TIDMCARR
RNS Number : 9300T
Carr's Group PLC
23 March 2023
23 March 2023
CARR'S GROUP PLC
("Carr's" or the "Group")
FULL YEAR RESULTS
For the year ended 3 September 2022
"A strong performance in a transformational year for the
Group"
Carr's (CARR.L), the Speciality Agriculture and Engineering
Group, announces its full year results for the year ended 3
September 2022.
Financials (continuing operations)
Adjusted (1) FY22 FY21 +/-
(restated)
(3)
------------------------- ------------ ------------ -----------
Revenue (GBPm) 124.2 120.3 +3.3%
Adjusted(1) operating
profit (GBPm) 11.9 11.1 +7.5%
Adjusted(1) profit
before tax (GBPm) 11.2 10.4 +8.0%
Adjusted(1) EPS (p) 10.0 10.1 -1.0%
Dividend (p per share) 5.20 5.00 +4.0%
Net debt (2) (GBPm) 14.0 10.0 -40.8%
Statutory FY22 FY21 +/-
(restated)
(3)
Revenue (GBPm) 124.2 120.3 +3.3%
Operating profit (GBPm) 8.2 8.2 +0.4%
Profit before tax
(GBPm) 7.6 7.5 +0.4%
Basic EPS (p) 6.4 6.2 +3.2%
Highlights
-- Revenue from continuing operations increased 3.3%
-- Adjusted profit before tax from continuing operations increased 8.0%
-- Reported operating profit from continuing operations in line with prior year at GBP8.2m
-- Agricultural Supplies business sold at market comparable 6.4 x FY21 EBITDA
-- Post year-end disposal leads to net cash on balance sheet
-- Refreshed Board for 2023
-- Group now focused on higher margin, differentiated, international businesses
Peter Page, Chief Executive Officer, commented:
"2022 was a year of significant change for Carr's Group. With a
clear direction and strategy, the business is now focused on
higher-margin, differentiated, international Speciality Agriculture
and Engineering businesses with strong growth prospects."
(1) Adjusted results are consistent with how business
performance is measured internally and are presented to aid
comparability of performance. Adjusting items are disclosed in note
3
(2) Excluding leases. Further details of net debt can be found in note 9
(3) Prior year restatement recognised in relation to the
recognition of revenue from customer contracts
within the Engineering division. Details are disclosed in note 10
Enquiries:
Carr's Group plc Tel: +44 (0) 1228 554 600
Peter Page (Chief Executive Officer)
David White (Chief Financial Officer)
FTI Consulting Tel: +44 (0) 20 3727 1340
Richard Mountain/Ariadna Peretz
Investec Bank plc Tel: +44 (0) 20 7597 4000
Carlton Nelson/David Anderson/William
Brinkley
An online briefing for analysts will be held today at 09:00 GMT.
Analysts and investors wishing to attend the call are asked to
contact FTI Consulting at FTI_Carrs@fticonsulting.com .
Shareholders or investors wishing to make an appointment to meet
with Senior Management should contact the Company directly a t
reception@carrsgroup.com .
About Carr's Group plc:
Carr's is an international leader in manufacturing value added
products and solutions, with market leading brands and robust
market positions in Agriculture and Engineering, supplying
customers around the world. Carr's operates a business model that
empowers operating subsidiaries, enabling them to be competitive,
agile, and effective in their individual markets whilst setting
overall standards and goals.
The Speciality Agriculture division manufactures and supplies
feed blocks, minerals and boluses containing trace elements and
minerals for livestock.
The Engineering division manufactures vessels, precision
components and remote handling systems, and provides specialist
engineering services, for the nuclear, defence and oil & gas
industries.
Update
Please note that some of the commentary below was included in
the Group's trading update announced on 21 February 2023. Such
commentary has been updated, where appropriate.
Overview
2022 was a transformational year for Carr's Group. The Board
addressed strategic priorities and made changes that will enable
growth in shareholder value by developing the Group's market
leading businesses in Speciality Agriculture and Engineering. The
Group will focus on higher margin, differentiated, international
businesses, following the disposal of the Agricultural Supplies
division in October 2022.
The future development of the Speciality Agriculture division
will be through organic growth opportunities and carefully targeted
acquisitions. The Engineering division will focus on the unique
qualities and strengths of the current businesses to realise their
full potential at a time when the nuclear sector is expanding
capacity and capability.
The Board has been refreshed, bringing considerable experience
to lead the Group at a time of change and renewal for businesses
that have strong prospects for the future.
Financial Performance
The review of financial performance focuses primarily on revenue
and profits from continuing operations in Speciality Agriculture
and Engineering, following the disposal of the Agricultural
Supplies division after the year end.
Revenue for the year from continuing operations increased to
GBP124.2m (2021 restated: GBP120.3m).
Adjusted operating profit from continuing operations increased
to GBP11.9m (2021 restated: GBP11.1m), with Speciality Agriculture
contributing GBP9.2m (2021: GBP9.5m), and Engineering contributing
GBP5.4m (2021 restated: GBP3.9m). Reported operating profit was in
line with last year at GBP8.2m (2021 restated: GBP8.2m).
Adjusted profit before tax from continuing operations increased
to GBP11.2m (2021 restated: GBP10.4m) whilst reported profit before
tax increased 0.4% to GBP7.6m (2021 restated: GBP7.5m).
Basic earnings per share from continuing operations increased to
6.4p (2021 restated: 6.2p) and adjusted earnings per share reduced
to 10.0p (2021 restated: 10.1p).
Net debt at 3 September 2022, excluding leases, was higher at
GBP14.0m (2021: GBP10.0m), funding increases in working capital
driven by inflationary cost increases. Since year end, with
completion of the disposal of the Agricultural Supplies division
and the receipt of the initial proceeds, the balance sheet is cash
positive.
The profit numbers referenced in this document exclude the
impact of discontinued operations. The net loss for the year after
tax from discontinued operations of GBP2.2m (2021: GBP3.8m profit)
consists of the loss recognised relating to the disposal of the
Carr's Billington Agricultural business, net of profit from the
Agricultural Supplies division.
Dividend
The Board is proposing a final dividend of 2.85 pence per share
which, together with the two interim dividends, makes a total
dividend of 5.20 pence per share for the full year, up 4% on the
prior year (2021: 5.00 pence).
Subject to approval by shareholders at the forthcoming General
Meeting of the Company, the final dividend will be paid on 12 May
2023 to shareholders on the register at close of business on 14
April 2023 and the shares will go ex-dividend on 13 April 2023.
Strategy
Since April 2021, business performance has been reported in
three divisions: Speciality Agriculture, Agricultural Supplies, and
Engineering. This provided clearer information on the profitability
of each division and more detail on how each contributes to
earnings per share.
In January 2022, a review of the strategic options for long-term
growth in shareholder value in each of the three divisions was
announced. Following careful evaluation of all options, supported
by external advisers, the Board determined that the Group will most
successfully create long-term shareholder value by focusing on the
higher margin, differentiated, international businesses in
Speciality Agriculture and Engineering.
The Speciality Agriculture division, which delivers measurable
productivity benefits to livestock farmers through patented
products sold under market-leading brands, will grow with
investment in the existing businesses and, over time, by carefully
targeted acquisitions. Opportunities include demand for nutritional
supplements generated by increasing use of low intensity
pasture-based grazing, the rise in sustainability-related nutrition
programmes, and growing interest in welfare-centred management
systems.
The Engineering division will develop the current portfolio of
businesses, which include patented and differentiated products and
services, to achieve their full potential in specialist markets at
a time when totally dependable engineering solutions and services,
fit for the nuclear industry, are in demand. Opportunities include
increasing capacity through small modular reactor technology
development, extending installed asset life to maintain capacity,
and supporting high levels of investment in long-term fundamental
research.
In August 2022, we reached agreement with co-owners Edward
Billington & Son Limited for the sale of all our holdings in
the Agricultural Supplies division. Following a general meeting on
19 September 2022 at which 98% of shareholder votes were in favour,
the sale was completed on 26 October 2022, with the Group's holding
valued at GBP44.5m (on a debt-free basis), a market comparable
multiple of 6.4 x FY21 EBITDA, leading to anticipated net proceeds
of GBP29.0m, after accounting for all transaction costs, debt and
working capital adjustments.
Whilst the Agricultural Supplies division generated
approximately 75% of historic Group revenues, the market
environment and ownership structure meant that it contributed
approximately 25% to adjusted earnings per share attributable to
shareholders. The split ownership structure meant that Carr's Group
did not have full control of the strategy or direction of the
combined business, whilst it consumed a substantial proportion of
management time. It required up to GBP10m of replacement capital
expenditure, and the rise in commodity prices led to a substantial
increase in working capital during 2022. The disposal addresses a
fundamental challenge to growing shareholder value.
The decision to focus on high margin, differentiated,
international businesses, and the disposal of the lower margin
UK-only division, are the first steps in an ongoing process of
strategic change for the Group. The receipt of sale proceeds puts
the balance sheet in a strong net cash position. The Board will
carefully consider the appropriate allocation of capital to achieve
a balance between investment for growth in long-term value of the
Group and returns to shareholders, including options to secure a
fully-funded, risk-free position for the legacy defined benefit
pension scheme.
Board
Carr's Group has a refreshed Board of new Executive and
Non-Executive members bringing considerable experience for the
benefit of all shareholders.
In line with Board succession plans, Shelagh Hancock and Stuart
Lorimer were appointed as Non-Executive Directors from 1 September
2022. Shelagh, CEO of First Milk, the leading UK farmer owned dairy
co-operative, has considerable experience relevant to the
Speciality Agriculture division. Stuart, Finance Director of FTSE
listed AG Barr plc, will become Audit Committee Chair in succession
to John Worby following the forthcoming General Meeting of the
Company. Both Shelagh and Stuart have already brought fresh insight
to Board meetings and provide constructive challenge to the
Executive Directors.
As part of the Board's succession plan, John Worby, who has been
on the Board since 2015, will complete his time as Audit Committee
Chair following the forthcoming General Meeting of the Company, and
will retire from the Board in mid-2023 following a period of
handover and support to the new Board members. John has provided
wise counsel and shared a lifetime's experience in finance and
public companies, which has been of great value to the Group.
In August 2022, Neil Austin indicated his intention to leave
Carr's Group to take up a new role at Westmorland Family,
headquartered at Penrith in Cumbria. Neil had been on the Board for
over ten years and was central to many of the improvements and
developments at Carr's Group in recent times. Neil made a
significant contribution to the work of the Board. His detailed
understanding of the workings of the Group combined with a sharp
intellect has been a real help to Board members and senior managers
throughout his tenure. Neil stood down as Chief Financial Officer
and from the Board on 21 February 2023, and left with all the Board
wishing him success in his new role, and gratitude for his legacy
at Carr's Group.
David White joined the Board on 21 February 2023 as Chief
Financial Officer, in succession to Neil Austin, bringing extensive
finance and operational experience gained at Aggreko plc, Weir
Group and in professional services. David was appointed following
an external search process and has made a very positive impact
since joining the Group on 3 January 2023.
In November 2022, following an extensive search process, it was
announced that Tim Jones would be joining the Board and would
become Non-Executive Chair. Tim's appointment took effect on 21
February 2023. Tim brings substantial experience to the role,
having been Non-Executive Chair of Treatt plc, a FTSE listed
business whose market capitalisation increased eight-fold in the 11
years of his tenure. Tim has a deep understanding of equity
markets, is an FCA approved person and a member of the Chartered
Institute of Securities and Investment, and is well placed to
engage with, and reflect the interests of, all shareholders.
Since October 2021 Peter Page has worked in the business
full-time as Executive Chair, following agreement with the
incumbent Chief Executive Officer, Hugh Pelham, that he would leave
the business and step down from the Board. Further to an extensive
internal and external search process, it was announced in August
2022 by the Board that Peter Page would be appointed Chief
Executive upon the appointment of a new Non-Executive Chair, which
took effect on 21 February 2023 with the appointment of Tim
Jones.
As separately announced on 21 February 2023, Martin Rowland
joined the Board as a Non-Executive Director of the Company on 6
March 2023 in accordance with a relationship agreement entered into
between Harwood Capital Management Limited and the Company on 20
February 2023.
Stakeholder Engagement
The January 2022 Annual General Meeting was the first
opportunity to meet with shareholders in person following the
lifting of COVID-19 restrictions. Throughout the year we have met
with shareholders, in person, online and through telephone calls.
It is important that the Chair and other Directors are accessible
to shareholders so we can benefit from the dialogue, challenge, and
exchange of views.
Around the time of the Annual General Meeting in January 2022,
we consulted with shareholders in some detail to address the issue
of Board composition and diversity, taking the opportunity to
discuss and explain the changes to the Board as part of the
succession plans. The feedback received and our response has been
published on the Group's website, with more detail in the
Nomination Committee Report on pages 58 to 60 of the 2022 Annual
Report and Accounts.
Members of the Board meet regularly with senior managers to
review business performance and progress in non-financial areas
including Health and Safety and Environmental issues. Ian Wood, as
the Board's nominee for employee engagement, actively participates
in specific topics on behalf of the whole Board.
There is regular engagement with current and prospective
customers, ranging from farmers at UK and US trade events and
distributors at international trade shows, to site visits in the
UK, USA and Japan. First hand contact with the market is critical
to understanding challenges and opportunities for the future.
It is valuable to maintain contact with related external
educational, research and development organisations, for example
the UK Atomic Energy Authority, agriculture faculties of US
universities and local colleges for skills training, and new
developments and opportunities.
Environment, Social and Governance
ESG is about the way that we do things, more than words and
statements. With ever increasing focus on sustainability, business
impact on the climate and society, all the Group's activities are
taking more direct responsibility for monitoring and reducing
emissions and waste. An experienced Environment and Sustainability
Manager was appointed in 2022, who has undertaken a critical review
of the systems and practices currently in place and is developing a
comprehensive plan for changes and actions to be addressed over the
coming year. The establishment of Green Teams that involve a range
of colleagues to lead relevant activities will ensure engagement
across the Group in a way that is appropriate for the circumstances
of each business. Further details can be found in our Responsible
Business Report on pages 28 to 36 and our TCFD Disclosures on pages
37 to 39 of the 2022 Annual Report and Accounts.
The Speciality Agriculture division offers customers nutrition
products which can reduce carbon impact. The Engineering division
supplies services that support low carbon sources of energy in the
nuclear sector. Following the sale of the Agricultural Supplies
division, the Group's environmental and sustainability priorities
have changed, ceasing involvement in the energy-intensive
fertiliser, fuels and farm machinery markets, and reducing
dependence on commodities.
High standards of Corporate Governance are a priority, with an
annual evaluation of the Board's performance in this area, to
ensure compliance with the UK Corporate Governance Code 2018 and
adapting our practices accordingly. Our Statement of Compliance can
be found on page 57 of the 2022 Annual Report and Accounts.
FY22 Year-End Process
In November 2022 a delay was announced to the completion of the
year-end process that had several consequences including a
temporary suspension of trading in the Company's ordinary shares,
delayed release of the Annual Report, audited results and payment
of the final dividend later than usual. Whilst the delay primarily
related to a part of the business in which Carr's Group had a
minority shareholding and that has now been sold, the Company will
carefully review the audit process to seek opportunities for the
timely completion of the current financial year.
People
All colleagues have contributed to a positive outturn for the
Group in a year of challenge and change. I am very grateful for
everyone's commitment to the business, and I wish all success to
our former colleagues in the Agricultural Supplies division. A
third of the Group's employees are now located outside the UK, in
Germany, USA, Ireland and New Zealand, an indication of the more
international outlook for the Group in the future.
GROUP PERFORMANCE REVIEW
Overview
The Group performed well during the financial year ended 3
September 2022 ("FY22"). Continuing operations, comprising
Speciality Agriculture and Engineering, delivered 8.0% growth in
adjusted profit before tax compared to the prior year, from a 3.3%
revenue increase. FY22 was challenging due to supply chain delays,
raw material cost increases and energy price rises, as the effects
of the Covid pandemic receded and global business activity started
to return to higher levels.
Health and Safety performance reflects increased awareness of
risks, and changing habits. Reportable Incidents declined from 9 in
2020 to 4 in each of 2021 and 2022. Lost Time Incidents reduced
from 19 in 2020 to 9 in 2021 to 4 in 2022. Leading indicators, such
as identification of hazards and reporting near misses, reflect a
greater awareness of safety-related issues and more confidence in
reporting them as a preventative measure.
Operational review for Continuing Operations
Speciality Agriculture
The Speciality Agriculture businesses have patented and
well-recognised brands, differentiated products and strong customer
relationships. Sales teams worked hard throughout the year to bring
sales prices in line with extraordinary raw material cost
increases, enabling the businesses to finish FY22 ahead of initial
expectations.
Adjusted operating profit for the division, at GBP9.2m, was
marginally below prior year (2021: GBP9.5m), whilst revenues rose
14.0%, to GBP78.1m (2021: GBP68.5m), as inflation in raw material
costs was necessarily passed on to the market.
USA
Adjusted operating profit in the US feed blocks business held up
well, due to strong margin discipline and a focus on addressing the
time lag between cost increases and sales. At the start of the
year, a significant increase in raw material costs impacted
margins, due to timing differences in the receipt of orders,
manufacturing, and deliveries, but was promptly addressed in the
first quarter to bring costs and pricing into line for the full
year. US feed block volumes were lower than prior year, adversely
affected by drought, in several regions of the market, causing a
reduction in the number of livestock out on grass, an impact that
lasted throughout the year and will continue into 2023. Market
forecasts are for a recovery in stock numbers in the medium-term,
once rainfall increases and forage availability improves.
For 2023, the US blocks management team has been expanded with
the appointment of a Vice-President of Sales and Marketing to lead
activity for revenue growth that will include recruitment of
additional distributors and providing strong product support.
HorsLic(R), the equine feed block, is a priority for additional
volumes, with a recently appointed account manager and new
distributor in Texas enabling the business to increase activity in
the region with the largest horse population in the USA.
Substantial movements in the relative prices of canola and soy
meal adversely impacted the bypass protein business in the
north-eastern US. New supply contracts and opportunities for
product diversification are being developed.
UK and Europe
Strong farmgate prices for dairy, beef and lamb in the UK in
2022 enabled the market to absorb price increases for feed blocks,
as the business passed on substantial rises in raw material costs.
Volumes were stable, with the UK slightly ahead of the prior year,
whilst Europe was marginally behind. Escalating costs and shortages
of key raw materials impacted margins in the first half of the year
but these were back on track by the year end. The launch of the new
Crystalyx (R) dairy range in 2021 was well received and remains an
opportunity for growth. A period of 3-shift working at the UK
manufacturing operation helped maintain inventories.
Bolus volumes were stable, with strong demand in the UK. Ireland
is a significant market for grass-fed stock, and now accounts for a
third of bolus revenues. Increases in raw material costs, from
copper to packaging, impacted margins in view of the need to
maintain competitive prices. During 2022, all bolus products were
brought under one brand, Tracesure(R), which has been refreshed in
the USA, New Zealand and Europe, to help extend our global
reach.
New Zealand
Logistics issues, due to reduced global freight capacity after
Covid, and associated increases in shipping costs, impacted short
term profitability of the business in New Zealand, but sales
volumes of both feed blocks and boluses were stable. A full
evaluation of the long-term opportunity for growth through
investment will be completed in 2023.
Outlook
The Speciality Agriculture division enables farmers to optimise
forage and grass-based nutrition systems, supporting their
objectives to raise healthy animals efficiently, in a welfare
friendly and environmentally responsible way, by providing
appropriate nutritional supplements that are released in the
required quantities at the right time. Investment in product
development will ensure a pipeline for future growth.
In 2022, the Speciality Agriculture division responded well to
supply chain and market challenges, maintaining margins and
ensuring product availability for customers. In 2023, costs of
energy and raw materials, whilst still much higher than in previous
years, are plateauing.
Engineering
The Engineering division reported a strong recovery in adjusted
operating profit during the year, up 38.2% to GBP5.4m, as a result
of closer control of projects and improving utilisation as the
interruptions of COVID-19 receded (2021 restated: GBP3.9m).
Adjusted operating margins rose to 11.6% (2021 restated: 7.5%) on
lower revenues of GBP46.2m (2021 restated: GBP51.9m). Several
important projects were awarded in the nuclear industry, reflecting
the specialist expertise of the companies in the Engineering
division, with the order book closing the year at GBP40.6m, 2.4%
ahead of the prior year (2021 restated: GBP39.7m).
Fabrication and Precision Engineering
The specialist fabrication business generated a strong result in
2022, due to a positive flow of orders from the nuclear
reprocessing and decommissioning sector, together with enhanced
utilisation. In September 2022, the specialist fabrication business
was accredited to the joint supply chain accreditation register
(JOSCAR) which enables the business to bid for work in the UK
defence, aerospace and security sectors.
The precision engineering business performed well, ahead of the
prior year, rebuilding the order book following disruption during
Covid, due to its close involvement with the oil and gas sector,
which has now recovered strongly. The business is currently
focusing on enhanced operating efficiencies and new business
opportunities to support growth in profitability. In late 2022, the
precision engineering business achieved the demanding Fit For
Nuclear quality accreditation.
To ensure availability of relevant skills in the future, the
fabrication and precision engineering businesses have
well-established apprentice programmes, with an intake of nine in
2022. Bendalls Engineering opened a dedicated Skills Academy in
Carlisle, in conjunction with Lakes College, that is open to other
manufacturers in the area. The Skills Academy is home to the
apprentice programmes and provides short courses to upskill
employees for specific projects.
Robotics
The Global Robotics business performed in line with
expectations, maintaining a strong presence in the nuclear market.
New contract wins include the first supply of an A1000 power
manipulator in the USA to an internationally renowned research
laboratory, the first order for an A100 master slave manipulator to
the US Navy, and powered manipulators to Posiva Solutions in
Finland for the world's first final deep storage solution for
nuclear waste.
The HWM double arm Telbot was selected by RACE, (part of the UK
Atomic Energy Authority focussed on remote applications in
challenging environments) for the UK-Japanese jointly funded
LongOps project to develop capabilities for removing and handling
waste debris at damaged nuclear sites such as Fukushima. The
European Spallation Source (ESS) in Sweden, one of the largest
science and technology infrastructure projects in Europe, ordered a
double arm robotic manipulator for the world's most advanced
neutron source.
Wälischmiller is the leading specialist robotics supplier in the
civil nuclear market, with a full range of manipulators, including
the recently launched A150, a lightweight, highly flexible,
small-scale telescopic manipulator for isotopes, and the unique
100% stainless steel manipulator, both designed for the growing
nuclear medicine market.
Engineering Solutions
The Engineering Solutions business in the USA provides unique
services in the maintenance of nuclear facilities worldwide. It
performed well in 2022, ahead of the Board's expectations. The
business completed two MSIP(R) projects in the USA during FY22,
with another in Slovenia closing out after year end. Further MSIP
projects are progressing in 2023.
During 2022, the business achieved 1,000,000 working hours
(equating to almost 12 years) without a lost-time injury, a
significant milestone as we continue to focus on safety.
Performance in the UK Engineering Solutions business was
impacted by delays and higher costs than expected on one
long-running defence contract. All plant has been successfully
installed and commissioned, and final handover was completed in
early 2023.
In November 2022, the US Government's Department of Energy
announced the award of a multimillion-dollar research contract to
NuVision Engineering, to develop processes for recycling nuclear
waste, opening up the prospect of further unique capabilities and
business opportunities in the future.
Outlook
The engineering companies are well regarded in the growing
nuclear market, as governments seek to improve energy security and
reduce dependence on fossil fuels. Each business is developing a
pipeline of long and short-term projects to strengthen order books
for 2023 and beyond.
Central Costs
In 2022, central costs at adjusted operating profit level were
GBP2.6m, slightly higher than the prior year (2021: GBP2.3m). With
the changing structure of the Group's businesses, central costs
will be reviewed to ensure that they remain in line with the future
strategy.
Discontinued Operations
Agricultural Supplies
Agricultural Supplies coped with an extraordinary increase in
costs affecting a large volume of raw material and commodities,
reflected in a 21.0% increase in revenues as these costs were
necessarily passed on to customers. Adjusted operating profit for
the division grew 6.8% to GBP6.9m, albeit with a substantial
increase in working capital.
Trading in the year was mixed, with stronger performances in the
retail and machinery businesses partially offsetting reduced
trading volumes in fuels and feeds. Whilst livestock and milk
prices remained high, rising input costs presented a significant
challenge for farmers. In the second half, the business saw a
reduction in beef and sheep feed volumes as customers extended
grazing to limit cash expenditure.
On 31 August 2022, the Group announced an agreement to dispose
of all its interests in the Agricultural Supplies division to
Edward Billington & Son Limited. Following shareholder approval
at a general meeting which took place on 19 September 2022, the
disposal was completed on 26 October 2022.
Outlook
With considerable strategic progress made during 2022, the Group
is now more focused. The unique know how and customer relations
embedded in the Speciality Agriculture and Engineering divisions
have considerable value as markets seek technical solutions to long
term sustainability challenges.
The Board is confident that both divisions will generate value
for shareholders in the long term. A detailed update on trading
will be provided at the time of the half year results.
Peter Page
Chief Executive Officer
22 March 2023
CONSOLIDATED INCOME STATEMENT
for the year ended 3 September 2022
2021
2022 (restated)
(2,3)
Notes GBP'000 GBP'000
Continuing operations
Revenue 2 124,240 120,319
Cost of sales (94,632) (89,195)
Gross profit 29,608 31,124
Other operating income 1,731 -
Distribution costs (5,338) (5,213)
Administrative expenses (18,609) (16,612)
Share of post-tax results of joint ventures 840 991
Impairment of joint venture (adjusting
item) 3 - (2,090)
Adjusted (1) operating profit 2 11,906 11,077
Adjusting items 3 (3,674) (2,877)
Operating profit 2 8,232 8,200
Finance income 351 260
Finance costs (1,017) (925)
Adjusted (1) profit before taxation 2 11,240 10,412
Adjusting items 3 (3,674) (2,877)
Profit before taxation 2 7,566 7,535
Taxation 4 (1,524) (1,788)
Adjusted (1) profit for the year from
continuing operations 9,374 9,357
Adjusting items 3 (3,332) (3,610)
Profit for the year from continuing
operations 6,042 5,747
Discontinued operations
(Loss)/profit for the year from discontinued
operations (including held for sale) 5 (2,193) 3,849
Profit for the year 3,849 9,596
========== =============
Profit attributable to:
Equity shareholders 5,072 7,656
Non-controlling interests (4) (1,223) 1,940
----------
3,849 9,596
========== =============
Basic earnings per share (pence)
Profit from continuing operations 6.4 6.2
(Loss)/profit from discontinued operations (1.0) 2.1
---------- -------------
6 5.4 8.3
========== =============
Diluted earnings per share (pence)
Profit from continuing operations 6.4 6.1
(Loss)/profit from discontinued operations (1.0) 2.0
---------- -------------
5.4 8.1
========== =============
(1) Adjusted results are consistent with how business
performance is measured internally and is presented to aid
comparability of performance. Adjusting items are disclosed in note
3. An alternative performance measures glossary can be found in
note 11.
(2) Restated to provide comparable information for continuing
and discontinued operations following the classification of the
Carr's Billington Agricultural business as a disposal group in the
current year. Further details of results from discontinued
operations and net assets relating to the disposal group can be
found in note 5.
(3) See note 10 for an explanation of the prior year restatement
in relation to the recognition of revenue from customer contracts
within the Engineering division.
(4) Non-controlling interests relate to businesses included in
the disposal group.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 3 September 2022
2021
(restated)
2022 (2)
GBP'000 GBP'000
Profit for the year 3,849 9,596
---------- ------------
Other comprehensive income/(expense)
Items that may be reclassified subsequently
to profit or loss:
* Foreign exchange translation gains/(losses) arising
on translation
of overseas subsidiaries 4,288 (1,762)
* Net investment hedges 60 165
* Taxation charge on net investment h edges (11) (31)
Items that will not be reclassified subsequently
to profit or loss:
- Actuarial (losses)/gains on retirement
benefit asset:
- Group (2,576) 1,205
- Share of associate (2022: included within
disposal group) (287) 578
* Taxation credit/(charge) actuarial (losses)/gains on
retirement benefit asset:
-Group 644 (301)
- Share of associate (2022: included within
disposal group) 72 (144)
Other comprehensive income/(expense) for
the year, net of tax 2,190 (290)
---------- ------------
Total comprehensive income for the year 6,039 9,306
========== ============
Total comprehensive income attributable
to:
Equity shareholders 7,262 7,366
Non-controlling interests (1) (1,223) 1,940
6,039 9,306
========== ============
Total comprehensive income attributable
to:
Continuing operations 8,447 5,023
Discontinued operations (2,408) 4,283
---------- ------------
6,039 9,306
========== ============
(1) Non-controlling interests relate to businesses included in
the disposal group.
(2) See note 10 for an explanation of the prior year restatement
in relation to the recognition of revenue from customer contracts
within the Engineering division.
CONSOLIDATED BALANCE SHEET
as at 3 September 2022
2021 2020
2022 (restated)(1) (restated)(1)
Notes GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Goodwill 23,609 31,560 32,041
Other intangible assets 4,635 5,151 6,365
Property, plant and equipment 33,204 36,198 38,259
Right-of-use assets 8,223 16,777 14,856
Investment property 74 152 158
Investment in associate - 14,268 14,042
Interest in joint ventures 6,065 9,482 10,551
Other investments 32 72 73
Contract assets 316 312 -
Financial assets
- Non-current receivables 23 20 20
Retirement benefit asset 6,828 9,371 8,037
Deferred tax asset 213 182 -
83,222 123,545 124,402
---------- -------------- --------------
Current assets
Inventories 26,990 43,226 41,579
Contract assets 7,564 7,202 7,765
Trade and other receivables 19,015 61,735 51,686
Current tax assets 3,866 2,669 2,068
Financial assets
- Cash and cash equivalents 22,515 24,309 17,571
- Derivative financial instruments - - 3
Assets included in disposal
group classified as held for
sale 5 148,531 - -
---------- -------------- --------------
228,481 139,141 120,672
---------- -------------- --------------
Total assets 311,703 262,686 245,074
---------- -------------- --------------
Liabilities
Current liabilities
Financial liabilities
- Borrowings (12,734) (11,113) (11,420)
- Leases (1,416) (2,967) (2,778)
- Derivative financial instruments (62) - -
Contract liabilities (2,426) (3,312) (2,179)
Trade and other payables (21,000) (69,526) (55,522)
Current tax liabilities (711) (42) (33)
Liabilities included in disposal
group classified as held for
sale 5 (101,566) - -
---------- -------------- --------------
(139,915) (86,960) (71,932)
---------- -------------- --------------
Non-current liabilities
Financial liabilities
- Borrowings (23,805) (23,159) (25,021)
- Leases (6,128) (12,458) (11,171)
Deferred tax liabilities (5,048) (5,503) (4,580)
Other non-current liabilities (336) (55) (1,385)
---------- -------------- --------------
(35,317) (41,175) (42,157)
---------- -------------- --------------
Total liabilities (175,232) (128,135) (114,089)
---------- -------------- --------------
Net assets 136,471 134,551 130,985
========== ============== ==============
Shareholders' equity
Share capital 2,350 2,343 2,312
Share premium 10,500 10,155 9,176
Other reserves 107,645 104,901 102,697
---------- -------------- --------------
Total shareholders' equity 120,495 117,399 114,185
Non-controlling interests 15,976 17,152 16,800
---------- -------------- --------------
Total equity 136,471 134,551 130,985
========== ============== ==============
(1) See note 10 for an explanation of the prior year restatement
in relation to the recognition of revenue from customer contracts
within the Engineering division.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 3 September 2022
Treasury Equity Foreign Total Non-
Share Share Share Compensation Exchange Other Retained Shareholders' controlling Total
Capital Premium Reserve Reserve Reserve Reserve Earnings Equity Interests Equity
1 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- ---------- ---------------- ---------- --------- ---------- --------------- ------------- ---------
As previously
reported
at 29 August
2020 2,312 9,176 (45) 734 3,550 197 98,907 114,831 16,800 131,631
Prior year
adjustment(1) - - - - 9 - (655) (646) - (646)
--------- --------- ---------- ---------------- ---------- --------- ---------- --------------- ------------- ---------
At 30 August
2020
(restated)(1) 2,312 9,176 (45) 734 3,559 197 98,252 114,185 16,800 130,985
--------- --------- ---------- ---------------- ---------- --------- ---------- --------------- ------------- ---------
Profit for
the year - - - - - - 7,656 7,656 1,940 9,596
Other
comprehensive
(expense)/income - - - - (1,628) - 1,338 (290) - (290)
--------- --------- ---------- ---------------- ---------- --------- ---------- --------------- ------------- ---------
Total
comprehensive
(expense)/income - - - - (1,628) - 8,994 7,366 1,940 9,306
Dividends
paid - - - - - - (5,490) (5,490) (1,647) (7,137)
Equity-settled
share-based
payment
transactions - - - 406 - - - 406 58 464
Excess deferred
taxation
on share-based
payments - - - - - - 32 32 1 33
Allotment
of shares 31 979 - - - - - 1,010 - 1,010
Purchase
of own shares
held in
trust - - (110) - - - - (110) - (110)
Transfer - - 155 (660) - (2) 507 - - -
At 28 August
2021 2,343 10,155 - 480 1,931 195 102,295 117,399 17,152 134,551
========= ========= ========== ---------------- ========== ========= ---------- =============== ============= =========
As previously
reported
at 28 August
2021 2,343 10,155 - 480 1,903 195 103,006 118,082 17,152 135,234
Prior year
adjustment(1) - - - - 28 - (711) (683) - (683)
--------- --------- ---------- ---------------- ---------- --------- ---------- --------------- ------------- ---------
At 29 August
2021
(restated)(1) 2,343 10,155 - 480 1,931 195 102,295 117,399 17,152 134,551
--------- --------- ---------- ---------------- ---------- --------- ---------- --------------- ------------- ---------
Profit/(loss)
for the
year - - - - - - 5,072 5,072 (1,223) 3,849
Other
comprehensive
income/(expense) - - - - 4,337 - (2,147) 2,190 - 2,190
--------- --------- ---------- ---------------- ---------- --------- ---------- --------------- ------------- ---------
Total
comprehensive
income/(expense) - - - - 4,337 - 2,925 7,262 (1,223) 6,039
Dividends
paid - - - - - - (4,687) (4,687) - (4,687)
Equity-settled
share-based
payment
transactions - - - 199 - - - 199 50 249
Excess deferred
taxation
on share-based
payments - - - - - - (30) (30) (3) (33)
Allotment
of shares 7 345 - - - - - 352 - 352
Transfer - - - (151) - (3) 154 - - -
At 3 September
2022 2,350 10,500 - 528 6,268 192 100,657 120,495 15,976 136,471
========= ========= ========== ================ ========== ========= ========== =============== ============= =========
(1) See note 10 for an explanation of the prior year restatement
in relation to the recognition of revenue from customer contracts
within the Engineering division
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 3 September 2022
2022 2021
Notes GBP'000 GBP'000
Cash flows from operating activities
Cash generated from continuing operations 7 4,473 18,131
Interest received 179 109
Interest paid (986) (936)
Tax paid (805) (1,278)
Net cash generated from operating activities
in continuing operations 2,861 16,026
Net cash (used in)/generated from operating
activities in discontinued operations (6,901) 2,871
Net cash (used in)/generated from operating
activities (4,040) 18,897
Cash flows from investing activities
Acquisition of subsidiaries (net of
cash acquired) (426) -
Contingent consideration paid - (1,077)
Dividend received from associate and
joint ventures 2,250 1,148
Purchase of intangible assets (342) (107)
Proceeds from sale of property, plant
and equipment 31 167
Purchase of property, plant and equipment (3,696) (3,026)
Proceed from sale of investment property 149 -
----------
Net cash used in investing activities
in continuing operations (2,034) (2,895)
Net cash (used in)/generated from investing
activities in discontinued operations (2,749) 155
Net cash used in investing activities (4,783) (2,740)
Cash flows from financing activities
Proceeds from issue of ordinary share
capital 352 1,010
Purchase of own shares held in trust - (110)
New financing and draw downs on RCF 10,051 11,526
Repayment of RCF draw downs (8,000) (8,500)
Lease principal repayments (1,550) (1,778)
Repayment of borrowings (2,840) (2,400)
Dividends paid to shareholders (4,687) (5,490)
---------- ---------
Net cash used in financing activities
in continuing operations (6,674) (5,742)
Net cash generated from/(used in) financing
activities in discontinued operations 20,324 (727)
Net cash generated from/(used in) financing
activities 13,650 (6,469)
Effect of exchange rate changes 332 (296)
---------- ---------
Net increase in cash and cash equivalents 5,159 9,392
Cash and cash equivalents at beginning
of the year 19,696 10,304
---------- ---------
Cash and cash equivalents at end of
the year 24,855 19,696
========== =========
NOTES TO THE PRELIMINARY ANNOUNCEMENT
1. Basis of preparation and going concern
The financial information in this preliminary announcement does
not constitute the Company's statutory accounts for the years ended
3 September 2022 or 28 August 2021. Statutory accounts for 2021
have been delivered to the Registrar of Companies, and those for
2022 will be delivered in due course. The auditor has reported on
those accounts; their reports were (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006.
Going concern
The financial information in this preliminary announcement has
been prepared on a going concern basis which the Directors consider
to be appropriate for the following reasons.
The Directors have reviewed the Group's operational forecasts
and projections for the three years to 31 August 2025 as used for
the viability assessment, taking account of reasonably possible
changes in trading performance, together with the planned capital
investment over that same period. The Group is expected to have a
sufficient level of financial resources available through operating
cash flows and existing bank facilities for the period to 31 March
2024 ("the going concern period"). The Group has operated within
all its banking covenants throughout the year. In addition, the
Group's main banking facility is in place until December 2024.
For the purpose of assessing the appropriateness of the
preparation of the Group's accounts on a going concern basis, the
Directors have prepared financial forecasts for the Group,
comprising profit before and after taxation, balance sheets and
cash flows covering the period to 31 March 2024. The forecasts
consider the current cash position, the availability of banking
facilities and an assessment of the principal areas of risk and
uncertainty. These forecasts have been sensitised on a combined
basis for severe but plausible downside scenarios. The scenarios
tested included significant reductions in profitability and
associated cashflows linked to the four principal risks of customer
demand, supply chain, strategic partners and reliance on key
customers. The results of this stress-testing showed that, due to
the stability of the core business, the Group would be able to
withstand the impact of these severe but plausible downside
scenarios occurring over the period of the financial forecasts.
In addition, several other mitigating measures remain available
and within the control of the Directors that were not included in
the scenarios. These include withholding discretionary capital
expenditure and reducing or cancelling future dividend
payments.
In all the scenarios, the Group complies with its financial bank
covenants, operates within its existing bank facilities, and meets
its liabilities as they fall due.
Consequently, the Directors are confident that the Group and the
Company will have sufficient funds to continue to meet their
liabilities as they fall due until 31 March 2024 and therefore have
prepared the financial information in this preliminary announcement
on a going concern basis.
Accounting policies
The accounting policies are consistent with those of the prior
year.
Prior year restatements
The Board has made two prior year restatements to continuing
operations, both related to revenue recognised under IFRS15
(Revenue from Contracts with Customers). The first restatement
relates to the timing of revenue recognition for a small number of
contracts with a single customer in China, where an adjustment to
correct the approach taken in previous years has been made, to
adhere to IFRS15 requirements on enforceable rights to payment in
the event of termination of contract by the customer.
The second case relates to contracts directly related to
Mechanical Stress Improvement Process technology and specifically
whether these contracts contained two performance obligations (the
conclusion reached in prior years) or one. This is an area which
requires significant judgement and after careful consideration, the
Board decided to account for the contracts as having one rather
than two performance obligations. The impact of this change has
been reflected on previous years' results as a prior year
restatement.
The Board has also made two prior year restatements to
discontinued operations, both related to revenue recognition.
Firstly, in prior years the Group had incorrectly identified itself
as acting as a principal when recognising revenue related to
fertiliser sales, made through one specific supplier. A review of
this transaction highlighted that the Group was acting as an agent,
rather than principal, under IFRS 15 guidance, which means the net
proceeds from the transaction, rather than gross sales, should be
recognised as revenue. A correction to reduce both revenue and cost
of sales in the prior year has been made. A further correction to
reduce both revenue and cost of sales has also been made in respect
of intra-company transactions which had not been netted off in
prior years. In both cases there is no impact on profit.
Further details of the effect of the prior year restatements can
be found in note 10.
2. Segmental information
The segmental information for the year ended 3 September 2022 is
as follows:
Speciality Continuing Discontinued
Agriculture Engineering Central Group operations
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total segment revenue 84,321 46,347 - 130,668 343,844
Inter segment revenue (6,244) (184) - (6,428) (6)
Revenue from external customers 78,077 46,163 - 124,240 343,838
============= ============== ========== =========== =============
Adjusted(1) EBITDA(2) 9,869 7,693 (2,487) 15,075 7,586
Depreciation, amortisation
and profit/(loss) on disposal
of non-current assets (1,532) (2,326) (151) (4,009) (2,693)
Share of post-tax results
of associate (adjusted(1)
) and joint ventures 840 - - 840 2,016
Adjusted(1) operating profit/(loss) 9,177 5,367 (2,638) 11,906 6,909
Adjusting items (note 3) 131 (3,351) (454) (3,674) (7,735)
-------------
Operating profit/(loss) 9,308 2,016 (3,092) 8,232 (826)
------------- -------------- ----------
Finance income 351 -
Finance costs (1,017) (756)
Adjusted(1) profit before
taxation 11,240 6,153
Adjusting items (note 3) (3,674) (7,735)
------------------------------------- ------------- -------------- ---------- ----------- -------------
Profit/(loss) before taxation 7,566 (1,582)
------------------------------------- ------------- -------------- ---------- ----------- -------------
Taxation of discontinued operations (611)
------------------------------------- ------------- -------------- ---------- -----------
Loss for the year from discontinued
operations (note 5) (2,193)
------------------------------------- ------------- -------------- ---------- ----------- -------------
(1) Adjusted results are consistent with how business
performance is measured internally and is presented to aid
comparability of performance. Adjusting items are disclosed in note
3
(2) Earnings before interest, tax, depreciation, amortisation,
profit/(loss) on the disposal of non-current
assets and before share of post-tax results of associate and joint ventures
The segmental information for the year ended 28 August 2021 is
as follows. This has been restated to present continuing operations
and discontinued operations separately. This is to aid
comparability with the segmental information presented for the
current year. Prior year disclosures have also been restated in
respect of the recognition of revenue from customer contracts
within the Engineering division and discontinued operations.
Further details of the prior year restatements can be found in note
10.
Speciality Continuing Discontinued
Agriculture Engineering Central Group operations
Restated: GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total segment revenue 74,395 51,864 - 126,259 284,240
Inter segment revenue (5,934) (6) - (5,940) (6)
Revenue from external customers 68,461 51,858 - 120,319 284,234
============= ============== ========== ============= ===============
Adjusted(1) EBITDA(2) 9,858 6,092 (2,094) 13,856 7,025
Depreciation, amortisation
and profit/(loss) on disposal
of non-current assets (1,335) (2,208) (227) (3,770) (2,513)
Share of post-tax results
of associate (adjusted(1)
) and joint ventures 991 - - 991 1,955
Adjusted(1) operating profit/(loss) 9,514 3,884 (2,321) 11,077 6,467
Adjusting items (note 3) (2,847) 97 (127) (2,877) (1,684)
Operating profit/(loss) 6,667 3,981 (2,448) 8,200 4,783
------------- -------------- ----------
Finance income 260 -
Finance costs (925) (307)
Adjusted(1) profit before
taxation 10,412 6,160
Adjusting items (note 3) (2,877) (1,684)
Profit before taxation 7,535 4,476
--------------------------------------- ------------- -------------- ---------- ------------- ---------------
Taxation of discontinued operations (627)
--------------------------------------- ------------- -------------- -------------- -------------
Profit for the year from discontinued
operations (note 5) 3,849
--------------------------------------- ------------- -------------- -------------- ------------- -----------
(1) Adjusted results are consistent with how business
performance is measured internally and is presented to aid
comparability of performance. Adjusting items are disclosed in note
3
(2) Earnings before interest, tax, depreciation, amortisation,
profit/(loss) on the disposal of non-current assets and before
share of post-tax results of associate and joint ventures
3. Adjusting items
In reporting financial information, the Group presents
alternative performance measures (APMs), which are not defined or
specified under the requirements of IFRS. These APMs are consistent
with how business performance is measured internally and therefore
the Group believes that these APMs provide stakeholders with
additional useful information on the performance of the business.
The following adjusting items have been added back to reported
profit measures.
2022 2021
Continuing Discontinued Continuing Discontinued
operations operations operations operations
GBP'000 GBP'000 GBP'000 GBP'000
Amortisation of acquired intangible
assets (i) 940 - 1,186 -
Adjustments to contingent consideration
(ii) (1,320) - (1,013) -
Restructuring/closure costs
(iii) - - 248 -
Strategic review costs (iv) 455 - - -
Acquisition-related costs (v) - 20 - -
Gain on acquisition of Afgritech
(vi) (733) - - -
Loss on fair value measurement
less costs to sell (vii) - 6,376 - -
Cloud configuration and customisation
costs - Group (viii) 113 974 366 990
Cloud configuration and customisation
costs - share of associate (viii) - 365 - 515
Goodwill impairment (ix) 4,219 - - -
Impairment of joint venture
(x) - - 2,090 -
Effect of deferred tax rate
change - share of associate
(xi) - - - 179
------------ -------------
Included in profit before taxation 3,674 7,735 2,877 1,684
Effect of deferred tax rate
change - Group (xi) - - 1,073 (83)
Taxation effect of the above
adjusting items (342) (186) (340) (188)
------------ ------------- ------------ -------------
Included in profit for the
year 3,332 7,549 3,610 1,413
============ ============= ============ =============
(i) Amortisation of acquired intangible assets which do not
relate to the underlying profitability of the Group but rather
relate to costs arising on acquisition of businesses.
(ii) Adjustments to contingent consideration arise from the
revaluation of contingent consideration in respect of acquisitions
to fair value at the year end. Movements in fair value arise from
changes to the expected payments since the previous year end based
on actual results and updated forecasts. Any increase or decrease
in fair value is recognised through the income statement.
(iii) Restructuring/closure costs include redundancy costs.
(iv) Strategic review costs include external adviser fees
incurred in the development of the Group's strategy.
(v) Acquisition-related costs relate to legal fees incurred in
respect of an aborted acquisition.
(vi) On 6 June 2022 the Group acquired the remaining 50%
shareholding in Afgritech Ltd and the financial position and
performance of the business, together with that of its 100% owned
subsidiary Afgritech LLC, was fully consolidated from this date.
The Group's joint venture interest was effectively disposed of at
this date with a gain of GBP197,000, being the difference between
the carrying value and the fair value of the joint venture
interest, recognised. Also included in the amount in the table
above are foreign exchange gains of GBP559,000 that have been
recycled from the foreign exchange reserve to the income statement
on disposal, acquisition-related costs of GBP27,000 and negative
goodwill of GBP4,000.
(vii) At 3 September 2022 the carrying value of the assets and
liabilities included in the disposal group classified as held for
sale exceeds the fair value less costs sell. As a result the net
assets of the disposal group have been reduced to the fair value
less costs to sell resulting in a loss of GBP6,376,000 being
recognised. This includes a loss attributable to the
non-controlling interests of GBP2,603,000 together with costs to
sell of GBP175,000 recognised within the accounts of Carrs
Billington Agriculture (Sales) Ltd.
(viii) Costs relating to material spend in relation to the
implementation of the Group's, and associate's, ERP system that are
expensed in accordance with the IFRIC agenda decision.
(ix) Impairment of goodwill in respect of the Chirton profit
centre and Wälischmiller Engineering GmbH cash-generating
units.
(x) During the prior year the joint venture Afgritech LLC
reported a loss and was expected to continue to underperform
against budgeted information in the short to medium term. An
impairment review was undertaken which resulted in an impairment
charge of GBP1,314,000 against the carrying amount of interest in
joint venture and an impairment charge of GBP776,000 against the
carrying amount of a loan receivable .
(xi) During the prior year legislation was substantively enacted
in the UK to increase the corporate tax rate to 25% with effect
from 1 April 2023. As a result of the change, a tax charge of
GBP179,000 was recognised in the prior year in the Group's share of
associate results and GBP990,000 was recognised in the Group's
prior year tax charge in relation to the remeasurement of deferred
assets and liabilities. This does not relate to the underlying
performance of the associate or Group and was therefore included as
an adjusting item.
4. Taxation
2022 2021
(restated)
Continuing Discontinued Continuing Discontinued
operations operations operations operations
GBP'000 GBP'000 GBP'000 GBP'000
Analysis of the charge in
the year
Current tax:
UK corporation tax
Current year 119 316 259 578
Adjustment in respect of prior
years 164 51 (205) 223
Foreign tax
Current year 1,607 - 1,130 -
Adjustment in respect of prior
years (1) - (84) -
------------ ------------- ------------ -------------
Group current tax 1,889 367 1,100 801
------------ ------------- ------------ -------------
Deferred tax:
Origination and reversal of
timing differences
Current year 10 224 764 18
Adjustment in respect of prior
years (375) 20 (76) (192)
------------ ------------- ------------ -------------
Group deferred tax (365) 244 688 (174)
------------ ------------- ------------ -------------
Tax on profit 1,524 611 1,788 627
============ ============= ============ =============
Profit/(loss) before taxation 7,566 (1,582) 7,535 4,476
------------ ------------- ------------ -------------
1,438 (301) 1,432 850
Tax at 19% (2021: 19%)
Effects of: (160) (314) (188) (240)
Tax effect of share of results
of associate and joint ventures
Tax effect of expenses that
are not allowable in determining
taxable profit 1,213 1,246 436 53
Tax effect of non-taxable
income (1,183) (143) (778) -
Effects of different tax rates
of foreign subsidiaries 149 - 99 -
Effects of deferred tax rates 68 52 1,057 (67)
Unrecognised deferred tax
on losses 99 - 95 -
Withholding taxes suffered 112 - - -
Adjustment in respect of prior
years (212) 71 (365) 31
------------ ------------- ------------ -------------
Total tax charge for the year 1,524 611 1,788 627
============ ============= ============ =============
The tax effect of expenses that are not allowable in determining
taxable profit includes share-based payments, depreciation of
non-qualifying assets, disregarded foreign exchange movements and
other expenses disallowable for UK corporation tax. In addition,
for current year continuing operations, it includes the goodwill
impairment (note 3) and, in respect of discontinued operations, it
includes the loss recognised on the measurement to fair value less
costs to sell of the disposal group (notes 3 and 5). Prior year
continuing operations includes adjustments for impairment of joint
venture (note 3).
The tax effect of non-taxable income includes adjustments to
contingent consideration (note 3), the effect of income within the
patent box regime, adjustments to profit before taxation for
research and development expenditure credits in respect of prior
years and the 30% benefit of the super deduction for capital
allowances.
In the prior year legislation was substantively enacted in the
UK to increase the corporate tax rate to 25% with effect from 1
April 2023. As a result of the change, a tax charge of GBP990,000
was recognised in the prior year for the parent Company and UK tax
resident subsidiaries in relation to the remeasurement of deferred
tax assets and liabilities. UK deferred tax balances at 3 September
2022 and 28 August 2021 are provided at 25%. In the prior year the
charge of GBP990,000 does not relate to the underlying
profitability of the Group and has been treated as an adjusting
item (note 3).
5. Discontinued operations and non-current assets held for sale
On 31 August 2022, the Group entered into a conditional
agreement to dispose of its interests in the Carr's Billington
Agricultural business to Edward Billington & Son Limited. In
accordance with IFRS 5 'Non-current assets held for sale and
discontinued operations', the assets and liabilities related to the
business were classified as a disposal group held for sale at 3
September 2022. The sale was conditional on approval by the Group's
shareholders which was given at a General Meeting held on 19
September 2022. The disposal completed on 26 October 2022.
On completion, the Company received GBP24.7m initial cash
proceeds following certain working capital adjustments since the
announcement on 31 August 2022. The consideration receivable
remains subject to any final adjustments once the completion
accounts mechanism is finalised. Current estimates of fair value
less costs to sell is lower than the carrying value of the disposal
group's net assets, and accordingly a loss of GBP6.2m has been
recognised in the loss for the year from discontinued
operations.
The tables below show the results of the discontinued operations
and the loss recognised on the remeasurement to fair value less
costs to sell for the year ended 3 September 2022, together with
the classes of assets and liabilities comprising the operations
held for sale in the Group balance sheet as at 3 September
2022.
2022 2021
GBP'000 GBP'000
Revenue (2021: restated) 343,838 284,234
Expenses (2021: restated) (340,870) (281,019)
---------- ----------
2,968 3,215
Share of post-tax results of associate 1,165 831
Share of post-tax results of joint venture 486 430
---------- ----------
Profit before taxation of discontinued operations 4,619 4,476
Taxation (note 4) (611) (627)
Profit after taxation of discontinued operations 4,008 3,849
Pre-taxation loss recognised on the measurement
to fair value less costs to sell (6,201) -
Taxation - -
---------- ----------
After taxation loss recognised on the measurement
to fair value less costs to sell (6,201) -
---------- ----------
(Loss)/profit for the year from discontinued
operations (2,193) 3,849
========== ==========
Revenue and expenses in the table above in respect of the prior
year have been reduced by GBP10,497,000 to remove revenues where
Carrs Billington Agriculture (Sales) Ltd acts as agent rather than
principal together with GBP2,769,000 in respect of intra-company
transactions which had not been netted off in prior years. There is
no impact on profit in respect of either of these.
The pre-taxation loss recognised on the measurement to fair
value less costs to sell includes GBP2,603,000 in respect of the
non-controlling interest's share of the measurement impairment.
The net assets relating to the disposal group at 3 September
2022 in the Group balance sheet is shown below:
GBP'000
Assets of the disposal group
Goodwill 5,285
Property, plant and equipment 8,539
Right-of-use assets 8,267
investment in associate 15,218
Interest in joint ventures 2,870
Other investments 45
Deferred tax asset 177
Inventories 34,442
Trade and other receivables 65,946
Current tax assets 101
Cash and cash equivalents 12,074
Loss on fair value measurement before costs to sell (4,433)
Total assets 148,531
==========
Liabilities of the disposal group
Borrowings (24,415)
Leases (8,196)
Trade and other payables (68,955)
Total liabilities (101,566)
==========
Net assets 46,965
==========
Costs to sell of GBP1,768,000 have been incurred by the parent
Company and are therefore excluded from the loss on fair value
measurement shown above. The loss on fair value measurement before
costs to sell includes GBP2,603,000 in respect of the
non-controlling interest's share of the measurement impairment.
6. Earnings per ordinary share
Basic earnings per share are based on profit attributable to
shareholders and on a weighted average number of shares in issue
during the year of 93,873,465 (2021: 93,123,043). The calculation
of diluted earnings per share is based on 95,133,662 shares (2021:
94,690,182).
Adjusting items disclosed in note 3 that are charged or credited
to profit do not relate to the underlying profitability of the
Group. The Board believes adjusted profit before these items
provides a useful measure of business performance. Therefore, an
adjusted earnings per share is presented as follows:
2021 2021
2022 2022 (restated) (restated)
Earnings Earnings Earnings Earnings
per per
GBP'000 share GBP'000 share pence
pence
Continuing operations
Earnings per share - basic 6,042 6.4 5,747 6.2
Adjusting items:
Amortisation of acquired intangible
assets 940 1.0 1,186 1.3
Adjustments to contingent
consideration (1,320) (1.4) (1,013) (1.1)
Restructuring/closure costs - - 248 0.3
Strategic review costs 455 0.5 - -
Gain on acquisition of Afgritech (733) (0.8) - -
Cloud configuration and customisation
costs - Group 113 0.1 366 0.4
Goodwill impairment 4,219 4.5 - -
Impairment of joint venture - - 2,090 2.2
Taxation effect of the above (342) (0.3) (340) (0.4)
Effect of increase to UK deferred
tax rate - Group - - 1,073 1.2
Earnings per share - adjusted 9,374 10.0 9,357 10.1
============ ============ ============ =============
2021 (restated) 2021 (restated)
2022 2022 Earnings Earnings
Earnings Earnings GBP'000 per
GBP'000 per Share
Share pence
pence
Discontinued operations
Earnings per share - basic (970) (1.0) 1,909 2.1
Adjusting items:
Acquisition-related costs 20 - - -
Loss on fair value measurement
less costs to sell 6,376 6.8 - -
Cloud configuration and customisation
costs - Group 974 1.0 990 1.1
Cloud configuration and customisation
costs - share of associate 365 0.4 515 0.6
Taxation effect of the above (186) (0.2) (188) (0.3)
Effect of increase to UK deferred
tax rate - Group - - (83) (0.1)
Effect of increase to UK deferred
tax rate - share of associate - - 179 0.2
Non-controlling interest in the
above (3,085) (3.3) (433) (0.5)
Earnings per share - adjusted 3,494 3.7 2,889 3.1
----------- ----------- ---------------- ----------------
Total (basic) 5,072 5.4 7,656 8.3
=========== =========== ================ ================
Total (adjusted) 12,868 13.7 12,246 13.2
=========== =========== ================ ================
7. Cash generated from continuing operations
2021
2022 (restated)
GBP'000 GBP'000
Continuing operations
Profit for the year 6,042 5,747
Adjustments for:
Tax 1,524 1,788
Tax credit in respect of R&D (1,553) (260)
Depreciation of property, plant and equipment 2,778 2,576
Depreciation on right-of-use assets 1,276 1,219
Depreciation of investment property 5 6
Intangible asset amortisation 988 1,228
Goodwill impairment 4,219 -
Profit on disposal of property, plant
and equipment (17) (73)
Profit on disposal of right-of-use assets (5) -
Profit on disposal of investment property (76) -
Gain on acquisition of Afgritech (764) -
Adjustments to contingent consideration (1,320) (1,013)
Net fair value charge on share-based
payments 148 345
Other non-cash adjustments (119) (606)
Interest income (351) (260)
Interest expense and borrowing costs 1,077 985
Share of results of joint ventures (840) (991)
Impairment of joint venture - 2,090
IAS19 income statement charge (excluding
interest):
Administrative expenses 126 18
Changes in working capital (excluding
the effects of acquisitions):
(Increase)/decrease in inventories (6,153) 568
Increase in receivables (218) (1,509)
(Decrease)/increase in payables (2,294) 6,273
-------- -------------
Cash generated from continuing operations 4,473 18,131
======== =============
8. Pensions
The Group operates its current pension arrangements on a defined
benefit and defined contribution basis. The valuation of the
defined benefit scheme under the IAS19 accounting basis showed a
surplus in the scheme at 3 September 2022 of GBP6.8m (2021:
GBP9.4m).
In the year, the retirement benefit charge, excluding interest,
in respect of the Carr's Group Pension Scheme was GBP126,000 (2021:
GBP18,000).
A Group subsidiary undertaking is a participating employer in a
defined benefit pension scheme of the associate, Carrs Billington
Agriculture (Operations) Ltd. The IAS19 accounting basis showed a
surplus for that scheme at 3 September 2022 of GBP5.6m (2021:
GBP5.4m). The scheme is treated as a defined contribution scheme by
the Group, and its level of participation in the scheme is
estimated at 48.5%, which is based on its estimated share of the
buy-out liabilities. Due to the fact that the sponsoring employer
is an associate company of the Group, 49% of the surplus calculated
on an IAS19 accounting basis is included in the Group's balance
sheet within its 'Investment in associate'.
At 3 September 2022 the investment in associate is included
within assets of a disposal group held for sale (note 5).
9. Analysis of net debt and leases
Transferred
to liabilities
At Other Acquired of At 3
29 August Cash Non-Cash with Exchange disposal September
2021 Flow Changes Subsidiaries Movements group 2022
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash
equivalents 24,309 9,354 - 594 332 (12,074) 22,515
Bank overdrafts (4,613) (5,121) - - - - (9,734)
----------- ---------- ---------- -------------- ----------- ---------------- ------------
19,696 4,233 - 594 332 (12,074) 12,781
Loans and other
borrowings:
- current (6,500) (20,849) 77 (117) (26) 24,415 (3,000)
- non-current (23,159) (322) (48) (214) (62) - (23,805)
Net debt (9,963) (16,938) 29 263 244 12,341 (14,024)
=========== ========== ========== ============== =========== ================ ============
Leases:
- current (2,967) - (181) - - 1,732 (1,416)
- non-current (12,458) 3,186 (3,212) - (108) 6,464 (6,128)
Leases (15,425) 3,186 (3,393) - (108) 8,196 (7,544)
=========== ========== ========== ============== =========== ================ ============
Net debt and
leases (25,388) (13,752) (3,364) 263 136 20,537 (21,568)
=========== ========== ========== ============== =========== ================ ============
. Prior year restatements
The Board has made two prior year restatements to continuing
operations, both related to revenue recognised under IFRS15
(Revenue from Contracts with Customers). The first restatement
relates to the timing of revenue recognition for a small number of
contracts with a single customer in China, where an adjustment to
correct the accounting treatment in previous years has been made,
to adhere to IFRS15 requirements on enforceable rights to payment
in the event of termination of contract by the customer. This
restatement of prior years has resulted in shareholders' equity at
30 August 2020 being reduced by GBP254,000 and increases to revenue
(GBP951,000) and adjusted profit after tax (GBP249,000) in the year
to 28 August 2021.
The second case relates to contracts directly related to
Mechanical Stress Improvement Process technology and specifically
whether these contracts contained two performance obligations (the
conclusion reached in prior years) or one. This is an area which
requires significant judgement and after careful consideration, the
Board decided to account for the contracts as having one rather
than two performance obligations. The impact of this change has
been reflected on previous years' results as a prior year
restatement.
Shareholders' equity at 30 August 2020 was reduced by GBP392,000
as a result of this change. For the year to 28 August 2021, revenue
was reduced by GBP386,000 and adjusted profit after tax decreased
by GBP305,000 as a result of this change.
The Board has also made two prior year restatements to
discontinued operations, both related to revenue recognition.
Firstly, in prior years the Group had incorrectly identified itself
as acting as a principal when recognising revenue related to
fertilisers sales, made through one specific supplier. A review of
this transaction highlighted that the Group was acting as an agent,
rather than principal, under IFRS 15 guidance, which means the net
proceeds from the transaction, rather than gross sales, should be
recognised as revenue. A correction to reduce both revenue and cost
of sales in the year to 28 August 2021 by GBP10,497,000 has been
made. There is no impact on profit.
A further correction to reduce both revenue and cost of sales of
GBP2,769,000 has also been made in respect of intra-company
transactions which had not been netted off on prior years. There is
no impact to profit.
The prior year restatements to discontinued operations are
reflected in note 5.
The affected financial statement line items for the continuing
operations of the Group are as follows.
28 August
2021 (previously Restatement 28 August
28 August reported in respect Restatement 2021 (restated
2021 (previously - continuing of enforceable in respect -continuing
reported operations rights to of performance operations
- Group) only) payment obligations only)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income Statement
Revenue 417,254 119,754 951 (386) 120,319
Cost of sales (365,174) (88,589) (606) - (89,195)
Gross profit 52,080 31,165 345 (386) 31,124
Adjusted operating
profit 17,585 11,118 345 (386) 11,077
Reported operating
profit 13,024 8,241 345 (386) 8,200
Adjusted profit
before
taxation 16,613 10,453 345 (386) 10,412
Reported profit
before
taxation 12,052 7,576 345 (386) 7,535
Taxation (2,400) (1,773) (96) (81) (1,788)
Adjusted profit for
the year 14,675 9,413 249 (305) 9,357
Reported profit for
the year 9,652 5,803 249 (305) 5,747
Basic EPS (pence) 8.3 6.2 0.3 (0.3) 6.2
Diluted EPS (pence) 8.1 6.1 0.3 (0.3) 6.1
---------------------- ------------------ ------------------ ---------------- ---------------- ----------------
Restatement
in respect Restatement
28 August of enforceable in respect
2021 (previously rights to of performance 28 August
reported) payment obligations 2021 (restated)
GBP'000 GBP'000 GBP'000 GBP'000
Balance Sheet
Deferred tax asset - 182 182
Total non-current assets 123,363 - 182 123,545
Total assets 262,504 - 182 262,686
Contract liabilities (2,447) - (865) (3,312)
Total current liabilities (86,095) - (865) (86,960)
Total liabilities (127,270) - (865) (128,135)
Net assets 135,234 - (683) 134,551
Other reserves 105,584 - (683) 104,901
Total shareholders'
equity 118,082 - (683) 117,399
Total equity 135,234 - (683) 134,551
---------------------------- ------------------- ---------------- ----------------- ------------------
In accordance with IAS 1, a third balance sheet has been
presented to show the impact to the opening balance sheet for the
prior year.
The affected financial statement line items are as follows.
Restatement
in respect Restatement
30 August of enforceable in respect
2020 (previously rights to of performance 30 August
reported) payment obligations 2020 (restated)
GBP'000 GBP'000 GBP'000 GBP'000
Balance Sheet
Inventories 40,961 618 - 41,579
Contract assets 8,114 (349) - 7,765
Total current
assets 120,403 269 - 120,672
Total assets 244,805 269 - 245,074
Contract liabilities (1,061) (622) (496) (2,179)
Total current
liabilities (70,814) (622) (496) (71,932)
Deferred tax liabilities (4,783) 99 104 (4,580)
Total non-current
liabilities (42,360) 99 104 (42,157)
Total liabilities (113,174) (523) (392) (114,089)
Net assets 131,631 (254) (392) 130,985
Other reserves 103,343 (254) (392) 102,697
Total shareholders'
equity 114,831 (254) (392) 114,185
Total equity 131,631 (254) (392) 130,985
11. Alternative performance measures glossary
The Preliminary Announcement includes alternative performance
measures ("APMs"), which are not defined or specified under the
requirements of IFRS. These APMs are consistent with how business
performance is measured internally and are also used in assessing
performance under the Group's incentive plans. Therefore the
Directors believe that these APMs provide stakeholders with
additional useful information on the Group's performance.
Alternative performance
measure Definition and comments
------------------------ ----------------------------------------------------------
Adjusted EBITDA Earnings before interest, tax, depreciation,
amortisation, profit/(loss) on the disposal
of non-current assets, before share of post-tax
results of the associate and joint ventures
and excluding items regarded by the Directors
as adjusting items. This measure is reconciled
to statutory operating profit and statutory
profit before taxation in note 2. EBITDA allows
the user to assess the profitability of the
Group's core operations before the impact
of capital structure, debt financing and non-cash
items such as depreciation and amortisation.
------------------------ ----------------------------------------------------------
Adjusted operating Operating profit after adding back items regarded
profit by the Directors as adjusting items. This
measure is reconciled to statutory operating
profit in the income statement and note 2.
Adjusted results are presented because if
included, these adjusting items could distort
the understanding of the Group's performance
for the year and the comparability between
the years presented.
------------------------ ----------------------------------------------------------
Adjusted profit Profit before taxation after adding back items
before taxation regarded by the Directors as adjusting items.
This measure is reconciled to statutory profit
before taxation in the income statement and
note 2. Adjusted results are presented because
if included, these adjusting items could distort
the understanding of the Group's performance
for the year and the comparability between
the years presented.
------------------------ ----------------------------------------------------------
Adjusted profit Profit after taxation after adding back items
for the year regarded by the Directors as adjusting items.
This measure is reconciled to statutory profit
after taxation in the income statement. Adjusted
results are presented because if included,
these adjusting items could distort the understanding
of the Group's performance for the year and
the comparability between the years presented.
------------------------ ----------------------------------------------------------
Adjusted earnings Profit attributable to the equity holders
per share of the Company after adding back items regarded
by the Directors as adjusting items after
tax divided by the weighted average number
of ordinary shares in issue during the year.
This is reconciled to basic earnings per share
in note 6.
------------------------ ----------------------------------------------------------
Net debt The net position of the Group's cash at bank
and borrowings per the balance sheet. Details
of the movement in net debt is shown in note
9.
------------------------ ----------------------------------------------------------
12. The Board of Directors approved the preliminary announcement on 22 March 2023.
13. The Company intends to post a copy of the Report and
Accounts to shareholders on or around 6 April 2023. The full Report
and Accounts will also be available upon request from the Company
Secretary, Carr's Group plc, Old Croft, Stanwix, Carlisle, CA3 9BA
or alternatively on the Company's website: carrsgroup-ir.com
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END
FR SEIESEEDSESD
(END) Dow Jones Newswires
March 23, 2023 03:00 ET (07:00 GMT)
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