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Latest Results

Full Year Results

"Foundations for growth"

Carr's (CARR.L), the fully-listed Agriculture and Engineering Group, announces results for the year ended 2 September 2017.

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Chairman's Statement

Review of the Year

The financial year ended 2 September 2017 was a challenging year as the Group’s financial performance was impacted by external factors affecting both divisions which were highlighted in our trading update on 20 July 2017. Despite this, the year was also one of investment and significant progress towards achieving the Group’s strategic objectives.

In our Agriculture division, while the UK business benefited from a recovery in farmgate milk prices and consequently improved farmer confidence, sales volumes in our USA feed block business were affected throughout the year by lower cattle prices. This was partially mitigated by a gradual recovery in the second half which has continued into the new financial year. In October 2017 we completed the acquisition of Pearson Farm Supplies Ltd in line with our strategy of strengthening our presence in current locations.

With the backdrop of this recovering USA trading environment, the strategic investment made in our new low moisture feed block plant in Tennessee, USA will provide us with access to new geographic markets in the Eastern and South Eastern states of the USA. The plant is expected to be completed before the end of December 2017 and following this the Group will have comprehensive coverage of all the major cattle areas in the USA.

In our Engineering division, we suffered a significant setback during the year as a result of a delay to the commencement of a major contract and the poor profitability of certain other contracts during the period. As previously disclosed in our trading update on 20 July 2017, the delayed contract has now been signed and work has begun which will continue throughout the current and into the next financial year.

During the year we also invested in the acquisition of two engineering businesses. In October 2016 we acquired a German family-owned engineering business, STABER GmbH, which designs and develops specialised technology and is highly complementary to Wälischmiller, our German remote handling business. Since its acquisition, STABER has been integrated with Wälischmiller and we are investing in the extension of our premises in Markdorf, Germany to consolidate both operations into one site and provide additional efficiency, flexibility and capacity.

In August 2017 we announced the acquisition of NuVision Engineering Inc., a world renowned technology and engineering company based in the USA, specialising in the supply of products and services to the nuclear industry. The acquisition will provide the Group with a foothold into new major nuclear markets and the opportunity to market Wälischmiller products in the USA. In addition, we have continued to invest in extending our reach into new markets, particularly China, where significant opportunities lie in the supply chain as part of the country’s increased development and investment in the nuclear power market.

We have also increased the strength and depth of our management team in the Engineering division through the appointment of a Divisional Managing Director who will oversee and coordinate the businesses in the UK, Germany and the USA.

In total, the Group has invested up to £24.3 million in expanding its USA feed block operations and in growing the Engineering division through acquisitions which take the Group into new geographic markets, provide additional capabilities, and support our growth ambitions. We therefore remain confident in the future prospects of both divisions.

 

Financial Review

Revenue for the year increased by 9.9% to £346.2 million (2016: £314.9 million).  Operating profit before amortisation of intangible assets and non-recurring items was down 28.5% to £9.3 million (2016: £13.0 million), with Agriculture contributing £8.6 million (2016: £10.4 million) and Engineering £0.7 million (2016: £2.6 million). The contribution from associates and joint ventures was up 35.2% at £2.8 million (2016: £2.1 million).
 
The Group incurred a number of non-recurring items in the year, totalling £1.3 million. This included acquisition costs of £1.4 million, primarily related to the acquisitions of NuVision and STABER, and a net credit relating to Chirton Engineering of £0.4 million. The net credit comprised an exceptional credit of £2.1 million for contingent consideration no longer payable and an impairment charge against the associated goodwill of £1.7 million. There was also a loss of £0.2 million on the disposal of an old, unutilised Agriculture site and restructuring costs of £0.1 million.

Reported operating profit after amortisation of intangible assets and non-recurring items was down 38.3% at £7.9 million (2016: £12.8 million).

Profit before tax before amortisation of intangible assets and non-recurring items was down 20.2% to £11.4 million (2016: £14.3 million), and reported profit before tax was down 29.0% at £10.0 million (2016: £14.1 million).  Basic earnings per share were down by 28.0% to 7.7 pence (2016 continuing operations: 10.7 pence), with fully diluted earnings per share of 7.6 pence (2016 continuing operations: 10.5 pence) and adjusted earnings per share, excluding amortisation of intangible assets and non-recurring items, of 8.9 pence (2016 continuing operations: 10.9 pence). 

Net debt at 2 September 2017 was £14.1 million (2016: net cash of £8.1 million). The movement included £13.2 million generated from operations, £14.3 million used for acquisitions and capital expenditure, and £19.5 million paid in dividends.

Dividend

The Board is proposing a final dividend of 2.1 pence per ordinary share, which together with the two interim dividends of 0.95 pence per ordinary share paid on 12 May 2017 and 6 October 2017, make a total of 4.0 pence per share for the year (2016: 3.8 pence per share) excluding the special dividend of 17.54 pence per share paid in October 2016. The final dividend, if approved by the Shareholders, will be paid on 12 January 2018, to Shareholders on the register on close of business 15 December 2017, and the shares will go ex-dividend on 14 December 2017.

Board composition and corporate governance

In line with our commitment to continual improvements in corporate governance, during the year we engaged Independent Audit Limited, a leading specialist in corporate governance, to conduct an external evaluation of the effectiveness of the Board and its Committees. That review concluded that the Board and its Committees were functioning well and noted that improvements had been made since the previous external review which we carried out in 2013. It also made a number of further recommendations which the Board has already begun to work towards implementing. The Board remains firmly committed to good governance.

Some changes have been made this year to the composition of the Board’s Committees and to the Group’s Remuneration Policy in light of feedback received from shareholders and investor reporting bodies following our 2016 Annual Report. We always welcome the views of all Carr’s Group plc stakeholders, particularly where it can lead to improvements in our governance framework.

Full details of our approach to Corporate Governance, the independent review undertaken during 2017 and our policy on continued improvement will be set out in our Annual Report and Accounts.

Outlook

The Group remains focused on delivering its stated strategic objectives of investing in both its people and its asset base whilst continuing to drive product innovation and deliver growth, both organically and by acquisition, across our two divisions.

The outlook for UK agriculture remains positive with farm incomes continuing to improve in the near term. Additionally, we continue to see a gradual improvement in cattle prices in the USA, resulting in improved feed block volumes, which is expected to continue.

In Engineering, the difficulties in our UK business largely caused by a significant contract delay have been addressed and, with the beneficial effects of other contract wins and strengthened management, we expect to see a significant improvement in the year ahead. The recent acquisitions enhance the depth of our offering and provide further opportunities to drive growth.   We are also encouraged by the opportunities apparent within our Engineering division, particularly in China and the USA.

Looking further ahead, it remains unclear what the UK’s terms of exit from the European Union will look like. However, the Board will continue to monitor the position closely and ensure that the Group is well positioned to respond to any challenges that may arise.

Overall, trading in the new financial year has started well and in line with the Board’s expectations, with a particularly good start to the year in our USA feed block business and strong order books across the Engineering division.  We believe that with the investments made in acquisitions and research during the year in both Agriculture and Engineering, we have laid a solid foundation for sustained growth and are confident in the outlook for the Group.

 

Chris Holmes DL
Chairman



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