Carrs Group Regulatory News (CARR)

05 January 2016

CARR'S GROUP PLC

("Carr's" or the "Group")

Trading Update

Carr's (CARR.L), the Agriculture, Food and Engineering Group, is issuing its first trading update for the year ending 3 September 2016 to coincide with its Annual General Meeting being held in Carlisle today at 11.30 am.

This update relates to the 18 week period which ended on 2 January 2016.

Carr's continues to trade in line with the Board's expectations for the full year.

Agriculture

The period saw much of the North of the UK, and in particular Cumbria, face severe flooding, causing significant disruption to many people and transport links. The Agriculture division was directly affected with one of our associate's three feed mills being flooded; however, through the dedication of their employees, it became partially operational after one week. Many of the Company's rural and agricultural customers were directly affected by the floods, and Carr's has worked with those affected to assist where possible and ensure that needs were met. Appropriate insurance covers are in place, mitigating any notable financial impact.

The fuel operation has benefited from the low oil price with sales volumes up on last year. The retail business has started positively, building on last year's success. The acquisition of Green (Agriculture) Co at Morpeth in September 2015 and Reid & Robertson Ltd in Balloch, Ayr and Oban, acquired in June 2015, have been successfully integrated into the retail operation. These acquisitions strengthen the geographic footprint of the Country Store network and enhance the services we are able to offer to the community.

Animal feed compound volumes have been ahead of the prior year. However, margins continue to be under pressure and machinery sales have been impacted by the reduction in farm incomes.

Feed block sales in the UK have been negatively impacted by the very warm autumn and winter weather. Conversely the USA has continued to perform well building on the excellent performance in the previous year as cattle numbers continue to recover across the USA. The redevelopment project at the manufacturing plant in Silver Springs, Nevada was completed with the first production of branded product, Smartlic®, commencing in December 2016.

Despite the various challenges, including continued depressed livestock and farmgate milk prices being received by our UK farming customers, the overall performance of the division continues to be in line with expectations.

Food

The Food division is also trading in line with expectations.

The floods in Cumbria directly affected one of our major customers, with a knock-on impact on the supply of flour into that business. However, we carry appropriate business interruption insurance cover and therefore we do not anticipate any notable financial impact as a direct result of this event.

Within the bakery category changing shopping habits and the retailers' response to those changes have, as expected, led to some margin pressure in the supply chain.

The 2015 UK harvest was again in excess of 16 million tonnes, although quality is more variable than last year. Carr's continues to benefit from long-term established relationships with customers, and well-invested assets at the cutting edge of the industry, and remains positive about the performance of the division for the remainder of the financial year.

Engineering

The Engineering division has had a slower than expected start, with the phasing of activity being more heavily weighted to the second half of the financial year. Overall, we expect the division to trade in line with expectations for the full year.

The remote handling businesses combined are performing ahead of expectations with MSM having a strong start to the year as a result of a significant contract for master slave manipulators for installation in Sellafield, with delivery due through 2016. Wälischmiller has a number of contracts due for completion in summer 2016, however, during the period has traded in line with expectations.

The manufacturing operations are broadly in line with expectations, with Chirton continuing to be adversely affected by the depressed oil price affecting its oil exploration customers. Collaboration on tenders with Bendalls for the nuclear industry has been successful with four contracts being awarded with delivery through 2016. Bendalls have also been awarded several new contracts from Sellafield, secured by both our new design business and existing manufacturing operations, with delivery due through to 2019.

Financial Position

The Group's financial position remains strong. Net debt as at 28 November 2015 was £31.9m compared to £30.4m as at 29 November 2014 and £24.4m as at 28 August 2015.

Undrawn banking facilities at 28 November 2015 amounted to £23.1m.

Dividend

Subject to shareholder approval at today's AGM, the proposed final dividend of 1.85 pence per share will be paid on Friday 15 January 2016 to shareholders on the register at close of business on 18 December 2015.

Tim Davies, Chief Executive, commented:

"Cumbria in particular has faced enormous challenges as a result of the flooding following Storm Desmond. Despite the direct impact of the floods on some of our employees, customers and suppliers, the direct financial impact on the Group is covered by insurance. The speed of our recovery owes much to the resilience and tenacity of our employees.

As highlighted at our results in November last year, we face a number of headwinds in the markets in which we operate. However, our geographic diversity, investment across our asset base, together with the acquisitions we have made, will continue to set us apart and ensure the Group remains in a robust position over the medium to long term. Additionally our strong balance sheet ensures we remain in a good position to take advantage of any potential acquisition opportunities."

The Company expects to issue its interim results for the 26 week period ending 27 February 2016 on 11 April 2016.

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