Latest Results

Financial Review 

The announcement in April of our decision to explore options for the maximisation of value of our Engineering Division was predicated on the differing circumstances of our two Divisions as we went into FY24. Our Engineering Division was performing strongly in structurally growing markets with an organisational design appropriate to optimise the opportunities available, whereas our Agriculture Division was unintegrated and ill equipped to optimise performance in globally challenging markets.

FY24 has therefore been a transformational year in which we have established an integrated agriculture management team and strategy, and have subsequently taken the first steps to implement that strategy at strategic and operational level, whilst continuing to focus on the long-term optimisation of value within the existing structures of the Engineering Division.

In light of the above, FY24 also marked a transitional year for our significant central costs as we embarked on a process to reduce costs following the expiration of the transitionary services associated with the FY23 disposal of the Agricultural Supplies Division whilst managing the transition to a future focused on the forward looking Agriculture Strategy. Realisation of value of non-core investment properties and de-risking from our defined benefit pension scheme have also been progressed in order to simplify the Group, with focus on future value creation.

The consequences of this have been:

1. Improved performance of our strategically core agriculture businesses, supported by the benefit of integration of key roles, but offset by underperformance in two non- core businesses – now addressed;
2. Improved performance of the Engineering Division – partially offset by underperformance in one business – now addressed; and
3. A short-term increase in central costs as a global agriculture management team has been established (realising savings at operational level) in addition to the multi divisional central cost base that will largely be eradicated post completion of any Engineering sale.

The changes reflected above have resulted in improved operational performance of the Group and in Adjusted  Operating Profit despite continuing challenges in the agriculture sector, however they have required significant exceptional costs in restructuring the Group and preparing for future profitable growth. The Board considers it appropriate to have incurred these cash costs and to recognise non-cash exceptional costs, detailed below, in order to optimise current and future shareholder value.

Presentation of Results for the Year

The statutory presentation of financial results under IFRS is intended to give the reader the information required to assess future performance. These reflect the continuing operations of the Group and businesses and assets within the Group that are not expected to remain part of the Group are disclosed as being “discontinued”. The Engineering Division and certain other assets are reported as being “discontinued activities” in FY24 and will again in FY25 for the period prior to any transaction.

Given the transition the Group is going through it is also relevant to report the performance of the Group on an equivalent basis to FY23 in addition to the statutory disclosure noted above.

On a basis comparable with that announced within our FY23 Annual Report and Accounts, Adjusted Operating Profit of £8.9m (FY23: £8.0m) reflects progress made in managing the activities of the Group throughout FY24 irrespective of their designation as continuing or discontinued.

FY24 Performance on basis comparable to the FY23 Report and Accounts

ContinuingOperations

The continuing operations of the Group represent its direct interests in the feed supplements markets for pasture based livestock in the UK and US and its joint ventures in the US and Germany.

In what has been a transitional year for the Agriculture business, FY24 has seen significant activity impacting each of strategy, structure and operations:

Strategy:

• to develop a strategy for value creation globally focused on nutritional supplements for pasture based livestock
• assess structure and operations in existing markets to optimise performance of core businesses throughout economic / market cycles
• decisively address under-performing and non-core businesses
• explore opportunities to enter new growing pasture-based livestock markets

Structure and Operations:

• establish a small global agriculture management team
• integrate UK operational management
• take first steps to integrate UK and Ireland operations
• close one unproductive US site within the core feed block business
• develop a turnaround plan for the production of boluses serving the UK business
• progress the closure of the loss-making New Zealand operation and establish as a distribution market
• prepare for closure and sale of the loss-making commodity feed business – Afgritech, closed post year end and reported as “discontinued”

Continuing operations

UK Agriculture

UK Agriculture comprises the Group’s Crystalyx® operations in Silloth, its Scotmin operations in Ayr and the Animax operations near Bury St Edmonds.

During the year the commercial operations of the three locations were integrated under a common management team. In markets that continue to be challenging focus was on optimising performance and future prospects through in-depth analysis of the business and the optimisation of margins and performance through market share, operating efficiency, and purchasing optimisation.

Our UK based feed blocks revenue increased by 2% representing a volume increase of 12% offset by reductions in pricing due to movements in raw material pricing. Our bolus producing Animax business saw an 8.5% reduction in revenue as a lucrative but non-core aquaculture contract came to an end. Our focus now is on simplifying the remaining business and achieving a profitable contribution. The benefits of commercial integration of these businesses were evident from a strong close to FY24 from our feed blocks businesses which was carried into the early months of FY25 and in progress in resolving the issues at Animax following several years of under-performance.

The overall contribution of UK Agriculture in the current year was influenced by costs associated with the formation of an integrated management team. The benefits of this integration across the UK and in the transformation of the Irish and New Zealand markets in FY25 will result in value creation. This resulted in a short term increase in costs as well as restructuring costs in the current year only.

US Agriculture

US Agriculture represents the Group’s New Generation Supplements (“NGS”) feed blocks business and the Afgritech dairy feed business.

Early in the year the decision was taken to close the NGS loss making facility in Silver Springs, Nevada. This closure contributed to an overall reduction in NGS revenue of 18% from a volume reduction of 15%. Revenue was also impacted by reduced molasses pricing. The impact of the closure of Silver Springs combined with improved performance elsewhere resulted in the NGS contribution for the year being up year on year despite continuing challenging drought-led market conditions, particularly in the southern USA.

In FY24 the Afgritech business continued to suffer from structural movements in the commodity markets for soya and canola. The decision was taken to close the business with effect from 31 October 2024 and the assets of the business were sold on 1 November.

Late in the year the ERP implementation across the remaining NGS sites was completed, bringing the UK and US feed blocks businesses onto a common system. The £0.8m exceptional costs incurred in respect of this project in FY24 will be the final significant costs for this multi-year project.

The closure of Silver Springs and the post year end closure and sale of Afgritech also resulted in exceptional closure costs totalling £1.9m.

Joint Ventures

The Group continues to target growth through its participation in joint ventures in selected geographies. In FY24 our contribution from joint ventures in Germany (1) and the US (2) was broadly flat at £1.4m. During the year the Group supported the installation of a second production line at the Gold Bar facility in the US, bringing opportunity for future growth.

Central

Central costs in the year have been influenced by a number of factors required in order to prepare the Group for the future implementation of a focused agriculture strategy. Several of these factors pull in differing directions from the perspective of the level of resource required : 1) the end of the transitional services agreement under which the Group provided services to the acquirer of the Agricultural Supplies Division following its sale in FY23, 2) the completion of the Agriculture ERP implementation project, 3) the exploration of value for the Engineering Division, 4) the simplification of non-core activities through the process to dispose of investment properties and to manage pension risk. For many of these activities FY24 and into FY25 have been transitional periods and the Group is committed to materially reducing its central costs. In FY24 on an adjusted basis central costs were broadly flat on FY23 at £3.0m however Adjusting Items of £4.5m comprised costs associated with pension de-risking (£3.2m) and restructuring costs (£1.4m).

Discontinued Operations

As we position the Group to implement its focussed Agriculture strategy a number of activities of the Group in FY24 meet the criteria for classification as “Held for Sale” or “Discontinued” under IFRS. As such the impact of these activities is excluded from the detail of the primary statements with the net impact reflected under “discontinued operations”. The full impact of these activities is presented above to give visibility of the profit and loss account on a basis comparable with that presented in the FY23 Annual Report and Accounts.

These discontinued operations are:

1. The Group’s Engineering Division. As announced in April 2024 the Group has been exploring means of optimising value for its Engineering Division, a process which is ongoing and progressing positively.
2. Within Agriculture, the Afgritech business in Watertown, New York. This business was engaged in the supply of commodity feeds to the dairy industry. In recent years it has been significantly impacted by movements in the canola commodity market. As a consequence the business lost £0.5m at adjusted operating profit level in FY24 and is non-core to the future agriculture strategy. The business was closed on 31 October 2024 with the assets of the business sold on 1 November 2024.
3. In the year the Group started the process to realise value for its non-core property portfolio comprising nine sites, one of which was sold in the year, and the Group’s former head office premises in Carlisle.

Discontinued Operations

Adjusting Items

In the year the Group recognised adjusting items totalling £14.6m, of which £7.1m were cash costs (now and in the future) and £7.4m reflected non-cash value adjustments. As indicated above the Board considers that this high level of charges was required to deliver the transformation of the Group and position it for growth through delivery of its focussed agriculture strategy.

Restructuring Costs

Restructuring costs in continuing operations of £2.1m were incurred primarily in restructuring the central organisation and Agriculture management structure as well as in the closure of the Silver Springs plant.

ERP Implementation

The ERP implementation within NGS in July 2024 brought to an end the multi-year project to implement a standardised ERP system across the UK and US feed blocks business.

Pension De-Risking

The Group has recognised past service costs of £2.9m in relation to a Barber Window equalisation adjustment identified by the Trustees of the Scheme during the year, which has been recognised as an adjusting item (see note 5 to the financial statements). This equalisation adjustment was discovered during the process undertaken to seek an insurer from whom to purchase an insured bulk annuity. This “buy-in” process remains ongoing.

Profit on Property Sale

In the year the sale of the first (of ten) non-core properties completed with a small gain. The process to achieve value for the remaining portfolio continues with one disposal in October 2024 bringing in cash of £1.3m and a further £2.6m expected in December 2024.

Asset Impairments

The Group reviews the carrying value of its assets annually and where appropriate adjusts the value down through impairment. In the current year the resultant impairments are:

• Continuing: £2.2m in respect of the Animax business as a result of continued challenges in its bolus business and the loss of its aquaculture contract. The underperformance of the business is being addressed as a matter of urgency, and £0.7m in respect of the closure of the Silver Springs plant.
• Discontinued: £3.2m in respect of assets in the Engineering Division and £0.8m in respect of assets in Afgritech LLC.

Adjusting items

As referred above, given the fundamental transformation of the Group that is in progress the level of adjusting items in FY24 is significant. The Board consider that the level of adjusting items is necessary and justified in order to effect the transformation and deliver a simpler and more resilient business. The adjusting items reflected in FY24 comparable reporting are:

Restatement of Prior Year Comparatives

In the Annual Report and Accounts for FY23 the full Group at that time was reflected in FY23 reporting. That Group has been unchanged throughout FY24 however as disclosed above material parts of the Group are disclosed as Discontinued Operations in this Report and prior year comparators are adjusted to relate only to these continuing activities in accordance with IFRS.   Like for Like results are presented to give a view consistent with FY23 reporting.

In addition, given the reduced size of the Group, two areas of accounting have been reviewed and revised in the year with the impact being a combined increase to revenue and cost of sales of £0.9m, FY23 impact of £0.9m (no margin or profit impact in either year) and an increase to assets and liabilities of £1.9m, (FY23: £2.3m) (no net assets impact in either year). After discussion with advisors the Directors felt that both adjustments were appropriate given the strict interpretation of current IFRS given the reduced size of the continuing Group moving forwards.  The two items have no impact on profitability or net assets.

Alternative Performance Measures

The Strategic Report and this Financial Review include references to both statutory and alternative performance measures (‘’APMs’’). The principal APMs are intended to give the reader visibility of the potentially recurring performance of the business and as such measure profitability excluding items regarded by the Directors as adjusting items (note 3). These APMs, generally referred to as “adjusted” statutory measures are used in the management of the business and also in assessing some performance objectives under the Group’s incentive plan. A glossary and reconciliation of the APMs is included in note 11.

Finance Costs

Net finance income from continuing activities of £0.3m and net finance costs from discontinued activities of £0.7m reflect the higher working capital nature of the Engineering businesses held as discontinued and the retention of cash centrally. The combined finance cost of £0.3m (FY23 on a like-for-like basis: £0.4m) reflects the impact of reduced interest rates and focus on working capital management.

Profit Before Tax

Adjusted profit before tax of £2.5m for continuing operations represented a reduction on a comparable basis from £2.9m in FY23. This reflects the impact of transitionary costs discussed above. The loss before tax of £6.5m (FY23: £0.8m) reflects the significant reorganisation and restructuring costs outlined above.

Taxation

The net tax credit of £0.4m reflects a tax credit on continuing operations of £2.0m and a tax charge from discontinued operations of £1.6m.

Earnings Per Share

The total loss attributable to the equity shareholders of the Company amounted to £5.7m, equating to a basic loss per share of 6.1 pence. The basic loss per share on continuing operations was 4.8 pence. The adjusted profit per share for continuing operations was 2.6 pence (FY23 restated: 2.5 pence).

Cash Flow and Net Cash / (Debt)

During the period the Group moved from a position of holding net cash of £4.2m to £4.5m (total Group) as at the period end. The period end net cash comprised £8.0m net cash for continuing activities and £3.5m net debt for discontinued activities. During the period the operating activities of continuing operations generated £4.2m of cash with additional inflows including dividends received from joint ventures of £0.9m and the final £4.0m deferred consideration from the sale of the Agricultural Supplies Division in FY23. Dividends of £6.0m were paid to shareholders during the period.

Pensions

The Group operates defined contribution and defined benefit pension schemes.

The defined benefit scheme is closed to new members and future accrual. During the period the Board, working with the defined benefit scheme trustees, have been exploring the viability of conducting a ‘buy-in’ of the pension scheme in order to de-risk the future position of both the Company and members. During this process a prior shortfall in accruals for past service costs came to light dating from equalisation of retirement ages in the 1990s. A one-off charge of £2.9m has been made in the year to address this shortfall.

This one-off charge has contributed to a reduction in the net pension asset recognised on the balance sheet from £5.3m to £1.8m. The other movements were increases in assessed obligations of £1.0m offset by an increase in fund assets of £0.4m. The net pension asset reflects assets of £48.2m and assessed liabilities of £46.4m.