Carrs Group Regulatory News (CARR)

CARR'S GROUP PLC ("Carr's" or the "Group")

FULL YEAR RESULTS

"Diversity strengthens performance"

Carr's (CARR.L), the fully-listed Agriculture, Food and Engineering Group, announces results for the year ended 29 August 2015.

Financial highlights (continuing operations)

· Revenue down 4.1% to £411.6m (2014: £429.0m) primarily due to low commodity prices

· EBITDA up 6.0% to £21.6m (2014: £20.4m)

· Profit before taxation up 5.5% to £17.5m (2014: £16.6m)

· Basic EPS up 4.7% to 13.4p (2014 restated: 12.8p**)

· Adjusted* EPS up 3.8% to 13.6p (2014 restated: 13.1p**)

· Proposed final dividend of 1.85p up 8.8% resulting in a total for the year of 3.7p (2014 restated: 3.4p**)

· Capital expenditure of £7.3m during the year with net debt of £24.4m at the year-end (2014: £24.6m)

Divisional highlights

· Agriculture profit before tax (excluding contribution from associate and JVs) up 8.8% to £10.4m, driven by a strong performance in the USA feed block business;

· Food profit before tax up 6.3% to £2.4m due to improved operational efficiencies;

· Engineering profit before tax down 16.7% to £3.1m due to contract mix and market difficulties.

Chris Holmes, Chairman, said:

"I am pleased to report that the Group achieved another record year of profit before tax, despite a number of headwinds across all of our divisions. We have been able to achieve this due to the diversity of our business and the resilience of our business model, together with the hard work of our management team and all of our employees.

While we expect these headwinds to continue in 2016, we are in a very strong position to handle those challenges and capitalise on any potential opportunities."

*Adjusted earnings per share is calculated after adjusting for non-recurring items and amortisation of intangible assets.

** Restated due to share split of 10:1 which took place on 14 January 2015.

Enquiries:

Notes to Editors

Carr's Group plc is an international business operating across Agriculture, Food and Engineering, supplying over 35 countries around the world.

The Agriculture division compromises an international feed block supplement business with manufacturing locations in the USA, UK and Europe. In the UK it sells animal feed, fertiliser, animal health products, oil, farm machinery and rural supplies from its 30 Country Stores.

The Food division produces flour from three strategically located mills in the UK to the bread, biscuit and retail markets.

The Engineering division designs, manufactures and supplies specialist precision parts, equipment, robotics and remote handling products from three sites in the UK and one site in Germany. These highly specialised products and services are supplied predominately into the nuclear and oil and gas markets.

The Group is listed on the London Stock Exchange.

Chairman's Statement

Review of the Year

I am pleased to report that the Group has delivered another record year of profit before tax. This is particularly encouraging given the challenging market backdrop across all three of our divisions. Achieving this performance is testament to the management team and employees of the Group and the Board would like to thank everyone involved for their dedication and continuing to strive for excellence.

Revenue for the year fell by 4.1% to £411.6 million (2014: £429.0 million). Profit before tax was up 5.5% to £17.5 million (2014: £16.6 million). This comprised an 8.8% increase in Agriculture profit before tax to £10.4 million (2014: £9.6 million), a 6.3% increase in Food profit before tax to £2.4 million (2014: £2.3 million), and a 16.7% reduction in Engineering profit before tax to £3.1 million (2014: £3.7 million). Basic earnings per share were up by 4.7% to 13.4 pence per share (2014 restated: 12.8 pence), with fully diluted earnings per share of 12.9 pence (2014 restated: 12.3 pence) and adjusted earnings per share, excluding non-recurring items and amortisation of intangibles, of 13.6 pence (2014 restated: 13.1 pence). Net debt decreased slightly to £24.4 million (2014: £24.6 million).

In Agriculture, the business continued to build on the momentum established in previous years, with our retail operations expanding into new territories through both acquisitions and organic growth. Our geographic presence and relevance of our product offering will be key to supporting farming customers, given the tough market climate they face over the forthcoming year.

Our international feed block business has performed well, with a key strength of the business being our geographic reach. In the UK, lower farm incomes, coupled with excellent quality forage, resulted in reduced demand. However, in the USA we have seen a significant uplift in demand on the back of the rebuilding of beef herds together with favourable weather conditions. We continue to invest heavily in the R&D of these products both in the UK and internationally to drive future growth.

The Food division has delivered further growth despite changes in the consumer market having an adverse impact on our customers, which is expected to continue into the current financial year. Our continuing excellent customer service across all three mills means we are well placed to face these challenges and ensure the needs of our customers are surpassed.

It has been a tough year for our Engineering division with a combination of the depressed oil price and the impact of a complicated factory move affecting our precision engineering business, Chirton Engineering. Additionally, reduced activity in the nuclear sector in Japan and economic sanctions with Russia impacted Wälischmiller. However, we have continued to invest across the division in order to build for the future and to benefit from the expected increase in demand from the UK nuclear sector.

Share split

The Company's shares split 10:1 on 14 January 2015 following shareholder approval. This reduced the nominal value of the ordinary shares to 2.5 pence each, and was undertaken primarily to improve the liquidity of the Company's shares.

Dividend

The Board is proposing an 8.8% increase in the final dividend to 1.85 pence per ordinary share, which together with the two interim dividends, each of 0.925 pence per ordinary share, paid on 15 May and 9 October 2015, make a total of 3.7 pence per share for the year (2014 restated: 3.4p), representing an increase of 8.8%. The final dividend, if approved by the Shareholders, will be paid on 15 January 2016 to Shareholders on the register at close of business on 18 December 2015, and the shares will go ex-dividend on 17 December 2015.

The Board

During the year, John Worby was appointed as a Non-Executive Director of the Board, taking over as Senior Independent Director and Audit Committee Chairman from Alistair Wannop and Robert Heygate respectively. John's experience in FTSE 250 companies Fidessa plc, Genus plc, Cranswick plc and Uniq plc, coupled with his financial and sector experience, enhances the Board's expertise. Since the year-end the Board has been further strengthened with the appointment of Non-Executive Director Ian Wood, who has extensive experience in the engineering and energy sectors, working currently for Centrica plc.

In addition, on 10 September 2015 it was announced that Robert Heygate had decided to stand down from the Board after 25 years' service, with effect from April 2016. I would like to take this opportunity to thank Bob, for his contribution, dedication, enthusiasm, and support during his time with Carr's.

Outlook

In the year ahead we expect the headwinds seen across all three divisions to continue. However, we remain confident that the Group's diversity and resilient business model positions us well to make further progress in 2016. We will continue to build on our success and invest for the future across the Group, both in the UK and internationally. We expect our innovative approach, in particular the development of new products, to continue to differentiate us from the competition and we will remain alert to suitable complementary acquisitions. This, alongside plans to develop existing businesses organically, ensures the Group is well placed in the medium term. 

Chris Holmes

Chairman

Chief Executive's Review

During the year we have continued to build on our vision to be recognised as a truly international business at the forefront of innovation and technology across Agriculture, Food and Engineering.

Agriculture

The geographic spread and operational diversity of our businesses within the Agriculture division led to another record year.

Feed Blocks

Feed block sales in the USA have been exceptional this year with sales volumes, excluding joint ventures, 19.9% higher. Record production levels have been driven by favourable market and weather conditions. The drought in the South East, Mid-West and North West States continues to recede, resulting in beef herds being rebuilt across our key territories. The investment at the plant in Silver Springs, Nevada, has been on-going and remains on track to begin production of our branded product, Smartlic®, in November 2015. This plant expands our geographic reach in the USA by supplying low moisture feed blocks to the West Coast dairy and beef markets.

There has been positive initial reaction to the launch in the summer of our innovative new product Piglyx®, which is an environmental enrichment product reducing stress levels in pigs, enabling the farmers to increase their returns. In the summer, Horslyx®, a product for the equine leisure market, was exported to the USA for the first time, and resultant revenues are expected in the current financial year.

We have continued with our strategy of research and development to ensure we deliver sustainable growth. A research project into our unique feed block, Megastart®, completed this year, has demonstrated significant benefits to livestock, which has led to a substantial increase in sales of Megastart® during the year. Crystalyx® has seen a decline in UK sales this year as a result of high quality forage harvested during 2014, and declining farm incomes. We continue our commitment to our international growth strategy with Crystalyx®, and have employed personnel in Brazil to develop this potential market. On-farm trials of Crystalyx® are due to commence in Brazil by the end of 2015.

Retail

The strategy for growing our retail business delivered results exceeding expectations, with sales 8.6% higher year on year, a third consecutive record year. Like for like sales, excluding the impact of additional stores, also increased by 5.3%. Our presence in strategic locations, coupled with the diverse retail offering, further strengthened our business. With a new Country Store at Rothbury, and redeveloped facilities in Appleby and Selkirk, we continue our commitment to, and investment in, servicing both the agricultural and rural communities. In addition to organic growth, in June 2015 we undertook the strategic acquisition of Reid and Robertson Ltd, an agricultural merchant business specialising in veterinary medicines, based at Balloch, Ayr and Oban in Scotland. This expands our geographic reach in Scotland, and provides access to a new customer base for our existing product offering. Since the year-end we have acquired Green (Agriculture) Co, an agricultural merchant business based in Morpeth, near our existing machinery Country Store. This acquisition strengthens the Country Store network in Northumberland and enhances the services offered to the local community. With organic growth and acquisitions, we now have 30 Country Stores in our network with a further 5 livestock market locations.

Our integrated oil distribution business has also surpassed expectations this year with increased sales volumes of 4.4%, despite the benign weather and increased competition. This is due to investment in our fleet, increased presence across our regions and our emphasis on customer service.

The acquisition of WM Nicholls & Company (Crickhowell) Ltd in October 2014, together with the previous year's acquisition of B E Williams Ltd, further developed our strategy for our feed business in South Wales. We have combined these businesses into a central administration location in Brecon, whilst maintaining a presence in Sennybridge in the short term. The UK feed market is currently suffering from pricing pressure due to falling farm incomes, and the impact of increased manufacturing activity in our geographic markets has intensified competition. Despite this, our feed business performed well with total feed volumes up 4.1% year on year.

While we remain cognisant of the uncertainty facing the UK agriculture sector, we believe that our strong regional presence, technical expertise, and diverse product offering provides a solid platform to service our customers' needs through the next financial year and beyond.

AminoMax®

AminoMax®, the patented animal bypass protein product for dairy cows, manufactured at Watertown, New York State, USA, and Lancaster, UK recorded flat worldwide sales this year, predominantly as a result of the fall in farm incomes due to the declining farm-gate milk price. The falling soya and canola commodity prices, and continuing pressures on farm incomes, are expected to have an adverse impact on AminoMax® sales in the forthcoming year. However, we are continuing with research and development to extend this innovative product range.

Market Conditions

Farmer confidence has been adversely affected this year and it is anticipated this will continue in the medium term, as a direct result of the significant decline in the farm-gate milk price, both in the UK and internationally. Many of our farming customers are starting to modify their spending in reaction to the ongoing uncertainty in the UK agriculture market, and are postponing sizable capital investments until they have further market visibility. Once again, UK farmers benefited from a mild winter and benign spring, resulting in lower costs of production, which provided some respite from market conditions. We continue to support our farming customers in choosing the appropriate strategy to enable them to navigate a path through these difficult markets.

Food

We have enjoyed strong growth in the Food division this year with sales volumes 4.6% higher than last year. Through the year our reputation for customer service, quality and technical expertise has resulted in important new business wins. The growth in the division's sales volumes follows last year's step change in operating performance, which was driven by the commissioning of our state-of- the-art mill at Kirkcaldy. We have continued our investment programme with the installation of cutting edge equipment at our other mills, which ensures we remain ahead of our customers' ever increasing demands, particularly in the need for food safety. The ongoing investment supports the commercial benefits derived from increased customer confidence in our ability to produce quality flour, milled to the highest standards of product integrity.

The wheat harvest in summer 2014 was relatively normal at just over 16 million tonnes, however there were inconsistencies in quality. Our versatility with regard to wheat sourcing and mill processing meant that we were well positioned to respond to the changing market dynamics. The 2015 harvest has been large and consistent in quality and the position of our three mills enables us to benefit from this exceptional harvest.

Changes in the retail landscape and consumers' shopping habits are impacting the whole food supply chain, including the bakery sector. In the current financial year, ending August 2016, it is anticipated that these headwinds will persist. This challenging backdrop will in part be off-set by our investment in technology, high standards of customer service, and our on-going commitment to operational efficiencies throughout our three mills which, over the medium term, leaves us well placed to handle these changing markets.

Engineering

2015 has been a year in which we have invested in the future growth of our Engineering division. Our Engineering business operates in high value markets and within two areas, manufacturing and remote handling. During the year there has been increased collaboration throughout the division with joint bids being submitted and parts being manufactured internally for the remote handling businesses.

Our remote handling businesses have met expectations and performed well this year in difficult markets. In particular, Carrs MSM has had an excellent year, and this is expected to continue with the Life of Plant contract at Sellafield and other significant contracts to the nuclear sector being delivered in the current financial year.

Wälischmiller had a successful site acceptance test for the Demo 2000 Telbot® project in Norway, and will now progress to the live testing phase. This project removes the need for human inspection of oil and gas tanks, improving safety and reducing the time needed to shut down the plant by up to 700 man hours per tank. In addition, operating within a UK led engineering consortium, Wälischmiller has also been awarded a contract for the design and supply of robotic remote handling equipment for ITER with potential sales due for delivery between 2017 and 2020. ITER is the international collaboration for the creation of an experimental fusion reactor based in France.

Wälischmiller has also invested in state of the art machinery, development of a new showroom, and a marketing programme in the USA. This will help offset the continuing macro-economic pressure resulting from the funding and political issues faced in Russia and Japan, which is expected to continue through 2016. There are signs of increased activity in the UK nuclear market, with delivery of two power manipulators to Dounreay, Scotland expected by the end of 2015, and the successful completion of a remote handling project for Sellafield, with further orders through to 2017 being received after the year-end.

Bendalls, one of our two manufacturing businesses, is also benefitting from the increased activity in the UK nuclear market with multiple new framework agreements being awarded by Sellafield, operational through 2016-2019. We invested in the organic growth of the business through the creation of a new design department in 2015, which has been awarded its first contract from Sellafield for the design of a skip conveyor system. The BP Shah Deniz project, for the manufacture of 33 pressure vessels for the gas pipeline in Azerbaijan, has been successfully delivered in accordance with the agreed timeline, with one vessel to be delivered in spring 2016, as previously announced.

Chirton has had a difficult trading year due to the decline in the oil price and the impact of a complicated move to new factory premises in March 2015. The delay in moving to the new factory caused a greater level of disruption than expected, and issues commissioning new equipment resulted in extra costs and more lost production time than planned. This has adversely affected results in the short term. The low oil price has had a direct impact on Chirton's oil exploration customers, and as a result management have taken the decision to accelerate Chirton's entry into the nuclear market. To facilitate this, it is working closely with our other Engineering businesses, taking advantage of the sector expertise, to ensure that cross selling opportunities are maximised. During the year, Chirton commenced selling engineered parts for our remote handling operations, and this is set to continue through the next financial year.

Tim Davies

Chief Executive Officer

9 November 2015

UNAUDITED CONSOLIDATED INCOME STATEMENT

for the year ended 29 August 2015

UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 29 August 2015

UNAUDITED CONSOLIDATED BALANCE SHEET

as at 29 August 2015

UNAUDITED CONSOLIDATED BALANCE SHEET

as at 29 August 2015 (continued)

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 29 August 2015

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS

for the year ended 29 August 2015

NOTES TO THE UNAUDITED PRELIMINARY STATEMENT

1. Basis of preparation

The Group's unaudited Preliminary Announcement does not constitute statutory consolidated financial statements for the year ended 29 August 2015 or the year ended 30 August 2014. The statutory accounts for the year ended 29 August 2015 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.

The financial statements for the year ended 30 August 2014 were unqualified and have been delivered to the Registrar of Companies.

2. Segmental information

The segmental information for the year ended 29 August 2015 is as follows:

1Earnings before interest, tax, depreciation and amortisation (and before profit/(loss) on the disposal of property, plant and

equipment)

2Includes Head Office net expense of £(663,000) and retirement benefit charge of £(120,000)

The segmental information for the year ended 30 August 2014 is as follows:

3Includes Head Office net expense of £(753,000) and retirement benefit charge of £(687,000)

3. Taxation

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 89,574,461 (2014 restated: 88,995,250). The calculation of diluted earnings per share is based on 92,672,538 shares (2014 restated: 92,254,310).

1Disallowable for tax purposes

2Restated for the effect of the 10:1 share split in January 2015

5. Cash generated from operations

6. Pensions

The Group operates its current pension arrangements on a defined benefit and defined contribution basis. The valuation of the defined benefit scheme under the IAS19 accounting basis showed a surplus net of the related deferred tax liability in the scheme at 29 August 2015 of £1.4m (2014: £1.6m).

In the year, the retirement benefit charge in respect of the Carr's Group Pension Scheme was £120,000 (2014: £687,000).

7. Analysis of changes in net debt

8. The Board of Directors approved the preliminary announcement on 9 November 2015.

9. The Company intends to post a Summary Report and Accounts to shareholders by 1 December 2015. The full Report and Accounts will be available upon request from the Company Secretary, Carr's Group plc, Old Croft, Stanwix, Carlisle, CA3 9BA or alternatively on the Company's website: www.carrsgroup.com