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. 

 

 

Financial highlights

 
 
 
  Adjusted1
H1 2022
Adjusted1
H1 2021
(restated)2
 
 
+/-
Revenue (£m) 222.7 201.4 +10.6%
Adjusted1 operating profit (£m) 10.8 11.0 -1.9%
Adjusted1 profit before tax (£m) 10.3 10.5 -2.3%
Adjusted1 EPS (p) 7.6 8.3 -8.4%
Net debt3 (£m)
 
29.9 10.6 +182.8%

 
 
 
Statutory
H1 2022
 
Statutory
H1 2021
(restated)2
 
 
 
+/-
Revenue (£m) 222.7 201.4 +10.6%
Operating profit (£m) 10.0 10.0 +0.2%
Profit before tax (£m) 9.5 9.5 -0.1%
Basic EPS (p) 7.6 7.8 -2.6%
Interim dividend (p) 1.175 1.175 -
 

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 8

2  Prior period restatement recognised in relation to the adoption of the IFRIC agenda decision on cloud configuration and customisation costs in April 2021. Further details can be found in note 18

3   Excluding leases. Further details of net debt can be found in note 12

 

Highlights

  • 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.

  H1 2022H1 2021 (restated)% Change
Revenue £42.7m £40.2m +6.2%
Adjusted operating profit £6.5m £8.3m -21.1%
Adjusted operating margin 15.3% 20.5%  

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.

  H1 2022 H1 2021 % Change
Revenue £158.7m £137.7m +15.3%
Adjusted operating profit £3.9m £3.3m +19.1%
Adjusted operating margin 2.5% 2.4%  

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.

  H1 2022 H1 2021 % Change
Revenue £21.3m £23.6m -9.6%
Adjusted operating profit £1.5m £0.9m +58.2%
Adjusted operating margin 6.8% 3.9%  

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

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.   

CONDENSED CONSOLIDATED INCOME STATEMENT

For the 26 weeks ended 26 February 2022

    26 weeks   ended
26 February
  2022
(unaudited)
26 weeks
ended
  27 February
2021
  (unaudited) (restated)2

52 weeks
ended
  28 August
2021
(audited)
Notes £’000   £’000   £’000
Continuing operations     
     
Revenue 6,7 222,706 201,435   417,254
Cost of sales  (198,972) (173,412)   (365,174)
     
Gross profit  23,734 28,023   52,080
     
Net operating expenses  (15,135) (20,154) (39,218)
Adjusted¹ share of post-tax results of associate  678 920 1,525
Adjusting items 8 (261) (73) (694)
Share of post-tax results of associate  417 847   831
Share of post-tax results of joint ventures  998 1,276 1,421
Impairment of joint venture (adjusting item) 8 - - (2,090)
     
Adjusted¹ operating profit 6 10,781 10,993   17,585
Adjusting items 8 (767) (1,001) (4,561)
Operating profit 6 10,014 9,992   13,024
     
Finance income  161 135   260
Finance costs  (691) (633) (1,232)
     
Adjusted¹ profit before taxation 6 10,251 10,495   16,613
Adjusting items 8 (767) (1,001) (4,561)
Profit before taxation 6 9,484 9,494   12,052
     
Taxation  (1,573) (1,600) (2,400)
Adjusted¹ profit for the period 6 8,305 8,589   14,675
Adjusting items 8 (394) (695) (5,023)
  
Profit for the period 7,911 7,894 9,652
  
Profit attributable to:   
Equity shareholders 7,127 7,199 7,712
Non-controlling interests 784 695 1,940
  
  
7,911 7,894 9,652
  
  
Earnings per share (pence)   
Basic 9 7.6 7.8 8.3
Diluted 9 7.5 7.5 8.1
Adjusted¹ 9 7.6 8.3 13.2
Diluted adjusted¹ 9 7.5 8.1 13.0
     

[1] Adjusted results are consistent with how business performance is measured internally and is presented to aid comparability of performance. Adjusting items are discussed in note 8. Adjustments made to calculate adjusted earnings per share can be found in note 9. An alternative performance measures glossary can be found in note 19.

2 See note 18 for an explanation of the prior period restatement recognised in relation to the adoption of the IFRIC agenda decision on cloud configuration and customisation costs.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the 26 weeks ended 26 February 2022

   
  26 weeks) ended)
  26 February)
2022)
(unaudited)
26 weeks ended
  27 February 2021
  (unaudited)   (restated)[1]
 
52 weeks
  Ended
  28 August
2021
(audited)
Notes £’000)   £’000)   £’000
     
    
     
Profit for the period  7,911 7,894 9,652
     
Other comprehensive income/(expense)     
    
Items that may be reclassified subsequently to profit or loss:     
Foreign exchange translation gains/(losses) arising on
  translation of overseas subsidiaries
  
123
 
(1,752)
 
(1,781)
Net investment hedges  133 76 165
Taxation charge on net investment hedges  (25) (14) (31)
     
Items that will not be reclassified subsequently to profit or loss:     
Actuarial gains/(losses) on retirement benefit asset:     
- Group 14 530 (295) 1,205
- Share of associate  - - 578
     
Taxation (charge)/credit on actuarial gains/(losses) on retirement benefit asset:     
- Group  (133) 56 (301)
- Share of associate  - - (144)
     
Other comprehensive income/(expense) for the period, net of tax 628 (1,929) (309)
     
Total comprehensive income for the period  8,539 5,965 9,343
     
Total comprehensive income attributable to:  
Equity shareholders 7,755 5,270 7,403
Non-controlling interests 784 695 1,940
  
8,539 5,965 9,343
[1] See note 18 for an explanation of the prior period restatement recognised in relation to the adoption of the IFRIC agenda decision on cloud configuration and customisation costs.

CONDENSED CONSOLIDATED BALANCE SHEET

As at 26 February 2022

 
As at
26 February
  2022
(unaudited)
As at
27 February
  2021
(unaudited) (restated)[1]

  As at
  28 August
2021
(audited)
Notes   £’000) £’000   £’000
Non-current assets     
Goodwill 11 31,634 31,530 31,560
Other intangible assets 11 4,656 5,705 5,151
Property, plant and equipment 11 37,155 35,609 36,198
Right-of-use assets 11 15,816 16,265 16,777
Investment property 11 149 155 152
Investment in associate  14,687 14,522 14,268
Interest in joint ventures  8,445 11,492 9,482
Other investments  72 72 72
Contract assets  310 - 312
Financial assets     
- Non-current receivables  20 20 20
Retirement benefit asset 14 9,964 7,807 9,371
  122,908 123,177 123,363
     
Current assets     
Inventories  51,926 43,392 43,226
Contract assets  6,623 7,885 7,202
Trade and other receivables  82,356 59,496 61,735
Current tax assets  3,216 2,705 2,669
Financial assets     
- Cash and cash equivalents 12 28,457 24,838 24,309
  172,578 138,316 139,141
     
Total assets  295,486 261,493 262,504
     
Current liabilities     
Financial liabilities     
- Borrowings 12 (37,069) (8,580) (11,113)
- Leases  (3,301) (2,965) (2,967)
Contract liabilities  (1,372) (3,019) (2,447)
Trade and other payables  (74,054) (67,704) (69,526)
Current tax liabilities  (254) (494) (42)
  (116,050) (82,762) (86,095)
Non-current liabilities     
Financial liabilities     
- Borrowings 12 (21,246) (26,815) (23,159)
- Leases  (11,982) (12,177) (12,458)
Deferred tax liabilities  (5,560) (4,830) (5,503)
Other non-current liabilities  (28) (1,370) (55)
  (38,816) (45,192) (41,175)
     
Total liabilities (154,866) (127,954) (127,270)
 
Net assets  140,620 133,539 135,234
     
Shareholders’ equity  
Share capital 15 2,349 2,330 2,343
Share premium 15 10,465 9,613 10,155
Other reserves 2,825 2,363 2,578
Retained earnings 107,017 102,071 103,006
Total shareholders’ equity 122,656116,377 118,082
Non-controlling interests  17,964 17,162 17,152
Total equity 140,620 133,539 135,234
      

[1] See note 18 for an explanation of the prior period restatement recognised in relation to the adoption of the IFRIC agenda decision on cloud configuration and customisation costs.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the 26 weeks ended 26 February 2022

  
ShareCapital
 
Share Premium
Treasury
  Share   Reserve
Equity
Compensation Reserve
  Foreign   Exchange  Reserve  
  Other   Reserve
 
Retained) Earnings)
Total) Shareholders’) Equity)   Non-  Controlling Interests  
Total) Equity)
£’000 £’000   £’000   £’000   £’000 £’000   £’000)   £’000) £’000 £’000)
At 29 August 2021
(audited)
 
2,343
 
10,155
 
  -
 
  480
 
1,903
 
195
 
103,006
 
118,082
 
17,152
 
135,234
Profit for the period -   -   -   - - - 7,127 7,127 784 7,911
Other comprehensive income-   -   -   - 231 - 397 628 - 628
Total comprehensive income -   -   -   - 231 - 7,524 7,755 784 8,539
Dividends paid -   -   -   - - - (3,583) (3,583) - (3,583)
Equity-settled share-based payment transactions  
-
 
  -
 
  -
 
18
 
-
 
-
 
68
 
86
 
28
 
114
Allotment of shares 6   310   -   - - - - 316 - 316
Transfer -   -   -   - - (2) 2 - - -
At 26 February 2022 (unaudited)  
2,349
 
10,465
 
  -
 
498
 
2,134
 
193
 
107,017
 
122,656
 
17,964
 
140,620
 
As previously reported at 29 August 2020 (audited)  
2,312
 
  9,176
 
(45)
 
  734
 
3,550
 
197
 
101,202
 
117,126
 
17,043
 
134,169
Prior period adjustment¹ -   -   -   - - - (2,295) (2,295) (243) (2,538)
At 30 August 2020 (restated)¹ 2,312   9,176 (45)   734 3,550 197 98,907 114,831 16,800 131,631
Profit for the period -   -   -   - - - 7,199 7,199 695 7,894
Other comprehensive expense -   -   -   - (1,690) - (239) (1,929) - (1,929)
Total comprehensive (expense)/income -   -   -   - (1,690) - 6,960 5,270 695 5,965
Dividends paid -   -   -   - - - (4,390) (4,390) (368) (4,758)
Equity-settled share-based payment transactions -   -   - (426) - - 646 220 35 255
Allotment of shares 18   437   -    - - - - 455 - 455
Purchase of own shares held in trust -   -   (9)   - - - - (9) - (9)
Transfer -   - 53   - - (1) (52) - - -
At 27 February 2021 (unaudited) 2,330   9,613   (1)   308 1,860 196 102,071 116,377 17,162 133,539
As previously reported at 29 August 2020 (audited)  
2,312
 
  9,176
 
(45)
 
  734
 
3,550
 
197
 
101,202
 
117,126
 
17,043
 
134,169
Prior period adjustment¹ -   -   -   - - - (2,295) (2,295) (243) (2,538)
At 30 August 2020 (restated)¹ 2,312   9,176 (45)   734 3,550 197 98,907 114,831 16,800 131,631
Profit for the period -   -   -   - - - 7,712 7,712 1,940 9,652
Other comprehensive (expense)/income -   -   -   - (1,647) - 1,338 (309) - (309)
Total comprehensive (expense)/income -   -   -   - (1,647) - 9,050 7,403 1,940 9,343
Dividends paid -   -   -   - - - (5,490) (5,490) (1,647) (7,137)
Equity-settled share-based payment transactions -   -   - (254) - - 660 406 58 464
Excess deferred taxation on share-based payments -   -   -   - - - 32 32 1 33
Allotment of shares 31   979   -   - - - - 1,010 - 1,010
Purchase of own shares held in trust -   -   (110)   - - - - (110) - (110)
Transfer -   -   155   - - (2) (153) - - -
At 28 August 2021 (audited) 2,343 10,155 - 480 1,903 195 103,006 118,082 17,152 135,234

  [1] See note 18 for an explanation of the prior period restatement recognised in relation to the adoption of the IFRIC agenda decision on cloud configuration and customisation costs.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the 26 weeks ended 26 February 2022

    26 weeks ended
26 February 2022
  (unaudited)
  26 weeks ended
27 February 2021
  (unaudited)  (restated)[1]

52 weeks ended
28 August 2021
(audited)
Notes   £’000) £’000 £’000
Cash flows from operating activities     
Cash (used in)/generated from continuing operations 16 (13,965) 15,225 22,163
Interest received  74   57 109
Interest paid  (702) (625) (1,244)
Tax paid   (579) (1,300) (2,131)
Net cash (used in)/generated from operating activities  (15,172)   13,357 18,897
Cash flows from investing activities     
Contingent consideration paid  - (131) (1,077)
Dividends received from associate and joint ventures  1,626   368 1,898
Purchase of intangible assets  (1) (49) (107)
Proceeds from sale of property, plant and equipment  41   125 396
Purchase of property, plant and equipment and right-of-use assets  (2,034) (1,645) (3,850)
Purchase of own shares held in trust  - (9) -
Net cash used in investing activities  (368) (1,341) (2,740)
Cash flows from financing activities     
Proceeds from issue of ordinary share capital  316   455 1,010
Purchase of own shares held in trust  -   - (110)
New financing and draw downs on RCF  5,311 5,609 11,526
Repayment of RCF draw downs  (6,000)   - (8,500)
Lease principal repayments  (1,354) (1,556) (3,252)
Repayment of borrowings  (1,406) (1,200) (2,400)
Increase/(decrease) in other borrowings  22,989 (604) 2,394
Dividends paid to shareholders  (3,583) (4,390) (5,490)
Dividends paid to related party  - (368) (1,647)
Net cash generated from/(used in) financing activities  16,273 (2,054) (6,469)
Effects of exchange rate changes  39 (373) (296)
Net increase in cash and cash equivalents  772 9,589 9,392
Cash and cash equivalents at beginning of the period  19,696   10,304 10,304
Cash and cash equivalents at end of the period  20,468   19,893 19,696
    
Cash and cash equivalents consist of:     
Cash and cash equivalents per the balance sheet  28,457   24,838 24,309
Bank overdrafts included in borrowings  (7,989) (4,945) (4,613)
  20,468   19,893 19,696

 [1] See note 18 for an explanation of the prior period restatement recognised in relation to the adoption of the IFRIC agenda decision on cloud configuration and customisation costs.

NOTES TO THE ANNOUNCEMENT

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

 

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