Interim Results
Carr's Milling Industries PLC
30 April 2002
CARR'S MILLING INDUSTRIES PLC - INTERIM ANNOUNCEMENT
'Board hopeful of further progress'
• Carr's, the Cumbria-based agriculture, food and engineering business,
announces improved results for the half year ended 2 March 2002, demonstrating
the Group's resilience to the scourge of foot and mouth disease, which
particularly affected its main trading area of Cumbria and South West Scotland:
Half year to 2 March 2002 2001 Increase
Turnover (£m) 64.9 55.9 16.0%
PBT - reported (£m) 1.96 1.72 13.7%
- underlying (£m) 1.65 1.44 14.7%
EPS - reported (p) 14.6 13.5 8.1%
underlying (p) 11.9 11.1 7.2%
Dividend per share (p) 3.0 3.0 -
NAV per share (p) 243.9 230.2 6.0%
• The Group's animal feed businesses - Carr's Billington Agriculture
(albeit with pressures on margins from over-capacity), Caltech and Animal Feed
Supplement in the US - all performed well, as did the Group's network of 16
retail branches, but the unusually wet February greatly delayed Spring sales of
fertiliser.
• The flour milling and food ingredients businesses, notably Carr's
Flour Mills, had a much better first half year than last year.
• Engineering is experiencing tough competition in many of the sectors
in which it operates and margins on awarded contracts remain tight.
• David Newton, Chairman, stated 'Animal feed sales in the second half
year will be at a lower level, because of the consequences of foot and mouth
disease, and the national level of fertiliser sales is expected to be smaller
this year as a consequence of the wet early months. On the other hand, the
Agriculture Division now benefits from a more efficient compound feed business,
following last September's restructuring of Carr's Billington Agriculture,
growing feed block businesses in the US and the UK, a streamlined fertiliser
business and an extended retail branch structure.'
Mr Newton concluded 'With a small improvement, relative to last year, in market
conditions expected for the Food Division but none for the Engineering Division,
the Board is hopeful of further progress in the current year and beyond.'
Enquiries:
Carr's Milling Industries PLC 01228-554600
Chris Holmes (Chief Executive Officer)
Ron Wood (Finance Director)
Bankside Consultants Limited
Charles Ponsonby 020-7444 4166
CHAIRMAN'S INTERIM STATEMENT
The improved results for the half-year ended 2 March 2002 demonstrate the
Group's resilience to the scourge of foot and mouth disease ('FMD'), which
particularly affected its main trading area of Cumbria and South West Scotland.
The FMD outbreak, which officially lasted from February 2001 to January 2002,
had an immaterial effect on the results for the half-year ended 3 March 2001,
but a worse effect on the half-year under review than on the second half of last
year, as predicted in the preliminary announcement dated 12 November 2001.
There were a number of steps taken early in this financial year which have
certainly benefited the half-year results, including the increased integration
of our agricultural activities, and, apart from Engineering, our other
activities in the Food Division and our US agricultural business performed
strongly.
FINANCIAL OVERVIEW
Turnover up 16.0% at £64.9 million reflects the changes to the structure of our
agricultural activities and includes animal feed previously sold by our joint
venture company. Pre-tax profit increased by 13.7% to £1.96 million whilst
earnings per share were 8.1% higher at 14.6p.The results in this half-year and
last half-year record one-off gains of a similar size; in this year, there is
the gain on the disposal of shares and last year there was a gain on the
disposal of property.
On an underlying basis, pre-tax profit increased by 14.7% to £1.65 million and
earnings per share improved by 7.2% to 11.9p.
Net interest payable of £0.44 million (2001 interim: £0.39 million) was covered
an unchanged 4.7 times by underlying profit before interest and tax. The
increase in working capital resulting from the increase in turnover caused
gearing, at a seasonal high point, to rise to 64.0% (2001 interim: 61.3%), with
net debt up £1.3 million at £12.6 million.
Equity shareholders' funds advanced to £19.64 million from £18.41 million,
representing net assets per share of 244p (2001 interim: 230p).
DIVIDEND
As last year, the Directors have taken into consideration uncertainties
surrounding the Group's main business activity, notably, in 2002, livestock
restocking levels in its principal trading area following FMD, and have decided
that maintaining the interim dividend at 3.0p per share is both prudent and
warranted.
The interim dividend will be paid on 29 May 2002 to shareholders on the register
at close of business on 10 May 2002.
OPERATIONS
Sales of compound animal feeds from Carr's Billington Agriculture's three mills
at Carlisle (Cumbria), Penrith (Cumbria) and Stone (Staffordshire) met their
budgeted levels, but with Cumbria, one of the Group's main trading areas, at
only 50% restocking and with a falling farm gate milk price again affecting
customers' confidence levels, the knock-on effects of over-capacity on margins
is still all too evident. However, the successful completion of the further
integration of the agricultural activities of Carr's Agriculture and Billington
Agriculture, which was announced last September, has stood us in good stead to
date and is expected to do so in the second half-year when, of course, we always
sell less product.
Caltech, the Group's UK feedblock company, performed very well in the UK and
Continental Europe, with increased sales of Crystalyx for cattle and of Horslyx
and Stable Lick in the equine market.
The performance of the Company's subsidiary in the USA, Animal Feed Supplement,
Inc, which produces Smartlic and Feed in the Drum low moisture feed blocks at
Belle Fourche, South Dakota and Poteau, Oklahoma, again beat expectations,
benefiting from the commissioning of the second production line at Belle Fourche
in October 2001.
The Group's fertiliser operation now comprises five blending facilities: two in
the North West of England - at Runcorn (Cheshire) and Silloth (Cumbria) - and
three in Scotland - at Methill (Fife), Montrose (Angus) and Invergordon (Easter
Ross). Fertiliser sales met budgeted levels in the Autumn, but the unusually
wet February greatly delayed Spring sales, which only in recent weeks have
experienced their seasonal surge. The fertiliser operation benefited from cost
reductions following the closure of the Group's Glasgow facility in August 2001
and the integration of its Scottish operations subsequent to the acquisition in
September 2001 of the outstanding 50% of the fertiliser blending activities of
Angus Fertilizers Limited in Montrose.
Our network of sixteen retail branches serving farmers from Milnathort in Fife
to Leek in Staffordshire performed well and our new branch at Brock, Lancashire
was opened in December and trading in the early months is encouraging.
The flour milling and food ingredients businesses had a much better first
half-year than last year.
Carr's Flour Mills, which primarily produces quality specialist flours, has
continued to develop sales to more technically demanding industrial flour users.
The business has also seen some improvement in margins following badly needed
industry restructuring. Good progress is also being made with a number of new
retail products including a range of flour aimed at the growing home bread-maker
market, which has benefited from excellent media publicity.
Our Engineering Division showed no significant improvement in this half-year and
is experiencing tough competition in many of the sectors in which we operate,
particularly the oil, gas and petrochemical sectors, where there is a low level
of activity. While order enquiry levels remain satisfactory, margins on awarded
contracts remain tight.
PROSPECTS
In the second half of the previous financial year, the Agriculture Division
benefited from increased animal feed sales resulting from the backlog of
slaughtering, livestock movement restrictions, and farmers not turning out their
stock while desperately trying to avoid FMD. Consequently, feed sales in this
second half-year will be at a lower level.
The national level of fertiliser sales is expected to be smaller this year as a
consequence of the wet early months, which is putting extra pressure on
producers with regard to both distribution logistics and margins.
On the other hand, the Agriculture Division now benefits from a more efficient
compound feed business, following last September's restructuring of Carr's
Billington Agriculture, growing feed block businesses in the US and the UK, a
streamlined fertiliser business and an extended retail branch structure.
With a small improvement, relative to last year, in market conditions expected
for the Food Division but none for the Engineering Division, the Board is
hopeful of further progress in the current year and beyond.
David A Newton
Chairman
30 April 2002
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE HALF YEAR ENDED 2 MARCH 2002
Half year ended Year ended
2 March 3 March 1 September
2002 2001 2001
£000 £000 £000
(unaudited) (unaudited) (audited)
Turnover: group and share of joint venture
Continuing operations 64,784 53,045 120,354
Discontinued operations 77 246 674
Acquisitions - 2,622 5,656
______ ______ ______
64,861 55,913 126,684
Less: share of turnover of joint venture - continuing operations - (6,344) (13,529)
______ ______ ______
Group turnover 64,861 49,569 113,155
______ ______ ______
Group operating profit
Continuing operations 1,879 1,850 2,454
Discontinued operations 7 42 62
Acquisitions - (65) (69)
______ ______ ______
Group operating profit 1,886 1,827 2,447
Share of operating profit in joint venture - 5 219
Share of operating profit in associate 204 - -
______ ______ _______
Total operating profit: group and share of associate and joint
venture 2,090 1,832 2,666
Continuing operations
Profit on part disposal of subsidiary undertaking 306 - -
Group share of profit on disposal of fixed assets in joint venture - 282 335
______ ______ ______
Profit on ordinary activities before interest 2,396 2,114 3,001
Interest receivable
Group 21 60 83
Joint venture - - 13
Interest payable
Group (413) (445) (953)
Associate (44) - -
Joint venture - (5) (82)
______ ______ ______
Profit on ordinary activities before taxation 1,960 1,724 2,062
Taxation (693) (630) (376)
______ ______ ______
Profit on ordinary activities after taxation 1,267 1,094 1,686
Minority interests - equity (91) (12) (11)
______ ______ ______
Profit for the period 1,176 1,082 1,675
Dividends (245) (240) (640)
______ ______ ______
Retained profit 931 842 1,035
______ ______ ______
Earnings per share
Basic 14.6p 13.5p 20.9p
Diluted 14.6p 13.5p 20.9p
Alternative basis 11.9p 11.1p 23.9p
CONSOLIDATED BALANCE SHEET AT 2 MARCH 2002
2 March 3 March 1 September
2002 2001 2001
£000 £000 £000
(unaudited) (unaudited) (audited)
Fixed assets
Intangible assets 122 37 30
Tangible assets 19,906 18,502 18,865
Investment in joint venture
Share of gross assets - 5,023 3,725
Share of gross liabilities - (5,043) (3,557)
- (20) 168
Investment in associate 276 - -
Loan to joint venture - 250 -
Loan to associate 1,225 - -
Other investments 13 13 13
______ ______ ______
21,542 18,782 19,076
Current assets
Assets held for resale 99 50 -
Stocks 11,965 12,790 8,136
Debtors 24,655 21,221 14,697
Cash at bank and in hand 331 243 1,307
______ ______ ______
37,050 34,304 24,140
Creditors
Amounts falling due within one year (35,525) (30,624) (20,817)
______ _______ ______
Net current assets 1,525 3,680 3,323
Total assets less current liabilities 23,067 22,462 22,399
Creditors
Amounts falling due after more than one year (1,211) (1,924) (1,343)
Provision for liabilities and charges (1,535) (1,528) (1,876)
Deferred income (211) (262) (234)
_____ _____ _____
20,110 18,748 18,946
______ ______ ______
Capital and reserves
Called-up share capital 2,013 1,999 1,999
Share premium account 4,741 4,698 4,698
Revaluation reserve 1,981 2,077 1,998
Profit and loss account 10,904 9,634 9,912
______ ______ _______
Equity shareholders' funds 19,639 18,408 18,607
Minority interests - equity 471 340 339
______ ______ ______
20,110 18,748 18,946
______ ______ ______
CONSOLIDATED CASH FLOW STATEMENT
FOR THE HALF YEAR ENDED 2 MARCH 2002
2 March 3 March 1 September
2002 2001 2001
£000 £000 £000
(unaudited) (unaudited) (audited)
Net cash (outflow)/inflow from operating activities (3,109) (2,098) 6,749
______ ______ ______
Returns on investments and servicing of finance
Interest received 24 64 91
Interest paid (362) (366) (771)
Interest paid on finance leases (58) (57) (138)
______ ______ ______
Net cash outflow from returns on investments and servicing of
finance (396) (359) (818)
______ ______ ______
Taxation (315) (360) (801)
______ ______ ______
Capital expenditure and financial investment
Purchase of tangible fixed assets (1,707) (785) (1,884)
Proceeds from sale of tangible fixed assets 367 46 91
Proceeds from sale of assets held for resale - - 50
Loan to associate (1,225) - -
Repayment of loan to joint venture - 300 550
______ ______ ______
(2,565) (439) (1,193)
______ ______ ______
Acquisitions and disposals
Proceeds from part disposal of subsidiary undertaking 400 - -
Proceeds from part disposal of joint venture 5 - -
Purchase of trade and net assets (762) - -
Purchase of subsidiary undertaking (100) (11) -
Bank account disposed of with subsidiary undertaking (305) - -
Bank account acquired in subsidiary undertaking - (562) (562)
______ ______ ______
(762) (573) (562)
______ ______ ______
Equity dividends paid (403) (480) (720)
______ ______ _______
Cash (outflow)/inflow before management of liquid resources and
financing (7,550) (4,309) 2,655
______ ______ _______
Financing 1,570 (66) (1,412)
______ ______ ______
(Decrease)/increase in cash (5,980) (4,375) 1,243
______ ______ ______
NOTES
1. On 3 September 2001 the Company sold 49% of its wholly-owned
subsidiary, Carrs Agriculture Limited, to Billington Agriculture Holdings
Limited for a consideration of £400,000 satisfied on completion in cash. Carrs
Agriculture Limited changed its name to Carrs Billington Agriculture (Sales)
Limited ('CBAL (Sales)'). At the same time CBAL (Sales) acquired the trade and
certain assets of Billington Agriculture Limited and the trade and assets of AF
Feeds for a total consideration of £762,000, satisfied on completion in cash. AF
Feeds was the agriculture feed and farm inputs division of Carrs Billington
Agriculture Limited (the Company's former 50:50 joint venture with Edward
Billington & Sons Limited).
On the same day, the Company sold 1% of its shareholding in Carrs Billington
Agriculture Limited, thereby reducing its shareholding to 49%, for a cash
consideration of £5,000.
Angus Fertilizers Limited had two businesses, fertiliser and horticulture until
29 September 2001. On that date, the fertiliser business was transferred to a
new subsidiary, and Carr's Milling Industries PLC exchanged its 50% subsidiary
investment in Angus Fertilizers Limited for 100% investment in that new
subsidiary. Carr's Milling Industries PLC no longer retains an interest in the
horticulture business.
2. The business and assets of the acquisition of AF Feeds from Carrs
Billington Agriculture Limited on 3 September 2001, and the animal feed trade
from Billington Agriculture Limited on 3 September 2001, were integrated into
the Group's activities after acquisition. It is not now possible to identify the
separate results or turnover of each of the separate parts of the business.
The acquisition in the prior year relates to Central Farmers (2000) Limited,
which was acquired in September 2000.
3. The tax charges for the half year ended 2 March 2002 and 3 March 2001
are based on the estimated tax charge for the applicable year.
4. The overseas estimated tax charge for the half year ended 2 March 2002
is £363,000 (2001 interim: £309,000; year ended 2001: £346,000).
5. The share of the associate's estimated tax charge for the half year
ended 2 March 2002 is £48,000 (2001 interim: nil; year ended 2001: nil).
The share of the joint venture's estimated tax charge for the half year ended 2
March 2002 is nil (2001 interim: £85,000; year ended 2001: £100,000).
6. The equity dividend for the half year ended 2 March 2002 is 3.0p per
share (2001 interim; 3.0p per share; year ended 2001: 8.0p per share).
7. The calculation of basic earnings per share is based on profits
attributable to shareholders of £1,176,000 (2001 interim: £1,082,000; year
ended 2001: £1,675,000) and on 8,053,359 (2001 interim: 7,996,639; year ended
2001: 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 profits of £1,176,000
and the weighted average number of shares in issue is adjusted to assume
conversion of all dilutive potential ordinary shares. The weighted average
number of shares is increased to 8,057,059 shares (2001 interim: 8,005,376;
year ended 2001: 8004,940).
Non-operating exceptional gains and losses do not relate to the profitability of
the Group on an ongoing basis. Therefore an alternative earnings per share is
presented as follows:
Half year ended Half year ended Year ended
2 March 2002 3 March 2001 1 September 2001
Earnings Earnings Earnings
Earnings per share Earnings per share Earnings per share
£000 p £000 p £000 p
Earnings per share 1,176 14.6 1,082 13.5 1,675 20.9
Exceptional items:
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
Share of profit on disposal
of fixed assets in joint
venture - - (282) (3.5) (335) (4.2)
Share of release of negative
goodwill in joint venture - - - - (373) (4.6)
Profit on part disposal of
subsidiary undertaking (306) (3.8) - - - -
Taxation arising on
exceptional items 92 1.1 85 1.1 (15) (0.2)
______ ______ ______ ______ ______ ______
Earnings per share -
alternative 962 11.9 885 11.1 1,914 23.9
______ ______ ______ ______ ______ ______
8. Cash flow from operating activities
Half year ended Year ended
2 March 2002 3 March 2001 1 September 2001
£000 £000 £000
(unaudited) (unaudited) (audited)
Group operating profit 1,886 1,827 2,447
Depreciation charge 1,079 995 2,305
Loss on disposal of fixed assets 15 4 51
Goodwill amortisation 8 6 13
Grants amortisation (23) (28) (56)
(Increase)/decrease in stocks (3,681) (4,895) 62
(Increase)/decrease in debtors (10,116) (6,684) 621
Increase in creditors 8,150 6,657 817
(Decrease)/increase in provisions (427) 20 489
______ ______ ______
Net cash (outflow)/inflow from operating activities (3,109) (2,098) 6,749
______ ______ ______
9. The accounts for the year ended 1 September 2001 have been reported on
by the auditors and delivered to the Registrar of Companies. The report of the
auditors was unqualified. This interim statement for the half year ended 2
March 2002 was approved by a duly appointed and authorised committee of the
Board of Directors on 29April 2002. The interim statement has neither been
audited nor reviewed by the auditors. This interim statement has been prepared
in accordance with the accounting policies set out in the Group's Report and
Accounts for the year ended 1 September 2001, with the exception that FRS19 has
first been adopted in these six months.
10. This interim report is being sent by post to all registered shareholders.
Copies are also available to the public from the Company's registered office:
Old Croft, Stanwix, Carlisle, CA3 9BA.
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