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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Carr's Group Plc | LSE:CARR | London | Ordinary Share | GB00BRK01058 | ORD 2.5P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 135.50 | 131.00 | 135.00 | 18,283 | 10:51:19 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Animal Specialties, Nec | 196.43M | -226k | -0.0024 | -564.58 | 127.57M |
TIDMCARR
RNS Number : 0928W
Carr's Group PLC
21 April 2021
21 April 2021
CARR'S GROUP PLC ("Carr's" or the "Group")
INTERIM RESULTS
For the 26 weeks ended 27 February 2021
"An improved H1 performance in a challenging environment"
Carr's (CARR.L), the Agriculture and Engineering Group, announces its Interim Results for the 26 weeks ended 27 February 2021.
Financial highlights
Adjusted(1) Adjusted(1) +/- H1 2021 H1 2020 Revenue (GBPm) 201.4 200.0 +0.7% Adjusted(1) operating profit (GBPm) 10.9 10.3 +5.3% Adjusted(1) profit before tax (GBPm) 10.4 9.6 +8.1% Adjusted(1) EPS (p) 8.2 8.0 +2.5% Net debt (2) (GBPm) 10.6 25.4 -58.5% Statutory Statutory +/- H1 2021 H1 2020 Revenue (GBPm) 201.4 200.0 +0.7% Operating profit (GBPm) 10.7 11.2 -5.1% Profit before tax (GBPm) 10.2 10.5 -3.2% Basic EPS (p) 8.2 9.3 -11.8% Interim dividend (p) 1.175 - N/A
Highlights
-- Initial business review complete following appointment of new CEO. -- Group now structured in three divisions: Speciality Agriculture (feed blocks, minerals, and trace element boluses, formerly Supplements), Agricultural Supplies (formerly UK Agriculture) and Engineering. -- Resilient business model despite COVID-19 and Brexit uncertainty - all agricultural stores and manufacturing facilities operational throughout. -- Strong performance from Speciality Agriculture and Agricultural Supplies. -- Engineering adversely impacted by low oil prices and travel restrictions in H1 but expected to be significantly better in H2. Order book now stands at GBP44m, increased by 19% since year end and order intake now improving. -- Business improvement programme initiated to simplify, standardise, and generate synergies between business units in each division. -- Reportable accident frequency rate reduced compared to last year and COVID-19 controls remain effective.
1 Adjusted results are consistent with how business performance is measured internally and are presented to aid comparability Page 1 of performance. Adjusting items are disclosed in note 8.
2 Excluding leases. Further details of net debt can be found in note 12.
Outlook
A continued positive performance is forecast across the Agricultural divisions together with an improved second half in the Engineering division as the impact of COVID-19 begins to recede and its order intake continues to increase. A programme of simplification and standardisation is forecast to improve performance over time. Trading since 27 February 2021 has been positive and the Board's expectations for the current financial year remain unchanged.
Hugh Pelham, Chief Executive Officer, commented:
"Despite a challenging operational environment with significant headwinds experienced in Engineering we have delivered an improved performance compared to the same period last year. Our Speciality Agriculture and Agricultural Supplies divisions have performed particularly strongly. The outlook for Engineering is for an improved performance in the second half of the financial year.
"I have been fortunate to inherit some sound foundations from my predecessor, Tim Davies. Carr's Group owns a portfolio of good businesses with strong market positions.
"Our people have responded brilliantly to the challenge of working in a COVID-19 environment. I would like to thank them for their commitment and dedication in keeping all our stores, fuel depots and manufacturing operations running in such difficult times.
"An initial operating review has been conducted and the Group is now structured in three divisions: Speciality Agriculture, Agricultural Supplies and Engineering to create greater operational efficiencies, market focus and provide greater transparency for investors. The results of our Speciality Agriculture division demonstrate the quality of our products in the feed block, minerals and animal health markets.
"Actions have been taken to strengthen reporting and governance systems within the business as part of a process to identify opportunities for improvement.
"Considerable opportunity exists to optimise the current portfolio through a process of standardisation, simplification and seeking synergies between similar businesses. Growth can be achieved through a mixture of geographic expansion, selling all our service lines to our customer base, and acquisition and potential industry consolidation.
"I am confident that the Group will continue to deliver a resilient and improving set of results over time."
Enquiries:
Carr's Group plc Tel: +44 (0) 1228 554600
Hugh Pelham (Chief Executive Officer)
Neil Austin (Chief Financial Officer)
Powerscourt Tel: +44 (0) 20 7250 1446
Nick Dibden / Lisa Kavanagh / Sam Austrums
About Carr's Group plc:
Carr's is an international leader in manufacturing value added products and solutions, with market leading brands and robust market positions in Agriculture and Engineering, supplying customers in over 50 countries around the world. Carr's operates a decentralised business model that empowers operating subsidiaries enabling them to be competitive, agile, and effective in their individual markets whilst setting overall standards and goals.
Its Speciality Agriculture division manufactures and supplies feed blocks, minerals and boluses containing trace metals and minerals for livestock.
Its Agricultural Supplies division manufactures compound animal feed, distributes farm machinery and runs a UK network of rural stores, providing a one-stop shop for the farming community.
Its Engineering division designs and manufactures pressure vessels, manufactures precision components from specialist steel alloys, manufactures robotic manipulators, and provides engineering design, assembly, and installation services for the nuclear, defence and oil & gas industries.
INTERIM MANAGEMENT REPORT
HSE AND COVID-19
The health, safety and wellbeing of our employees and customers is of paramount importance. We continue to follow Government guidelines and maintain rigorous social distancing controls, hygiene measures and shift-working practices across all locations.
The reportable accident frequency rate compared to last year has declined and various improvements in health, safety, and environmental management systems across the Group have been implemented.
The impact of the COVID-19 pandemic on the Group remains under close review by the Board. The Group has successfully implemented a range of measures and planned contingencies across all our businesses which are designed to minimise the impact of the pandemic, and as a result all our manufacturing facilities have remained fully operational. However, we have been impacted by delays in the progress of engineering projects and restrictions on visiting customer sites.
Given the positive trading performance during the period the Group has not utilised the Coronavirus Job Retention Scheme and currently has no plans to do so.
RESULTS
In challenging market conditions, Carr's has delivered an improved performance in the period.
During the 26 weeks ended 27 February 2021 revenues increased to GBP201.4m (H1 2020: GBP200.0m).
Adjusted operating profit of GBP10.9m (H1 2020: GBP10.3m) was 5.3% up on the prior year. Adjusted profit before tax increased by 8.1% to GBP10.4m (H1 2020: GBP9.6m). The improvement in adjusted profits is mainly attributable to improved performances in Speciality Agriculture and Agricultural Supplies.
Adjusted earnings per share increased by 2.5% to 8.2p (H1 2020: 8.0p).
STRATEGIC AND OPERATIONAL REVIEW
The Group has commenced a strategic and operational review. As a result of this, its activities are now structured into three divisions:
1. Speciality Agriculture 2. Agricultural Supplies 3. Engineering
Our strategy is to continue to invest in established businesses with distinct value propositions or new companies with proven technology and strong growth prospects.
We will add value by:
-- Differentiating - investing in innovative technology, patented processes / products and better customer service.
-- Optimising - simplifying, standardising and seeking synergies between related companies in our portfolio.
-- Consolidating - creating scale and critical mass by consolidating similar businesses in a market sector.
-- Growing - expanding our geographic presence, cross selling to our customer base and developing new products.
Each division has developed an initial plan in these areas, and these will be further refined over the coming months. The Group will continue its strategic and operational review in the second half of this financial year.
SPECIALITY AGRICULTURE
Speciality Agriculture comprises our feed blocks, mineral supplements and trace element boluses in the UK, Europe, North America, and New Zealand.
H1 2021 H1 2020 % Change Revenue GBP40.2m GBP36.6m +9.8% Adjusted operating profit GBP8.2m GBP6.5m +24.7%
Our businesses have performed strongly in all geographic areas driven by strong livestock prices and more seasonal weather patterns than prior years. Overall, 101,000 tonnes of feed blocks and speciality minerals were sold worldwide, an increase of 8.4% year on year. Sales revenues recovered in our animal health business, Animax. Our project to automate the production process at Animax continues with benefits expected in the next financial year.
Our strategy remains to focus on molasses based feed blocks and specialist animal health products where our patented manufacturing processes deliver differentiated products. Initiatives to improve processes, supply chain buying and upgrade our manufacturing plants are underway. Growth opportunities to expand our presence in the USA, Canada and Germany are the highest priority, as well as developing more environmentally sustainable packaging for key products lines.
AGRICULTURAL SUPPLIES
Agricultural Supplies comprises our Carr's Billington branded agricultural stores, machinery, fuel and compound feed business and our joint venture business Bibby Agriculture.
H1 2021 H1 2020 % Change Revenue GBP137.7m GBP138.4m -0.5% Adjusted operating profit GBP3.3m GBP2.5m +33.5%
Total feed sales volumes increased to 318kt, an increase of 0.4% compared to the prior year. Machinery revenues were also strong, increasing by 29.1% year on year, and total retail sales also increased by 4.3% with like-for-like sales showing an 8.1% increase. Fuel volumes were down 2.5% versus the prior year, with the main impact being felt in the first quarter of the financial year.
Significant increases in raw material prices impacted the profitability of the feed business in the first half, however, margins were stronger in retail, fuel and machinery which helped offset the impact of higher raw material costs.
In the UK specifically, the agreement of a trade deal with the EU in December 2020 has significantly improved farmer confidence, which has been further buoyed by strong farmgate prices. The UK Agriculture Bill will also provide opportunities as farmers are incentivised by efficiency and environmental schemes.
Our strategy remains to provide all a farmer needs and differentiate ourselves through our product range, our customer and technical service levels, having a local presence, and the quality of our compound feeds. Operationally, a number of initiatives have been implemented to standardise product range and prices, improve supply chain arrangements and better manage raw material buying and pricing. Further opportunities to grow exist through the opening of new stores and industry consolidation.
ENGINEERING
Engineering comprises our fabrication and precision engineering businesses in the UK, robotics businesses in the UK and Europe and our engineering solutions businesses in the UK and USA.
H1 2021 H1 2020 % Change Revenue GBP23.6m GBP24.9m -5.4% Adjusted operating profit GBP0.9m GBP1.2m -24.1%
The profitability of our engineering solutions business in the USA and UK has been resilient with continued work with large blue-chip customers in the nuclear and defence sectors. Additional work has recently been secured in the defence sector.
The performance of our fabrication and precision engineering businesses have been adversely affected by low oil & gas prices. More positively, our fabrication business has received a significant level of orders in the nuclear sector. A turnaround plan is in place for the precision engineering business and performance is expected to be significantly better in H2.
The performance of our robotics business has substantively improved compared to H1 last year with exports to China expected to resume in H2 2021.
Our overall Engineering order book at GBP44m (H1 2020: GBP47m) is less than at the equivalent point last year but GBP7m higher than at the end of 2020 (FY 2020: GBP37m). In the second half of the prior year a significant number of orders were subsequently cancelled following the outbreak of COVID-19.
Our strategy in the Engineering division is to provide specialist high margin services primarily to the nuclear and defence sectors. Our differentiators include patented MSIP(R), Power Fluidics(TM) processes, the range of precision engineering machinery, the product life and quality of our robotic manipulators and a direct workforce with highly specialist welding capabilities.
Opportunities to grow exist with our current customer base by providing our full range of specialist services and by selectively pursuing new customers in the nuclear and defence industries in particular.
FINANCE REVIEW
Adjusted results
Revenue increased by 0.7% to GBP201.4m (H1 2020: GBP200.0m), with an increase of 9.8% in Speciality Agriculture offset by a reduction in both Engineering and Agricultural Supplies of 5.4% and 0.5% respectively.
Adjusted operating profit increased 5.3% to GBP10.9m (H1 2020: GBP10.3m). Strong performances in Speciality Agriculture, up 24.7%, and Agricultural Supplies, up 33.5%, were partially offset by a reduction in Engineering of 24.1%. Central costs were higher at GBP1.5m (H1 2020: credit of GBP0.1m) partly due to a change in provision for a non-recoverable debt, phasing, increased costs for performance related remuneration, and CEO handover costs.
Net finance costs of GBP0.5m (H1 2020: GBP0.7m) reduced year on year due to lower borrowings. Net debt was GBP10.6m at the period end (H1 2020: 25.4m), driven by a strong operating performance with EBITDA of GBP12.6m and a reduction in working capital of GBP4.1m, offset by dividends of GBP4.4m, net capital expenditure of GBP2.3m and tax and interest of GBP1.9m. The Group's main banking facilities run to 2023.
The Group's adjusted profit before tax increased by 8.1% to GBP10.4m (H1 2020: GBP9.6m).
Adjusted earnings per share increased by 2.5% to 8.2p (H1 2020: 8.0p). The increase is proportionately lower than the increase in profit before tax because of the higher effective tax rate, due to a higher mix of overseas profits and the impact of minority interests.
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.
In H1 2020, adjusting items were a net credit of GBP0.9m related mainly to adjustments to contingent consideration (H1 2020: GBP2.1m compared to H1 2021: GBP0.7m) partly offset by amortisation of intangible assets. In H1 2021, they are a charge of GBP0.2m. Full details of all adjusting items are given in note 8.
Statutory results
Reported operating profit on a statutory basis was GBP10.7m (H1 2020: GBP11.2m) and reported profit before tax was GBP10.2m (H1 2020: GBP10.5m). Basic earnings per share on a statutory basis was 8.2p (H1 2020: 9.3p).
Balance sheet and cash flow
Net cash generated from operating activities in the first half was GBP14.1m (H1 2020: GBP4.9m). Net debt, excluding leases, fell to GBP10.6m from GBP18.9m at the financial year end (H1 2020: GBP25.4m). This is primarily related to strong working capital management resulting in a working capital inflow of GBP4.1m combined with improved EBITDA.
The Group's defined benefit pension scheme remains in surplus but at a slightly decreased level of GBP7.8m compared to GBP8.0m at 29 August 2020.
Shareholder's equity
Shareholders' equity at 27 February 2021 was GBP119.0m (29 August 2020: GBP117.1m), with the increase primarily due to profit retained by the Group for the period offset by foreign exchange translation losses and dividends paid.
A first interim dividend of 1.175 pence per ordinary share will be paid on 8 June 2021 to shareholders on the register on 30 April 2021. The ex-dividend date will be 29 April 2021.
GOVERNANCE
The Group announces that, with effect from today, Kristen Eshak Weldon has been appointed as the Board's Representative for Employee Engagement. Kristen was appointed to the Board in October 2020 and takes on the role from Alistair Wannop who will be standing down from the Board in January 2022. Kristen is currently Global Head of ESG and Impact Investing at Partners Capital. Prior to this she served on the Executive Committee of Louis Dreyfus Company and co-headed the London office of Blackstone's Hedge Fund Solutions business. The Board considers that Kristen's experience of stakeholder engagement places her well to ensure that wider views across the workforce are fully understood and considered by the Board in its decision-making processes.
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 28 to 30 of the Annual Report and Accounts 2020 (available on the Company's website at http://investors.carrsgroup.com ), with the exception of Brexit where the risk has reduced following the UK-EU trade agreement which took effect from 31 December 2020.
OUTLOOK
A continued positive performance is forecast across the Agricultural divisions together with an improved second half in the Engineering division as the impact of COVID-19 begins to recede and its order intake continues to increase. A programme of simplification and standardisation is forecast to improve performance over time. Trading since 27 February 2021 has been positive and the Board's expectations for the current financial year remain unchanged.
CONDENSED CONSOLIDATED INCOME STATEMENT
For the 26 weeks ended 27 February 2021
26 weeks 52 weeks 26 weeks ended ended ended 27 February 29 February 29 August 2021 2020 2020 (unaudited) (unaudited) (audited) Notes GBP'000 GBP'000 GBP'000 -------------------------------------------- ------ -------------------- ------------------- --------------------- Continuing operations Revenue 6,7 201,435 199,957 395,630 Cost of sales (173,412) (172,924) (343,381) Gross profit 28,023 27,033 52,249 Net operating expenses (19,547) (17,685) (41,042) Share of post-tax results of associate and joint ventures 2,196 1,892 2,633 Adjusted (1) operating profit 6 10,869 10,322 16,247 Adjusting items 8 (197) 918 (2,407) -------------------------------------------- ------ -------------------- ------------------- --------------------- Operating profit 6 10,672 11,240 13,840 Finance income 135 178 313 Finance costs (633) (905) (1,656) Adjusted (1) profit before taxation 6 10,371 9,595 14,904 Adjusting items 8 (197) 918 (2,407) -------------------------------------------- ------ -------------------- ------------------- --------------------- Profit before taxation 6 10,174 10,513 12,497 Taxation (1,714) (1,382) (1,575) Profit for the period 8,460 9,131 10,922 -------------------------------------------- ------ -------------------- ------------------- --------------------- Profit attributable to: Equity shareholders 7,574 8,565 9,533 Non-controlling interests 886 566 1,389 8,460 9,131 10,922 -------------------------------------------- ------ -------------------- ------------------- --------------------- Earnings per share (pence) Basic 9 8.2 9.3 10.3 Diluted 9 7.9 9.1 10.2 Adjusted (1) 9 8.2 8.0 11.9 Diluted adjusted (1) 9 8.0 7.9 11.8
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. An alternative performance measures glossary can be found in note 18.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the 26 weeks ended 27 February 2021
26 weeks ended 52 weeks 27 February Ended 2021 26 weeks ended 29 August (unaudited) 29 February 2020 2020 (unaudited) (audited) Notes GBP'000 GBP'000 GBP'000 ----------------------------------------------------------- ------ ---------------- ------------------ ----------- Profit for the period 8,460 9,131 10,922 ----------------------------------------------------------- ------ ---------------- ------------------ ----------- Other comprehensive (expense)/income Items that may be reclassified subsequently to profit or loss: Foreign exchange translation losses arising on translation of overseas subsidiaries (1,752) (2,778) (2,552) Net investment hedges 76 210 (54) Taxation (charge)/credit on net investment hedges (14) (40) 10 Items that will not be reclassified subsequently to profit or loss: Actuarial (losses)/gains on retirement benefit asset: - Group 14 (295) (1,187) 142 - Share of associate - - 408 Taxation credit/(charge) on actuarial (losses)/gains on retirement benefit asset: - Group 56 202 (27) - Share of associate - - (96) Other comprehensive expense for the period, net of tax (1,929) (3,593) (2,169) ------------------------------------------------------------------- ---------------- ------------------ ----------- Total comprehensive income for the period 6,531 5,538 8,753 ----------------------------------------------------------- ------ ---------------- ------------------ ----------- Total comprehensive income attributable to: Equity shareholders 5,645 4,972 7,364 Non-controlling interests 886 566 1,389 6,531 5,538 8,753 ----------------------------------------------------------- ------ ---------------- ------------------ -----------
CONDENSED CONSOLIDATED BALANCE SHEET
As at 27 February 2021
As at As at As at 27 February 29 February 29 August 2021 2020 2020 (unaudited) (unaudited) (audited) Notes GBP'000 GBP'000 GBP'000 ---------------------------- ------ ------------------------------------ ------------- --------------------------- Non-current assets Goodwill 11 31,530 32,070 32,041 Other intangible assets 11 9,118 9,315 9,171 Property, plant and equipment 11 35,609 36,767 38,259 Right-of-use assets 11 16,265 15,870 14,856 Investment property 11 155 161 158 Investment in associate 14,860 13,846 14,307 Interest in joint ventures 11,492 10,392 10,551 Other investments 72 74 73 Financial assets - Non-current receivables 20 21 20 Retirement benefit asset 14 7,807 6,643 8,037 Deferred tax assets - 410 - 126,928 125,569 127,473
---------------------------- ------ ------------------------------------ ------------- --------------------------- Current assets Inventories 43,392 48,915 40,961 Contract assets 7,885 8,412 8,114 Trade and other receivables 59,496 60,537 51,686 Current tax assets 2,058 328 1,535 Financial assets - Derivative financial instruments - - 3 - Cash and cash equivalents 12 24,838 29,318 17,571 137,669 147,510 119,870 ---------------------------- ------ ------------------------------------ ------------- --------------------------- Total assets 264,597 273,079 247,343 ---------------------------- ------ ------------------------------------ ------------- --------------------------- Current liabilities Financial liabilities - Borrowings 12 (8,580) (26,855) (11,420) - Leases (2,965) (2,557) (2,778) Contract liabilities (3,019) (2,351) (1,061) Trade and other payables (67,704) (62,520) (55,522) Current tax liabilities (494) (158) (33) ---------------------------- ------ ------------------------------------ ------------- --------------------------- (82,762) (94,441) (70,814) ---------------------------- ------ ------------------------------------ ------------- --------------------------- Non-current liabilities Financial liabilities - Borrowings 12 (26,815) (27,896) (25,021) - Leases (12,177) (12,666) (11,171) Deferred tax liabilities (4,830) (4,634) (4,783) Other non-current liabilities (1,370) (2,537) (1,385) (45,192) (47,733) (42,360) ---------------------------- ------ ------------------------------------ ------------- --------------------------- Total liabilities (127,954) (142,174) (113,174) ---------------------------- ------ ------------------------------------ ------------- --------------------------- Net assets 136,643 130,905 134,169 ---------------------------- ------ ------------------------------------ ------------- --------------------------- Shareholders' equity Share capital 15 2,330 2,312 2,312 Share premium 15 9,613 9,165 9,176 Other reserves 2,363 4,379 4,436 Retained earnings 104,741 98,655 101,202 ---------------------------- ------ ------------------------------------ ------------- --------------------------- Total shareholders' equity 119,047 114,511 117,126 Non-controlling interests 17,596 16,394 17,043 Total equity 136,643 130,905 134,169 ---------------------------- ------ ------------------------------------ ------------- ---------------------------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the 26 weeks ended 27 February 2021
Foreign Exchange Share Premium Treasury Equity Reserve Retained Total Non- Total Share Share Reserve Compensation Other Reserve Earnings Shareholders' Controlling Equity Capital Reserve Equity Interests GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 --------------------- ------------------------- ------------------- ------------------ ------------------------------ ------------------ ------------------ ------------ --------------------------- ----------------------- ---------- At 30 August 2020 (audited) 2,312 9,176 (45) 734 3,550 197 101,202 117,126 17,043 134,169 Profit for the period - - - - - - 7,574 7,574 886 8,460 Other comprehensive expense - - - - (1,690) - (239) (1,929) - (1,929) --------------------- ------------------------- ------------------- ------------------ ------------------------------ ------------------ ------------------ ------------ --------------------------- ----------------------- ---------- Total comprehensive (expense)/income - - - - (1,690) - 7,335 5,645 886 6,531 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 1,860 196 104,741 119,047 17,596 136,643 --------------------- ------------------------- ------------------- ------------------ ------------------------------ ------------------ ------------------ ------------ --------------------------- ----------------------- ---------- At 1 September 2019 (audited) 2,299 9,165 - 1,577 6,146 199 93,771 113,157 16,125 129,282 Profit for the period - - - - - - 8,565 8,565 566 9,131 Other comprehensive
expense - - - - (2,608) - (985) (3,593) - (3,593) --------------------- ------------------------- ------------------- ------------------ ------------------------------ ------------------ ------------------ ------------ --------------------------- ----------------------- ---------- Total comprehensive (expense)/income - - - - (2,608) - 7,580 4,972 566 5,538 Dividends paid - - - - - - (3,344) (3,344) (294) (3,638) Equity-settled share-based payment transactions - - - (933) - - 659 (274) (3) (277) Allotment of shares 13 - - - - - - 13 - 13 Purchase of own shares held in trust - - (13) - - - - (13) - (13) Transfer - - 12 - - (1) (11) - - - --------------------- ------------------------- ------------------- ------------------ ------------------------------ ------------------ ------------------ ------------ --------------------------- ----------------------- ---------- At 29 February 2020 (unaudited) 2,312 9,165 (1) 644 3,538 198 98,655 114,511 16,394 130,905 --------------------- ------------------------- ------------------- ------------------ ------------------------------ ------------------ ------------------ ------------ --------------------------- ----------------------- ---------- At 1 September 2019 (audited) 2,299 9,165 - 1,577 6,146 199 93,933 113,319 16,229 129,548 Profit for the period - - - - - - 9,533 9,533 1,389 10,922 Other comprehensive (expense)/income - - - - (2,596) - 427 (2,169) - (2,169) --------------------- ------------------------- ------------------- ------------------ ------------------------------ ------------------ ------------------ ------------ --------------------------- ----------------------- ---------- Total comprehensive (expense)/income - - - - (2,596) - 9,960 7,364 1,389 8,753 Dividends paid - - - - - - (3,344) (3,344) (588) (3,932) Equity-settled share-based payment transactions - - - (843) - - 691 (152) 15 (137) Excess deferred taxation on share-based payments - - - - - - (27) (27) (2) (29) Allotment of shares 13 11 - - - - - 24 - 24 Purchase of own shares held in trust - - (58) - - - - (58) - (58) Transfer - - 13 - - (2) (11) - - - --------------------- ------------------------- ------------------- ------------------ ------------------------------ ------------------ ------------------ ------------ --------------------------- ----------------------- ---------- At 29 August 2020 (audited) 2,312 9,176 (45) 734 3,550 197 101,202 117,126 17,043 134,169 --------------------- ------------------------- ------------------- ------------------ ------------------------------ ------------------ ------------------ ------------ --------------------------- ----------------------- ----------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the 26 weeks ended 27 February 2021
26 weeks ended 26 weeks ended 52 weeks ended 27 February 2021 29 February 2020 29 August 2020 (unaudited) (unaudited) (audited) Notes GBP'000 GBP'000 GBP'000 --------------------- ------ -------------------------------------------- ---------------------------------------------- ----------------------------------------------- Cash flows from operating activities Cash generated from continuing operations 16 15,956 7,840 22,639 Interest received 57 111 176 Interest paid (625) (897) (1,696) Tax paid (1,300) (2,139) (3,059) --------------------- ------ -------------------------------------------- ---------------------------------------------- ----------------------------------------------- Net cash generated 14,088 4,915 18,060 from operating activities --------------------- ------ -------------------------------------------- ---------------------------------------------- ----------------------------------------------- Cash flows from investing activities Contingent/deferred (131) (1,596) (2,659) consideration paid Dividends received 368 294 701 from associate and joint ventures Other loans - 382 718 Purchase of (780) (845) (1,459) intangible assets Proceeds from sale 125 141 421 of property, plant and equipment Purchase of (1,645) (2,569) (6,569) property, plant and equipment Purchase of own (9) (13) (58) shares held in trust
Net cash used in (2,072) (4,206) (8,905) investing activities --------------------- ------ -------------------------------------------- ---------------------------------------------- ----------------------------------------------- Cash flows from financing activities Proceeds from issue 455 13 24 of ordinary share capital New financing and 5,609 2,500 1,889 movement on RCF Lease principal (1,556) (1,569) (3,171) repayments Repayment of (1,200) (1,247) (2,459) borrowings (Decrease)/increase (604) 114 (14,508) in other borrowings Dividends paid to (4,390) (3,344) (3,344) shareholders Dividends paid to (368) (294) (588) related party --------------------- ------ -------------------------------------------- ---------------------------------------------- ----------------------------------------------- Net cash used in (2,054) (3,827) (22,157) financing activities --------------------- ------ -------------------------------------------- ---------------------------------------------- ----------------------------------------------- Effects of exchange (373) (410) (989) rate changes --------------------- ------ -------------------------------------------- ---------------------------------------------- ----------------------------------------------- Net 9,589 (3,528) (13,991) increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the period 10,304 24,295 24,295 --------------------- ------ -------------------------------------------- ---------------------------------------------- ----------------------------------------------- Cash and cash equivalents at end of the period 19,893 20,767 10,304 --------------------- ------ -------------------------------------------- ---------------------------------------------- ----------------------------------------------- Cash and cash equivalents consist of: Cash and cash equivalents per the balance sheet 24,838 29,318 17,571 Bank overdrafts (4,945) (8,551) (7,267) included in borrowings --------------------- ------ -------------------------------------------- ---------------------------------------------- ----------------------------------------------- 19,893 20,767 10,304 --------------------- ------ -------------------------------------------- ---------------------------------------------- -----------------------------------------------
Statement of Directors' responsibilities
We confirm that to the best of our knowledge:
-- the condensed consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union ("EU") pursuant to Regulation (EC) No 1606/2002 as it applies in the EU and in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006; and -- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed consolidated financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party
transactions described in the last Annual Report that could do so.
The Directors are listed in the Annual Report and Accounts 2020, with the exception of the following changes in the period: Hugh Pelham was appointed on 4 January 2021, and Tim Davies resigned on 12 January 2021. Kristen Eshak Weldon was appointed on 1 October 2020 and was included in the list of Directors in the Annual Report and Accounts 2020. A list of current Directors is maintained on the website: www.carrsgroup.com
On behalf of the Board
Hugh Pelham Neil Austin
Chief Executive Officer Chief Financial Officer
21 April 2021 21 April 2021
Unaudited notes to condensed interim financial information
1. General information
The Group operates across three divisions of Speciality Agriculture, Agricultural Supplies and Engineering. The Company is a public limited company, which is listed on the London Stock Exchange and is incorporated and domiciled in the UK. The address of the registered office is Old Croft, Stanwix, Carlisle, Cumbria CA3 9BA.
These condensed interim financial statements were approved for issue on 21 April 2021.
The comparative figures for the financial year ended 29 August 2020 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditor and delivered to the Registrar of Companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
2. Basis of preparation
These condensed interim financial statements for the 26 weeks ended 27 February 2021 have been prepared in accordance with IAS 34, 'Interim financial reporting' as adopted by the EU pursuant to Regulation (EC) No 1606/2002 as it applies to the EU.
The annual financial statements of the Group for the year ending 28 August 2021 will be prepared in accordance with International Financial Reporting Standards (IFRSs) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the EU and in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. As required by the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, this condensed set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the year ended 29 August 2020 which were prepared in accordance with IFRSs as adopted by the EU.
The Group is expected to have a sufficient level of financial resources available through operating cash flows and existing bank facilities for a period of at least 12 months from the signing date of these condensed consolidated interim financial statements. The Group has operated within all its banking covenants throughout the period. In addition, the Group's main banking facility is in place until November 2023 and an invoice discounting facility is in place until August 2023.
Detailed cash forecasts continue to be updated regularly for a period of at least 12 months from the reporting period end. These forecasts are sensitised for various worst case scenarios including a COVID-19 outbreak resulting in a short term closure, delays on order books, and reduced payments from customers. The results of this stress testing showed that, due to the stability of the core business, the Group would be able to withstand the impact of these severe but plausible downside scenarios occurring over the period of the forecasts.
In addition, several other mitigating measures remain available and within the control of the Directors that were not included in the scenarios. These include withholding discretionary capital expenditure and reducing or cancelling future dividend payments.
Consequently, the Directors are confident that the Group will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the signing date of these condensed consolidated interim financial statements. The Group therefore continues to adopt the going concern basis in preparing its condensed consolidated interim financial statements.
3. Accounting policies
The accounting policies adopted are consistent with those of the previous financial year except for:
Taxation
Income taxes are accrued based on management's estimate of the weighted average annual income tax rate expected for the full financial year based on enacted or substantively enacted tax rates at 27 February 2021. Our effective tax rate was 21.1% (H1 2020: 19.1%) after adjusting for results from associate and joint ventures, which are reported net of tax, and adjustments to contingent consideration (note 8) which is treated as non-taxable. The higher effective tax rate is due to a higher mix of overseas profits.
4. Significant judgements and estimates
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the 52 weeks ended 29 August 2020, with the exception of changes in estimates that are required in determining the provision for income taxes as explained in note 3.
5. Financial risk management
The Group's activities expose it to a variety of financial risks: market risk (including currency risk and price risk), credit risk and liquidity risk.
The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's annual financial statements as at 29 August 2020. The impact of COVID-19 is discussed further in the interim management report.
6. Operating segment information
The Group's chief operating decision-maker ("CODM") has been identified as the Executive Directors. Management has determined the operating segments based on the information reviewed by the CODM for the purposes of allocating resources and assessing performance.
The CODM considers the business from a product/services perspective. Following a strategic and operational review reportable operating segments have been identified as Speciality Agriculture, Agricultural Supplies and Engineering. Central comprises the central business activities of the Group's head office, which earns no external revenues. Performance is assessed using operating profit. For internal purposes the CODM assesses operating profit before material adjusting items (note 8) consistent with the presentation in the financial statements. The CODM believes this measure provides a better reflection of the Group's underlying performance. Sales between segments are carried out at arm's length.
The following tables present revenue, profit, asset and liability information regarding the Group's operating segments for the 26 weeks ended 27 February 2021 and the comparative periods.
26 weeks ended 27 February Speciality Agricultural 2021 Agriculture Supplies Engineering Central Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Total segment revenue 44,075 137,687 23,565 - 205,327 Inter segment revenue (3,888) (3) (1) - (3,892) ------------------- -------------------- ------------------- ---------------- Revenue from external customers 40,187 137,684 23,564 - 201,435 ----------------- ------------------- -------------------- ------------------- ---------------- Adjusted(1) EBITDA(2) 7,885 3,466 2,205 (1,404) 12,152 Depreciation, amortisation and profit/(loss) on disposal of non-current assets (785) (1,320) (1,283) (91) (3,479) Share of post-tax results of associate and joint ventures 1,054 1,142 - - 2,196 Adjusted(1) operating profit 8,154 3,288 922 (1,495) 10,869 Adjusting items (note 8) (245) - 78 (30) (197) ----------------- ----------------- ------------------- -------------------- ------------------- ---------------- Operating profit 7,909 3,288 1,000 (1,525) 10,672 ----------------- ------------------- -------------------- ------------------- Finance income 135 Finance costs (633) ---------------- Adjusted(1) profit before taxation 10,371 Adjusting items (note 8) (197) ----------------- ----------------- ------------------- -------------------- ------------------- ---------------- Profit before taxation 10,174 ---------------- Segment gross assets 49,348 112,686 78,421 24,142 264,597 ----------------- ------------------- -------------------- ------------------- ---------------- Segment gross liabilities (11,497) (56,126) (28,591) (31,740) (127,954) --------------- --------------- ---------------- --------------- -------------
1 Adjusted results are consistent with how business performance is measured internally and is presented to aid comparability of performance. Adjusting items are disclosed in note 8.
(2) Earnings before interest, tax, depreciation, amortisation, profit/(loss) on the disposal of non-current assets and before share of post-tax results of associate and joint ventures.
The following tables have been restated to present Speciality Agriculture and Agricultural Supplies separately. This is to aid comparability with the segmental information presented for the current period to 27 February 2021.
26 weeks ended 29 February Speciality Agricultural 2020 Agriculture Supplies Engineering Central Group (restated) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Total segment revenue 39,909 138,445 24,919 - 203,273 Inter segment revenue (3,311) (4) (1) - (3,316) ------------------- -------------------- --------------------------- ---------------- Revenue from external customers 36,598 138,441 24,918 - 199,957 ---------------- ------------------- -------------------- --------------------------- ---------------- Adjusted(1) EBITDA(2) 6,211 2,840 2,492 195 11,738 Depreciation, amortisation and profit/(loss) on disposal of non-current assets (640) (1,302) (1,277) (89) (3,308) Share of post-tax results of associate and joint ventures 967 925 - - 1,892 Adjusted(1) operating profit 6,538 2,463 1,215 106 10,322 Adjusting items (note 8) 1,068 (74) (76) - 918 --------------- ---------------- ------------------- -------------------- --------------------------- ---------------- Operating profit 7,606 2,389 1,139 106 11,240 ---------------- ------------------- -------------------- ---------------------------
Finance income 178 Finance costs (905) ---------------- Adjusted(1) profit before taxation 9,595 Adjusting items (note 8) 918 --------------- ---------------- ------------------- -------------------- --------------------------- ---------------- Profit before taxation 10,513 ---------------- Segment gross assets 49,098 121,952 83,786 18,243 273,079 ---------------- ------------------- -------------------- --------------------------- ---------------- Segment gross liabilities (10,574) (70,122) (30,896) (30,582) (142,174) --------------- --------------- ---------------- --------------- ------------- 52 weeks ended 29 August 2020 Speciality Agricultural Central (restated) Agriculture Supplies Engineering GBP'000 Group GBP'000 GBP'000 GBP'000 GBP'000 Total segment revenue 66,948 280,740 53,020 - 400,708 Inter segment revenue (5,058) (8) (12) - (5,078) ------------------- -------------------- --------------------------- --------------- Revenue from external customers 61,890 280,732 53,008 - 395,630 ---------------- ------------------- -------------------- --------------------------- --------------- Adjusted(1) EBITDA(2) 7,914 6,884 6,754 (781) 20,771 Depreciation, amortisation and profit/(loss) on disposal of non-current assets (1,366) (2,665) (2,944) (182) (7,157) Share of post-tax results of associate and joint ventures 1,061 1,572 - - 2,633 Adjusted(1) operating profit 7,609 5,791 3,810 (963) 16,247 Adjusting items (note 8) 730 (688) (2,449) - (2,407) --------------- ---------------- ------------------- -------------------- --------------------------- --------------- Operating profit 8,339 5,103 1,361 (963) 13,840 ---------------- ------------------- -------------------- --------------------------- Finance income 313 Finance costs (1,656) --------------- Adjusted(1) profit before taxation 14,904 Adjusting items (note 8) (2,407) --------------- ---------------- ------------------- -------------------- --------------------------- --------------- Profit before taxation 12,497 --------------- Segment gross assets 47,367 98,046 83,852 18,078 247,343 ---------------- ------------------- -------------------- --------------------------- --------------- Segment gross liabilities (8,845) (44,664) (31,156) (28,509) (113,174) ---------------- --------------- ---------------- --------------- -------------
1 Adjusted results are consistent with how business performance is measured internally and is presented to aid comparability of performance. Adjusting items are disclosed in note 8.
(2) Earnings before interest, tax, depreciation, amortisation, profit/(loss) on the disposal of non-current assets and before share of post-tax results of associate and joint ventures.
7. Disaggregation of revenue
The following table presents the Group's reported revenue disaggregated based on the timing of revenue recognition.
26 weeks 26 weeksended 52 weeks ended 29 February ended 27 February 2020 29 August 2021 2020 Timing of revenue recognition GBP'000 GBP'000 GBP'000 ------------------------------- ------------- -------------- ----------- Over time 18,464 16,054 34,790 At a point in time 182,971 183,903 360,840 201,435 199,957 395,630 ------------------------------- ------------- -------------- ----------- 8. Adjusting items 26 weeks 26 weeks 52 weeks ended ended ended 27 29 February 29 August February 2020 2020 2021 GBP'000 GBP'000 GBP'000 --------------------------------- ---------------------------------------------- ------------- -------------------- Amortisation of acquired intangible assets (i) 621 687 1,380 Adjustments to contingent consideration (ii) (671) (2,147) (937) Restructuring/closure costs (iii) 247 542 1,964 197 (918) 2,407 --------------------------------- ---------------------------------------------- ------------- --------------------
(i) Amortisation of acquired intangible assets which do not relate to the underlying profitability of the Group but rather relate to costs arising on acquisition of businesses.
(ii) Adjustments to contingent consideration arise from the revaluation of contingent consideration in respect of acquisitions to fair value at the period end. Movements in fair value arise from changes to the expected payments since the previous period end based on actual results and updated forecasts. Any increase or decrease in fair value is recognised through the income statement.
(iii) Restructuring/closure costs include redundancy costs and impairments of assets to recoverable amounts.
9. Earnings per share
Adjusting items disclosed in note 8 that are charged or credited to profit do not relate to the underlying profitability of the Group. The Board believes adjusted profit before these items provides a useful measure of business performance. Therefore, an adjusted earnings per share is presented as follows:
26 weeks 26 weeks 52 weeks ended ended ended 27 February 29 February 29 August 2021 2020 2020 GBP'000 GBP'000 GBP'000 ----------------------- --------------------------------- ---------------------------------- ------------------------------------
Earnings 7,574 8,565 9,533 Adjusting items: Amortisation of acquired intangible assets 621 687 1,380 Adjustments to contingent consideration (671) (2,147) (937) Restructuring/closure costs 247 542 1,964 Taxation effect of the above (167) (225) (639) Non-controlling interest in the above - (29) (273) Earnings - adjusted 7,604 7,393 11,028 ----------------------- --------------------------------- ---------------------------------- ------------------------------------ Number Number Number ----------------------- --------------------------------- ---------------------------------- ------------------------------------ Weighted average number of ordinary shares in issue 92,588,219 92,214,566 92,346,828 Potentially dilutive share options 2,813,125 1,669,575 1,384,216 95,401,344 93,884,141 93,731,044 ----------------------- --------------------------------- ---------------------------------- ------------------------------------ Earnings per share (pence) Basic 8.2p 9.3p 10.3p Diluted 7.9p 9.1p 10.2p Adjusted 8.2p 8.0p 11.9p Diluted adjusted 8.0p 7.9p 11.8p 10. Dividends
An interim dividend of GBP2,079,551 (H1 2020: GBP1,034,348) that related to the period to 29 August 2020 was paid on 2 October 2020. This included the deferred first interim dividend that, under normal circumstances, would have been paid in May 2020. This was deferred due to the uncertainty associated with the COVID-19 pandemic. A final dividend of GBP2,310,612 (H1 2020: GBP2,310,140) in respect of the period to 29 August 2020 was paid on 15 January 2021.
11. Intangible assets, property, plant and equipment, right-of-use assets and investment property
Other Property, Right-of-use Investment intangible plant and assets property Goodwill assets equipment GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ---------------- ------------------ -------------------------- ---------------- --------------- -------------------- 26 weeks ended 27 February 2021 Opening net book amount at 30 August 2020 32,041 9,171 38,259 14,856 158 Exchange differences (511) (52) (570) (17) - Additions - 780 1,628 1,818 - Disposals and transfers - - (1,748) 861 - Depreciation and amortisation - (781) (1,960) (1,253) (3) ---------------- ------------------ -------------------------- ---------------- --------------- -------------------- Closing net book amount at 27 February 2021 31,530 9,118 35,609 16,265 155 ---------------- ------------------ -------------------------- ---------------- --------------- -------------------- 26 weeks ended 29 February 2020 Opening net book amount at 1 September 2019 32,877 9,318 41,917 - 164 Transition to IFRS 16 - - (4,409) 15,903 - Exchange differences (807) (99) (911) (48) - Additions - 845 2,569 1,263 - Disposals - - (90) - - Depreciation, amortisation and impairment - (749) (2,309) (1,248) (3) ---------------- ------------------ -------------------------- ---------------- --------------- -------------------- Closing net book amount as at 29 February 2020 32,070 9,315 36,767 15,870 161 ---------------- ------------------ -------------------------- ---------------- --------------- --------------------
Transfers include assets refinanced under a lease and finance leased assets that became owned assets on maturity of the lease term.
Capital commitments contracted, but not provided for, by the Group at the period end amounts to GBP632,000 (2020: GBP1,559,000).
12. Borrowings As at As at As at 27 29 29 February February August 2021 2020 2020 GBP'000 GBP'000 GBP'000 --------------------------- -------------------------- ----------------------------- ------------------------------ Current 8,580 26,855 11,420 Non-current 26,815 27,896 25,021 --------------------------- -------------------------- ----------------------------- ------------------------------ Total borrowings 35,395 54,751 36,441 Cash and cash equivalents as per the balance sheet (24,838) (29,318) (17,571) --------------------------- -------------------------- ----------------------------- ------------------------------ Net debt (excluding leases) 10,557 25,433 18,870 --------------------------- -------------------------- ----------------------------- ------------------------------ Undrawn facilities 35,324 22,412 35,083 --------------------------- -------------------------- ----------------------------- ------------------------------ Current borrowings include bank overdrafts of GBP4.9m (2020: GBP8.6m). Undrawn facilities include overdraft facilities of GBP2.5m (2020: GBP2.5m) that are renewable on an annual basis. 26 weeks 26 weeks ended ended 27 February 29 February Movements in borrowings are analysed as follows: 2021 2020 GBP'000 GBP'000 -------------------------------------------------- ------------- ----------------------------- Balance at start of period (excluding leases) 36,441 49,519 Exchange differences (235) (362) New bank loans/RCF drawdown 4,000 2,500 Repayments of borrowings (1,200) (1,247) (Decrease)/increase in other borrowings (604) 114 Loan forgiven (715) - Release of deferred borrowing costs 30 30 Net increase to bank overdraft (2,322) 4,197
-------------------------------------------------- ------------- ----------------------------- Balance at end of period 35,395 54,751 -------------------------------------------------- ------------- -----------------------------
New bank loans/RCF drawdown excludes re-financing of assets under new finance lease arrangements. The balance of GBP49.5m at the start of the comparative period excludes finance leases of GBP2.9m which were previously included within borrowings as at 31 August 2019 however, on transition to IFRS 16 'Leases' on 1 September 2019, these were presented separately to borrowings on the face of the balance sheet.
13. Financial instruments
IFRS 13 requires financial instruments that are measured at fair value to be classified according to the valuation technique used:
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 - inputs, other than Level 1 inputs, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
Level 3 - unobservable inputs
Transfers between levels are deemed to have occurred at the end of the reporting period. There were no transfers between levels in the above hierarchy in the period.
All derivative financial instruments are measured at fair value using Level 2 inputs. The Group's bankers provide the valuations for the derivative financial instruments at each reporting period end based on mark to market valuation techniques.
Contingent consideration is measured at fair value using Level 3 inputs. Fair value is determined considering the expected payment, which is discounted to present value. The expected payment is determined separately in respect of each individual earn-out agreement taking into consideration the expected level of profitability of each acquisition.
The significant unobservable inputs are the projections of future profitability, which have been based on budget and forecast information for the current year and future periods, and the discount rate, which has been based on the incremental borrowing rate. A significant amount of the contingent consideration payable is included within current liabilities and has therefore not been discounted. A reasonable change in the discount rate applied would not have a material impact on the balances recognised within non-current liabilities.
The following table presents a reconciliation of the contingent consideration liability measured at fair value on a recurring basis using significant unobservable inputs (level 3).
As at As at 27 29 As at February February 29 August 2021 2020 2020 GBP'000 GBP'000 GBP'000 --------------------------- ---------------------------- ------------------------------- -------------------------- Fair value at the start of the period 3,422 7,954 7,954 Exchange differences (12) (175) (184) Payments made to vendors (including legal costs) (131) (1,473) (2,513) Change in fair value (671) (3,027) (1,835) Fair value at the end of the period 2,608 3,279 3,422 --------------------------- ---------------------------- ------------------------------- -------------------------- 14. Retirement benefit asset
The amounts recognised in the Income Statement are as follows:
26 weeks 52 weeks 26 weeks ended Ended ended 27 February 29 February 29 August 2021 2020 2020 GBP'000 GBP'000 GBP'000 ------------------------------------- --------------------------- -------------------------- ---------------------- Administrative expenses 9 9 13 Net interest on the net defined benefit asset (74) (70) (139) Total income (65) (61) (126) ------------------------------------- --------------------------- -------------------------- ----------------------
Net interest on the defined benefit retirement asset is recognised within interest income.
The amounts recognised in the Balance Sheet are as follows:
As at As at As at 27 29 29 August February February 2020 2021 2020 GBP'000 GBP'000 GBP'000 ----------------------------- ---------------------------- ---------------------------- --------------------------- Present value of funded defined benefit obligations (62,685) (67,203) (65,834) Fair value of scheme assets 70,492 73,846 73,871 ----------------------------- ---------------------------- ---------------------------- --------------------------- Surplus in funded scheme 7,807 6,643 8,037 ----------------------------- ---------------------------- ---------------------------- ---------------------------
Actuarial losses of GBP295,000 (2020: GBP1,187,000) have been reported in the Statement of Comprehensive Income. The surplus has decreased over the period since 29 August 2020 due to changes in market conditions contributing to an overall reduction in the scheme surplus.
The Group's associate's defined benefit pension scheme is closed to future service accrual and the valuation for this scheme has not been updated for the half year as any actuarial movements are not considered to be material.
15. Share capital Allotted and fully paid ordinary Number Share capital Share premium Total shares of 2.5p each of shares GBP'000 GBP'000 GBP'000 ------------------------------------ ------------ -------------- ---------------------- ------------------- Opening balance as at 30 August 2020 92,465,833 2,312 9,176 11,488 Proceeds from shares issued: - LTIP 309,823 7 - 7 - Share save scheme 421,744 11 437 448 At 27 February 2021 93,197,400 2,330 9,613 11,943 ------------------------------------ ------------ -------------- ---------------------- ------------------- Opening balance at 1 September 2019 91,942,005 2,299 9,165 11,464 Proceeds from shares issued: - LTIP 513,604 13 - 13 At 29 February 2020 92,455,609 2,312 9,165 11,477 ------------------------------------ ------------ -------------- ---------------------- -------------------
309,823 shares were issued in the period to satisfy the share awards under the LTIP scheme which were exercised in December 2020.
421,744 shares were issued in the period to satisfy the share awards under the share save scheme with exercise proceeds of GBP447,611. The related weighted average price of the shares exercised in the period was GBP1.061 per share. At the period end the Company holds 50,045 of these shares in treasury.
As announced on 1 April 2021 the Company's issued share capital had increased to 93,544,724 shares of which 75,955 shares were held in treasury. The increase in issued share capital was due to the issue of 347,324 shares under the share save scheme with exercise proceeds of GBP368,511 and a related weighted average exercise price of GBP1.061 per share.
16. Cash generated from continuing operations 26 weeks 26 weeks 52 weeks ended ended ended 27 February 29 February 29 August 2021 2020 2020 GBP'000 GBP'000 GBP'000 ----------------------------------------- ------------------------ ------------------------- ---------------------- Profit for the period from continuing operations 8,460 9,131 10,922 Adjustments for: Tax 1,714 1,382 1,575 Tax credit in respect of R&D (180) (240) (250) Depreciation and impairment of property, plant and equipment 1,960 2,309 4,567 Depreciation and impairment of right-of-use assets 1,253 1,248 2,462 Depreciation of investment property 3 3 6 Intangible asset amortisation 781 749 1,513 Loss/(profit) on disposal of property, plant and equipment 103 (51) 265 Profit on disposal of right-of-use assets - - (37) Adjustments to contingent consideration (671) (2,147) (937) Net fair value charge/(credit) on share based payments 255 (277) (137) Release of loan provision - - (783) Other non-cash adjustments (157) (618) (504) Interest income (135) (178) (313) Interest expense and borrowing costs 663 935 1,716 Share of results of associate and joint ventures (2,196) (1,892) (2,633) IAS 19 income statement charge (excluding interest): Administrative expenses 9 9 13 Changes in working capital (excluding the effects of acquisitions): (Increase)/decrease in inventories (2,783) (3,348) 4,811 (Increase)/decrease in receivables (7,872) (4,976) 3,862 Increase/(decrease) in payables 14,749 5,801 (3,479) Cash generated from continuing operations 15,956 7,840 22,639 ----------------------------------------- ------------------------ ------------------------- ---------------------- 17. Related party transactions
The Group's significant related parties are its associate and joint ventures, as disclosed in the Annual Report and Accounts 2020.
Rent Net management Dividends Sales Purchases receivable charges receivable Amounts Amounts to from from (from)/to from owed from owed to GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ----------- -------- --------------- ----------- --------------------- -------------------- ----------------- -------------------- 26 weeks to 27 February 2021 Associate 346 (60,865) 10 (69) 368 368 (20,539) Joint ventures 373 (229) - 82 - 1,623 (102) 26 weeks to 29 February 2020 Associate 280 (55,183) 10 (69) 294 214 (24,334) Joint ventures 238 (143) - 80 - 1,756 (2) ----------- -------- --------------- ----------- --------------------- -------------------- ----------------- -------------------- 18. Alternative performance measures
The Interim Results include alternative performance measures ("APMs"), which are not defined or specified under the requirements of IFRS. These APMs are consistent with how business performance is measured internally and therefore the Directors believe that these APMs provide stakeholders with additional useful information on the Group's performance.
Alternative performance measure Definition and comments ----------------------- ---------------------------------------------------------- EBITDA Earnings before interest, tax, depreciation, amortisation, profit/(loss) on the disposal of non-current assets and before share of post-tax results of the associate and joint ventures. EBITDA allows the user to assess the profitability of the Group's core operations before the impact of capital structure, debt financing and non-cash items such as depreciation and amortisation. ----------------------- ---------------------------------------------------------- Adjusted EBITDA Earnings before interest, tax, depreciation, amortisation, profit/(loss) on the disposal of non-current assets, before share of post-tax results of the associate and joint ventures and excluding items regarded by the Directors as adjusting items. This measure is reconciled to statutory operating profit and statutory profit before taxation in note 6. EBITDA allows the user to assess the profitability of the Group's core operations before the impact of capital structure, debt financing and non-cash items such as depreciation and amortisation. ----------------------- ---------------------------------------------------------- Adjusted operating Operating profit after adding back items regarded profit by the Directors as adjusting items. This measure is reconciled to statutory operating profit in the income statement and note 6. Adjusted results are presented because if included, these adjusting items could distort the understanding of the Group's performance for the period and the comparability between the periods presented. ----------------------- ---------------------------------------------------------- Adjusted profit Profit before taxation after adding back items before taxation regarded by the Directors as adjusting items. This measure is reconciled to statutory profit before taxation in the income statement and note 6. Adjusted results are presented because if included, these adjusting items could distort the understanding of the Group's performance for the period and the comparability between the periods presented. ----------------------- ---------------------------------------------------------- Adjusted earnings Profit attributable to the equity holders of the per share Company after adding back items regarded by the Directors as adjusting items after tax divided by the weighted average number of ordinary shares in issue during the period. This is reconciled to basic earnings per share in note 9. ----------------------- ---------------------------------------------------------- Adjusted diluted Profit attributable to the equity holders of the earnings per share Company after adding back items regarded by the Directors as adjusting items after tax divided
by the weighted average number of ordinary shares in issue during the period adjusted for the effects of any potentially dilutive options. Diluted earnings per share is shown in note 9. ----------------------- ---------------------------------------------------------- Net debt The net position of the Group's cash at bank and borrowings. Details of the movement in borrowings is shown in note 12. ----------------------- ----------------------------------------------------------
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