Final Results
Carr's Milling Industries PLC
08 November 2004
CARR'S MILLING INDUSTRIES PLC - PRELIMINARY ANNOUNCEMENT
Carr's, the Cumbria-based agriculture, food and engineering group, announces a
sixth successive annual increase in underlying earnings per share.
Financial Highlights
* Turnover increased by 4.7% to £155.7m.
* The pre-tax profit of £5.13m represents an increase of 26.0% (reported)
and 12.3% (underlying).
* Basic earnings per share increased by 30.8% to 39.9p.
* Adjusted earnings per share increased by 15.0%.
* Net assets per share increased by 8.1% to 297.7p.
* Dividends per share are 17.4% higher at 13.5p, covered 3.0 x.
Commercial Highlights
• Agriculture achieved an operating profit of £5.73m (2003: £5.03m,
after one-off costs of £0.26m) on a turnover of £124.4m (2003: £120.8m). This
outcome reflected further improvements in UK animal feed and fertiliser,
outweighing a decreased contribution from US animal feed after an exceptionally
good previous year.
• Food's operating profit was halved at £0.27m (2003: £0.60m) on a
turnover increased by 8.4% at £22.0m following an exceptionally large rise in
the price of wheat, in particular in the first half.
• Engineering broke even (2003: made a loss of £0.68m, after one-off
costs of £0.24m) on a turnover up 22.2% at £9.3m. This result benefited from the
closure of Keytor in March 2003 and the subsequent consolidation of R Hind from
three sites to one.
• Subsequent to the year end, on 11 October 2004, Carr's announced the
£5.3m disposal of its property at London Road, Carlisle, where Bendalls, its
high integrity welding business, is currently based.
• Also subsequent to the year end, on 29 October 2004, Carr's announced
the proposed acquisition of Meneba UK Holdings Limited, which owns and operates
two flour mills, for £4.7m in cash plus the repayment of approximately £5.4m of
inter-company debt.
David Newton, Chairman, stated 'Despite having to absorb higher energy costs
across the Group, mainly for electricity, the current year is expected to show
further progress in all three Divisions, especially in Food, where gross margins
in flour have returned to a more normal level following unprecedented wheat
price increases last year. With the growth of the existing business combined
with the Meneba acquisition, the Board considers that Carr's is well placed for
further progress.'
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
In the year ended 28 August 2004, Agriculture and Engineering improved their
results whilst Food's operating profit halved in unusually difficult market
conditions for flour during the first six months of the year. As usual,
Agriculture was much the most important of the three Divisions in terms of both
turnover and profit.
FINANCIAL OVERVIEW
On turnover up 4.7% at £155.7m (2003: £148.7m), operating profit increased by
22.0% to £5.77m (2003: £4.73m), whilst pre-tax profit was 26.0% ahead at £5.13m
(2003: £4.07m), despite a £0.4m increase in pension costs. Basic earnings per
share advanced by 30.8% to 39.9p (2003: 30.5p). If 2003's £0.50m exceptional
reorganisation costs are disregarded, the increases in operating profit, pre-tax
profit and earnings per share are 10.4%, 12.3% and 15.0%, respectively.
Year end equity shareholders' funds increased by 8.1% to £24.04m (2003:
£22.24m), representing net assets per share of 297.7p (2003: 275.4p). Net debt
increased slightly to £5.76m (2003: £5.62m), giving gearing of 24.0% (2003:
25.2%). Net interest payable is similar to last year at £0.65m (2003: £0.66m)
and was covered 8.9 times (2003: 7.1 times) by profit before interest and tax.
DIVIDENDS
A final dividend per share of 9.0p (2003: 7.5p), up 20.0%, is proposed, payable
on
21 January 2005 to shareholders on the register at close of business on 17
December 2004, with an ex-dividend date of 15 December 2004.
Together with the interim dividend per share of 4.5p (2003: 4.0p), proposed
dividends per share are 17.4% higher at 13.5p (2003: 11.5p), covered 3.0 times
(2003: 2.7 times, or 3.0 times if exceptional items are disregarded).
The AGM will be held at 11.30 am on Thursday 6 January 2005 at the Crown Hotel,
Wetheral, Carlisle.
OPERATIONAL REVIEW
Agriculture
Feed
The Group's animal feed business comprises the UK manufacture of compound feed
by Carrs Billington Agriculture (in association with Edward Billington & Sons
Ltd) at Carlisle (Cumbria), Penrith (Cumbria) and Stone (Staffordshire) and the
blending of animal feeds as Askrigg (North Yorkshire) and Kirkbride (Cumbria).
Carrs Billington Agriculture's compound feed and blends volumes were well ahead
of last year, but margins were squeezed due to under-recovery of unprecedented
raw material cost increases in grain and proteins.
The low-moisture animal feedblock business comprises the UK manufacture by
Caltech at Silloth (Cumbria) and in the US by Animal Feed Supplements at Belle
Fourche (South Dakota) and Poteau (Oklahoma).
Caltech's Crystalyx low-moisture animal feedblock again increased turnover in
both the UK and Continental Europe. Its Calflyx Easy Breather, a new product
launched for calves, exceeded all expectations. Caltech also benefited from the
first full year of molasses being imported into the port at Silloth.
In the USA in 2003, Animal Feed Supplements benefited from the US Government's
Drought Assistance Programme, which subsidised feed supplement products for
ranchers in certain states, thereby achieving a record sales increase in that
year of 29%. In 2004, the sales were lower as ranchers using subsidised stock of
Feed in a Drum and Smartlic in particular during the first half of the financial
year. Underlying growth continued to be achieved as new markets were entered.
The strength of the pound versus the US dollar also had a negative impact in
excess of £0.1m.
Fertiliser
Carrs Fertiliser operates three blending sites, at Invergordon (Easter Ross),
Montrose (Angus) and Silloth (Cumbria), producing a wide range of fertilisers.
Following the successful rationalisation of production facilities, with the
planned reduction of sales volumes shedding certain low margin business, the
profitability improved to respectable levels. The investment in Silloth and
Montrose to enhance capacity and efficiency enabled demand to be met at the
critical time of usage.
Retail
Following the closure in March 2004 of a small branch at Pitscottie (Fife),
Carr's Retail comprises 14 branches, from Perth in the north to Leek
(Staffordshire) in the south, selling farm supplies.
Turnover increased by 13%, reflecting the opening in December 2003 of a larger
branch in Cockermouth (Cumbria), which performed ahead of expectations, and the
addition of new products to the portfolio.
Machinery
Carr's Machinery distributes new and used agricultural and groundcare machinery
from six of the retail branches, in the north west of England and the south west
of Scotland. These branches have modern workshops that maintain and repair
machinery and provide a comprehensive spare parts service.
Turnover and profit again exceeded expectations, and were ahead of last year,
which was a record.
Food
Carr's principal food company is Carrs Flour Mills, a cereals processing company
with flour mills at Silloth using the latest milling technology to meet the
quality and specialist requirements of bakers, food manufacturers and retailers.
Following a very difficult first half as the result of considerable
under-recovery of the 60% increase in UK wheat prices, the second half performed
better, with selling price increases being effective in the early months of
2004. The high-quality Carrs Breadmaker brand, which was launched two years ago,
while a small percentage of divisional turnover, continues to sell well, with
listings in three major multiple retailers.
On 29 October 2004 we exchanged contracts to acquire, for a cash consideration
of £4.7 million, the flour milling business of Meneba UK which has two flour
mills, Robert Hutchinson at Kirkcaldy, Fife and Greens Flour Mills at Maldon,
Essex. The acquisition is subject to shareholder approval at the Extraordinary
General Meeting on 18 November 2004 and the details of the acquisition were
forwarded in a Circular to shareholders on 1 November 2004.
The enlarged milling group will have a strong market presence in the northern
part of the UK and will increase its activity in the area of speciality mixes
under both the Carrs and the Greens names. The acquisition will be an excellent
strategic fit for Carrs and will more than double the size of our flour
business. It is expected to be earnings enhancing in the first full year of
ownership.
Engineering
Engineering now comprises Bendalls and R Hind, both of which are based in
Carlisle, and Carrs MSM, which is based in Swindon. Bendalls, whose specialism
is precision welding, designs and manufactures plant and equipment for the
petro-chemical, oil and gas, nuclear power, pharmaceutical, process and water
industries. R Hind provides vehicle body building and accident repairs for cars
and commercial vehicles. Carrs MSM designs and manufactures master slave
manipulators, which are key components for many industries but notably the
nuclear industries.
Bendalls performed better, with a steady order book throughout the year and
improved overall margins; the business has won substantial orders in recent
months. Our involvement in renewable energy continues and funding for phase 2 of
the underwater turbine project 'Seagen' is agreed. The design of 'Seagen' should
be approved in early 2005, with manufacture to progress thereafter. R Hind had a
disappointing year, with tight margins and some unprofitable work. Carrs MSM,
which was set up in December 2003, has a small but satisfactory order book, with
its main customer being British Nuclear Fuels Limited.
After the year end, in October, Carr's completed the disposal of its property at
London Road, Carlisle, where Bendalls Engineering, its high integrity welding
business, is currently based.
The cash consideration receivable by Carr's is £2.6 million. In addition, the
purchaser has committed to build a new 55,000 sq ft factory for Bendalls at
Kingstown Industrial Estate which is expected to cost £2.7 million, bringing the
total consideration to £5.3 million. The cash consideration will be used to
equip the new factory and for general working capital purposes.
The total book value of the net assets disposed is £0.8 million. Accordingly,
the profit on disposal is expected to be approximately £4.5 million, which will
be accounted for as an exceptional gain in the current year to 3 September 2005.
A further benefit, the Directors believe, is that the change in location will
enable Bendall to operate from a more efficient factory.
Bendalls will remain operating from the London Road site until the completion of
the new factory and the equipping thereof to its own specifications at a cost to
it of
£0.75 million, which is expected to be in August 2005.
OUTLOOK
Despite having to absorb higher energy costs across the Group, mainly for
electricity, the current year is expected to show further growth in all three
Divisions, especially in Food, where gross margins in flour have returned to a
more normal level following unprecedented wheat price increases last year.
With the growth of the existing business combined with the acquisition of Meneba
UK, the Board considers that Carr's is well placed for further progress.
David Newton
Chairman 8 November 2004
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 28 August 2004
28 August 30 August
2004 2003
£000 £000
Turnover
Continuing operations 155,749 148,688
______ ______
Group operating profit
Continuing operations 5,036 4,011
Share of operating profit in associate - continuing
operations 739 718
______ ______
Total operating profit: group and share of associate 5,775 4,729
Profit on ordinary activities before interest 5,775 4,729
Interest receivable
Group 116 162
Interest payable
Group (691) (746)
Associate (73) (79)
______ ______
Profit on ordinary activities before taxation 5,127 4,066
Taxation
Group (1,498) (1,331)
Associate (135) 54
______ ______
Profit on ordinary activities after taxation 3,494 2,789
Minority interests - equity (275) (329)
______ ______
Profit for the financial year 3,219 2,460
Dividends (1,090) (930)
______ ______
Retained profit for the financial year 2,129 1,530
______ ______
Earnings per ordinary share
Basic 39.9p 30.5p
Diluted 39.8p 30.5p
Adjusted 39.9p 34.7p
Dividend per share 13.5p 11.5p
CONSOLIDATED BALANCE SHEET
at 28 August 2004
28 August 30 August
2004 2003
£000 £000
Fixed assets
Intangible assets 184 63
Tangible assets 20,474 19,723
Investments
Share of net assets in associate 1,992 1,461
Loan to associate 1,225 1,225
Other investments 253 153
______ ______
24,128 22,625
Current assets
Stocks 10,387 9,123
Debtors 19,943 18,694
Cash at bank and in hand 1,091 1,472
______ ______
31,421 29,289
Creditors
Amounts falling due within one year (25,265) (22,845)
______ ______
Net current assets 6,156 6,444
Total assets less current liabilities 30,284 29,069
Creditors
Amounts falling due after more than one year (3,779) (4,265)
Provision for liabilities and charges (951) (1,266)
Deferred income (244) (303)
_____ _____
25,310 23,235
______ ______
Capital and reserves
Called-up share capital 2,018 2,018
Share premium account 4,752 4,752
Revaluation reserve 1,663 1,742
Profit and loss account 15,605 13,727
______ ______
Equity shareholders' funds 24,038 22,239
Minority interests - equity 1,272 996
______ ______
25,310 23,235
_____ ______
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 28 August 2004
28 August 30 August
2004 2003
£000 £000
Net cash inflow from operating activities 6,256 5,504
______ ______
Returns on investments and servicing of finance
Interest received 120 153
Interest paid (563) (638)
Interest paid on finance leases (88) (101)
______ ______
Net cash outflow from returns on investments and
servicing of finance (531) (586)
______ ______
Taxation (1,330) (1,303)
______ ______
Capital expenditure and financial investment
Purchase of tangible fixed assets (2,997) (2,829)
Purchase of intangible fixed assets (160) -
Sale of tangible fixed assets 295 679
Purchase of investments (100) (2)
Sale of investment - 2
Grants received - 189
______ ______
Net cash outflow from capital expenditure and
financial investments (2,962) (1,961)
______ ______
Equity dividends paid (969) (847)
______ ______
Cash inflow before financing 464 807
______ ______
Financing (1,311) (1,486)
______ ______
Decrease in net cash (847) (679)
______ ______
NOTES
1. Segmental analysis
Turnover Operating profit
2004 2003 2004 2003
£'000 £'000 £'000 £'000
Business analysis
Agriculture
group 124,443 120,787 4,991 4,310
associate - - 739 718
Food 21,990 20,275 268 599
Engineering 9,316 7,626 (14) (683)
Central - - (209) (215)
______ ______ ______ ______
155,749 148,688 5,775 4,729
______ ______ ______ ______
2. Turnover, cost of sales and other operating income and expenses
2004 2004 2003 2003
£'000 £'000 £'000 £'000
Turnover 155,749 148,688
Cost of sales (132,464) (125,639)
______ ______
Gross profit 23,285 23,049
Net operating expenses
Distribution costs (9,446) (9,520)
Administrative expenses
- Normal (8,803) (9,014)
- Exceptional (Note 3) - (504)
______ ______
(18,249) (19,038)
______ ______
Operating profit - continuing
operations 5,036 4,011
Share of profit in associate 739 718
______ ______
Total operating profit: group and
share
of joint venture and associate 5,775 4,729
Exceptional items (as above) - 504
______ ______
Total operating profit: group and
share
of joint venture and associate (before 5,775 5,233
exceptional items)
______ ______
3. Exceptional items
2004 2004 2003 2003
Tax Tax
Amount Credit Amount Credit
£'000 £'000 £'000 £'000
Cost of reorganising Engineering Division - - (243) 92
Cost of reorganising Agriculture Division - - (261) 74
______ ______ ______ ______
Total exceptional operating expenses - - (504) 166
______ ______ ______ ______
4. Taxation
2004 2003
£'000 £'000
United Kingdom
Current year at 30% (2003: 30%) 1,428 785
Prior year (47) 109
Foreign Tax
Current year 287 609
Prior year (2) (19)
______ ______
Group current tax 1,666 1,484
Associate
Current year 143 50
Prior year - (82)
______ ______
Total current tax 1,809 1,452
Deferred tax
Origination and reversal of timing differences
Group (168) (153)
Associate (8) (22)
______ ______
Tax on profit on ordinary activities 1,633 1,277
______ ______
5. Dividends
2004 2003
£'000 £'000
Equity:
Ordinary - Interim paid of 4.5p per share (2003: 4.0p) 363 324
- Final proposed of 9.0p per share (2003: 7.5p) 727 606
______ ______
1,090 930
______ ______
6. Earnings per share
The calculation of basic earnings per share is based on profits attributable to
shareholders of
£3,219,000 (2003: £2,460,000) and on 8,073,599 shares (2003: 8,066,072 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
£3,219,000 (2003: £2,460,000) and on 8,086,150 shares (2003: 8,079,179 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 is based on the
profit for the financial year of £3,219,000 (2003: £2,798,000).
2004 2003
Earnings Earnings
Earnings Per share Earnings Per share
£'000 Pence £'000 Pence
Earnings per share - basic 3,219 39.9 2,460 30.5
Exceptional items:
Reorganisation costs in
Agriculture
Division - - 261 3.2
Reorganisation costs in
Engineering
Division - - 243 3.1
Taxation arising on exceptional
items - - (166) (2.1)
______ ______ ______ ______
Earnings per share - adjusted 3,219 39.9 2,798 34.7
______ ______ ______ ______
7. Cash flow from operating activities
Continuing operations
2004 2003
£'000 £'000
Group operating profit 5,036 4,011
Depreciation charge 2,367 2,271
Profit on disposal of fixed assets (108) (166)
Amortisation of intangible assets 38 35
Grants amortisation (59) (65)
Increase in stocks (1,264) (66)
(Increase)/decrease in debtors (1,447) 119
Increase/(decrease) in creditors 1,860 (802)
(Decrease)/increase in provisions (167) 167
______ ______
Net cash inflow from continuing operating activities 6,256 5,504
______ ______
8. Reconciliation of net cash flow to movement in net debt
2004 2003
£'000 £'000
Decrease in cash in the year (847) (679)
Cash outflow from debt and lease financing 1,312 1,502
______ ______
465 823
New finance leases (609) (478)
Exchange adjustments 1 27
______ ______
(143) 372
Net debt at 31 August 2003 (5,615) (5,987)
______ ______
Net debt at 28 August 2004 (5,758) (5,615)
______ ______
9. The Board of Directors approved the preliminary announcement on 8 November
2004.
10. The financial information set out above does not constitute the statutory
accounts for the years ended 28 August 2004 and 30 August 2003. Statutory
accounts for the year ended 30 August 2003 have been delivered to the Registrar
of Companies and those for the year ended 28 August 2004 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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