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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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Chief Executive's Review

Despite difficult market conditions and a disappointing performance in our UK Manufacturing business, we have continued to invest in our business, which is consistent with our vision to be recognised as a truly international business at the forefront of innovation and technology across Agriculture and Engineering.

Agriculture

The Agriculture division has experienced a challenging year. Lower farming profits in the USA, resulting from lower cattle prices, impacted sales volumes of our feed blocks. However, this was partially offset by a recovery in UK agriculture as farmgate milk prices and farmer confidence improved.

Feed blocks

In the USA, pressure from lower cattle prices impacted our feed block business, with sales volumes, including joint ventures, down 4.1% year on year. As anticipated, the second half of the year saw the beginning of a recovery, resulting in volumes being marginally ahead of previous expectations. This gradual recovery is expected to continue in the current year.

Our new low moisture feed block plant in Tennessee is expected to be fully operational by the end of December 2017, providing access to new markets across the Eastern and South Eastern states of the USA and providing additional capacity as the market recovery continues.

UK feed blocks performed well, demonstrating the strength of our brands, despite milder spring weather conditions which caused a slowdown in the second half.

Overall, feed block sales were down 2.1% on last year.

We continue to develop opportunities to expand geographically. In South America, our trials at FAI Farms (a commercial research institute in Brazil) and the Instituto de Zootecnia near Ribeirao Preto, São Paulo State are progressing well. Completion of the trials is expected in the current financial year and initial results are encouraging. In New Zealand we have incorporated a subsidiary company and established a direct sales operation distributing to farmers through key merchants as we make progress towards establishing our feed block products in this important market.

Investment in research in all our territories continues as we demonstrate the continued value of our existing brands such as Crystalyx® and Smartlic® as well as the introduction of new products, such as FlaxLic® and Megastart®. The continued investment in research which confirms the efficacy of our products is the foundation for the success of our feed block business globally, and sets us apart from our competitors.

UK Agriculture

The recovery we witnessed in the first half in UK Agriculture continued into the second half with manufactured feed volumes, which includes compound feed and blends, increasing 10.9% year on year, against a national market rise of 6.6% . This is a strong performance which demonstrates the value we bring to our customers. On 5 June 2017 we acquired the trade and assets of Mortimer Feeds, a feed merchant business operating principally in Cheshire. This acquisition adds incremental feed volumes, converts some existing merchant business into direct sales, and is in line with our strategy of strengthening our presence in current locations and leading in dairy nutrition.

The retail business has delivered another strong performance, with the country store network across Northern England and Southern Scotland reporting an increase of 0.8% in like-for-like sales and a 2.2% increase in total sales following the opening of Penicuik, East Midlothian in December 2016 and the acquisition of Horse and Pet Warehouse Ltd, Ayr in March 2017.

On 31 October 2017 we acquired the entire issued share capital of Pearson Farm Supplies Ltd, an agricultural retail business with locations across Yorkshire, Lancashire and North West Wales. This will significantly expand our customer base, bring together key people and provide key synergies across the Group. The acquisition takes our total retail footprint to 43 locations.

The strategy for the retail business remains the expansion of our geographic reach into adjacent territories, redeveloping existing facilities and expanding our product offering to meet the needs of our customers, particularly those located in rural communities.  As part of our strategy, we continue to ensure that our retail stores have the best possible locations alongside livestock auction markets and in key agricultural locations.

In addition, we had a strong performance in agricultural machinery where sales achieved a record level, increasing 27.8% year on year. New tractor sales were up 42% year on year against a market increase of 21% and our market share for key brands increased by 3% to 19%.

The oil distribution business saw sales volumes decline 3.5%, which was a resilient performance given the mild weather conditions, with ambient temperatures during winter and spring higher than the prior year. Our continued good performance can be attributed to our product offer and excellent levels of customer service.

Agriculture Outlook

Farmer confidence has returned during the year as a result of the increase in farmgate milk prices and improved revenues from beef and sheep leading to a recovery in farm incomes. We expect farm incomes to continue to improve throughout the current financial year.

The uncertainty following the outcome from the EU referendum remains, particularly relating to the future of the single farm payment and support for UK farmers. However, in the short-term UK livestock and dairy prices have responded positively due to a number of factors, including the devaluation of sterling.

The division is well placed both operationally and geographically to adapt to future market conditions whilst continuing to support the needs of our farming customers.

Engineering

The Engineering division had a disappointing year with a poor performance in UK Manufacturing due largely to a delayed contract. Despite this, the division made significant strategic progress with the highlights being the acquisition and integration of STABER into our remote handling business and the acquisition of NuVision. This takes the business into new markets in the USA, increases the focus on nuclear and its adjacent markets, and brings new technology and capabilities to the Group.

UK Manufacturing

Revenues declined in the year as a result of the contract delay in the first half of the year. As announced on 30 March 2017, efforts to mitigate the effects of that delay were only partially successful. The impact of the reduction in revenues, together with poor margins on work completed during the year, largely as a result of the continuing pressures in the oil and gas markets, resulted in a loss in our UK Manufacturing business.
We have strengthened the management team in the UK Manufacturing business in the final quarter of the financial year. Also, we were pleased to report on 20 July 2017 that the delayed contract had been signed. This will be delivered throughout the current financial year and into the next financial year. Additionally, work within the Sellafield Vessels and Tanks Category Management Framework is expected to commence during the current financial year. This contract, with a value of £48m at the time of the tender, secures design and manufacturing services relating to Sellafield’s highest complexity vessels for a 10 year period. This underpins the growth and development of our UK Manufacturing business over the medium and long term.

The Group’s focus on the nuclear industry has continued although, as previously reported, the pivot by part of the manufacturing business away from oil and gas to nuclear and its adjacent markets, including defence, has been slower than initially anticipated due to the aforementioned contract delay.

The UK nuclear industry has benefited from the Government’s commitment to both the ongoing decommissioning process and the future construction of new nuclear power facilities. Consequently, the division is seeing an increase in the level of activity and engagement with the new build sector and is establishing itself as a strategically relevant partner to the international effort behind the new build programme.

USA Engineering

On 7 August 2017, we announced the acquisition of USA based engineering business NuVision Engineering, Inc., which operates from locations in Pittsburgh, Pennsylvania and Charlotte, North Carolina. The Group acquired the company for an initial consideration of $11.5m (£8.8m), before adjustments for working capital, and a total consideration of up to $20m (£15.4m) dependent upon future financial performance. NuVision is recognised internationally as a leading technology and engineering solutions business specialising in supplying products and services at nuclear and power plant facilities, government waste remediation facilities and in waste clean-up programmes.

The acquisition provides a strong foothold into USA nuclear markets and will enable significant revenue synergies with the Group's existing engineering businesses, including the opportunity to market Wälischmiller's products in the USA. NuVision is already a key supplier under a major nuclear contract being delivered by the UK Manufacturing business.

Remote Handling

During the year the remote handling business performed ahead of the Board’s expectations with high levels of activity, particularly in relation to the manufacturing of products for the Chinese market. Furthermore, the order book is at its highest level for several years.

In January 2017 we were notified that the Group had won the tender for the supply of a number of manipulators, including three A1000s, 36 A100s and four A200s, into China. Manufacturing commenced during the second half of the year and continues in the current financial year. This is particularly encouraging given the significant increase in the planning and construction of new nuclear power plants and forms part of the Chinese Government’s strategic plan to remove its current reliance on coal generated power. As part of that plan, power companies are mandated to include remote handling capability within the design of a new nuclear power station in order for it to be able to handle waste and potential future decommissioning requirements.

During the year it was confirmed by Statoil that funding would continue to be supplied for the Demo 2000 project which involves the development of a lightweight Telbot® especially for use on oil and gas platforms and which is designed to reduce risk and downtime during tank inspections.

On 24 October 2016 we acquired STABER GmbH, one of the primary suppliers to Wälischmiller, our German remote handling business, including all of its associated technology for a total cash consideration of €7.9m (£6.98m). STABER and Wälischmiller have been working together closely for over 50 years and its acquisition will help drive efficiencies and profitability within the division.

The first stage of integrating STABER into Wälischmiller has been successfully completed, with key personnel being retained and working together effectively, and the extension of the premises in Markdorf, Germany is underway. This will provide additional flexibility and capacity, and consolidates both operations into one facility which will complete the integration process and be of significant benefit.

Following the acquisition of NuVision in August 2017, which has its own range of heavy-duty manipulators, the Group has one of the most technologically advanced ranges of remote handling equipment in the world.

Management

To maximise opportunities and synergies following the strategic progress made during the year, we have strengthened the management in the Engineering division through the appointment of a Divisional Managing Director to oversee Engineering operations across the Group.

Engineering Outlook

We continue to invest in the ongoing development of our products and services within the Engineering division to ensure that they remain at the forefront of innovation and technology. When combined with our existing decommissioning portfolio and strong pipeline of current and potential contracts, the Group is well positioned to benefit from future opportunities and developments, particularly in the nuclear sector where our reputation as a premium supplier of high integrity equipment is already well established.

 

Tim Davies
Chief Executive Officer
13 November 2017


Department for Environment, Food and Rural Affairs, 2017

 



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