UNAUDITED CONSOLIDATED INCOME STATEMENT

For the 26 weeks ended 4 March 2017

 UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the 26 weeks ended 4 March 2017

UNAUDITED CONSOLIDATED BALANCE SHEET

As at 4 March 2017

¹ restated by £4,553,000 for the grossing up of cash and cash equivalents and bank overdrafts for accounts with right of offset within the same banking facility (see note 3)
 

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the 26 weeks ended 4 March 2017

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS

For the 26 weeks ended 4 March 2017

¹ restated by £4,553,000 for the grossing up of cash and cash equivalents and bank overdrafts for accounts with right of offset within the same banking facility (see note 3)
 

Statement of Directors' responsibilities

The Directors confirm that these condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

·        an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·        material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

The Directors are listed in the Annual Report and Accounts 2016.  A list of current Directors is maintained on the website: www.carrsgroup.com

On behalf of the Board

Tim Davies                                                         Neil Austin

Chief Executive                                               Group Finance Director

12 April 2017                                                     12 April 2017

Unaudited notes to condensed interim financial information

1.    General information

The Group operates across two divisions of Agriculture 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 12 April 2017.

These condensed interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006.  Statutory accounts for the 53 weeks ended 3 September 2016 were approved by the Board of Directors on 16 November 2016 and delivered to the Registrar of Companies.  The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

2.    Basis of preparation

These condensed interim financial statements for the 26 weeks ended 4 March 2017 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union.  The condensed interim financial statements should be read in conjunction with the annual financial statements for the 53 weeks ended 3 September 2016, which have been prepared in accordance with IFRSs as adopted by the European Union.

The Directors have made suitable enquiries, and based on financial performance to date and available banking facilities they have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.  The Group therefore continues to adopt the going concern basis in preparing its condensed interim financial statements.

3.    Accounting policies

The accounting policies adopted are consistent with those of the previous financial year.

Taxes on income in the interim periods are accrued based on management's estimate of the weighted average annual income tax rate expected for the full financial year.

Cash and cash equivalents and overdrafts, within current borrowings, as at 27 February 2016 have been restated by £4.6m to recognise overdrafts that would previously have been offset against cash balances.  This restatement ensures comparability of the three period ends presented in the interim financial statements and reflects the accounting policy adopted in the preparation of the financial statements for the 53 weeks ended 3 September 2016 and the 26 weeks ended 4 March 2017.

The Group continues to review the impact of IFRS 15 'Revenue from contracts with customers' and IFRS 16 'Leases' on the results and net assets of the Group.  It is not possible at this stage to quantify any financial impact arising from either of these two standards.

4.    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 53 weeks ended 3 September 2016, with the exception of changes in estimates that are required in determining the provision for income taxes.

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 3 September 2016.  There have been no changes in risk management practices since the year end.

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.  Operating segments have been identified as Agriculture and Engineering.  The previously recognised Food operating segment was disposed on 3 September 2016.  Performance is assessed using operating profit, which is measured in a manner consistent with the financial statements.  Sales between segments are carried out at arm's length. 

The following tables present revenue, profit and asset information regarding the Group's operating segments for the 26 weeks ended 4 March 2017 and the comparative periods.

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

7.    Non-recurring exceptional items

Business combination expenses relate to acquisition costs incurred in the period as well as contingent consideration in relation to the prior year acquisition of Phoenix Feeds Limited which is explained further below.

Phoenix Feeds Limited was acquired on 1 June 2016 for cash consideration of £1,744,000 including £490,000 of contingent consideration.  The contingent consideration is linked to the continued employment of key personnel and therefore in accordance with IFRS 3 this was not recognised as consideration in the acquisition accounting in the 53 weeks ended 3 September 2016 and is instead being recognised in the income statement over a two year period.  Given the nature of the payment it has been recognised as a non-recurring item.

Restructuring costs comprise redundancy costs.
 

8.    Earnings per share

Non-recurring items and amortisation that are charged or credited to profit do not relate to the profitability of the Group on an ongoing basis.  Therefore an adjusted earnings per share is presented as follows:

9.    Dividends

An interim dividend of £866,393 that relates to the period to 3 September 2016 was paid on 7 October 2016, and a final dividend of £1,736,169 was paid on 13 January 2017.  A special dividend of £15,996,351 was paid on 7 October 2016 following the disposal of Carr's Flour Mills Limited.

In addition, an interim dividend of 0.95p per share (2016: 0.95p per share) has been approved by the Directors.  It is payable to shareholders on the register at 21 April 2017.  This interim dividend, amounting to £868,258 (2016: £854,968), has not been recognised as a liability in this interim financial information.  It will be recognised in shareholders' equity in the 52 weeks to 2 September 2017.

10.  Intangible assets, property, plant and equipment and investment property

Capital commitments contracted, but not provided for, by the Group at the period end amounts to

£687,000 (2016: £758,000).

11.  Borrowings and loans

12.  Financial instruments

IFRS13 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

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. 

The Group holds shares in several private limited companies.  These have been classified as unquoted investments for which fair value cannot be reliably measured and are held at cost less accumulated impairment.  Had fair value been applied this financial asset would have been Level 3.

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.

With the exception of those detailed above, the Group's financial instruments are measured at amortised cost.

13.   Retirement benefit asset

The amounts recognised within the Income Statement were as follows:

As a result of the closure to future accrual on 31 December 2015 a negative past service cost, net of associated costs, of approximately £350,000 has been recognised in the income statement in the 26 weeks ended 27 February 2016 and in the 53 weeks ended 3 September 2016.

Net interest on the defined benefit retirement asset is recognised within interest income.

The amounts recognised in the Balance Sheet were as follows:

Actuarial gains of £5,418,000 (2016: £879,000) have been reported in the Statement of Comprehensive Income. The surplus has increased over the period since 3 September 2016 mainly as a result of improving market conditions.

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.

14.   Share Capital

Employee share schemes: options exercised during the period to 4 March 2017 resulted in 24,710 shares being issued (2016: 26,584 shares), with exercise proceeds of £19,177 (2016: £15,765) under the share save scheme and nil shares being issued (2016: 60,000 shares), with exercise proceeds of £nil (2016: £28,560) under the approved share option scheme.  The related weighted average price of the shares exercised was £0.776 (2016: £0.593) per share and £nil (2016: £0.476) respectively.

In addition 178,027 shares were issued in the period and held initially as Treasury shares.  These shares were subsequently used to satisfy the share awards under the LTIP scheme which were exercisable in November 2016. 

15.   Acquisition

On 24 October 2016 Wälischmiller Engineering GmbH ("Wälischmiller") acquired the entire issued share capital of STABER GmbH ("STABER") for cash consideration of €7.85m including deferred consideration of €2.0m, which is payable by 30 June 2018 at the latest.

STABER and Wälischmiller have been working together closely for over 50 years and STABER has most recently been a key supplier of parts for the remote handling business.  STABER has designed and developed specialised intellectual property ("IP") which will be strategically beneficial to Wälischmiller in both the near and long term. This IP will accelerate the ongoing strategic development work on the Telbot® and the Demo 2000 Telbot® by Wälischmiller.

Goodwill represented the excess of the consideration paid over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities acquired.

STABER has generated intra segmental revenue of £205,000 which has been eliminated on consolidation and incurred a loss before taxation of £9,000 since the date of acquisition.

Acquisition related costs amounted to £190,000 which have been recognised within exceptional items in the consolidated income statement.

The assets and liabilities provisionally recognised in the acquisition accounting are set out below:

Intangible assets represent the fair value of know-how within the business.

Had the acquisition of STABER occurred at the beginning of the accounting period the Group's revenue and profit before taxation for the period would not be materially different to the amounts actually recognised in the consolidated income statement.

16.   Cash generated from continuing operations

17.   Related party transactions

The Group's significant related parties are its associate and joint ventures, as disclosed in the Annual Report and Accounts 2016.

Transactions and balances with the associate and joint ventures were all undertaken on an arm's length basis in the normal course of business and are as follows:

18.   Post balance sheet event

On 17 March 2017, after the period end, the Group acquired the entire issued share capital of Horse and Pet Warehouse Limited for cash consideration of £124,577.

The principal activity of Horse and Pet Warehouse Limited is a retailer of animal products for the pet, equine and smallholding market.

The primary reason for the business combination was the expansion of the existing agriculture business.

Given that this has been a recent acquisition the identifiable assets and liabilities at completion and goodwill have yet to be finalised.  The Directors therefore consider it impracticable to be able to disclose this information in these financial statements.