Latest Results

INTERIM RESULTS
For the 26 weeks ended 26 February 2022 

“A robust performance in the period with full year expectations unchanged”

 Carr's (CARR.L), the Agriculture and Engineering Group, announces its Interim Results for the 26 weeks ended 26 February 2022. 

• Strong performance in Agricultural Supplies despite significant raw material cost increases
• Engineering order book value increased 14% during H1 with improved utilisation and stronger margins
• Speciality Agriculture margins impacted by timing difference between input cost increases and sale price movements
• Full year outlook in line with Board’s expectations

Outlook

During the second half, an improved performance in Engineering, where order books stand at record levels, together with continued positive trading in Agricultural Supplies are expected to offset volume and pricing challenges in Speciality Agriculture. The Board is confident in the prospects of all three divisions in the medium term and its full year expectations are unchanged. 

Peter Page, Executive Chairman, commented:

"Carr's Group has performed well in the first half, with a strong performance in Agricultural Supplies at a time of extraordinary raw material cost increases and a marked recovery in Engineering offsetting input cost impact on margins in Speciality Agriculture. The outlook for the second half remains positive with the group on track to meet the Board’s expectations for the full year."

INTERIM MANAGEMENT REPORT

RESULTS

The Group has delivered a half year result broadly in line with the prior year, but behind the Board’s expectations for the period. With a stronger performance anticipated in Engineering in H2, full year expectations are unchanged.

During the 26 weeks ended 26 February 2022 revenues increased to £222.7m (H1 2021: £201.4m). Adjusted operating profit of £10.8m (H1 2021: restated £11.0m) was 1.9% down on the prior year.  Adjusted profit before tax reduced by 2.3% to £10.3m (H1 2021: restated £10.5m).

Adjusted earnings per share decreased by 8.4% to 7.6p (H1 2021: restated 8.3p).

MARKET INFORMATION

During the period, significant raw material cost inflation has affected all parts of the business.

The Engineering division successfully managed the impact of steel and component cost increases through existing contract arrangements.

Management is confident that pricing in all parts of the UK-based Agricultural Supplies division correctly reflects the rapidly changing raw material cost base, so far with limited impact on volumes.

In Speciality Agriculture changes to selling prices lagged cost increases in the early part of the year due to the time gap between orders received and delivery in a period of rapid cost movement, but costs and prices have since been brought into line and the situation has stabilised at higher levels. Volume demand has been relatively strong in the first half. Second half volumes may be adversely impacted by higher prices and drought in some parts of the USA. Management will closely monitor UK volumes through the summer months when customers may decide to limit outgoings by more intensive use of grazing and pasture.

SPECIALITY AGRICULTURE

The Speciality Agriculture division manufactures livestock supplements including feed blocks, minerals, and trace element boluses, which are distributed to farmers across the UK, Europe, North America, and New Zealand.

In the UK and Ireland, feed blocks sales remained strong where volumes increased on the prior year by 2.5%.  Feed block volumes in Europe also increased by 4.5% and continued to grow in New Zealand.   Performance in the USA, where volumes (excluding JVs) were 5.9% down on the prior year, was impacted by lower livestock numbers in certain areas due to a reduction in forage availability resulting from drought, reducing demand for feed blocks.

Animal health revenues were down compared to the prior year, which had benefitted from increased sales in advance of the UK:EU trade deal in December 2020.

As reported in the Group’s January trading update, margin erosion was seen across the division due to a lag in passing through increases in raw material prices.  Inflationary costs have now been fully passed through into selling prices.

AGRICULTURAL SUPPLIES

The Agricultural Supplies division includes our UK network of country stores, fuel depots, machinery franchises, and compound feed business.

The division performed well overall in the period.  Livestock and milk prices remain high, although rising input costs continue to present a significant challenge for farmers.

Total feed sales volumes were 2.5% lower compared to the prior year, although selling prices were 26.3% higher in the period primarily due to the pass through of rising input costs.

Machinery revenues remained strong and 0.4% ahead of the prior year.  In the period a new machinery branch opened in Stranraer, and another will be opening in Thirsk later this financial year. 

Total retail sales were up 4.1%, with like-for-like sales showing the same level of increase.  In the period an e-commerce site was launched in part of the business, which is expected to be rolled out more broadly in this calendar year.

As previously reported, milder weather seen over the winter period led to fuel volumes being down 8.5% versus the prior year.

ENGINEERING

The Engineering division includes fabrication and precision engineering businesses in the UK, robotics businesses in the UK, Europe and USA, and engineering solutions businesses in the UK and USA.

Performance across the division improved significantly against the prior year but remained behind the Board’s expectations for the period.  The order book continues to be strong with £44.2m recorded at the period end, being 8.6% higher than at the half year in the prior year and 13.8% higher than the year end position of £38.8m.

The fabrication and precision engineering business performed well in the period, benefitting from high activity levels and a recovery in the oil and gas market.  Work continues to progress well through the Cumbrian Manufacturing Alliance, which was formed in 2021 to secure larger projects in the UK nuclear sector.

The robotics business performed as expected.  During the period the business achieved a significant milestone, securing its first contract to supply a power manipulator in the USA to an internationally renowned research institution.  The business also completed development of the A150, which is a new, small-scale telescopic manipulator for the growing nuclear medicine market.

The engineering solutions business experienced challenges in the period, largely due to delays and higher costs than anticipated on one defence project, where installation work is complete and commissioning is expected this calendar year, and technical faults on a service contract where work will be completed at a later date.

REVIEW OF STRATEGIC OPTIONS

In January the Board announced it would undertake a review of the strategic options for each of the three divisions to evaluate potential to grow shareholder value. This work has progressed well with an assessment of internal and external market information nearing completion.  The Board will provide an update during the second half of the financial year.

FINANCE REVIEW

Adjusted results

Revenue increased by 10.6% to £222.7m (H1 2021: £201.4m), with increases of 6.2% in Speciality Agriculture and 15.3% in Agricultural Supplies offset by a reduction in Engineering of 9.6%.

Adjusted operating profit fell 1.9% to £10.8m (H1 2021: restated £11.0m). Strong performances in Agricultural Supplies, up 19.1%, and Engineering, up 58.2%, offsetting a reduction in Speciality Agriculture of 21.1%.

Central costs were 24.6% lower at £1.1m (H1 2021: restated £1.5m), primarily due to lower performance-based remuneration under current interim executive arrangements.  

Net finance costs of £0.5m (H1 2021: £0.5m) were slightly higher due to a higher level of borrowings compared to the same period in the prior year.

The Group’s adjusted profit before tax decreased by 2.3% to £10.3m (H1 2021: restated £10.5m). Adjusted earnings per share, which was impacted by a higher non-controlling interest from Agricultural Supplies, decreased by 8.4% to 7.6p (H1 2021: restated 8.3p).

Adjusting items

The Group provides the adjusted profit measures referred to above to present additional useful information on business performance consistent with how business performance is measured internally. These measures show underlying profits before certain adjusting items. Adjusting items during the period were a net charge of £0.8m (H1 2021: restated £1.0m), consisting of cloud computing costs of £1.2m (H1 2021: restated £0.8m), amortisation of acquired intangible assets of £0.5m (H1 2021: £0.6m), and strategic review costs of £0.4m (H1 2021: nil), offset by the release of contingent consideration of £1.3m (H1 2021: £0.7m).  The prior period also included restructuring costs of £0.2m.

Statutory results

Reported operating profit on a statutory basis was £10.0m (H1 2021: restated £10.0m) and reported profit before tax was £9.5m (H1 2021: restated £9.5m). Basic earnings per share on a statutory basis was 7.6p (H1 2021: restated 7.8p).

Balance sheet and cash flow

Net cash used in operating activities in the first half was £15.2m (H1 2021: restated: cash generated of £13.4m).

Net debt, excluding leases, increased to £29.9m from £10.0m at the financial year end (H1 2021: £10.6m). This is primarily related to cash absorbed into working capital, particularly receivables and inventories of £19.7m and £8.9m respectively.  The majority of this relates to Agricultural Supplies, where receivables are higher due to a combination of higher selling prices and some slower collections. Inventories are higher due to a combination of higher prices and a decision to hold more machinery inventory.  This is expected to reverse in the second half.

The Group’s defined benefit pension scheme remains in surplus, with a balance of £10.0m compared to £9.4m at 28 August 2021.

Shareholder’s equity

Shareholders’ equity at 26 February 2022 was £122.7m (28 August 2021: £118.1m).

A first interim dividend of 1.175 pence per ordinary share will be paid on 7 June 2022 to shareholders on the register on 29 April 2022. The ex-dividend date will be 28 April 2022.

BOARD SUCCESSION

The Board has recruitment processes running for a CEO and an additional Non-Executive Director. These are progressing to plan and the Board will update shareholders in due course.

PRINCIPAL RISKS AND UNCERTAINTIES

The Group has a process in place to identify and assess the impact of risks on its business, which is reviewed and updated quarterly. The principal risks and uncertainties for the remainder of the financial year are not considered to have changed materially from those included on pages 33 to 36 of the Annual Report and Accounts 2021 (available on the Company’s website at http://investors.carrsgroup.com).

OUTLOOK

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the 26 weeks ended 26 February 2022

NOTES TO THE ANNOUNCEMENT

The notes are available in the printable pdf of the results. To download it, please  click here