Final Results

Carr's Milling Industries PLC 11 November 2002 CARR'S MILLING INDUSTRIES PLC - PRELIMINARY ANNOUNCEMENT â€¢ Carr's, the agriculture, food and engineering business, announces a 42.0% increase in underlying pre-tax profit to Â£3.29 m in the year ended 31 August 2002 despite continuing problems from both the foot and mouth disease outbreak and low prices for UK farm commodities. 2002 2001 Increase Turnover (Â£m) 143.4 113.2 26.7% Pre-tax profit: underlying (Â£m) 3.29 2.32 42.0% reported (Â£m) 3.59 2.06 74.3% Earnings per share: underlying (p) 33.3 23.9 39.3% reported (p) 36.3 20.9 73.7% Dividends per share (p) 9.5 8.0 18.8% Net assets per share (p) 257 233 10.3% â€¢ The result is ahead of market expectations both pre and post Carr's positive trading statement in early July. â€¢ Agriculture achieved an operating profit of Â£4.0 m (2001: Â£2.8 m) on a turnover of Â£114.8 m (2001: Â£101.3 m), benefiting from the integration of the sales operation in the UK of Carr's and Billington from 3 September 2001, combined with a strong performance by the low moisture feed block business in the USA and improvements in the low moisture feed block and fertiliser businesses in the UK. â€¢ Food achieved an operating profit of Â£727,000 (2001: Â£374,000) on a turnover of Â£20.5 m (2001: Â£17.5 m), with a better trading environment in flour and the launch of new products. â€¢ Engineering made an operating loss of Â£328,000 (2001: loss of Â£314,000) on a turnover of Â£8.1 m (2001: Â£7.8 m), mainly because of the need for low pricing to win contracts. â€¢ David Newton, Chairman, stated 'We have seen the beneficial effects this year of taking proactive decisions based on a realistic reading of our major market places. This we will continue to do, reinforcing our competitive stance in what are still fragile circumstances. The year to August 2003 has started well in the Agriculture and Food divisions, notably in the USA, where our subsidiary company, Animal Feed Supplement Inc., produces feed blocks benefiting from the Government's Cattle Feed Drought Assistance Programme. Further out, we believe that Carr's proven ability to restructure its business, and thereby to operate successfully despite adverse market conditions for much of its activities, will continue to stand it in good stead.' Enquiries: Carr's Milling Industries PLC 01228-554600 Chris Holmes (Chief Executive Officer) Ron Wood (Finance Director) Bankside Consultants Limited Charles Ponsonby 020-7444 4166 CHAIRMAN'S STATEMENT FINANCIAL REVIEW As we predicted in our positive trading statement in early July, the result for the year ended 31 August 2002 is ahead of market expectations at that time despite continuing problems from both the foot and mouth disease (FMD) outbreak and low prices for UK farm commodities. Group turnover moved up from Â£113.2 million last year to Â£143.4 million this year. This reflects changes to the structure of our agricultural activities, thereby including sales of animal feed previously sold by our former joint venture company, in addition to increases in sales of farm machinery and of feed blocks, in both the UK and the USA. Profit before tax rose by 74.3%, from Â£2.06 million last year to Â£3.59 million. On an underlying basis, which excludes one-off items, the increase was 42.0%, from Â£2.32 million to Â£3.29 million. Net interest charges at roughly the same level in both years of Â£0.9 million were covered 4.6 times (2001: 3.5 times) by underlying profit before interest and tax. Basic earnings per share increased by 73.7%, from 20.9p to 36.3p. On the alternative basis, using underlying earnings, the figure was 33.3p, up from 23.9p last time, a 39.3% increase. Earnings per share increases have benefited from the decrease in the effective tax rate, from 18.2% to 11.0%, as a result of an adjustment to prior years' tax and the recognition in full of deferred tax assets. Next year, the effective tax rate will return to a more normal level. Equity shareholders' funds advanced to Â£20.7 million from Â£18.6 million, representing net assets per share of 257p (2001: 233p). Gearing came down from the half-year high point of 64.0% to a level similar to last year of 28.9% (2001: 29.4%). DIVIDENDS A year ago, the directors took the view that the likely impact on the Group of FMD over the first six months of the year could be worse than that in the 2001 financial year. Hence they recommended a final dividend per share of 5.0p against 6.0p the year before, which shareholders overwhelmingly supported at the AGM. I am very pleased to tell you that the directors feel able this year not only to restore the final dividend to its former level but also to propose a further increase. The Board is proposing a final dividend per share of 6.5p, which, with the maintained 3.0p paid at the half year, gives a total of 9.5p against a total last year of 8.0p, an increase of 18.8%. Total dividends per share are covered 3.5 times (2001: 3.0 times) by underlying earnings per share. If approved at the AGM to be held at 11:30 am on 7 January 2003 at The Crown Hotel, Wetheral, Carlisle, the final dividend will be paid on 24 January 2003 to shareholders on the register at close of business on 20 December 2002. AGRICULTURE Operating profit of Â£4.0 million (2001: Â£2.8 million) was achieved on a turnover of Â£114.8 million (2001: Â£101.3 million), with further progress achieved in the UK, the USA and Continental Europe. Animal Feed The last case of foot and mouth disease (FMD) in Cumbria was reported on 30 September 2001. Livestock restocking started to take place slowly towards the end of 2001 and with more pace during 2002. However, 35% of farmers affected by FMD have not restocked; therefore, the creation of the Carrs Billington Sales operation was timely in terms of cost saving benefits. Sales of compound animal feeds from Carrs Billington Agriculture's three mills in Carlisle (Cumbria), Penrith (Cumbria) and Stone (Staffordshire) continued to meet their budgeted levels. In the USA, low moisture feed block sales by the Company's subsidiary, Animal Feed Supplement, under the brands 'Feed in a Drum' and 'Smartlic', increased last year from the production facilities at Belle Fourche, South Dakota and Poteau, Oklahoma, with a second production line being commissioned at the former in October 2001. We have a strong management team in the USA that dealt with the difficulties of drought conditions in many of the markets we sell into. By achieving record sales, sterling profits were maintained at Â£0.9 million despite a weakening of the dollar. In the UK and Continental Europe, Caltech's low moisture feed block, ' Crystalyx', continued to grow, with an entry into new markets. The 'Horslyx' and 'Stable Lick' equine brands surpassed all expectations, as did a new product, 'Respiratory Lick'. Further growth in sales is expected in this leisure market. A combination of farmers not restocking and a farm-gate milk price at less than the cost of production does not help the animal feed industry. Despite these difficulties, the planned cost savings and excellent performance on distribution enabled us to achieve our objectives. Fertiliser The Group's fertiliser operation now comprises five blending facilities: two in the North West of England - at Runcorn (Cheshire) and Silloth (Cumbria) - and three in Scotland - at Methil (Fife), Montrose (Angus) and Invergordon (Easter Ross). The fertiliser operation benefited from cost reductions following the closure of the Group's Glasgow facility in August 2001 and the integration of its Scottish operations subsequent to the acquisition in September 2001 of the fertiliser blending activities of Angus Fertilizers in Montrose. It was a most difficult spring, with the weather being extremely wet for a prolonged period, then turning fine during the fertiliser usage time. The demand for product was unprecedented and we were unable to satisfy these high levels of demand. We have made changes, as a result of which, should this happen again, we would be able to satisfy demand without incurring significant extra costs. Retail Retail sales from the branch network performed well, increasing market share and exceeding sales targets. The opening of a new branch at Brock in Lancashire in December 2001 and the closure of the smaller Pilling and Kirkby Stephen branches, in Lancashire and Cumbria respectively, achieved the necessary cost savings. As a result, the branch network reduced from 16 to 15, which extends from Fife in Scotland to Staffordshire in the South. Machinery Farm machinery sales achieved record sales, as many farmers changed from livestock to arable production. We gained market share with our sales of Massey Ferguson tractors. Our expectations are that sales in 2003 financial year will not continue at the same high level. FOOD Operating profit from the food division, which comprises Carr's Flour Mills, Carrs Foodtech, Carrs Blends, all in Cumbria, and George Shackleton in Dublin, was Â£727,000 (2001: Â£374,000) on a turnover of Â£20.5 million (2001: Â£17.5 million). Flour sales increased during the year and, combined with operating in a more favourable market, the badly needed improvement in profitability was achieved. The capital expenditure made in recent years in the flour mill is now beginning to generate real benefits, with the launch of bread making flours branded as Carrs across major multiples. We have also developed a new food product after extensive focus group research and testing, which has resulted in the launch of Carrs Makefresh, a high quality bio-yogurt that is made in the home, by the addition of just water. Initial responses from the test marketing are very encouraging, with repeat sales being excellent. A major launch of this product is being made at the BBC Good Food Show in late November. ENGINEERING The engineering division, based in Carlisle, made an operating loss of Â£328,000 (2001: loss Â£314,000) on sales of Â£8.1 million (2001: Â£7.8 million). Bendalls, our high integrity welding business operating in the oil, gas and pharmaceuticals sectors, continued to suffer, like many UK engineering businesses, from lower demand and competitive pricing on contracts from overseas. Bendalls' investment in time, design and quality is forecast to bear fruit in the current year. Bendalls is participating in the exciting development of renewable energy and, together with strategic partners, is building and erecting the first underwater turbine off the North Devon coast. Further investment by our partners will permit the identification of other potential sites around the UK coast which has some of the world's highest tidal current flows. Keytor, our mechanical and electrical engineering business, continues to operate in a very depressed market place, with demand for capital expenditure on its specialism of feed and flour mills being extremely low. Hinds, our commercial vehicle body building business, performed very well, benefiting from new contracts achieved and completed last year. The order book and the outlook are encouraging. OUTLOOK We have seen the beneficial effects this year of taking proactive decisions based on a realistic reading of our major market places. This we will continue to do, reinforcing our competitive stance in what are still fragile circumstances. The year to August 2003 has started well in the Agriculture and Food divisions, notably in the USA, where our subsidiary company, Animal Feed Supplement Inc., produces feed blocks benefiting from the Government's Cattle Feed Drought Assistance Programme. Further out, we believe that Carr's proven ability to restructure its business, and thereby to operate successfully despite adverse market conditions for much of its activities, will continue to stand it in good stead. David A Newton Chairman 11 November 2002 CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 August 2002 31 August 1 September 2002 2001 Â£000 Â£000 Turnover: group and share of joint venture Continuing operations 143,301 126,010 Discontinued operations 77 674 ________ ________ 143,378 126,684 Less: share of turnover of joint venture - continuing operations - (13,529) ________ ________ Group turnover 143,378 113,155 ________ ________ Group operating profit Continuing operations 3,748 2,385 Discontinued operations 7 62 ________ ________ Group operating profit 3,755 2,447 Share of operating profit in associate - continuing operations 434 - Share of operating profit in joint venture - continuing operations - 219 ________ ________ Total operating profit: group and share of associate and joint venture 4,189 2,666 Group share of profit on disposal of fixed assets in joint venture - 335 Profit on part disposal of subsidiary undertaking 307 - ________ ________ Profit on ordinary activities before interest 4,496 3,001 Interest receivable group 82 83 joint venture - 13 Interest payable group (904) (953) associate (80) joint venture - (82) ________ ________ Profit on ordinary activities before taxation 3,594 2,062 Taxation group (647) (276) associate 250 - joint venture - (100) ________ ________ Profit on ordinary activities after taxation 3,197 1,686 Minority interests - equity (277) (11) ________ ________ Profit for the financial year 2,920 1,675 Dividends (768) (640) ________ ________ Retained profit for the financial year 2,152 1,035 ________ ________ Earnings per ordinary share Basic 36.3p 20.9p Diluted 36.3p 20.9p Alternative basis 33.3p 23.9p Dividend per share 9.5p 8.0p CONSOLIDATED BALANCE SHEET at 31 August 2002 31 August 1 September 2002 2001 Â£000 Â£000 Fixed assets Intangible assets 96 30 Tangible assets 19,232 18,865 Investment in joint venture Share of gross assets - 3,725 Share of gross liabilities - (3,557) - 168 Share of net assets in associate 768 - Loan to associate 1225 - Other investments 153 13 ________ ________ 21,474 19,076 Current assets Stocks 9,057 8,136 Debtors 18,697 14,697 Cash at bank and in hand 856 1,307 ________ ________ 28,610 24,140 Creditors Amounts falling due within one year (22,939) (20,817) ________ ________ Net current assets 5,671 3,323 Total assets less current liabilities 27,145 22,399 Creditors Amounts falling due after more than one year (4,470) (1,343) Provision for liabilities and charges (1,127) (1,876) Deferred income (179) (234) ________ ________ 21,369 18,946 ________ ________ Capital and reserves Called-up share capital 2,013 1,999 Share premium account 4,741 4,698 Revaluation reserve 1,963 1,998 Profit and loss account 11,992 9,912 ________ ________ Equity shareholders' funds 20,709 18,607 Minority interests - equity 660 339 ________ ________ 21,369 18,946 ________ ________ CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 August 2002 31 August 1 September 2002 2001 Â£000 Â£000 Net cash inflow from continuing operating activities 5,564 6,749 ________ ________ Returns on investments and servicing of finance Interest received 91 91 Interest paid (815) (771) Interest paid on finance leases (119) (138) ________ ________ Net cash outflow from returns on investments and servicing of finance (843) (818) ________ ________ Taxation (1,060) (801) ________ ________ Capital expenditure and financial investment Purchase of tangible fixed assets (2,521) (1,884) Sale of tangible fixed assets 850 91 Sale of assets held for resale - 50 Purchase of investments (100) - Sale of investment 11 - Loan made to associate (1,225) - Loan repaid to joint venture - 550 ________ ________ (2,985) (1,193) ________ ________ Acquisitions and disposals Net overdraft acquired with subsidiary undertaking - (562) Purchase of trade and net assets (762) - Purchase of subsidiary undertaking (100) - Bank overdraft disposed of with subsidiary undertaking 305 - Proceeds from part disposal of subsidiary undertaking 400 ________ ________ (157) (562) ________ ________ Equity dividends paid (645) (720) ________ ________ Cash (outflow)/inflow before financing (126) 2,655 ________ ________ Financing 3,306 (1,412) ________ ________ Increase in net cash 3,180 1,243 ________ ________ NOTES 1. Segmental analysis Turnover Operating profit 2002 2001 2002 2001 Â£'000 Â£'000 Â£'000 Â£'000 Business analysis Agriculture group 114,816 87,793 3,544 2,582 associate - - 434 - joint venture - 13,529 - 219 Food 20,477 17,525 727 374 Engineering 8,085 7,837 (328) (314) Central - - (188) (195) ________ ________ ________ ________ 143,378 126,684 4,189 2,666 ________ ________ ________ ________ 2. Turnover and cost of sales and other operating income and expenses 2002 2002 2001 2001 Â£'000 Â£'000 Â£'000 Â£'000 Turnover 143,378 113,155 Cost of sales 122,528 95,808 ________ ________ Gross profit 20,850 17,347 Net operating expenses Distribution costs (9,202) (6,546) Administrative expenses - Normal (7,891) (7,551) - Exceptional (Note 3) (2) (803) ________ ________ (7,893) (8,354) ________ ________ Operating profit - continuing operations 3,755 2,447 Share of operating profit in joint venture - Normal - 5 - Exceptional - 214 Share of profit in associate 434 - ________ ________ 434 219 ________ ________ Total operating profit: group and share of joint venture and associate 4,189 2,666 Exceptional items (as above) 2 589 ________ ________ Total operating profit: group and share of joint venture and associate (before 4,191 3,255 exceptional items) ________ ________ The total figures include the following amounts relating to acquisitions: cost of sales Â£nil (2001: Â£4,894,000), gross profit of Â£nil (2001: Â£762,000) and net operating expenses of Â£nil (2001: Â£831,000). 3. Exceptional items 2002 2002 2001 2001 Tax Tax (charge)/ (charge)/ credit credit Â£'000 Â£'000 Â£'000 Â£'000 Cost of reorganising Agriculture Division 149 (27) (529) 114 Impairment of fixed assets in Agriculture Division (151) - (274) - ________ ________ ________ ________ (2) (27) (803) 114 ________ ________ ________ ________ Cost in joint venture of reorganising Agriculture Division - - (159) 48 Group share of negative goodwill in joint venture - - 373 - ________ ________ ________ ________ (2) (27) 214 48 ________ ________ ________ ________ Total exceptional operating expenses (2) (27) (589) 162 Group share of profit on disposal of fixed assets in joint venture - - 335 (147) Profit on part disposal of subsidiary undertaking 307 (36) ________ ________ ________ ________ Total exceptional items 305 (63) (254) 15 ________ ________ ________ ________ 4. Taxation 2002 2001 Â£'000 Â£'000 United Kingdom UK corporation tax at 30% (2001: 30%) 870 581 Adjustment to prior years' corporation tax (300) (586) ________ ________ Total UK corporation tax 570 (5) Foreign taxes Corporation taxes 377 346 ________ ________ Total current tax 947 341 Deferred tax Origination and reversal of timing differences (300) (65) Representing: United Kingdom (149) (65) Foreign tax (151) - ________ ________ Total deferred tax (300) (65) Joint venture - 100 Associate (250) - ________ ________ Tax on profit on ordinary activities 397 376 ________ ________ 5. Dividends 2002 2001 Â£'000 Â£'000 Equity: Ordinary - Interim paid of 3.0p per share (2001: 3.0p) 245 240 - Final proposed of 6.5p per share (2001: 5.0p) 523 400 ________ ________ 768 640 ________ ________ 6. Earnings per share The calculation of basic earnings per share is based on profits attributable to shareholders of Â£2,920,000 (2001: Â£1,675,000) and on 8,038,576 shares (2001:7,996,639 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 ofÂ£2,920,000 (2001: Â£1,675,000) and on 8,047,458 shares (2001:8,004,940 shares), being the weighted average number of shares in issue during the year plus 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 Â£2,920,000 adjusting for exceptional items of Â£305,000 net ofrelated tax charge of Â£63,000 to give a profit for the financial year of Â£2,678,000 (2001: Â£1,914,000). 2002 2001 Earnings Earnings Earnings Per share Earnings Per share Â£'000 Pence Â£'000 pence Earnings per share - basic 2,920 36.3 1,675 20.9 Exceptional items: Profit on part disposal of subsidiary undertaking (307) (3.8) - - Reorganisation costs in Agriculture division (149) (1.8) 529 6.6 Impairment of fixed assets in Agriculture division 151 1.8 274 3.4 Share of reorganisation costs in joint venture - - 159 2.0 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 63 0.8 (15) (0.2) ________ ________ ________ ________ Earnings per share - alternative 2,678 33.3 1,914 23.9 ________ ________ ________ ________ 7. Cash flow from operating activities - continuing operations 2002 2001 Â£'000 Â£'000 Group operating profit 3,755 2,447 Depreciation charge 2,358 2,305 (Profit)/loss on disposal of fixed assets (71) 51 (Profit) on disposal of investments (4) - Goodwill amortisation 33 13 Grants amortisation (55) (56) (Increase)/decrease in stocks (774) 62 (Increase)/decrease in debtors (4,184) 621 Increase in creditors 5,082 817 (Decrease)/increase in provisions (576) 489 ________ ________ Net cash inflow from continuing operating activities 5,564 6,749 ________ ________ 8. Reconciliation of net cash flow to movement in net debt 2002 2001 Â£'000 Â£'000 Increase in cash in the year 3,180 1,243 Cash (inflow)/outflow from debt and lease financing (2,934) 1,412 ________ ________ 246 2,655 New finance leases (795) (723) Finance leases disposed of with subsidiary undertakings 47 - Cash acquired on acquisition of business 1 - Exchange adjustments (10) (11) ________ ________ (511) 1,921 Net debt at 1 September 2001 (5,476) (7,397) ________ ________ Net debt at 31 August 2002 (5,987) (5,476) ________ ________ 9. The board of directors approved the preliminary announcement on 11 November 2002. 10. The preliminary results for the year ended 31 August 2002 are unaudited and do not constitute the Company's statutory accounts. Comparative figures have been derived from the statutory accounts for the year ended 1 September 2001, 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 theyear ended 31 August 2002 will in due course be delivered to the Registrar of Companies. This information is provided by RNS The company news service from the London Stock Exchange

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