“A robust performance in a year of significant challenge”
Carr's (CARR.L), the Agriculture and Engineering Group, announces its full year results for the year ended 29 August 2020.
|Adjusted1||FY 20||FY 19||+/-|
|Adjusted1 operating profit (£m)||16.2||18.9||-14.2%|
|Adjusted1 profit before tax (£m)||14.9||18.0||-17.4%|
|Adjusted1 EPS (p)||11.9||14.6||-18.5%|
|Statutory||FY 20||FY 19||+/-|
|Operating profit (£m)||13.8||17.2||-19.5%|
|Profit before tax (£m)||12.5||16.3||-23.4%|
|Basic EPS (p)||10.3||13.1||-21.4%|
|Dividend (p per share)||4.75||4.75||-|
|Net debt2 (£m)||18.9||20.9||-9.6%|
Peter Page, Chairman, commented:
“In difficult market conditions the Group delivered a robust financial performance, with full year profitability slightly ahead of the Board’s revised expectations. Across both divisions, the Group responded well to managing the challenges
arising from the COVID-19 pandemic.
“The global economy has been dominated by COVID-19, creating uncertainty and making forecasts difficult. Nevertheless, the Group is well positioned as the agriculture sector remains crucial in supplying raw materials and ingredients to the food
chain, and our engineering businesses are predominantly involved in government funded contracts in the nuclear sector.
“Trading in the new financial year has started in line with the Board’s expectations. Whilst uncertainties remain in the broader economic environment, the Board is confident about the prospects of our business in the medium term.”
1 Adjusted results are consistent with how business performance is measured internally and are presented to aid comparability of performance. Adjusting items are disclosed in note 3
2 Excluding leases. Further details of net debt can be found in note 8
Review of the year
For the year ended 29 August 2020, in difficult market conditions the Group delivered a robust financial performance, with full year profitability slightly ahead of the Board’s revised expectations. Across both divisions, the Group responded well
to managing the challenges arising from the COVID-19 pandemic.
First half trading in the Agriculture division was characterised by both challenging market conditions affecting farm incomes and continued unseasonal weather in the UK and USA. Trading in the second half of the year recovered well, and overall
profitability exceeded the Board’s revised expectations for the year. As COVID-19 restrictions were tightened, the UK Agriculture businesses proved adept in maintaining supplies to farmers whilst keeping people safe. In the Supplements
business, new and innovative products were launched, and expanded production and research capabilities supported our international footprint, particularly in New Zealand and Canada where feed block sales continued to build.
In the Engineering division, the first half of the year was impacted by contract phasing. Whilst it had been expected some of this would recover in the second half, delays in receiving expected orders on overseas projects meant that this was not the case.
Restrictions imposed on travel and access to customer sites as a consequence of COVID-19, together with the weakened oil price, also negatively affected the division’s full year performance with profitability below the Board’s revised
At the onset of COVID-19, all sites moved quickly to follow government guidelines and implemented a range of safety measures including social distancing, increased hygiene and shift-working. People worked from home where possible, maintaining strong engagement
with our customers, suppliers and each other, using virtual media. Contingencies were planned across both divisions, which remain under constant review.
Revenue for the year decreased by 2.0% to £395.6m (2019: £403.9m). Adjusted operating profit was down 14.2% to £16.2m (2019: £18.9m), with Agriculture contributing £13.4m (2019: £14.7m) and Engineering £3.8m
(2019: £5.9m). Reported operating profit fell by 19.5% to £13.8m (2019: £17.2m). Adjusted profits are before amortisation of acquired intangible assets totalling £1.4m and restructuring and closure costs of £2.0m
offset by adjustments to contingent consideration totalling £0.9m, giving a net total adjusting items of £2.4m.
Adjusted profit before tax was down 17.4% to £14.9m (2019: £18.0m) and reported profit before tax decreased by 23.4% to £12.5m (2019: £16.3m). Basic earnings per share were down by 21.4% to 10.3p (2019: 13.1p), with fully
diluted earnings per share of 10.2p (2019: 12.8p) and adjusted earnings per share down 18.5% to 11.9p (2019: 14.6p).
Net debt at 29 August 2020, excluding leases, was £18.9m (2019: £20.9m). This movement included £18.1m generated from operations, £8.9m used in investing activities and £3.3m paid in dividends.
The recent leasing standard IFRS 16 has been adopted in the year, with a consequential reduction to opening net assets of £1.4m as operating leases were brought onto the balance sheet. There was also a consequential impact to the income statement
of an additional charge to profit before tax of £0.1m resulting from the new standard.
With the onset of COVID-19, the Group implemented a rigorous cash forecasting process which is tested regularly against a variety of scenarios. Cash management measures were also implemented to limit non-essential expenditure. Whilst
an interim dividend decision in April 2020 was deferred, this was subsequently confirmed and reinstated in July 2020 once the short-term impact of COVID-19 on the business became clearer. Such measures preserved the Group’s strong cash
and net debt positions, leaving good headroom on the Group’s committed banking facilities.
The Board is proposing a final dividend of 2.5 pence per share which, together with the interim dividend of 2.25 pence per share declared in July 2020, makes a total dividend for the year of 4.75 pence per share (2019: 4.75p). The final dividend, if approved
by Shareholders, will be paid on 15 January 2021, to shareholders on the register on close of business 4 December 2020, and the shares will go ex-dividend on 3 December 2020.
Corporate governance and Board succession
This has been an important year for Board succession. After joining the Board in November 2019, I took over as Non-Executive Chairman following the AGM in January 2020. In October 2020 Kristen Eshak Weldon joined the Board as an Independent Non-Executive
Director, bringing international experience of investment appraisal along with real insight into new technology applications in the agri-food sector.
In August 2020 we announced that Tim Davies would be stepping down after seven years as CEO of the Group. On behalf of all shareholders, I am extremely grateful to Tim for his dedication and contribution to the business. Tim’s leadership style and
genuine concern for colleagues have been most evident since March 2020 as everyone has come to terms with different ways of working, heightened levels of uncertainty and increased demands on the business. Tim will leave the Board at the AGM in January
2021 but will remain available to give advice and share his knowledge during a handover period.
Hugh Pelham joins Carr’s Group as CEO in January 2021, standing for election at the AGM. Hugh has relevant experience in developing and growing businesses and integrating them into larger group structures, he has worked in many markets around
the world, and he has developed high performing management teams. I look forward to welcoming Hugh to the Group.
As part of its long-term succession strategy, it is planned that Alistair Wannop will stand down from the Board at the conclusion of the AGM in January 2022. Alistair was first appointed to the Board as a Non-Executive Director in September 2005.
Given the level of Board succession achieved during 2019 and 2020, and recognising Alistair’s deep knowledge of the Group’s activities and understanding of agricultural industries, the Board considers it appropriate for Alistair to remain
appointed for another year to ensure continuity.
AGM January 2021
In the light of the COVID-19 pandemic, the AGM on 12 January 2021 will be held in a revised format. As shareholders will not be able to attend the meeting in person, the Board will be inviting shareholders to vote on the resolutions proposed by proxy,
and to submit any questions in advance of the meeting. We will be publishing a broadcast on the Company’s website, reflecting on the year, providing an update on current trading, introducing Hugh Pelham, and answering questions raised by shareholders,
following the AGM on 12 January 2021.
Carr’s employs over 1,100 people across the globe, all of whom have made a significant contribution to the business this year, particularly in the demanding situation arising from COVID-19. I am extremely grateful for everyone’s support, endurance
The Group remains committed to building value by focusing on markets with growth potential, diversifying its international footprint and differentiation through innovation and technology.
The global economy has been dominated by COVID-19, creating uncertainty and making forecasts difficult. Nevertheless, the Group is well positioned as the agriculture sector remains crucial in supplying raw materials and ingredients to the food chain,
and our engineering businesses are predominantly involved in government funded contracts in the nuclear sector. Management will continue to focus on optimising all the businesses in the Group.
Trading in the new financial year has started in line with the Board’s expectations. Whilst uncertainties remain in the broader economic environment, the Board is confident about the prospects of our business in the medium term.
23 November 2020
As outlined in our trading update on 12 March 2020, trading conditions across both divisions during the first half of the year were challenging and, unrelated to COVID-19, led to a reduction in the Board's performance expectations for the full year.
I am pleased to report, however, that despite these challenges, and the significant measures adopted across the Group in order to manage the effects of the pandemic, a very robust performance in the second half resulted in a full year performance which
exceeded those revised expectations.
While cash preservation has remained a key priority, we have been able to continue to invest in key areas to ensure that the Group remains well placed for the future. During the year, we strengthened our presence in growth markets across the world,
whilst driving innovation and technological advances to maintain our strong position in our established markets.
As previously reported, trading in our Agriculture division in the first half was slower than the prior year, largely driven by atypical weather patterns and growing conditions from the previous summer which reduced demand for key products. Improved
trading during the second half, however, resulted in a robust outturn for the full year.
During the year, revenue was down 4.1% to £342.6m (2019: £357.4m). Adjusted operating profit was down 8.5% to £13.4m (2019: £14.7m), whilst reported operating profit was down 4.8% to £13.4m (2019: £14.1m).
During the period, following the appointment of a new Managing Director in the UK Agriculture business, the management team was strengthened through a further four senior appointments to help optimise efficiencies and drive strategic growth, whilst maintaining
an absolute focus on serving our customers. We also appointed a new Commercial Director in our Supplements business.
Total global feed block sales volumes were up 1.2% year-on-year. Sales volumes were slightly ahead of the Board’s expectations as a direct result of increased demand and growth in target markets during the second half. Despite overall volume
increases, however, increases in raw material prices were not wholly mitigated through selling price increases which led to lower margins, particularly in the UK.
UK feed block volumes were up 5.2% compared to the prior year. This performance was driven by improved livestock prices in the second half, which increased farmers’ willingness to invest in supplementation.
Following a weaker first half, US feed block sales subsequently recovered towards the end of the financial year, with volumes up 0.5% in the period overall. Whilst cattle prices were suppressed during the majority of the period, prices recovered towards
During the year, we successfully launched our new FesCool® feed block in the USA following extensive research trials undertaken in conjunction with Kansas State University. FesCool® enhances the performance of grazing cattle in warm climates by
reducing the impact of fescue toxicity and enhances our range of innovative supplements that add real value to livestock farmers.
In 2020, we also invested in and enhanced our production systems in the USA, spending £2.1m in improving our manufacturing facilities at two of our sites and in the creation of a research facility. This investment will help drive efficiencies
and provide us with the opportunity to develop and test new product ranges, ingredients, and manufacturing techniques.
We continue to make progress in developing sales of feed blocks into Canada. As North America moved into stricter national travel restrictions, we benefited from having a sales team on the ground locally. The Canadian market represents a significant
potential market for sales into beef and equine sectors, and can be supplied out of the Group’s existing facility in Belle Fourche, South Dakota.
New Zealand feed block sales were up 40% in the period where we continued to make progress in raising customer awareness and building relationships with further distribution partners. The Group continues to consider the New Zealand market
as offering strong potential for future growth.
In Germany, our joint venture business, Crystalyx Products GmbH, saw a 4.1% decrease in feed block sales compared to the prior year. During the year, the business launched its new Pick Block product, manufactured out of its plant in Oldenburg, Germany,
and sales are expected to build. Pick Block is designed to improve poultry welfare standards through environmental enrichment, encouraging birds to demonstrate a wider range of natural behaviours.
Animax, the Group’s manufacturer of livestock bolus supplements, had a challenging year owing to market pressures coupled with milder weather which reduced customer demand. During the year, the business appointed a new Commercial Director
and increased focus on international growth opportunities. The Group continues to make progress on its manufacturing automation project, which is expected to help drive future efficiencies, new product ranges and even higher product quality.
Total volumes in our compound feed business declined by 6.9% during the year. This was largely driven by the warm summer in 2019 and subsequent mild winter which led to high stocks of good forage and reduced farmer demand for bought-in feeds during the
first half. Such reduction in demand gave rise to increased competition which impacted margins during the period. During the second half, the initial closure of the food service sector impacted farmer incomes; however, the strong retail sales
subsequently seen led to a significant pick-up in demand for certain meat and dairy products which largely offset the effect of this.
The Group’s fuel distribution business saw sales volumes increase 2.9% on the prior year. This was driven by colder weather during March 2020 and customers stocking up on heating oil in the early stages of the pandemic when commodity prices were
low, as well as increased demand from farmers due to a busy spring period on farms generally.
Machinery sales were particularly strong in the year, up 19.2% overall and achieving record sales of £45.5m. New machinery sales were up 17% on the previous year. The performance was driven by improved farmer confidence and government
loan schemes supporting farming investments, together with pent-up demand following a period of subdued activity prior to the original Brexit date. Growth in the machinery business, which outperformed the market significantly, is also attributable
to the development of our relationship with a key supplier.
The Group’s retail outlets performed resiliently, with like-for-like sales up 1.6% and overall sales up 0.6% during the period. During the pandemic, extensive measures were taken to ensure that our network of country stores could continue to service
our core farming customers, who remain critical to the UK's food supply chain. These innovative measures included the successful roll-out of a pre-order, collection and delivery service across all branches.
During the year we also progressed our rationalisation and efficiency programme in UK Agriculture. Our ongoing review of retail store effectiveness resulted in the closure of four sites as we focus our offering at strategic locations and enhancing
our delivery and collection models. During the pandemic, the early stages of lockdown gave us the ability to test new ways of working, which has provided valuable strategic insight for the future and helped develop our strategy for managing
a second wave.
Whilst short-term uncertainty relating to Brexit continues, our resilient performance in UK Agriculture during the pandemic illustrates the strength of our business and its ability to overcome future challenges. That adaptability, combined with operational
efficiencies and enhanced customer focus, places the business well for future growth. Since the year-end, we have also significantly expanded the geographic coverage of our machinery franchise across southern Scotland with a more focused product
range, which provides an opportunity to grow sales over the medium term.
Internationally, our Supplements business continues to enhance its presence in territories with significant growth opportunity, particularly across Europe, the USA, Canada, and New Zealand. We also remain focused upon increasing our presence in new markets
including the UK dairy sector. We continue to build growth through strategic partnerships and sustained research and development, and remain confident in the division’s medium term outlook.
The Engineering division performed resiliently despite significant challenges. First half trading was slow due to contract phasing and delays in receiving key robotics orders. This did not improve in the second half, as had been expected, mainly due to temporary disruption to nuclear and defence projects due to COVID-19 restrictions, which affected travel and access to customer sites. In addition, the sharp decline in the oil price led to customers deferring investments in the oil and gas sector. Whilst delays to projects had a negative impact on divisional performance, the business was able to strengthen its customer relationships by working flexibly to accommodate changing needs.
During the year, revenue was up 14.0% to £53.0m (2019: £46.5m). NW Total, acquired towards the end of the prior year, contributed £11.7m (2019: £1.9m). Adjusted operating profit was down 35.6% to £3.8m (2019: £5.9m)
and reported operating profit was down 77.2% to £1.4m (2019: £6.0m).
UK Service and Manufacturing
Our UK Service and Manufacturing business delivered a solid performance during the first half. The second half, however, was heavily impacted by the decline in the oil price and significantly reduced investment in the oil and gas sector, which led to
delays on one major project. In the year, total revenues were £29.4m (2019: £23.0m), including NW Total revenues of £11.7m (2019: £1.9m).
NW Total had a strong performance in its first full year as part of the Group. Whilst COVID-19 restrictions were imposed temporarily on one customer site, this had a limited impact on the business overall and the risk of further impact or delay
to that project is reduced by on-site controls now in place. The order book for the business remains very strong and we remain very encouraged by the opportunities, particularly in the defence sector, that NW Total brings to the division.
During the year the Group also invested £1.3m in state-of-the-art machinery at its site in Carlisle, bringing large-scale machining capabilities and enhancing the range of customer services available within the division.
The Group’s Global Robotics business had a challenging year. This was driven by a weaker order book, resulting from contract phasing and delays to projects in Japan, together with export restrictions which continue to affect China. These challenges
were exacerbated by delays and travel restrictions imposed as a result of COVID-19. Revenues for the year totalled £14.8m (2019: £16.5m).
While the business experienced lower levels of activity during the year, the order book was strengthened significantly. We also remain optimistic about opportunities in Japan, where many of the country’s nuclear facilities continue to be decommissioned.
In the year, we opened a showroom for our products in Japan which will help develop opportunities in the region.
Our Global Robotics business continues to develop its position in the USA. Good progress continues to be made on the significant $8.5m contract previously announced, and during the year we opened a robotics showroom at our facility in Mooresville,
North Carolina, which will help demonstrate the efficacy of our products to customers in North America.
Global Technical Services
The Group’s Global Technical Services business performed in line with expectations, generating revenues of £8.8m (2019: £7.0m).
The phasing of several long-term Mechanical Stress Improvement Process (MSIP®) projects enhanced performance in the second half of the year, which will continue throughout the current year. During the period, the business was awarded another $6m MSIP®
contract to be delivered through to 2022.
The development of our passive cooling technology continues to progress, following the award of funding from the US Department of Energy in 2019. It is anticipated that an application for a second tranche of funding will be made during 2021. This
technology has the potential to be retrofitted on existing nuclear power plants to improve safety.
Whilst parts of the division which serve oil and gas markets have been impacted in the short-term, owing to a reduction in customer investment attributable to the low oil price, there remain significant opportunities across nuclear and defence markets.
The division also continues to develop technologies, in conjunction with its strategic partners, to provide innovative solutions to customer challenges in nuclear markets.
Our improved divisional structure provides a comprehensive offering, able to compete on a larger scale than before. Such changes provide an uplift in the volume of contracts we can tender for and leave the division well placed for future growth.
Chief Executive Officer
23 November 2020
|Cost of sales||(343,381)||(349,798)|
|Adjusted1 share of post-tax results of associate||1,191||1,230|
|Share of post-tax results of associate||1,191||924|
|Share of post-tax results of joint ventures||1,442||1,453|
|Adjusted1 operating profit||16,247||18,930|
|Adjusted1 profit before taxation||14,904||18,044|
|Profit before taxation||2||12,497||16,309|
|Profit for the year||10,922||13,624|
|Profit attributable to:|
|Earnings per ordinary share (pence)|
1Adjusted results are consistent with how business performance is measured internally and is presented to aid comparability of performance. Adjusting items are disclosed in note 3. An alternative performance measures glossary can be found in note 9.
|Profit for the year||10,922||13,624|
|Other comprehensive (expense)/income|
|Items that may be reclassified subsequently to profit or loss:|
|- Foreign exchange translation (losses)/gains arising on translation of overseas subsidiaries||(2,552)||1,857|
|- Net investment hedges||(54)||37|
|- Taxation credit/(charge) on net investment hedges||10||(7)|
|Items that will not be reclassified subsequently to profit or loss:|
| - Actuarial gains/(losses) on retirement benefit asset:|
- Share of associate
|- Taxation (charge)/credit on actuarial gains/(losses) on retirement benefit asset:|
- Share of associate
Other comprehensive (expense)/income for the year, net of tax
|Total comprehensive income for the year||8,753||13,907|
|Total comprehensive income attributable to:|
|Other intangible assets||9,171||9,318|
|Property, plant and equipment||38,259||41,917|
|Investment in associate||14,307||13,392|
|Interest in joint ventures||10,551||9,671|
|- Non-current receivables||20||22|
|Retirement benefit asset||8,037||7,769|
|Deferred tax asset||-||410|
|Trade and other receivables||51,686||56,349|
|Current tax assets||1,535||-|
|- Derivative financial instruments||3||-|
|- Cash and cash equivalents||17,571||28,649|
|Trade and other payables||(55,522)||(62,653)|
|Current tax liabilities||(33)||(1,010)|
|Deferred tax liabilities||(4,783)||(4,987)|
|Other non-current liabilities||(1,385)||(2,999)|
|Total shareholders’ equity||117,126||114,250|
|Treasury Share Reserve|
|At 2 September |
|Profit for the |
|Other comprehensive income/(expense)||-||-||-||-||1,887||-||(1,604)||283||-||283|
|Total comprehensive income||-||-||-||-||1,887||-||10,445||12,332||1,575||13,907|
|Equity-settled share-based payment transactions||-||-|| |
|Allotment of shares||14||24||-||-||-||-||-||38||-||38|
|Purchase of own shares held in trust||-||-|| |
|Reclassified from liabilities||-||-|| |
|At 31 August 2019||2,299||9,165||-||1,577||6,146||199||94,864||114,250||16,740||130,990|
|As previously reported at 31 August 2019||2,299||9,165||-||1,577||6,146||199||94,864||114,250||16,740||130,990|
|Effect of IFRS 16 adoption||-||-||-||-||-||-||(931)||(931)||(511)||(1,442)|
|At 1 September 2019 (restated)||2,299||9,165||-||1,577||6,146||199||93,933||113,319||16,229||129,548|
|Profit for the |
|Other comprehensive (expense)/income||-||-||-||-||(2,596)||-||427||(2,169)||-||(2,169)|
|Total comprehensive (expense)/income||-||-||-||-||(2,596)||-||9,960||7,364||1,389||8,753|
|Equity-settled share-based payment transactions||-||-||-||(843)||-||-||691||(152)||15||(137)|
|Excess deferred taxation on share-based payments||-||-||-||-||-||-||(27)||(27)||(2)||(29)|
|Allotment of shares||13||11||-||-||-||-||-||24||-||24|
|Purchase of own shares held in trust||-||-||(58)||-||-||-||-||(58)||-||(58)|
|At 29 August 2020||2,312||9,176||(45)||734||3,550||197||101,202||117,126||17,043||134,169|
|Cash flows from operating activities|
|Cash generated from continuing operations||6||22,639||16,004|
|Net cash generated from operating activities||18,060||12,600|
|Cash flows from investing activities|
|Acquisition of subsidiaries (net of overdraft/cash acquired)||-||(9,868)|
|Contingent/deferred consideration paid||(2,659)||(379)|
|Dividend received from associate and joint ventures||701||711|
|Purchase of intangible assets||(1,459)||(1,310)|
|Proceeds from sale of property, plant and equipment||421||831|
|Purchase of property, plant and equipment||(6,569)||(4,471)|
|Purchase of own shares held in trust||(58)||(13)|
|Net cash used in investing activities||(8,905)||(14,420)|
|Cash flows from financing activities|
|Proceeds from issue of ordinary share capital|
New bank loans and movement on RCF
|Lease principal repayments||(3,171)||(1,278)|
|Repayment of borrowings||(2,459)||(2,493)|
|Decrease in other borrowings||(14,508)||(1,352)|
|Dividends paid to shareholders||(3,344)||(4,173)|
|Dividends paid to related party||(588)||(588)|
|Net cash (used in)/generated from financing activities||(22,157)||4,584|
|Effect of exchange rate changes||(989)||526|
|Net (decrease)/increase in cash and cash equivalents||(13,991)||3,290|
|Cash and cash equivalents at beginning of the year||24,295||21,005|
|Cash and cash equivalents at end of the year||10,304||24,295|
The notes are available in the printable pdf of the results. To download it, please click here