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Regulatory Story
Company Carr's Group PLC
TIDM CARR
Headline Interim Results
Released 07:00 15-Apr-2019
Number 1173W07

RNS Number : 1173W
Carr's Group PLC
15 April 2019
 

15 April 2019                

CARR'S GROUP PLC ("Carr's" or the "Group")

 

Interim Results

For the 26 weeks ended 2 March 2019

 

"Continued growth in challenging markets"

 

Carr's (CARR.L), the Agriculture and Engineering Group, announces its results for the 26 weeks ended 2 March 2019. 

 

Financial highlights

 

 

Adjusted1

H1 2019

Adjusted1

H1 2018

+/-

 

 

 

 

Revenue (£m)

206.2

200.1

+3.0%

Adjusted1 operating profit (£m)

11.9

11.3

+5.2%

Adjusted1 profit before tax (£m)

11.4

10.9

+4.5%

Adjusted1 EPS (p)

9.4

9.2

+2.2%

 

 

 

 

 

Statutory

H1 2019

Statutory

H1 2018

 

 

 

 

 

Revenue (£m)

206.2

                        200.1

+3.0%

Operating profit (£m)

10.8

                        11.0

-1.6%

Profit before tax (£m)

10.3

                        10.6

-2.6%

Basic EPS (p)

8.3

9.0

-7.8%

Dividend per share (p)

1.125

1.075

+4.7%

 

Net debt2 of £23.3m (£15.4m net debt at 1 September 2018)

 

Commercial highlights

 

Agriculture

 

·           Robust performance in Agriculture despite challenging market conditions

·           Warm weather in the UK and USA, in marked contrast to the same period in 2018, impacted volumes in Agriculture

·           Reduced volumes in Agriculture mitigated through improved efficiencies, operating cost controls and effective procurement

·          USA feed block volumes, including joint ventures, up 5.6% driven by strong performance from new low moisture feed block plant at Shelbyville, Tennessee

·           Integration of Animax progressing well, with good progress in new product development

 

Engineering

 

·           Strong performance in Engineering, significantly ahead of prior year

·           Significant improvement in UK Manufacturing, driven by a strengthened management team and improved manufacturing efficiencies

·           Good performance in USA Engineering and strong order book following significant MSIP® contracts won in 2018

·           Significant funding awarded by the US Department of Energy in December 2018 to develop passive cooling technology

·           Major USA $8.5m contract win in Remote Handling business strengthens confidence in medium term performance of the business

 

Outlook

 

·           The Board's expectations for the full year remain unchanged

 

 

1 Adjusted results are after adding back amortisation of acquired intangible assets and non-recurring items including acquisition costs

2 Further details of net debt can be found in note 12

 

Tim Davies, Chief Executive Officer, commented:

 

"The Group delivered a good performance during the first half of the financial year and trading remains in line with the Board's expectations for the full year. During the period, our Agriculture division was impacted by challenging external market conditions, including unseasonably mild weather in marked contrast to the same period in 2018, and continued uncertainty in the UK around Brexit. However, we were able to mitigate the effect of these challenges through improved efficiencies, operating cost controls and better procurement.

 

I am pleased to report that our Engineering division had a strong start to the year as a result of good performances in our UK Manufacturing and USA Engineering businesses.  We are now seeing strong order books across the division, driven by contract wins, and we have improved manufacturing processes and strengthened our management teams.

 

Trading in the second half of the year has started in line with expectations, and the Board's outlook for the full year remains unchanged.  We also remain confident in the medium term prospects of the Group as we continue to invest across our divisions, expand our product offering and grow our international footprint."

 

 

Enquiries:

 

Carr's Group plc
Tim Davies (Chief Executive)
Neil Austin (Group Finance Director)

Tel: +44 (0) 1228 554 600

 

 

Powerscourt
Nick Dibden / Lisa Kavanagh / Sam Austrums

Tel: +44 (0) 20 7250 1446

 

 

About Carr's Group plc:

 

Carr's is an international leader in manufacturing value added products and solutions, with market leading brands and robust market positions in Agriculture and Engineering, supplying customers in over 50 countries around the world.

 

Its Agriculture division manufactures and supplies feed blocks and supplementation products for livestock, distributes farm machinery and runs a UK network of rural stores, providing a one-stop shop for the farming community. Its Engineering division designs and manufactures bespoke equipment and provides technical engineering services into the nuclear, petrochemical, oil and gas, pharmaceutical, process and renewable energy industries, including robotic and remote handling equipment.

 

 

INTRODUCTION

 

Carr's has delivered a good performance during the period and ahead of the same period last year driven by improved profits in Engineering and a solid performance in Agriculture.

 

BUSINESS REVIEW

 

During the 26 weeks ended 2 March 2019 Group revenues were £206.2m, up on the prior year (H1 2018: £200.1m). Adjusted profit before tax increased by 4.5% to £11.4m (H1 2018: £10.9m).  Adjusted operating profits are stated before amortisation of acquired intangibles and non-recurring items.  The Board considers that this measure better reflects the Group's underlying performance.   Reported profit before tax after amortisation and non-recurring items was £10.3m (H1 2018: £10.6m). Amortisation and non-recurring items of £1.1m (H1 2018: £0.3m) related mainly to the costs of GMP equalisation in the closed defined benefit pension scheme (£0.8m), together with business combination expenses and amortisation of acquired intangible assets.

 

Adjusted group operating profit of £11.9m (H1 2018: £11.3m) was 5.2% ahead of the prior year driven by the improved performance in Engineering, and reported operating profit was 1.6% behind the prior year at £10.8m (H1 2018: £11.0m).

 

On an adjusted basis, earnings per share increased by 2.2% to 9.4p (H1 2018: 9.2p). Basic earnings per share decreased by 7.8% from 9.0p to 8.3p.

 

AGRICULTURE

 

Overall, Agriculture continues to perform in line with the Board's expectations for the full year.

 

The unfavourable weather conditions experienced within the first quarter of the year continued for the rest of the period, affecting volumes in both the UK and USA.  This was in marked contrast to the same period in 2018. The continued uncertainty around Brexit also led to caution among the farming community impacting UK Agriculture. However, the resulting effect on profitability was offset through strong positions on raw materials and highly effective procurement across a broad range of product lines.  Against this backdrop, the Agriculture division has reported adjusted operating profit of £10.0m (H1 2018: £10.0m), unchanged from the prior year and in line with the Board's expectations for the half year.  Reported operating profit was £9.8m (H1 2018: £9.8m).

 

Feed blocks and supplements

 

Overall, global feed block volumes decreased 0.5% against the prior year.

 

Following a strong start to the year for our USA feed block business, volumes, including joint ventures, were 5.6% up on the prior year despite adverse weather conditions that made trading more difficult.   Our new low moisture feed block plant at Shelbyville, Tennessee delivered a strong performance during its first full year of operation. This facility expands our geographic footprint, providing access to customers across the eastern and south eastern states of the USA. 

 

UK feed block sales volumes were down 14.1% compared to H1 2018 due to significantly warmer and drier weather conditions experienced during the period, in contrast to the much colder and wetter conditions in the same period last year.

 

Feed block sales in Europe through our joint venture business based in Germany, Crystalyx Products GmbH, were also affected by similar weather conditions to the UK, with volumes down 9.9% on H1 2018.

 

Despite some challenging market conditions, principally weather related, which resulted in lower volumes across a number of our feed block plants, we were able to mitigate the negative impact on profitability by adopting a series of measures, including increased efficiencies, strict control of operating costs and better procurement.

 

The integration of Animax Limited, our recently acquired manufacturer of market-leading trace element supplements for livestock, is progressing well. As part of the first integration phase we have commenced the implementation of production efficiencies and made good progress in the areas of new product development.  The performance of the business during its first period of ownership was in line with the Board's expectations. Animax, which is highly complementary to the Group's global feed block offering, broadens our product range in the animal health and supplementation markets which deliver added value to farmers.

 

UK Agriculture

 

The current financial year started positively, however, volumes in our feed and fuel businesses were lower during the period as the unseasonably mild weather reduced demand.  This resulted in total compound feed volumes decreasing by 4.1% during the period. Similarly, volumes in our fuel distribution business were down 6.0% on last year.

 

Our retail business was similarly affected by the mild, dry winter; revenues were down 0.4% and like for like sales were down 5.5%.

 

Machinery revenues were down 10.2% against a record performance last year, reflecting heightened concern of our farming customers in relation to the outcome of Brexit negotiations.

 

The implementation of efficiencies, good procurement and strong raw materials positions offset the impact on profitability of the unseasonably mild and dry weather.

 

ENGINEERING

 

Overall, our Engineering division is performing in line with the Board's expectations for the full year.  Adjusted operating profit was up 45.1% at £2.0m (H1 2018: £1.4m) driven by improved performances in UK Manufacturing and USA Engineering; reported operating profit was £1.9m (H1 2018: £1.2m). 

 

UK Manufacturing

 

Our UK Manufacturing business performed well during the period. The new management team installed in our fabrication business approximately twelve months ago has successfully delivered a significant improvement in the business, which has resulted in a marked uplift in the forward order book, opportunity pipeline, and in the performance of the business.

 

Our precision engineering business has also significantly evolved during the period through a strengthened management team and improved manufacturing efficiencies.  This has supported increased business development which, when combined with a recovery in the oil price, has resulted in a very strong order book.

 

Remote Handling

 

As reported at the time of our AGM statement in January 2019, we have secured a major contract worth $8.5m in the USA, which represents a significant strategic milestone for the Group and fully supports our strategy for delivering sustainable growth. As anticipated, in the shorter term the business is currently experiencing a softer order book.  However, this is not expected to impact on overall divisional performance owing to the performance of our UK Manufacturing and USA Engineering businesses.  The medium term prospects for our Remote Handling business remain strong.

 

USA Engineering

 

Our USA Engineering business has had a particularly strong start to the year driven by the contracts won last year, including two significant MSIP® contracts won in summer 2018 which run through to FY21. In December 2018 we received confirmation of significant funding from the US Department of Energy to develop our passive cooling technology, which has the potential to be retrofitted on existing nuclear power plants.  Work on this project is expected to commence during the second half of the current financial year.

 

BALANCE SHEET AND CASHFLOW

 

Net cash generated from operating activities in the first half was £3.8m (H1 2018: £5.5m). Net debt rose to £23.3m from £15.4m at the 2018 financial year end. This is primarily related to the acquisition of Animax and seasonal working capital increases. The Group's defined benefit pension scheme remains in surplus, although that surplus had decreased from £10.1m at 1 September 2018 to £6.8m at 2 March 2019.  This was primarily due to market conditions and a charge of £0.8m for GMP equalisation following the High Court case against Lloyds Bank plc and others.

 

SHAREHOLDERS' EQUITY

 

Shareholders' equity at 2 March 2019 was £106.7m (1 September 2018: £105.3m), with the increase primarily due to profit retained by the Group for the period offset by the reduction in the Group's pension surplus and dividends paid.

 

DIVIDEND

 

A first interim dividend of 1.125 pence per ordinary share (2018: 1.075 pence per ordinary share) will be paid on 31 May 2019 to shareholders on the register on 26 April 2019. The ex-dividend date will be 25 April 2019.

 

PRINCIPAL RISKS AND UNCERTAINTIES

 

The Group has a process in place to identify and assess the impact of risks on its business, which is reviewed and updated quarterly. The principal risks and uncertainties for the remainder of the financial year are not expected to change materially from those included on pages 14 to 16 of the Annual Report and Accounts 2018, having been previously identified as follows:

 

·        Brexit

·        IT and Cyber Security

·        Acquisitions

·        Managing Costs

·        Reliance on Key Customers

·        People

·        Strategic Partners

·        Customer Demand

·        Treasury

·        Business Continuity

 

OUTLOOK

 

The Group continues to deliver on its strategic objectives of investing in its people and its asset base, focusing on product innovation and expanding its geographic footprint, to ultimately drive growth across both divisions in a safe and sustainable manner.

 

We remain confident in the medium term prospects of the Agriculture division. In the UK, while there is now greater visibility in relation to farming support post Brexit, uncertainty around the future trade agreements with the EU and the rest of the world has impacted farmer confidence in the immediate term, leading to increased caution among the farming community.  The integration of our strategic acquisition of Animax is progressing well and has broadened our product range. In the USA our footprint across the eastern and south eastern states continues to expand.

 

In our Engineering division, the order books in our UK Manufacturing and USA Engineering businesses are strong, driven by improved manufacturing processes and a strengthened management team, which together have contributed to a significant increase in performance.  As expected, in the short term, the order book in our Remote Handling business remains softer, however, the major new contract secured in the USA, which will mainly impact FY20, provides confidence in the medium term.

 

Despite a number of external factors impacting the Group's performance in the first half, trading in the second half of the year has started in line with expectations, and the Board's outlook for the full year remains unchanged. Recent investments, new product development, geographic expansion and strengthened management teams leave the Group well placed to deliver continued growth.  Supporting this, we continue to seek further acquisition opportunities that complement our existing businesses and align with the Group's strategy.

 

 

CONDENSED CONSOLIDATED INCOME STATEMENT

For the 26 weeks ended 2 March 2019

                                   

 

 

     26 weeks           ended

       2 March

            2019

(unaudited)

   (Restated)

      26 weeks

           ended

        3 March

             2018

  (unaudited)

 

       52 weeks

             ended

  1 September

               2018

        (audited)

 

Notes

           £'000

            £'000

              £'000

Continuing operations

 

 

 

 

 

 

 

 

 

Revenue

6,7

206,210

200,108

         403,192

Cost of sales

 

(176,702)

(171,285)

        (349,864)

 

 

 

 

 

Gross profit

 

29,508

28,823

           53,328

 

 

 

 

 

Net operating expenses

 

(20,885)

(19,954)

          (40,138)

Share of post-tax results of associates and joint ventures

 

2,207

2,140

             3,215

 

 

 

 

 

Adjusted3 operating profit

6

11,922

11,330

           17,464

Amortisation of acquired intangible assets and non-recurring items

8

(1,092)

(321)

            (1,059)

Operating profit

6

10,830

11,009

           16,405

 

 

 

 

 

Finance income

 

226

182

                358

Finance costs

 

(722)

(576)

            (1,261)

 

 

 

 

 

Adjusted3 profit before taxation

6

11,426

10,936

           16,561

Amortisation of acquired intangible assets and non-recurring items

8

(1,092)

(321)

            (1,059)

Profit before taxation

6

10,334

10,615

           15,502

 

 

 

 

 

Taxation

 

(1,884)

(1,567)

            (1,855)

 

 

 

 

 

 

 

 

 

 

Profit for the period

 

8,450

9,048

           13,647

 

 

 

 

 

Profit attributable to:

 

 

 

 

Equity shareholders

 

7,656

8,190

           11,892

Non-controlling interests

 

794

858

             1,755

 

 

 

 

 

 

 

 

 

 

 

 

8,450

9,048

           13,647

 

 

 

 

 

 

 

 

 

 

Earnings per share (pence)

 

 

 

 

Basic

9

8.3

9.0

13.0

Diluted

9

8.1

8.8

12.7

Adjusted

9

9.4

9.2

13.9

Diluted adjusted

9

9.1

9.0

13.6

 

 

 

 

 

 

3 Adjusted results are after adding back amortisation of acquired intangible assets and non-recurring items including acquisition costs

4 Restated for the inclusion of share of post-tax results of associates and joint ventures within operating profit
 

 

 

 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the 26 weeks ended 2 March 2019

 

 

 

     26 weeks)            ended

       2 March

             2019

   (unaudited)

       26 weeks              ended

         3 March                2018

    (unaudited)

         52 weeks

              Ended

   1 September

                2018

         (audited)

 

Notes

            £'000

             £'000

               £'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the period

 

8,450

9,048

13,647

 

 

 

 

 

Other comprehensive (expense)/income

 

 

 

 

 

 

 

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

 

 

Foreign exchange translation losses arising on

  translation of overseas subsidiaries

 

 

(1,487)

 

(1,936)

 

(505)

Net investment hedges

 

177

53

111

Taxation charge on net investment hedges

 

(33)

(10)

(21)

 

 

 

 

 

Items that will not be reclassified subsequently to profit or loss:

 

 

 

 

Actuarial (losses)/gains on retirement benefit asset:

 

 

 

 

- Group

14

(2,640)

698

4,836

- Share of associate

 

-

-

1,194

 

 

 

 

 

Taxation credit/(charge) on actuarial movement on

  retirement benefit asset:

 

 

 

 

- Group

 

449

(119)

(822)

- Share of associate

 

-

-

(203)

 

 

 

 

 

Other comprehensive (expense)/income for the period, net of tax

(3,534)

(1,314)

4,590

 

 

 

 

 

Total comprehensive income for the period

 

4,916

7,734

18,237

 

 

 

 

 

Total comprehensive income attributable to:

 

 

 

 

Equity shareholders

 

4,122

6,876

16,482

Non-controlling interests

 

794

858

1,755

 

 

 

 

 

 

 

4,916

7,734

18,237

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED BALANCE SHEET

As at 2 March 2019

 

 

 

                       As at

                  2 March

                       2019

            (unaudited)

As at

3 March

2018

(unaudited)

                As at

   1 September

                2018 

         (audited)

 

Notes

                  £'000

 £'000

               £'000

Non-current assets

 

 

 

 

Goodwill

11

28,138

24,228

24,272

Other intangible assets

11

2,737

2,048

2,223

Property, plant and equipment

11

40,029

36,775

38,484

Investment property

11

167

173

170

Investment in associates

 

13,783

12,209

13,129

Interest in joint ventures

 

8,980

7,359

8,004

Other investments

 

74

72

74

Financial assets

 

 

 

 

- Non-current receivables

 

20

627

21

Retirement benefit asset

14

6,841

5,969

10,146

 

 

100,769

89,460

96,523

 

 

 

 

 

Current assets

 

 

 

 

Inventories

 

51,542

43,701

42,371

Contract assets

 

6,958

-

-

Trade and other receivables

 

59,553

69,967

67,516

Current tax assets

 

554

116

119

Financial assets

 

 

 

 

- Derivative financial instruments

 

-

-

26

- Cash and cash equivalents

12

29,239

33,835

24,632

 

 

147,846

147,619

134,664

 

 

 

 

 

Total assets

 

248,615

237,079

231,187

 

 

 

 

 

Current liabilities

 

 

 

 

Financial liabilities

 

 

 

 

- Borrowings

12

(28,507)

(27,269)

(34,994)

- Derivative financial instruments

 

-

(127)

-

Contract liabilities

 

(441)

-

-

Trade and other payables

 

(65,020)

(67,349)

(64,290)

Current tax liabilities

 

(1,296)

(1,612)

(175)

 

 

(95,264)

(96,357)

(99,459)

Non-current liabilities

 

 

 

 

Financial liabilities

 

 

 

 

- Borrowings

12

(24,012)

(22,661)

(4,997)

Deferred tax liabilities

 

(3,737)

(3,006)

(3,981)

Other non-current liabilities

 

(2,696)

(3,864)

(1,784)

 

 

(30,445)

(29,531)

(10,762)

 

 

 

 

 

Total liabilities

 

(125,709)

(125,888)

(110,221)

 

 

 

 

 

Net assets

 

122,906

111,191

120,966

 

 

 

 

 

Shareholders' equity

 

 

 

 

Share capital

15

2,298

2,285

2,285

Share premium

15

9,149

9,141

9,141

Other reserves

 

4,411

3,885

5,888

Retained earnings

 

90,878

80,792

87,967

Total shareholders' equity

 

106,736

96,103

105,281

Non-controlling interests

 

16,170

15,088

15,685

Total equity

 

122,906

111,191

120,966

           

 

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the 26 weeks ended 2 March 2019

 

 

                 

        Share

      Capital

 

Share

Premium

   Treasury

        Share    Reserve

Equity Compensation Reserve

 Foreign  Echange

Reserve

 

          Other

 Reserve

 

Retained

Earnings

              Total Shareholders'             Equity

                Non-  Controlling          Interests

 

Total

Equity

 

         £'000

£'000

         £'000

£'000

           £'000

           £'000

     £'000

             £'000

               £'000

£'000

As previously reported

 

 

 

 

 

 

 

 

 

 

at 1 September 2018 (audited)

 

2,285

 

         9,141

 

                 -

 

                1,427

 

4,259

 

202

 

87,967

 

105,281

 

15,685

 

120,966

Effect of IFRS 15 adoption

-

                 -

                 -

                        -

-

-

(124)

(124)

-

(124)

At 2 September 2018

(restated)5 (unaudited)

 

2,285

 

         9,141

 

                 -

 

                1,427

 

4,259

 

202

 

87,843

 

105,157

 

15,685

 

120,842

Profit for the period

-

                 -

                 -

                        -

-

-

7,656

7,656

794

8,450

Other comprehensive expense

 

-

 

                 -

 

                 -

 

                        -

 

(1,343)

 

-

 

(2,191)

 

(3,534)

 

-

 

(3,534)

Total comprehensive (expense)/income

      -

 

                 -

 

                 -

 

                        -

 

(1,343)

 

-

 

5,465

 

4,122

 

794

 

4,916

Dividends paid

-

                 -                 

                 -

                        -

-

-

(3,139)

(3,139)

(343)

(3,482)

Equity-settled share based payment transactions

 

-

 

                 -

 

                 -

 

                 (133)

 

-

 

-

 

721

 

588

 

34

 

622

Allotment of shares

13

                8

                 -

                        -

-

-

-

21

-

21

Purchase of own shares held in trust

-

                 -

              (13)

                        -

-

-

-

(13)

-

(13)

Transfer

-

                 -                 

              13

                        -

-

(1)

(12)

-

-

-

At 2 March 2019 (unaudited)

 

2,298

 

         9,149

 

                 -

 

                1,294

 

2,916

 

201

 

90,878

 

106,736

 

16,170

 

122,906

 

At 3 September 2017

 

 

 

 

 

 

 

 

 

 

 (audited)

2,285

         9,130

                 -

                   386

4,674

205

74,802

91,482

14,441

105,923

Profit for the period

-

                 -

                 -

                        -

-

-

8,190

8,190

858

9,048

Other comprehensive (expense)/income

-

                 -

                 -

                        -

(1,893)

-

579

(1,314)

-

(1,314)

Total comprehensive (expense)/income

-

                 -

                 -

                        -

(1,893)

-

8,769

6,876

858

7,734

Dividends paid

-

                 -

                 -

                        -

-

-

(2,788)

(2,788)

(245)

(3,033)

Equity-settled share based payment transactions

-

                 -

                 -

                   514

-

-

8

522

34

556

Allotment of shares

-

              11                 

                 -                 

                        -

-

-

-

11

-

11

Transfer

-

                 -

                 -

                        -

-

(1)

1

-

-

-

At 3 March 2018 (unaudited)

2,285

         9,141

                 -

                   900

2,781

204

80,792

96,103

15,088

111,191

 

 

 

 

 

 

 

 

 

 

 

At 3 September 2017 (audited)

2,285

         9,130

                 -

                   386

4,674

205

74,802

91,482

14,441

105,923

Profit for the period

-

                 -

                 -

                        -

-

-

11,892

11,892

1,755

13,647

Other comprehensive (expense)/income

-

                 -

                 -

                        -

(415)

-

5,005

4,590

-

4,590

Total comprehensive (expense)/income  

-

                 -

                 -

                        -

(415)

-

16,897

16,482

1,755

18,237

Dividends paid                       

-

                 -

                 -

                        -

-

-

(3,770)

(3,770)

(588)

(4,358)

Equity-settled share based payment transactions

-

                 -

                 -

                1,041

-

-

8

1,049

76

1,125

Excess deferred taxation on share based payments

-

                 -

                 -

                        -

-

-

27

27

1

28

Allotment of shares

-

              11

                 -

                        -

-

-

-

11

-

11

Transfer

-

                 -

                 -

                        -

-

(3)

3

-

-

-

At 1 September 2018 (audited)

         2,285

         9,141

-

1,427

4,259

              202

     87,967

105,281

15,685

120,966

 

5 Restated for the adoption of IFRS 15 (note 19)

 

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the 26 weeks ended 2 March 2019

 

 

 

              26 weeks ended

                   2 March 2019

                         (unaudited)

            26 weeks ended

                 3 March 2018

                       (unaudited)

               52 weeks ended

          1 September 2018

                                 (audited)

 

Notes

                                     £'000

                                     £'000

                                        £'000

Cash flows from operating activities

 

 

 

 

Cash generated from continuing operations

17

5,015

6,947

14,980

Interest received

 

86

                                         119

226

Interest paid

 

(596)

                                       (560)

(1,210)

Tax paid

 

 (734)

                                       (978)

(2,511)

Net cash generated from operating activities

 

3,771

                                    5,528

11,485

Cash flows from investing activities

 

 

 

 

Acquisition of subsidiaries (net of overdraft/cash acquired)

16

(4,717)

                                   (1,562)

(1,522)

Contingent/deferred consideration paid

 

(155)

                                       (561)

(2,617)

Net costs of disposal of associate

 

-

                                                -

(90)

Dividend received from associate and joint ventures

 

343

                                         245

704

Loan repaid by associate

 

-

                                         164

1,008

Other loans

 

53

                                            59

59

Purchase of intangible assets

 

(550)

                                          (61)

(325)

Proceeds from sale of property, plant and equipment

 

362

                                         174

189

Purchase of property, plant and equipment

 

(1,851)

                                   (1,846)

(4,488)

Purchase of own shares held in trust

 

(13)

                                                -

-

Redemption of preference shares in joint venture

 

-

                                                -

20

Net cash used in investing activities

 

(6,528)

                                   (3,388)

(7,062)

Cash flows from financing activities

 

 

 

 

Proceeds from issue of ordinary share capital

 

21

                                            11

11

New bank loans and movement on RCF

 

8,394

                                    2,943

(2,076)

Finance lease principal repayments

 

(641)

                                       (501)

(997)

Repayment of borrowings

 

(1,628)

                                   (1,951)

(3,241)

Increase in other borrowings

 

3,766

                                 10,159

8,934

Dividends paid to shareholders

 

(3,139)

                                   (2,788)

(3,770)

Dividends paid to related party

 

(343)

                                       (245)

(588)

Net cash generated from/(used in) financing activities

 

6,430

                                    7,628

(1,727)

Effects of exchange rate changes

 

(538)

                                       (528)

(305)

Net increase in cash and cash equivalents

 

3,135

                                    9,240

2,391

Cash and cash equivalents at beginning of the period

 

21,005

                                 18,614

18,614

Cash and cash equivalents at end of the period

 

24,140

                                 27,854

21,005

 

 

 

 

 

Cash and cash equivalents consist of:

 

 

 

 

Cash and cash equivalents per the balance sheet

 

29,239

                                 33,835

24,632

Bank overdrafts included in borrowings

 

(5,099)

                                   (5,981)

(3,627)

 

 

24,140

                                 27,854

21,005

 

 

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 EU; 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 2018.  A list of current Directors is maintained on the website: www.carrsgroup.com

 

 

On behalf of the Board

 

Tim Davies                                                         Neil Austin

Chief Executive                                                 Group Finance Director

15 April 2019                                                    15 April 2019

 

 

Unaudited notes to condensed interim financial information

 

1.    General information

 

The Group operates across two divisions of Agriculture and Engineering.  The Company is a public limited company, which is listed on the London Stock Exchange and is incorporated and domiciled in the UK.  The address of the registered office is Old Croft, Stanwix, Carlisle, Cumbria CA3 9BA.

 

These condensed interim financial statements were approved for issue on 15 April 2019.

 

These condensed interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006.  Statutory accounts for the 52 weeks ended 1 September 2018 were approved by the Board of Directors on 19 November 2018 and delivered to the Registrar of Companies.  The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

 

2.    Basis of preparation

 

These condensed interim financial statements for the 26 weeks ended 2 March 2019 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union.  The condensed interim financial statements should be read in conjunction with the annual financial statements for the 52 weeks ended 1 September 2018, which have been prepared in accordance with IFRSs as adopted by the European Union.

 

The Directors have made suitable enquiries and based on financial performance to date and available banking facilities they have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.  The Group therefore continues to adopt the going concern basis in preparing its condensed interim financial statements.

 

3.    Accounting policies

 

The accounting policies adopted are consistent with those of the previous financial year except for the adoption of new standards as detailed below.

 

Taxes on income in the interim periods are accrued based on management's estimate of the weighted average annual income tax rate expected for the full financial year.

 

IFRS 9 Financial Instruments

The Group adopted IFRS 9 retrospectively from 2 September 2018.  There was no material impact on adoption of this new standard.

 

IFRS 15 Revenue from Contracts with Customers

The Group adopted IFRS 15 with effect from 2 September 2018 and has applied the standard retrospectively with the cumulative effect of initially applying the standard recognised at the date of initial application.  The Group has restated its opening equity position as at 2 September 2018 by a charge of £0.1m.  Comparative information has not been restated and is therefore still reported under IAS 11 and IAS 18.  To assist comparability, note 19 shows the balance sheet as at 2 March 2019 had the Group continued to adopt IAS 11 and IAS 18.

 

Accounting standards not yet adopted by the Group

IFRS 16, "Leases", is effective for periods beginning on or after 1 January 2019, and will therefore first apply to Carr's in the year ending August 2020.  The Group continues to assess the impact of the accounting changes that will be required.  A further update will be provided in the full year Report and Accounts for year ending 2019.

 

 

4.    Estimates

 

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense.  Actual results may differ from these estimates.

 

In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the 52 weeks ended 1 September 2018, with the exception of changes in estimates that are required in determining the provision for income taxes.

 

5.    Financial risk management

 

The Group's activities expose it to a variety of financial risks: market risk (including currency risk and price risk), credit risk and liquidity risk.

 

The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's annual financial statements as at 1 September 2018.  There have been no changes in risk management practices since the year end.

 

 

6.    Operating segment information

 

The Group's chief operating decision-maker ("CODM") has been identified as the Executive Directors.  Management has determined the operating segments based on the information reviewed by the CODM for the purposes of allocating resources and assessing performance.

 

The CODM considers the business from a product/services perspective.  Operating segments have been identified as Agriculture and Engineering.  Performance is assessed using operating profit.  For internal purposes the CODM assesses operating profit before amortisation of acquired intangible assets and non-recurring items consistent with the presentation of adjusted operating profit 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 and asset information regarding the Group's operating segments for the 26 weeks ended 2 March 2019 and the comparative periods.

 

 

 

26 weeks ended 2 March 2019

 

Agriculture

£'000

 

Engineering

£'000

    IAS 19 past service cost

           £'000

 

        Group

         £'000

 

Total segment revenue

      185,179

         21,039

                  -

     206,218

Inter segment revenue

                (7)

                 (1)

                  -

               (8)

Revenue from external customers

      185,172

         21,038

                  -

     206,210

 

 

 

 

 

Adjusted6 EBITDA7

          9,265

           2,899

                  -

       12,164

 

 

 

 

 

Depreciation, amortisation and profit/(loss)

on disposal of property, plant and equipment

 

         (1,519)

 

             (930)

 

                  -

 

        (2,449)

Share of post-tax results of associate and joint ventures

          2,207

                   -

                  -

         2,207

Adjusted6 operating profit

          9,953

           1,969

                  -

       11,922

Amortisation of acquired intangible assets and

non-recurring items (note 8)

 

            (194)

 

             (103)

 

            (795)

 

        (1,092)

Operating profit

          9,759

           1,866

            (795)

       10,830

Finance income

 

 

 

            226

Finance costs

 

 

 

           (722)

Adjusted6 profit before taxation

 

 

 

       11,426

Amortisation of acquired intangible assets and

non-recurring items (note 8)

 

 

 

 

        (1,092)

 

 

 

 

 

Profit before taxation

 

 

 

       10,334

 

 

 

 

 

Segment gross assets

      179,969

         68,646

                  -

     248,615

 

 

6   Adjusted results are after adding back amortisation of acquired intangible assets and non-recurring items including acquisition costs

7   Earnings before interest, tax, depreciation, amortisation, profit/(loss) on the disposal of property, plant and equipment and share of post-tax results of associate and joint ventures

 

 

 

Agriculture

Engineering

Group

 

£'000

£'000

£'000

26 weeks ended 3 March 2018

 

 

 

Total segment revenue

      178,268

          21,867

200,135

Inter segment revenue

               (6)

               (21)

(27)

Revenue from external customers

      178,262

          21,846

200,108

 

 

 

 

Adjusted8 EBITDA9

          9,060

            2,278

11,338

 

 

 

 

Depreciation, amortisation and profit/(loss) on disposal of property, plant and equipment

 

        (1,303)

 

             (845)

 

(2,148)

Share of post-tax results of associates and joint ventures

          2,216

               (76)

2,140

Adjusted8 operating profit

          9,973

            1,357

11,330

Amortisation of acquired intangible assets and non-recurring items (note 8)

 

           (198)

 

             (123)

 

(321)

Operating profit

          9,775

            1,234

11,009

Finance income

 

 

182

Finance costs

 

 

(576)

Adjusted8 profit before taxation

 

 

10,936

Amortisation of acquired intangible assets and non-recurring items (note 8)

 

 

 

(321)

 

 

 

 

Profit before taxation

 

 

10,615

 

 

 

 

Segment gross assets

      167,831

          69,248

237,079

 

 

 

Agriculture

   Engineering

Group

 

£'000

£'000

£'000

52 weeks ended 1 September 2018

 

 

 

Total segment revenue

359,620

43,618

403,238

Inter segment revenue

(12)

(34)

(46)

Revenue from external customers

359,608

43,584

403,192

 

 

 

 

Adjusted8 EBITDA9

12,751

6,000

18,751

 

 

 

 

Depreciation, amortisation and profit/(loss) on disposal of property, plant and equipment

 

(2,769)

 

(1,733)

 

(4,502)

Share of post-tax results of associates and joint ventures

3,396

(181)

3,215

Adjusted8 operating profit

13,378

4,086

17,464

Amortisation of acquired intangible assets and non-recurring items (note 8)

 

(386)

 

(673)

 

(1,059)

Operating profit

12,992

3,413

16,405

Finance income

 

 

358

Finance costs

 

 

(1,261)

Adjusted8 profit before taxation

 

 

16,561

Amortisation of acquired intangible assets and non-recurring items (note 8)

 

 

 

(1,059)

 

 

 

 

Profit before taxation

 

 

         15,502

 

 

 

 

Segment gross assets

159,305

71,882

       231,187

 

 

8   Adjusted results are after adding back amortisation of acquired intangible assets and non-recurring items including acquisition costs

9   Earnings before interest, tax, depreciation, amortisation, profit/(loss) on the disposal of property, plant and equipment and share of

     post-tax results of associates and joint ventures

 

 

 

7.    Disaggregation of revenue

 

In accordance with IFRS 15 'Revenue from Contracts with Customers' the following table presents the Group's reported revenue for the 26 weeks ended 2 March 2019 disaggregated based on the timing of revenue recognition.  The Group implemented the new standard on 2 September 2018.

 

 

 

 

 

Total

Timing of revenue recognition

 

 

£'000

Over time

 

 

13,098

At a point in time

 

 

193,112

 

 

 

206,210

 

 

 

8.    Amortisation of acquired intangible assets and non-recurring items

 

 

26 weeks

ended

2 March

2019

26 weeks ended

 3 March

2018

52 weeks

ended

1 September

2018

 

£'000

£'000

£'000

Amortisation of acquired intangible assets

150

204

292

Past service cost (IAS 19)

795

-

-

Goodwill impairment

-

-

516

Business combination expenses

147

117

251

 

1,092

321

1,059

 

For further details of the past service cost of £795,000 see note 14.

 

Business combination expenses relate to acquisition costs incurred in the period, and in respect of prior periods contingent consideration in relation to the acquisitions of Phoenix Feeds Limited and the business and certain assets of Mortimer Feeds Limited which is explained further below.

 

Phoenix Feeds Limited was acquired on 1 June 2016.  The consideration paid included £490,000 of contingent consideration linked to the continued employment of key personnel and therefore in accordance with IFRS 3 this was not recognised as consideration in the acquisition accounting in the 53 weeks ended 3 September 2016.  It is instead being recognised in the income statement over a two year period with £nil (H1 2018: £92,000) recognised in the 26 weeks ended 2 March 2019.  Given the nature of the payment it has been recognised as a non-recurring item.

 

Mortimer Feeds was acquired on 5 June 2017.  The consideration paid included £30,000 of contingent consideration linked to the continued employment of key personnel and therefore in accordance with IFRS 3 this was not recognised as consideration in the acquisition accounting in the 52 weeks ended 2 September 2017.  It is instead being recognised in the income statement over a one year period with £nil (H1 2018: £20,000) recognised in the 26 weeks ended 2 March 2019.  Given the nature of this payment it has been recognised as a non-recurring item.

 

The goodwill impairment recognised in the year ended 1 September 2018 was against the carrying value of goodwill in respect of the Bendalls engineering business.

 

 

9.    Earnings per share

 

Amortisation of acquired intangible assets and non-recurring items 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

            2 March 2019

         26 weeks ended

             3 March 2018

           52 weeks ended

        1 September 2018

 

                          £'000

                           £'000

                             £'000

Earnings

7,656

8,190

                          11,892

Amortisation and non-recurring items:

 

 

 

Amortisation of acquired intangible assets

150

204

                               292

Past service cost (IAS 19)

795

-

                                    -

Goodwill impairment

-

-

                               516

Business combination expenses

147

117

                               251

Taxation effect of the above

(166)

(43)

                                (60)

Non-controlling interest in the above

-

(89)

                              (145)

 

 

 

 

Earnings - adjusted

8,582

8,379

                          12,746

 

 

 

 

 

                     Number

           Number

                        Number

 

 

 

 

Weighted average number of ordinary shares in issue

91,697,033

91,401,939

                   91,402,338

Potentially dilutive share options

2,821,066

2,062,033

                     2,036,269

 

 

 

 

 

94,518,099

93,463,972

                   93,438,607

 

 

 

 

Earnings per share (pence)

 

 

 

Basic

                           8.3p

                             9.0p

                           13.0p

Diluted

                           8.1p

                             8.8p

                           12.7p

Adjusted

                           9.4p

                             9.2p

                           13.9p

Diluted adjusted

                           9.1p

                             9.0p

                           13.6p

 

 

 

 

 


10.  Dividends

 

An interim dividend of £982,583 that related to the period to 1 September 2018 was paid on 5 October 2018, and a final dividend of £2,156,098 was paid on 11 January 2019. 

 

In addition, an interim dividend of 1.125p per share (2018: 1.075p per share) has been approved by the Directors.  It is payable to shareholders on the register on 26 April 2019.  This interim dividend, amounting to £1,034,223 (2018: £982,578), has not been recognised as a liability in this interim financial information.  It will be recognised in shareholders' equity in the 52 weeks to 31 August 2019.

 

 

11.  Intangible assets, property, plant and equipment and investment property

 

 

 

 

     Goodwill

           £'000

Other

intangible assets

£'000

Property, plant and equipment

£'000

 

Investment

property

£'000

26 weeks ended 2 March 2019

 

 

 

 

Opening net book amount at 2 September 2018

        24,272

        2,223

          38,484

170

Exchange differences

            (402)

           (42)

              (486)

-

Subsidiary acquired

          4,268

           226

            1,868

-

Additions

                  -

           550

            2,901

-

Disposals

                  -

               -

              (352)

-

Depreciation and amortisation

                  -

         (220)

           (2,386)

 (3)

Closing net book amount at 2 March 2019

        28,138

        2,737

          40,029

167

 

 

 

 

 

26 weeks ended 3 March 2018

 

 

 

 

Opening net book amount at 3 September 2017

        24,241

        2,266

          37,149

176

Exchange differences

            (687)

         (109)

              (706)

-

Subsidiary acquired

             674

             34

               167

-

Additions

                  -

             61

            2,383

-

Disposals

                  -

               -

                (45)

-

Depreciation and amortisation

                  -

         (204)

           (2,173)

(3)

Closing net book amount as at 3 March 2018

        24,228

        2,048

          36,775

173

 

Capital commitments contracted, but not provided for, by the Group at the period end amounts to £132,000 (2018: £772,000).

 

 

12.  Borrowings and loans

 

                     As at

               2 March

                     2019

As at

3 March

2018

                    As at

       1 September

                    2018

 

                    £'000

£'000

                   £'000

 

 

 

 

Current

28,507

      27,269

34,994

Non-current

24,012

      22,661

4,997

Total borrowings and loans

52,519

      49,930

39,991

Cash and cash equivalents

(29,239)

    (33,835)

(24,632)

Net debt

23,280

      16,095

15,359

 

 

 

 

Undrawn facilities

21,456

      22,730

27,242

 

Undrawn facilities include overdraft facilities of £2.5m (2018: £2.5m) that are renewable on an annual basis.

 

Movements in borrowings are analysed as follows:

 

 

 

 

26 weeks ended 2 March 2019

 

 

£'000

Opening amount as at 2 September 2018

 

 

39,991

Exchange differences

 

 

(246)

Subsidiary acquired

 

 

340

New bank loans/RCF drawdown and finance leases

 

 

9,444

Finance lease principal repayments

 

 

(641)

Repayments of borrowings

 

 

(1,628)

Increase in other borrowings

 

 

3,766

Release of deferred borrowing costs

 

 

21

Net increase to bank overdraft (excluding the effects of acquisitions)

 

1,472

Closing amount as at 2 March 2019

 

 

52,519

 

 

 

 

26 weeks ended 3 March 2018

 

 

                            £'000

Opening amount as at 3 September 2017

 

 

38,026

Exchange differences

 

 

(186)

Subsidiary acquired

 

 

                            554

New bank loans/RCF drawdown and finance leases

 

 

                         3,537

Finance lease principal repayments

 

 

(501)

Repayments of borrowings

 

 

(1,951)

Increase in other borrowings

 

 

10,159

Release of deferred borrowing costs

 

 

29

Net increase to bank overdraft (excluding the effects of acquisitions)

 

 

263

Closing amount as at 3 March 2018

 

 

49,930

 

 

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

 

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 such as entity projections of future profitability.

 

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.

 

Financial instruments recognised at fair value are as follows:

 

 

                    As at

               2 March

                     2019

                       As at

                 3 March

                       2018

                   As at

      1 September

                   2018

Book value and fair value

                    £'000

                      £'000

                  £'000

 

 

 

 

Derivative financial instruments (asset)

-

-

26

Derivative financial instruments (liability)

-

(127)

-

Current contingent consideration payable

(3,417)

-

(1,956)

Non-current contingent consideration payable

(2,517)

(3,629)

(1,576)

 

The movement on the fair value of current and non-current contingent consideration since 1 September 2018 is mainly due to the acquisition of Animax Limited.

 

 

14.   Retirement benefit asset

 

The expense/(income) is recognised within the Income Statement as shown below:

 

 

             26 weeks

ended

2 March

2019

             26 weeks

                  Ended

               3 March

                    2018

        52 weeks

              ended

   1 September

                2018

 

                   £'000

                   £'000

               £'000

 

 

 

 

Administrative expenses

11

-

24

Past service cost

795

-

-

Net interest on the net defined benefit asset

(141)

(62)

(125)

 

665

(62)

(101)

 

In October 2018 the High Court ruled on the case of Lloyds Banking Group Pensions Trustees Ltd v Lloyds Bank plc and others.  This ruling required all UK defined benefit pension schemes to equalise Guaranteed Minimum Pensions (GMPs) between males and females. The Scheme's actuary has estimated the effect on the Carr's Group Pension Scheme to be a £795,000 increase in liabilities and this has been recognised as a past service cost through the Income Statement and disclosed as a non-recurring item (note 8).

 

It is expected that there will be further court hearings from which clarity over the practical application of the ruling will arise. There is also the possibility of the case being taken to appeal. 

 

Net interest on the defined benefit retirement asset is recognised within interest income.

 

The amounts recognised in the Balance Sheet were as follows:

 

 

                  As at

             2 March

                   2019

                  As at

             3 March

                   2018

                 As at

    1 September

                 2018

 

                  £'000

                  £'000

                £'000

 

 

 

 

Present value of funded defined benefit obligations

(61,930)

(66,486)

(60,488)

Fair value of scheme assets

68,771

72,455

70,634

Surplus in funded scheme

6,841

5,969

10,146

 

Actuarial losses of £2,640,000 (2018: gains of £698,000) have been reported in the Statement of Comprehensive Income. The surplus has decreased over the period since 1 September 2018 due to the recognition of additional scheme liabilities arising from GMP equalisation as discussed above together with changes in market conditions contributing to an overall reduction in the scheme surplus.

 

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

 

 

 

Allotted and fully paid ordinary shares of 2.5p each

  Number of          shares

Share capital

£'000

         Share

premium

£'000

           Total
          £'000

 

 

 

 

 

Opening balance as at 2 September 2018

91,403,112

2,285

9,141

11,426

Proceeds from shares issued:

 

 

 

 

- Treasury/LTIP

520,313

13

-

13

- share save scheme

7,540

-

8

8

At 2 March 2019

91,930,965

2,298

9,149

11,447

 

 

 

 

 

Opening balance at 3 September 2017

91,395,541

2,285

9,130

11,415

Proceeds from shares issued:

 

 

 

 

- share save scheme

7,100

-

11

11

At 3 March 2018

91,402,641

2,285

9,141

11,426

 

Options exercised under the share save scheme during the period to 2 March 2019 resulted in 7,540 shares being issued (2018: 7,100 shares), with exercise proceeds of £8,000 (2018: £10,792).  The related weighted average price of the shares exercised was £1.061 (2018: £1.52) per share.

 

In addition, 520,313 shares were issued in the period and held initially as Treasury shares.  These shares were subsequently used to satisfy the share awards under the LTIP scheme which were exercised in November 2018. 

 

 

16.   Acquisition

 

On 21 September 2018 the Group acquired the entire issued share capital of Animax Limited, a producer of market-leading animal health products, for a total cash consideration of up to £8.5m.  As part of the acquisition, the Group also acquired the entire issued share capital of Animax Limited's related party, Clinimax Limited.  Clinimax Limited is a manufacturer of specialist disinfectant products for use in the medical industry.

 

Both businesses were acquired for an initial cash consideration of £6.0m, with an additional cash consideration of up to a maximum of £2.5m payable over the period to November 2020, based on the achievement of agreed financial targets.

 

The acquisition of Animax Limited aligns with the Group's stated strategy of investing in growing agriculture markets in the UK and internationally.

 

Goodwill represented the excess of the consideration paid over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities acquired.

 

The acquired companies have generated revenue of £3,182,000 and profit before taxation of £398,000 since the date of acquisition.

 

Total acquisition related costs amounted to £268,000 which have been recognised within non-recurring items in the consolidated income statement.  £147,000 has been charged to the income statement in the 26 weeks ended 2 March 2019 and £121,000 has been recognised in prior years as incurred.

 

Given this is a recent acquisition the fair value accounting exercise has not been fully completed.  The fair value disclosures in the table below represent provisional fair values.  Finalised disclosures will be presented in the full year Report and Accounts for the year ending 31 August 2019.

 

The aggregate assets and liabilities provisionally recognised in the acquisition accounting are set out below:

 

 

Provisional

Fair value

 

£'000

Intangible assets

226

Property, plant and equipment

1,868

Inventories

1,036

Receivables

1,355

Cash at bank

1,430

Payables

(1,224)

Bank loan

(340)

Taxation

 

   Current tax

21

   Deferred tax

(244)

Net assets acquired

4,128

Goodwill

4,268

 

8,396

 

 

Satisfied by:

 

Cash consideration

6,000

Contingent consideration

2,396

Total consideration

8,396

 

 

Intangible assets represent the fair value of customer relationships.

 

Had the acquisition of Animax Limited and Clinimax Limited occurred at the beginning of the accounting period the Group's revenue and profit before taxation for the period would not be materially different to the amounts actually recognised in the consolidated income statement.

 

 

 

17.   Cash generated from continuing operations

 

 

          26 weeks

                ended

            2 March

                  2019

           26 weeks

                 ended

             3 March

                   2018

         52 weeks

              ended

   1 September

                2018

 

                 £'000

                  £'000

               £'000

 

 

 

 

Profit for the period from continuing operations

8,450

9,048

13,647

Adjustments for:

 

 

 

Tax

1,884

1,567

1,855

Tax credit in respect of R&D

(330)

(90)

(451)

Depreciation of property, plant and equipment

2,386

2,173

4,372

Depreciation of investment property

3

3

6

Goodwill impairment

-

-

516

Intangible asset amortisation

220

204

397

(Profit)/loss on disposal of property, plant and equipment

(10)

(28)

19

Business combination expenses

147

117

251

Net fair value expense on share based payments

503

556

1,125

Other non-cash adjustments

(51)

112

107

Finance costs:

 

 

 

Interest income

(226)

(182)

(358)

Interest expense and borrowing costs

743

605

1,357

Share of results of associates and joint ventures

(2,207)

(2,140)

(3,215)

IAS19 income statement charge (excluding interest):

 

 

 

   Administrative expenses

11

-

24

   Past service cost

795

-

-

Changes in working capital (excluding the effects of

   acquisitions):

 

 

 

Increase in inventories

(6,715)

(6,127)

(5,106)

Increase in receivables

(3,377)

(9,623)

(7,015)

Increase in payables

2,789

10,752

7,449

Cash generated from continuing operations

5,015

6,947

14,980

 

 

 

 

 

18.   Related party transactions

 

The Group's significant related parties are its associate and joint ventures, as disclosed in the Annual Report and Accounts 2018.

 

Transactions and balances with the associate and joint ventures were all undertaken on an arm's length basis in the normal course of business and are as follows:

 

 

Sales to

Purchases from

Rent receivable from

Net management  charges

receivable

from

Interest receivable from

 

 

 

Dividends receivable

from

Amounts

owed from

             Amounts

owed to

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

26 weeks to

2 March 2019

 

 

 

 

 

 

 

Associates

356

     (66,428)

             10

                    7

                -

            343

                97

(26,970)

Joint ventures

467

          (277)

                -

                111

                -

                  -

           1,772

(12)

 

 

 

 

 

 

 

 

 

26 weeks to

3 March 2018

 

 

 

 

 

 

 

 

Associates

427

     (56,318)

10

                    4

             37

245

850

(25,971)

Joint ventures

300

          (757)

-

                163

                -

-

1,720

(82)

 

 

19.  Adoption of IFRS 15 'Revenue from Contracts with Customers'

 

The Group adopted IFRS 15 with effect from 2 September 2018 and has applied IFRS 15 retrospectively with the cumulative effect of initially applying the standard recognised at the date of initial application.  Comparative information has not been restated and is therefore still reported under IAS 11 and IAS 18.

 

Adjustments to the opening balance sheet arising from the adoption of IFRS 15 are as follows.

 

 

         1 September

                       2018

                      £'000

 

        Adjustments

                     £'000

        2 September

                      2018

                     £'000

 

 

 

 

Current assets

 

 

 

Inventories

42,371

            1,442

                 43,813

Contract assets

-

                    6,502

                   6,502

Trade and other receivables

67,516

                (12,128)

                 55,388

 

 

 

 

Current liabilities

 

 

 

Contract liabilities

-

                  (1,051)

                  (1,051)

Trade and other payables

(64,290)

                    5,111

                (59,179)

 

 

 

 

Equity

 

 

 

Retained earnings

87,967

                     (124)

                 87,843

 

 

 

 

 

 

 

 

Headline figures

 

 

 

Non-current assets

96,523

                           -

                 96,523

Current assets

134,664

                  (4,184)

               130,480

Total assets

231,187

                  (4,184)

               227,003

Current liabilities

(99,459)

                    4,060

                (95,399)

Non-current liabilities

(10,762)

                           -

                (10,762)

Total liabilities

(110,221)

                    4,060

              (106,161)

Net assets

120,966

                     (124)

               120,842

Total shareholders' equity

105,281

                     (124)

               105,157

Total equity

120,966

                     (124)

               120,842

 

 

 

 

 

 

 

 

The adjustments to the opening position reflect the transition impact of £124,000 reduction in retained earnings together with the reclassification of amounts to the new asset and liability categories of 'contract assets' and 'contract liabilities'.

 

To enable users of these accounts to compare the periods presented in this interim report the following table shows the balance sheet of the Group as at 2 March 2019 as though IAS 11 and IAS 18 still applied.

 

 

   2 March2019

   (as reported -   unaudited)

      Adjustments

2 March2019

        (IAS 11 &

           IAS 18 -   unaudited)

 

                £'000

                  £'000

             £'000

 

 

 

 

Current assets

 

 

 

Inventories

51,542

(1,207)

50,335

Contract assets

6,958

(6,958)

-

Trade and other receivables

59,553

8,344

67,897

 

 

 

 

Current liabilities

 

 

 

Contract liabilities

(441)

441

-

Trade and other payables

(65,020)

(496)

(65,516)

 

 

 

 

Equity

 

 

 

Retained earnings

90,878

124

91,002

 

 

 

 

 

 

 

 

Headline figures

 

 

 

Non-current assets

100,769

-

100,769

Current assets

147,846

179

148,025

Total assets

248,615

179

248,794

Current liabilities

(95,264)

(55)

(95,320)

Non-current liabilities

(30,445)

-

(30,445)

Total liabilities

(125,709)

(55)

(125,764)

Net assets

122,906

124

123,030

Total shareholders' equity

106,736

124

106,860

Total equity

122,906

124

123,030

 

 

 

 

 

 

 

 

The adjustments reflect the reclassification of amounts to the new asset and liability categories of 'contract assets' and 'contract liabilities'.

 

 


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