Final Results

Carr's Milling Industries PLC 10 November 2003 CARR'S MILLING INDUSTRIES PLC - PRELIMINARY ANNOUNCEMENT Record pre-tax profits in difficult markets, Board remains confident â€¢ Carr's, the Cumbria-based agriculture, food and engineering business, announces record pre-tax profits in difficult markets in the year ended 30 August 2003. This achievement principally reflected strong trading by Carr's US Agriculture business, Animal Feed Supplement, assisted by continued sales growth in all areas of the Agriculture business - feed, fertiliser, retail and machinery - combined with improved efficiencies resulting from proactive management and capital expenditure. â€¢ Turnover up by 3.7% to Â£148.7m. â€¢ Profit before tax and exceptionals up by 38.9% to Â£4.57m (including Â£0.5m of additional pension costs); on a reported basis, the increase was 13.1% to Â£4.07m. â€¢ Exceptional costs of Â£0.5m represent reorganisation costs. â€¢ Adjusted EPS increased by 4.2% to 34.7p (following an increase in the effective tax rate from 11% to 31%), a fifth successive annual increase. Basic and diluted EPS decreased by 16% to 30.5p. â€¢ Final dividend per share of 7.5p (2002: 6.5p), giving total dividends per share of 11.5p, up 21.1% (2002: 9.5p). â€¢ Strong balance sheet: net debt down by Â£0.4m to Â£5.6m, giving gearing of 25.2%, and interest cover of 7.1 times. â€¢ Net assets per share increased by 7.0% to 275p. â€¢ David Newton, Chairman, stated 'In the current year, UK Agriculture will benefit for a full year from the rationalisation of fertiliser blending facilities into three plants; US Agriculture from the commissioning in October 2003 of an upgrade of the second production line at Poteau in Oklahoma; and Engineering from both the elimination of Keytor's losses, following its closure in March 2003, and Hinds operating from one site throughout the year. However, US Agriculture will not have the advantage of a Cattle Feed Drought Assistance Programme, and lower levels of activity in the sales of farm machinery must be expected. The incremental pension charges for the full year will cost a further Â£0.2m' â€¢ Mr Newton concluded 'Overall, trading in the new financial year has started well and is ahead of last year. The Board remains confident of achieving further progress in the current year.' Presentation: From 11.00 a.m. to 12.00 noon today, a presentation will be held at the offices of Bankside Consultants, 123 Cannon Street, London EC4N 5AU. Enquiries: Carr's Milling Industries PLC 01228-554 600 Chris Holmes (Chief Executive Officer) Ron Wood (Finance Director) Bankside Consultants Limited Charles Ponsonby 020-7444 4166 CHAIRMAN'S STATEMENT Continued sales growth in all areas of our Agriculture business - feed, fertiliser, retail and machinery - combined with improved efficiencies resulting from proactive management and capital expenditure helped us achieve record profits in difficult markets in the year ended 30 August 2003. This achievement principally reflected strong trading by our US Agriculture business. FINANCIAL OVERVIEW Group turnover increased by 3.7% to Â£148.7 million (2002: Â£143.4 million) and profit before tax was up by 13.1% to Â£4.07 million (2002: Â£3.59 million), a record despite an increase in the recurring funding requirements for the Group's pension arrangements of Â£0.5 million. Profit before tax and exceptional items was up by 38.9% to Â£4.57 million (2002: Â£3.29 million). Exceptional costs of Â£0.5 million represent the reorganisation costs associated with the Engineering (Â£0.2 million) and Agriculture Divisions (Â£0.3 million) (2002: exceptional profit of Â£0.3 million). Basic earnings per share were 30.5p (2002 : 36.3p), down 16.0%, and, on the adjusted basis, the figure was 34.7p, up from 33.3p last year, a 4.2% increase and a fifth successive annual increase. The main reason for these apparent distortions in earnings per share, when compared to the higher profit before tax, is that last year the effective tax rate was 11% (affected by prior year items), whereas this year is based on a more usual effective tax rate of 31.4%. Equity shareholders' funds increased to Â£22.2 million from Â£20.7 million, with net assets per share moving up by 7.0% to 275p from 257p last year. Net debt came down again this year, to Â£5.6 million from Â£6.0 million last year, and gearing reduced to 25.2% (2002 : 28.9%). Net interest payable of Â£0.66 million (2002 : Â£0.90 million) was covered 7.1 times (2002 : 5.0 times). DIVIDENDS At the half year, the Board paid an increased interim dividend, up 33% from 3p per share to 4p per share, partly to reflect a more conventional balance between half year and full year payments and partly to reflect the Group's progress. With our dividend 3.5 times covered by adjusted earnings per share last year and considering the overall performance of the business, I am pleased to tell you that the Board is recommending a further increase in the final dividend payment, of 15.4% to 7.5p per share, making a total for the year of 11.5p per share, an overall increase of 21.1%. The dividend at this level is covered 2.7 times (3.0 times excluding exceptional items). If approved at the AGM to be held at 11.30 a.m. on 6 January 2004 at the Crown Hotel, Wetheral, Carlisle, the final dividend will be paid on 23 January 2004 to shareholders on the register at close of business on 19 December 2003, with an ex-dividend date of 17 December 2003. OPERATIONAL REVIEW Agriculture Operating profit of Â£5.0 million before one-off costs of Â£0.3 million (2002 : Â£4.0 million) was achieved on a turnover of Â£120.8 million (2002 : Â£114.8 million). Feed UK sales of both animal feed compounds and feed blends grew as the restocking by farmers affected by foot and mouth disease was completed. The extra volume through Carrs Billington Agriculture's three feed mills and two blending plants had a major positive impact on these results. Margins, however, remained under pressure. In the USA, our subsidiary company, Animal Feed Supplement, the low moisture feed block business, had an excellent year with the management maximising the opportunities presented by the introduction of the US Government's Cattle Feed Drought Assistance Programme. This programme, which ran from September to December 2002, provided cash amounts to farmers in drought assisted areas for each purchase of feed that contained dried skimmed milk powder. Many farmers who purchased for the first time our 'Smartlic' product from Belle Fourche, South Dakota have enjoyed the benefits of our feed blocks and should be long term customers. Sales of 'Feed In A Drum', produced at Poteau, Oklahoma, also increased beyond budgeted and prior year levels in areas not benefiting from the Drought Assistance Programme. The upgrade of our second production line at Poteau, commissioned in October 2003, will enable us to meet the expected increased demand in the southern parts of the USA. 'Crystalyx', our low moisture feed block produced at Silloth in Cumbria and sold and distributed throughout the UK and in many parts of Continental Europe, grew at a satisfactory level. The equine range of feed blocks, 'Horslyx', 'Stable Lick' and 'Respiratory Lick', continues to grow at a very satisfactory rate in both the UK and other parts of the world. Further developments to the 'Crystalyx' brand range continue with the launch of 'Calflyx' in September 2003. This new product is formulated for calves, as an aid to maintaining a healthy respiratory system. Fertiliser The fertiliser business had a much better year following the planned cost reductions and the changes made in 2002 to meet demand at critical times. In the context of the reduction in UK demand for fertiliser over recent years, from 5 million tonnes to 4 million tonnes, we have been proactive. Significant capital expenditure was committed to increasing the blending facilities at Silloth (Cumbria) and Montrose (Angus), thereby enabling the closure of our blending plants at Runcorn (Cheshire) and Methil (Fife), at a cost of Â£0.3 million. The capacity increase at our three existing plants will be about half of the volume produced by the two plants closed. The investment at our sites, which can best service our key markets of northern England and Scotland, facilitating a reduction in our cost base, will result in further improvements in profitability. Retail With a full year's trading from our retail branch at Brock, Lancashire and all 14 other branches increasing their profitability through either increased sales or reduced costs or a combination of the two, the retail activities had a record year. The building of a larger retail branch in Cockermouth, west Cumbria will be complete at the end of 2003. Machinery Contrary to our expectations, sales of machinery achieved another record year and we increased further our market share through sales of Massey Ferguson tractors. We have not budgeted for such high levels of activity for 2004. Food Operating profit from the Food Division, which comprises Carrs Flour Mills and Carrs Blends, located in Cumbria, and George Shackleton, in Dublin, was Â£599,000 (2002 : Â£727,000) on a turnover of Â£20.3 million (2002 : Â£20.5 million). Carrs Flour Mills performed well, continuing to grow sales of the high quality Carrs Breadmaker brand following the launch last year. National distribution of the product was gained with two major retail multiples. The sharp increases in wheat prices reduced gross margins markedly during the second half of the year, but the consequent badly needed selling price increases have been achieved for the initial months of the current financial year. The launch of Carrs 'Makefresh', a high quality bio-yogurt, resulted in new sales being generated, but not as great as budgeted and, together with the launch costs, resulted in a loss. We are currently revising our strategy for this brand. Engineering The Engineering Division, based in Carlisle, made an operating loss of Â£683,000 including the Â£0.2 million one-off costs detailed below (2002 : loss of Â£328,000) on a turnover of Â£7.6 million (2002 : Â£8.1 million). The Division was reorganised with the closure of Keytor, a mechanical and electrical engineering business, during March 2003. The closure costs amounted to Â£0.2 million, in addition to which the operating losses to the date of closure were Â£0.3 million. We relocated Hinds, our vehicle body building and accident repair business, to the Keytor site. Hinds previously operated from three sites and the benefits of a one-site operation should help us to grow the Hinds business. Hinds is also expected to benefit from a new commercial vehicle jig - the nearest competitor is over 50 miles away - and two replacement commercial vehicle spray paint ovens. Bendalls' skill and engineering expertise, which is portrayed by quality systems approval in the UK, the USA and China, is winning through. Bendalls, whose business is high integrity welding, has been successful in winning contracts in a market which remains tough. The well-publicised decommissioning of BNFL sites in north west England and south west Scotland should, when it commences, result in further opportunities for Bendalls. Our involvement in renewable energy continues and the results from the underwater turbine off the north coast of Devon, commissioned in the early summer, are encouraging. Bendalls, together with its strategic partners, is working towards phase 2 of the development, which is expected to commence in early 2004. OUTLOOK Yet again, we have seen the benefits of the Group's management being proactive in dealing with loss making activities and working hard to develop the more profitable areas of the business, resulting in a steady improvement. This we will continue to do and, although no doubt the old saying that 'only those who do things, make mistakes' will haunt us sometimes, we have plans for developing the business still further. In the current year, UK Agriculture will benefit for a full year from the rationalisation of fertiliser blending facilities into three plants; US Agriculture from the commissioning in October 2003 of an upgrade of the second production line at Poteau, Oklahoma; and Engineering from both the elimination of Keytor's losses following its closure in March 2003 and Hinds operating from one site throughout the year. However, US Agriculture will not have the advantage of a Cattle Feed Drought Assistance Programme, and lower levels of activity in the sales of farm machinery must be expected. The incremental pension charges for the full year will cost a further Â£0.2 million. Overall, trading in the new financial year has started well and is ahead of last year. The Board remains confident of achieving further progress in the current year. David Newton Chairman 10 November 2003 CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 30 August 2003 30 August 31 August 2003 2002 Â£000 Â£000 Turnover Continuing operations 148,688 143,301 Discontinued operations - 77 ______ ______ Group turnover 148,688 143,378 ======== ======== Group operating profit Continuing operations 4,011 3,748 Discontinued operations - 7 ______ ______ Group operating profit 4,011 3,755 Share of operating profit in associate - continuing operations 718 434 ______ ______ Total operating profit: group and share of associate 4,729 4,189 Profit on part disposal of subsidiary undertaking - 307 ______ ______ Profit on ordinary activities before interest 4,729 4,496 Interest receivable Group 162 82 Interest payable Group (746) (904) Associate (79) (80) ______ ______ Profit on ordinary activities before taxation 4,066 3,594 Taxation Group (1,331) (647) Associate 54 250 ______ ______ Profit on ordinary activities after taxation 2,789 3,197 Minority interests - equity (329) (277) ______ ______ Profit for the financial year 2,460 2,920 Dividends (930) (768) ______ ______ Retained profit for the financial year 1,530 2,152 ======== ======== Earnings per ordinary share Basic 30.5p 36.3p Diluted 30.5p 36.3p Adjusted 34.7p 33.3p Dividends per share 11.5p 9.5p CONSOLIDATED BALANCE SHEET at 30 August 2003 30 August 31 August 2003 2002 Â£000 Â£000 Fixed assets Intangible assets 63 96 Tangible assets 19,723 19,232 Investments Share of net assets in associate 1,461 768 Loan to associate 1,225 1,225 Other investments 153 153 _____ ______ 22,625 21,474 Current assets Stocks 9,123 9,057 Debtors 18,694 18,697 Cash at bank and in hand 1,472 856 ______ ______ 29,289 28,610 Creditors Amounts falling due within one year (22,845) (22,937) ______ ______ Net current assets 6,444 5,673 Total assets less current liabilities 29,069 27,147 Creditors Amounts falling due after more than one year (4,265) (4,470) Provision for liabilities and charges (1,266) (1,129) Deferred income (303) (179) _____ _____ 23,235 21,369 ======== ======== Capital and reserves Called-up share capital 2,018 2,013 Share premium account 4,752 4,741 Revaluation reserve 1,742 1,963 Profit and loss account 13,727 11,992 ______ ______ Equity shareholders' funds 22,239 20,709 Minority interests - equity 996 660 ______ ______ 23,235 21,369 ======== ======== CONSOLIDATED CASH FLOW STATEMENT for the year ended 30 August 2003 30 August 31 August 2003 2002 Â£000 Â£000 Net cash inflow from continuing operating activities 5,504 5,564 ______ ______ Returns on investments and servicing of finance Interest received 153 91 Interest paid (638) (815) Interest paid on finance leases (101) (119) ______ ______ Net cash outflow from returns on investments and servicing of finance (586) (843) ______ ______ Taxation (1,303) (1,060) ______ ______ Capital expenditure and financial investment Purchase of tangible fixed assets (2,829) (2,521) Sale of tangible fixed assets 679 850 Purchase of investments (2) (100) Sale of investment 2 11 Loan made to associate - (1,225) Grants received 189 - ______ ______ Net cash outflow from capital expenditure and financial investments (1,961) (2,985) ______ ______ Acquisitions and disposals 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 ______ ______ Net cash outflow from acquisitions and disposals - (157) ______ ______ Equity dividends paid (847) (645) ______ ______ Cash inflow/(outflow) before financing 807 (126) ______ ______ Financing (1,486) 3,306 ______ ______ (Decrease)/increase in net cash (679) 3,180 ======== ======== NOTES 1. Segmental analysis Turnover Operating profit 2003 2002 2003 2002 Â£'000 Â£'000 Â£'000 Â£'000 Business analysis Agriculture group 120,787 114,816 4,310 3,544 associate - - 718 434 Food 20,275 20,477 599 727 Engineering 7,626 8,085 (683) (328) Central - - (215) (188) ______ ______ ______ ______ 148,688 143,378 4,729 4,189 ======== ======== ======== ======== 2. Turnover and cost of sales and other operating income and expenses 2003 2003 2002 2002 Â£'000 Â£'000 Â£'000 Â£'000 Turnover 148,688 143,378 Cost of sales (125,639) (122,528) ______ ______ Gross profit 23,049 20,850 Net operating expenses Distribution costs (9,520) (9,202) Administrative expenses - Normal (9,014) (7,891) - Exceptional (Note 3) (504) (2) ______ ______ (19,038) (17,095) ______ ______ Operating profit - continuing operations 4,011 3,755 Share of profit in associate 718 434 ______ ______ Total operating profit: group and share of joint venture and associate 4,729 4,189 Exceptional items (as above) 504 2 ______ ______ Total operating profit: group and share of joint venture and associate (before 5,233 4,191 exceptional items) ======= ======== 3. Exceptional items 2003 2003 2002 2002 Tax Tax (charge)/ (charge)/ credit credit Â£'000 Â£'000 Â£'000 Â£'000 Cost of reorganising Engineering (243) 92 - - Division Cost of reorganising Agriculture (261) 74 149 (27) Division Impairment of fixed assets in Agriculture Division - - (151) - ______ ______ ______ ______ Total exceptional operating (504) 166 (2) (27) expenses Profit on part disposal of subsidiary undertaking - - 307 (36) ______ ______ ______ ______ Total exceptional items (504) 166 305 (63) ======== ======== ======== ======== 4. Taxation 2003 2002 Â£'000 Â£'000 United Kingdom Current year at 30% (2002: 30%) 785 870 Prior year 109 (300) Foreign Tax Current year 609 377 Prior year (19) - ______ ______ Group current tax 1,484 947 Associate Current year 50 - Prior year (82) - ______ ______ Total current tax 1,452 947 Deferred tax Origination and reversal of timing differences Group (153) (300) Associate (22) (250) ______ ______ Tax on profit on ordinary activities 1,277 397 ======== ======== 5. Dividends 2003 2002 Â£'000 Â£'000 Equity: Ordinary - Interim paid of 4.0p per share (2002: 3.0p) 324 245 - Final proposed of 7.5p per share (2002: 6.50p) 606 523 ______ ______ 930 768 ======== ======== 6. Earnings per share The calculation of basic earnings per share is based on profits attributable to shareholders of Â£2,460,000 (2002: Â£2,920,000) and on 8,066,072 shares (2002: 8,038,576 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 Â£2,460,000 (2002: Â£2,920,000) and on 8,079,179 shares (2002: 8,047,458 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 adjusted basis (including acquisitions) is based on the profit for the financial year of Â£2,460,000 adjusting for exceptional items of Â£338,000 net of related tax charge of Â£166,000 to give a profit for the financial year of Â£2,798,000 (2002:Â£2,678,000). 2003 2002 Earnings Earnings Earnings per share Earnings per share Â£'000 Pence Â£'000 Pence Earnings per share - basic 2,460 30.5 2,920 36.3 Exceptional items: Profit on part disposal of subsidiary Undertaking - - (307) (3.8) Reorganisation costs in Agriculture Division 261 3.2 (149) (1.8) Impairment of fixed assets in Agriculture Division - - 151 1.8 Reorganisation costs in Engineering Division 243 3.1 - - Taxation arising on (166) (2.1) 63 0.8 exceptional items ______ ______ ______ ______ Earnings per share - 2,798 34.7 2,678 33.3 adjusted ======== ======== ======== ======== 7. Cash flow from operating activities Continuing operations 2003 2002 Â£'000 Â£'000 Group operating profit 4,011 3,755 Depreciation charge 2,271 2,358 Profit on disposal of fixed assets (166) (71) Profit on disposal of investments - (4) Goodwill amortisation 35 33 Grants amortisation (65) (55) Increase in stocks (66) (774) Decrease/(increase) in debtors 119 (4,184) (Decrease)/increase in creditors (802) 5,082 Increase/(decrease) in provisions 167 (576) ______ ______ Net cash inflow from continuing operating activities 5,504 5,564 ======== ======== 8. Reconciliation of net cash flow to movement in net debt 2003 2002 Â£'000 Â£'000 (Decrease)/increase in cash in the year (679) 3,180 Cash inflow/(outflow) from debt and lease financing 1,502 (2,934) ______ ______ 823 246 New finance leases (478) (795) Finance leases disposed of with subsidiary undertakings - 47 Cash acquired on acquisition of business - 1 Exchange adjustments 27 (10) ______ ______ 372 (511) Net debt at 1 September 2002 (5,987) (5,476) ______ ______ Net debt at 30 August 2003 (5,615) (5,987) ======== ======== 9. The Board of Directors approved the preliminary announcement on 10 November 2003. 10. The financial information set out above does not constitute the statutory accounts for the years ended 30 August 2003 and 31 August 2002. Statutory accounts for 2002 have been delivered to the Registrar of Companies and those for 2003 will be delivered following the Company's Annual General Meeting. The auditors have reported on these accounts, their reports were unqualified and did not contain statements under section 237 (2) or (3) of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange

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