment revenue (5,934) (6) (6) - (5,946)
Revenue from external customers 68,461 297,500 51,293 - 417,254
Adjusted¹ EBITDA² 9,858 7,348 6,133 (2,417) 20,922
Depreciation, amortisation and profit/(loss)
on disposal of non-current assets (1,335) (2,602) (2,208) (138) (6,283)
Share of post-tax results of associate (adjusted¹) and joint ventures 991 1,955 - - 2,946
Adjusted¹ operating profit 9,514 6,701 3,925 (2,555) 17,585
Adjusting items (note 8) (2,847) (1,684) 97 (127) (4,561)
Operating profit 6,667 5,017 4,022 (2,682) 13,024
Finance income 260
Finance costs (1,232)
Adjusted¹ profit before taxation 16,613
Adjusting items (note 8) (4,561)
Profit before taxation 12,052
Segment gross assets 48,558 110,716 79,994 23,236 262,504
Segment gross liabilities (12,251) (58,056) (27,783) (29,180) (127,270)
( )
1 Adjusted results are consistent with how business performance is measured
internally and is presented to aid comparability of performance. Adjusting
items are disclosed in note 8.
(2 )Earnings before interest, tax, depreciation, amortisation,
profit/(loss) on the disposal of non-current assets and before share of
post-tax results of associate and joint ventures.
7. Disaggregation of revenue
The following table presents the Group's reported revenue disaggregated based
on the timing of revenue recognition.
26 weeks 26 weeks ended 52 weeks
ended 27 February ended
26 February 2021 28 August
2022 2021
Timing of revenue recognition £'000 £'000 £'000
Over time 13,046 18,464 36,435
At a point in time 209,660 182,971 380,819
222,706 201,435 417,254
8. Adjusting items
26 26 weeks 52 weeks
weeks
ended ended
ended 27 February 28 August
26 February 2021 (restated) 2021
£'000 £'000
2022
£'000
Amortisation of acquired intangible assets (i) 468 621 1,186
Adjustments to contingent consideration (ii) (1,320) (671) (1,013)
Restructuring/closure costs (iii) - 247 248
Strategic review costs (iv) 375 - -
Cloud configuration and customisation costs - Group (v) 983 731 1,356
Cloud configuration and customisation costs - share of associate (v) 261 73 515
Impairment of joint venture (vi) - - 2,090
Effect of deferred tax rate change - share of associate (vii) - - 179
Charge included in profit before taxation 767 1,001 4,561
Effect of deferred tax rate change - Group (vii) - - 990
Taxation effect of the above adjusting items (373) (306) (528)
Charge included in profit for the period 394 695 5,023
(i) Amortisation of acquired intangible assets which do not
relate to the underlying profitability of the Group but rather relate to costs
arising on acquisition of businesses.
(ii) Adjustments to contingent consideration arise from the
revaluation of contingent consideration in respect of acquisitions to fair
value at the year end. Movements in fair value arise from changes to the
expected payments since the previous year end based on actual results and
updated forecasts. Any increase or decrease in fair value is recognised
through the income statement.
(iii) Restructuring/closure costs include redundancy costs.
(iv) Strategic review costs include external advisor fees incurred
in the development of the Group's strategy.
(v) Costs relating to material spend previously capitalised 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. See note 18 for further details of the prior period restatement.
(vi) During the prior year the joint venture Afgritech LLC
reported a loss and was expected to continue to underperform against budgeted
information in the short to medium term. An impairment review was undertaken
which resulted in an impairment charge of £1,314,000 against the carrying
amount of interest in joint venture and an impairment charge of £776,000
against the carrying amount of a loan receivable.
(vii) During the prior year legislation was substantively enacted in
the UK to increase the corporate tax rate to 25% with effect from 1 April
2023. As a result of the change, a tax charge of £179,000 was recognised in
the prior year in the Group's share of associate results and £990,000 was
recognised in the Group's tax charge in relation to the remeasurement of
deferred assets and liabilities. This did not relate to the underlying
performance of the associate or Group and was therefore included as an
adjusting item.
9. Earnings per share
Adjusting items disclosed in note 8 that are charged or credited to profit do
not relate to the underlying profitability of the Group. The Board believes
adjusted profit before these items provides a useful measure of business
performance. Therefore, an adjusted earnings per share is presented as
follows:
26 weeks
ended 52 weeks
26 weeks
27 February 2021 (restated) ended
ended 28 August 2021
26 February 2022
£'000
£'000 £'000
Earnings 7,127 7,199 7,712
Adjusting items:
Amortisation of acquired intangible assets 468 621 1,186
Adjustments to contingent consideration (1,320) (671) (1,013)
Restructuring/closure costs - 247 248
Strategic review costs 375 - -
Cloud configuration and customisation costs - Group 983 731 1,356
Cloud configuration and customisation costs - share of associate 261 73 515
Impairment of joint venture - - 2,090
Taxation effect of the above (373) (306) (528)
Effect of increase to UK deferred tax rate - Group - - 990
Effect of increase to UK deferred tax rate - share of associate - - 179
Non-controlling interest in the above (390) (191) (433)
Earnings - adjusted 7,131 7,703 12,302
Number Number Number
Weighted average number of ordinary shares in issue 93,759,322 92,588,219 93,123,043
Potentially dilutive share options 1,069,129 2,813,125 1,567,139
94,828,451 95,401,344 94,690,182
Earnings per share (pence) (restated)
Basic 7.6p 7.8p 8.3p
Diluted 7.5p 7.5p 8.1p
Adjusted 7.6p 8.3p 13.2p
Diluted adjusted 7.5p 8.1p 13.0p
10. Dividends
An interim dividend of £1,100,423 (H1 2021: £2,079,551) that related to the
period to 28 August 2021 was paid on 1 October 2021. A final dividend of
£2,482,959 (H1 2021: £2,310,612) in respect of the period to 28 August 2021
was paid on 26 January 2022.
11. Intangible assets, property, plant and equipment, right-of-use
assets and investment property
Other Property,
intangible plant and Right-of-use Investment
assets
Goodwill
equipment assets property
£'000
£'000 £'000 £'000 £'000
26 weeks ended 26 February 2022
Opening net book amount at 29 August 2021 31,560 5,151 36,198 16,777 152
Exchange differences 74 9 9 11 -
Additions and lease modifications - 1 2,041 1,124 -
Disposals, transfers and reclassifications - - 779 (701) -
Depreciation and amortisation - (505) (1,872) (1,395) (3)
Closing net book amount at 26 February 2022 31,634 4,656 37,155 15,816 149
26 weeks ended 27 February 2021 (restated)
Opening net book amount at 30 August 2020 32,041 6,365 38,259 14,856 158
Exchange differences (511) (52) (570) (17) -
Additions - 49 1,628 1,818 -
Disposals and transfers - - (1,748) 861 -
Depreciation and amortisation - (657) (1,960) (1,253) (3)
Closing net book amount as at 27 February 2021 31,530 5,705 35,609 16,265 155
Transfers include assets refinanced under a lease and finance leased assets
that became owned assets on maturity of the lease term.
Capital commitments contracted, but not provided for, by the Group at the
period end amounts to £659,000 (2021: £632,000).
The Group reviewed its accounting policy following the IFRIC agenda decision
in April 2021 in respect of the configuration and customisation costs
previously capitalised in relation to the Group's cloud hosted ERP system.
Following this review, costs previously capitalised as additions for the 6
months ended 27 February 2021 of £731,000 have now been expensed and
amortisation of £124,000 charged on those assets in that period has been
reversed. See note 18 for further details of this prior period restatement.
12. Borrowings
As at As at As at
26 February 27 February 28 August
2022 2021 2021
£'000 £'000 £'000
Current 37,069 8,580 11,113
Non-current 21,246 26,815 23,159
Total borrowings 58,315 35,395 34,272
Cash and cash equivalents as per the balance sheet (28,457) (24,838) (24,309)
Net debt 29,858 10,557 9,963
Undrawn facilities 20,381 35,324 35,996
Current borrowings include bank overdrafts of £8.0m (2021: £4.9m). Undrawn
facilities include £6.1m (2021: £5.7m) in respect of facilities that are
renewable on an annual basis.
Movements in borrowings are analysed as follows: 26 weeks 26 weeks
ended ended
26 February 27 February
2022 2021
£'000 £'000
Balance at start of period 34,272 36,441
Exchange differences (168) (235)
New bank loans and draw downs on RCF 5,222 4,000
Repayment of RCF draw downs (6,000) -
Repayments of borrowings (1,406) (1,200)
Increase/(decrease) in other borrowings 22,989 (604)
Loan forgiven - (715)
Release of deferred borrowing costs 30 30
Net increase/(decrease) to bank overdraft 3,376 (2,322)
Balance at end of period 58,315 35,395
New bank loans and draw downs on RCF excludes re-financing of assets under new
finance lease arrangements.
13. Financial instruments
IFRS 13 requires financial instruments that are measured at fair value to be
classified according to the valuation technique used:
Level 1 - quoted prices (unadjusted) in active markets for
identical assets or liabilities
Level 2 - inputs, other than Level 1 inputs, that are observable
for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices)
Level 3 - unobservable inputs
Transfers between levels are deemed to have occurred at the end of the
reporting period. There were no transfers between levels in the above
hierarchy in the period.
All derivative financial instruments are measured at fair value using Level 2
inputs. The Group's bankers provide the valuations for the derivative
financial instruments at each reporting period end based on mark to market
valuation techniques.
Contingent consideration is measured at fair value using Level 3 inputs. Fair
value is determined considering the expected payment, which is discounted to
present value. The expected payment is determined separately in respect of
each individual earn-out agreement taking into consideration the expected
level of profitability of each acquisition.
The significant unobservable inputs are the projections of future
profitability, which have been based on budget information, and the discount
rate, which has been based on the incremental borrowing rate. At 26 February
2022 there is no remaining contingent consideration payable. At 28 August
2021, all of the remaining contingent consideration payable is included within
current liabilities and has therefore not been discounted. In respect of the
period ended 27 February 2021 a reasonable change in the discount rate applied
would not have a material impact on the balances recognised within non-current
liabilities.
The following table presents a reconciliation of the contingent consideration
liability measured at fair value on a recurring basis using significant
unobservable inputs (level 3).
As at As at As at
26 February 27 February 28 August 2021
2022 2021
£'000 £'000 £'000
Fair value at the start of the period 1,320 3,422 3,422
Exchange differences - (12) (12)
Payments made to vendors - (131) (1,077)
Change in fair value (1,320) (671) (1,013)
Fair value at the end of the period - 2,608 1,320
14. Retirement benefit asset
The amounts recognised in the Income Statement are as follows:
26 weeks ended 26 weeks 52 weeks
26 February Ended ended
2022 27 February 28 August
2021 2021
£'000 £'000 £'000
Administrative expenses 16 9 18
Net interest on the net defined benefit asset (79) (74) (147)
Total income (63) (65) (129)
Net interest on the defined benefit retirement asset is recognised within
interest income.
The amounts recognised in the Balance Sheet are as follows:
As at As at As at
26 February 27 February 28 August
2022 2021 2021
£'000 £'000 £'000
Present value of funded defined benefit obligations (59,500) (62,685) (66,254)
Fair value of scheme assets 69,464 70,492 75,625
Surplus in funded scheme 9,964 7,807 9,371
Actuarial gains of £530,000 (2021: losses of £295,000) have been reported in
the Statement of Comprehensive Income. The surplus has increased over the
period since 28 August 2021 due to changes in 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.
15. Share capital
Number of shares Share capital Share Total
£'000
£'000 premium
£'000
Allotted and fully paid ordinary shares of 2.5p each
Opening balance as at 29 August 2021 93,720,125 2,343 10,155 12,498
Proceeds from shares issued:
- Share save scheme 250,415 6 310 316
At 26 February 2022 93,970,540 2,349 10,465 12,814
Opening balance at 30 August 2020 92,465,833 2,312 9,176 11,488
Proceeds from shares issued:
- LTIP 309,823 7 - 7
- Share save scheme 421,744 11 437 448
At 27 February 2021 93,197,400 2,330 9,613 11,943
250,415 shares were issued in the period to satisfy the share awards under the
share save scheme with exercise proceeds of £315,774. The related weighted
average price of the shares exercised in the period was £1.261 per share.
Since the period end the Company's issued share capital has increased to
93,977,598 shares due to the issue of 7,058 shares under the share save scheme
with exercise proceeds of £8,999 and a related weighted average exercise
price of £1.275 per share.
16. Cash (used in)/generated from continuing operations
26 weeks
26 weeks ended 52 weeks
ended 27 February ended
26 February 2021 28 August
2022 (restated) 2021
£'000 £'000 £'000
Profit for the period from continuing operations 7,911 7,894 9,652
Adjustments for:
Tax 1,573 1,600 2,400
Tax credit in respect of R&D (1,352) (180) (260)
Depreciation of property, plant and equipment 1,872 1,960 3,822
Depreciation of right-of-use assets 1,395 1,253 2,529
Depreciation of investment property 3 3 6
Intangible asset amortisation 505 657 1,256
(Profit)/loss on disposal of property, plant and equipment (21) 103 (144)
Profit on disposal of right-of-use assets (2) - -
Adjustments to contingent consideration (1,320) (671) (1,013)
Net fair value charge on share based payments 114 255 464
Other non-cash adjustments (20) (157) (600)
Interest income (161) (135) (260)
Interest expense and borrowing costs 721 663 1,292
Share of post-tax results of associate and joint ventures (1,415) (2,123) (2,252)
Impairment of joint venture - - 2,090
IAS 19 income statement charge (excluding interest):
Administrative expenses 16 9 18
Changes in working capital:
Increase in inventories (8,863) (2,783) (2,679)
Increase in receivables (19,658) (7,872) (10,606)
Increase in payables 4,737 14,749 16,448
Cash (used in)/generated from continuing operations (13,965) 15,225 22,163
The majority of the increases in receivables and inventories relates to
Agricultural Supplies, where receivables are higher due to a combination of
higher selling prices and some slower collections. Inventories are higher due
to a combination of higher prices and a decision to hold more machinery
inventory. This is expected to reverse in the second half.
17. Related party transactions
The Group's significant related parties are its associate and joint ventures,
as disclosed in the Annual Report and Accounts 2021.
Sales to Purchases from Rent receivable from Net management charges Dividends received Amounts Amounts
(from)/to from owed from owed to
£'000 £'000 £'000 £'000 £'000 £'000 £'000
26 weeks to
26 February 2022
Associate 1,268 (69,154) 10 (65) - 902 (31,707)
Joint ventures 135 (631) - 118 1,626 985 (87)
26 weeks to
27 February 2021
Associate 346 (60,865) 10 (69) 368 368 (20,539)
Joint ventures 373 (229) - 82 - 1,623 (102)
18. Prior period restatement
In April 2021, the IFRS Interpretations Committee (IFRIC) published an agenda
decision on the clarification of accounting in relation to the configuration
and customisation costs incurred in implementing Software-as-a-Service (SaaS)
as follows:
· Amounts paid to the cloud vendor for configuration and
customisation that are not distinct from access to the cloud software are
expensed over the SaaS contract term.
· In limited circumstances, other configuration and
customisation costs incurred in implementing SaaS arrangements may give rise
to an identifiable intangible asset, for example, where code is created that
is controlled by the entity.
· In all other instances, configuration and customisation costs
will be expensed as the customisation and configuration services are received.
Following the publication of this agenda decision the Group reviewed and
changed its accounting policy for the capitalisation of costs incurred in
respect of the configuration and customisation of its cloud hosted ERP system
to align with the IFRIC guidance. This revision has been accounted for
retrospectively resulting in a prior period restatement.
This change in accounting policy has also been reflected in these condensed
interim financial statements. The consolidated income statement,
consolidated statement of comprehensive income, consolidated balance sheet,
consolidated statement of changes in equity and the consolidated statement of
cash flows have been restated for the comparative period ended 27 February
2021.
The Group identified £2,894,000 of capitalised costs incurred by the parent
Company and its subsidiaries in the years up to and including 29 August 2020
that has been expensed with a further £667,000 in its associate's balance
sheet, of which the Group recognises 49%. Cumulative amortisation on these
costs as at 29 August 2020 of £88,000 has been reversed.
In relation to the comparative period ended 27 February 2021, costs of
£731,000 incurred by the parent Company and its subsidiaries have been
expensed and amortisation charged of £124,000 has been reversed. A tax
credit of £114,000 has been recognised in the consolidated income statement
with a corresponding increase to the current tax asset in the consolidated
balance sheet. In addition, the associate incurred costs of £183,000 during
the period ended 27 February 2021, of which the Group recognises 49%, that
have been expensed and recognised, net of an associated tax credit, through
the Group's share of post-tax results of associate.
The affected financial statement line items for the Group are as follows.
27 February 2021 27 February 2021
(previously reported) Restatement (restated)
£'000 £'000
£'000
Income Statement
Net operating expenses (19,547) (607) (20,154)
Adjusted share of post-tax results of associate 920 - 920
Reported share of post-tax results of associate 920 (73) 847
Adjusted operating profit 10,869 124 10,993
Reported operating profit 10,672 (680) 9,992
Adjusted profit before taxation 10,371 124 10,495
Reported profit before taxation 10,174 (680) 9,494
Taxation (1,714) 114 (1,600)
Adjusted profit for the period 8,490 99 8,589
Reported profit for the period 8,460 (566) 7,894
Basic EPS (pence) 8.2 (0.4) 7.8
Diluted EPS (pence) 7.9 (0.4) 7.5
Adjusted EPS (pence) 8.2 0.1 8.3
Diluted adjusted EPS (pence) 8.0 0.1 8.1
Balance Sheet
Other intangible assets 9,118 (3,413) 5,705
Investment in associate 14,860 (338) 14,522
Total non-current assets 126,928 (3,751) 123,177
Current tax assets 2,058 647 2,705
Total current assets 137,669 647 138,316
Total assets 264,597 (3,104) 261,493
Net assets 136,643 (3,104) 133,539
Retained earnings 104,741 (2,670) 102,071
Total shareholders' equity 119,047 (2,670) 116,377
Non-controlling interests 17,596 (434) 17,162
Total equity 136,643 (3,104) 133,539
Cash Flow Statement
Cash generated from continuing operations 15,956 (731) 15,225
Net cash generated from operating activities 14,088 (731) 13,357
Purchase of intangible assets (780) 731 (49)
Net cash used in investing activities (2,072) 731 (1,341)
The opening balance sheet of the prior period has been restated and the
affected financial statement line items are as follows.
30 August 2020 30 August 2020
(previously reported) Restatement (restated)
£'000 £'000 £'000
Balance Sheet
Other intangible assets 9,171 (2,806) 6,365
Investment in associate 14,307 (265) 14,042
Total non-current assets 127,473 (3,071) 124,402
Current tax assets 1,535 533 2,068
Total current assets 119,870 533 120,403
Total assets 247,343 (2,538) 244,805
Net assets 134,169 (2,538) 131,631
Retained earnings 101,202 (2,295) 98,907
Total shareholders' equity 117,126 (2,295) 114,831
Non-controlling interests 17,043 (243) 16,800
Total equity 134,169 (2,538) 131,631
19. Alternative performance measures
The Interim Results include alternative performance measures ("APMs"), which
are not defined or specified under the requirements of IFRS. These APMs are
consistent with how business performance is measured internally and 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
EBITDA Earnings before interest, tax, depreciation, amortisation, profit/(loss) on
the disposal of non-current assets and before share of post-tax results of the
associate and joint ventures. EBITDA allows the user to assess the
profitability of the Group's core operations before the impact of capital
structure, debt financing and non-cash items such as depreciation and
amortisation.
Adjusted EBITDA Earnings before interest, tax, depreciation, amortisation, profit/(loss) on
the disposal of non-current assets, before share of post-tax results of the
associate and joint ventures and excluding items regarded by the Directors as
adjusting items. This measure is reconciled to statutory operating profit and
statutory profit before taxation in note 6. EBITDA allows the user to assess
the profitability of the Group's core operations before the impact of capital
structure, debt financing and non-cash items such as depreciation and
amortisation.
Adjusted operating profit Operating profit after adding back items regarded by the Directors as
adjusting items. This measure is reconciled to statutory operating profit in
the income statement and note 6. Adjusted results are presented because if
included, these adjusting items could distort the understanding of the Group's
performance for the period and the comparability between the periods
presented.
Adjusted profit before taxation Profit before taxation after adding back items regarded by the Directors as
adjusting items. This measure is reconciled to statutory profit before
taxation in the income statement and note 6. Adjusted results are presented
because if included, these adjusting items could distort the understanding of
the Group's performance for the period and the comparability between the
periods presented.
Adjusted profit for the period 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 period and the comparability between the periods
presented.
Adjusted earnings per share Profit attributable to the equity holders of the Company after adding back
items regarded by the Directors as adjusting items after tax divided by the
weighted average number of ordinary shares in issue during the period. This is
reconciled to basic earnings per share in note 9.
Adjusted diluted earnings per share Profit attributable to the equity holders of the Company after adding back
items regarded by the Directors as adjusting items after tax divided by the
weighted average number of ordinary shares in issue during the period adjusted
for the effects of any potentially dilutive options. Diluted earnings per
share is shown in note 9.
Net debt The net position of the Group's cash at bank and borrowings excluding leases.
Details of the movement in borrowings is shown in note 12.
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