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
• 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.
• Turnover up by 3.7% to £148.7m.
• Profit before tax and exceptionals up by 38.9% to £4.57m (including
£0.5m of additional pension costs); on a reported basis, the increase was 13.1%
to £4.07m.
• Exceptional costs of £0.5m represent reorganisation costs.
• 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.
• Final dividend per share of 7.5p (2002: 6.5p), giving total
dividends per share of 11.5p, up 21.1% (2002: 9.5p).
• Strong balance sheet: net debt down by £0.4m to £5.6m, giving
gearing of 25.2%, and interest cover of 7.1 times.
• Net assets per share increased by 7.0% to 275p.
• 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
£0.2m'
• 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 £148.7 million (2002: £143.4 million) and
profit before tax was up by 13.1% to £4.07 million (2002: £3.59 million), a
record despite an increase in the recurring funding requirements for the Group's
pension arrangements of £0.5 million. Profit before tax and exceptional items
was up by 38.9% to £4.57 million (2002: £3.29 million). Exceptional costs of
£0.5 million represent the reorganisation costs associated with the Engineering
(£0.2 million) and Agriculture Divisions
(£0.3 million) (2002: exceptional profit of £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 £22.2 million from £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 £5.6 million from £6.0 million last year,
and gearing reduced to 25.2% (2002 : 28.9%). Net interest payable of £0.66
million (2002 : £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 £5.0 million before one-off costs of £0.3 million (2002 :
£4.0 million) was achieved on a turnover of £120.8 million (2002 : £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 £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 £599,000
(2002 : £727,000) on a turnover of £20.3 million (2002 : £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 £683,000
including the £0.2 million one-off costs detailed below (2002 : loss of
£328,000) on a turnover of £7.6 million (2002 : £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 £0.2 million, in addition to which the operating losses to the date of
closure were £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 £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
£000 £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
£000 £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
£000 £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
£'000 £'000 £'000 £'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
£'000 £'000 £'000 £'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
£'000 £'000 £'000 £'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
£'000 £'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
£'000 £'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
£2,460,000 (2002: £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 £2,460,000 (2002: £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 £2,460,000
adjusting for exceptional items of £338,000 net of related tax charge of
£166,000 to give a profit for the financial year of £2,798,000
(2002:£2,678,000).
2003 2002
Earnings Earnings
Earnings per share Earnings per share
£'000 Pence £'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
£'000 £'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
£'000 £'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.
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