Final Results
Carr's Milling Industries PLC
12 November 2001
CARR'S MILLING INDUSTRIES PLC
Preliminary announcement - year ended 1 September 2001
* Carr's, the Cumbria-based agriculture, food and engineering group,
announces a pre-tax profit of £2.06m (2000: £2.17m), which it considers 'very
respectable given the dire backdrop of foot & mouth disease (FMD).' On an
underlying basis, the result is even better at £2.32m (2000: £2.49m).
* Turnover (including share of joint venture's) increased by 21.6% to
£126.7m.
* EPS increased by 19% to 23.9p on an underlying basis and 18% to 20.9p
on a reported basis.
* In view of the likely impact on Carr's of FMD over the next six
months - worse than that in the 2001 financial year - total dividends per
share of 8.0p (2000: 9.0p) are proposed.
* Net assets per share increased to 233p (2000: 220p), whilst gearing
was much reduced at 29.4%.
* Underlying operating profit for the Agriculture Division was £3.5m
(2000: £3.6m) on a turnover of £87.8m (2000: £73.0m). Again, an excellent
performance was achieved in the USA, with Carr's branded low moisture feed
block, 'Smartlic', continuing to grow market share.
* The Food Division made an operating profit of £374,000 (2000:
£607,000) on a turnover of £17.5m (2000: £18.3m) - one of its best
performances considering the turmoil in which the flour milling industry has
been.
* The Engineering Division achieved a poor financial result in
difficult circumstances, with an operating loss of £314,000 (2000: loss
£150,000) on a turnover of £7.8m (2000: £6.7m).
* David Newton, Chairman, stated 'FMD has had and will continue to have
a drastic effect on our business in so many ways. We continue to address the
issues to maintain a strong company, hence our increased integration with the
Carrs Billington Agriculture businesses, our continued expansion of our feed
block business in the USA and the UK together with several other initiatives
in the pipeline, all of which will help the Group to remain strong and
progressive in the future. Despite continuing difficult market conditions for
much of our business in the UK, we are hopeful of further progress in the
current year.'
Enquiries:
Carr's Milling Industries PLC 01228-528291
Chris Holmes (Chief Executive)
Ron Wood (Finance Director)
Bankside Consultants Limited
Charles Ponsonby 020-7444 4166
CHAIRMAN'S STATEMENT
FINANCIAL OVERVIEW
If a week is a long time in politics, a year like the last one is a long time
in any business, but particularly British Agriculture!
The reported result for the year to 1 September 2001 at £2.06 million, against
£2.17 million last year, is very respectable given the dire backdrop of Foot
and Mouth Disease (FMD). On an underlying basis, excluding one-off items
both ways, the result is even better at £2.32 million (2000: £2.49 million).
Basic earnings per share were 20.9p against 17.5p last time, a 19% increase.
Using the underlying basis, earnings per share rose by 18% to 23.9p against
20.2p last time.
Gearing reduced again this year, to 29.4% from 41% last year and, as forecast,
was much reduced from 61% at the half year. Equity shareholders' funds of
£18.6 million (2000: £17.6 million) represent net assets per share of 233p
(2000: 220p). Interest cover was 3.2 times (2000: 3.8 times).
DIVIDENDS
At the half-year we proposed a dividend of 3.0p per share, despite the very
dark clouds on the horizon. We also cautioned that this should in no way be
regarded as a pointer to the level of the full year dividend payment.
While considering the final dividend the Board has taken into its judgement
the likely impact on the business of FMD over the next six months and the
Board is proposing a final dividend of 5.0p (2000: 6.0p), making a total for
the year of 8.0p (2000: 9.0p).
If approved at the AGM to be held at 11.30 am on 8 January 2002 at the Crown
Hotel, Wetheral, Carlisle, this will be paid on 25 January 2002 to
shareholders on the register at close of business on 21 December 2001.
OPERATIONAL OVERVIEW
AGRICULTURE
Operating profit for the Agriculture Division after adjusting for the
exceptional reorganisation costs was £3.5 million (2000: £3.6 million) on a
turnover of £87.8 million (2000: £73.0 million). This result is particularly
pleasing against the backdrop of FMD that ravaged the North of England and
South West Scotland and particularly our heartland, Cumbria. The result
reflected a very high level of activity in agricultural machinery as many
farmers purchased equipment to grow alternative crops for cash flow as their
livestock had been culled. Also feed sales did not suffer to the expected
reduced level, partly because farmers not affected were unable to move
livestock due to being in restricted areas.
Again, an excellent performance was achieved in the USA, with our branded low
moisture feed block, 'Smartlic', continuing to grow market share. The second
plant in the USA, commissioned in September 1999, at Belle Fourche, South
Dakota, reached capacity during the year and capital expenditure was
authorised for a second production line. This second line was commissioned in
October 2001. The lawsuit against our USA subsidiary, Animal Feed Supplement,
Inc., was resolved to our benefit but with only partial recovery of our costs.
We now have the uncontested right to the use of the half-barrel trademark.
Sales of our low moisture feed block, 'Crystalyx', beat expectations,
particularly in continental Europe; 'Horslyx' and the 'Stable Lick' equine
brands continue to grow in both the UK and continental Europe. The equine
brands are being fed to some of the leading horses in the world and we expect
to see further growth in this market.
The bringing together of the sales forces of AF Feeds, Billington Agriculture
and Carrs Agriculture on 3 September 2001, subsequent to the year end, has
achieved the cost savings which will be necessary to drive the business
forward profitably.
The impact of FMD is going to be one of reduced demand this winter for animal
feed and animal health products. We had the benefit last winter of the feed
mills working at full capacity prior to the outbreak. We are now facing a
slow build up of animal numbers as farmers gradually restock their farms.
Fertiliser was performing well until the outbreak of FMD, which then resulted
in orders being cancelled, changed or delayed as farms became affected or put
off receiving fertiliser until their fate was known. This caused us to carry
out a strategic review of the business, which resulted in the closure of our
fertiliser blending facility in Glasgow. The cost savings being achieved, as
a result of this review, will have a positive impact on profits in the current
year.
Our retail business performed exceptionally well last year, given the
circumstances. With our strength in this area and the new Carrs Billington
Agriculture sales operation formed on 3 September 2001, extending our retail
network to 16 branches serving farmers from Milnathort in Fife down to Leek in
Staffordshire, further long-term growth is expected.
The enlarged Agriculture Division comprising Animal Feed Supplement Inc., USA;
Carrs Agriculture, incorporating Caltech Biotechnology and Carrs Fertilisers;
and Carrs Billington Agriculture (Sales) Ltd, the feed and retail branches
business will achieve significant sales growth. The closing of facilities,
rationalisation and restructuring of Carrs Billington Agriculture cost
£962,000, which has been charged against profits in this year. These one-off
costs were partially offset by exceptional gains in the year of £708,000,
which mainly related to the sale of unused properties in Carrs Billington
Agriculture. We are therefore moving forward in agriculture with a focussed
sales force, an extended retail branch structure, a streamlined fertiliser
business and a low moisture feed block business, all ready for the challenges
that will undoubtedly occur.
FOOD
Operating profit from the Food Division, which comprises Carrs Flour Mills,
Carrs Foodtech, both in Cumbria, and George Shackleton in Dublin, was £374,000
(2000: £607,000) on a turnover of £17.5 million (2000: £18.3 million).
Although the operating profit was down by almost 40%, I consider it to be one
of the best performances the Division has made considering the turmoil in
which the flour milling industry has been. During the last year the situation
started to change with some competitor flour mills ceasing to trade and being
closed. This has resulted in supply and demand being more in balance with
margins moving towards more realistic levels, which should allow the industry
to deal with the difficult harvest. The recent capital expenditure in our
flour mill should show real financial benefits this year, particularly with
the quality specialised products which we can produce so well.
ENGINEERING
The Engineering Division, based in Carlisle, achieved a poor financial result
due to difficult circumstances, with an operating loss of £314,000 (2000: loss
£150,000) on a turnover of £7.8 million (2000: £6.7 million).
Bendalls, our high integrity welding business operating in the oil, gas and
petrochemical sectors, continued to feel the adverse effects of the strong
pound and intense competition for work in these sectors. Bendalls' status as a
preferred supplier to BNFL was beneficial in the year but postponed contract
work in the nuclear sector more than offset this position. Tremendous effort
has been put into new markets, which it is hoped will come to fruition during
the current year.
Keytor, our mechanical and electrical engineering business which operates
mainly in the agriculture and food markets, suffered with feed mills and flour
mills being closed rather than built.
R Hind, our specialist vehicle bodybuilding and accident repair centre, made
progress during the year, winning new contracts, the benefits from which will
come through during the current year.
The redundancy costs at Bendalls and Keytor during the year, and other changes
thereafter, have reduced our operating costs moving forward.
OUTLOOK
Foot and Mouth Disease has had and will continue to have a drastic effect on
our business in so many ways. We continue to address the issues to maintain a
strong company, hence our increased integration with the Carrs Billington
Agriculture businesses, our continued expansion of our feed block business in
the USA and the UK together with several other initiatives in the pipeline,
all of which will help the Group to remain strong and progressive in the
future. Despite continuing difficult market conditions for much of our
business in the UK, we are hopeful of further progress in the current year.
David A Newton
Chairman
12 November 2001
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 1 September 2001
1 2
September September
2001 2000
£'000 £'000
Turnover: group and share of joint venture
Continuing operations 121,028 104,186
Acquisitions 5,656 -
______ ______
126,684 104,186
Less: share of turnover of joint venture - continuing
operations (13,529) (6,192)
______ ______
Group turnover 113,155 97,994
______ ______
Group operating profit
Continuing operations 2,516 3,470
Acquisitions (69) -
______ ______
Group operating profit 2,447 3,470
Share of operating profit/(loss) in joint venture 219 (629)
______ _______
Total operating profit: group and share of joint venture 2,666 2,841
Group share of profit on disposal of fixed assets in joint
venture 335 -
Investment income - 1
Profit on disposal of investment - 111
______ ______
Profit on ordinary activities before interest 3,001 2,953
Interest receivable
Group 83 21
Joint venture 13 12
Interest payable
Group (953) (820)
Joint venture (82) -
______ ______
Profit on ordinary activities before taxation 2,062 2,166
Taxation (376) (700)
______ ______
Profit on ordinary activities after taxation 1,686 1,466
Minority interests - equity (11) (68)
______ ______
Profit for the financial year 1,675 1,398
Dividends (640) (720)
______ ______
Retained profit for the financial year 1,035 678
______ ______
Earnings per ordinary share
Basic 20.9p 17.5p
Diluted 20.9p 17.5p
Alternative basis 23.9p 20.2p
Dividend per share 8.0p 9.0p
CONSOLIDATED BALANCE SHEET
at 1 September 2001
1 September 2 September
2001 2000
£'000 £'000
Fixed assets
Intangible assets 30 43
Tangible assets 18,865 18,620
Investment in joint venture
Share of gross assets 3,725 4,379
Share of gross liabilities (3,557) (4,596)
168 (217)
Loan to joint venture - 550
Other investments 13 22
______ ______
19,076 19,018
Current assets
Assets held for resale - 50
Stocks 8,136 7,895
Debtors 14,697 14,549
Cash at bank and in hand 1,307 140
______ ______
24,140 22,634
Creditors
Amounts falling due within one year (20,817) (19,771)
______ ______
Net current assets 3,323 2,863
Total assets less current liabilities 22,399 21,881
Creditors
Amounts falling due after more than one year (1,343) (2,157)
Provision for liabilities and charges (1,876) (1,534)
Deferred income (234) (290)
_____ _____
18,946 17,900
______ ______
Capital and reserves
Called-up share capital 1,999 1,999
Share premium account 4,698 4,698
Revaluation reserve 1,998 2,093
Profit and loss account 9,912 8,782
______ _______
Equity shareholders' funds 18,607 17,572
Minority interests - equity 339 328
______ ______
18,946 17,900
______ ______
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 1 September 2001
1 2
September September
2001 2000
£'000 £'000
Net cash inflow from continuing operating activities 6,749 6,984
______ ______
Returns on investments and servicing of finance
Interest received 91 4
Interest paid (771) (796)
Interest paid on finance leases (138) (70)
Investment income received - 1
______ ______
Net cash outflow from returns on investments and servicing
of finance (818) (861)
______ ______
Taxation (801) (478)
______ ______
Capital expenditure and financial investment
Purchase of tangible fixed assets (1,884) (1,121)
Sale of tangible fixed assets 91 200
Sale of assets held for resale 50 257
Sale of investment - 112
Loan to joint venture repaid/(made) 550 (550)
______ ______
(1,193) (1,102)
______ ______
Acquisitions and disposals
Net overdraft acquired with subsidiary undertaking (562) -
Investment in joint venture - (150)
______ ______
(562) (150)
______ ______
Equity dividends paid (720) (640)
______ _______
Cash inflow before financing 2,655 3,753
______ _______
Financing (1,412) (1,489)
______ ______
Increase in net cash 1,243 2,264
______ ______
NOTES
1. Segmental analysis
Group Group
Turnover Operating profit
2001 2000 2001 2000
£'000 £'000 £'000 £'000
Business analysis
Agriculture 87,793 73,000 2,582 3,132
Food 17,525 18,334 374 607
Engineering 7,837 6,660 (314) (150)
Central - - (195) (119)
______ ______ ______ ______
113,155 97,994 2,447 3,470
______ ______ ______ ______
2. Cost of sales and other operating income and expenses
2001 2001 2000 2000
£'000 £'000 £'000 £'000
Cost of sales 95,808 81,184
______ ______
Gross profit 17,347 16,810
Net operating expenses
Distribution costs (6,546) (6,267)
Administrative expenses
- Normal (7,551) (7,073)
- Exceptional (803) -
______ ______
(8,354) (7,073)
______ ______
Operating profit - continuing operations 2,447 3,470
Share of operating profit/(loss) in joint
venture
- Normal 5 (197)
- Exceptional 214 (432)
______ ______
219 (629)
______ ______
Total operating profit: group and share
of joint venture 2,666 2,841
Exceptional items (as above) 589 432
______ ______
Total operating profit: group and share of joint
venture before exceptional items
3,255 3,273
______ ______
The total figures include the following amounts relating to acquisitions: cost
of sales £4,894,000 (2000: £nil), gross profit of £762,000 (2000: £nil) and
net operating expenses of £831,000 (2000: £nil).
3. Exceptional items
2001 2001 2000 2000
Tax Tax
(charge)/ (charge)/
credit credit
£'000 £'000 £'000 £'000
Cost of reorganising Agriculture
Division (529) 114 - -
Impairment of fixed asset in Agriculture
Division (274) - - -
Profit on disposal of investment in listed
company - - 111 (35)
______ ______ ______ ______
(803) 114 111 (35)
______ ______ ______ ______
Cost in joint venture of
reorganising Agriculture Division (159) 48 (432) 138
Group share of negative goodwill in
joint venture 373 - - -
______ ______ ______ ______
214 48 (432) 138
______ ______ ______ ______
Total exceptional operating expenses (589) 162 (321) 103
Group share of profit on disposal of fixed
assets in joint venture 335 (147) - -
______ ______ ______ ______
Total exceptional items (254) 15 (321) 103
______ ______ ______ ______
4. Taxation
2001 2000
£'000 £'000
UK corporation tax at 30% (2000: 30%) - current 581 713
- deferred (15) 98
Over provision in respect of prior years - current (586) (96)
- deferred (50) (23)
Overseas taxation 346 158
Joint venture 100 (150)
______ ______
376 700
______ ______
5. Dividends
2001 2000
£'000 £'000
Equity:
Ordinary - Interim paid of 3.0p per share (2000: 3.0p) 240 240
- Final proposed of 5.0p per share (2000: 6.0p) 400 480
______ ______
640 720
______ ______
6. Earnings per share
The calculation of basic earnings per share is based on profits attributable
to shareholders of £1,675,000 (2000: £1,398,000) and on 7,996,639 shares (2000:
7,996,639 shares), being the weighted average number of shares in issue during
the period.
The calculation of diluted earnings per share is based on the profit for the
financial year of £1,675,000 (2000: £1,398,000) and on 8,004,940 shares (2000:
8,002,993 shares) being the weighted average number of shares in issue during
the year and the weighted average number of ordinary shares that would be issued
on the conversion of all the dilutive potential ordinary shares.
The calculation of earnings per share on the alternative basis (including
acquisitions) is based on the profit for the financial year of £1,675,000
adjusting for exceptional items of £254,000 net of related tax charge of £15,000
to give a profit for the financial year of £1,914,000 (2000: £1,616,000).
2001 2000
Earnings Earnings
Earnings Per share Earnings Per share
£'000 pence £'000 pence
Earnings per share - basic 1,675 20.9 1,398 17.5
Exceptional items:
Disposal of investment - - (111) (1.4)
Reorganisation costs in Agriculture
Division 529 6.6 - -
Impairment of property in Agriculture
Division 274 3.4 - -
Share of reorganisation costs in joint
venture 159 2.0 432 5.4
Share of profit on disposal of fixed
assets in joint venture (335) (4.2) - -
Share of profit on release of negative
goodwill in joint venture (373) (4.6) - -
Taxation arising on exceptional items (15) (0.2) (103) (1.3)
______ ______ ______ ______
Earnings per share - alternative 1,914 23.9 1,616 20.2
______ ______ ______ ______
7. Cash flow from operating activities
Continuing operations
2001 2000
£'000 £'000
Group operating profit 2,447 3,470
Depreciation charge 2,307 1,927
Loss/(profit) on disposal of fixed assets 51 (17)
Goodwill amortisation 13 17
Grants amortisation (56) (55)
Decrease/(increase) in stocks 61 (172)
Decrease in debtors 621 1,568
Increase in creditors 816 434
Increase/(decrease) in provisions 489 (188)
______ ______
Net cash inflow from operating activities 6,749 6,984
______ ______
8. Reconciliation of net cash flow to movement in net debt
2001 2000
£'000 £'000
Increase in cash in the year 1,243 2,264
Cash outflow from debt and lease financing 1,412 1,489
______ ______
2,655 3,753
New finance leases (723) (1,292)
Exchange adjustments (11) (76)
______ ______
1,921 2,385
Net debt at 3 September 2000 (7,397) (9,782)
______ ______
Net debt at 1 September 2001 (5,476) (7,397)
______ ______
9. The board of directors approved the preliminary announcement on 12
November 2001.
10. The preliminary results for the year ended 1 September 2001 are unaudited
and do not constitute the Company's statutory accounts. Comparative figures
have been derived from the statutory accounts for the year ended 2 September
2000, which have been delivered to the Registrar of Companies. They were
subject of an unqualified audit report by the Company's auditors. The
statutory accounts for the year ended 1 September 2001 will in due course be
delivered to the Registrar of Companies.
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