Carrs Group Regulatory News (CARR)

19 Apr 2005 07:00

Carr's Milling Industries PLC19 April 2005 CARR'S MILLING INDUSTRIES PLC - INTERIM ANNOUNCEMENT Carr's, the Cumbria-based agriculture, food and engineering group, which hasincreased adjusted earnings per share in each of the last six years, announcesthat it remains on track for further progress in the current year and willbenefit substantially from the Meneba UK acquisition. Financial Highlights •Turnover increased by 9.4% to £78.42m. •Pre-tax profit totalled £7.24m (2004: £2.87m) or £3.20m, up 11.6% (despite a £0.35m reorganisation charge for the Meneba UK Holdings Limited flour business, which was acquired on 18 November 2004), if the exceptional £4.04m profit on the disposal of the Bendalls Engineering site in October 2004 is excluded. •Basic earnings per share were 75.7p (2004: 22.6p) or 28.8p, up 27.4%, in the absence of property profits. •Reflecting the Group's progressive dividend policy, the Board has declared an increased interim dividend per share of 5.0p, up 11.1% on 2004's 4.5p. •Net assets per share increased by 25.8% to 360.3p (2004: 287.8p). Commercial Highlights •Agriculture was again the most important of the three Divisions in terms of both turnover and profit, albeit both of these reduced. Despite industry overcapacity in animal feeds and some adverse weather, Agriculture is still performing well, but the full year divisional profit is now expected to be slightly less than last year. •Benefiting from lower wheat prices, Food made significant progress, despite the £0.35m reorganisation charge in the acquired mills and the loss of flour sales to McVitie's biscuit factory in Carlisle following the floods on 8 January 2005 and to the Rathbones plant bakery following a fire on 19 February 2005. In the full year, Food is the Division which is expected to make the greatest improvement. The newly acquired two flour mills, Hutchison's in Kirkcaldy and Green's in Maldon, are integrating well with Carr's in Silloth and are expected to be profit generating in the full year, after finance and reorganisation costs. •Engineering broke even, having made a small loss in the comparative period. With orders strong at Bendalls and satisfactory at MSM, Engineering is expected to move into profits in the full year, after five years of losses. Chris Holmes, Chief Executive, stated: "Overall, the year to 3 September 2005 isexpected to be one of further progress." Presentation: Today, there will be a presentation to brokers' analysts between 13:00 and14.00, over a sandwich lunch, at the offices of Bankside Consultants, 123 CannonStreet, London EC4N 5AU. Those wishing to attend are asked to contact Banksideon 020-7444 4166 / charles.ponsonby@bankside.com. Enquiries: Carr's Milling Industries plc 01228-554 600Chris Holmes (Chief Executive Officer)Ron Wood (Finance Director) Bankside Consultants LimitedCharles Ponsonby 020-7444 4166 CHIEF EXECUTIVE'S INTERIM REVIEW At the AGM on 6 January 2005, it was stated that the first four months of thenew financial year had started well and that the progress expected for the fullyear should also be manifested in the interim results for the 26 weeks ending 26February 2005. This prediction has been justified, with pre-tax profit beforeexceptional gain increasing by 11.6% to £3.20m despite a £0.35m reorganisationcharge for the Meneba UK Holdings Limited flour business, which was acquired on18 November 2004. The Directors believe that Carr's, which has increased adjusted earnings pershare in each of the last six years, remains on track for further progress inthe current year and will benefit substantially from the Meneba UK acquisition. FINANCIAL REVIEW Group turnover increased by 9.4% to £78.42m (2004: £71.70m) or a small decreaseof 1.9% to £70.37m if the Meneba UK acquisition is disregarded. Group operating profit was 15.2% higher at £3.64m (2004: £3.16m), a margin of4.6% (2004: 4.4%). Without Meneba UK, the increase was 12.5% to £3.56m. Pre-tax profit totalled £7.24m (2004: £2.87m) or £3.20m, up 11.6%, if the £4.04mprofit on the disposal of the Bendalls Engineering site in October 2004 isexcluded. Basic earnings per share were 75.7p (2004: 22.6p) or 28.8p, up 27.4%, in theabsence of property profits. Period end equity shareholders' funds increased by 25.8% to £29.23m (2004:£23.24m), representing net assets per share of 360.3p (2004: 287.8p). Reflectingthe £8.75m of cash required to fund the Meneba UK acquisition, and adversetiming issues in relation to working capital demands in the AgricultureDivision, net debt increased to £21.80m (2004: £7.21m), giving gearing of 74.6%(2004: 31.0%). Net debt will reduce substantially by the 3 September 2005 yearend. Net interest payable increased to £0.44m (2004 : £0.29m) and was covered8.3 times (2004: 10.9 times) by total group operating profit. Agriculture was again the most important of the three Divisions in terms of bothturnover and profit, albeit both of these reduced. INTERIM DIVIDEND Reflecting the Group's progressive dividend policy, the Board has declared anincreased interim dividend per share of 5.0p, up 11.1% on 2004's 4.5p, to bepaid on 27 May 2005 to shareholders on the register at close of business on 29April 2005, with an ex-dividend date of 27 April 2005. BUSINESS REVIEW Agriculture Feed The Group's animal feed business comprises: Operation Product LocationAnimal Feed Supplement Low moisture feed Belle Fourche (South block Dakota, USA) Poteau (Oklahoma, USA) Caltech Low moisture feed Silloth (Cumbria) block Carrs Billington Agriculture Compound feed Carlisle (Cumbria)(in association with Edward Penrith (Cumbria)Billington & Sons Ltd) Stone (Staffordshire) Blended feed Askrigg (North Yorkshire) Kirkbride (Cumbria) In the USA, volumes and profit of Feed in a Drum and Smartlic feed block weresimilar to last year, starting slowly because of the dry, warm weather butfinishing strongly in January and February. The strength of the pound againstthe US dollar adversely impacted profit by £0.1m. Volumes and profit for UK feed blocks were similar to last year. Sales ofCalflyx Easy Breather, a product for calves successfully launched in 2003,continued to grow. Additional production capacity was commissioned in Decemberto produce new products for the equine market, effectively 'horse treats',Minilick (the Original product with mint, and the Respiratory products withaniseed), which were launched in February 2005. The expected impact of decoupling following the mid-term review combined with avery mild winter with an abundance of grass, and the over-capacity in theindustry, resulted in reduced demand and profitability for compound and blendedanimal feeds. Fertiliser Carr's Fertilisers has three manufacturing and blending sites, at Invergordon(Easter Ross), Montrose (Angus) and Silloth (Cumbria), producing a wide range offertilisers. The fertiliser business traded well in the first six months. Farmers' cash flowshave been affected by the introduction in 2004 of the single farm payment and bythe excellent growing conditions for grass. As a result, we expect fertilisersales to be lower this year. Retail Carr's Retail comprises 14 branches, from Perth in the North to Leek(Staffordshire) in the South, selling farm supplies. Both turnover and profit increased, partially reflecting the fully operationaleffect of the opening of a larger branch in Cockermouth (Cumbria) in October2003. Machinery Carr's Machinery distributes new and used agriculture and ground care machineryfrom six of the retail branches, in the North of England and South West ofScotland. These branches have modern workshops that test equipment and provide acomprehensive stock of spare parts. Turnover was similar to last year, but profit was ahead. Food Carr's principal food companies are Carr's Flour Mills, with a flour mill atSilloth, and the two recently acquired flour mills of Meneba UK, Hutchisons atKirkcaldy (Fife) and Greens at Maldon (Essex). In the prior half year ended 28 February 2004, Food barely broke even due toinevitable delays in passing on the 60% increase in the wheat price in the eightmonths to January 2004. In the period under review, significant progress wasmade, despite the £0.35m reorganisation charge in the acquired mills and theloss of flour sales to the McVitie's biscuit factory in Carlisle following thefloods on 8 January 2005, and to the Rathbones plant bakery following the fireon 19 February 2005. The integration of Hutchisons' and Greens' business with that of Carr's FlourMills is progressing well and its trading remains on budget. Not only does theacquisition more than double the size of Carr's flour business, but the Boardremains confident that it will be earnings enhancing in the first full year ofownership. Engineering Engineering comprises Bendalls and R Hind, both of which are based in Carlisle,and Carrs MSM, which is based in Swindon. Bendalls, whose specialism isprecision welding, designs and manufactures process plant and equipment; R Hindprovides vehicle bodybuilding and accident repairs for cars and commercialvehicles; and Carrs MSM designs and manufactures master slave manipulators,which are key components for many industries but notably the nuclear industry. In the period under review, Engineering broke even, having made a small loss inthe comparative period. Bendalls remains busy. Its site at London Road, Carlisle was sold for a netconsideration now calculated at £4.9m - a profit of £4.0m - in October 2004 andthe move to a more efficient, purpose-built, 55,000 sq. ft. factory at KingstownIndustrial Estate, Carlisle, is expected to take place in August 2005. The netcash receivable by Bendalls of £2.4m will be used to equip the new factory andfor general working capital purposes. Bendalls' involvement in renewable energyis ongoing, with the tidal energy project, SeaGen, expected to be commissionedand connected to the grid in 2006. The small R Hind business is trading steadily. Carrs MSM, which was established in December 2003, is benefiting from asatisfactory order book. BOARD After a period of illness which precluded David Newton from participating in theGroup's affairs since last September, David has decided not to continue with anydirectorships following medical advice. The Board and the employees of Carr'swish David a speedy recovery and thank him for his considerable contribution tothe Group over the last nine years. The recruitment of a non-executive Chairmanis underway. OUTLOOK Agriculture is still performing well despite the production over-capacity in theindustry for animal feeds and the reduced demand for fertilisers in the peakmonths of March and April. Accordingly, the full year divisional profit is nowexpected to be slightly less than last year. Food is expected to make greater improvement than Engineering. Carr's FlourMills is expected to make good progress, despite the slow build up of businesswith McVitie's following the return to production in March. The newly acquiredtwo flour mills, Hutchisons and Greens, are also expected to be profitgenerating, after financing and reorganisation costs. With orders strong at Bendalls and satisfactory at MSM, Engineering is expectedto move into profit, after five years of reported losses. Overall, therefore, the year to 3 September 2005 is expected to be one offurther progress. C N C Holmes Chief Executive 19 April 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT for the half year ended 26 February 2005 Half Year Ended Year Ended 26 February 28 February 28 August 2005 2004 2004 £'000 £'000 £'000 Notes (unaudited) (unaudited) (audited) Group turnover - continuing operations 70,371 71,699 155,749Group turnover - acquisition 8,049 - - -------------------------Total turnover 78,420 71,699 155,749 ========================= Group operating profit - continuing operations 3,235 2,495 5,036Group operating profit - acquisition 86 - - -------------------------Total operating profit 3,321 2,495 5,036Share of operating profit in associate -continuing operations 321 666 739 -------------------------Total operating profit: group and share ofassociate 3,642 3,161 5,775Profit on disposal of fixed assets 4,040 - - -------------------------Profit on ordinary activities before interestand taxation 7,682 3,161 5,775Interest receivableGroup 33 48 116Interest payableGroup (447) (313) (691)Associate (25) (26) (73) -------------------------Profit on ordinary activities before taxation 7,243 2,870 5,127Taxation 1 (1,013) (918) (1,633) --------------------------Profit on ordinary activities after taxation 6,230 1,952 3,494Minority interests - equity (104) (124) (275) --------------------------Profit for the period 6,126 1,828 3,219Dividends (409) (363) (1,090) --------------------------Retained profit 5,717 1,465 2,129 =========================Earnings per ordinary shareBasic 2 75.7p 22.6p 39.9pDiluted 2 75.5p 22.6p 39.8pAdjusted basis 2 28.8p 22.6p 39.9pDividend per share 3 5.0p 4.5p 13.5p STATEMENT OF GROUP TOTAL RECOGNISED GAINS AND LOSSES for the half year ended 26 February 2005 Half Year Ended Year Ended 26 February 28 February 28 August 2005 2004 2004 £'000 £'000 £'000 (unaudited) (unaudited) (audited)Profit for the period 6,126 1,828 3,219Currency translation differences onforeign currency net investments (201) (467) (330) ----------------------------------Total recognised gains and lossesrelating to the period 5,925 1,361 2,889 ================================== CONSOLIDATED BALANCE SHEET at 26 February 2005 At At At 26 February 28 February 28 August 2005 2004 2004 £'000 £'000 £'000 Notes (unaudited) (unaudited) (audited)Fixed assets Intangible assetsGoodwill 158 210 184Negative goodwill (632) - - --------------------------------- (474) 210 184Tangible assets 26,561 19,531 20,474InvestmentsInvestment in associate 2,199 1,909 1,992Loan to associate 1,225 1,225 1,225Other investments 255 253 253 --------------------------------- 29,766 23,128 24,128Current assetsStocks 18,826 13,925 10,387Debtors 36,968 27,740 19,943Cash at bank and in hand 728 1,650 1,091 --------------------------------- 56,522 43,315 31,421CreditorsAmounts falling due within oneyear (43,570) (36,622) (25,265) ----------------------------------Net current assets 12,952 6,693 6,156Total assets less currentliabilities 42,718 29,821 30,284CreditorsAmounts falling due after morethan one year (10,645) (4,089) (3,779)Provision for liabilities andcharges (1,219) (1,099) (951)Deferred income (246) (274) (244) ---------------------------------Net assets 30,608 24,359 25,310 =================================Capital and reservesCalled-up share capital 2,028 2,018 2,018Share premium account 4 4,826 4,752 4,752Revaluation reserve 4 1,648 1,678 1,663Profit and loss account 4 20,730 14,789 15,605 --------------------------------Equity shareholders' funds 29,232 23,237 24,038Minority interests - equity 4 1,376 1,122 1,272 -------------------------------- 30,608 24,359 25,310 ================================ CONSOLIDATED CASH FLOW STATEMENT for the half year ended 26 February 2005 Half Year Ended Year Ended 26 February 28 February 28 August 2005 2004 2004 £'000 £'000 £'000 Notes (unaudited) (unaudited) (audited) Net cash (outflow)/inflow fromoperating activities 5 (4,376) 1,432 6,256 --------------------------------- Returns on investments andservicing of financeInterest received 36 51 120Interest paid (309) (273) (563)Interest paid on financeleases (37) (42) (88) --------------------------------Net cash outflow from returnson investmentsand servicing of finance (310) (264) (531) -------------------------------- Taxation (865) (594) (1,330) -------------------------------- Capital expenditure andfinancial investmentPurchase of tangible fixedassets (1,389) (1,153) (2,997)Purchase of intangible fixedassets - (160) (160)Sale of tangible fixed assets- non-exceptional 71 235 295Sale of tangible fixed assets- exceptional 6 1,226 - -Purchase of investments (2) (100) (100) ---------------------------------Net cash outflow from capitalexpenditure and financial investment (94) (1,178) (2,962) -------------------------------- AcquisitionPurchase of subsidiaryundertaking 6 (5,568) - -Net cash acquired withsubsidiary undertaking 1,787 - -Loan repaid (5,370) - - ---------------------------------Net cash outflow fromacquisition (9,151) - - --------------------------------- Equity dividends paid (730) (606) (969) ----------------------------------- Cash (outflow)/inflow beforefinancing (15,526) (1,210) 464 ---------------------------------- Financing 7,830 (746) (1,311) ---------------------------------- Decrease in net cash (7,696) (1,956) (847) ================================== NOTES 1 The tax charges for the half year ended 26 February 2005 and 28 February 2004are based on the estimated tax charge for the applicable year. The overseasestimated tax charge for the half year ended 26 February 2005 is £174,000 (2004interim : £249,000; year ended 2004 : £285,000) The share of the associate'sestimated tax charge for the half year ended 26 February 2005 is £89,000 (2004interim : £192,000; year ended 2004 : £143,000). In accordance with FRS19, deferred tax has not been recognised on the disposalon 7 October 2004 of the property known as the Bendalls site in Carlisle as itis intended that the proceeds of the sale will be reinvested. The Group iscontracted to reinvest part of the proceeds and other investment projects areplanned which will mitigate the tax that would become payable on the disposal. 2 The calculation of basic earnings per share is based on profits attributableto shareholders of £6,126,000 (2004 interim : £1,828,000; year ended 2004 :£3,219,000) and on 8,094,371 (2004 interim : 8,073,599; year ended 2004 :8,073,599) shares, being the weighted average number of shares in issue duringthe period. The calculation of diluted earnings per share is based on profitsattributable to shareholders of £6,126,000 (2004 interim : £1,828,000; yearended 2004 : £3,219,000) and the weighted average number of shares in issue toassume conversion of all dilutive potential ordinary shares. The weightedaverage number of shares is increased to 8,115,988 shares (2004 interim :8,085,417; year ended 2004 : 8,086,150). Exceptional gains and losses do notrelate to the ongoing profitability of the Group and an alternative earnings pershare is presented as follows: Half year ended Half year ended Year ended 26 February 2005 28 February 2004 28 August 2004 Earnings Earnings Earnings Earnings per share Earnings per share Earnings per share £'000 p £'000 p £'000 pEarnings/earnings per share 6,126 75.7 1,828 22.6 3,219 39.9ExceptionalitemsSale ofproperty (4,040) (49.9) - - - -Reorganisationcosts in FoodDivision 350 4.3Taxationarising onexceptionalitem (105) (1.3) - - - - --------------------------------------------------------------Earnings/earnings per share- adjusted 2,331 28.8 1,828 22.6 3,219 39.9 =============================================================== 3 The equity dividend for the half year ended 26 February 2005 is 5.0p per share(2004interim : 4.5p per share; year ended 2004 : 13.5p per share). 4 Reserves Share Premium Revaluation Profit and Loss Minority Account Reserve Account Interest £'000 £'000 £'000 £'000At 29.08.04 4,752 1,663 15,605 1,272Exchangeadjustments - - (201) -Transfer fromrevaluation reserveto profit and lossaccount - (15) 15 -Goodwill - - (406) -Retained profit forthe year - - 5,717 -Shares issues 74 - - -Minority share ofprofit - - - 104 -------------------------------------------------At 26.02.05 4,826 1,648 20,730 1,376 ================================================= 5 Cash flow from operating activities Half year ended Year ended 26 February 2005 28 February 2004 28 August 2004 £'000 £'000 £'000 (unaudited) (unaudited) (audited) Group operating profit 3,321 2,495 5,036Depreciation charge 1,401 1,138 2,367Profit on sale oftangible fixed assets (13) (74) (108)Goodwill amortisation 16 13 38Grants amortisation (23) (29) (59)Increase in stocks (7,177) (4,802) (1,264)Increase in debtors (7,534) (8,748) (1,447)Increase in creditors 5,633 11,606 1,860Decrease in provisions - (167) (167) -------------------------------------------Net cash(outflow)/inflow fromoperating activities (4,376) 1,432 6,256 =========================================== 6 Acquisition and disposal Total acquisition costs in the period totalled £5,568,000 of which £5,162,000relates to the purchase of Meneba UK detailed in note (a) below. The balance of£406,000 relates to a further payment for shares in Bendalls referred to in note(b) below. (a) Acquisition of Meneba UK Holdings LimitedThe Company acquired on 18 November 2004 the entire issued share capital ofMeneba UK Holdings Limited for a total consideration of £5,162,000. The totalprovisional adjustments required to the book values of the assets andliabilities ofthe acquired company in order to present the net assets at fair values and inaccordance with group accounting principles were £613,000, details of which areset out below, together with the resultant amount of negative goodwill arising. From the date of acquisition to 26 February 2005, the acquisition contributed£8,049,000 to turnover, £86,000 to profit before interest and after goodwillamortisation and reorganisation costs of £350,000. The acquired companycontributed £446,000 to the Group's net operating cash flows, and £5,000 inrespect of interest, £5,000 in respect of taxation, and it utilised £71,000 forcapital expenditure. In its last financial year to 30 June 2004, Meneba UK Holdings Limited made aprofit after tax of £287,000. For the period since that date to the date ofacquisition, the management accounts of Meneba UK Holdings Limited show: £'000 Turnover 12,052Operating profit 752Profit before taxation 637Taxation (207)Profit attributable to shareholders 430 Book Goodwill Provisonal value Revaluations elimination fair value £'000 £'000 £'000 £'000Intangible fixed assets 1,061 - (1,061) -Tangible fixed assets 5,298 1,674 - 6,972Stock 1,262 - - 1,262Debtors 5,760 - - 5,760Creditors (4,035) - - (4,035)Taxation- Current (309) - - (309)- Deferred (263) - - (263)Cash 1,787 - - 1,787Loans (5,370) - - (5,370)------------------------------------------------------------------------------- Net assets acquired 5,191 1,674 (1,061) 5,804Negative goodwill (642)------------------------------------------------------------------------------- Consideration (satisfied bycash) 5,162------------------------------------------------------------------------------ The book value of assets and liabilities has been taken from the managementaccounts of Meneba UK Holdings Limited at 18 November 2004 (the date ofacquisition). The above fair values are provisional and will be finalised in thefull year financial statements when the detailed acquisition investigation hasbeen completed. (b) Disposal of property at London Road, Carlisle. Carrs Engineering Limited, a wholly owned subsidiary of the Company, enteredinto a conditional agreement dated 16 July 2004 to sell the property known astheBendalls site. The conditions of the agreement were satisfied on 7 October 2004.On completion Carrs Engineering Limited received £1.2m net of expenses in cashand a further payment in cash of £1.6m is due on Carrs Engineering giving vacantpossession of the site. As part of the agreement, the purchaser is committed tobuild a new 55,000 sq. ft. factory for Bendalls at an expected cost of £2.1m.Theprofit on disposal is £4.0m. The disposal of the Bendalls site triggered afurtherpayment of £0.4m for the shares acquired in 1996 of James A Bendall (Property)Limited. 7 Analysis of net debt At At At 26 February 2005 28 February 2004 28 August 2004 £'000 £'000 £'000 (unaudited) (unaudited) (audited) Cash at bank and inhand 728 1,650 1,091Bank overdrafts (9,526) (3,879) (2,169)Loans: amounts fallingdue within one year (2,800) (1,366) (1,290)Loans: amounts fallingdue after more than oneyear (8,755) (2,335) (2,165)Finance leases: amountsfalling due within oneyear (614) (402) (554)Finance leases: amountsfalling due after morethan one year (830) (880) (671) ------------------------------------------- (21,797) (7,212) (5,758) ============================================ 8 The figures and financial information for the year ended 28 August 2004 do notconstitute the statutory financial statements for that year. Those financialstatements have been reported on by the auditors and delivered to the Registrarof Companies. The report of the auditors was unqualified. This interim statementfor the half year ended 26 February 2005 was approved by a duly appointed andauthorised committee of the Board of Directors on 18 April 2005. The interimstatement does not constitute a set of statutory financial statements under s240of the Companies Act 1985, and has neither been audited nor reviewed by theauditors. This interim statement has been prepared in accordance with theaccounting policies set out in the Group's Report and Accounts for the yearended 28 August 2004. 9 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. This information is provided by RNS The company news service from the London Stock Exchange