Final Results

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

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