Final Results

Carr's Milling Industries PLC 12 November 2007 Monday 12 November 2007 CARR'S MILLING INDUSTRIES PLC Unaudited Preliminary Announcement Carr's (CRM.L), the agriculture, food and engineering group, announces unaudited results for the 52 week period to 1 September 2007 which are creditable in the context of challenging market conditions, particularly in the important areas of flour and UK animal feed. The Group's pre-tax profit would have improved but for the impact of an unprecedented increase in wheat prices on the Food Division. FINANCIAL HIGHLIGHTS â€¢Revenue up 4.2% to Â£252.8m (Â£242.6m) â€¢Adjusted* pre-tax profit down 17.1% to Â£6.1m (Â£7.3m ) â€¢Adjusted* earnings per share down 6.2% to 56.0p (59.7p) â€¢Dividends per share up 5.6% to 19p (18p) - double those in 2002 * Adjusted disregards non-recurring items and amortisation of intangible assets OPERATIONAL HIGHLIGHTS Agriculture: â€¢Operating profit (before retirement benefit charge) of Â£5.1m (Â£5.0m) was achieved on revenue up 6.6% at Â£185.9m (Â£174.5m) â€¢Compound feed improved market share and profitability â€¢Crystalyx low-moisture feed blocks increased sales in all areas, save sheep, in the UK and achieved revenues ahead of expectations in the German JV â€¢Fertiliser performed well, after a slow start â€¢Retailing and Machinery increased both revenue and profit â€¢In the US, low-moisture feed blocks increased volumes and achieved profit little changed in local currency terms Food: â€¢In a much more difficult market for flour, operating profit (before retirement benefit charge) more than halved to Â£1.1m (Â£2.5m) on revenue up 2.4% to Â£57.0m (Â£55.7m) â€¢The profit decrease reflected delays in passing on the full impact of the c.80% increase in the average price of wheat, in a competitive market place. â€¢Sales volumes were down, mainly due to the short term loss of a major customer â€¢Further significant savings in production and distribution costs were achieved Engineering: â€¢Operating profit (before retirement benefit charge) totalled Â£1.0m (Â£1.1m) on revenue of Â£9.6m (Â£12.2m) â€¢Bendalls completed three large storage tanks and an automated flask-handling facility for Sellafield's nuclear decommissioning programme â€¢Bendalls delivered the top structure for the world's first large-scale commercial tidal turbine for Northern Ireland â€¢Bendalls was successful in winning substantial orders for LNG conversion plants in Chile and Peru Commenting on the result, Chris Holmes, CEO, said: 'Whilst disappointed not to be able to deliver a 9th successive period of growth in adjusted EPS, the Board believes that, overall, conditions are favourable for a resumption in the upward trend in the Group's results. The increase in bread and milk prices achieved by the Group's customers is helping to improve returns in our food and agricultural businesses. Our animal feed market share increased and our new products are showing good progress. We are constantly monitoring our costs and looking to improve our operating performance. We are committed to increasing shareholder value by growing our core businesses and developing opportunities in new markets. Trading in the new financial year has started well, overall, and is in line with our expectations.' Presentation: Today, there will be a presentation to brokers' analysts and private client brokers between 13:00 and 14:00, over a sandwich lunch, at the offices of Bankside Consultants, 1 Frederick's Place, London EC2R 8AE. Those wishing to attend are asked to contact Bankside Consultants. Enquiries: Carr's Milling Industries plc 01228-554 600 Chris Holmes (Chief Executive Officer) Ron Wood (Finance Director) Bankside Consultants Limited Charles Ponsonby 020-7367 8851 charles.ponsonby@bankside.com CHAIRMAN'S STATEMENT I am pleased to announce unaudited results for the 52 week period to 1 September 2007 which are creditable in the context of challenging market conditions, particularly in the important areas of flour and UK animal feed. Adjusted pre-tax profit is lower than the prior period, as expected, but it is slightly higher than anticipated in February's Trading Statement. The Group's pre-tax profit would have improved but for the impact of an unprecedented increase in wheat prices on the Food Division. During the period, the average price of wheat increased by approximately 80%. This price increase impacted the Group's flour milling business and, to a lesser extent, its animal feed business, as it was unable to pass on increases in raw material costs, fully and immediately, to its customers. In addition, for the period, the farm gate milk price received by the Group's customers averaged no more than 18p per litre, which compares with 24p per litre ten years ago, an uneconomically low level. Happily, market conditions have improved for both Food and Agriculture since the period end. Food is benefiting from the price increases in August and November for flour, together compensating for much of the increased raw material costs, and Agriculture is benefiting from its dairy farming customers being notified of an increase in the farm gate milk price to an average of c. 27p per litre. FINANCIAL OVERVIEW Revenue in the 52 week period to 1 September 2007 increased by 4.2% to Â£252.8m (2006: Â£242.6m). The pre-tax profit was Â£5.5m (2006: Â£6.3m) and basic earnings per share, benefiting from an unusually low effective tax rate of 22.2% (2006: 31.5%), were 50.7p (2006: 51.0p). Adjusted to disregard non-recurring items and the amortisation of intangible assets (as set out in Note 3), pre-tax profit decreased by 17.1% to Â£6.1m (2006: Â£7.3m) and adjusted basic earnings per share were 6.2% lower at 56.0p (2006: 59.7p). Total shareholders' equity increased by 31.7% to Â£26.8m (2006: Â£20.4m), reflecting the profit for the period and the decrease in net retirement benefit obligations as a result of favourable investment performance, higher bond yields and additional contributions. Net debt increased to Â£15.4m (2006: Â£13.9m) but gearing reduced to 57.4% (2006: 68.3%). Net finance costs of Â£1.0m (2006: Â£1.0m) were covered a substantial 6.2 times (2006: 7.9 times) by adjusted Group operating profit. DIVIDENDS The Board is proposing an increase in the final dividend per share of 8.0% to 13.5p (2006: 12.5p). If approved by shareholders at the AGM to be held on 8 January 2008, the dividend will be paid on 17 January 2008 to shareholders on the register at the close of business on 14 December 2007, with the shares going ex-dividend on 12 December 2007. Together with the unchanged interim dividend per share of 5.5p paid on 31 May 2007, the proposed dividends per share for the period total 19.0p (2006: 18.0p), up 5.6%, covered 2.9 times (2006: 3.3 times) by adjusted earnings per share. This would be the sixth successive annual increase in dividends per share and the total proposed for the period is double the 9.5p paid five years ago, in 2002. BUSINESS REVIEW Agriculture Operating profit (before retirement benefit charge) of Â£5.1m (2006: Â£5.0m) was achieved on revenue up 6.6% at Â£185.9m (2006: Â£174.5m). United Kingdom Agriculture achieved both profit and revenue gains against a challenging marketplace. The persistence of low farm gate milk prices and high energy costs, together with higher raw material feed and fertiliser costs, had a negative effect on results. Compound feed did well in both market share and profitability. Sales benefited from the marketing of new products, notably AminoMax, an innovative by-pass protein feed ingredient to enhance animal health and milk yield. The restructuring and integration into Carrs Billington Agriculture of Pye Bibby Agriculture, which was acquired in July 2005, was completed in September 2006. Crystalyx low-moisture feed blocks, increased sales in all areas, apart from sheep brands, because of the mild winter, which reduced the demand for supplementary feeding. Fertiliser performed well, after a slow start. The increased cost of fertiliser to the farmer, caused by higher energy costs and increased worldwide demand as a result of the expanded acreage of bio-fuel crops, resulted in a slight decrease in sales volumes. Carr's Agricultural Retailing and Carr's Machinery increased both revenue and profit from its 14 branches across the north of England and in Scotland. Johnstone Fuels & Lubricants was acquired in January and merged with Wallace Oils. The Group intends to grow its business in this activity, should suitable opportunities present themselves. Bibby Agriculture performed exceptionally well, gaining market share. Overseas In the US, Animal Feed Supplement, which produces Smartlic and Feed in a Drum low-moisture animal feed blocks, increased its volumes. Its profit was little changed in local currency terms, but suffered from the 10% weakening in the average $/Â£ exchange rate during the period. In Germany, Crystalyx Products, the joint venture in conjunction with Agravis, achieved revenues ahead of expectations, in Germany and Eastern Europe. Crystalyx is manufactured at a plant at Oldenburg, north-west Germany. Food In a much more difficult market for flour, operating profit (before retirement benefit charge) more than halved to Â£1.1m (2006: Â£2.5m) on revenue up 2.4% to Â£57.0m (2006: Â£55.7m). Wheat prices rose steadily during the period, culminating in a sudden, very sharp increase in the summer of 2007 as the markets responded to intensifying concerns about global supply and demand. The divisional profit decrease reflected delays in passing on the full impact of these raw material price increases in a competitive market place. However, further significant savings in production and distribution costs were made during the period. Sales volumes were also down, mainly as a result of the short-term loss of a major customer. Engineering Operating profit (before retirement benefit charge) totalled Â£1.0m (2006: Â£1.1m) on revenue of Â£9.6m (2006: Â£12.2m). Bendalls completed three large storage tanks and an automated flask-handling facility for Sellafield Limited's nuclear decommissioning programme in Cumbria. Bendalls was also active in the renewable energy market and delivered the top structure for the world's first large-scale commercial tidal turbine for Marine Current Turbines Limited's Strangford Lough project in Northern Ireland, scheduled for installation in early 2008. In addition, Bendalls was successful in winning some substantial orders for conversion plants in Chile and Peru, for the fast-growing liquefied natural gas market, and for the supply of process equipment for low-sulphur fuel plants in the UK, which are being built to meet new EU emission legislation. Of the smaller businesses, Carrs MSM traded well and has entered the current period with a strong order book, whilst R Hind traded satisfactorily. Outlook Agriculture will benefit appreciably from improved customer confidence following the recent increase in the farm gate milk price. The flour price increases in August and November should together enable the Food Division to return to more acceptable levels of profitability. In Engineering, Bendalls and Carrs MSM have strong order books. Overall, therefore, conditions are favourable for resumption in the upward trend in the Group's results. Richard Inglewood Chairman UNAUDITED CONSOLIDATED INCOME STATEMENT for the period ended 1 September 2007 Notes Unaudited Audited 52 week 52 week period period 2007 2006 Â£'000 Â£'000 Revenue 2 252,753 242,576 Cost of sales (218,603) (206,658) ---------- ---------- Gross profit 34,150 35,918 Net operating expenses (28,365) (28,802) ---------- ---------- Group operating profit 5,785 7,116 Analysed as: Operating profit before non-recurring items and amortisation 6,192 7,987 Non-recurring items and amortisation 3 (407) (871) ---------- ---------- Group operating profit 5,785 7,116 Interest income 392 378 Other finance income 95 143 Interest expense (1,484) (1,532) Share of post-tax profit in associate and joint ventures 738 218 ---------- ---------- Profit before taxation 2 5,526 6,323 Taxation (1,225) (1,989) ---------- ---------- Profit for the period 4,301 4,334 ========== ========== Profit attributable to minority interests 120 139 Profit attributable to equity shareholders 4,181 4,195 ---------- ---------- 4,301 4,334 ========== ========== Earnings per share Basic 4 50.7p 51.0p Diluted 49.9p 50.4p Adjusted earnings per share Basic 4 56.0p 59.7p UNAUDITED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE for the period ended 1 September 2007 Note Unaudited Audited 52 week 52 week period period 2007 2006 Â£'000 Â£'000 Foreign exchange translation differences arising on translation of overseas subsidiaries (253) (150) Actuarial gains/(losses) on retirement benefit obligation: -Group 4,570 (3,900) -Share of associate 1,437 206 Taxation (charge)/credit on actuarial movement on retirement benefit obligation: -Group (1,595) 1,170 -Share of associate (459) (62) ------------ --------------- Net income/(expense) recognised directly in equity 3,700 (2,736) Profit for the period 4,301 4,334 ------------ --------------- Total recognised income and expense for the period 8 8,001 1,598 ============ =============== Attributable to minority interests 8 120 139 Attributable to equity shareholders 8 7,881 1,459 ------------ --------------- 8,001 1,598 ============ =============== UNAUDITED CONSOLIDATED BALANCE SHEET at 1 September 2007 Note Unaudited Audited 2007 2006 Â£'000 Â£'000 Assets Non-current assets Goodwill 1,016 235 Other intangible assets 444 802 Property, plant and equipment 28,481 29,172 Investment property 756 794 Investment in associate 2,456 982 Interest in joint ventures 935 704 Other investments 251 254 Financial assets - Derivative financial instruments 132 37 - Non-current receivables 100 208 Deferred tax assets 3,228 5,162 ---------- ----------------- 37,799 38,350 ---------- ----------------- Current assets Inventories 14,853 11,944 Trade and other receivables 35,481 33,546 Current tax assets 82 1 Cash at bank and in hand 1,315 2,292 ---------- ----------------- 51,731 47,783 ---------- ----------------- ---------- ----------------- Total assets 89,530 86,133 ---------- ----------------- Liabilities Current liabilities Financial liabilities - Borrowings (10,717) (9,682) - Derivative financial instruments (10) (27) Trade and other payables (28,478) (25,387) Current tax liabilities (570) (1,324) ---------- ----------------- (39,775) (36,420) ---------- ----------------- Non-current liabilities Financial liabilities - Borrowings (5,971) (6,512) Retirement benefit obligation (9,807) (15,796) Deferred tax liabilities (3,418) (3,600) Other non-current liabilities (1,705) (1,524) ---------- ----------------- (20,901) (27,432) ---------- ----------------- ---------- ----------------- Total liabilities (60,676) (63,852) ---------- ----------------- ---------- ----------------- Net assets 28,854 22,281 ========== ================= UNAUDITED CONSOLIDATED BALANCE SHEET at 1 September 2007(continued) Note Unaudited Audited 2007 2006 Â£'000 Â£'000 Shareholders' equity Ordinary shares 8 2,064 2,058 Share premium 8 5,073 5,004 Treasury share reserve 8 (101) - Equity compensation reserve 8 95 22 Foreign exchange reserve 8 (483) (230) Other reserve 8 1,570 1,601 Retained earnings 8 18,574 11,895 ------------ ------------------ Total shareholders' equity 8 26,792 20,350 Minority interests in equity 8 2,062 1,931 ------------ ------------------ Total equity 8 28,854 22,281 ============ ================== UNAUDITED CONSOLIDATED CASH FLOW STATEMENT for the period ended 1 September 2007 Note Unaudited Audited 52 week 52 week period period 2007 2006 Â£'000 Â£'000 Cash flows from operating activities Cash generated from operations 5 6,906 11,069 Interest received 389 379 Interest paid (1,407) (1,755) Tax paid (2,053) (2,454) ------------ ---------- Net cash generated from operating activities 3,835 7,239 ------------ ---------- Cash flows from investing activities Acquisition of subsidiaries (net of cash acquired) (1,141) (3) Investment in joint ventures - (710) Net payment of loans to joint ventures (90) (280) Purchase of intangible assets (11) (9) Proceeds from sale of property, plant and equipment 121 192 Purchase of property, plant and equipment (1,896) (2,901) Proceeds from sale of investment property 96 - Proceeds from sale of investments 1 1 Receipt of non-current receivables 100 - Purchase of own shares held in trust (101) - ------------ ---------- Net cash used by investing activities (2,921) (3,710) ------------ ---------- Cash flows from financing activities Net proceeds from issue of ordinary share capital 75 32 Finance lease principal repayments (1,005) (1,047) Repayment of borrowings (83) (2,487) Dividends paid to shareholders (1,486) (1,358) ------------ ---------- Net cash used by financing activities (2,499) (4,860) ------------ ---------- Effect of exchange rate changes (97) (88) ------------ ---------- Net decrease in cash and cash equivalents (1,682) (1,419) Cash and cash equivalents at beginning of the period 1,084 2,503 ------------ ---------- Cash and cash equivalents at end of the period (598) 1,084 ============ ========== NOTES TO THE UNAUDITED PRELIMINARY STATEMENT 1. Basis of preparation The unaudited Group's Preliminary Announcement for the periods ended 1 September 2007 and 2 September 2006 are not statutory accounts within the meaning of Section 240 (5) of the Companies Act 1985. The Group's auditors, PricewaterhouseCoopers LLP, have made a report under Section 235 of the Act on the Group's statutory accounts for the period ended 2 September 2006. Such report was unqualified and did not contain a statement under 237 (2), (3) or (4) of the Act and such accounts have been delivered to the Registrar of Companies. The Group's accounting policies can be found in the statutory accounts. 2. Segmental analysis Operating Revenue profit/(loss)* 2007 2006 2007 2006 Â£'000 Â£'000 Â£'000 Â£'000 Agriculture - normal 185,930 174,492 5,235 4,998 - non-recurring and amortisation - - (90) (44) Food - normal 57,035 55,700 1,419 3,333 - non-recurring and amortisation - - (317) (827) Engineering 9,574 12,171 1,018 1,055 Other 214 213 (313) (325) ------- ------- -------- ------- 252,753 242,576 6,952 8,190 ======= ======= Retirement benefit charge (1,167) (1,074) Interest income 392 378 Other finance income 95 143 Interest expense (1,484) (1,532) Share of post-tax profit of associate 496 393 Share of post-tax profit/(loss) of joint ventures 242 (175) -------- ------- Profit before taxation 5,526 6,323 ======== ======= *before deduction of retirement benefit charge It is not possible to allocate the assets and liabilities of the defined benefit pension scheme across the segments. Therefore, this is shown as a reconciling item. 3. Non-recurring items and amortisation 2007 2006 Amount Tax credit Amount Tax credit Â£'000 Â£'000 Â£'000 Â£'000 Group operating profit: Immediate recognition of negative goodwill - - 77 - Amortisation of intangible assets (407) 114 (948) 284 -------- --------- ------- -------- (407) 114 (871) 284 Share of post-tax profit in associate and joint ventures: Impairment of goodwill and property, plant and equipment - associate, net of tax (119) - - - Amortisation of intangible assets and impairment of goodwill - joint ventures, net of tax (19) - (129) - -------- -------- -------- -------- Total non-recurring items and amortisation (545) 114 (1,000) 284 ======== ======== ======== ======== Profit before taxation 5,526 6,323 Non-recurring items and amortisation (545) (1,000) --------- --------- Adjusted profit before taxation 6,071 7,323 ========= ========= Group operating profit 5,785 7,116 Non-recurring items and amortisation (407) (871) ---------- ---------- Adjusted Group operating profit 6,192 7,987 ========== ========== 4. Earnings per share Basic earnings per share are based on profit attributable to shareholders and on a weighted average number of shares in issue during the period of 8,240,848 (2006 : 8,227,329). The calculation of diluted earnings per share is based on 8,384,975 shares (2006 : 8,328,566). 2007 2006 Earnings Earnings per Earnings Earnings share pence per share Â£'000 Â£'000 pence Earnings per share - basic 4,181 50.7 4,195 51.0 Non-recurring items and intangible asset amortisation: Immediate recognition of negative goodwill - - (77) (0.9) Amortisation of intangible assets 407 5.0 948 11.5 Impairment of goodwill and property, plant and equipment - associate, net of tax 119 1.5 - - Amortisation of intangible asset and impairment of goodwill - joint ventures, net of tax 19 0.2 129 1.6 Taxation arising on non-recurring items (114) (1.4) (284) (3.5) -------- -------- -------- -------- Earnings per share - adjusted 4,612 56.0 4,911 59.7 ======== ======== ======== ======== 5. Cash generated from operations 2007 2006 Â£'000 Â£'000 Profit for the period 4,301 4,334 Adjustments for: Tax 1,225 1,989 Depreciation on property, plant and equipment 3,507 3,391 Loss on disposal of property, plant and equipment 18 27 Depreciation on investment property 19 28 Profit on disposal of investment property (77) - Loss/(profit) on disposal of investments 3 (1) Immediate recognition of negative goodwill - (77) Intangible asset amortisation 446 986 Net fair value (gains)/losses on derivative financial instruments (17) 27 Net fair value loss on share based payments 84 27 Net foreign exchange differences 3 14 Interest income (392) (378) Interest expense and borrowing costs 1,491 1,539 Net fair value gains on derivative financial instruments (95) (143) Share of profit from associate and joint ventures (738) (218) IAS19 income statement credit in respect of employer contributions (2,586) (1,297) IAS19 income statement charge 1,167 1,074 Changes in working capital (excluding the effects of acquisitions) (Increase)/decrease in inventories (2,738) 1,003 (Increase)/decrease in receivables (321) 1,903 Increase/(decrease) in payables 1,606 (3,159) --------- --------- Cash generated from continuing operations 6,906 11,069 ========= ========= 6. Pensions The Group operates its current pension arrangements on a defined benefit and defined contribution basis. The valuation under the IAS19 accounting basis showed a deficit net of the related deferred tax asset in the scheme at 1 September 2007 of Â£7.1m (2 September 2006: Â£11.1m). The movement in the current year arose principally as a result of favourable investment performance, higher bond yields and additional Group contributions. A Group subsidiary undertaking is a participating employer in a defined benefit pension scheme of the associate. The IAS19 accounting basis showed a deficit, for that scheme, net of the related deferred tax asset in the scheme at 1 September 2007 of Â£1.2m (2006: Â£4.0m). The Group recognises in its balance sheet approximately 50% of the deficit and deferred tax asset through its investment in associate. In the period, the retirement benefit charge was Â£1,167,000 (2006: Â£1,074,000). 7. Analysis of changes in net debt At 3 Other At 1 September Cash Non-Cash Exchange September 2006 Flow Changes Movements 2007 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Group Cash and cash equivalents 2,292 (977) - - 1,315 Bank overdrafts (1,208) (608) - (97) (1,913) -------- -------- -------- --------- --------- 1,084 (1,585) - (97) (598) Loans and other borrowings: - current (7,634) 83 (500) - (8,051) - non-current (5,640) - 493 - (5,147) Finance leases: - current (840) 1,005 (918) - (753) - non-current (872) - 48 - (824) -------- -------- -------- --------- --------- Net debt (13,902) (497) (877) (97) (15,373) ======== ======== ======== ========= ======== 8. Statement of changes in shareholders' equity and minority interest Equity Foreign Share Treasury Compen-sation Ex-change Other Total Share Premium Share Reserve Reserve Re-serves Retained Shareholders' Minority Group Capital Account Reserve Â£'000 Â£'000 Â£'000 Earnings Equity Interest Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 ----------------- --------- ---------- ------------- ------------- ---------- --------- --------- ------------- ------- ----------------- --------- ---------- ------------- ------------- ---------- --------- --------- ------------- ------- Balance at 2,058 5,004 - 22 (230) 1,601 11,895 20,350 1,931 22,281 3 September 2006 Total recognised income and expense for the period - - - - (253) - 8,134 7,881 120 8,001 Dividends paid - - - - - - (1,486) (1,486) - (1,486) Equity settled share- based payment transactions, net of tax - - - 73 - - - 73 11 84 Share options exercised by employees 4 20 - - - - - 24 - 24 Allotment of shares 2 49 - - - - - 51 - 51 Purchase of own shares held in trust - - (101) - - - - (101) - (101) Transfer - - - - - (31) 31 - - - ----------------- --------- ---------- ------------- ------------- ---------- --------- --------- ------------- -------- ----------------- --------- ---------- ------------- ------------- ---------- --------- --------- ------------- -------- Balance at 1 September 2007 2,064 5,073 (101) 95 (483) 1,570 18,574 26,792 2,062 28,854 =============== ========= ========= =========== =========== ========== ========= ========= ============= ======== ====== 9. The board of directors approved the Preliminary Announcement on 12 November 2007. 10. The financial information included in the Chairman's Statement in this Preliminary Announcement for the period ended 1 September 2007 is unaudited. The financial information set out in this Preliminary Announcement does not constitute the statutory accounts for the periods ended 1 September 2007 and 2 September 2006. The statutory accounts for the period ended 1 September 2007 will be finalised on the basis of the financial information presented by the directors in this Preliminary Announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. 11. The Company intends to post the Report & Accounts to shareholders by 12 December 2007. Further copies will be available upon request from the Company Secretary, Carr's Milling Industries PLC, Old Croft, Stanwix, Carlisle, CA3 9BA or alternatively on the Company's website: www.carrs-milling.com This information is provided by RNS The company news service from the London Stock Exchange

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