Final Results

Carr's Milling Industries PLC 13 November 2006 CARR'S MILLING INDUSTRIES PLC - PRELIMINARY ANNOUNCEMENT Carr's, (CRM.L) the Cumbria-based agriculture, food and engineering group, announces an eighth successive annual increase in both adjusted pre-tax profit and adjusted basic earnings per share in the 52 weeks ended 2 September 2006. FINANCIAL HIGHLIGHTS * Revenue increased by 26.3% to Â£242.6m, partially due to the inclusion for the full year of the Pye animal feed business acquired by an associate in July 2005 and of the Meneba flour business acquired in November 2004. * Adjusted pre-tax profit+ was up 9.2% at Â£7.3m. * Adjusted basic earnings per share+ rose 17.3% to 59.7p. * Cash generated from operations totalled Â£11.1m (2005: Â£6.7m), up 66.1%. * Reflecting the Group's progressive dividend policy, its good performance and the strength of its business, the Board is proposing an increase in the final dividend per share of 13.6% to 12.5p, making a total for the year of 18.0p, up 12.5%. + Adjusted excludes non-recurring items, the write-back of negative goodwill and the amortisation of intangible assets, but includes share of profit in associate and joint ventures. COMMERCIAL HIGHLIGHTS * Agriculture achieved an operating profit of Â£5.0m (2005: Â£5.9m) on revenue of Â£174.5m (2005: Â£132.7m). Agriculture's UK market place was even more challenging than last year. Although the Group took decisive action to rationalise its expanded compound and blended feed operations, manufacturing capacity in its trading area of the North West of England and South West of Scotland remains in excess of demand. Fertiliser profits slightly reduced, but feed blocks in the UK and the USA again increased their profit. * Food increased its operating profit before non-recurring items to Â£3.3m (2005: Â£2.3m) on revenue of Â£55.7m (2005: Â£48.0m). In a more favourable market for flour, all three mills - at Silloth (Cumbria), Kirkcaldy (Fife) and Maldon (Essex) - worked near capacity throughout the year. Higher margin speciality flours are performing particularly well. The Kirkcaldy and Maldon mills acquired from Meneba benefited from a full year's trading and the greater efficiencies implemented since acquisition. * Engineering profit totalled Â£1.1m (2005: Â£0.8m, before the gain on disposal of property of Â£4.1m) on revenue of Â£12.2m (2005: Â£11.2m). During the year, Bendalls, which is much the largest of the Group's three engineering businesses, successfully completed a Â£2.5m contract to supply pressure vessels to the Azerbaijan pipeline. * During the year, the Group successfully established three Joint Ventures: Bibby Agriculture in Wales; Crystalyx Products in Oldenburg (North West Germany); and Afgritech in Langwathby (Cumbria). Richard Inglewood, Chairman stated, 'Commercially, the year was significant for the successful integration of the previous year's two substantial acquisitions in the important areas of animal feed and flour and for the establishment by Agriculture, which remains much the largest of the Group's three Divisions, of three joint ventures - in Wales, Germany and England.' With regard to prospects, Lord Inglewood added 'Market conditions for Agriculture are not getting any easier with the low farm gate milk price and again long delays expected in the settlement by DEFRA of the Single Farm Payment with respect to the previous harvest year. The massive increase in wheat prices, combined with high-energy costs, will make it a tough year for Food. Engineering made good progress this year in improving its underlying result, but this is unlikely to be repeated in the current year. Given these trading environments, to achieve a ninth successive annual increase in adjusted profit before tax will be challenging, despite the greater strength of the business and Carr's track record in successfully combating adverse conditions.' Lunchtime Presentation: Today, Monday 13 November, from 13:00 to 14.00, Carr's will be presenting to brokers' analysts and private client brokers over a sandwich lunch, at the offices of Bankside Consultants, 1 Frederick's Place, London EC2R 8AE. Those wishing to attend are asked to notify 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 Ian Payne 020-7367 8853 ian.payne@bankside.com CHAIRMAN'S STATEMENT It gives me great satisfaction to report to Shareholders that Carr's has once again raised to record levels both adjusted pre-tax profit, with a 9.2% increase to Â£7.3 million, and adjusted earnings per share, with a 17.3% increase to 59.7p. Both represent an eighth successive annual increase. Commercially, the year was significant for the successful integration of the previous year's two substantial acquisitions in the important areas of animal feed and flour and for the establishment by Agriculture, which remains much the largest of the Group's three Divisions, of three joint ventures - in Wales, Germany and England. FINANCIAL REVIEW The annual figures have, for the first time, been prepared under International Financial Reporting Standards ('IFRS') and those for 2005 have been restated on a comparable basis. Revenue in the 52 weeks to 2 September 2006 rose 26.3% to Â£242.6 million (53 weeks to 3 September 2005: Â£192.1 million), partially due to the inclusion for the full year of the Pye animal feed business acquired by an associate in July 2005 and of the Meneba flour business acquired in November 2004. Profit before tax was Â£6.3 million (2005 : Â£10.4 million). Profit before tax excluding non-recurring items (principally the Â£4.1 million gain on disposal of the Bendall's engineering factory in the previous year) and amortisation of intangibles increased by 9.2% to Â£7.3 million (2005: Â£6.7 million). Adjusted basic earnings per share, on a similar basis, rose 17.3% to 59.7p (2005: 50.9p). Operating cash flow in the year was strong. Cash generated from operations of Â£11.1 million compared with Â£6.7 million in the previous year. Net debt reduced to Â£13.9 million (2005: Â£14.9 million), representing gearing of 68.3% (2005: 73.9%). More importantly, the net interest charge of Â£1.0 million (2005: Â£1.2 million) was covered 7.9 times (2005: 6.7 times) by adjusted Group operating profit. DIVIDENDS Reflecting the Group's progressive dividend policy, its good performance and the strength of its business, the Board is proposing an increase in the final dividend of 13.6% to 12.5p per share. Along with the interim dividend of 5.5p per share, paid in May 2006 (2005: 5.0p), this makes a total dividend for the year of 18.0p per share, an increase of 12.5 % on last year's 16.0p. The final dividend, if approved by Shareholders, will be paid on 19 January 2007 to Shareholders on the register at the close of business on 15 December 2006. Shares will trade ex-dividend on 13 December 2006. Dividends per share are covered 3.3 times (2005: 3.1 times) by adjusted earnings per share. BOARD In September 2005 and as reported in last year's Preliminary Announcement, Alastair Wannop, a significant member of the Cumbrian farming community, was appointed a non-executive Director, bringing non-executive Directors to three and independent non-executive Directors to two, and I succeeded David Newton as Chairman. As in previous years, the Board reviewed best practice Corporate Governance policies and procedures and made changes where appropriate to ensure that the Group remains compliant, to the extent appropriate to the size of the Group, with the Combined Code. AGRICULTURE The Group's Agriculture business comprises, in the UK (primarily in the North West of England and South West of Scotland), four related activities - animal feed manufacture, fertiliser blending, agricultural retailing and oil distribution - and, in the USA and Germany, animal feed manufacture. Operating profit of Â£5.0 million (2005: Â£5.9 million) was achieved on a revenue of Â£174.5 million (2005: Â£132.7 million). This represents a modest, and much reduced, operating margin of 2.8% (2005: 4.4%), mainly reflecting market conditions and actions taken to improve for the future the Group's marketplace for compound and blended animal feed. United Kingdom Agriculture's UK market place was even more challenging than last year. In general, this reflected delays and uncertainty in farmers' receiving the initial Single Farm Payment (indeed, some payments are still outstanding in respect of the 2005 harvest year), the low farm gate milk price and higher energy costs. Further problems specifically affecting the manufacture of compound ruminant animal feed included the mild winter weather (enabling animals to feed outside) and substantial over-production, reflecting reduced demand, in the Group's trading area. In the latter context, the Group, together with its associate, took decisive action (as it has often done when faced with adverse conditions). Within months of the acquisition in July 2005 by the Group's associate company, Carrs Billington Agriculture Operations, of certain assets of W&J Pye (in Administration), compound feed mills were closed at Blackburn (Lancashire), Penrith (Cumbria) and Shrewsbury (Shropshire). This left Carrs Billington Agriculture with four compound feed mills - at Carlisle (Cumbria), Langwathby (Cumbria), Lancaster (Lancashire) and Stone (Staffordshire) - and three blended feed mills - at Askrigg (North Yorkshire), Kirkbride (Cumbria) and Lancaster. Notwithstanding, manufacturing capacity in the Group's trading area remains in excess of demand. The rationalisation and integration of the two entities has gone well, as too has the capital expenditure programme to improve the efficiency and quality of product at the Lancaster mill. In March 2006, Afgritech, a joint venture company in which Carr's is a 50% shareholder, was formed with Afgri, one of the largest South African agricultural companies. Afgritech has invested Â£0.7 million in a new plant at Langwathby to produce by-pass protein for ruminant animals, which will initially be available exclusively to customers of Carrs Billington Agriculture, simultaneously increasing labour productivity at that plant. Production will start next month. Caltech, which has a plant at Silloth (Cumbria), again increased revenue and profits from its manufacture of low-moisture feed blocks for the domestic agricultural livestock and equine market. The successful launch of a new product, Garlyx, designed to repel biting insects on cattle and horses, will fully benefit the current financial year. Bibby Agriculture, the joint venture company formed in September 2005 in which Carrs Billington Agriculture Sales is a 50% shareholder, has made a good start selling in Wales animal feed manufactured by its shareholders, fertiliser and other farming supplies. Fertiliser, produced at the Group's three blending plants - at Invergordon (Easter Ross), Montrose (Angus) and Silloth - marginally increased its volumes, but profits slightly reduced. This reflected a difficult first half and peak period of March/April, largely as a result of farmers' reluctance to pay energy-related higher prices. The Group's unique range of environmentally-protective fertiliser, New Choice, increased both revenue, by 15%, and profit. Carr's Agricultural Retailing increased both revenue and profits from its 14 branches, operating from Perth in the North to Leek (Staffordshire) in the South, selling farm supplies. Carr's Machinery distributes new and used agricultural and groundcare machinery from six of these branches, across the north of England and in Dumfries and Galloway in South West Scotland. Sales of Massey Ferguson machinery again exceeded expectations and the increased sales of parts and workshop services again contributed to the result. Wallace Oils, which was acquired in April 2005, supplies oils and lubricants to a broad customer base out of three depots, located at Carlisle, Dumfries and Stranraer, the latter two in Dumfries and Galloway. In its first full year of ownership, Wallace Oils performed satisfactorily and began to make inroads into the Group's customer base. Overseas In the US, our subsidiary, Animal Feed Supplement, which produces Smartlic and Feed in a Drum low-moisture animal feed blocks at mills in Belle Fourche (South Dakota) and Poteau (Oklahoma), substantially increased its volumes, but profit margins were lower as a result of further cost increases in the base raw material, molasses. The installation of a new production line to replace the 1998 production line, the older of the two, at Belle Fourche will be completed this month without disrupting production. In Germany, a 50:50 joint venture, Crystalyx Products, was established in 2005 in conjunction with Agravis, one of Germany's largest agricultural companies. In January 2006, a new low-moisture animal feed plant was commissioned to manufacture Crystalyx in Oldenburg, North West Germany for the domestic market. The business has commenced well, breaking into new European markets. FOOD Operating profit before non-recurring items of Â£3.3 million (2005 : Â£2.3 million) was achieved on revenue of Â£55.7 million (2005: Â£48.0 million). Carr's principal food businesses are Carr's Flour Mills, with a flour mill at Silloth, and, since November 2004, the two former Meneba flour mills, Hutchisons at Kirkcaldy (Fife) and Greens at Maldon (Essex). The Meneba acquisition more than doubled the size of Carr's flour business. In a more favourable market for flour, all three mills worked near capacity throughout the year and a price increase was implemented in September 2005, partially offsetting increases in the cost of electricity and distribution. Higher margin speciality flours are performing particularly well. Silloth suffered no repetition of the previous year's three month loss of flour sales to United Biscuits' factory in Carlisle, as a result of flooding, and increased its sales to United Biscuits' Tollcross factory outside Glasgow. The Kirkcaldy and Maldon mills benefited from a full year's trading and the greater efficiencies implemented since acquisition. The Carr's Breadmaker range of retail flours continues to sell well, with listings in three major multiple retailers. ENGINEERING Engineering profit totalled Â£1.1 million (2005: Â£0.8 million, before the gain on disposal of property of Â£4.1 million) on revenue of Â£12.2 million (2005: Â£11.2 million). Engineering comprises Bendalls and R Hind, which are based in Carlisle, and Carrs MSM, which is based in Swindon (Wiltshire). Bendall's designs and manufactures specialist steel fabrications for the global petrochemical, nuclear, renewable energy and process industries. R Hind provides vehicle bodybuilding 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 industry. Bendalls, which is much the largest of the three businesses, benefited from more efficient working conditions following the move into larger, modern premises in July 2005. A Â£2.5 million contract to supply pressure vessels to the Azerbaijan oil pipeline was successfully completed in the year. The SeaGen next generation tidal energy device, for which Bendalls has manufactured a part of the structure, is expected to be delivered to Strangford Lough, outside Belfast, and connected to the National Grid in January 2007. Prospects for improved orders from British Nuclear Group at Sellafield are good as its decommissioning programme progresses. Of the smaller businesses, R Hind traded satisfactorily, whilst Carrs MSM traded well, gaining some new customers and entering the current year with a strong order book. PROSPECTS Market conditions for Agriculture are not getting any easier with the low farm gate milk price and again long delays expected in the settlement by DEFRA of the Single Farm Payment with respect to the previous harvest year. The massive increase in wheat prices, combined with high-energy costs, will make it a tough year for Food. Engineering made good progress this year in improving its underlying result, but this is unlikely to be repeated in the current year. Given these trading environments, to achieve a ninth successive annual increase in adjusted profit before tax will be challenging, despite the greater strength of the business and Carr's track record in successfully combating adverse conditions. Richard Inglewood Chairman 13 November 2006 CONSOLIDATED INCOME STATEMENT for the period ended 2 September 2006 Notes 52 week 53 week period period 2006 2005 Â£'000 Â£'000 Revenue 2 242,576 192,124 Cost of sales (206,658) (161,296) ----------- ---------- Gross profit 35,918 30,828 Net operating expenses (28,802) (18,564) ----------- ---------- Operating profit 7,116 12,264 Analysed as: Operating profit before non-recurring items and amortisation 7,987 7,975 Non-recurring items and amortisation (871) 4,289 ----------- ---------- Group operating profit 7,116 12,264 Net finance costs (1,011) (1,198) Share of post-tax profit/(loss) in associate and joint ventures 218 (697) ----------- ---------- Profit before taxation 2 6,323 10,369 Income tax expense (1,989) (2,557) ----------- ---------- Profit for the period 4,334 7,812 =========== ========== Profit attributable to minority interests 139 329 Profit attributable to equity shareholders 4,195 7,483 ----------- ---------- 4,334 7,812 === =========== ========== Earnings per share 4 Basic 51.0p 92.1p Diluted 50.4p 90.3p Adjusted earnings per share 4 Basic 59.7p 50.9p Diluted 59.0p 49.9p CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE for the period ended 2 September 2006 52 week period 53 week period 2006 2005 Â£'000 Â£'000 Foreign exchange translation differences arising on translation of overseas subsidiaries (150) (80) Actuarial (losses)/gains on retirement benefit obligation: (3,900) (1,543) -Group 206 (944) -Share of associate Taxation credit/(charge) on actuarial movement on retirement benefit obligation: 1,170 463 -Group (62) 283 -Share of associate ------------ ----------- Net expenses recognised directly in equity (2,736) (1,821) === === Profit for the period 4,334 7,812 ------------ ----------- Total recognised income for the period 1,598 5,991 ============ =========== Profit attributable to minority interests 139 329 Profit attributable to equity shareholders 1,459 5,662 ------------ ----------- 1,598 5,991 ============ =========== CONSOLIDATED BALANCE SHEET at 2 September 2006 2006 2005 Â£'000 Â£'000 Assets Non-current assets Goodwill 235 400 Intangible assets 802 1,738 Property, plant and equipment 29,172 28,838 Investment property 794 822 Investment in associate 982 445 Interest in joint ventures 704 172 Other investments 254 255 Derivative financial instruments 37 - Non-current receivables 208 223 Deferred tax assets 5,162 3,962 ---------- ---------- 38,350 36,855 ---------- ---------- Current assets Inventories 11,944 12,947 Trade and other receivables 33,546 35,197 Current tax assets 1 87 Cash and cash equivalents 2,292 3,149 ---------- ---------- 47,783 51,380 ---------- ---------- Total assets 86,133 88,235 ---------- ---------- Liabilities Current liabilities Financial liabilities - Borrowings (9,682) (10,666) - Derivative financial instruments (27) - Trade and other payables (25,387) (29,318) Current tax liabilities (1,324) (1,581) ---------- ---------- (36,420) (41,565) ---------- ---------- Non-current liabilities Financial liabilities - Borrowings (6,512) (7,399) - Derivative financial instruments - (106) Retirement benefit obligation (15,796) (12,119) Deferred tax liabilities (3,600) (3,854) Other non-current liabilities (1,524) (1,287) ---------- ---------- (27,432) (24,765) ---------- ---------- Total liabilities (63,852) (66,330) ---------- ---------- Net assets 22,281 21,905 ========== ========== Shareholders' equity Ordinary shares 2,058 2,053 Share premium 5,004 4,977 Equity compensation reserve 22 - Foreign exchange reserve (230) (80) Other reserve 1,601 1,632 Retained earnings 11,895 11,613 ---------- ---------- Total shareholders' equity 20,350 20,195 ---------- ---------- Minority interests in equity 1,931 1,710 ---------- ---------- Total equity 22,281 21,905 ========== ========== CONSOLIDATED CASH FLOW STATEMENT for the period ended 2 September 2006 52 week period 53 week period 2006 2005 Â£'000 Â£'000 Cash flows from operating activities Cash generated from operations 11,069 6,663 Interest received 379 95 Interest paid (1,755) (1,195) Tax paid (2,454) (1,855) ----------- ---------- Net cash generated from operating activities 7,239 3,708 ----------- ---------- Cash flows from investing activities Acquisition of subsidiaries (net of cash acquired) (3) (10,256) Investment in joint ventures (710) (172) Payment of loans to joint ventures (280) - Purchase of intangible assets (9) - Proceeds from sale of property, plant and equipment 192 3,114 Purchase of property, plant and equipment (2,901) (3,396) Proceeds from sale of investments 1 - Purchase of investments - (2) ----------- ---------- Net cash used by investing activities (3,710) (10,712) ----------- ---------- Cash flows from financing activities Net proceeds from issue of ordinary share capital 32 260 Net proceeds from issue of new bank loans and other borrowings - 13,668 Finance lease principal repayments (1,047) (804) Repayment of borrowings (2,487) (1,375) Dividends paid to shareholders (1,358) (1,136) ----------- ---------- Net cash (used by)/generated from financing activities (4,860) 10,613 ----------- ---------- Effect of exchange rate changes (88) (28) ----------- ---------- Net (decrease)/increase in cash and cash equivalents (1,419) 3,581 =========== ========== Cash and cash equivalents at beginning of the year 2,503 (1,078) Cash and cash equivalents at end of the year 1,084 2,503 NOTES 1. Basis of preparation The Group's Preliminary Announcement for the periods ended 2 September 2006 and 3 September 2005 are not statutory accounts within the meaning of Section 240 (5) of the Companies Act 1985. The Company's auditors, PricewaterhouseCoopers LLP, have made a report under Section 235 of the Act on the Company's statutory accounts for the year ended 3 September 2005. 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. This is the first period in which the Company has prepared financial statements under International Financial Reporting Standards ('IFRS'), and the comparatives have been restated from UK Generally Accepted Accounting Principles ('UK GAAP') to comply with IFRS. The effect of the Group's conversion to IFRS has already been communicated to shareholders in a statement in April 2006. The Company's accounting policies can be found in the statutory accounts. 2. Segmental analysis Revenue Operating profit* 2006 2005 2006 2005 Â£'000 Â£'000 Â£'000 Â£'000 Agriculture 174,492 132,662 4,954 5,866 Food - normal 55,700 48,004 3,333 2,262 - non-recurring and amortisation (827) 179 Engineering - normal 12,171 11,199 1,055 764 - non-recurring and amortisation - 4,110 Other 213 259 (325) 15 ------- ------- -------- ------ 242,576 192,124 8,190 13,196 ======= ======= Retirement benefit charge (1,074) (932) === === Share of post-tax profit/(loss) of 393 (697) associate Share of post-tax loss of joint (175) - ventures -------- ------- 7,334 11,567 Net finance costs (1,011) (1,198) -------- ------- Profit before tax 6,323 10,369 ======== ======= *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 2006 2005 Amount Tax credit/ Amount Tax credit/ Â£'000 (charge) Â£'000 (charge) Â£'000 Â£'000 Group operating profit: Cost of reorganising Food - - (350) 105 division Profit on disposal of property, - - 4,110 (719) plant and equipment Immediate recognition of 77 - 1,526 - negative goodwill Amortisation of intangible (948) 284 (997) 299 assets -------- --------- ------- -------- (871) 284 4,289 (315) Share of post-tax loss in associate and joint ventures: Cost of reorganising - - (627) - associate Amortisation of intangible assets and impairment (129) - - - of goodwill - joint venture -------- -------- -------- -------- Total non-recurring items and (1,000) 284 3,662 (315) amortisation ======== ======== ======== ======== Profit before 6,323 10,369 taxation Non-recurring items and (1,000) 3,662 amortisation --------- --------- Adjusted profit 7,323 6,707 before taxation ========= ========= Group operating 7,116 12,264 profit Non-recurring items and (871) 4,289 amortisation ---------- ---------- Adjusted Group 7,987 7,975 operating profit ========== ========== 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 year of 8,227,329 (2005 : 8,127,328). The calculation of diluted earnings per share is based on 8,328,566 shares (2005 : 8,285,919). 2006 2005 Earnings Earnings per Earnings Earnings share per share Â£'000 pence Â£'000 pence Earnings per share - basic 4,195 51.0 7,483 92.1 Non-recurring items and intangible asset amortisation: Cost of reorganising food division - - 350 4.3 Cost of reorganising associate, net of tax - - 627 7.7 Profit on disposal of property, plant and equipment - - (4,110) (50.5) Immediate recognition of negative goodwill (77) (0.9) (1,526) (18.8) Amortisation of intangible asset 948 11.5 997 12.2 Amortisation of intangible asset and impairment of goodwill - joint venture, net of tax 129 1.6 - - Taxation arising on non-recurring items (284) (3.5) 315 3.9 -------- -------- -------- -------- Earnings per share - adjusted 4,911 59.7 4,136 50.9 ======== ======== ======== ======== 5. Cash generated from operations 2006 2005 Â£'000 Â£'000 Profit for the period 4,334 7,812 Adjustments for: Tax 1,989 2,557 Depreciation 3,419 3,055 Loss/(profit) on disposal of property, plant and 27 (4,199) equipment Profit on disposal of investments (1) - Immediate recognition of negative goodwill (77) (1,526) Intangible asset amortisation 986 1,029 Net fair value losses on derivative financial 27 6 instruments Net fair value loss on share based payments 27 - Net foreign exchange differences 14 19 Interest income (378) (93) Interest expense and borrowing costs 1,396 1,297 Share of profit/(loss) from associate and joint (218) 697 ventures Changes in working capital (excluding the effects of acquisitions) Decrease/(increase) in inventories 1,003 (1,009) Decrease/(increase) in receivables 1,903 (6,595) (Decrease)/increase in payables (3,382) 3,613 -------------------------------- --------- --------- Cash generated from continuing operations 11,069 6,663 ================================ ========= ========= 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 2 September 2006 of Â£11.1m (3 September 2005: Â£8.5m). The movement in the current year arose principally as a result of a reassessment of the mortality rates, applicable discount rates and inflation rates. 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 2 September 2006 of Â£4.0m (2005: Â£4.6m). The Group recognises in its balance sheet approximately 50% of the deficit and deferred tax asset through its investment in associate. In the year, the retirement benefit charge was Â£1,074,000 (2005: Â£932,000). 7. Analysis of changes in net debt At 4 Cash Other Exchange At 2 September Non-Cash September 2005 Flow Changes Movements 2006 Â£,000 Â£,000 Â£,000 Â£,000 Â£,000 Group Cash and cash 3,149 (857) - - 2,292 equivalents Bank (646) (474) - (88) (1,208) overdrafts -------- -------- -------- --------- --------- 2,503 (1,331) - (88) 1,084 Loans and (9,220) 2,487 (901) - (7,634) other borrowings: - current (6,534) - 894 - (5,640) - non-current Finance leases: - current (800) 1,047 (1,087) - (840) - (865) - (7) - (872) non-current -------- -------- -------- --------- --------- Net debt (14,916) 2,203 (1,101) (88) (13,902) ======== ======== ======== ========= ========= 8. Reconciliation of movements in shareholders' equity and minority interest Group Share Share Equity Foreign Other Retained Total Minority Total Shareholders' Equity Capital Premium Compensation Exchange Reserves Earnings Â£'000 Interest Â£'000 Â£'000 Account Reserve Reserve Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 --------- ------ ------- -------- ------- ------ ------ -------- ------ ------ Balance at 2,053 4,977 - (80) 1,632 11,613 20,195 1,710 21,905 4 September 2005 Total recognised income and expense for the period - - - (150) - 1,609 1,459 139 1,598 Dividends - - - - - (1,358) (1,358) - (1,358) Equity settled share- - - 22 - - - 22 5 27 based payment transactions Share options exercised by employees 5 27 - - - - 32 - 32 Minority interest on increase in shareholding in subsidiary - - - - - - - 77 77 Transfer - - - - (31) 31 - - - ========= ====== ======= ======== ======= ====== ====== ======== ====== ====== Balance at 2,058 5,004 22 (230) 1,601 11,895 20,350 1,931 22,281 2 September 2006 ====== ======= ======== ======= ====== ====== ======== ====== ====== ========= 9. The Group has taken the exemption provided under IFRS1 : First-time adoption of International Financial Reporting Standards not to restate comparatives. Details of the exemptions adopted by the Group can be found in the statutory accounts. 10. The board of directors approved the preliminary announcement on 10 November 2006. 11. The accounts for the preliminary results for the period ended 2 September 2006 are unaudited. The financial information set out in this announcement does not constitute the statutory accounts for the periods ended 2 September 2006 and 3 September 2005. The statutory accounts for the period ended 2 September 2006 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. 12. The Company intends to post the Report and Accounts to shareholders by 12 December 2006. 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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