Half-year Report

RNS Number : 6935U

Carr's Group PLC

11 April 2016

 

Carr's Group plc
	11 April 2016

CARR'S GROUP plc ("Carr's" or the "Group")
INTERIM RESULTS

"Diversity drives a resilient half year performance despite challenging market conditions"

Carr's (CARR.L), the Agriculture, Food and Engineering Group, announces results for the six months ended 27 February 2016.

Financial highlights

·     Revenue down 9.4% to £189.1m (H1 2015: £208.6m)

·     Operating profit up 0.5% to £9.6m (H1 2015: £9.6m)

·     Profit before tax down 0.9% to £10.5m (H1 2015: £10.6m)

·     Basic EPS up 4.7% to 8.9p (H1 2015: 8.5p)

·     Adjusted EPS¹ up 3.4% to 9.0p (H1 2015: 8.7p)

·     First interim dividend up 2.7% to 0.95p (H1 2015: 0.925p)

·     Net debt of £27.0m (£24.4m as at 29 August 2015)

Commercial highlights

·     On track first half performance demonstrating the strength of the Group's operational and  geographic diversity

·     Outstanding performance by the USA feed block business

·     Strengthened retail network and product offering drives retail sales growth in UK Country  Stores

·     UK agricultural market conditions continue to deteriorate

·     Strategy of focusing on the UK nuclear sector proving successful with new contracts awarded  from Sellafield - as expected performance will be second half weighted

·     Growth maintained in the Food division

Tim Davies, Chief Executive Officer, commented:

"The Group is operating in challenging markets, however our international presence and diversity has provided a robust H1 performance.  Trading in the second half is as anticipated and we remain on track to meet the full year expectations of the Board.

The UK agricultural market has suffered from the depressed farm gate milk and livestock prices and we expect this to continue through 2016 and 2017, which will directly adversely impact our UK farm customers."

¹ Adjusted EPS is after adding back amortisation of intangibles and non-recurring items, e.g. acquisition related costs

Enquiries:

Carr's Group plc Tim Davies (Chief Executive Officer) Neil Austin (Group Finance Director)	01228 554 600
Powerscourt Nick Dibden Sophie Moate	020 7250 1446 [e-mail]

Notes to Editors

Carr's Group (CARR.L) is an international leader in the provision of essential industrial services focused on the Agriculture, Food and Engineering sectors. The Group offers a range of services including the manufacturing and supply of flour, robotic and remote handling equipment, farm machinery, feed blocks for livestock, and a UK network of rural stores, with a facility footprint spanning the UK, Europe and North America, supplying customers in 35 countries around the world.

 

Diversity Drives Resilient Performance 

Introduction

Carr's has delivered results in line with expectations despite operating in tough market conditions across all three divisions. This result demonstrates the resilience of the Group driven by its operational and geographic diversity. 

During December, the floods in the North of England affected a number of our sites and had a significant operational impact on the Lancaster feed mill and a major customer of our Cumbrian flour mill. Carr's has suffered no adverse financial impact as a result of the floods due to appropriate and comprehensive insurance cover, and because of the outstanding efforts of our employees the Group's affected sites returned to operation faster than expected.

The depressed farm gate milk price, challenging broader agricultural market and the mild weather conditions in the UK have resulted in the tough market conditions of H1 continuing into H2. The impact of this has been mitigated by the strong performance of our agriculture businesses in the USA. The Board remains confident that the Group will meet its expectations for the full year, however significant challenges are anticipated in the next financial year.

Business Review

During the 26 weeks ended 27 February 2016 the Group delivered a resilient performance and a satisfactory set of results. Group revenues were £189.1m, down 9.4% from the prior year (2015: £208.6m) primarily due to commodity price movements.  Profit before tax decreased by 0.9% to £10.5m (2015: £10.6m).

Group operating margins increased to 5.1% (2015: 4.6%), with Group operating profit of £9.6m (2015: £9.6m). The Group's share of profit after tax from associate and joint venture companies was £1.4m (2015: £1.6m).

Basic earnings per share increased by 4.7% from 8.5p to 8.9p as a result of reductions to the UK rate of tax used to calculate deferred tax.

Agriculture

The Agriculture division has reported profit in line with expectations for the half year. This is a resilient performance, which demonstrates the value of our geographic and business diversity, with a strong USA performance offsetting lower profit delivery in the UK and Europe.

International

An outstanding performance from branded feed blocks, Smartlic® and Feed in a Drum® in the USA, resulted in sales volume growth of 11.7% (excluding joint ventures) year on year. This has been driven by favourable weather conditions, the ongoing increase in the size of the beef herds and continuing investment in operations. The new plant at Silver Springs, Nevada, is now fully commissioned and operational. It is assisting with meeting the increased demand on volume at the plant in Belle Fourche, South Dakota, whilst sales continue to build organically. The full benefit will be realised in the next financial year.

Sales of our feed block, Crystalyx®, into mainland Europe have fallen due to the continuing low farm gate milk price, with sales volumes down 5.4% year on year, and this is set to continue through H2.

Following the launch of the new innovative product, Piglyx®, which reduces stress levels in pigs, international export opportunities are being pursued, particularly into the Asian market.  

 UK

Against a challenging backdrop of continuing mild winter weather and low farm gate milk and livestock prices, sales volumes of feed blocks are down 2.8% year on year. Manufactured animal feed has seen a very slight decline of 0.3% on last year, outperforming the sector which has seen a national decline of circa 4.3% on average. This outperformance has been driven by our ability to support farmers with technical advice, at a time when key strategic nutrition decisions have to be taken. Animal feed margins continue to be under pressure, due to the on-going competitive landscape.

Declining farm incomes has resulted in considerable weakness in the machinery market, with sales down 11.7% year on year. This is expected to continue through the rest of this year and into the next financial year.

Retail has performed well with the Country Store network across Northern England and Southern Scotland seeing an increase in like for like sales of 2% year on year. The business of Reid & Robertson based in Balloch, Ayr and Oban, acquired in June 2015, has been fully integrated and is making a positive contribution. During the period Green (Agriculture) Co, an agriculture merchant business based at Morpeth, was acquired, which strengthens the retail network and offering in Northumberland.

Despite the mild autumn and winter, the fuel distribution business has performed well, with sales volumes up 6.2% year on year due to the increase in the size of the fleet operating out of two depots, Langwathby, Cumbria, and Hexham, Northumberland.

The challenging UK farming environment is expected to have a continued impact on the Agriculture division during H2 and into the next financial year as farm incomes continue to be under pressure and farmers look to reduce input costs and delay replacing machinery. However, the diversification of the Agriculture division's product offering and geographic spread is expected to partially mitigate the impact, with the strength of the USA operations and the anticipated ongoing expansion of the beef herds through 2016 and into 2017 expected to continue to benefit the division. 

Food

The floods in Cumbria directly affected one of our major customers, which had a consequential impact on our sales volumes in the period, however underlying sales volumes have increased 0.4%. We do not anticipate any notable financial impact due to our business interruption insurance cover.

The underlying sales growth during H1 is in spite of the on-going changes in the consumer market, notably the decline in consumption of the traditional sliced loaf and the concurrent increase in bake-off products. The division's performance has also been assisted by the efficient and technologically advanced mill at Kirkcaldy and excellent long term relationships with customers.

The 2015 UK wheat harvest was in excess of 16 million tonnes, although the quality was variable. The wheat price volatility in the market has continued, with significant price falls experienced in early 2016. The strategic port-side mill locations and the strength of our customer relationships mean that the division is well placed to respond to the changing market conditions.  

 ¹ After adjusting for volumes attributable to the affected customer, which are covered by insurance

Engineering

As previously reported, the Engineering division had a slow start to the year, partly due to the phasing of contracts and as the refocusing of the UK manufacturing business on nuclear started to gain traction. As a result H1 operating profit is down 58.2% year on year, but the full year expectations remain unchanged. Overall, revenues generated by the UK manufacturing businesses from the nuclear sector represented 55.4% of the total in the period against 20.5% in the corresponding period last year.

The UK manufacturing businesses have been awarded several new contracts from Sellafield, with the new design business assisting in driving these opportunities. While H1 has been slower than forecast, work has now commenced on some of the newly won contracts and this is set to accelerate through H2. The challenge for the rest of the year is to minimise any contract delays, ensuring that the anticipated level of completion is achieved by the year end.  The manufacturing businesses are benefitting from a strong contract pipeline, with orders through 2017.

The remote handling businesses have performed well and in line with expectations, and this is set to continue in H2. Completion of the contract for two highly specialised A1000 robotic arms for the nuclear facility at Dounreay in Scotland was completed in the period. The final step of the three year long R&D project, Demo 2000, was successfully completed in December 2015. This project developed a robotic system for vessel inspection and cleaning, the first in the world to be certified for use in the most highly explosive environments. It has successfully undergone a live test in Statoil´s own test facility in Norway under explosive conditions. The customer will now undertake a live test in-situ at one of their operational facilities.

A product development programme has commenced, to ensure our remote handling technology remains at the forefront of the industry.

Finance

Net debt has risen by 10.7% from £24.4m at 29 August 2015 to £27.0m, driven predominantly by working capital movements, both seasonal within Agriculture and also within the Engineering division.

The Group's defined benefit pension scheme remains in surplus and this increased from £1.8m at 29 August 2015 to £3.9m. On 31 December 2015, the scheme was closed to future accrual. Deficit reduction contributions, which were ongoing for a number of years at £2.3m per annum, have now ceased as the scheme was fully funded at the last full actuarial valuation. 

Shareholders' Equity

Shareholders' equity at 27 February 2016 increased by 9.8% to £95.6m (29 August 2015: £87.1m), primarily due to the profit retained by the Group in the period.

Dividend

A first interim dividend of 0.95 pence per ordinary share (2015: 0.925 pence per ordinary share), an increase of 2.7%, will be paid on 13 May 2016 to shareholders on the register on 22 April 2016. The ex-dividend date will be 21 April 2016.

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 15 to 17 of the Annual Report and Accounts 2015.

The principal risks and uncertainties are as follows:

·     Health and safety

·     People

·     Business continuity

·     Commodity costs

·     Product innovation

·     Strategic partners

·     Treasury

·     Non-compliance with legislation and regulation

·     Acquisitions

·     Customer demand

·     Reliance on key customers

·     Political instability

·     Reliance on key ingredients

·     Defined benefit pension scheme

Board Changes

On 1 October 2015 Ian Wood was appointed to the Board as a Non-Executive Director. He was previously the Commercial Director, International Business Development in Centrica (formerly British Gas) and has held a number of positions within Centrica covering engineering, customer services, industrial and commercial marketing, and energy trading within Europe and North America. 

Outlook

The Group is operating in difficult and challenging markets, which show no signs of abating in the short term.  However, the Group's geographic and operational diversity offers resilience, which combined with the continued investment in our assets ensures that the Group is well placed to respond to these challenges. Carr's remains on track to meet the full year expectations of the Board. The Board recognises that the difficult agriculture market will continue through 2017, which it anticipates will impact the Group's performance in the next financial year.

The Group is focused on generating organic growth and is committed to driving innovation through research and development to ensure it remains at the forefront of all the markets in which it operates. In conjunction with this, Carr's continues to review acquisition opportunities which will support future growth.

 

UNAUDITED CONSOLIDATED INCOME STATEMENT

For the 26 weeks ended 27 February 2016

			(Restated)	(Restated)
		26 weeks ended 27 February 2016	26 weeks ended 28 February 2015	52 weeks ended  29 August 2015
	Notes	£'000	£'000	£'000
Continuing operations
Revenue	6	189,073	208,638	411,565
Cost of sales		(161,228)	(179,535)	(356,708)
Gross profit		27,845	29,103	54,857
Net operating expenses		(18,206)	(19,515)	(38,623)
Group operating profit	6	9,639	9,588	16,234
Finance income		119	154	338
Finance costs		(662)	(717)	(1,412)
Share of post-tax profit in associate and joint ventures		1,423	1,586	2,307
Profit before taxation	6	10,519	10,611	17,467
Taxation		(1,778)	(2,208)	(3,774)
Profit for the period		8,741	8,403	13,693
Profit attributable to:
Equity shareholders		7,990	7,626	11,989
Non-controlling interests		751	777	1,704
		8,741	8,403	13,693
Earnings per share (pence)
Basic	7	8.9	8.5	13.4
Diluted	7	8.6	8.2	12.9
Adjusted	7	9.0	8.7	13.6
Diluted adjusted	7	8.6	8.3	13.2

 

 UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the 26 weeks ended 27 February 2016

		26 weeks ended  27 February 2016	26 weeks ended  28 February 2015	52 weeks ended  29 August 2015
	Notes	£'000	£'000	£'000
Profit for the period		8,741	8,403	13,693
Other comprehensive income/(expense)
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation gains/(losses) arising on   translation of overseas subsidiaries		2,019	(157)	20
Items that will not be reclassified subsequently to profit or loss:
Actuarial gains/(losses) on retirement benefit asset:
- Group	12	879	(1,959)	(2,848)
- Share of associate		-	-	70
Taxation (charge)/credit on actuarial movement on   retirement benefit asset:
- Group		(158)	392	570
- Share of associate		-	-	(14)
Other comprehensive income/(expense) for the period,   net of tax		2,740	(1,724)	(2,202)
Total comprehensive income for the period		11,481	6,679	11,491
Total comprehensive income attributable to:
Equity shareholders		10,730	5,902	9,787
Non-controlling interests		751	777	1,704
		11,481	6,679	11,491

 

UNAUDITED CONSOLIDATED BALANCE SHEET

As at 27 February 2016

		As at 27 February 2016		As at 28 February   2015	As at  29 August  2015
	Notes		£'000	£'000	£'000
Non-current assets
Goodwill	9		10,931	10,040	10,849
Other intangible assets	9		413	454	448
Property, plant and equipment	9		60,391	56,629	58,385
Investment property	9		626	646	636
Investment in associate			9,196	7,788	8,439
Interest in joint ventures			6,082	5,493	5,012
Other investments			72	88	79
Financial assets
- Non-current receivables			150	501	50
Retirement benefit asset	12		3,927	1,198	1,767
Deferred tax assets			29	1,085	861
			91,817	83,922	86,526
Current assets
Inventories			39,113	36,872	35,031
Trade and other receivables			70,736	68,482	64,454
Current tax assets			401	330	839
Financial assets
- Derivative financial instruments			2	108	50
- Cash and cash equivalents	10		8,719	17,943	16,488
			118,971	123,735	116,862
Total assets			210,788	207,657	203,388
Current liabilities
Financial liabilities
- Borrowings	10		(10,286)	(16,079)	(15,157)
- Derivative financial instruments			(132)	(73)	(72)
Trade and other payables			(57,302)	(56,958)	(54,496)
Current tax liabilities			(980)	(1,132)	(472)
			(68,700)	(74,242)	(70,197)
Non-current liabilities
Financial liabilities
- Borrowings	10		(25,447)	(27,876)	(25,744)
Deferred tax liabilities			(4,173)	(4,123)	(4,184)
Other non-current liabilities			(4,226)	(6,848)	(4,300)
			(33,846)	(38,847)	(34,228)
Total liabilities			(102,546)	(113,089)	(104,425)
Net assets			108,242	94,568	98,963
Shareholders' equity
Share capital	13		2,246	2,237	2,244
Share premium	13		8,657	8,498	8,615
Equity compensation reserve			1,351	904	1,138
Foreign exchange reserve			1,504	(692)	(515)
Other reserve			856	869	862
Retained earnings			80,946	71,789	74,706
Total shareholders' equity			95,560	83,605	87,050
Non-controlling interests			12,682	10,963	11,913
Total equity			108,242	94,568	98,963

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the 26 weeks ended 27 February 2016

	Share      Capital	Share Premium	Equity Compensation Reserve	Foreign   Exchange  Reserve	Other Reserve	Retained Earnings	Total Shareholders' Equity	Non-Controlling Interests	Total Equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30 August 2015	2,244	8,615	1,138	(515)	862	74,706	87,050	11,913	98,963
Profit for the period	-	-	-	-	-	7,990	7,990	751	8,741
Other           comprehensive income	-	-	-	2,019	-	721	2,740	-	2,740
Total comprehensive income	-	-	-	2,019	-	8,711	10,730	751	11,481
Dividends paid	-	-	-	-	-	(2,492)	(2,492)	-	(2,492)
Equity-settled share based payment transactions, net of tax	-	-	213	-	-	15	228	18	246
Allotment of shares	2	42	-	-	-	-	44	-	44
Transfer	-	-	-	-	(6)	6	-	-	-
At 27 February 2016	2,246	8,657	1,351	1,504	856	80,946	95,560	12,682	108,242
At 31 August 2014	2,235	8,453	640	(535)	875	67,996	79,664	10,163	89,827
Profit for the period	-	-	-	-	-	7,626	7,626	777	8,403
Other comprehensive expense	-	-	-	(157)	-	(1,567)	(1,724)	-	(1,724)
Total comprehensive (expense)/     Income	-	-	-	(157)	-	6,059	5,902	777	6,679
Dividends paid	-	-	-	-	-	(2,280)	(2,280)	-	(2,280)
Equity-settled share based payment transactions, net of tax	-	-	264	-	-	8	272	23	295
Allotment of shares	2	45	-	-	-	-	47	-	47
Transfer	-	-	-	-	(6)	6	-	-	-
At 28 February 2015	2,237	8,498	904	(692)	869	71,789	83,605	10,963	94,568
At 31 August 2014	2,235	8,453	640	(535)	875	67,996	79,664	10,163	89,827
Profit for the period	-	-	-	-	-	11,989	11,989	1,704	13,693
Other comprehensive income/(expense)	-	-	-	20	-	(2,222)	(2,202)	-	(2,202)
Total comprehensive income	-	-	-	20	-	9,767	9,787	1,704	11,491
Dividends paid	-	-	-	-	-	(3,110)	(3,110)	-	(3,110)
Equity-settled share based payment transactions, net of tax	-	-	498	-	-	40	538	46	584
Allotment of shares	9	162	-	-	-	-	171	-	171
Transfer	-	-	-	-	(13)	13	-	-	-
At 29 August 2015	2,244	8,615	1,138	(515)	862	74,706	87,050	11,913	98,963

 

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS

For the 26 weeks ended 27 February 2016

			26 weeks ended  27 February 2016	26 weeks  ended  28 February  2015	52 weeks ended 29 August 2015
	Notes		£'000	£'000	£'000
Cash flows from operating activities
Cash generated from operations	15		1,956	6,368	15,127
Interest received		77		96	194
Interest paid		(642)		(687)	(1,380)
Tax paid		(117)		(1,571)	(3,965)
Net cash generated from operating activities		1,274		4,206	9,976
Cash flows from investing activities
Acquisition of subsidiaries/businesses (net of cash    acquired)		(265)		(1,246)	(1,749)
Return of investment in joint venture		-		-	488
Loan repaid by joint ventures		2,055		76	129
Loan repaid by associate		-		-	500
Other loans		(70)		270	220
Purchase of intangible assets		(37)		(3)	(15)
Proceeds from sale of property, plant and equipment		178		313	462
Purchase of property, plant and equipment		(3,348)		(2,517)	(5,970)
Purchase of investments		-		(10)	-
Redemption of preference shares in joint venture		-		-	150
Net cash used in investing activities		(1,487)		(3,117)	(5,785)
Cash flows from financing activities
Proceeds from issue of ordinary share capital		44		48	171
Net proceeds from issue of new bank loans		143		8,104	9,061
Finance lease principal repayments		(1,160)		(1,171)	(2,395)
Repayment of loan from related party		-		-	(500)
Repayment of borrowings		(544)		(4,198)	(4,880)
Decrease in other borrowings		(4,438)		(1,171)	(3,638)
Dividends paid to shareholders		(2,492)		(2,280)	(3,110)
Receipt of grant income		-		300	500
Net cash used in financing activities		(8,447)		(368)	(4,791)
Effects of exchange rate changes		720		(107)	(150)
Net (decrease)/increase in cash and cash equivalents		(7,940)		614	(750)
Cash and cash equivalents at beginning of the period		16,275		17,025	17,025
Cash and cash equivalents at end of the period		8,335		17,639	16,275
Cash and cash equivalents consist of:
Cash and cash equivalents per the balance sheet		8,719		17,943	16,488
Bank overdrafts included in borrowings		(384)		(304)	(213)
		8,335		17,639	16,275

Statement of Directors' responsibilities

The Directors confirm that these condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

·     an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·     material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

The Directors are listed in the Annual Report and Accounts 2015, including Ian Wood who was appointed to the Board on 1 October 2015.  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

11 April 2016                                                      11 April 2016

 

Unaudited notes to condensed interim financial information

1.    General information

The Group operates across three divisions of Agriculture, Food, 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 11 April 2016.

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 29 August 2015 were approved by the Board of Directors on 11 November 2015 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 27 February 2016 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 29 August 2015, 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 with the exception that the net interest on the net defined benefit retirement asset has been reclassified from operating profit to interest income in the consolidated income statement.  This has had no impact on the profit before tax reported for each period presented.

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.

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 29 August 2015, 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 29 August 2015.  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, Food and Engineering.  Performance is assessed using operating profit, which is measured in a manner consistent with the financial statements.  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 27 February 2016 and the comparative periods.

	Agriculture	Food	Engineering	Group
	£'000	£'000	£'000	£'000
26 weeks ended 27 February 2016
Total segment revenue	139,329	35,717	14,080	189,126
Inter segment revenue	(17)	-	(36)	(53)
Revenue from external customers	139,312	35,717	14,044	189,073
EBITDA¹	8,621	2,588	1,098	12,307
Depreciation of property, plant and equipment	(1,218)	(930)	(500)	(2,648)
Depreciation of investment property	(3)	(7)	-	(10)
Profit on the disposal of property, plant and equipment	80	-	-	80
Amortisation of intangible assets	(50)	(7)	(33)	(90)
Operating profit	7,430	1,644	565	9,639
Finance income				119
Finance costs				(662)
				9,096
Share of post-tax profit of associate				757
Share of post-tax profit of joint ventures				666
Profit before taxation				10,519
Segment gross assets	107,760	47,277	42,240	197,277
Other and consolidation adjustments				13,511
Total gross assets				210,788

¹ Earnings before interest, tax, depreciation and amortisation (and before profit/(loss) on the disposal of property, plant and equipment)

6.    Operating segment information (continued)

	Agriculture	Food	Engineering	Group
	£'000	£'000	£'000	£'000
26 weeks ended 28 February 2015 (restated)²
Total segment revenue	149,793	41,698	17,216	208,707
Inter segment revenue	(43)	-	(26)	(69)
Revenue from external customers	149,750	41,698	17,190	208,638
EBITDA¹	7,892	2,476	1,828	12,196
Depreciation of property, plant and equipment	(1,134)	(952)	(440)	(2,526)
Depreciation of investment property	(3)	(7)	-	(10)
Profit on the disposal of property, plant and equipment	19	-	16	35
Amortisation of intangible assets	(47)	(8)	(52)	(107)
Operating profit	6,727	1,509	1,352	9,588
Finance income				154
Finance costs				(717)
				9,025
Share of post-tax profit of associate				904
Share of post-tax profit of joint ventures				682
Profit before taxation				10,611
Segment gross assets	114,462	48,703	33,829	196,994
Other and consolidation adjustments				10,663
Total gross assets				207,657

² Net interest on the net defined benefit retirement asset previously included within the IAS19 income statement (credit)/charge in operating profit has been reclassified to interest income.

	Agriculture	Food	Engineering	Group
	£'000	£'000	£'000	£'000
52 weeks ended 29 August 2015 (restated)²
Total segment revenue	297,858	80,280	33,588	411,726
Inter segment revenue	(115)	-	(46)	(161)
Revenue from external customers	297,743	80,280	33,542	411,565
EBITDA¹	12,907	4,713	3,875	21,495
Depreciation of property, plant and equipment	(2,384)	(1,860)	(815)	(5,059)
Depreciation of investment property	(6)	(14)	-	(20)
Profit/(loss) on the disposal of property, plant and   equipment	38	12	(24)	26
Amortisation of intangible assets	(100)	(15)	(93)	(208)
Operating profit	10,455	2,836	2,943	16,234
Finance income				338
Finance costs				(1,412)
				15,160
Share of post-tax profit of associate				1,500
Share of post-tax profit of joint ventures				807
Profit before taxation				17,467
Segment gross assets	112,038	48,412	33,991	194,441
Other and consolidation adjustments				8,947
Total gross assets				203,388

7.    Earnings per share

Non-recurring items and amortisation that are charged or credited to profit do not relate to the profitability of the Group on an ongoing basis.  Therefore an adjusted earnings per share is presented as follows:

	26 weeks ended  27 February 2016	26 weeks ended  28 February 2015	52 weeks ended 29 August 2015
	£'000	£'000	£'000
Earnings	7,990	7,626	11,989
Amortisation and non-recurring items:
Amortisation of intangible assets	90	107	208
Tax relief on amortisation	(21)	(26)	(52)
Acquisition related costs¹	-	35	58
Earnings - adjusted	8,059	7,742	12,203

¹ Disallowable for tax purposes

	Number	Number	Number
Weighted average number of ordinary shares in issue	89,819,777	89,433,051	89,574,461
Potentially dilutive share options	3,468,339	3,306,934	3,098,077
	93,288,116	92,739,985	92,672,538
Earnings per share (pence)
Basic	8.9p	8.5p	13.4p
Diluted	8.6p	8.2p	12.9p
Adjusted	9.0p	8.7p	13.6p
Diluted adjusted	8.6p	8.3p	13.2p

8.    Dividends

An interim dividend of £830,281 that relates to the period to 29 August 2015 was paid on 9 October 2015, and a final dividend of £1,662,111 was paid on 15 January 2016.

In addition, an interim dividend of 0.95p per share (2015: 0.925p per share) has been approved by the Directors.  It is payable to shareholders on the register at 22 April 2016.  This interim dividend, amounting to £854,968 (2015: £829,726), has not been recognised as a liability in this interim financial information.  It will be recognised in shareholders' equity in the 53 weeks to 3 September 2016. 

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

	Goodwill	Other Intangible assets	Property, plant and equipment	Investment property
	£'000	£'000	£'000	£'000
26 weeks ended 27 February 2016
Opening net book amount at 30 August 2015	10,849	448	58,385	636
Exchange differences	2	18	862	-
Business acquired	80	-	23	-
Additions	-	37	3,867	-
Disposals	-	-	(98)	-
Depreciation and amortisation	-	(90)	(2,648)	(10)
Closing net book amount at 27 February 2016	10,931	413	60,391	626
26 weeks ended 28 February 2015
Opening net book amount at 31 August 2014	9,798	499	56,626	656
Exchange differences	2	(22)	(322)	-
Subsidiaries acquired	240	81	139	-
Additions	-	3	2,941	-
Disposals	-	-	(229)	-
Depreciation and amortisation	-	(107)	(2,526)	(10)
Closing net book amount as at 28 February 2015	10,040	454	56,629	646

Capital commitments contracted, but not provided for, by the Group at the period end amounts to £758,000 (2015: £1,412,000).

10.  Borrowings and loans

	As at 27 February  2016	As at 28 February 2015	As at 29 August 2015
	£'000	£'000	£'000
Current	10,286	16,079	15,157
Non-current	25,447	27,876	25,744
Total borrowings and loans	35,733	43,955	40,901
Cash and cash equivalents	(8,719)	(17,943)	(16,488)
Net debt	27,014	26,012	24,413
Undrawn facilities	26,805	19,386	19,007
Movements in borrowings are analysed as follows:
26 weeks ended 27 February 2016			£'000
Opening amount as at 30 August 2015			40,901
Exchange differences			67
New bank loans and finance leases			718
Finance lease principal repayments			(1,160)
Repayments of borrowings			(544)
Decrease in other borrowings			(4,438)
Release of deferred borrowing costs			18
Net increase to bank overdraft			171
Closing amount as at 27 February 2016			35,733

10.  Borrowings and loans (continued)

26 weeks ended 28 February 2015			£'000
Opening amount as at 31 August 2014			41,877
New bank loans and finance leases			8,541
Finance lease principal repayments			(1,171)
Repayments of borrowings			(4,198)
Decrease in other borrowings			(1,171)
Release of deferred borrowing costs			16
Net increase to bank overdraft			61
Closing amount as at 28 February 2015			43,955

11.  Financial instruments

IFRS13 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. 

The Group holds shares in several private limited companies.  These have been classified as unquoted investments for which fair value cannot be reliably measured and are held at cost less accumulated impairment.  Had fair value been applied this financial asset would have been Level 3.

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.

With the exception of those detailed above, the Group's financial instruments are measured at amortised cost.

12.  Retirement benefit asset

The amounts recognised within the Income Statement were as follows:

	26 weeks ended  27 February 2016	26 weeks ended  28 February 2015	52 weeks ended 29 August 2015
	£'000	£'000	£'000
Service cost - including current service costs, past service costs and    settlements	(427)	149	31
Service cost - administrative cost	80	153	230
Net interest on the net defined benefit asset	(46)	(54)	(141)
	(393)	248	120

As a result of the closure to future accrual on 31 December 2015 a negative past service cost, net of associated costs, of approximately £350,000 has been recognised in the income statement. 

12.  Retirement benefit asset (continued)

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 27 February 2016	As at     28 February                 2015	As at        29 August                 2015
	£'000	£'000	£'000
Present value of funded defined benefit obligations	(59,040)	(66,136)	(60,352)
Fair value of scheme assets	62,967	67,334	62,119
Surplus in the balance sheet	3,927	1,198	1,767

Actuarial gains of £879,000 (2015: losses of £1,959,000) have been reported in the Statement of Comprehensive Income. The surplus has increased over the period since 29 August 2015.  The main reasons for this include the contributions paid by the employer to meet the funding deficit and the cessation to future accrual from 31 December 2015.

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.

13.  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 30 August 2015	89,760,090	2,244	8,615	10,859
Proceeds from shares issued:
- share option scheme	60,000	1	27	28
- share save scheme	26,584	1	15	16
At 27 February 2016	89,846,674	2,246	8,657	10,903
Opening balance at 31 August 2014	89,401,900	2,235	8,453	10,688
Proceeds from shares issued:
- share option scheme	90,000	2	41	43
- share save scheme	8,190	-	4	4
At 28 February 2015	89,500,090	2,237	8,498	10,735

Employee share schemes: options exercised during the period to 27 February 2016 resulted in 26,584 shares being issued (2015: 8,190 shares), with exercise proceeds of £15,765 (2015: £4,685) under the share save scheme and 60,000 shares being issued (2015: 90,000 shares), with exercise proceeds of £28,560 (2015: £42,840) under the approved share option scheme.  The related weighted average price of the shares exercised was £0.593 (2015: £0.572) per share and £0.476 (2015: £0.476) respectively.

Since the period end there was a further allotment of 150,000 shares with a nominal value of £3,750 due to the exercise of share options.

14.  Acquisition

On 4 September 2015 Carrs Billington Agriculture (Sales) Limited acquired the business and certain assets of Green (Agriculture) Co, an agricultural merchant, for net cash consideration of £0.3m.

The primary reason for the business combination was the expansion of the existing Agriculture business.

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.

Following a review of the acquisition for separately identifiable intangible assets where fair value can be reliably measured the Directors do not consider there to be any material intangible assets requiring recognition.

Revenue of £428,000 and profit before taxation of £4,000 has been generated since the date of acquisition.

There were no external acquisition related costs to be recognised in the consolidated income statement.

The assets recognised in the acquisition accounting are set out below:

	Fair value
	£'000
Property, plant and equipment	23
Inventories	112
Receivables	50
Assets acquired	185
Goodwill	80
	265
Satisfied by:
Cash consideration	265

Had the acquisition of Green (Agriculture) Co 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.

15.  Cash generated from operations

		(Restated)¹	(Restated)¹
	26 weeks ended  27 February 2016	26 weeks ended  28 February 2015	52 weeks ended 29 August 2015
	£'000	£'000	£'000
Profit for the period from operations	8,741	8,403	13,693
Adjustments for:
Tax	1,778	2,208	3,774
Tax credit in respect of R&D	(96)	(489)	(623)
Depreciation of property, plant and equipment	2,648	2,526	5,059
Depreciation of investment property	10	10	20
Intangible asset amortisation	90	107	208
Profit on disposal of property, plant and equipment	(80)	(35)	(26)
Loss on disposal of investment	10	-	-
Amortisation of grants	(74)	(130)	(120)
Net fair value loss on share based payments	247	295	584
Net foreign exchange differences	(180)	(54)	53
Net fair value losses/(gains) on derivative financial instruments in operating profit	108	(50)	7
Finance costs:
Interest income	(119)	(154)	(338)
Interest expense and borrowing costs	680	733	1,445
Share of profit from associate and joint ventures	(1,423)	(1,586)	(2,307)
Pension contributions - deficit reduction	(780)	(1,170)	(2,340)
- ongoing	(108)	(179)	(339)
IAS19 income statement (credit)/charge (excluding interest)	(347)	302	261
Changes in working capital (excluding the effects of    acquisitions):
Increase in inventories	(3,970)	(3,418)	(967)
(Increase)/decrease in receivables	(8,015)	(4,168)	320
Increase/(decrease) in payables	2,836	3,217	(3,237)
Cash generated from operations	1,956	6,368	15,127

¹ Net interest on the net defined benefit retirement asset previously included within the IAS19 income statement (credit)/charge has been reclassified to interest income.

16.  Related party transactions

The Group's significant related parties are its associate and joint ventures, as disclosed in the Annual Report and Accounts 2015.

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 (to)/from	Amounts owed from	Amounts owed to
	£'000	£'000	£'000	£'000	£'000	£'000
26 weeks to 27 February 2016
Associate	327	(44,977)	9	(57)	616	(21,050)
Joint ventures	186	(661)	-	84	1,952	(48)
26 weeks to 28 February 2015
Associate	550	(48,279)	9	(14)	1,221	(17,369)
Joint ventures	72	(592)	-	63	3,668	(39)

 

END

 

 

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