Final Results
Carr's Milling Industries PLC
13 November 2000
13 November 2000
CARR'S MILLING INDUSTRIES PLC - PRELIMINARY ANNOUNCEMENT
Further progress, Board confident
* Carr's announces that, in the year ended 2 September 2000, it
substantially increased Group operating profit and further developed its
business, despite adverse market conditions in all three areas of
operation - agriculture, food and engineering.
2000 1999 Increase
Group turnover £98.0 m £97.3 m 0.7%
Group operating profit £3.47m £2.38m 45.8%
Pre-tax profit: pre-exceptionals £2.49m £2.27m 9.5%
Earnings per share: pre-exceptionals 20.2p 19.8p 2.0%
Cashflow from operating activities £6.98m £2.51m 178.1%
Dividends per share 9.0 p 8.0 p 12.5%
* The Agriculture Division was by some way the largest contributor to both
turnover, with a 6.7% increase to £73.0 m (1999: £68.4 m), and operating
profit, to £3.1m from £1.1m, with the major area of progress being the
USA, where the US manufactured branded low moisture feed blocks, SmartLic
and Feed in a Drum, continued to gain market share, the second plant at
Belle Fourche, South Dakota, was commissioned in September 1999 and there
was no repeat of the 1999 litigation provision.
* The UK manufactured feed blocks, Crystalyx and Horslyx, continued to
make excellent progress in the UK and continental Europe, whilst the
fertiliser business made a good contribution, having emerged strongly from
a period of industry turmoil.
* The Food Division increased its operating profit, to £0.61m from £0.50m,
despite slightly reduced turnover of £18.3 m (1999: £18.5 m), and progress
was made across all three businesses - Carr's Flour Mills, Carrs Foodtech,
and George Shackleton, Dublin.
* The Engineering Division reported only a small operating loss of £0.15m
(1999: profit £0.85m) despite a turnover substantially reduced to £6.7 m
(1999: £10.5 m).
* David Newton, Chairman, stated 'We see little significant change on the
horizon in our main trading sectors, which in essence means that we have
to continue to concentrate on doing well at what we do best and maximize
both our efficiencies and any opportunities as they arise. Management and
staff have already demonstrated their capabilities operating in tough
trading conditions and that gives the Board good reason for confidence in
the future performance of the Group.'
Enquiries:
Carr's Milling Industries PLC 01228-528291
Chris Holmes (Chief Executive)
Ron Wood (Finance Director)
Bankside Consultants Limited 020-7220 7477
Charles Ponsonby
CHAIRMAN'S STATEMENT
In the year ended 2 September 2000, the Group substantially increased Group
operating profit and further developed its business, despite adverse market
conditions in all three areas of operation - agriculture, food and
engineering.
FINANCIAL OVERVIEW
I indicated in my Interim Report in May that, despite the well-known problems
in British agriculture and the effects of currency exchange rates on our
engineering businesses, the Board remained confident of further progress in
the full year, even allowing for the expected net loss of income this year on
our 50 per cent share of the profit from the Robertsons bakery joint venture,
which was sold in August 1999.
It is pleasing therefore to be able to report to you a substantial increase in
Group operating profit to £3.47 million (1999: £2.38 million). The pre-tax
profit of £2.17 million also compares very favourably with last year, a profit
of £3.32 million, after taking into account in 2000 £0.62 million of
reorganisation costs and early trading losses associated with our share of AF
plc, the animal feed and farm supplies company, recently acquired by our joint
venture company, Carrs Billington Agriculture. The result in 1999 also
reflects the share of profit and the one time gain on disposal of our share in
Robertsons and its related property, which together added £2.08 million
profit.
Basic earnings per share were 17.5 p (1999: 29.5p which included the gain on
the disposal of Robertsons), or 20.2p (1999: 19.8p ) on the alternative basis.
Group turnover increased slightly to £98.0 million (1999: £97.3 million), with
the increased sales of fertilisers being offset by the reduction in activity
in engineering.
The balance sheet remains strong, with equity shareholders' funds rising to £
17.57 million (1999: £16.79 million). Gearing reduced to 41% from 57% and 85%
at the two previous year-ends, and interest cover was 3.8 times (1999: 4.0
times).
DIVIDENDS
The Board is proposing an increased final dividend per share of 6.0p (1999:
5.0p). If approved at the AGM, to be held at 11.30 a.m. on 9 January 2001 at
the Crown Hotel, Wetheral, Carlisle, this will be paid on 24 January 2001 to
shareholders on the register at close of business on 3 January 2001. Total
dividends per share for the year of 9.0p (1999: 8.0p), up 12.5 per cent, are
covered 2.2 times by earnings per share (alternative basis).
OPERATIONAL REVIEW
Agriculture
Operating profit for the Agriculture Division increased to £3.1 million, from
a very low base in 1999 of £1.1 million, on a turnover of £73.0 million (1999:
£68.4 million). The major areas of progress were in the USA, with our US
manufactured branded low moisture feed blocks, 'SmartLic' and 'Feed in a
Drum', continuing to gain market share. Also, the results benefited from the
first full year's contribution from our second plant in the USA, at Belle
Fourche, South Dakota, commissioned in September 1999.
The ongoing lawsuit against our USA subsidiary, Animal Feed Supplement, Inc.,
has reached a point where the matter should be resolved by means of a
settlement agreement in our favour. We anticipate the agreement comprising the
dismissal of the lawsuit and a partial recovery of our defence costs, which
will not be material, no monetary or other liability in connection with the
lawsuit and no restrictions on the use of the steel half- barrel trademark.
Sales of our UK manufactured feed blocks, 'Crystalyx' and 'Horslyx', continue
to grow in the UK and continental Europe, with excellent progress being made
despite the strength of sterling. Sales of the equine brands, 'Horslyx' and
the recently launched 'Stablelick', are exceeding budget.
The expected progress was made by Carrs Billington Agriculture (our 50 per
cent joint venture with Edward Billington & Son, established in July 1998, to
manufacture ruminant feeds exclusively for the two shareholders) through
increased volumes and production efficiencies plus the benefit of not having
the initial set-up costs. The mills performed well in the year.
Carrs Billington Agriculture completed the recommended take-over, for £0.85
million in cash, of AF plc in June 2000. The Group's share of the early
trading losses and reorganisation costs from the date of acquisition until 2
September 2000 was £0.62 million. In the year ended 30 November 1999 AF, which
had animal feed mills and six retail stores, made a pre-tax loss of £3.75
million on a turnover of £49.14 million. Following a strategic review of AF
operations the Preston animal feed mill was closed in July and production
consolidated in the three mills at Carlisle, Penrith and Stone. The Preston
head office was also closed and the administration moved to Carlisle. Our
share of the reorganisation costs was £0.43 million. With the reorganisation
and mill closure complete, we expect the benefits from manufacturing and
distribution efficiencies, combined with an increase in sales of feed and
fertilisers, to begin to be seen.
The four fertiliser blending plants in Scotland and the two plants in North
West England made a good contribution to this year's results, having emerged
strongly from a period of industry turmoil.
The eight retail branches that service the agricultural market in the North of
England and South of Scotland performed well with increased sales.
Agricultural machinery is still affected by the very low level of farm incomes
inhibiting planned capital expenditure on a proper scale. There are
encouraging signs of a badly needed increase in the price farmers are paid for
milk. This, and the need eventually to replace working equipment with new
tractors and other machinery, puts us in a strong position for the future.
After the year-end, in September 2000, an agricultural merchants business
operating from three retail stores in Fife, Scotland was acquired.
Food
The Food Division, comprising Carrs Flour Mills and Carrs Foodtech in Cumbria
and George Shackleton in Dublin, made an increased operating profit of £0.61
million (1999: £0.50 million) on a turnover of £18.3 million (1999: £18.5
million). Progress was made across all three activities.
Carrs Flour Mills, much the largest of the businesses, increased sales of
quality flour in a market suffering from over-capacity. The benefit of recent
capital expenditure in the mill at Silloth is being shown in increased
efficiencies.
The speciality ingredients business, Carrs Foodtech, continues to develop into
new markets, most recently the ready meals sector.
George Shackleton, Dublin, achieved an improved performance despite margins
being squeezed on ingredients sourced from the UK, which were adversely
affected by exchange rates.
Engineering
Our Cumbria-based Engineering Division reported only a small operating loss of
£0.15 million (1999: profit £0.85 million) despite a turnover reduced to £6.7
million (1999: £10.5 million).
Trading in our high integrity welding business, Bendalls, suffered in one of
its key market sectors from the low price of oil for much of the period with
investment in the oil, gas and petrochemical industries being at very low
levels. Coupled with the strength of sterling making the domestic market more
competitive through imports and overcapacity as a result of lost exports,
management's emphasis was placed on reducing costs and exploring new markets.
With the progress that has been made in developing these new markets together
with the dramatic increase in the price of oil, there has been a significant
upturn in enquiry levels at Bendalls which should lead to a return to profit
in the coming year. During the year, Bendalls gained the CE mark in accordance
with the Pressure Equipment Directive governing the supply of pressure vessels
to the EU. Subsequent to the year-end, in September 2000, Bendalls was
nominated as a major supplier of fabricated and machine spares to BNFL
Sellafield.
Capital expenditure in animal feed mills is running at a very low level with
feed mills being closed rather than built or expanded. This has impacted
severely on the results of Keytor, our mechanical and electrical engineer.
Keytor also operates in the UK human food sector and manufacturing indirectly
for export; both of these sectors adversely impacted on its performance as a
result of uncertainty as to the corporate future of a large customer delaying
decisions on large capital/maintenance projects and the result of sterling's
strength, respectively.
R Hind, the commercial and motor vehicle body repair business and the smallest
of the three engineering businesses, did not escape the problems faced by our
two larger engineering companies and profits were lower than the previous
year.
In 2001, the Engineering Division is expected to return to a modest level of
profitability based on current market conditions.
OUTLOOK
We see little significant change on the horizon in our main trading sectors,
which in essence means that we have to continue to concentrate on doing well
at what we do best and maximise both our efficiencies and any opportunities as
they arise.
Each part of the business has specific issues to address in the next 12 months
but management and staff have already demonstrated their capabilities
operating in tough trading conditions and that gives the Board good reason for
confidence in the future performance of the Group.
David Newton 13 November 2000
Chairman
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 2 September 2000
2 September 2000 28 August 1999
£000 £000
Turnover: group and share of joint venture
Continuing operations 104,186 100,208
Less: share of turnover of joint venture - (6,192) (2,872)
continuing operations
Group turnover 97,994 97,336
===== =====
Group operating profit - continuing operations 3,470 2,377
Share of operating (loss)/profit in joint (629) (10)
venture -
continuing operations
Associate - discontinued operations - 558
______ ______
Total operating profit: group and share of 2,841 2,925
Joint venture and associate
Continuing operations
Investment income 1 6
Profit on disposal of investment 111 -
Discontinued operations
Profit on sale of associate - 1,434
Profit on disposal of fixed assets - 75
______ ______
Profit on ordinary activities before interest: 2,953 4,440
Interest receivable
Group 21 23
Joint venture 12 10
Associate - 12
Interest payable - group (820) (1,168)
______ ______
Profit on ordinary activities before taxation 2,166 3,317
Taxation (700) (940)
______ ______
Profit on ordinary activities after taxation 1,466 2,377
Minority interest (68) (14)
______ ______
Profit attributable to shareholders 1,398 2,363
Dividends (720) (640)
______ ______
Retained profit 678 1,723
===== =====
Earnings per share
Basic 17.5p 29.5p
Diluted 17.5p 29.5p
Alternative basis 19.8p 20.2p
Dividends per share 8.0p 9.0p
CONSOLIDATED BALANCE SHEET
at 2 September 2000
2 September 2000 28 August 1999
£000 £000 £000 £000
FIXED ASSETS
Intangible assets 43 60
Tangible assets 18,620 18,141
INVESTMENT
Investment in joint venture
Share of gross assets 4,379 925
Share of gross liabilities (4,596) (825)
______ ______
(217) 100
Loan to joint venture 550 -
Other investments 22 23
______ ______
355 123
______ ______
19,018 18,324
CURRENT ASSETS
Assets held for resale 50 307
Stocks 7,895 7,723
Debtors 14,549 16,098
Cash at bank and in hand 140 102
______ _____
22,634 24,230
CREDITORS
Amounts falling due within one year 19,771 21,043
_____ _____
NET CURRENT ASSETS 2,863 3,187
______ _____
TOTAL ASSETS CURRENT LIABILITIES 21,881 21,511
CREDITORS
Amounts falling due after more than one year 2,157 2,506
PROVISION FOR LIABILITIES AND CHARGES 1,534 1,578
DEFERRED INCOME 290 345
_____ _____
3,981 4,429
_____ _____
17,900 17,082
===== =====
CAPITAL AND RESERVES
Called-up share capital 1,999 1,999
Reserves 15,573 14,794
_____ _____
Equity shareholders' funds 17,572 16,793
Minority interests - equity 328 289
_____ _____
17,900 17,082
===== =====
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 2 September 2000
2 September 28 August
2000 1999
£'000 £'000
Net cash inflow from operating activities 6,984 2,511
_______ _______
Dividend received from associate - 390
_______ _______
Returns on investments and servicing of finance
Interest received 4 23
Interest paid (796) (1,110)
Interest paid on finance leases (70) (89)
Investment income received 1 6
_______ _______
Net cash outflow from returns on investments
and servicing of finance (861) (1,170)
_______ _______
Taxation (478) 90
_______ _______
Capital expenditure and financial investment
Purchase of tangible fixed assets (1,121) (1,547)
Sale of tangible fixed assets 200 1,775
Sale of assets held for resale 257 197
Sale of investment 112 -
Loan to joint venture (550) -
_______ _______
(1,102) 425
_______ _______
Acquisitions and disposals
Purchase of trade - (185)
Investment in joint venture (150) (100)
Disposal of investment in associate - 2,243
_______ _______
(150) 1,958
_______ _______
Equity dividends paid (640) (400)
_______ _______
Cash inflow before management of liquid
resources and financing 3,753 3,804
Financing (1,489) (1,606)
_______ _______
Increase in cash in the year 2,264 2,198
NOTES
1 Segmental analysis
Group turnover Group operating profit
2000 1999 2000 1999
£000 £000 £000 £000
Business analysis
Agriculture 73,000 68,390 3,132 1,103
Food 18,334 18,484 607 504
Engineering 6,660 10,462 (150) 854
Central - - (119) (84)
_____ _____ _____ _____
97,994 97,336 3,470 2,377
==== ==== ==== ====
2 Cost of sales and other operating income and expenses
2000 2000 1999 1999
£000 £000 £000 £000
Cost of sales 81,184 82,765
_____ _____
Gross profit 16,810 14,571
Net operating expenses
Distribution costs (6,267) (5,511)
Administrative expenses - normal (7,073) (6,220)
- exceptional - (463)
_____ _____
(7,073) (6,683)
_____ _____
Operating profit 3,470 2,377
Share of operating loss in joint venture (197) (10)
- normal
- exceptional (432) -
Share of operating profit in associate - 558
- discontinued
_____ _____
Total operating profit: group and share 2,841 2,925
of joint venture and associate
==== ====
All results relate to continuing operations except as otherwise noted above.
In 2000 the exceptional element of loss in the joint venture relates to the
company's share of the reorganisation costs associated with the closure of the
Preston Mill and the head office acquired by our joint venture company, Carrs
Billington Agriculture Limited. The tax credit for the year in respect of this
loss is £138,000.
In 1999 the exceptional administrative costs related to the costs incurred and
a provision for the likely costs of defending proceedings against, Animal Feed
Supplement, Inc. ('AFS'), a subsidiary undertaking. This litigation related to
a dispute with a competitor in the US, which alleged that the subsidiary
undertaking had infringed a trademark in the US. In May 2000 the Courts ruled
in our favour and granted AFS summary judgment in all trademark related
matters. AFS is currently pursuing a competitor in the US for compensation for
costs incurred in defending the lawsuit. Legal costs incurred in 2000 were
charged against the provision created in 1999.
3. Non operating items
In 2000 the Company disposed of its investment in a listed company for a gross
consideration of £112,000, which was settled in cash. The tax charge for the
year is £35,000.
In 1999 the Company disposed of its fifty per cent holding of the
issued share capital of Robertsons Limited giving rise to a profit on
disposal of £1,434,000. On the same date Robertsons (Bakers) Limited
made the associated disposal of the leasehold property known as the
Bakery giving rise to a profit on disposal of £75,000. The tax charge
in respect of these disposals is £268,000.
4 Taxation 2000 1999
£000 £000
UK corporation tax at 30% (1999: 30.6%) - current 713 730
- deferred 98 41
(Under)/over provision in respect of prior years (96) 9
- current
- deferred (23) (71)
Joint venture (150) -
Asociate - 179
Overseas taxation 158 52
_____ _____
700 940
==== ====
5 Dividends 2000 1999
£000 £000
Equity
Ordinary - Interim paid of 3.0p per share (1999: 3.0p) 240 240
- Final proposed of 6.0p per share (1999: 5.0p) 480 400
_____ _____
720 640
===== =====
6. Earnings per share
The calculation of basic earnings per share is based on profits
attributable to shareholders of £1,398,000 (1999: £2,363,000) and on
7,996,639 shares (1999: 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 £1,398,000 (1999: £2,363,000) and on 8,002,993 shares
(1999 : 7,998,406 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 £1,398,000
adjusting for exceptional items of £321,000 net of related tax charge of £
103,000 to give a profit for the financial year of £1,616,000 (1999: £
1,585,000).
2000 1999
Earnings Earnings
Earnings per Earnings per
share share
£'000 pence £'000 pence
Earnings per share 1,398 17.5 2,363 29.5
Exceptional items:
Continuing operations (111) (1.4) 463 5.8
Gains on disposal of associate and other - - (1,509) (18.9)
fixed assets
Share of reorganisation costs in joint 432 5.4 - -
venture
Taxation arising on exceptional items (103) (1.3) 268 3.4
________ ________ ________ ________
Earnings excluding exceptional items and 1,616 20.2 1,585 19.8
alternative earnings per share
7. Cash flow from operating activities
2000 1999
£'000 £'000
Continuing operations
Group operating profit 3,470 2,377
Depreciation charge 1,927 1,881
Profit on disposal of fixed assets (17) (173)
Goodwill amortisation 17 12
Grants amortisation (55) (70)
Increase in stocks (172) (437)
Decrease/(increase) in debtors 1,568 (854)
Increase/(decrease) in creditors 434 (136)
Decrease in provisions (188) (89)
_______ _______
6,984 2,511
8. Reconciliation of net cash flow to movement in net debt
2000 1999
£'000 £'000
Increase in cash in the year 2264 2198
Cash outflow from debt and lease financing 1489 1606
_______ _______
3,753 3,804
New finance leases (1,292) (495)
Exchange adjustments (76) (61)
_______ _______
2,385 3,248
Net debt at 29 August 1999 (9,782) (13,030)
_______ _______
Net debt at 2 September 2000 (7,397) (9,782)
9. The board of directors approved the preliminary announcement on
13 November 2000.
10. The preliminary results for the year ended 2 September 2000 are
unaudited and do not constitute the Company's statutory accounts. Comparative
figures have been derived from the statutory accounts for the year ended 28
August 1999, which have been delivered to the Registrar of Companies. They
were the subject of an unqualified audit report by the Company's auditors. The
statutory accounts for the year ended 2 September 2000 will in due course be
delivered to the Registrar of Companies.
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