ANNUAL REPORT AND ACCOUNTS
2015
AGRICULTURE | FOOD | ENGINEERING
DIVERSITY STRENGTHENS PERFORMANCE
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Old Croft, Stanwix, Carlisle CA3 9BA
www.carrsgroup.com
STRATEGIC REPORT
THE
GROUP
CARR’S GROUP PLC IS FOCUSSED ON THE
PRINCIPAL ACTIVITIES OF AGRICULTURE,
FOOD AND ENGINEERING.
Carr’s Group plc is an international
business operating across
Agriculture, Food and Engineering,
supplying over 35 countries around
the world.
The Agriculture division comprises
an international feed block
supplement business with
manufacturing locations in the
USA, UK and Europe. In the UK
the division also sells animal feed,
fertiliser, animal health products, oil,
farm machinery and rural supplies
from its 30 Country Stores.
The Food division produces flour
from three strategically located mills
in the UK to the bread, biscuit and
retail markets.
The Engineering division designs,
manufactures and supplies
specialist precision parts,
equipment, robotics and remote
handling products from three
sites in the UK and one site in
Germany. These highly specialised
products and services are supplied
predominately into the nuclear and
oil and gas markets.
The Group is listed on the London
Stock Exchange.
CONTENTS
STRATEGIC REPORT
1 Highlights
2 Group at a Glance
4 Chairman’s Statement
6 Group Strategy
7 Divisional Highlights
8 Strategy in Action
10 Chief Executive’s Review
15 Risk Management
18 Financial Review
20 Key Performance Indicators
21 The Board
22 Corporate Responsibility
CORPORATE GOVERNANCE
25 Corporate Governance Report
28 Audit Committee Report
30 Remuneration Committee Report
36 Nominations Committee Report
37 Directors’ Report
FINANCIAL STATEMENTS
40 Independent Auditors’ Report to the Members
of Carr’s Group plc
44 Consolidated Income Statement
45 Consolidated and Company Statements
of Comprehensive Income
46 Consolidated and Company Balance Sheets
47 Consolidated Statement of Changes in Equity
48 Company Statement of Changes in Equity
49 Consolidated and Company Statements of Cash Flows
50 Principal Accounting Policies
55 Notes to the Financial Statements
92 Five Year Statement
94 Directory of Operations
96 Registered Office and Advisers
Designed and produced by corporateprm, Edinburgh and London. www.corporateprm.co.uk
FINANCIAL
HIGHLIGHTS
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REVENUE
PROFIT BEFORE TAX
EARNINGS PER SHARE**
DIVIDEND PER SHARE**
£411.6m
£17.5m
13.4p
3.7p
4.1% DOWN FROM 2014
5.5% UP FROM 2014
4.7% UP FROM 2014
8.8% UP FROM 2014
* restated for IAS 19 Revised
** restated for the effect of the 10:1 share split in January 2015
2015
HIGHLIGHTS
FURTHER INVESTMENT IN
OUR RETAIL NETWORK
View this report online
www.carrsgroup.com
CREATION OF ENGINEERING
DESIGN DEPARTMENT
AGRICULTURE DIVISION ACQUISITIONS
01
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS GROUP AT A GLANCE:
STRENGTH THROUGH DIVERSITY
Carr’s is an international group focussed on developing innovative solutions for our global customers. The Group’s
distribution network spans over 35 countries worldwide, and the geographic and divisional diversity lies at the
centre of our strategy. The Group consists of three divisions operating in markets that offer growth prospects,
delivering products and services to the global agri-food and energy sectors. Our diverse geographic and divisional
exposure provides strength in an increasingly volatile global economic environment.
AGRICULTURE
OVERVIEW AND MARKETS
FOOD
OVERVIEW AND MARKETS
ENGINEERING
OVERVIEW AND MARKETS
The Agriculture division develops and supplies
a range of branded innovative animal nutrition
products into the livestock industries as well
as servicing the UK farming and rural
communities through a network of retail stores
and fuel businesses.
Carr’s develops and manufactures branded
molasses-based feed supplements, in the
form of high and low moisture feed blocks,
which enrich the diet of all types of farm
animals.
Operational Locations
The division’s products are manufactured in
the USA, Germany and the UK, which are sold
through a vast distributor network across
the UK, Europe, New Zealand and North
America.
The Food division supplies bakeries, food
manufacturers and multiples across the
UK, using the latest milling technologies
and sourcing the best wheat either from
the UK or overseas.
The Engineering division designs and
manufactures bespoke equipment for use in the
nuclear, oil and gas, and petrochemical industries.
Products include manipulators, robotics,
specialist fabrication and precision machining.
Carr’s works with its customers to meet their
changing requirements in a constantly changing
marketplace; developing commercial strategies
in response to increasingly volatile commodity
markets.
Carr’s is focussed on the design and manufacture
of pressure vessels and steel fabrications together
with specialist remote handling technology,
robotics and radiation protection equipment for
use in environments inaccessible to humans.
Operational Locations
The division operates from two strategically
located dockside sites in the UK, on the coast
at Silloth in Cumbria and at the state-of-the-art
site at Kirkcaldy in Fife, as well as a third mill at
Maldon in Essex.
Operational Locations
The division is based in a number of key locations
across the UK and in Germany, distributing to
clients around the world including Europe, North
and South America, Russia, Australia, Japan and
South Africa.
Customer Base
Leading livestock farmers across the globe
in the dairy, beef, sheep, pig and equine sectors.
Customer Base
Food manufacturers and retailers, which use
bulk and bagged flour as well as ethnic and
artisanal flour products.
Customer Base
Key players across the worldwide nuclear,
research, oil and gas, and petrochemical
industries.
REVENUE
£297.7m
OPERATING PROFIT
£11.2m
REVENUE
£80.3m
OPERATING PROFIT
£3.1m
REVENUE
£33.5m
OPERATING PROFIT
£3.3m
EMPLOYEES TOTAL: 605
EMPLOYEES TOTAL: 169
EMPLOYEES TOTAL: 302
435
170
139
30
258
44
02
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORT
INTERNATIONAL
DISTRIBUTION
CANADA
USA
Our Engineering and Agriculture
divisions distribute to customers
all over the world.
ARGENTINA
UK
LOCATIONS
UK
ICELAND
GERMANY
KAZAKHSTAN
TURKEY
CYPRUS
KUWAIT
QATAR
UNITED ARAB
EMIRATES
MAURITIUS
SOUTH AFRICA
RUSSIA
CHINA
SOUTH KOREA
JAPAN
TAIWAN
INDONESIA
AUSTRALIA
NEW ZEALAND
FINLAND
ESTONIA
LATVIA
LITHUANIA
AGRICULTURE
EUROPEAN DISTRIBUTION
NORWAY
SWEDEN
UK
DENMARK
NETHERLANDS
BELGIUM
GERMANY
FRANCE
SWITZERLAND
IRELAND
PORTUGAL
SPAIN
ITALY
POLAND
CZECH
REPUBLIC
AUSTRIA
UKRAINE
SLOVAKIA
HUNGARY
ROMANIA
SERBIA
GREECE
ENGINEERING
EUROPEAN DISTRIBUTION
NORWAY
SWEDEN
NETHERLANDS
UK
BELGIUM
GERMANY
FRANCE
SWITZERLAND
POLAND
CZECH
REPUBLIC
AUSTRIA
HEAD OFFICE
FOOD
AGRICULTURE
ENGINEERING
03
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
CHAIRMAN’S
STATEMENT
“The Group’s diversity, both geographic and
operational, has driven performance, with another
year of record profit.”
CHRIS HOLMES
CHAIRMAN
STRATEGIC DELIVERY
I am pleased to report that the Group has
delivered another record year of profit before
tax. This is particularly encouraging given the
challenging market backdrop across all three
of our divisions. Achieving this performance
is testament to the management team and
employees of the Group and the Board would like
to thank everyone involved for their dedication
and continuing to strive for excellence.
Revenue for the year fell by 4.1% to £411.6
million (2014: £429.0 million). Profit before
tax was up 5.5% to £17.5 million (2014:
£16.6 million). This comprised an 8.8%
increase in Agriculture profit before tax to
£10.4 million (2014: £9.6 million), a 6.3%
increase in Food profit before tax to £2.4
million (2014: £2.3 million), and a 16.7%
reduction in Engineering profit before
tax to £3.1 million (2014: £3.7 million).
Basic earnings per share were up by 4.7% to
13.4 pence per share (2014 restated: 12.8
pence), with fully diluted earnings per share
of 12.9 pence (2014 restated: 12.3 pence)
and adjusted earnings per share, excluding
non-recurring items and amortisation of
intangibles of 13.6 pence (2014 restated:
13.1 pence). Net debt decreased slightly to
£24.4 million (2014: 24.6 million).
04
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORT In addition, on 10 September 2015 it was
announced that Robert Heygate had decided
to stand down from the Board after 25 years’
service, with effect from April 2016. I would
like to take this opportunity to thank Bob, for
his contribution, dedication, enthusiasm, and
support during his time with Carr’s.
OUTLOOK
In the year ahead we expect the headwinds
seen across all three divisions to continue.
However, we remain confident that the
Group’s diversity and resilient business model
positions us well to make further progress
in 2016. We will continue to build on our
success and invest for the future across the
Group, both in the UK and internationally.
We expect our innovative approach, in
particular the development of new products,
to continue to differentiate us from the
competition and we will remain alert to
suitable complementary acquisitions. This,
alongside plans to develop existing businesses
organically, ensures the Group is well placed
in the medium term.
CHRIS HOLMES
Chairman
11 November 2015
In Agriculture, the business continued to build
on the momentum established in previous
years, with our retail operations expanding
into new territories through both acquisitions
and organic growth. Our geographic presence
and relevance of our product offering will be
key to supporting farming customers, given
the tough market climate they face over the
forthcoming year.
Our international feedblock business has
performed well, with a key strength of the
business being our geographic reach. In
the UK, lower farm incomes, coupled with
excellent quality forage, resulted in reduced
demand. However, in the USA we have seen
a significant uplift in demand on the back
of the rebuilding of beef herds together with
favourable weather conditions. We continue
to invest heavily in the R&D of these products
both in the UK and internationally to drive
future growth.
The Food division has delivered further growth
despite changes in the consumer market
having an adverse impact on our customers,
which is expected to continue into the current
financial year. Our continuing excellent
customer service across all three mills ensures
we are well placed to face these challenges
and ensure the needs of our customers are
surpassed.
It has been a tough year for our Engineering
division, with a combination of the depressed
oil price and the impact of a complicated
factory move affecting our precision
engineering business, Chirton Engineering.
Additionally, reduced activity in the nuclear
sector in Japan and economic sanctions with
Russia impacted Wälischmiller. However, we
have continued to invest across the division
in order to build for the future and to benefit
from the expected increase in demand from
the UK nuclear sector.
GOVERNANCE
The Board is mindful of the UK Corporate
Governance Code and takes its responsibilities
very seriously. It continues to strive to comply
with all areas of the Code and a full report on
Corporate Governance can be found on pages
25 to 27. All Directors will be standing for
election at the Annual General Meeting (AGM)
on 5 January 2016.
SHARE SPLIT
The Company’s shares split 10:1 on 14
January 2015 following shareholder approval.
This reduced the nominal value of the
ordinary shares to 2.5 pence each, and was
undertaken to primarily improve the liquidity
of the Company’s shares.
CHANGE OF NAME
At a General Meeting on 8 April 2015 the
shareholders approved the change of Company
name from Carr’s Milling Industries PLC to
Carr’s Group plc with the change effective on
9 April 2015.
ARTICLES OF ASSOCIATION
As a result of the change of name to Carr’s
Group plc the Board have reviewed the
Articles of Association and have asked the
Company’s solicitor to amend the Articles in
line with minor regulatory changes and best
practice. The resolution to adopt the new
Articles will be proposed at the AGM on
5 January 2016, and a copy of the Articles
will be enclosed with the notice of the AGM.
SHARESAVE SCHEME
The Carr’s Milling Industries Sharesave
Scheme 2006 expires in 2016 so no further
options may be granted to employees under
the scheme. Therefore a replacement, Carr’s
Group Sharesave Scheme 2016, incorporating
the old scheme and updates necessary for
changes in legislation, has been drafted and
a resolution to adopt the replacement scheme
will be proposed at the AGM on 5 January
2016. A copy of the main terms of the
replacement scheme will be enclosed with
the notice of the AGM.
DIVIDEND
The Board is proposing a 8.8% increase in
the final dividend to 1.85 pence per ordinary
share, which together with the two interim
dividends, each of 0.925 pence per ordinary
share paid on 15 May and 9 October 2015,
make a total of 3.7 pence per share for the
year (2014 restated: 3.4p), representing
an increase of 8.8%. The final dividend, if
approved by the Shareholders, will be paid
on 15 January 2016 to Shareholders on the
register at close of business on 18 December
2015, and the shares will go ex-dividend on
17 December 2015.
THE BOARD
During the year, John Worby was appointed as
a Non-Executive Director of the Board, taking
over as Senior Independent Director and Audit
Committee Chairman from Alistair Wannop and
Robert Heygate respectively. John’s experience
in FTSE 250 companies Fidessa plc, Genus
plc, Cranswick plc and Uniq plc, coupled with
his financial and sector experience, enhances
the Board’s expertise. Since the year-end the
Board has been further strengthened with
the appointment of Non-Executive Director
Ian Wood, who has extensive experience in
the engineering and energy sectors, working
currently for Centrica plc.
05
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS GROUP
STRATEGY
VISION
To be recognised as a truly international business
at the forefront of technology and innovation
Investment in assets to
ensure long term competitive
advantage
Seen and recognised as
leaders in innovation
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FOOD
ENGINEERING
E
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Investing in people that
will shape the business in
ten years’ time
Acquisition strategy for
growth and joint ventures with
strategic purpose
06
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORT
BUSINESS
STRATEGIES
DIVISIONAL HIGHLIGHTS
AGRICULTURE
FOOD
ENGINEERING
TRADING OVERVIEW
TRADING OVERVIEW
TRADING OVERVIEW
• Retail sales growth
• Feed blocks growth
• Investments –
Silver Springs (USA)
Retail store upgrades
• Acquisition of Reid & Robertson Ltd
• Acquisition of WM. Nicholls &
Company (Crickhowell) Ltd
• Maintaining financial step change
• Market dynamics
• Volume growth
• Continued improvement in operational
efficiencies
• Investment in food safety
• Investment at Wälischmiller
• Strong performance at Carrs MSM
• New specialist design business
at Bendalls
• BP contract delivery on time
• Investment at Chirton
DIVISIONAL PLANS
DIVISIONAL PLANS
DIVISIONAL PLANS
• Brand growth
• Lead in dairy nutrition
• Investment in targeted research
• New markets
• Strengthen UK position
• Acquisitions
• Maintain benefits of new mill
• Capitalise on market changes
• Service excellence
• Logistics optimisation
• Exploit new areas of market growth
• Product research, innovation and
development
• Investment in new products
• Exploit growing market sectors
• Acquisitions
DELIVERY
DELIVERY
• Research
• New plants
• New products
• New markets
• Retail development and expansion
• Acquisitions
• Step change in financial performance
• Baking category and brand
• New contracts
DELIVERY
• Wälischmiller –
Telbot
Demo 2000
• New contract wins
INVESTMENT
INVESTMENT
INVESTMENT
£5.6m
including new branches at Rothbury and
Selkirk and acquisitions of WM. Nicholls & Co.
(Crickhowell) Ltd and Reid & Robertson Ltd
£1.3m
including state of the art machinery
£1.7m
including state of the art machinery
and creation of a specialist design
department
07
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS STRATEGY IN ACTION
KEY ELEMENTS OF OUR BUSINESS MODEL
The business has four key strategic pillars to drive success and long
term sustainable value for shareholders in the form of increased
earnings and dividends.
INVESTMENT
Carr’s is an international business
with key production facilities in
the UK, Germany and the USA.
USA
UK
To drive operational excellence we invest
strategically and for the long term across our
divisions ensuring we operate in attractive
growing markets across the globe.
Our aim is to develop market leadership in all
territories in which we are active.
In the UK this means a regional strength across
the North of England and Scotland in our
flour milling and agricultural retail businesses.
Globally this has meant expanding the markets
into which we sell our remote handling
equipment and feedblocks.
TECHNOLOGY
Developing new innovative
products and services will ensure
long-term sales growth and
increased market share.
Focussing on innovation and excellent customer
service has allowed us to lead in key markets.
The Engineering division has built a position
as quality leader in the nuclear field through
superior innovative products, reliability and a
customer orientation. It will continue to lead by
focussing on its innovation pipeline not only in
the nuclear market but also in oil and gas.
08
The investment to develop the feed block
production facility in Silver Springs, Nevada
is almost complete, with full commissioning
expected in November. This facility will
be able to manufacture the branded feed
block Smartlic® to the highest standard and
service the needs of customers throughout
the western states.
The retail division has continued its strategy
of investment in its Country Store network
with significant expenditure at Appleby,
the relocation of Selkirk and the opening
of Rothbury. The Selkirk Country Store
showcases a new look of Country Store with
a particular emphasis on the country dweller
and equine market, whilst still providing
a full range of products for the farmer
customer.
BENDALLS
WÄLISCHMILLER ENGINEERING
Bendalls created an equipment design team
that utilises the latest 3D and analytical
software. Bendalls has also enhanced its
project management capability to ensure
that any commercial risks of the new design
business are diligently managed. The design
team will capture a greater breadth of the
value chain enabling the business to pursue
broader opportunities. The design capability,
coupled with the extensive manufacturing
expertise in Bendalls and Chirton, creates
client value propositions which will be
leveraged in nuclear, sub-sea, and oil & gas.
The Demo 2000 project with partners Shell
& Statoil has concluded with a successful
site acceptance test. This project was for
the creation of a robot capable of entering
an explosive environment for inspection and
cleaning of gas tanks. The robot, based on
the Telbot®, removes human involvement in
the inspection and cleaning process. This
results in significantly less downtime, and,
importantly, enhanced safety and wellbeing
of the employees. This robot is the first of its
kind worldwide.
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORT ACQUISITIONS
Reid & Robertson Ltd
The Group has continued to strengthen its UK Agriculture business
with three value added acquisitions.
Carr’s has been particularly successful at
identification, acquisition, and integration of
owner managed businesses, which enhance
the existing Agriculture division. The Group
will continue with this focus in the short and
medium term.
2015
• Green (Agriculture) Co based in Morpeth,
expanding the retail customer base (after
year end);
• Reid & Robertson Ltd in Balloch, Ayr and Oban;
• WM. Nicholls & Company (Crickhowell)
Ltd based in Crickhowell, Wales,
complementing the acquisition of B E
Williams Ltd in 2014, and consolidating
our feed business in South Wales.
Based in Balloch, Ayr and Oban, Reid
& Robertson significantly extends the
geographic reach of the retail business,
providing a strong presence in Western
Scotland. Reid & Robertson is an agriculture
supplier with over 100 years’ history,
specialising in animal health preparations.
The synergies between the experience and
expertise of the Reid & Robertson business,
and the broader product offering of our
existing retail network, will deliver improved
financial performance this year.
PEOPLE
FUTURE PIPELINE
During the year Carr’s has created an
apprentice exchange programme, which will
commence in the winter of 2015 and will
operate in the Carrs Engineering division.
The programme will allow selected apprentices
to visit and work at Wälischmiller, Bendalls,
and Chirton, gaining insight into the different
areas within these multifaceted businesses.
This initiative has been developed and led
by Claudia Reich, the Managing Director of
Wälischmiller, located in Germany. It will
provide a great opportunity for the apprentices
to broaden their knowledge of our Engineering
division and its operational capability whilst
building confidence and cultural diversity.
This is an exciting investment in our future
talent pipeline, and one which will improve the
capability and integration of our Engineering
division.
09
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS CHIEF EXECUTIVE’S
REVIEW
PROFIT BEFORE TAX BY SECTOR
AGRICULTURE
£10.4m
8.8% UP
FROM 2014
FOOD
£2.4m
6.3% UP
FROM 2014
ENGINEERING
£3.1m
16.7% DOWN
FROM 2014
“The Group has delivered another record
performance, driven by operational and geographic
diversity, despite headwinds in all divisions”
TIM DAVIES
CHIEF EXECUTIVE OFFICER
During the year we have continued to build
on our vision to be recognised as a truly
international business at the forefront of
innovation and technology across Agriculture,
Food and Engineering.
Our strategy remains centred around four key
pillars:
These strategic pillars are at the heart of each
of our divisions and their implementation has
ensured we have once again delivered another
record year of profit growth for the Group.
Our investment in the business has continued
to be a priority. Major projects commenced and
completed in the year include:
• £0.3m on land acquired at Morpeth adjacent
to our existing machinery Country Store;
• £1.0m Acquisition of WM Nicholls &
Company (Crickhowell) Ltd completed in
October 2014;
• £0.9m Acquisition of Reid and Robertson Ltd
completed in June 2015;
• £0.3m Acquisition of Green (Agriculture) Co
completed September 2015;
• investing in our people, who are vital to the
• $2.3m redevelopment of a feed block facility
• £0.7m new factory for Chirton completed in
long term success of the business;
at Silver Springs, Nevada, USA;
March 2015;
• investing in our asset base, to ensure we
• £0.2m on redevelopment of the Country Store
• £0.3m on new equipment to further enhance
retain our competitive advantage;
• driving product innovation across each of our
divisions;
• delivering growth through acquisitions and
organic expansion.
network;
– Rothbury
– Selkirk
– Appleby
10
food safety for Carr’s Flour Mills.
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORT AGRICULTURE
Profit before tax for the year increased by 8.8%
to £10.4 million (2014: £9.6 million) on revenue
down by 5.5% to £297.7 million (2014: £314.9
million) due to falling commodity prices. Profit
before tax for the year, including contributions from
associate and joint ventures, increased by 5.5% to
£12.7 million (2014: £12.1 million)
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PROFIT
£10.4m
8.8% UP FROM 2014
The geographic spread and operational
diversity of our businesses within the
Agriculture division led to another record year.
FEED BLOCKS
Feed block sales in the USA have been
exceptional this year with sales volumes,
excluding joint ventures, 19.9% higher.
Record production levels have been driven by
favourable market and weather conditions.
The drought in the South East, Mid-West
and North West States continues to recede,
resulting in beef herds being rebuilt across
our key territories. The investment at the plant
in Silver Springs, Nevada, has been on-going
and remains on track to begin production of
our branded product, Smartlic®, in November
2015. This plant expands our geographic reach
in the USA by supplying low moisture feed
blocks to the West Coast dairy and beef market.
There has been positive initial reaction to the
launch in the summer of our innovative new
product Piglyx®, which is an environmental
enrichment product reducing stress levels in
pigs, enabling the farmers to increase their
returns. In the summer, Horslyx® a product for
the equine leisure market, was exported to the
USA for the first time, and resultant revenues
are expected in the current financial year.
We have continued with our strategy of
research and development to ensure we deliver
sustainable growth. A research project into our
unique feedblock, Megastart®, completed this
year, has demonstrated significant benefits
to livestock, which has led to a substantial
increase in sales of Megastart® during the year.
Crystalyx® has seen a decline in UK sales this
year as a result of high quality forage harvested
11
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS CHIEF EXECUTIVE’S
REVIEW CONTINUED
during 2014, and declining farm incomes. We
continue our commitment to our international
growth strategy with Crystalyx®, and have
employed personnel in Brazil to develop this
potential market. On-farm trials of Crystalyx® are
due to commence in Brazil by the end of 2015.
RETAIL
The strategy for growing our retail business
delivered results exceeding expectations,
with sales 8.6% higher year on year, a third
consecutive record year. Like for like sales,
excluding the impact of additional stores also
increased by 5.3%. Our presence in strategic
locations, coupled with the diverse retail
offering, further strengthened our business.
With a new Country Store at Rothbury, and
redeveloped facilities in Appleby, Wigton, and
Selkirk, we continue our commitment to, and
investment in, servicing both the agricultural
and rural communities. In addition to organic
growth, in June 2015 we undertook the
strategic acquisition of Reid and Robertson
Ltd, an agricultural merchant business
specialising in veterinary medicines, based
at Balloch, Ayr, and Oban in Scotland. This
expands our geographic reach in Scotland,
and provides access to a new customer base
for our existing product offering. Since the
year-end we have acquired Green (Agriculture)
Co., an agricultural merchant business based
in Morpeth, near our existing machinery
Country Store. This acquisition strengthens
the Country Store network in Northumberland
and enhances the services offered to the
local community. With organic growth and
acquisitions, we now have 30 Country Stores in
our network with a further 5 livestock market
locations.
Our integrated oil distribution business has also
surpassed expectations this year with increased
sales of 4.4%, despite the benign weather and
increased competition. This is due to investment
in our fleet, increased presence across our
regions, and our emphasis on customer service.
The acquisition of WM. Nicholls & Company
(Crickhowell) Ltd in October 2014 together with
the previous year’s acquisition of B E Williams
Ltd further developed our strategy for our feed
business in South Wales.
We have combined these businesses into a
central administration location in Brecon, whilst
maintaining a presence in Sennybridge in the
short term. The UK feed market is currently
suffering from pricing pressure due to falling
farm incomes, and the impact of increased
manufacturing activity in our geographic
markets has intensified competition. Despite
this, our feed business performed well with total
feed volumes up 4.1% year on year.
While we remain cognisant of the uncertainty
facing the UK agriculture sector, we believe
that our strong regional presence, technical
expertise, and diverse product offering provides
a solid platform to service our customers’ needs
through the next financial year and beyond.
AminoMax®
AminoMax®, the patented animal bypass
protein product for dairy cows, manufactured
at Watertown, New York State, USA, and
Lancaster, UK recorded flat worldwide sales
this year, predominantly as a result of the fall
in farm incomes due to the declining farm-
gate milk price. The falling soya and canola
commodity prices, and continuing pressures
on farm incomes, are expected to have an
adverse impact on AminoMax® sales in the
forthcoming year. However, we are continuing
with research and development to extend this
innovative product range.
Market Conditions
Farmer confidence has been adversely affected
this year and it is anticipated this will continue
in the medium term, as a direct result of the
significant decline in the farm-gate milk price,
both in the UK and internationally. Many of
our farming customers are starting to modify
their spending in reaction to the ongoing
uncertainty in the UK agriculture market, and
are postponing sizable capital investments
until they have further market visibility. Once
again, UK farmers benefited from a mild
winter and benign spring, resulting in lower
costs of production, which provided some
respite from market conditions. We continue to
support our farming customers in choosing the
appropriate strategy to enable them to navigate
a path through these difficult markets.
12
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORT FOOD
Profit before tax for the year increased 6.3% from
£2.3 million to £2.4 million in this financial year
on revenue down by 7.8% to £80.3 million (2014:
£87.1 million) driven by falling commodity prices
m
4
.
2
£
m
3
.
2
£
m
6
.
0
£
3
1
0
2
4
1
0
2
5
1
0
2
PROFIT
£2.4m
6.3% UP FROM 2014
We have enjoyed strong growth in the Food
division this year with sales volumes 4.6%
higher than last year. Through the year our
reputation for customer service, quality and
technical expertise has resulted in important
new business wins. The growth in the division’s
sales volumes follows last year’s step change
in operating performance, which was driven by
the commissioning of our state of the art mill
at Kirkcaldy. We have continued our investment
programme with the installation of cutting edge
equipment at our other mills, which ensures we
remain ahead of our customers’ ever-increasing
demands, particularly in the need for food
safety. The ongoing investment supports the
commercial benefits derived from increased
customer confidence in our ability to produce
quality flour, milled to the highest standards of
product integrity.
The wheat harvest in summer 2014 was relatively
normal at just over 16 million tonnes, however
there were inconsistencies in quality. Our
versatility with regard to wheat sourcing and mill
processing meant that we were well positioned to
respond to the changing market dynamics. The
2015 harvest has been large and consistent in
quality and the position of our three mills enables
us to benefit from this exceptional harvest.
Changes in the retail landscape and consumers’
shopping habits are impacting the whole food
supply chain, including the bakery sector.
In the current financial year, ending August
2016, it is anticipated that these headwinds
will persist. This challenging backdrop will in
part be off-set by our investment in technology,
high standards of customer service, and our
on-going commitment to operational efficiencies
throughout our three mills which, over the
medium term, leaves us well placed to handle
these changing markets.
13
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS CHIEF EXECUTIVE’S
REVIEW CONTINUED
ENGINEERING
Profit before tax for the year fell by 16.7% to
£3.1 million (2014: £3.7 million) on revenue up by
24.8% to £33.5 million (2014: £26.9 million)
m
2
.
4
m£
7
.
3
m£
1
.
3
£
3
1
0
2
4
1
0
2
5
1
0
2
PROFIT
£3.1m
16.7% DOWN FROM 2014
2015 has been a year in which we have
invested in the future growth of our
Engineering division. Our Engineering business
operates in high value markets and within
two distinct areas, manufacturing and remote
handling. During the year there has been
increased collaboration throughout the division
with joint bids being submitted and parts
being manufactured internally for the remote
handling businesses.
macro-economic pressure resulting from the
funding and political issues faced in Russia
and Japan, which is expected to continue
through 2016. There are signs of increased
activity in the UK nuclear market, with delivery
of two power manipulators to Dounreay,
Scotland expected by the end of 2015, and
the successful completion of a remote handling
project for Sellafield, with further orders through
to 2017 being received after the year-end.
market. To facilitate this, it is working closely
with our other Engineering businesses, taking
advantage of the sector expertise, to ensure
that cross selling opportunities are maximised.
During the year, Chirton commenced selling
engineered parts for our remote handling
operations, and this is set to continue through
the next financial year.
TIM DAVIES
Chief Executive Officer
11 November 2015
Our remote handling businesses have met
expectations in this difficult market, and
performed well this year. In particular, Carrs
MSM has had an excellent year, and this
is expected to continue with Life of Plant
contract and other significant contracts to the
nuclear sector being delivered in the current
financial year.
Wälischmiller had a successful site acceptance
test for the Demo 2000 Telbot® project in
Norway. This project removes the need for
human inspection of oil and gas tanks and
improving safety reducing the time needed to
shut down the plant by up to 700 man hours
per tank. In addition, operating within a UK
led engineering consortium, Wälischmiller
has also been awarded a contract for the
design and supply of robotic remote handling
equipment for ITER with potential sales due
for delivery between 2017 and 2020. ITER is
the international collaboration for the creation
of an experimental fusion reactor based in
France.
Wälischmiller has also invested in state of
the art machinery, development of a new
showroom, and a marketing programme in
the USA. This will help offset the continuing
Bendalls, one of our two manufacturing
businesses, is also benefiting from the increased
activity in the UK nuclear market with multiple
new framework agreements being awarded by
Sellafield, operational through 2016-2019. We
invested in the organic growth of the business
through the creation of a new design department
in 2015, which has been awarded its first
contract from Sellafield for the design of a skip
conveyor system. The BP Shah Deniz project,
for the manufacture of 33 pressure vessels
for the gas pipeline in Azerbaijan, has been
successfully delivered in accordance with the
agreed timeline, with one vessel to be delivered
in spring 2016, as previously announced.
Chirton has had a difficult trading year due to
the decline in the oil price and the impact of
a complicated move to new factory premises
in March 2015. The delay in moving to the
new factory caused a greater level of disruption
than expected, and issues commissioning new
equipment resulted in extra costs and more
lost production time than planned. This has
adversely affected results in the short term.
The low oil price has had a direct impact on
Chirton’s oil exploration customers, and as a
result management have taken the decision
to accelerate Chirton’s entry into the nuclear
14
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORT RISK
MANAGEMENT
OUR RISK APPETITE AND APPROACH TO RISK MANAGEMENT
Our success as a Group depends on the ability to identify and maximise the opportunities generated by our
businesses and the markets in which we operate. In doing so, we continue to develop an embedded approach to
risk management which puts risk and opportunity assessment at the heart of our strategy.
The Group adopts a risk profile aligned to our
vision to be recognised as a truly international
business at the forefront of technology and
innovation. Our available capital and resources
are applied to underpin our four strategic pillars:
people, investment, innovation, and growth
through acquisition and organically.
who have an active responsibility for focusing
on the principal areas of risk to the Group.
The Board reviews these risk areas, including
consideration of environmental, social, and
governance matters, and retains responsibility
for determining the nature and extent of the
risks that the Group is prepared to undertake.
Our approach to risk management is designed
to provide reasonable assurance that our assets
are safeguarded. The risks facing the business
are assessed and, where possible, mitigated. All
relevant information is reported to and reviewed
by the Board.
ORGANISATION AND PROCESS
The Board assumes overall responsibility for
the management of risk and for reviewing the
effectiveness of the Group’s risk management
and internal control systems.
The Group operates a risk management
framework whereby for each of our principal
risks we detail our assessment of the risk, the
controls we have in place, who is responsible
for managing the risk, as well as any
further mitigating actions required. Further
development work on the risk management
framework and system is planned for 2015/16.
This will further strengthen risk management
and will lead to an overall increase in the
amount of time the Board allocates to the
discussion of risk.
The Board has established a clear organisational
structure with well-defined accountabilities for
the principal risks the Group faces in the short,
medium, and long term, across all divisions.
This is overseen by the Executive Directors,
BOARD’S ASSESSMENT OF COMPLIANCE WITH
THE RISK MANAGEMENT FRAMEWORKS
The Board, advised by the Audit Committee,
review the effectiveness of the company’s risk
management and internal control systems at
least annually. Details of the activities of the
Audit Committee in relation to this can be found
in the Audit Committee Report on pages 28 to
29. There is a more regular discussion of risks
affecting the business as and when required at
each Board meeting.
PRINCIPAL RISK FACTORS
Our business is subject to a variety of risks and
uncertainties. On the following pages we have
identified the risks we regard as most relevant to
our Group and performance at this time. These
may change as the Group develops over the
year. We have commented on mitigating actions
that we believe help us manage these risks.
However, we may not be successful in deploying
some or all of these mitigating actions. If
the circumstances in these risks occur or are
not successfully mitigated, our cash flow,
operating results, financial position, business
and reputation could be materially adversely
affected.
KEY RISKS
DESCRIPTION OF THE RISK
WHAT WE ARE DOING TO MANAGE THE RISK
Safety
The safety of our employees, contractors and suppliers and
the communities in which we operate is paramount. We must
operate within local laws, regulations, rules, and ordinances
relating to health, safety, and the environment, including
emissions.
We have Health and Safety policies that apply to all facilities, with dedicated
staff to ensure they are embedded within our culture and regularly measured
and assessed. This includes an annual compliance programme, which reports
monthly to the Executive Directors, highlighting any issues that require action,
including training needs. Regular training in this area is also provided to key
personnel in the Group’s locations.
Business Continuity
The operation of manufacturing plants involves many risks that
could cause a temporary or permanent stoppage in production
and could have a material adverse effect on the Group.
The Group has Business Continuity arrangements in place to enable continuity
of supply, as quickly as practicable, of product to customers in the event of a
natural disaster or major equipment or plant failure. A programme of insurance
is also in place to protect against the cost of major business interruptions.
People
Performance, knowledge, and skills of employees are central to
the success of the Group. We must attract, integrate, and retain
the talent required to fulfil our strategic growth ambitions.
Inability to retain key knowledge, and adequately plan for
succession could have a negative impact on the Group’s
performance.
The Group has remuneration policies designed to attract, retain and reward
employees with the ability and experience to execute the Group’s strategy.
Management development programmes are in place, alongside detailed
succession planning across the Group. Succession plans for senior roles are
reviewed by the Nominations Committee annually.
15
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS RISK
MANAGEMENT CONTINUED
DESCRIPTION OF THE RISK
WHAT WE ARE DOING TO MANAGE THE RISK
Commodity Costs
Margins may be affected by fluctuations in crop prices due to factors
such as harvest and weather conditions, crop disease, crop yields,
alternative crops, and by-product values.
In some cases, due to the basis for pricing in sales contracts, or due
to competitive markets, we may not be able to pass on to customers
the full amount of raw material price increases or higher energy,
freight or other operating costs.
The Group has a number of strategies in place to manage this risk.
These include:
• strategic long term relationships with suppliers;
• multiple-source suppliers for key ingredients;
• raw material and forward energy purchasing policies to provide security
of supply and cost;
• the use of derivatives where most beneficial to hedge exposure to
movements in future prices of commodities; and
• close monitoring of contract execution to ensure supply is within
agreed terms.
Product Innovation Risk
Our commercial success depends, in part, on innovation and then
obtaining and maintaining trademark and patent protection on
certain products and technology.
The Group invests heavily in research and development to innovate
across its businesses. For new innovations, there is an organised and
secure process for identifying and recording innovations, trade secrets,
and potentially patentable ideas.
Failure to innovate could have an adverse effect on our business. We
must also successfully defend trademarks and patents against third-
party challenges or infringements.
The Group has an in-house Legal Counsel to monitor and oversee
this risk, supported by expert intellectual property lawyers in multiple
jurisdictions.
Strategic Partners
The Group has a number of strategic partners, particularly in the
Agriculture division, who are involved either as joint venture partners
or significant minority shareholders. A successful working relationship
with these partners in paramount to those businesses’ success.
Close working relationships are maintained with all the Group’s strategic
partners. This includes regular meetings, both formally and informally,
and close involvement in the setting and monitoring of strategy for those
businesses. In addition, arrangements are appropriately documented in
contracts and legal agreements.
Treasury
We are exposed to a variety of financial risks in relation to treasury.
The Group must ensure that it has an adequate level of facilities to
provide sufficient funding to operate its businesses and to develop
growth opportunities.
Changes to the value of currencies can fluctuate widely and could
have a significant impact on a division’s results. Furthermore,
because the Group has international businesses it is subject to
exchange risks in the translation of the underlying net assets and
earnings of its foreign subsidiaries.
The level of facilities are regularly reviewed by the Group Finance
Director, and these are also regularly reported to and discussed by the
Board.
The Group operates a treasury policy of hedging all significant
transactional currency exposures. Additionally, translational hedging
instruments are used to limit the potential impact of fluctuating
currencies on reported earnings from foreign subsidiaries.
For interest rate risk on floating rate debt, we maintain a mix of fixed
rate debt, primarily finance lease, and floating rate debt. These levels are
monitored and assessed against forecast changes in interest rates and
forward guidance from interest rate setting authorities.
Non-compliance with Legislation and Regulation
The Group operates in diverse markets and therefore is exposed to
a range of constantly changing legislation and regulation. We must
comply with, and understand, all regulation and legislation, and be
able to make correct interpretations for our diverse Group. Any breach
could have a financial impact and damage our reputation.
The Group is committed to complying with the laws and regulations of
the countries in which we operate.
In-house Legal Counsel provides immediate legal knowledge and
understanding to the Board and management, and this is supplemented
by external legal advisers assisting with monitoring external changes in
legislation and advising accordingly.
We have a tax risk framework, including a tax strategy and code of
conduct, which sets out our approach to managing global tax risks.
The Group also maintains policies in areas such as antitrust, money
laundering and bribery laws. A whistleblowing policy and procedure is
also in place.
16
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORT
DESCRIPTION OF THE RISK
WHAT WE ARE DOING TO MANAGE THE RISK
Acquisitions
The Group is acquisitive and is therefore exposed to the possibility
of acquiring a company based on inaccurate information, unrealistic
synergies and financial benefits, and inappropriate deal structure.
Failure to effectively integrate acquired businesses could also
undermine any expected synergies.
Customer Demand
Changes in customer demand, be that retail or commercial
customers, caused by economic factors could result in a fall in
demand for the Group’s product offering, resulting in a significant
loss of revenue.
Reliance on Key Customers
Some businesses within the Group have a significant proportion
of their revenue generated from a small number of key customers.
A loss of a number of these customers could adversely affect the
performance of a division and in turn the Group.
A thorough and careful due diligence process is undertaken, utilising
relevant skilled internal personnel, as well as external expertise when
required. Individual businesses and Group resources are used to analyse
potential synergies and financial benefits. Consideration is given to
the composition and skills of the management team of the acquired
company and support and relevant training is provided by Group
personnel to ensure a successful integration. The deal structure is
reviewed on a case by case basis.
Post-acquisition reviews are also undertaken to identify any areas for
improvement in future transactions.
The Group operates in diverse worldwide markets, which provide
resilience for the Group against difficulties faced by any one market
or economy. The businesses are managed flexibly to react to changing
demands in their own sector.
The businesses have established good long term relationships with key
customers to ensure that demands and expectations are met. The Group
is constantly investing in its businesses to ensure that they are able to
satisfy customer needs and are market leaders.
The Group is continually working on identifying new markets, products,
and opportunities to expand the customer base of all its businesses.
Political Instability
Disruption to business activity as a result of political instability in one
of our key markets, particularly in our Engineering business, could
impact sales into that market.
The wide geographic spread of the Group’s operations and customer
base diminishes the impact of any one market on the results of the
Group as a whole.
Reliance on Key Ingredients
Our feed block business relies on a key ingredient of molasses.
Should there be volatility in the molasses market or should a crop
disaster result in little to no global harvest it could adversely affect
the Group’s performance.
Our feed block businesses acquire molasses from a variety of sources
worldwide and therefore there is no over reliance on any one producer.
The molasses market is international and therefore it is unlikely that
molasses could not be sourced from an alternative location should any
one harvest be adversely impacted by a natural disaster. In addition,
research is underway to establish alternative ingredients to molasses.
Defined Benefit Pension Scheme
The Group operates one active defined benefit pension scheme. The
funding of the scheme could be adversely affected by a number of
factors including: investment returns, interest rate fluctuations, and
members’ longevity. Changes in all or some of these inputs could
increase the cost to the Group of funding this scheme in the future.
The scheme closed to new members in 2001. The Group has made
significant contributions to the deficit over a number of years and the
Group and the Trustees monitor the performance regularly and take
investment and actuarial advice when required. In addition, the Group is
currently consulting with affected employees and the Trustees to cease
future accrual in the scheme from 31 December 2015.
17
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS FINANCIAL
REVIEW
CURRENT AND FUTURE DEVELOPMENT AND PERFORMANCE
“The key features of the year have been the record
profit before tax for the Group, for another successive
year, and continued capital investment across all
three divisions.”
NEIL AUSTIN
GROUP FINANCE DIRECTOR
REVENUE
Reported revenues were £411.6m, down 4.1%
behind last year (2014: £429.0m).
Revenues have fallen primarily as a result of
lower raw material prices, which because of
the nature of some of our contracts can directly
affect sales values.
OPERATING PROFIT
Group operating profit of £16.4m is up 6.1%
on last year (2014: £15.4m). As a percentage
of revenues, Group operating margin is 4.0%
compared to 3.6% in 2014.
Operating profits per division and as a
percentage of divisional revenues are as follows:
18
Operating Profit
Agriculture
Food
Engineering
2015
£m
11.2
3.1
3.3
2015
%
3.8
3.9
9.7
2014
£m
10.4
3.1
3.8
2014
%
3.3
3.5
14.2
SHARE OF ASSOCIATE AND JVS
The Group’s share of the post-tax result in
its associate and joint ventures was £2.3m,
compared to £2.5m in 2014. The result
reflected a slight decrease in its associate’s
profitability, together with a slight decrease
in the European feed block and USA feed
supplement joint ventures driven by the market
issues in the dairy sector.
FINANCE COSTS
Net finance costs of £1.2m (2014: £1.4m)
were lower than the previous year. This reflected
lower average borrowings during the year as
a result of lower working capital and debt
repayments. Interest cover was 15.4 times
compared to 13.2 times in 2014.
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORT PROFIT BEFORE TAX
Profit before tax at £17.5m was 5.5% higher
than in the previous year (2014: £16.6m).
TAXATION
The Group’s effective tax charge on profit from
activities after net finance costs and excluding
profits from associate and joint ventures was
24.9% (2014: 26.0%). A reconciliation of the
actual total tax charge to the standard rate of
corporation tax in the UK of 20.58% is given
in note 6 to the financial statements.
EARNINGS PER SHARE
The profit attributable to the equity holders of
the Company amounted to £12.0m (2014:
£11.4m), and basic earnings per share was
13.4p (2014 restated: 12.8p), an increase
of 4.7%.
Adjusted earnings per share of 13.6p
(2014 restated: 13.1p), is calculated by
dividing the profit attributable to equity holders
for the period, before non-recurring items
and amortisation of intangible assets, by the
weighted average number of shares in issue
during the period.
ACQUISITIONS
On 20 October 2014 the Group acquired the
entire issued share capital of WM. Nicholls &
Company (Crickhowell) Limited, an agricultural
merchant, for a net cash consideration of
£1.0 million.
On 12 June 2015, the entire issued share
capital of Reid and Robertson Limited, also
an agricultural merchant, was acquired by the
Group. The cash consideration was £0.9 million.
Both of these acquisitions combined generated
goodwill of £1.1 million.
CASH FLOW AND NET DEBT
Our net debt has decreased slightly over the
year, due to cash generated from operating
activities exceeding cash spend on acquisitions
and capital expenditure.
A free cash flow of £7.6 million was generated
in the year, representing a decrease of 31.2%
on the previous year.
During the year loans in our Agriculture division
were consolidated with RBS and an additional
£2.0m revolving credit facility provided for
ongoing acquisition activity.
Headroom against existing facilities was
£19.0m at the year end. Other than the Group’s
overdraft, which is renewable annually, the
majority of the Group’s existing facilities are due
for renewal in June 2019. An additional £5.0
million of facilities was agreed after the year.
Cash flow and net debt
Operating profit
Depreciation and profit on disposal
Amortisation
EBITDA (excluding associate and joint ventures)
Increase in inventories
Decrease in receivables
Decrease in payables
Other
Net operating cash flow
Net interest
Taxation
Cash flow from operations
Maintenance capital expenditure net of disposal proceeds
Free cash flow
Expansionary capital expenditure net of disposal proceeds
Acquisitions
Dividends
Loans and finance leases received/paid
Other
Decrease in cash and cash equivalents
Opening cash equivalents
Cash and cash equivalents at the end of the year
Opening net debt
Decrease in cash and cash equivalents
Net decrease in borrowings
Closing net debt
£’000
16,375
5,053
208
21,636
(967)
320
(3,237)
(2,625)
15,127
(1,186)
(3,965)
9,976
(2,350)
7,626
(3,158)
(1,749)
(3,110)
(2,352)
1,993
(750)
17,025
16,275
24,609
750
(946)
24,413
PENSIONS
The Group operates its current pension
arrangements on a defined benefit and defined
contribution basis. The defined benefit section
is closed to new members and has 40 active
members, 80 deferred members and 227
current pensioners. The scheme received
£2.3 million during the year in additional
contributions from the Group in accordance with
the 2011 actuarial valuation as agreed between
the Company and the Trustees.
The triennial actuarial valuation as at
31 December 2014 was undertaken in the year
and the results showed that the agreed recovery
plan was on target and, all else being equal,
recovery payments would not be required after
31 December 2015.
The valuation on an IAS 19 accounting basis
showed a surplus before the related deferred
tax liability in the scheme at 29 August 2015
of £1.8m (2014: £2.1m). Actuarial losses
of £2.8m (2014: gains of £3.2m) have been
recognised in the Consolidated Statement of
Comprehensive Income.
The Group and the Trustees continue to work
together to introduce ways of de-risking the
defined benefit scheme to provide less volatility
in the scheme’s assets and liabilities in the
future. Several initiatives were introduced during
the year.
NEIL AUSTIN
Group Finance Director
11 November 2015
19
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS KEY PERFORMANCE
INDICATORS
We monitor our performance against the strategy by means of key performance indicators (‘KPIs’):
%
6
.
4
1
3
1
0
2
%
4
.
0
1
*
3
1
0
2
%
9
.
2
*
3
1
0
2
.
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8
1
£
-
3
1
0
2
%
7
9
1
.
%
)
9
.
8
(
4
1
0
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%
7
.
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1
4
1
0
2
%
7
.
3
4
1
0
2
m
1
.
1
1
£
4
1
0
2
%
8
8
1
.
%
)
4
.
4
(
5
1
0
2
%
3
.
3
1
5
1
0
2
%
0
.
4
5
1
0
2
m
6
.
7
£
5
1
0
2
%
9
7
1
.
UNDERLYING SALES GROWTH/DECLINE
(4.4)%
Financial Review
Pages 18 to 19
GROSS MARGIN
13.3%
Financial Review
Pages 18 to 19
Definition
Year on year increase/
(decrease) in sales
revenue excluding the
impact of acquisitions
and disposals.
Comments
Revenues are monitored by the Board, although because of
the nature of our businesses it is not, by itself, an indicator
of performance. Our volume driven businesses are all subject
to significant raw material price variations, the majority of
which are passed through to selling prices. Hence falling raw
material prices are expected to lead to falling revenues.
Definition
Gross profit as a
percentage of sales
revenue.
Comments
Gross margin is a reflection on how successfully we have
managed raw material price volatility in our markets, together
with how successful we have been in pricing in other areas
of our business in competitive markets. Our gross margin
grew to 13.3% in the current year, which highlights how we
continue to manage input price volatility.
ADJUSTED GROUP OPERATING MARGIN
4.0%
Financial Review
Pages 18 to 19
FREE CASH FLOW
£7.6m
Financial Review
Pages 18 to 19
RETURN ON NET ASSETS
17.9%
Definition
Operating profit before
non-recurring items
and amortisation, as a
percentage of revenue.
Comments
The adjusted Group operating margin reflects the gross
margin achieved, which is described above, but also indicates
the efficiency of our operations from both an administrative
and distribution perspective. The growth in margin to 4.0%
relates to both of these aspects.
Definition
Cash generated from
operating activities,
less maintenance
capital expenditure.
Comments
This KPI indicates how much cash is available for the
Group to utilise for expansionary capital investment, paying
dividends, or financing/repaying borrowings. The reduction
in the year is predominantly due to working capital changes
across the business.
Definition
Profit before tax,
non-recurring items
and amortisation as
a percentage of net
assets.
Comments
Return on net assets reduced slightly by 0.9% this year.
The Group’s asset base continues to increase reflecting the
investment made in facilities and infrastructure, for the long
term.
*
3
1
0
2
4
1
0
2
5
1
0
2
Financial Review
Pages 18 to 19
* restated for IAS 19 Revised
20
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORT
THE
BOARD
1
5
2
6
3
7
4
8
1 TIM DAVIES
Chief Executive Officer
Tim joined Carr’s in March 2013 as Chief Executive. Tim was formerly
the Group Managing Director at Openfield. Prior to this, he progressed
from Sales Director to Managing Director of Grainfarmers plc in 2005.
He subsequently led the successful merger of Grainfarmers plc and
Centaur Grain Ltd in 2008, forming Openfield, the largest farmer-owned
grain marketing business in the UK. Tim continued in his role as Group
Managing Director until 2013. He has been a Director of the Agricultural
Industries Confederation since 2003.
2 NEIL AUSTIN
Group Finance Director
Neil joined Carr’s in January 2013 and became Group Finance Director
in April 2013. Neil was formerly a Director at PwC, having joined as
a graduate in their Newcastle office in 1997. He was appointed as a
Director of the Newcastle office in 2007 with lead responsibility for part
of the Assurance practice, and has experience with FTSE 350 companies
and multi-nationals.
3 CHRIS HOLMES
Board Chairman
Nominations Committee Chairman
Chris joined Carr’s in 1991 as the Managing Director of the Agriculture
business, having previously worked for J Bibby & Sons. Chris was
appointed Chief Executive in 1994, and remained in that role until he was
appointed Chairman in 2013. He commenced as Chairman of Carlisle
Youth Zone in 2013 and is a Non-Executive Director of Break 90 Limited.
4 ROBERT HEYGATE
Non-Executive Director
Robert joined Carr’s as a Non-Executive Director in 1991. He is the
joint Managing Director of Heygate & Sons Ltd, the UK’s largest
independent flour milling company, which is also engaged in animal feed
compounding and other agricultural activities.
5 ALISTAIR WANNOP
Remuneration Committee Chairman
Alistair was appointed a Non-Executive Director in 2005. Alistair has been
the Chairman of both the County NFU and the MAFF northern regional
advisory panel. He has served as a Director of The English Farming and
Food Partnership, Rural Regeneration Cumbria, and Cumbria Vision.
Alistair is a fellow of the Royal Agricultural Society of England.
6 JOHN WORBY
Senior Independent Director
Audit Committee Chairman
John was appointed a Non-Executive Director in April 2015. John is
currently a Non-Executive Director of Fidessa plc and Senior Independent
Director of Connect Group plc. John was previously the Finance Director of
Genus and a Non-Executive Director of Cranswick plc. John is a chartered
accountant and a member of the Financial Reporting Review Panel.
7 IAN WOOD
Non-Executive Director
Ian was appointed to the Board on 1 October 2015. He is the Commercial
Director, International Business Development in Centrica (previously British
Gas) and has held a number of positions with the Company, covering
various aspects of the business including engineering, customer services,
industrial and commercial marketing, and energy trading within the UK,
Continental Europe and North America.
8 KATIE SINCLAIR
Company Secretary
Katie was appointed Counsel and Assistant Company Secretary in 2010.
She became Company Secretary in January 2013, whilst maintaining
her role as Counsel. Katie is a solicitor and has worked with FTSE and
NASDAQ companies, and has a breadth of experience in corporate,
commercial and employment matters. She is an Associate of the Chartered
Institute of Secretaries.
21
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS CORPORATE
RESPONSIBILITY
ONGOING COMMITMENT TO CORPORATE RESPONSIBILITY
The Group maintains its emphasis on ensuring it operates with ethical
responsibility and remains committed to all aspects of corporate social
responsibility.
PEOPLE
People are fundamental to every business and
our employees are critical to the successful
delivery of our strategic objectives; one of the
four key pillars being “investing in people,
who are vital to the long term success of the
business”.
Our values of trust, respect, and integrity run
throughout all our businesses. Our high levels
of teamwork and co-operation are a major
contributing factor to our success. We remain
committed to employee engagement throughout
the Group, and employees are kept up-to-date
with the Group’s performance and development
through regular briefing notes.
We have continued to assess the development
needs and opportunities across the business,
to support our short, medium and longer term
objectives.
This year our senior team have assessed
leadership development throughout the Group
and in November 2016 the first leadership
programme commences, with participants
from across all three divisions. This is an
exciting addition to our training programme.
Management and supervisory development
has been taking place throughout the year
with specific focus on areas such as sales and
customer service.
Identifying talent and people development will
remain key priorities for us going forward.
We remain committed to providing a working
environment that:
• is consistent and fair;
• is free from discrimination;
• aids development and skills;
• supports employee engagement.
22
maintaining the current open, fair and non-
discriminatory recruitment process operated
throughout the Group, and seek to have full
engagement with any employee who becomes
disabled during their employment.
The Group employs, 1,101 people. The split is
as follows:
23%
Sharesave
The Group operates a sharesave scheme, in
which currently all UK based employees are
entitled to participate. The Group recognises
that the scheme is a well-established method of
employee engagement, facilitating ownership in
the Group.
Equal opportunities
The Group is committed to an active equal
opportunities policy promoting an environment
free from discrimination, harassment and
victimisation, where everyone will receive
equal treatment regardless of gender, colour,
ethnic or national origin, disability, age,
marital status, sexual orientation or religion.
All decisions relating to employment practices
will be objective, free from bias and based
solely upon work criteria and individual merit.
The Group is responsive to the needs of its
employees, customers and the community
at large. We are an organisation which uses
everyone’s talents and abilities and where
diversity is valued.
77%
846 Men
255 Women
Senior Managers and Executives, male and
female:
24%
76%
Employees with disabilities
It is our policy that people with disabilities
should have full and fair consideration for
all vacancies. We remain committed to
13 Men
4 Women
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORT
HEALTH & SAFETY
The Group is committed to the maintenance
of high standards of health and safety for all
its employees, visitors, customers, suppliers
and others who may be affected by its
business activities. There is also recognition
of the need to continually improve safety
performance.
Health and safety is reviewed regularly at
Board level and is a standing Board meeting
agenda item. This enables review of accident
statistics, auditing activity and other
initiatives as well as ensuring the Board are
alerted to key risk management and legislative
changes. The Board also endorses an ongoing
programme of safety improvements.
This year an Executive Health and Safety
Committee was formed, comprising the Cheif
Executive Officer, Group Finance Director and
Group Risk Manager, which meets monthly in
advance of the monthly Board meetings. This
formalises the previous meeting arrangements
in order to make them more in line with the
recommendations of the Institute of Directors
and HSE.
The Group has repeated the extremely
successful IOSH accredited Managing Safety
training course for UK staff. In addition to
the Group training plan, each Division also
runs their own annual training programmes
focusing in depth on the business needs.
The Group has also focussed upon the
management of road risk, with a Company
car driver training initiative and the issue of a
Company car drivers’ handbook.
The Group Risk Manager continuously monitors
safety performance across all Group businesses,
to ensure there is a high standard of health and
safety management, with an annual audit plan
undertaken across the Group.
Despite this proactive approach to safety
management, the overall number of accidents
across the UK Group companies was 51, a
slight increase on the 48 recorded in 2014.
However it should be recognised these figures
include recently acquired businesses and
an increase in employee numbers, without
which the figure for 2015 would have reduced
to 45. The number of RIDDOR reportable
injuries has reduced down to 6, from 7 in
2014, and the number of days lost resulting
from RIDDOR reportable injuries decreased
29% from 166 in 2014 to 118 this year.
The Board is committed to improving
standards of health and safety and remains
confident that the procedures adopted across
the Group, coupled with the culture of the
employees, will achieve this.
SUSTAINABILITY
The Group remain committed to reducing
carbon emissions, and increasing sustainable
energy consumption. During the year the
in-house data and monitoring system was
expanded to encompass all UK and overseas
subsidiary companies. Additional data collection
and monitoring is now operational for all
elements of environmental performance:
• Energy and carbon generation
• Water utilisation
• Waste generation and recycling
• Transport fuels
The new data and monitoring system was
launched in the spring of 2015 and sets
benchmark targets for improvements to all
Group operations.
Our Engineering division is leading the way
for the Group with several sites utilising green
renewable grid supplied electricity. In addition,
the new Chirton Engineering factory site, opened
early in 2015, is the first site operation across
the Group to be completely green, utilising
green electricity and bio-mass heating.
During 2015 the Group undertook a full Energy
Audit in accordance with the mandatory Energy
Savings Opportunity Scheme. The full Audit
Report detailing potential further energy/carbon
reduction opportunities is due to be completed
and presented to the Directors in early
November 2015.
Carbon Generation Report
The Group does not generate any additional
greenhouse gases other than C02 from the
utilisation of grid supplied electricity and
natural gas.
The energy intensive operations of the Food
division and UK feedblock business continue
to be in receipt of Climate Change Discount
Agreements in exchange for target carbon
reductions.
Due to changes in the qualifying status for
entry into the CRC Scheme the Group were
able to withdraw from the second phase of the
scheme.
Detailed below is the C02 generation for all of
the Group’s subsidiary companies comparing
actual volume against previous year. It should
be noted that this does not include transport
C02 generated for the period 2014/15, this is
detailed separately below.
GROUP CARBON C02 GENERATION 2013/14 v 2014/15
Division
CO2 Tonnes 2013/14
CO2 Tonnes 2014/15
Food
UK Agriculture
USA Agriculture
Engineering
Sub Total
Total Transport
Total
15,666
4,349
6,986
797
27,798
—*
27,798
* Transport data was not collected for 2013/2014
14,256
4,277
7,052
821
26,406
5,038
31,444
23
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS During the year the Group created a Cumbria
Community Foundation Fund, which has been
established with an initial sum of £35,000.
This Fund enables charitable groups to
support rural communities, disadvantaged
individuals, and young people, throughout
Cumbria.
The Fund supports activities that promote life
skills with the intention of raising aspirations,
enabling people to fulfil their potential.
It also aims to provide support to farming
communities and improve knowledge of
countryside matters.
We maintain our relationship with Carlisle
Youth Zone, which serves the social,
recreational and emotional needs of young
people in the Carlisle area.
We strive to ensure that our community work
reflects our broader responsibilities as a Group
operational throughout the UK, Germany and
USA.
CORPORATE
RESPONSIBILITY CONTINUED
Electricity and Gas Utilisation
Annual UK Group Electricity Consumption for 2014/15
Group Overseas Electricity Consumption for 2014/15
Annual UK Group Gas Consumption for 2014/15
Group Overseas Gas Consumption for 2014/15
Total Other Fossil Fuel Consumption for 2014/15
32,345,551 Kwh
7,667,445 Kwh
9,215,234 Kwh
6,356.002 Kwh
1,844,355 Kwh
Transport Fuels
During 2014/15 the Carr’s Group utilised
1,880,166 litres of Diesel Fuel for Own Fleet
Vehicles and Company Cars throughout its UK
operations.
The C02 generated from this fuel consumption
during 2014/15 is 5,038 tonnes.
C02 conversion factors, as approved by the
Department of Energy. Fuel and energy use
are based on direct measurement verified
through purchase invoices for the vast
majority of our sites. In certain instances, an
exceptionally small number of invoices were
not available, therefore it has been necessary
to estimate energy and fuel usage.
CARR’S GROUP PLC TOTAL ENERGY BY DIVISION
14% UK Agriculture
3% Engineering
16% Total
Transport
Environmental Compliance
Across the Group there have been no breaches
of environmental legislation. The large
manufacturing sites continue to operate
within the emission levels set by the UK
Environment Agency and current permit
conditions, and constant monitoring is
undertaken.
22% USA
Agriculture
Food
USA Agriculture
Total Transport
UK Agriculture
Engineering
45% Food
Waste recycling data has been collected over
the year enabling the Group to set targets for
reduction in waste and increased recycling,
where possible, across the Group for this
current year.
We maintain our promotion of the culture of
environmental and sustainability awareness
and encourage all employees to reduce waste
and improve energy efficiency.
Total C02 generated by the Group
Combining the C02 generated through
operations and fuel consumption the total
Group C02 Generation for the year is 31,444
tonnes. On a like for like basis this resulted in
an annual decrease of C02 emissions of 5%.
COMMUNITY
Interacting with and supporting the
communities in which we operate continues
to be important to the Group. Support takes
many forms from donations and sponsorship
to volunteering and mentoring.
Intensity Matrix
Due to the diverse nature of the operations
of the Group it was decided that people were
the best measure for the intensity matrix. The
2014/15 intensity matrix is 29 C02 tonnes
per employee being 31,444 C02 tonnes/1,101
employees.
The C02 emissions data is reported in
metric tonnes. The C02 emissions data has
been calculated on the basis of measured
energy and fuel use multiplied by relevant
Our employees take part in a variety of
community interactions as well as the Group’s
involvement in a variety of charities and
sponsorships.
The Group and the BBSRC (Biotechnology
and Bioscience Research Council) continue
to jointly fund the four year PhD scholar at
Lancaster University. The PhD student is
researching wheat root systems so as to be
able to identify wheat varieties which are
suited to drought conditions.
24
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORT
CORPORATE
GOVERNANCE REPORT
“Achieving the highest standards of corporate
governance remains exceptionally important to
the Board.”
CHAIRMAN’S OVERVIEW
I value the openness, mutual respect and trust
of the Board. It is through this, coupled with the
expertise, range of perspectives and probative
questioning, that the Board is able to assess
future opportunities, anticipate risks and build a
sustainable business.
We are required to state how we have applied the
principles contained in the Code and disclose
whether we have complied with the provisions
of the Code during the year. The Board consider
that the Company has, during the year ended
29 August 2015, complied with the requirements
of the Code other than with the following:
Carr’s approach to governance is outlined in
the following report, which describes how it
integrates the main principles of the 2012 UK
Corporate Governance Code.
The corporate governance of the Company is
continuously being reviewed as the Company
develops, to ensure that the stakeholders’
interests are always aligned with the Company.
CHRIS HOLMES
Chairman
11 November 2015
Statement by the Directors on compliance with
the provisions of the UK Corporate Governance
Code 2012.
UK CORPORATE GOVERNANCE CODE
The UK Corporate Governance Code dated
September 2012 (‘the Code’) issued by the
Financial Reporting Council is applicable to
listed companies, and sets out standards of
good practice in relation to issues such as:
• Board composition and effectiveness;
• the role of Board committees;
• risk management;
• remuneration;
• relationships with shareholders.
• B.1.1. Chris Holmes was the Chief Executive
Officer and proceeded immediately to
Chairman and therefore does not meet
the independence criteria for a Chairman.
However, the Group believed that the
substantial in-depth knowledge of Chris
Holmes was invaluable to the business and
it was therefore in the best interests of the
shareholders for him to have a continuing
role with the Group. Clear division of
responsibilities with the Chief Executive ensure
there is no conflict, as set out on page 26.
• B.1.1. The Board considers Robert Heygate as
independent, notwithstanding his longstanding
position on the Board and his substantial
shareholding. Robert Heygate has a wealth of
knowledge in the flour milling industry which
the Board values, and despite being a Non-
Executive Director for 24 years, he has always
continued to question with the impartiality
expected of a Non-Executive Director. In
addition, his shareholding aligns his interests
with the other shareholders. Robert Heygate on
10 September 2015 confirmed his intention
to stand down from the Board in April 2016.
• B.2.1, B.2.2, B.2.4. A Nominations
Committee was created within the financial
year to 29 August 2015, and its terms of
reference are available on the Company’s
website www.carrsgroup.com.
The Company is aware of its ongoing corporate
governance obligations and appointed a new
independent Non-Executive Director,
CHRIS HOLMES
CHAIRMAN
John Worby, who commenced on 1 April 2015
and is both the Audit Committee Chairman and
Senior Independent Director. John Worby is a
former Finance Director and therefore complies
with the Code’s requirements regarding having
relevant financial experience. After the period
end the Company appointed a new independent
Non-Executive Director, Ian Wood, who
commenced on 1 October 2015.
THE BOARD
The Directors have a collective duty to promote
the long term success of the Company for its
shareholders. In determining long-term strategy
and objectives of the Group, the Board is mindful
of its duties and responsibilities to shareholders
as well as employees and other stakeholders.
The Board reviews management and financial
performance and monitors strategic delivery and
achievement of business objectives, resulting in
promoting the vision of the Group.
The powers of the Directors are set out in the
Company’s Articles of Association. In addition,
the Directors have responsibilities and duties
under legislation, in particular the Companies
Act 2006.
During the year ended 29 August 2015, the
Board comprised of two Executive Directors, a
Chairman, and three Non-Executive Directors
(John Worby from 1 April 2015). There is
a Company Secretary to the Board. The
biographies of the Board including the newly
appointed Non-Executive Director Ian Wood can
be found on page 21.
The Board met 11 times during the year.
In addition to the regular scheduled meetings
throughout the year, unscheduled supplementary
meetings may also take place as and when
necessary, although during this financial year
there was no reason to hold an unscheduled
meeting. Directors who are unable to attend a
25
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS CORPORATE
GOVERNANCE REPORT CONTINUED
The Board’s time can be grouped in to six
key areas as outlined below. A portion of their
time is also spent on administrative matters.
The UK Corporate Governance Code stipulates that
there should be a clear division of responsibility
between the running of the Board and Executive
responsibilities for running the Company.
Board. The Company Secretary is responsible
to the Board for the timeliness and quality of
information.
Strategy
Setting strategic targets.
Reviewing potential
acquisitions.
Research and technology.
Risk
Group’s risk and internal
control framework.
Governance Legal updates and new
disclosure requirements.
Internal Board review.
Succession planning.
Finance
Stakeholder
engagement
Oversight of the financial
performance of the Group
and of the preparation and
management of the financial
statements.
Dividend policy.
Pensions strategy.
AGM and other shareholder
feedback.
Investor calls, meetings and
roadshows.
Safety
Health & Safety monthly
updates and management.
The Chairman was responsible for:
• setting the Board agenda;
• the leadership of the Board and ensuring its
effectiveness on all aspects of its role;
• providing strategic insight from his long
business experience in the industry and with
the Company;
• providing a sounding board for the Chief
Executive on key business decisions and
challenging proposals where appropriate.
The Chief Executive was responsible for:
• the day-to-day management of the Group’s
business;
• leading the business and the rest of the
management team in accordance with the
strategy agreed by the Board;
• leading the development of the Group’s
strategy with input from the rest of the Board;
• leading the management team in the
implementation of the Group’s strategy;
• bringing matters of particular significance
to the Chairman for discussion and
consideration by the Board if appropriate.
particular meeting receive relevant briefing papers
and are given the opportunity to discuss any
issues with the Chairman, the Chief Executive
or the Group Finance Director. During this year
Robert Heygate and Alistair Wannop were unable
to attend one Board meeting each, there were no
other Director absences during the year.
Elections
The Company’s Articles of Association provide
that one third of the Directors retire by rotation
each year at the AGM, however, in line with
it best practice the Company requires all the
Directors to retire annually.
To enable the Directors of the Board to carry
out their responsibilities all Directors have full
and timely access to all relevant information.
The Board has a schedule of matters for its
discussion, which is reviewed against best
practice. A summary is shown below and a full
schedule is available on the Company’s website.
Attendance & Agenda
In advance of all Board meetings the Directors
are supplied with detailed and comprehensive
papers covering the Group’s strategy and
operations. Members of the executive
management team can attend and make
presentations as appropriate at meetings of the
Details of the number of meetings of, and
members’ attendance at, the Board, Audit
Remuneration and Nomination Committees
during the period are set out in the table below.
Support
Directors can obtain independent professional
advice at the Company’s expense in performance
of their duties as Directors. None of the Directors
obtained independent professional advice in the
period under review. All Directors have access
to the advice and the services of the Company
Secretary. In addition to these formal roles, the
Non-Executive Directors have access to senior
management of the business either by telephone
or via involvement at informal meetings.
DIRECTORS’ CONFLICTS OF INTEREST
The Companies Act 2006 and the Company’s
Articles of Association require the Board to
consider any potential conflicts of interest. The
Board has a policy and procedures for managing
and, where appropriate, authorising actual
or potential conflicts of interest. Under those
procedures, Directors are required to declare
all directorships or other appointments to
organisations that are not part of the Group and
which could result in actual or potential conflicts
of interest, as well as other situations which
could result in a potential conflict of interest.
The Board is required to review Directors’ actual
or potential conflicts of interest at least annually.
Directors are required to disclose proposed new
appointments to the Chairman before taking
them on, to ensure that any potential conflicts
of interest can be identified and addressed
appropriately. Any potential conflicts of interest
in relation to proposed Directors are considered
by the Board prior to their appointment. In
this financial year there have been no declared
conflicts of interest.
The Board is responsible for:
• the Group’s strategy;
• acquisitions and divestment policy;
• corporate governance, risk and environment
policy and management;
• approval of budgets;
• general treasury policy;
• major capital expenditure projects;
• dividend policy;
• monitoring the Group’s profit and cash flow
performance.
The Board has delegated authority to the Audit,
Remuneration, and Nomination Committees to
carry out certain tasks as defined in their written
terms of reference approved by the Board; these
are also available on the Company website.
26
Meetings Attendance
No. of meetings
Chris Holmes
Robert Heygate
Alistair Wannop
John Worby**
Neil Austin
Tim Davies
* part of the meetings by invitation
** attended all meetings since his appointment
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
11
11
10
10
4
11
11
3
3
2
3
2
3
3
3
3
3
3
0
2*
1*
2
2
2
2
0
1*
1*
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015CORPORATE GOVERNANCE BOARD EVALUATION
The Board conducted an internal evaluation,
building on the external evaluation in 2013,
which found that the Board was operating
effectively. Improvements have been
implemented throughout the year, with new
action points set out for the forthcoming year.
The Board will undertake an externally facilitated
evaluation in the financial year ending 2016.
The Chairman appraised the individual
performance of the Directors and the Non-
Executives met and appraised the performance
of the Chairman.
BOARD COMMITTEES
Audit Committee
The Audit Committee’s key function is to review
the effectiveness of the Company’s financial
reporting and performance of the external auditor.
The Audit Committee comprised of four Non-
Executive Directors, John Worby (Chairman),
Chris Holmes, Robert Heygate and Alistair
Wannop. Since the year-end Ian Wood has
joined the Audit Committee. The Board
considers that the Committee meets the main
requirements of the Code for a company of
Carr’s size. The work, responsibilities and
governance of the Audit Committee are set
out on pages 28 to 29. The Chair of the Audit
Committee will be available at the AGM to
answer any shareholder questions on the
Committee and its activities.
Remuneration Committee
During the year the Remuneration Committee
comprised of Alistair Wannop (Chairman),
Chris Holmes, Robert Heygate, and John
Worby. Since the year-end Ian Wood has
joined the Remuneration Committee. The
work, responsibilities and governance of the
Remuneration Committee are set out on pages
30 to 35. The Chair of the Committee will be
available at the AGM to answer any shareholder
questions on the Committee and its activities.
Nomination Committee
During the year the Nomination Committee
comprised of Chris Holmes (Chairman),
Alistair Wannop, Robert Heygate, and John
Worby. Since the year-end Ian Wood has
joined the Nomination Committee. The
work, responsibilities and governance of the
Nomination Committee are set out on page 36.
The Chair of the Committee will be available at
the AGM to answer any shareholder questions
on the Committee and its activities.
Relations with Shareholders
The Board recognises and values the
importance of good communications with all
shareholders. The Group maintains dialogue
with institutional shareholders and analysts,
and hosts presentations on the preliminary and
interim results. Shareholders have access to the
Company’s website at www.carrsgroup.com.
We engage with our shareholders through our
regular communications. Significant matters
relating to trading or development of the
business are disseminated to the market by
way of Stock Exchange announcements. We
announce our financial results on a six monthly
basis with all shareholders receiving a summary
full year statement, a half year statement, and
we produce trading updates during the year. All
reports and updates are made available on our
website.
The AGM provides all shareholders with
the opportunity to develop further their
understanding of the Company. It is the
principal forum for all the Directors to engage in
dialogue with private investors. All shareholders
are given the opportunity to raise questions on
any matter at the meeting. The Group aims
to send notices of AGMs to shareholders at
least 20 working days before the meeting, as
required by the Code, and it is the Company’s
practice to indicate the proxy voting results on
all resolutions at the meetings. Following the
AGM the voting results for each resolution are
published and are available on the Company’s
website.
FAIR, BALANCED AND UNDERSTANDABLE
The Directors have also reviewed the financial
statements and taken as a whole consider
them to be fair, balanced and understandable,
and provide the information necessary
for shareholders to assess the Company’s
performance, business model and strategy.
GOING CONCERN
The Directors have prepared the accounts on a
going concern basis, having satisfied themselves
from a review of internal budgets and forecasts
and current bank facilities that the Group has
adequate resources to continue in operational
existence for the foreseeable future.
SHARE SPLIT
At the AGM on 13 January 2015 the
Shareholders voted approving the split of the
Company’s shares 10 for 1, and the subdivision
of the shares took place on 14 January 2015.
CHANGE OF NAME
At a General Meeting on 8 April 2015 the
Shareholders voted approving the change of
Company name from Carr’s Milling Industries
PLC to Carr’s Group plc, with the change
effective on 9 April 2015.
INTERNAL CONTROL
The Board of Directors has overall
responsibility for the Group’s systems
of internal control and for reviewing
its effectiveness, including: financial,
operational and compliance controls and
risk management, which safeguard the
shareholders’ investment and the Group’s
assets. Such a system can only provide
reasonable and not absolute assurance
against material misstatement or loss, as it is
designed to manage rather than eliminate the
risk of failure to achieve business objectives.
The Board of Directors is not aware of any
significant losses caused by breaches of internal
control in the year.
The Group operates within a clearly defined
organisational structure with established
responsibilities, authorities and reporting lines
to the Board. The organisational structure
has been designed in order to plan, execute,
monitor and control the Group’s objectives
effectively and to ensure that internal control
becomes embedded in the operations. The
Board confirms that the key on-going processes
and features of the Group’s internal risk based
control system, which accord with the Turnbull
guidance, have been fully operative throughout
the year and up to the date of the Annual Report
being approved. These include: a process to
identify and evaluate business risk; a strong
control environment; an information and
communication process; a monitoring system
and a regular Board review for effectiveness.
The Group Finance Director is responsible for
overseeing the Group’s internal controls.
The Group’s internal controls systems cover
controls over the financial reporting process,
including monthly reporting from subsidiaries,
its associate and joint ventures. This reporting is
subject to detailed review by the Chief Executive
and the Group Finance Director and detailed
validation by the Group finance team, and
forms the basis for information presented to and
reviewed by the Board. All monthly reporting is
prepared in line with Group accounting policies,
which are reviewed annually and are also
subject to review by the external auditors.
The management of the Group’s businesses
identified the key business risks within their
operations, considered the financial implications
and assessed the effectiveness of the control
processes in place to mitigate these risks. The
Board reviewed a summary of the findings
and this, along with direct involvement in
the strategies of the businesses, investment
appraisal and budgeting process, enabled the
Board to report on the effectiveness of internal
control. A summary of the risk management
framework and key risks to the business are set
out on pages 15 to 17.
By order of the Board
KATIE SINCLAIR
Company Secretary
Carlisle
CA3 9BA
11 November 2015
27
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS AUDIT
COMMITTEE REPORT
JOHN WORBY
CHAIRMAN OF THE AUDIT COMMITTEE
• Implementation of IFRS 10 and 11, and
considerations of whether the adoption of
these new accounting standards required
any changes in our accounting treatment of
investments. No such changes were required;
• The assumptions adopted for the accounting
valuation of our defined benefit pension
scheme. The Committee concluded that the
assumptions used were appropriate;
• Potential impairment of goodwill for historic
acquisitions, especially in relation to Chirton
given the current state of the oil market. The
Committee reviewed the assumptions used
and the impact of sensitivities and agreed that
no provision for impairment was required;
• Provisioning policies in relation to accounts
receivable particularly in the Agriculture
division. The Committee determined that the
judgements made were appropriate to justify
the provisions held at 29 August 2015;
• Revenue recognition in the Engineering
division. The Committee focussed on the
recognition of revenue and profit or losses
on long term contracts and agreed with
management’s judgements.
The Committee, further to the Board’s request,
has reviewed the Annual Report and financial
statements with the intention of providing
advice to the Board on whether, as required by
the Code, ‘the Annual Report and Accounts,
taken as a whole, is fair, balanced and
understandable and provides the information
necessary for shareholders to assess the
company’s performance, business model and
strategy’.
INTRODUCTION
On behalf of the Audit Committee, I am pleased
to present my first report to shareholders
following my appointment as Chairman of the
Committee. The purpose of this report is to
highlight the areas that the Committee has
reviewed during the year and how we have
discharged our responsibilities effectively during
the year.
RESPONSIBILITIES
The key responsibility of the Committee
is to provide effective governance over the
appropriateness of the Company’s financial
reporting.
Under its terms of reference, the Committee is
required, amongst other things, to:
• monitor the integrity of the financial
statements of the Company including the
appropriateness of the accounting policies
adopted and whether the Annual Report is
fair, balanced and understandable;
• review, understand and evaluate the
Company’s internal financial risk, and other
internal controls and risk management
systems;
• oversee the relationship with the external
auditors, making recommendations to the
Board in relation to their appointment,
remuneration and terms of engagement;
• monitor and review the effectiveness of the
external audit including the external auditors’
independence, objectivity and effectiveness
and to approve the policy on the engagement
of the external auditors to supply non-audit
services;
• keep under review the requirement for and
extent of internal audit activities in the
Company.
The terms of reference can be found on the
Company’s website www.carrsgroup.com.
MEETINGS
The Audit Committee met three times during
the year, and has an agenda linked to the Group
financial calendar. It invites the Chief Executive,
Group Finance Director, Group Financial
Controller and external auditors to attend its
meetings. The Committee met with the external
auditors at the conclusion of the audit without
the Executive Directors being present.
The Committee has met once since the end of
the financial year.
MAIN ACTIVITIES DURING THE YEAR
Set out below is a summary of the key areas
considered by the Committee during the year
and up to the date of this report.
FINANCIAL REPORTING
During the year the Audit Committee reviewed
reports and information provided by both
the Group Finance Director and the external
auditors in respect of the half year and annual
financial report.
An important responsibility of the Audit
Committee is to review and agree significant
estimates and judgements made by
management. To satisfy this responsibility, the
Committee reviewed a written formal update
from the Group Finance Director on such issues
as well as reports from the external auditors.
The Committee carefully considered the content
of these reports in evaluating the significant
issues and area of judgement across the Group.
The key areas of judgement in the year were as
follows:
28
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015CORPORATE GOVERNANCE Taking into account our findings in relation
to the effectiveness of the audit process and
in relation to the independence of PwC, the
Committee is satisfied that PwC continues to
be independent, and free from any conflicting
interest with the Group. As a result, the
Committee has recommended to the Board
that PwC be proposed for reappointment at the
forthcoming AGM in January 2016.
INTERNAL AUDIT
Consideration was given to whether there should
be a formal internal audit function within the
Group. The Committee agreed that in view of
the current size of the Group and the absence
of any significant control issues having arisen,
no such internal audit function was required.
The Committee has however recommended that
this be reviewed in the year ahead given the
increasing spread of the Group’s activities.
The Committee also reviewed the Committee’s
terms of reference and its effectiveness.
As Chairman of the Committee, I will be
available at the AGM to respond to any
shareholder questions that might be raised on
the Committee’s activities.
JOHN WORBY
Chairman of the Audit Committee
11 November 2015
To make this assessment, the Committee
reviewed a report prepared by the Group
Finance Director outlining the key matters
worthy of consideration. We also considered
the KPIs included in the Strategic Report
(see page 20) and concluded that, whilst
they were appropriate for our shareholders’
understanding of the performance, position
and future prospects of the business, there
could be inclusion of additional non-financial
KPIs. These will continue to be developed over
the forthcoming financial year. In addition, the
committee also considered and was satisfied
that all the key events and issues which have
been reported to the Board in the CEO’s monthly
report during the year, both good and bad, have
been adequately referenced or reflected within
the Annual Report.
INTERNAL CONTROL AND RISK MANAGEMENT
During the year the Committee reviewed the
Group’s internal control and risk management
systems.
The Committee also reviewed current risk
management activities and management’s plans
to further enhance risk management within the
Group as further explained on pages 15 to 17 of
the Annual Report.
In the light of this work, the Committee reported
to the Board that it had reviewed and was
satisfied with the effectiveness of the Company’s
internal control and risk management systems.
EXTERNAL AUDIT
The Audit Committee is responsible for
recommendations for the appointment,
reappointment or removal of external auditors
and for approval of their remuneration.
PricewaterhouseCoopers LLP (PwC) and its
predecessor firms have been the Auditor for
Carr’s Group plc since the Company first listed
on the London Stock Exchange in 1972.
The Audit Committee assesses annually the
qualification, expertise and independence of
the auditors and the effectiveness of the audit
process.
Subject to the ongoing satisfactory performance
of the external auditors, the Committee expects
to carry out a tendering process for the 2019
year end following the conclusion of the five year
term of the current audit partner.
Following approval by shareholders to re-appoint
PwC at last year’s AGM, the Audit Committee
reviewed and approved the terms of engagement
and remuneration of the external auditors.
AUDIT EFFECTIVENESS
The effectiveness of the external audit
process is dependent on appropriate audit risk
identification at the start of the audit cycle. PwC
present their detailed audit plan to us each year
identifying their assessment of these key risks.
Our assessment of the effectiveness and quality
of the audit process and addressing these key
risks is formed by, amongst other things, the
reporting from the auditors and also seeking
feedback from management on the audit
process.
The Committee remain satisfied with PwC’s
performance and is of the view that there is
nothing of concern that would impact the
effectiveness of the external audit process.
AUDITOR INDEPENDENCE
The Group meets its obligations for maintaining
an appropriate relationship with the external
auditors through the Audit Committee, whose
terms of reference include an obligation to
consider and keep under review the degree
of work undertaken by the external auditor
other than the statutory audit, to ensure such
objectivity and independence is safeguarded.
In accordance with the Auditing Practices Board
Ethical Standards, PwC has to implement rules
and requirements which include that none of
their employees working on our audit can hold
any shares in Carr’s. PwC is also required to
tell us about any significant facts and matters
that may reasonably be thought to bear on their
independence or on the objectivity of the lead
partner and the audit team. The lead partner in
the audit team must change every five years.
The Audit Committee reviewed and approved
the non-audit services policy, the objective of
which is to ensure that the provision of such
services does not impair, or is not perceived to
impair, the external auditors’ independence or
objectivity. The policy imposes guidance on the
areas of work that the external auditors may
be asked to undertake and those assignments
where the external auditors should not be
involved. There is a further category of services
for which a case-by-case decision is necessary.
In order to ensure that the policy is effective and
the level of non-audit fees is kept under review,
major work to be awarded to the audit firm must
be agreed in advance by the Audit Committee
Chairman. For the 2015 financial year end, the
non-audit to audit services ratio was 0.41. Note
3 on page 57 provides further detail on non-
audit service fees.
29
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS REMUNERATION
COMMITTEE REPORT
“As Chairman of the Remuneration Committee I am
pleased to present the Remuneration Committee’s
annual report on Directors’ remuneration for the
year to 29 August 2015.”
ALISTAIR WANNOP
CHAIRMAN OF THE REMUNERATION COMMITTEE
INTRODUCTION
This report sets out the Group’s remuneration
policy and details of remuneration paid to
Executive and Non-Executive Directors during
the year.
ROLE
The main role of the Remuneration Committee is
to determine the remuneration for the Executive
Directors, in agreement with the Board. The
Committee is responsible for all aspects of the
Executive Directors’ remuneration, including
bonus and long term incentives, and makes
recommendations regarding awarding long term
incentives to senior management. It reviews
the long term incentives to ensure they are
aligned with the development of the Group and
the business needs. The policy that has been
adopted was created by taking into account the
need to create shareholder value and therefore
putting in place the appropriate incentives for
the Executive Directors.
The Committee considered the following during
the year:
• total remuneration and review of base pay for
the Directors;
• annual earnings of the Directors, including
the outcome of annual bonus plans;
• the LTIP for the Executive Directors and
senior management; and
• the requirement for a minimum shareholding
requirement.
The Remuneration Committee currently
comprises Alistair Wannop (Chairman), Chris
Holmes, Robert Heygate, John Worby and
Ian Wood. Neil Austin and Tim Davies attend
meetings of the Committee by invitation and in
an advisory capacity. No Director attends any
part of a meeting at which his own remuneration
30
is discussed. The Chairman and the Executive
Directors determine the remuneration of the
other Non-Executive Directors. The remuneration
of the Chairman is determined by the Board.
The Committee has access to advice from the
Company Secretary and to detailed analysis
of executive remuneration in comparable
companies. The Chair of the Committee, will be
available at the AGM to answer any shareholder
questions on the Committee and its activities.
The Committee is authorised by the Board to:
• determine the total remuneration packages,
authorise terms and conditions, and contracts
for the Board;
• approve the design and determine the targets
for performance related pay schemes of the
Executive Directors; and
• review the design of any share incentive plans
for approval by the Board and shareholders.
REMUNERATION POLICY
In this forward looking section we describe
our remuneration policy for the Board. This
includes considerations when determining policy,
a description of the elements of the reward
package, and an indication of the potential future
value of this package for each Executive Director.
There have been no changes to the policy
during 2014/15, and no changes are currently
planned. However we will review the policy
each year to ensure it continues to support the
Group’s strategy.
CONSIDERATIONS WHEN DETERMINING
REMUNERATION POLICY
The Group’s policy is that the overall
remuneration package offered should be
sufficiently competitive to attract, retain
and motivate high quality executives and to
align the rewards of the Executive Directors
with the progress of the Group, whilst giving
consideration to salary levels in similar size
quoted companies in similar industry sectors.
The remuneration package is split into two parts:
• A non-performance related element
represented by basic salary (including
benefits); and
• A significant performance related element
in the form of an annual profit related bonus
and a Long Term Incentive Plan.
PERFORMANCE MEASURES AND TARGETS
Our Group strategy and business objectives are
the primary consideration when we are selecting
performance measures for incentive plans.
Targets within incentive plans that are related to
internal financial measures, such as profit, are
typically determined based on our budgets. The
threshold and maximum levels of performance
are set to reflect minimum acceptable levels
at threshold and very stretching but achievable
levels at maximum.
At the end of each performance period we
review performance against the targets, using
judgement to account for items such as
foreign exchange rate movements, changes in
accounting treatment, and significant one-off
transactions. The application of judgement is
important to ensure that final assessments of
performance are fair and appropriate.
In addition, the Remuneration Committee
reviews the bonus and incentive plan results
before any payments are made to Executive
Directors or any shares vest and has full
discretion to adjust the final payment or vesting
downwards if they believe the circumstances
warrant it.
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015CORPORATE GOVERNANCE REMUNERATION POLICY TABLE
ELEMENT
Base salary
PURPOSE
AND LINK
TO STRATEGY
POLICY AND APPROACH
To attract and retain the
best talent.
Salaries are reviewed annually and fixed for 12 months commencing
1 September. The decision is influenced by:
• level of skill, experience and scope of responsibilities of individual;
• business performance, economic climate and market conditions;
• increases elsewhere in the Group; and
• external comparator groups (used for reference purposes only).
CHANGE
OF POLICY
VERSUS
2014?
No.
OPPORTUNITY
Base salary
increases are
applied in
line with the
outcome of
the annual
review.
Pension
To remain competitive in
the market place.
Executive Directors are entitled to participate in a defined contribution
pension arrangement.
15% of base
salary.
No.
Company contributions are 15% of base salary.
Benefits
To aid retention and
remain competitive in
the market place.
These include permanent health insurance, private medical insurance
and life assurance. Relocation benefits may also be provided in the case
of recruitment of a new Executive Director.
Market rate
determines
value.
Annual
cash bonus
Designed to reward
delivery of key strategic
priorities during the year.
Bonus levels and appropriateness of performance measures and
weighting are reviewed annually to ensure they continue to support
our strategy. Performance is measured against stretching profit related
targets, and is usually paid in November each year for performance
in the previous financial year. The bonuses payable are capped at a
maximum of 100% of base salary.
Maximum of
100% of base
salary.
No.
No.
Save As
You Earn
(SAYE)
Long Term
Incentive
Plan (LTIP)
To encourage employee
involvement and
encourage greater
shareholder alignment.
To motivate and
incentivise delivery of
sustained performance
over the longer term,
and to support and
encourage greater
shareholder alignment.
A SAYE scheme is available to eligible staff, including Executive
Directors. Currently there is a 3 year and a 5 year scheme in operation.
N/A
No.
Award levels and vesting are reviewed annually to ensure they continue
to support the Group’s strategy. Awards are capped at the equivalent of
100% of base salary at the date of award.
Maximum of
100% of base
salary.
No.
Three awards have been made, one maturing in 2015, one in 2016 and
one in 2017. For the 2015 maturing award, the amount vesting will
be based on average growth of adjusted EPS over the three year period
2013 – 2015. A minimum average annual growth of 7% is required
to vest 25% of the award with a sliding scale arrangement up to 10%
average annual growth to vest 100% of the award. For the 2016 and
2017 maturing awards, which are also based on three year performance
periods, a minimum average annual growth in adjusted EPS of 3% is
required to vest 25%, with a sliding scale up to 100% vesting at an
annual average growth of 10%.
31
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS REMUNERATION
COMMITTEE REPORT CONTINUED
CHAIRMAN AND NON-EXECUTIVE DIRECTORS
REMUNERATION
Our policy is for the Executive Directors to
review the remuneration of Non-Executive
Directors annually following consultation with
the Chairman. Remuneration reflects:
• the time commitment and responsibility of
their roles;
• market rate; and
• that they do not participate in any bonus,
pension or share based scheme.
Non-Executive Directors are engaged on one
year fixed-term letters of appointment that set
out their duties and responsibilities.
SHAREHOLDING GUIDELINES
The Committee believes that it is important
for a significant investment to be made
by each Executive Director in the shares
of the Company to provide alignment with
shareholder interests. Executive Directors are
required to build up a minimum shareholding,
equivalent to 200% of base salary over a five
year period. This guideline was introduced
within the year and therefore the five year
period began at that time.
APPROACH TO RECRUITMENT REMUNERATION
The remuneration package for a new Executive
Director would be set in accordance with the
terms of the Company’s approved remuneration
policy in force at the time of appointment.
Buy-out awards
In addition, the Committee may offer additional
cash and/or share-based elements (on a one-
time basis or ongoing) when it considers these
to be in the best interests of the Group (and
therefore shareholders). Any such payments
would be limited to a reasonable estimate of
value of remuneration lost when leaving the
former employer and would reflect the delivery
mechanism (i.e. cash and/or share-based), time
horizons and whether performance requirements
are attached to that remuneration.
Maximum level of variable pay
The maximum initial level of long-term
incentives which may be awarded to a new
Executive Director will be limited to the
maximum Long Term Incentive Plan limit of
100% of base salary. Therefore the maximum
initial level of overall variable pay that may be
offered will be 200% of base salary (i.e. 100%
annual bonus plus 100% Long Term Incentive
Plan). These limits are in addition to the value
of any buy-out arrangements which are governed
by the policy above.
In the case of an internal appointment, any
variable pay element awarded in respect of the
prior role would be allowed to pay out according
to its terms, adjusted as relevant to take into
account the appointment. In addition, any
other previously awarded entitlements would
continue, and be disclosed in the next Annual
Report on remuneration.
Base salary and relocation expenses
The Committee has the flexibility to set the salary
of a new appointment at a discount to the market
level initially, with a series of planned increases
implemented over the following few years to bring
the salary to the appropriate market position,
subject to individual performance in the role.
For external and internal appointments, the
Committee may agree that the Group will meet
certain relocation expenses as appropriate.
Appointment of Non-Executive Directors
For the appointment of a new Chairman or
Non-Executive Director, the fee arrangement
would be set in accordance with the approved
remuneration policy in force at that time.
ESTIMATES OF TOTAL FUTURE POTENTIAL REMUNERATION FROM 2016 PAY PACKAGES
The tables below provide estimates of the potential future remuneration of each Executive
Director based on the remuneration opportunity granted in the 2016 financial year. Potential
outcomes based on different scenarios are provided for each Executive Director.
The assumptions underlying each scenario are described below.
Fixed
Consists of base salary, pension and other benefits.
Base salaries are as at 1 September 2015.
Benefits are valued using the figures in the total remuneration for the 2015
financial year table, adjusted for any benefits that will not be provided
during 2016.
Pensions are valued by applying the appropriate percentage to the base salary.
Tim Davies
Neil Austin
Base
£’000
264
195
Benefits
£’000
Pension
£’000
1
1
40
29
Total
£’000
305
225
On target
Based on what a Director would receive if performance was in line with plan
and the threshold level was achieved under the LTIP.
Maximum
Assumes that the full stretch target for the LTIP are achieved, and maximum
performance is obtained under the annual bonus scheme.
Tim Davies, Chief Executive Officer
800
600
400
200
0
Total:
£635,000
66
Total:
£833,000
264
Total:
£305,000
264
264
305
305
305
Fixed
On target
Maximum
Neil Austin, Group Finance Director
700
600
500
400
300
200
100
0
Total:
£469,000
49
195
225
Total:
£615,000
195
195
225
On target
Maximum
Total:
£225,000
225
Fixed
LTIP
Annual bonus
Salary and benefits
32
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015CORPORATE GOVERNANCE SERVICE CONTRACTS AND LETTERS OF
APPOINTMENT
The Group’s current policy is not to enter into
employment contracts with any element of
notice period in excess of one year. Dates of
service contracts and first appointment to the
Board for all Directors are given opposite.
For early termination, the Remuneration
Committee will consider circumstances,
including any duty to mitigate, and determine
any compensation payments accordingly.
Copies of Executive Directors’ service contracts
and Non-Executive Directors’ letters of
appointment are available for inspection at
the Company’s registered office during normal
hours of business and will be available at the
Company’s AGM.
ANNUAL REPORT ON REMUNERATION
Remuneration Committee
In this section we give details of the composition
of the Remuneration Committee and activities
undertaken during the 2015 financial year.
2015 AGM
The 2014 remuneration report received a
99.91% vote in favour, with 0.09% against.
The approval of the remuneration policy
received a 89.78% vote in favour, with
10.22% against.
Shareholder Contact
No shareholders have contacted the
Remuneration Committee during the year to
share views regarding remuneration.
Executive Directors
Tim Davies
Neil Austin
Non-Executive Directors
Chris Holmes
Alistair Wannop
Robert Heygate
John Worby
Ian Wood
Date of service contract/
letter of appointment
Date first appointed
to the Board
18 October 2012
1 January 2013
1 March 2013
1 May 2013
1 September 2015
1 September 2015
1 September 2015
1 April 2015
1 October 2015
7 January 1992
1 September 2005
1 May 1991
1 April 2015
1 October 2015
The performance period for the 2013 LTIP
awards has completed, and the awards will vest
at 100%. The awards do not vest however until
the expiry of the three year period, which is May
2016, therefore the share price used to value
the awards in the table above has been taken
as the average price in the final quarter of the
2014/15 financial year.
2015 Remuneration (Audited Information)
In this section we summarise the pay packages
awarded to our Executive Directors for
performance in the 2015 financial year versus
2014. The table below shows all remuneration
that was earned by each individual during the
year and includes a single total remuneration
figure for the year. The value of the annual
bonus was earned in the year but will be paid
out as cash in the following financial year.
The Remuneration Committee reviews all
incentive awards prior to payment and has full
discretion to reduce awards if it believes this
is appropriate. The Committee did not exercise
any discretion in determining the annual bonus
payout for this year.
Salary/Fees
Benefits
Bonus
LTIP
Pension
Total
2015
£’000
2014
£’000
2015
£’000
2014
£’000
2015
£’000
2014
£’000
2015
£’000
2014
£’000
2015
£’000
2014
£’000
2015
£’000
2014
£’000
Executive Directors
Tim Davies
Neil Austin
Non-Executive Directors
Chris Holmes
Alistair Wannop
Robert Heygate
John Worby1
261
193
256
189
35*
1
77
36
36
15
75
36
36
—
—
—
—
—
9
1
—
—
—
—
261
193
256
189
315
233
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
39
29
—
—
—
—
38
28
—
—
—
—
911
649
559
407
77
36
36
15
75
36
36
—
1 Represents a 5 month period – pro rata would be £36,000
* Benefits in 2015 include certain relocation costs agreed at the time of appointment.
33
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
LONG TERM INCENTIVE PLAN AWARDS DURING
THE YEAR
The 2015 long-term awards were in line with
the remuneration policy as disclosed in our
2014 remuneration report. The performance
conditions are based on annual average growth
in adjusted EPS over a three year period.
Average annual growth %
3
10
% vesting
25
100
Nothing is payable below 3%, and a sliding scale
operates between this and the maximum available.
ALL EMPLOYEE SHARE PLANS
The Executive Directors are also eligible to
participate in the UK all-employee plans.
The CMI Sharesave Scheme 2006 is a HM
Revenue & Customs (‘HMRC’) approved scheme
open to all staff permanently employed in a
UK Group company as of the eligibility date.
Options under the plan are granted at a 20%
discount to market value. Executive Directors’
participation is included in the option table later
in this report.
REMUNERATION
COMMITTEE REPORT CONTINUED
2015 ANNUAL BONUS PAYOUT
The annual bonus is payable based on adjusted
profit before tax (‘PBT’) performance of
different parts of the Group, and an element
payable based on total Group performance.
If the Group target is achieved, regardless of
individual divisional performance, then the
maximum bonus is payable. Adjusted PBT is
calculated as reported PBT after adding back or
deducting any one-off items outside of normal
trading that were not anticipated at the time
the performance targets were set, such as
acquisition related costs.
The targets are split between the different
aspects of the Group as follows:
Agriculture
Food
Engineering
Group
20%
20%
20%
40%
In the 2015 financial year the adjusted PBT
target for the Group was set at £17.62m for
maximum payout. An adjusted PBT in excess
of this was achieved, therefore the maximum
bonus was awarded.
FIVE YEAR HISTORICAL TSR PERFORMANCE
400
350
300
250
200
150
100
50
0
34
/
0
1
8
0
1
3
/
/
0
1
1
1
0
3
/
/
1
1
2
0
8
2
/
/
1
1
5
0
1
3
/
/
1
1
8
0
1
3
/
/
1
1
1
1
0
3
/
/
2
1
2
0
9
2
/
/
2
1
5
0
1
3
/
/
2
1
8
0
1
3
/
/
2
1
1
1
0
3
/
/
3
1
2
0
8
2
/
/
3
1
5
0
1
3
/
/
3
1
8
0
1
3
/
/
3
1
1
1
0
3
/
/
4
1
2
0
8
2
/
/
4
1
5
0
1
3
/
/
4
1
8
0
1
3
/
/
4
1
1
1
0
3
/
/
5
1
2
0
8
2
/
Carr’s Group plc
Source: Thomson Datastream
FTSE All-Share Price Index
/
5
1
5
0
1
3
/
/
5
1
8
0
1
3
/
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015CORPORATE GOVERNANCE DIRECTORS’ INTERESTS IN THE SHARES OF THE
COMPANY (AUDITED INFORMATION)
A summary of interests in shares and scheme
interests of the Directors who served during the
year is given opposite.
PERFORMANCE SHARES (AUDITED INFORMATION)
The maximum number of outstanding shares
that have been awarded to Directors under the
LTIP are currently as follows:
ASSESSING PAY AND PERFORMANCE
In the table opposite we summarise the Chief
Executive’s single remuneration figure over
the past 5 years, as well as how variable pay
plans have paid out in relation to the maximum
opportunity.
Total number of
interests in shares
Unvested LTIP
SAYE (unvested
without performance
conditions)
20,000
20,000
315,620
233,560
2,958
4,933
1,252,500
22,610
372,250
25,000
—
—
—
—
—
—
—
—
Executive Directors
Tim Davies
Neil Austin
Non-Executive Directors
Chris Holmes
Alistair Wannop
Bob Heygate
John Worby
2012/13 award
2013/14 award
2014/15 award
Tim Davies
Neil Austin
190,110
140,680
152,260
112,670
163,360
120,890
Single figure of total remuneration
Annual variable element (actual award
versus maximum opportunity)
Long-term incentive (vesting versus
maximum opportunity)
2011
Chris
Holmes
£’000
2012
Chris
Holmes
£’000
2013
Tim
Davies
£’000
2014
Tim
Davies
£’000
2015
Tim
Davies
£’000
845
573
2831
559
596
100%
100%
100%
100%
100%
N/A
N/A
N/A
N/A
100%
1 Represents a 6 month period – pro rata would be £566,000
CHANGE IN CHIEF EXECUTIVE’S REMUNERATION
In the table opposite we show the percentage
change in the Chief Executive’s remuneration
between 2014 and 2015 financial years
compared to the other employees.
Base pay
Benefits
Annual bonus
Employee costs
Dividends paid to shareholders
2015
£’000
39,148
3,110
RELATIVE SPEND ON PAY
The table shows the relative importance of
spend on pay compared to distributions to
shareholders.
By order of the Board
ALISTAIR WANNOP
Chairman of the Remuneration Committee
11 November 2015
Tim Davies
Other employees
2.0%
289.0%
2.0%
2014
£’000
35,755
2,912
2.0%
0%
2.0%
% change
9.5%
6.8%
35
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS CHRIS HOLMES
CHAIR OF THE NOMINATION COMMITTEE
NOMINATION
COMMITTEE REPORT
INTRODUCTION
This year the Board created a Nomination
Committee. During the year the Committee
focused on Board succession plans, and the
outcomes are set out in this report.
Looking ahead, this year we plan to focus in
particular on succession planning for critical
roles in senior management to ensure that our
talent pipeline is appropriately resourced and
supported.
COMPOSITION AND CONSTITUTION
The Nomination Committee comprises the
Chairman of the Company and all the Non-
Executive Directors.
ROLE OF THE COMMITTEE
The Committee meets at least once a year, it
reviews the structure, size and composition of
the Board and considers the optimal level of
independence and diversity of skills, knowledge,
experience and gender required for the Board
to operate effectively. It is responsible for
considering and making recommendations to
the Board on new appointments of Executive
and Non-Executive Directors. It also gives due
consideration to succession planning throughout
the Group, taking into account the challenge
and opportunities facing the Group and the
skills and expertise needed within the Board
and senior management in the future.
BOARD SUCCESSION PLANNING
John Worby joined the Board on 1 April 2015,
and Ian Wood joined the Board on 1 October
2015. Both appointments were made after
conclusion of a process which included using
independent external search consultants.
Biographical details are set out on page 21.
RE-ELECTION
At the AGM on 5 January 2016, John and
Ian will stand for election for the first time.
Executive Directors and all other Non-Executive
Directors will stand for re-election in accordance
with best practice under the UK Corporate
Governance Code 2012.
The Board has set out in the Notice of AGM
its reasons for supporting the re-election of
the Directors at the forthcoming AGM. Their
biographical details on page 21 demonstrate the
range of experience and skills which each brings
to the benefit of the Group.
The Chair of the Nomination Committee will
attend the AGM to respond to any Shareholder
questions that might be raised on the
Committee’s activities.
On behalf of the Board
ACTIVITIES OF THE COMMITTEE
The Committee met on two occasions in the
year to consider the following matters:
CHRIS HOLMES
Chair of the Nomination Committee
11 November 2015
• the structure, size, composition and diversity
of both the Board and its Committees;
• the Committee’s Terms of Reference to
ensure they reflect the Committee’s remit.
36
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015CORPORATE GOVERNANCE
DIRECTORS’
REPORT
THE DIRECTORS SUBMIT THEIR REPORT AND
THE AUDITED ACCOUNTS OF THE COMPANY FOR
THE YEAR ENDED 29 AUGUST 2015.
The Company is a public limited company
incorporated and domiciled in England and Wales
whose shares are listed and traded on the London
Stock Exchange. The address of its registered
office is Old Croft, Stanwix, Carlisle, CA3 9BA.
RESULTS AND DIVIDENDS
A review of the results can be found on pages
18 to 19.
First Interim dividend per
share paid on 15 May 2015
Second Interim dividend per
share paid on 9 October 2015
Final dividend per share
proposed
2015 2014*
0.925p
0.85p
0.925p
0.85p
1.85p
1.70p
*restated due to 10:1 share split on 14 January 2015.
Subject to approval at the AGM, the final
dividend will be paid on 15 January 2016
to members on the register at the close of
business on 18 December 2015. Shares will
be ex-dividend on 17 December 2015.
The Group profit from continuing activities
before taxation was £17.5 million (2014: £16.6
million). After taxation charge of £3.8 million
(2014: £3.7 million), the profit for the year is
£13.7 million (2014: £12.9 million).
PENSIONS
Estimates of the amount and timing of future
funding obligations for the Group’s pension plans
are based on various assumptions including,
among other things, the actual and projected
market performance of the pension plan assets,
future long-term corporate bond yields, longevity
of members and statutory requirements. The
Group continued to make monthly payments to
reduce the Group’s pension fund deficit, totalling
£2.3 million in the year, which are scheduled to
end on 31 December 2015.
The Group continually reviews this risk and
takes action to mitigate where possible. In
addition, while the Group is consulted by the
Trustees on the investment strategies of its
pension plans, the Group has no direct control
over these matters as the Trustees are directly
responsible for the strategy.
Details of the Group’s pension plans are in note
24 in the Notes to the Financial Statements.
EMPLOYMENT POLICIES AND EMPLOYEES
The Company is committed to its employees
and further details on the Company’s policies
and commitment can be found in the Corporate
Responsibility Report on pages 22 to 24.
ENVIRONMENT
The Company’s report on sustainability including
carbon footprint and energy usage is on pages
23 and 24.
Group contributed £43,920 (2014: £41,000)
in the UK for charitable purposes. Further
details have been included with the Corporate
Responsibility statement on page 24. There
were no political donations during the year
(2014: £Nil).
INVESTMENT PROPERTIES
The market value of the Group’s investment
properties at 29 August 2015 exceeded their net
book amount by approximately 429,000. The
previous valuation in July 2011 for the majority
of the investment properties was undertaken by
independent, professionally qualified valuers.
The Directors have reviewed the valuations and
are satisfied there are no significant changes to
the assumptions and the valuations.
SHARE CAPITAL
The Company has a single class of share capital
which is divided into Ordinary Shares of £0.025
each. The movement in the share capital during
the year is detailed in note 25 to the financial
statements.
ACQUISITIONS
On 20 October 2014 Carrs Billington
Agriculture (Sales) Ltd acquired the entire
issued share capital of WM. Nicholls & Company
(Crickhowell) Ltd, an agricultural merchant
based in Crickhowell, Wales. For the cash
consideration payable see note 27 on page 85.
On 12 June 2015, Carrs Billington Agriculture
(Sales) Ltd acquired the entire issued share
capital of Reid & Robertson Ltd, an agricultural
merchant based in Balloch, Ayr and Oban,
Scotland. For the cash consideration payable
see note 27 on page 85.
POLITICAL AND CHARITABLE DONATIONS
During the period ended 29 August 2015 the
In January 2015 the Company’s shareholders
approved the split of the Company’s shares
10:1, which reduced the nominal value of the
ordinary shares to 2.5 pence each.
At the last AGM the Directors received authority
from the shareholders to:
Allot Shares – this gives Directors the authority
to allot authorised but unissued shares and
maintains the flexibility in respect of the
Company’s financing arrangements. The nominal
value of ordinary shares which the Directors
may allot in the period up to the next AGM to be
held on 5 January 2016, is limited to £737,865
which is equal to 33% of the nominal value of
the issued share capital on 12 November 2014.
37
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS Interest of the Directors
Tim Davies
Neil Austin
Chris Holmes
Robert Heygate
Alistair Wannop
John Worby
At 29 August 2015
Ordinary
Shares
At 30 August 2014
Ordinary
Shares
20,000
20,000
1,252,500
372,250
22,610
25,000
10,000*
10,000*
1,252,500*
372,250*
22,610*
0
*restated due to 10:1 share split on 14 January 2015.
All the above interests are beneficial. There have been no other changes to the above interests
in the period from 29 August 2015 to 11 November 2015.
RIGHTS AND OBLIGATIONS ATTACHING TO SHARES
In a general meeting of the Company, subject to
the provisions of the Articles of Association and
to any special rights or restrictions as to voting
attached to any class of shares in the Company
(of which they are none), the holders of the
Ordinary Shares are entitled to one vote in a
poll for every Ordinary Share held. No member
shall be entitled to vote at any general meeting
or class meeting in respect of any shares held if
any call or other sum then payable in respect of
that share remains unpaid. Currently all issued
shares are fully paid.
Full details of the deadlines for exercising
voting rights in respect of the resolutions to be
considered at the AGM to be held on 5 January
2016 are set out in the Notice of AGM.
Subject to the provisions of the Companies Act
2006, the Company may, by ordinary resolution,
declare a dividend to be paid to the members,
but no dividend shall exceed the amount
recommended by the Board. The Board may
pay interim dividends, and also any fixed rate
dividend, whenever the financial position of the
Company, in the opinion of the Board, justifies
its payment. All dividends shall be apportioned
and paid pro rata according to the amounts paid
up on the shares.
MAJOR SHAREHOLDERS
The Company has been informed of the
following interests at 11 November 2015 in the
89,820,680 ordinary shares of the Company, as
required by the Companies Act 2006:
Major Shareholders
Number of shares
% of issued share
capital
Heygate & Sons Limited*
T W G Charlton
Goldman Sachs Securities (Nominees) Ltd (ILSEG)
Rathbone Nominees Limited
HSBC Global Custody Nominee (UK) Limited
* Robert Heygate is a director of Heygate & Sons Ltd.
12,652,870
5,100,000
4,335,940
3,644,950
2,968,940
14.1
5.68
4.83
4.06
3.31
DIRECTORS’
REPORT CONTINUED
The directors do not have any present intention of
exercising this authority other than in connection
with the issue of ordinary shares in respect of
the Company’s share option plans. This authority
will expire at the end of the AGM to be held on 5
January 2016.
Disapplication of rights of pre-emption – this
disapplies rights of pre-emption on the allotment
of shares by the Company and the sale by the
Company of treasury shares. The authority will
allow the Directors to allot equity securities for
cash pursuant to the authority to allot shares
mentioned above, and to sell treasury shares for
cash, on a pro rata basis to existing shareholders
(but subject to any exclusion or arrangements
as the Directors consider necessary or expedient
in relation to fractional entitlements, any legal,
regulatory or practical problems or costs under
the laws or regulations of any overseas territory or
the requirements of any regulatory body or stock
exchange) and otherwise on a pro rata basis up
to an aggregate nominal amount of £111,798,
representing 5% of the Company’s issued share
capital as at 12 November 2014. This authority
will expire at the end of the AGM to be held on 5
January 2016.
To buy own shares – this authority allows the
Company to buy its own shares in the market,
as permitted under the Articles of Association
of the Company, up to a limit of 10% of the
Company’s issued share capital. The price to
be paid for any share must not be less than
0.25p, being the nominal value of a share, and
must not exceed 105% of the average middle
market quotations for the ordinary shares of the
Company as derived from the London Stock
Exchange Daily Official List for the 5 business
days immediately preceding the day on which
the ordinary shares are purchased. The Directors
have no immediate plans to exercise the powers
of the Company to purchase its own shares
and undertaken that the authority would only
be exercised if the Directors were satisfied
that a purchase would result in an increase in
expected earnings per share and was in the best
interests of the Company at the time.
This authority will expire at the end of the AGM
to be held on 5 January 2016. The Directors
would consider holding any of its own shares
that it purchases pursuant to this authority as
treasury shares.
The interests of the Directors, as defined by the
Companies Act 2006, in the ordinary shares of
the Company, other than in respect of options to
acquire ordinary shares (which are detailed
in the analysis of options included in the
Directors’ Remuneration Report on pages
30 to 35), are as follows:
38
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015CORPORATE GOVERNANCE
CHANGE OF CONTROL
There are no agreements that the Company
considers significant and to which the
Company is party that would take effect, alter
or terminate upon change of control of the
Company following a takeover bid, other than
the following:
• The Company is party to a number of
banking agreements which upon a change of
control of the Company are terminable by the
bank immediately.
DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the
Annual Report, the Directors’ Remuneration
Report and the Financial Statements in
accordance with applicable law and regulations.
RESPONSIBILITY FOR PREPARING FINANCIAL
STATEMENTS
Company law requires the Directors to prepare
financial statements for each financial period.
Under that law the Directors have elected
to prepare the Group and parent Company
financial statements in accordance with
International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Under company law the Directors must not
approve the Financial Statements unless they
are satisfied that they give a true and fair view
of the state of affairs of the Group and the
Company and of the profit or loss of the Group
for that period. In preparing those Financial
Statements, the Directors are required to:
• select suitable accounting policies and then
apply them consistently;
• make judgements and accounting estimates
that are reasonable and prudent;
• state whether applicable IFRSs as adopted
by the European Union have been followed,
subject to any material departures disclosed
and explained in the financial statements;
• prepare the financial statements on the going
concern basis, unless it is inappropriate to
presume that the Company will continue in
business.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Company’s
transactions and disclose with reasonable
accuracy at any time the financial position
of the Company and of the Group and enable
them to ensure that the Financial Statements
and Directors’ Remuneration Report comply
with the Companies Act 2006 and, as regards
the Group Financial Statements, Article 4 of
the IAS Regulation. They are also responsible
for safeguarding the assets of the Company
and the Group and hence for taking reasonable
steps for the prevention and detection of fraud
and other irregularities.
The Directors are responsible for the
maintenance and integrity of the Company
website. Legislation in the United Kingdom
governing the preparation and dissemination
of Financial Statements may differ from
legislation in other jurisdictions.
DIRECTORS’ STATEMENT AS TO DISCLOSURE OF
INFORMATION TO AUDITORS
The Directors who were members of the Board
at the time of approving the Directors’ Report
are listed on page 21. Having made enquiries
of fellow Directors each of these Directors, at
the date of this report, confirms that:
• he is aware there is no relevant audit
information of which the Company’s auditors
are unaware; and
• he has taken all the steps that he ought
to have taken as a Director in order to
make himself aware of any relevant audit
information and to establish that the
Company’s auditors are aware of that
information.
RESPONSIBILITY STATEMENT
Each of the Directors, whose names and
functions are listed on page 21 confirm that, to
the best of their knowledge:
• the Group Financial Statements, which have
been prepared in accordance with IFRSs as
adopted by the EU, give a true and fair view
of the assets, liabilities, financial position
and profit of the Group;
• the Chief Executive’s Review includes a fair
review of the development and performance
of the business and the position of the
Group; and
• the Risk Management review provides
a description of the principal risks and
uncertainties that the Company faces.
By Order of the Board
KATIE SINCLAIR
Company Secretary
11 November 2015
39
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF CARR’S GROUP PLC
REPORT ON THE FINANCIAL STATEMENTS
Our opinion
In our opinion:
• Carr’s Group plc’s Group financial statements
and Company financial statements (the
“financial statements”) give a true and fair
view of the state of the Group’s and of the
Company’s affairs as at 29 August 2015 and
of the Group’s profit and the Group’s and the
Company’s cash flows for the year then ended;
• the Group financial statements have been
properly prepared in accordance with
International Financial Reporting Standards
(“IFRSs”) as adopted by the European
Union;
• the Company financial statements have been
properly prepared in accordance with IFRSs
as adopted by the European Union and as
applied in accordance with the provisions of
the Companies Act 2006; and
• the financial statements have been prepared
in accordance with the requirements of the
Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the
IAS Regulation.
• the Consolidated and Company Statements of
Cash Flows for the year then ended;
• the Principal Accounting Policies; and
• the Notes to the Financial Statements, which
include other explanatory information.
What we have audited
The financial statements, included within the
Annual Report and Accounts (the “Annual
Report”), comprise:
• the Consolidated and Company Balance
Sheets as at 29 August 2015;
• the Consolidated Income Statement and
Consolidated and Company Statements of
Comprehensive Income for the year then
ended;
• the Consolidated Statement of Changes in
Equity for the year then ended;
• the Company Statement of Changes in Equity
for the year then ended;
Certain required disclosures have been presented
elsewhere in the Annual Report, rather than in
the notes to the financial statements. These are
cross-referenced from the financial statements
and are identified as audited.
The financial reporting framework that has
been applied in the preparation of the financial
statements is applicable law and IFRSs as
adopted by the European Union and, as regards
the Company financial statements, as applied
in accordance with the provisions of the
Companies Act 2006.
OUR AUDIT APPROACH
Overview
Materiality
Audit scope
Area of
focus
• Overall Group materiality: £875,000 which represents 5% of profit before tax.
• Audit of complete financial information of two financially significant reporting units and three
significant risk reporting units.
• Specified audit procedures over four other reporting units.
• Reporting units located in UK, USA and Germany visited.
• Fraud risk in revenue recognition.
• Defined benefit pension scheme surplus.
• Receivable provisioning.
The scope of our audit and our areas of focus
We conducted our audit in accordance with
International Standards on Auditing (UK and
Ireland) (“ISAs (UK & Ireland)”).
We designed our audit by determining
materiality and assessing the risks of material
misstatement in the financial statements. In
particular, we looked at where the Directors
made subjective judgements, for example in
respect of significant accounting estimates that
involved making assumptions and considering
future events that are inherently uncertain. As
in all of our audits we also addressed the risk
of management override of internal controls,
including evaluating whether there was evidence
of bias by the directors that represented a risk of
material misstatement due to fraud.
The risks of material misstatement that had
the greatest effect on our audit, including
the allocation of our resources and effort, are
identified as “areas of focus” in the table below.
We have also set out how we tailored our audit
to address these specific areas in order to
provide an opinion on the financial statements
as a whole, and any comments we make on the
results of our procedures should be read in this
context. This is not a complete list of all risks
identified by our audit.
40
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
AREA OF FOCUS
HOW OUR AUDIT ADDRESSED THE AREA OF FOCUS
Fraud risk in revenue recognition
Refer also to the significant judgements, key assumptions
and estimates within the principal accounting policies.
ISAs (UK & Ireland) presume there is a risk of fraud in
revenue recognition. We have determined this to apply
specifically to the occurrence of revenue in all divisions
because of the pressure management may feel to achieve
the planned results. Within the Agriculture and Food
division this is specifically in relation to whether a sale
has occurred and within the Engineering division this is in
relation to the judgements involved in long term contract
accounting.
Defined benefit pension scheme surplus
Refer also to the significant judgements, key assumptions
and estimates within the principal accounting policies and
note 24.
The Group has a defined benefit pension scheme with post-
retirement assets of £62.1 million and post-retirement
liabilities of £60.4 million, which are significant in the
context of the overall balance sheet of the Group.
The valuation of the pension scheme liabilities requires
significant levels of judgement and technical expertise in
choosing appropriate assumptions. Unfavourable changes
in a number of the key assumptions (including salary
increases, inflation, discount rates, and mortality) can have
a material impact on the calculation of the liability.
In addition, the recognition of the post-retirement plan
surplus position for accounting purposes is dependent on
the rights of the employer to recover any surplus.
Receivable provisioning
Refer also to the significant judgements, key assumptions
and estimates within the principal accounting policies and
note 18.
The Group has material amounts of trade receivables that
are past due and not impaired. The key associated risk
was the recoverability of these past due trade receivables.
Management’s related provisions are subjective and are
influenced by assumptions concerning customer credit
risk.
We focused in particular on the Agriculture division given
the significance of this division’s receivables balances to
the Group balance sheet and the slower historic collection
pattern in this division.
Our testing of revenue transactions focused on demonstrating a service had been
provided or a sale had occurred.
For the Agriculture and Food divisions this involved testing the operating
effectiveness of controls around dispatches and invoicing as well as substantively
testing that revenue agreed to accounts receivable and cash received. Where
revenue did not directly agree to accounts receivable/cash further work was
performed to understand and substantively test those transactions. From the work
we performed no material exceptions were noted.
For the Engineering division we focused on the judgements required to account for
long term contracts. This involved reading extracts of the related contracts in order
to understand the nature of services provided. We also evaluated management’s
assessment of the stage of completion of significant contracts through performing
a look back test to assess management’s previous estimations as well as on a
sample basis agreeing the inputs into the calculation of the revenue to supporting
documentation and reperforming the calculation.
From the work we performed no material exceptions were noted.
Utilising our pension specialists we focused on the valuations of pension plan
liabilities and the pension assets as follows:
• We compared the assumptions around salary increases and mortality rates to
national and industry averages and guidance.
• We compared the discount and inflation rates used in the valuation of the
pension liability to our internally developed benchmarks.
• We obtained third party confirmations on ownership and valuation of pension
assets.
• We tested the census data back to the latest triennial valuation provided by the
administrator.
• We checked that the Company is entitled to any surplus by examining the Trust
Deed and Rules documentation.
We found that the assumptions underlying the pension scheme surplus were
consistent with external data and internally developed benchmarks. We found no
material exceptions from our other testing.
With focus on the Agriculture division we understood management’s receivables
provisioning policy and tested the accuracy of the ageing of the receivables
balances in order to recalculate management’s receivables provision. We then
analysed the receivables provision focusing on any anomalies in the provisioning
methodology and followed up any anomalies, such as unusual payment terms,
through investigation with management and review of customer payment history.
We tested the operating effectiveness of controls around approval of credit limits
for customers and monthly detailed review of the receivables ledger. We examined
large individual aged receivable balances, understanding the rationale for
management’s provisioning decisions by reference to payment patterns during the
year as well as other information available.
We also assessed the level of cash collected by the business after the year end on
past due receivable balances to consider any additional provisioning requirements.
From the work we performed we did not identify any further material balances
requiring a provision and no material exceptions were noted.
41
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF CARR’S GROUP PLC CONTINUED
How we tailored the audit scope
We tailored the scope of our audit to ensure that
we performed enough work to be able to give an
opinion on the financial statements as a whole,
taking into account the geographic structure of
the Group, the accounting processes and controls,
and the industry in which the Group operates.
The Group is structured in three business
divisions, Agriculture, Food and Engineering. The
Group financial statements are a consolidation
of 16 reporting units, comprising the Group’s
operating businesses within these business
divisions. The Group operates mainly in the UK
but has a global presence particularly in the USA
and Germany.
These nine reporting units accounted for 88%
of Group revenue and 63% of Group profit
before tax.
Materiality
The scope of our audit was influenced by
our application of materiality. We set certain
quantitative thresholds for materiality. These,
together with qualitative considerations,
helped us to determine the scope of our audit
and the nature, timing and extent of our
audit procedures on the individual financial
statement line items and disclosures and in
evaluating the effect of misstatements, both
individually and on the financial statements
as a whole.
statements were signed. As part of our audit we
have concluded that the Directors’ use of the
going concern basis in preparing the financial
statements is appropriate.
However, because not all future events or
conditions can be predicted, these statements
are not a guarantee as to the Group’s and
Company’s ability to continue as a going concern.
OTHER REQUIRED REPORTING
Consistency of other information
Companies Act 2006 opinions
In our opinion:
• the information given in the Strategic Report
and the Directors’ Report for the financial
year for which the financial statements are
prepared is consistent with the financial
statements; and
Within the Agriculture division significant
operations include subsidiaries Carrs Billington
Agriculture (Sales) Limited and Carrs
Agriculture Limited as well as an associate Carrs
Billington Agriculture (Operations) Limited all
located within the UK. Within Food the largest
operation is Carr’s Flour Mills Limited again
located in the UK. Finally within the Engineering
division Wälischmiller Engineering GmbH,
located in Germany, is the largest operation.
The Group also has centralised functions
such as a treasury function and a payroll
function which includes the pension scheme
administration, all performed by the Company.
We identified five reporting units, being those
named above within the Agriculture and Food
divisions alongside the Company, which in
our view required an audit of their complete
financial information. Two of these reporting
units were deemed financially significant and
the other three were selected for particular risk
characteristics, which included coverage of the
risks relating to pension assumptions and fraud
in revenue recognition, and of the profit from
the associate.
Specific audit procedures on certain balances
and transactions were performed on four further
reporting units, including those based in the
USA and Germany, in order to gain coverage of
individually material financial statement line
items.
The Senior Statutory Auditor visited six of
the nine reporting units located in both the UK
and in Germany. For another two he attended
the clearance meeting, one of which was via
conference call in respect of the associate
Carrs Billington Agriculture (Operations)
Limited which was audited by another firm
operating under our instruction. The final
reporting unit based in the US was visited by a
senior member of the audit team.
42
Based on our professional judgement, we
determined materiality for the financial
statements as a whole as follows:
Overall Group
materiality
How we
determined it
£875,000 (2014: £830,000).
5% of profit before tax.
Rationale for
benchmark
applied
We believe that profit before tax is the primary measure used by the
shareholders in assessing the performance of the Group, and is a generally
accepted auditing benchmark.
Reporting unit
materiality
For each reporting unit in our audit scope, we allocated a materiality that
was less than our overall Group materiality. The range of materiality allocated
across reporting units was between £111,000 and £800,000.
We agreed with the Audit Committee that we
would report to them misstatements identified
during our audit above £44,000 (2014:
£42,000) as well as misstatements below that
amount that, in our view, warranted reporting for
qualitative reasons.
• the information given in the Corporate
Governance Statement set out on pages 25
to 27 with respect to internal control and risk
management systems and about share capital
structures is consistent with the financial
statements.
Going concern
Under the Listing Rules we are required to
review the Directors’ statement, set out on
page 27, in relation to going concern. We have
nothing to report having performed our review.
As noted in the Directors’ statement, the
Directors have concluded that it is appropriate to
prepare the financial statements using the going
concern basis of accounting. The going concern
basis presumes that the Group and Company
have adequate resources to remain in operation,
and that the Directors intend them to do so,
for at least one year from the date the financial
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you if, in our opinion:
• Information in the Annual Report is:
− materially inconsistent with the information in the audited financial statements; or
− apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group and Company
We have no
exceptions to
report.
acquired in the course of performing our audit; or
− otherwise misleading.
• the statement given by the Directors on page 27, in accordance with provision C.1.1 of the UK Corporate Governance Code
(the ‘Code’), that they consider the Annual Report taken as a whole to be fair, balanced and understandable and provides
the information necessary for members to assess the Group’s and Company’s performance, business model and strategy is
materially inconsistent with our knowledge of the Group and Company acquired in the course of performing our audit.
• the section of the Annual Report on pages 28 to 29, as required by provision C.3.8 of the Code, describing the work of
the Audit Committee does not appropriately address matters communicated by us to the Audit Committee.
We have no
exceptions to
report.
We have no
exceptions to
report.
Adequacy of accounting records and information
and explanations received
Under the Companies Act 2006 we are required
to report to you if, in our opinion:
• we have not received all the information and
explanations we require for our audit; or
• adequate accounting records have not been
kept by the Company, or returns adequate
for our audit have not been received from
branches not visited by us; or
• the Company financial statements and the
part of the Directors’ Remuneration Report
to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from
this responsibility.
Directors’ remuneration
Directors’ Remuneration Report – Companies Act
2006 opinion
In our opinion, the part of the Directors’
Remuneration Report to be audited has been
properly prepared in accordance with the
Companies Act 2006.
Other Companies Act 2006 reporting
Under the Companies Act 2006 we are required
to report to you if, in our opinion, certain
disclosures of Directors’ remuneration specified
by law are not made. We have no exceptions to
report arising from this responsibility.
Corporate Governance Statement
Under the Companies Act 2006 we are required
to report to you if, in our opinion, a Corporate
Governance Statement has not been prepared
by the Company. We have no exceptions to
report arising from this responsibility.
Under the Listing Rules we are required to
review the part of the Corporate Governance
Statement relating to ten provisions of the Code.
We have nothing to report having performed our
review.
• the reasonableness of significant accounting
estimates made by the Directors; and
• the overall presentation of the financial
RESPONSIBILITIES FOR THE FINANCIAL
STATEMENTS AND THE AUDIT
Our responsibilities and those of the Directors
As explained more fully in the Directors’
Responsibilities set out on page 39, the
Directors are responsible for the preparation of
the financial statements and for being satisfied
that they give a true and fair view.
Our responsibility is to audit and express
an opinion on the financial statements in
accordance with applicable law and ISAs (UK &
Ireland). Those standards require us to comply
with the Auditing Practices Board’s Ethical
Standards for Auditors.
This report, including the opinions, has been
prepared for and only for the Company’s
members as a body in accordance with Chapter
3 of Part 16 of the Companies Act 2006 and
for no other purpose. We do not, in giving these
opinions, accept or assume responsibility for
any other purpose or to any other person to
whom this report is shown or into whose hands
it may come save where expressly agreed by our
prior consent in writing.
What an audit of financial statements involves
An audit involves obtaining evidence about
the amounts and disclosures in the financial
statements sufficient to give reasonable
assurance that the financial statements are free
from material misstatement, whether caused by
fraud or error. This includes an assessment of:
• whether the accounting policies are
appropriate to the Group’s and the Company’s
circumstances and have been consistently
applied and adequately disclosed;
statements.
We primarily focus our work in these areas
by assessing the Directors’ judgements
against available evidence, forming our own
judgements, and evaluating the disclosures in
the financial statements.
We test and examine information, using
sampling and other auditing techniques, to
the extent we consider necessary to provide a
reasonable basis for us to draw conclusions.
We obtain audit evidence through testing the
effectiveness of controls, substantive procedures
or a combination of both.
In addition, we read all the financial and
non-financial information in the Annual Report
to identify material inconsistencies with the
audited financial statements and to identify
any information that is apparently materially
incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course
of performing the audit. If we become aware
of any apparent material misstatements or
inconsistencies we consider the implications for
our report.
BILL MACLEOD (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Newcastle upon Tyne
11 November 2015
43
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 29 AUGUST 2015
Continuing operations
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Group operating profit
Finance income
Finance costs
Share of post-tax profit in associate
Share of post-tax profit in joint ventures
Profit before taxation
Taxation
Profit for the year
Profit attributable to:
Equity shareholders
Non-controlling interests
Earnings per ordinary share (pence)
Basic
Diluted
Notes
2015
£’000
2014
£’000
2
3
5
5
2
6
8
8
411,565
(356,708)
54,857
(21,313)
(17,169)
16,375
197
(1,412)
1,500
807
17,467
(3,774)
428,956
(378,670)
50,286
(19,438)
(15,421)
15,427
264
(1,624)
1,579
907
16,553
(3,660)
13,693
12,893
11,989
1,704
13,693
13.4
12.9
11,372
1,521
12,893
12.8
12.3
44
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
CONSOLIDATED AND COMPANY STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 29 AUGUST 2015
Notes
Group
2015
£’000
2014
£’000
13,693
12,893
Company
2015
£’000
2,870
2014
£’000
2,021
Profit for the year
Other comprehensive income/(expense)
Items that may be reclassified subsequently
to profit or loss:
Foreign exchange translation gains/(losses) arising
on translation of overseas subsidiaries
Items that will not be reclassified subsequently
to profit or loss:
Actuarial (losses)/gains on retirement benefit obligation:
– Group
– Share of associate
Taxation credit/(charge) on actuarial (losses)/gains
on retirement benefit obligation:
– Group
– Share of associate
Other comprehensive (expense)/income for the year,
net of tax
24
16
20
(950)
—
—
(2,848)
70
3,209
(619)
(2,848)
—
3,209
—
570
(14)
(642)
124
570
—
(2,202)
1,122
(2,278)
Total comprehensive income for the year
11,491
14,015
Total comprehensive income attributable to:
Equity shareholders
Non-controlling interests
9,787
1,704
12,494
1,521
11,491
14,015
592
592
—
592
(642)
—
2,567
4,588
4,588
—
4,588
45
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
CONSOLIDATED AND COMPANY BALANCE SHEETS
AS AT 29 AUGUST 2015
Assets
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Investment property
Investment in subsidiary undertakings
Investment in associate
Interest in joint ventures
Other investments
Financial assets
– Non-current receivables
Retirement benefit asset
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Current tax assets
Financial assets
– Derivative financial instruments
– Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Financial liabilities
– Borrowings
– Derivative financial instruments
Trade and other payables
Current tax liabilities
Non-current liabilities
Financial liabilities
– Borrowings
Deferred tax liabilities
Other non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Share capital
Share premium
Equity compensation reserve
Foreign exchange reserve
Other reserve
Retained earnings
Total shareholders’ equity
Non-controlling interests
Total equity
Notes
9
9
10
11
12,15
12,13
12,14
12
18
24
16
17
18
19
23
20
22
23
21
22
16
21
25
Group
2015
£’000
2014
£’000
Company
2015
£’000
2014
£’000
10,849
448
58,385
636
—
8,439
5,012
79
50
1,767
861
9,798
499
56,626
656
—
6,883
4,836
77
501
2,056
1,507
—
—
—
—
12,205
245
272
—
—
1,767
3
—
—
—
—
12,755
245
272
—
500
2,056
3
86,526
83,439
14,492
15,831
35,031
64,454
839
50
16,488
33,315
63,623
47
—
17,268
116,862
114,253
203,388
197,692
(15,157)
(72)
(54,496)
(472)
(19,688)
(15)
(54,236)
(1,631)
(70,197)
(75,570)
—
36,845
1,564
30
8,973
47,412
61,904
(690)
—
(1,915)
—
(2,605)
—
33,812
1,192
—
8,822
43,826
59,657
(1,553)
—
(1,302)
—
(2,855)
(25,744)
(4,184)
(4,300)
(22,189)
(4,111)
(5,995)
(16,414)
(353)
—
(12,047)
(412)
—
(34,228)
(32,295)
(16,767)
(12,459)
(104,425)
(107,865)
(19,372)
(15,314)
98,963
89,827
42,532
44,343
2,244
8,615
1,138
(515)
862
74,706
87,050
11,913
98,963
2,235
8,453
640
(535)
875
67,996
79,664
10,163
89,827
2,244
8,615
1,239
—
—
30,434
42,532
—
42,532
2,235
8,453
699
—
—
32,956
44,343
—
44,343
The financial statements set out on pages 44 to 91 were approved by the Board on 11 November 2015 and signed on its behalf by:
Tim J Davies
Neil Austin
46
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 29 AUGUST 2015
Share
Capital
£’000
Equity
Share Compensation
Reserve
£’000
Premium
£’000
Foreign
Exchange
Reserve
£’000
Other
Reserve
£’000
Total
Retained Shareholders’
Equity
Earnings
£’000
£’000
Non-
controlling
Interests
£’000
Total
Equity
£’000
At 1 September 2013
2,223
8,183
326
Profit for the year
Other comprehensive
(expense)/income
Total comprehensive
(expense)/income
Dividends paid
Equity settled share-
based payment
transactions, net of tax
Allotment of shares
Transfer
—
—
—
—
—
12
—
—
—
—
—
—
270
—
At 30 August 2014
2,235
8,453
At 31 August 2014
2,235
8,453
Profit for the year
Other comprehensive
income/(expense)
Total comprehensive
income/(expense)
Dividends paid
Equity settled share-
based payment
transactions, net of tax
Allotment of shares
Transfer
—
—
—
—
—
9
—
—
—
—
—
—
162
—
—
—
—
—
314
—
—
640
640
—
—
—
—
498
—
—
415
—
(950)
(950)
—
—
—
—
888
57,396
69,431
8,610
78,041
—
—
—
—
—
—
(13)
11,372
11,372
1,521
12,893
2,072
1,122
—
1,122
13,444
(2,912)
12,494
(2,912)
1,521
—
14,015
(2,912)
55
—
13
369
282
—
32
—
—
401
282
—
(535)
875
67,996
79,664
10,163
89,827
(535)
875
67,996
79,664
10,163
89,827
—
20
20
—
—
—
—
—
—
—
—
—
—
(13)
11,989
11,989
1,704
13,693
(2,222)
(2,202)
—
(2,202)
9,767
(3,110)
9,787
(3,110)
1,704
—
11,491
(3,110)
40
—
13
538
171
—
46
—
—
584
171
—
At 29 August 2015
2,244
8,615
1,138
(515)
862
74,706
87,050
11,913
98,963
The equity compensation reserve reflects the cumulative accounting impact, at the balance sheet date, of the fair value of the share schemes
over the vesting periods. The movement on the equity compensation reserve is taken through the consolidated income statement. During the year
£40,000 (2014: £55,000) was transferred from the equity compensation reserve to retained earnings in respect of options exercised in the year.
The Group has opted to use previous revaluations of property made under UK GAAP as deemed cost. On adoption of IFRS the revaluation reserve
was reclassified to other reserves.
47
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 29 AUGUST 2015
Share
Capital
£’000
Share
Premium
£’000
Equity
Compensation
Reserve
£’000
Foreign
Exchange
Reserve
£’000
Retained
Earnings
£’000
Total
Equity
£’000
At 1 September 2013
2,223
8,183
373
(221)
31,481
42,039
Profit for the year
Other comprehensive income
Total comprehensive income
Dividends paid
Equity settled share-based payment
transactions, net of tax
Allotment of shares
Transfer
At 30 August 2014
At 31 August 2014
Profit for the year
Other comprehensive expense
Total comprehensive income
Dividends paid
Equity settled share-based payment
transactions, net of tax
Allotment of shares
—
—
—
—
—
12
—
—
—
—
—
—
270
—
2,235
8,453
2,235
8,453
—
—
—
—
—
9
—
—
—
—
—
162
—
—
—
—
326
—
—
699
699
—
—
—
—
540
—
At 29 August 2015
2,244
8,615
1,239
—
—
—
—
—
—
221
—
—
—
—
—
—
—
—
—
2,021
2,567
4,588
(2,912)
20
—
(221)
2,021
2,567
4,588
(2,912)
346
282
—
32,956
44,343
32,956
44,343
2,870
(2,278)
592
(3,110)
(4)
—
2,870
(2,278)
592
(3,110)
536
171
30,434
42,532
The equity compensation reserve reflects the cumulative accounting impact, at the balance sheet date, of the fair value of the share schemes over
the vesting periods. The movement on the equity compensation reserve is taken through the income statement where it relates to employees of
the Company and to investment in subsidiaries where it relates to employees of the subsidiaries. During the year £4,000 (2014: £20,000) was
transferred from the equity compensation reserve to retained earnings and £45,000 (2014: £58,000) was transferred from the equity compensation
reserve to investment in subsidiaries in respect of options exercised in the year.
48
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
CONSOLIDATED AND COMPANY STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 29 AUGUST 2015
Group
Company
Cash flows from operating activities
Cash generated from/(used in) operations
Interest received
Interest paid
Tax (paid)/recovered
Notes
28
2015
£’000
15,127
194
(1,380)
(3,965)
2014
£’000
17,125
275
(1,668)
(3,226)
Net cash generated from/(used in) operating activities
9,976
12,506
27
Cash flows from investing activities
Acquisition of subsidiaries (net of cash acquired)
Dividends received from subsidiaries
Net payment of loans to subsidiaries
Return/(cost) of investment in joint venture
Loan repaid by/(paid to) joint ventures
Loan repaid by associate
Other loans
Purchase of intangible assets
Proceeds from sale of property, plant and equipment
Purchase of property, plant and equipment
Disposal of investment
Redemption of preference shares in joint venture
(1,749)
—
—
488
129
500
220
(15)
462
(5,970)
—
150
(3,649)
—
—
(965)
(159)
225
(270)
(57)
738
(7,201)
32
150
2015
£’000
(2,915)
884
(359)
(92)
(2,482)
—
4,200
(2,602)
—
—
500
—
—
—
—
—
—
Net cash (used in)/generated from investing activities
(5,785)
(11,156)
2,098
Cash flows from financing activities
Proceeds from issue of ordinary share capital
Net payment of loans from subsidiaries
Net proceeds from issue of new bank loans
Finance lease principal repayments
Repayment of loan from related party
Repayment of borrowings
(Decrease)/increase in other borrowings
Dividends paid to shareholders
Receipt of grant income
Net cash (used in)/generated from financing activities
Effects of exchange rate changes
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
25
7
20
20
171
—
9,061
(2,395)
(500)
(4,880)
(3,638)
(3,110)
500
(4,791)
(150)
(750)
17,025
283
—
2,731
(2,325)
(225)
(7,077)
2,256
(2,912)
450
(6,819)
(181)
(5,650)
22,675
16,275
17,025
171
—
4,854
—
—
(1,383)
—
(3,110)
—
532
3
151
8,822
8,973
2014
£’000
(3,677)
834
(534)
466
(2,911)
—
3,510
(5,401)
—
(223)
225
—
—
—
—
29
—
(1,860)
283
(289)
2,731
—
—
(5,971)
—
(2,912)
—
(6,158)
(71)
(11,000)
19,822
8,822
49
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
PRINCIPAL ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The consolidated financial statements are prepared on a going concern
basis in accordance with International Financial Reporting Standards
(IFRSs) and International Financial Reporting Standards Interpretation
Committee (IFRS IC) interpretations endorsed by the European Union
(EU) and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS.
The Company is a public limited company incorporated and
domiciled in England and Wales whose shares are listed and traded
on the London Stock Exchange. The address of its registered office
is Old Croft, Stanwix, Carlisle, CA3 9BA.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting year. Although these
estimates are based on management’s best knowledge of the amount,
event or actions, actual results ultimately may differ materially from the
estimates.
Accounting policies have been applied consistently, other than where new
policies have been adopted.
The consolidated financial statements are prepared under the historic
cost convention as modified by the revaluation of financial assets and
financial liabilities (including derivative financial instruments) at fair
value through profit or loss.
BASIS OF CONSOLIDATION
The consolidated financial statements comprise Carr’s Group plc
and all its subsidiaries, together with the Group’s share of the results
of its associate and joint ventures. The financial information of the
subsidiaries, associate and joint ventures is prepared as of the same
reporting date and consolidated using consistent accounting policies.
Group inter-company balances and transactions, including any unrealised
profits arising from Group inter-company transactions, are eliminated
in full. Profits and losses on transactions with the associate and joint
ventures are recognised in the consolidated income statement.
Results of subsidiary undertakings acquired during the current and
prior financial year were included in the financial statements from the
effective date of control. The separable net assets, both tangible and
intangible, of the acquired subsidiary undertakings were incorporated into
the financial statements on the basis of the fair value as at the effective
date of the Group acquiring control.
IFRS 10 introduces a new definition of control which could affect
whether an entity is consolidated into the Group accounts. An investor
controls an investee when it is exposed, or has right, to variable returns
from its involvement with the investee and has the ability to affect those
returns through its power over the investee. Control requires power over
the investee, exposure, or rights, to variable returns and the ability to use
power to affect returns.
Subsidiaries are entities that meet the new definition of control.
Subsidiaries are consolidated from the date on which control is
transferred to the Group and are included until the date on which the
Group ceases to control them.
Associates are entities over which the Group has significant influence
but not control, generally accompanied by a share of between 20% and
50% of the voting rights. Joint ventures are entities over which the Group
has joint control, established by contractual agreement. Investments
in associates and joint ventures are accounted for using the equity
method. The Group’s share of its associate and joint ventures’ post-tax
50
profits or losses are recognised in the income statement, and its share
of movement in reserves is recognised in reserves. The cumulative
movements are adjusted against the carrying amount of the investment.
The Group’s investment in associate and joint ventures includes any
goodwill arising on acquisition. If the Group’s share of losses in an
associate or joint venture equals or exceeds its investment in the
associate or joint venture, the Group does not recognise further losses,
unless it has incurred obligations or made payments on behalf of the
associate or joint venture.
All subsidiaries are accounted for by applying the purchase method.
The cost of a business combination is measured as the aggregate of
the fair values, at the acquisition date, of the assets given, liabilities
incurred or assumed, and equity instruments issued by the Group. The
identifiable assets, liabilities and contingent liabilities of the acquiree
are measured initially at fair value at the acquisition date, irrespective of
the extent of any non-controlling interest. The excess of the cost of the
business combination over the Group’s interest in the net fair value of
the identifiable assets, liabilities and contingent liabilities is recognised
as goodwill.
Acquisition related costs are expensed to the consolidated income
statement in the year they are incurred.
The Group applies a policy of treating transactions with non-controlling
interests as transactions with parties external to the Group.
EMPLOYEE SHARE TRUST
IFRS 10 requires that the Group consolidate a structured entity where
the substance of the relationship between the parties indicates that
the Group controls the entity. The employee share trust sponsored by
the Group falls within this category of structured entity and has been
accounted for as if it were, in substance, a subsidiary.
CURRENCY TRANSLATION
The financial statements for the Group’s subsidiaries, associate and joint
ventures are prepared using their functional currency. The functional
currency is the currency of the primary economic environment in which
an entity operates. The presentation currency of the Group is Sterling.
Foreign currency transactions are translated into the functional currency
using exchange rates prevailing at the dates of the transactions. Exchange
differences resulting from the settlement of such transactions and from the
translation, at exchange rates ruling at the balance sheet date, of monetary
assets and liabilities denominated in currencies other than the functional
currency are recognised in the consolidated income statement.
The balance sheets of foreign operations are translated into sterling using
the exchange rate at the balance sheet date and the income statements
are translated into sterling using the average exchange rate for the year.
Where this average is not a reasonable approximation of the cumulative
effect of the rates prevailing on the transaction dates, the exchange rate on
the transaction date is used. Exchange differences arising are recognised
as a separate component of shareholders’ equity. On disposal of a foreign
operation any cumulative exchange differences held in shareholders’ equity
are transferred to the consolidated income statement.
REVENUE RECOGNITION
Revenue from the sale of goods or services is measured at the fair
value of the consideration, net of rebates and excluding value added
tax. Revenue from the sale of goods or services is recognised when the
Group has transferred the significant risks and rewards of ownership of
the goods to the buyer, when the amount of revenue can be measured
reliably and when it is probable that the economic benefits associated
with the transaction will flow to the Group. Inter segmental transactions
are on an arm’s length basis.
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS In respect of construction contracts, revenue is calculated on the basis
of the stage of completion and the total sales value of each contract.
of the equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group’s estimate of shares
that will eventually vest.
The stage of completion is determined as the proportion that contract
costs incurred for work performed to date bear to the total estimated total
contract costs. No profit is recognised until a contract is at least 30%
complete. Amounts invoiced for work completed are deducted from the
selling price, while amounts invoiced in excess of work completed are
recognised as current liabilities.
Where it is probable that contract costs will exceed total contract revenue
the expected loss is recognised immediately as an expense in the
consolidated income statement.
RETIREMENT BENEFIT OBLIGATIONS
The Group participates in two defined benefit pension schemes, Carr’s
Group Pension Scheme and Carrs Billington Agriculture Pension Scheme.
The Group also offers various defined contribution schemes to its
employees.
The assets of the above named schemes are held separately from those
of the Group and are invested with independent investment managers.
Contributions to defined contribution schemes are charged to the
consolidated income statement in the year to which they relate.
The asset/(obligation) recognised in the consolidated balance sheet at the
year end in respect of defined benefit pension schemes is the present
value of the defined benefit obligation at the balance sheet date less the
fair value of scheme assets. Independent actuaries calculate the defined
benefit asset/(obligation) annually using the projected unit credit method.
The present value of the defined benefit obligation is determined by
discounting the estimated future cash outflows using interest rates
of high-quality corporate bonds that are denominated in the currency
in which the benefits will be paid, and that have terms to maturity
approximating to the terms of the related pension liability.
The service costs, including pension scheme administrative costs are
included in operating profit in the consolidated income statement.
A charge is made within operating profit which represents a net interest
amount that is calculated by applying the discount rate at the beginning
of the year to the net defined benefit asset/(obligation) at the beginning
of the year. The net interest amount also takes into account changes to
the net asset/(obligation) during the year.
Actuarial gains and losses arising from experience adjustments and
changes in actuarial assumptions are recognised in the consolidated
statement of comprehensive income. The pension schemes’ deficits
or surpluses, to the extent that they are considered recoverable, are
recognised in full on the consolidated balance sheet.
IFRIC 14 confirms that where a company has an unconditional right
to a refund of surplus from a defined benefit pension plan during the
lifetime of that plan or when it winds it up, and where there is expected
to be surplus assets, there is no limit on the asset the Company can
show on its balance sheet. At 29 August 2015 and 30 August 2014
the consolidated balance sheet recognises the full surplus on the Carr’s
Group defined benefit pension scheme.
The Group’s share of the deficit in the Carrs Billington Agriculture
Pension Scheme is recognised through its investment in associate.
SHARE BASED PAYMENTS
The Group issues equity-settled share-based payments to certain
employees. Equity-settled share-based payments are measured at fair
value at the date of the grant. The fair value determined at the grant date
Fair value is measured by use of a valuation model. The expected life
used in the model has been adjusted, based on management’s best
estimate, for the effects of non-transferability, exercise restrictions and
behavioural considerations.
At each balance sheet date the Group revises its estimate of the number
of options that are expected to vest. Changes to the fair value recognised
as a result of this are charged or credited to the consolidated income
statement with a corresponding adjustment to the equity compensation
reserve.
INTEREST
Interest is recognised in the consolidated income statement on an
accruals basis using the effective interest method.
BORROWING COSTS
General and specific borrowing costs directly attributable to the
acquisition, construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to get ready for
their intended use or sale, are added to the cost of those assets, until
such time as the assets are substantially ready for their intended use
or sale.
All other borrowing costs are recognised in the consolidated income
statement in the year in which they are incurred.
OPERATING SEGMENTS
IFRS 8 requires operating segments to be identified on the basis of
internal financial information about components of the Group that are
regularly reviewed by the Chief Operating Decision Maker (‘CODM’) to
allocate resources to the segments and to assess their performance. The
CODM has been identified as the Executive Directors.
The CODM considers the business from a product/services perspective.
Operating segments have been identified as Agriculture, Food and
Engineering.
NON-RECURRING ITEMS
Non-recurring items that are material by size and/or by nature are
presented within their relevant income statement category. Items that
management consider fall into this category are disclosed within a note
to the financial statements. The separate disclosure of non-recurring
items helps provide a better indication of the Group’s underlying business
performance. Events which may give rise to non-recurring items include,
but are not limited to, gains or losses on the disposal of businesses,
derivative gains or losses in respect of capital expenditure, gains or losses
on the disposal of properties, gains or losses on the disposal of material
investments, the restructuring of businesses, the integration of new
businesses, acquisition related costs and asset impairments.
GOODWILL
Goodwill arises on the acquisition of subsidiaries and represents the
excess of the consideration transferred over the Group’s interest in the
net fair value of the net identifiable assets, liabilities and contingent
liabilities of the acquiree and the fair value of the non-controlling interest
in the acquiree.
51
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS PRINCIPAL ACCOUNTING POLICIES CONTINUED
For the purpose of impairment testing, goodwill acquired in a business
combination is allocated to each of the CGUs, or groups of CGUs, that
is expected to benefit from the synergies of the combination. Each unit
or group of units to which the goodwill is allocated represents the lowest
level within the entity at which the goodwill is monitored for internal
management purposes. Goodwill is monitored at the operating segment
level.
Goodwill impairment reviews are undertaken annually or more frequently
if events or changes in circumstances indicate a potential impairment.
The carrying value of goodwill is compared to the recoverable amount,
which is the higher of value in use and the fair value less costs of
disposal. Any impairment is recognised immediately as an expense and
is not subsequently reversed.
Goodwill written off to reserves under UK GAAP prior to 31 August
1998 has not been reinstated and would not form part of the gain or
loss on the disposal of a business.
OTHER INTANGIBLE ASSETS
Other intangible assets are carried at cost less accumulated amortisation
and accumulated impairment losses. Amortisation commences when
assets are available for use. The expected useful lives, over which the
assets are amortised, are generally as follows:
Customer relationships
Brands
Know-how
Patents and trademarks
Software
1 – 5 years
15 – 20 years
5 years
contractual life
3 – 10 years
Customer relationships and brands are amortised in line with the profit
and income streams they are respectively expected to generate over their
expected useful life.
Know-how, patents, trademarks and software are amortised on a
straight-line basis.
The cost of intangible assets acquired in a business combination
is the fair value at the acquisition date. The cost of separately acquired
intangible assets comprises the purchase price and any directly
attributable costs of preparing the assets for use.
RESEARCH AND DEVELOPMENT COSTS
All research costs are recognised in the consolidated income statement as
incurred. Development costs are recognised as an asset only to the extent
that specific recognition criteria, as set out in IAS38 ‘Intangible assets’,
relevant to the proposed application are met and the amount recognised is
recoverable through future economic benefits.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is carried at cost less accumulated
depreciation and accumulated impairment losses. Cost comprises
purchase price and directly attributable costs.
Freehold land and assets in the course of construction are not
depreciated. For all other property, plant and equipment, depreciation is
calculated on a straight-line basis to allocate cost less residual values of
the assets over their estimated useful lives as follows:
Freehold buildings
Leasehold buildings
Plant and equipment
up to 50 years
shorter of 50 years or lease term
3 to 20 years
Residual values and useful lives are reviewed, and adjusted if
appropriate, at each financial year-end.
Assets not fully constructed at the balance sheet date are classified
as assets in the course of construction. When construction is complete
these assets are reclassified to the appropriate heading within property,
plant and equipment. Depreciation commences when the asset is ready
for use.
The cost of maintenance, repairs and minor equipment is charged
to the consolidated income statement as incurred; the cost of major
renovations and improvements is capitalised.
Gains and losses on disposals are determined by comparing the
proceeds with the carrying amount and are recognised within the
consolidated income statement.
INVESTMENT PROPERTY
Investment properties are properties held for long-term rental yields.
Investment properties are carried in the balance sheet at cost less
accumulated depreciation. Freehold land is not depreciated. For all
other investment property, depreciation is calculated on a straight-
line basis to allocate cost less residual values of the assets over their
estimated useful lives as follows:
Freehold buildings
up to 50 years
The cost of maintenance, repairs and minor equipment is charged
to the consolidated income statement as incurred; the cost of major
renovations and improvements is capitalised.
Gains and losses on disposals are determined by comparing the
proceeds with the carrying amount and are recognised within the
consolidated income statement.
IMPAIRMENT OF NON-FINANCIAL ASSETS
Non-financial assets are reviewed for impairment where there are
any events or changes in circumstances that would indicate potential
impairment. In addition, at each reporting date, the Group assesses
whether there is any indication that goodwill may be impaired. Where
an indicator of impairment exists, the Group makes an estimate of
recoverable amount. Where the carrying amount of an asset exceeds its
recoverable amount the asset is written down to its recoverable amount.
Recoverable amount is the higher of fair value less costs to sell and
value in use and is deemed for an individual asset. If the asset does
not generate cash flows that are largely independent of those from
other assets or groups of assets, the recoverable amount of the cash
generating unit to which the asset belongs is determined. Discount rates
reflecting the asset specific risks and the time value of money are used
for the value in use calculation.
INVENTORIES
Inventories are stated at the lower of cost and net realisable value. Cost
comprises direct materials and, where applicable, direct labour costs
and those overheads that have been incurred in bringing the inventories
to their present location and condition. Where appropriate, cost is
calculated on a specific identification basis. Otherwise inventories are
valued using the first-in first-out method.
Net realisable value represents the estimated selling price less all
estimated costs to completion and costs to be incurred in marketing,
selling and distribution.
Provision has been made, where necessary, for slow moving, obsolete
and defective inventories.
Contract work in progress is measured at the selling price of the work
performed at the balance sheet date. The selling price is measured by
reference to the stage of completion at the balance sheet date and total
expected income from the contract work.
52
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
Progress payments received are deducted from the value of work in
progress except to the extent that payments on account exceed the
value of work in progress on any contract where the excess is included
in trade and other payables.
Tax is recognised in the consolidated income statement, unless the
tax relates to items recognised directly in shareholders’ equity, in which
case the tax is recognised directly in shareholders’ equity through the
consolidated statement of comprehensive income.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents for the purposes of the consolidated
statement of cash flows comprise cash at bank and in hand, money
market deposits and other short term highly liquid investments with
original maturities of three months or less and bank overdrafts. Bank
overdrafts are presented in borrowings within current liabilities in the
consolidated balance sheet.
DIVIDENDS
Final equity dividends to the shareholders of the Company are
recognised in the year that they are approved by the shareholders.
Interim equity dividends are recognised in the year that they are paid.
Dividends receivable are recognised in the period in which they
are received.
GRANTS
Grants received on capital expenditure are recorded as deferred income
and taken to the consolidated income statement in equal annual
instalments over the expected useful lives of the assets concerned.
FINANCIAL INSTRUMENTS
Financial assets and liabilities are recognised on the Group’s
consolidated balance sheet when the Group becomes a party to the
contractual provisions of the instrument.
Revenue grants and contributions are taken to the consolidated income
statement in the year to which they apply.
LEASES
Leases are classified as finance leases at inception where substantially
all of the risks and rewards of ownership are transferred to the Group.
Assets classified as finance leases are capitalised on the consolidated
balance sheet and are depreciated over the shorter of the useful life of
the asset and the term of the lease. The interest element of the rental
obligations is charged to the consolidated income statement over the
period of the lease using the actuarial method.
Rentals paid under operating leases are charged to the consolidated
income statement on a straight-line basis over the term of the lease.
Leasehold land is normally classified as an operating lease. Payments
made to acquire leasehold land are included in prepayments at cost
and are amortised over the life of the lease. Any incentives to enter into
operating leases are recognised as a reduction of rental expense over the
lease term on a straight-line basis.
TAX
The tax charge comprises current tax and deferred tax.
The current tax charge represents an estimate of the amounts payable to
tax authorities in respect of the Group’s taxable profits.
Deferred tax is provided in full, using the liability method, on temporary
differences arising between the tax base of assets and liabilities
and their carrying amounts in the consolidated financial statements.
Deferred tax arising from initial recognition of an asset or liability in a
transaction, other than a business combination, that at the time of the
transaction affects neither accounting nor taxable profit or loss, is not
recognised. Deferred tax is measured using tax rates that have been
enacted or substantively enacted by the balance sheet date and are
expected to apply when the asset is realised or the liability is settled.
Deferred tax assets are recognised to the extent that it is probable
that future taxable profit will be available against which the temporary
differences can be utilised.
Deferred tax is provided on temporary differences arising on investments
in subsidiaries, associates and joint ventures, except where the Group
is able to control the timing of the reversal of the temporary difference
and it is probable that the temporary difference will not reverse in the
foreseeable future.
Trade receivables
Trade receivables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method, less
provision for impairment. A provision for impairment of trade receivables
is established when there is objective evidence that the Group will not
be able to collect all amounts due according to the original terms of the
receivables. Significant financial difficulties of the debtor, probability
that the debtor will enter bankruptcy or financial reorganisation, and
default or delinquency in payments are considered indicators that
the trade receivable is impaired. The amount of the provision is the
difference between the asset’s carrying amount and the present value of
estimated future cash flows, discounted at the original effective interest
rate. The carrying amount of the asset is reduced through the use of a
provision for impairment, and the amount of the loss is recognised in
the consolidated income statement. The provision is utilised when a
trade receivable is uncollectible.
Investments
Investments are initially measured at cost, including transaction costs.
Equity investments that do not have a quoted market price in an active
market and whose fair value cannot be reliably measured by other
means are held at cost.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to
the substance of the contractual arrangements entered into.
An equity instrument is any contract that evidences a residual interest in
the assets of the Group after deducting all of its liabilities.
Bank borrowings
Interest-bearing loans and overdrafts are recognised initially at fair
value net of direct issue costs and are subsequently stated at amortised
cost. Finance charges, including premiums payable on settlement or
redemption and direct issue costs, are accounted for on an effective
interest method and are added to the carrying amount of the instrument
to the extent that they are not settled in the year in which they arise.
Trade payables
Trade payables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds
received, net of direct issue costs.
53
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
PRINCIPAL ACCOUNTING POLICIES CONTINUED
Derivative financial instruments and hedging activities
The Group primarily uses forward foreign currency contracts, options and
currency swaps to manage its exposures to fluctuating foreign exchange
rates. These instruments are initially recognised at fair value and are
subsequently re-measured at their fair value at each balance sheet date.
SIGNIFICANT JUDGEMENTS, KEY ASSUMPTIONS AND ESTIMATES
Application of certain Group accounting policies requires management to
make judgements, assumptions and estimates concerning the future
as detailed below.
The Group’s policy is to hedge its international assets and it has
designated foreign currency borrowings as a hedge against net
investment in foreign operations. The portion of the gain or loss on an
instrument used to hedge a net investment in a foreign operation that
is determined as an effective hedge is recognised directly in equity.
The gain or loss on any ineffective portion of the hedge is recognised
immediately in the consolidated income statement.
Valuation of pension obligations
The valuation of the Group’s defined benefit pension scheme is
determined each year following advice from a qualifying independent
actuary and can fluctuate based on a number of external factors. Such
factors include the major assumptions as shown in the table in note 24
and actual returns on scheme assets compared to those predicted in the
previous scheme valuation.
NEW STANDARDS AND INTERPRETATIONS
From 31 August 2014 the following became effective and were adopted
by the Group:
Valuation of share-based payments
The fair value of share-based payments is determined using valuation
models and is charged to the consolidated income statement over the
vesting period.
The valuation models require certain assumptions to be made as shown
in the tables in note 26. Estimations of vesting and satisfaction of
performance criteria are required to determine fair value.
Impairment of goodwill
The carrying value of goodwill must be assessed for impairment annually,
or more frequently if there are indications that goodwill might be
impaired. This requires an estimation of the value in use of the cash
generating units to which goodwill is allocated. Value in use is dependent
on estimations of future cash flows from the cash generating unit and the
use of an appropriate discount rate to discount those cash flows to their
present value.
No impairment has been identified in the year (note 9).
Revenue recognition on construction contracts
Under long term contracts, the Group recognises revenue and profits
based on the percentage completion method. This requires management
to make an assessment of the overall profitability and the stage of
completion of the entire contract in order to determine the level of
revenue and profit to recognise.
Provision for impairment of trade receivables
The financial statements include a provision for impairment of trade
receivables (note 18) that is based on management’s estimation of
recoverability. There is a risk that the provision will not match the trade
receivables that ultimately prove to be irrecoverable.
Valuation of derivative financial instruments
The fair value of derivative financial instruments (note 23) is determined
using market factors at the year end over which management have no
control. Such factors include the estimation of future currency exchange
rates. In addition the fair value of such instruments is affected by the
global economic environment and financial institution pricing structures.
IFRS 10 ‘Consolidated financial statements’
IFRS 11 ‘Joint arrangements’
IFRS 12 ‘Disclosures of interests in other entities’
Amendments to IFRS 10, 11 and 12 on transition guidance
IAS 27 (revised 2011) ‘Separate financial statements’
IAS 28 (revised 2011) ‘Associates and joint ventures’
Amendments to IFRS 10, IFRS 12 and IAS 27 on consolidation
for investment entities
Amendments to IAS 32 on Financial instruments asset and
liability offsetting
Amendments to IAS 36 ‘Impairment of assets’ on recoverable
amount disclosures
Amendments to IAS 39 ‘Financial instruments: Recognition and
measurement’ on novation of derivatives and hedge accounting
IFRIC 21 ‘Levies’
The adoption of these standards and interpretations has had no impact
on the Group’s profit for the year or equity.
NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS ISSUED BUT NOT
YET EFFECTIVE AND NOT EARLY ADOPTED
IFRS 9 ‘Financial instruments’
Amendments to IFRS 10 ‘Consolidated financial statements’ and
IAS 28 ‘Investments in associates and joint ventures’
Amendment to IFRS 10 and IAS 28 on investment entities applying
the consolidation exemption
Amendment to IFRS 11 ‘Joint arrangements’ on acquisition
of an interest in a joint operation
IFRS 14 ‘Regulatory deferral accounts’
IFRS 15 ‘Revenue from contracts with customers’
Amendment to IAS 1 ‘Presentation of financial statements’
on the disclosure initiative
Amendment to IAS 16 ‘Property, plant and equipment’ and
IAS 38 ‘Intangible assets’ on depreciation and amortisation
Amendment to IAS 16 ‘Property, plant and equipment’ and
IAS 41 ‘Agriculture’ regarding bearer plants
Amendment to IAS 19 regarding defined benefit plans
Amendments to IAS 27, ‘Separate financial statements’
on the equity method
Annual improvements to IFRSs 2012, 2013 and 2014
It is considered that the above standards and amendments will not have
a significant effect on the results or net assets of the Group.
54
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS
1 The Company has taken advantage of the exemption, under section 408 of the Companies Act 2006, from presenting its own income statement.
The profit after tax for the year dealt with in the accounts of the Company was £2,870,000 (2014: £2,021,000).
2 Segmental information
The chief operating decision maker (“CODM”) has been identified as the Executive Directors. Management has identified the operating
segments based on internal financial information reviewed by the CODM. The CODM considers the business from a product/services perspective.
Operating segments have been identified as Agriculture, Food and Engineering. Operating segments have not been aggregated for the purpose
of determining reportable segments.
Agriculture aims to provide for all farming requirements. It derives its revenue from the sale of animal feed and feed blocks together with retail sales
of farm equipment, fuels and farm consumables.
Food derives its revenues from the milling of wheat into flour. Customers range from the larger companies, bread and biscuit manufacturers
and supermarkets, to smaller owner managed bakeries.
Engineering derives its revenues from the design and manufacture of remote handling equipment for use in research and nuclear industries.
In addition the UK business is involved in precision machining and the design and manufacture of pressure vessels for the oil, petrochemical
and gas industry.
Performance is assessed using profit before taxation. For internal purposes profit before taxation is measured in a manner consistent with that
in the financial statements, with the exception of material non-recurring items, which are excluded.
Inter-segmental transactions are all undertaken on an arm’s length basis.
Adjustments to segmental information and amounts classified as ‘other’ represents non-reportable segments and consolidation adjustments.
As segment liabilities are not reviewed by the CODM they are not required to be disclosed under IFRS 8.
The Group has operations in the UK and overseas. In accordance with IFRS 8, entity wide disclosures based on the geography of operations
is also presented. The geographical analysis of revenue is presented by revenue origin.
The segmental information for the year ended 29 August 2015 is as follows:
Total segment revenue
Inter segment revenue
297,811
(115)
80,280
—
33,588
(46)
Revenue from external customers
297,696
80,280
33,542
47
—
47
411,726
(161)
411,565
Agriculture
£’000
Food
£’000
Engineering
£’000
Other
£’000
Group
£’000
EBITDA1
13,557
4,995
4,201
(1,117)
21,636
Depreciation of property, plant and equipment
Depreciation of investment property
Profit/(loss) on the disposal of property, plant and equipment
Amortisation of intangible assets
Operating profit/(loss)
Finance income
Finance costs
Share of post-tax profit of associate
Share of post-tax profit of joint ventures
Profit/(loss) before taxation
(2,259)
—
50
(100)
11,248
49
(865)
10,432
1,500
807
12,739
(1,860)
(4)
12
(15)
3,128
1
(695)
2,434
—
—
2,434
(815)
—
(24)
(93)
3,269
2
(180)
3,091
—
—
3,091
(125)
(16)
(12)
—
(1,270)
145
328
(797)2
—
—
(5,059)
(20)
26
(208)
16,375
197
(1,412)
15,160
1,500
807
(797)
17,467
1 Earnings before interest, tax, depreciation and amortisation (and before profit/(loss) on the disposal of property, plant and equipment)
2 Includes Head Office net expense of £(663,000) and retirement benefit charge of £(120,000)
55
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2 Segmental information (continued)
Assets
Segment gross assets
106,193
42,977
33,964
20,254
203,388
Agriculture
£’000
Food
£’000
Engineering
£’000
Other
£’000
Group
£’000
The segmental information for the year ended 30 August 2014 is as follows:
Total segment revenue
Inter segment revenue
315,019
(94)
87,107
(1)
26,939
(61)
47
—
429,112
(156)
Revenue from external customers
314,925
87,106
26,878
47
428,956
Agriculture
£’000
Food
£’000
Engineering
£’000
Other
£’000
Group
£’000
EBITDA1
12,563
4,955
4,618
(1,719)
20,417
Depreciation of property, plant and equipment
Depreciation of investment property
Profit/(loss) on the disposal of property, plant and equipment
Amortisation of intangible assets
Operating profit/(loss)
Finance income
Finance costs
Share of post-tax profit of associate
Share of post-tax profit of joint ventures
(2,215)
—
102
(56)
10,394
88
(897)
9,585
1,579
907
(1,856)
(4)
(6)
(17)
3,072
2
(784)
2,290
—
—
(690)
—
8
(120)
3,816
3
(107)
3,712
—
—
(121)
(15)
—
—
(1,855)
171
164
(1,520)3
—
—
(4,882)
(19)
104
(193)
15,427
264
(1,624)
14,067
1,579
907
Profit/(loss) before taxation
12,071
2,290
3,712
(1,520)
16,553
3 Includes Head Office net expense of £(753,000) and retirement benefit charge of £(687,000)
Assets
Segment gross assets
101,203
44,485
31,822
20,182
197,692
Agriculture
£’000
Food
£’000
Engineering
£’000
Other
£’000
Group
£’000
Entity wide disclosures
Revenues from external customers are derived from the sale of products by individual business segment. The breakdown of revenue by business
segment is provided above.
Revenues from external customers:
UK
Europe
USA
56
2015
£’000
368,007
13,759
29,799
2014
£’000
391,581
14,137
23,238
411,565
428,956
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
2 Segmental information (continued)
Non-current assets excluding deferred tax assets:
Goodwill
Other intangible assets
Property, plant and equipment
Investment property
Investment in associate
Interest in joint ventures
Other investments
Non-current receivables
Retirement benefit asset
2015
UK
£’000
Europe
£’000
10,520
173
48,256
636
8,439
1,748
61
50
1,767
313
245
6,009
—
—
2,097
—
—
—
USA
£’000
16
30
4,120
—
—
1,167
18
—
—
Total
£’000
UK
£’000
Europe
£’000
2014
10,849
448
58,385
636
8,439
5,012
79
50
1,767
9,470
107
47,620
656
6,883
1,738
61
501
2,056
313
351
6,580
—
—
1,953
—
—
—
USA
£’000
15
41
2,426
—
—
1,145
16
—
—
Total
£’000
9,798
499
56,626
656
6,883
4,836
77
501
2,056
71,650
8,664
5,351
85,665
69,092
9,197
3,643
81,932
Major customers
There are no revenues from transactions with individual customers which amount to ten percent or more of Group revenue.
3 Group operating profit
Group operating profit is stated after (crediting)/charging:
Amortisation of grants
Profit on disposal of property, plant and equipment
Depreciation of property, plant and equipment
Depreciation of owned investment property
Amortisation of intangible assets
Foreign exchange losses/(gains)
Derivative financial instruments losses
Operating lease charges
Auditors’ remuneration:
Audit services (Company £15,300; 2014: £15,000)
The auditing of accounts of subsidiaries of the Company pursuant to legislation (including overseas)
Total audit services
Taxation compliance services
Other taxation advisory services
Other non-audit services
Total non-audit services
Included within Group operating profit is the following in respect of investment property leased to,
and occupied by, external parties:
Rental income
Operating expenses
2015
£’000
(120)
(26)
5,059
20
208
50
7
1,077
75
136
211
33
35
19
87
(54)
64
10
2014
£’000
(54)
(104)
4,882
19
193
(52)
9
897
74
131
205
30
45
69
144
(54)
58
4
57
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
4 Staff costs
Group
Wages and salaries
Social security costs
Other pension costs
Share based payments
Included within other pension costs is £120,000 (2014: £687,000) in respect of the defined benefit pension scheme.
The average monthly number of employees, including Directors, during the year was made up as follows:
Group
Sales, office and management
Manufacture and distribution
2015
£’000
33,010
3,536
2,018
584
39,148
2015
Number
566
491
1,057
2014
£’000
29,674
3,292
2,388
401
35,755
2014
Number
542
423
965
Key management are considered to be the Directors of the Group.
Full details of the Directors’ emoluments, pension benefits and share options are given in the Remuneration Committee Report on pages 30 to 35.
5 Finance income and finance costs
Finance income
Bank interest
Other interest
Total finance income
Finance costs
Interest payable on bank overdrafts
Interest payable on bank loans and other borrowings
Interest payable on finance leases
Other interest
2015
£’000
2014
£’000
187
10
197
(190)
(763)
(389)
(70)
246
18
264
(219)
(901)
(428)
(76)
Total finance costs
(1,412)
(1,624)
58
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
6 Taxation
(a) Analysis of the charge in the year
Current tax:
UK corporation tax
Current year
Adjustment in respect of prior years
Foreign tax
Current year
Adjustment in respect of prior years
Group current tax
Deferred tax:
Origination and reversal of timing differences
Current year
Adjustment in respect of prior years
Group deferred tax (note 16)
Tax on profit from ordinary activities
2015
£’000
1,736
114
621
(33)
2,438
1,293
43
1,336
3,774
2014
£’000
1,480
238
1,722
98
3,538
362
(240)
122
3,660
(b) Factors affecting tax charge for the year
The tax assessed for the year is higher (2014: lower) than the rate of corporation tax in the UK of 20.58% (2014: 22.17%). The differences are
explained below:
Profit before taxation
Tax at 20.58% (2014: 22.17%)
Effects of:
Tax effect of share of profit in associate and joint ventures
Tax effect of expenses that are not allowable in determining taxable profit
Tax effect of non-taxable income
Effects of different tax rates of foreign subsidiaries
Effects of changes in tax rates
Adjustment in respect of prior years
Other
2015
£’000
2014
£’000
17,467
16,553
3,595
3,670
(475)
154
(92)
478
(16)
124
6
(551)
75
—
420
(57)
96
7
Total tax charge for the year
3,774
3,660
(c) Factors affecting future tax charges
The main rate of UK corporation tax was reduced from 21% to 20% from 1 April 2015. This was substantively enacted prior to the year end. UK
deferred tax balances at 29 August 2015 have been calculated using a tax rate of 20%.
59
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
7 Dividends
Equity
Second interim paid for the year ended 30 August 2014 of 0.85p per 2.5p share (2013 restated: 0.775p)
Final dividend for the year ended 30 August 2014 of 1.7p per 2.5p share (2013 restated: 1.65p)
First interim paid for the year ended 29 August 2015 of 0.925p per 2.5p share (2014 restated: 0.85p)
2015
£’000
760
1,520
830
3,110
2014
£’000
689
1,467
756
2,912
Since the year end a second interim dividend of £830,281, being 0.925p per share, has been paid. The financial statements do not reflect this
dividend payable.
The proposed final dividend for the year ended 29 August 2015 to be considered by shareholders at the Annual General Meeting is £1,661,683, being
1.85p per share, making a total for the year of 3.7p (2014 restated: 3.4p). The financial statements do not reflect this proposed final dividend as payable.
8 Earnings per ordinary share
Earnings per share are calculated by reference to a weighted average of 89,574,461 shares (2014 restated: 88,995,250) in issue during the year.
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:
Earnings per share – basic
Amortisation and non-recurring items:
Amortisation of intangible assets
Taxation relief on amortisation
Acquisition related costs1
Earnings per share – adjusted
2015
Earnings
per share
pence
2014
Earnings
per share
pence2
Earnings
£’000
13.4
11,372
0.2
(0.1)
0.1
13.6
193
(50)
123
11,638
12.8
0.2
(0.1)
0.2
13.1
Earnings
£’000
11,989
208
(52)
58
12,203
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential
ordinary shares. The potentially dilutive ordinary shares, where the exercise price is less than the average market price of the Company’s ordinary
shares during the year, are disclosed in note 26.
2015
Weighted
average
number
of shares
Earnings
£’000
Earnings
per share
pence
Earnings
£’000
2014
Weighted
average
number
of shares2
Earnings per share
11,989
89,574,461
13.4
11,372
88,995,250
Effect of dilutive securities:
Share option scheme
Share save scheme
Long term incentive plan
—
—
—
332,332
1,288,785
1,476,960
Diluted earnings per share
11,989
92,672,538
(0.1)
(0.2)
(0.2)
12.9
—
—
—
537,350
1,756,950
964,760
11,372
92,254,310
Diluted adjusted earnings
per share
12,203
92,672,538
13.2
11,638
92,254,310
Earnings
per share
pence2
12.8
(0.1)
(0.3)
(0.1)
12.3
12.6
1 Disallowable for tax purposes
2 Restated for the effect of the 10:1 share split in January 2015
60
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
9 Goodwill and other intangible assets
Group
Cost
At 1 September 2013
Exchange differences
Subsidiaries acquired
Additions
At 30 August 2014
Exchange differences
Subsidiaries acquired
Additions
At 29 August 2015
Accumulated amortisation
and impairment
At 1 September 2013
Exchange differences
Charge for the year
At 30 August 2014
Exchange differences
Charge for the year
At 29 August 2015
Net book amount
At 31 August 2013
At 30 August 2014
At 29 August 2015
Goodwill
£’000
Customer
relationships
£’000
Brands
£’000
Know-how
£’000
Patents and
trademarks
£’000
Software
£’000
Total
£’000
5,540
(2)
4,585
—
10,123
1
1,050
—
11,174
325
—
—
325
—
—
325
5,215
9,798
10,849
3,158
—
51
—
3,209
—
162
—
3,371
3,158
—
51
3,209
—
81
3,290
—
—
81
612
(18)
—
—
594
(16)
—
—
578
310
(6)
33
337
(6)
30
361
302
257
217
240
—
—
—
240
—
—
—
240
240
—
—
240
—
—
240
—
—
—
153
(11)
—
3
145
13
—
5
163
107
(7)
5
105
9
19
133
46
40
30
577
(41)
—
54
590
(40)
—
10
560
310
(26)
104
388
(26)
78
440
267
202
120
10,280
(72)
4,636
57
14,901
(42)
1,212
15
16,086
4,450
(39)
193
4,604
(23)
208
4,789
5,830
10,297
11,297
During the year goodwill of £1,050,000 arose on acquisitions (note 27).
During the prior year goodwill totalling £4,585,000 arose on the acquisitions of Chirton Engineering Limited and B.E. Williams Limited. Goodwill
represented the excess of the consideration paid over the Group’s interest in the net fair value of the net identifiable assets, liabilities and contingent
liabilities acquired.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to cash generating units that are expected to benefit
from the synergies of the combination.
61
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
9 Goodwill and other intangible assets (continued)
The carrying value of goodwill has been allocated to the following cash generating units:
Carrs Billington Agriculture (Sales) Limited
Carrs Billington Agriculture (Sales) Limited – Johnstone Wallace Oils profit centre
Carrs Billington Agriculture (Sales) Limited – Borders profit centre
Carrs Billington Agriculture (Sales) Limited – Wooler profit centre
Carrs Billington Agriculture (Sales) Limited – Safe at Work profit centre
Carrs Billington Agriculture (Sales) Limited – Laycocks profit centre
Carrs Billington Agriculture (Sales) Limited – Williams profit centre
Carrs Billington Agriculture (Sales) Limited – Nicholls profit centre
Carrs Billington Agriculture (Sales) Limited – Reid and Robertson profit centre
Carrs Agriculture Limited – Scotmin profit centre
Animal Feed Supplement, Inc. – Silver Springs profit centre
Wälischmiller Engineering GmbH
Carrs Engineering Limited – Bendalls Engineering profit centre
Carrs Engineering Limited – Chirton profit centre
29 August
2015
£’000
30 August
2014
£’000
195
781
264
369
568
125
359
267
783
2,068
15
313
516
4,226
10,849
195
781
264
369
568
125
359
—
—
2,068
14
313
516
4,226
9,798
Goodwill is tested annually for impairment, or more frequently if there are indications that goodwill might be impaired. Goodwill is tested for
impairment by estimating future cash flows from the cash generating units to which goodwill has been allocated and discounting these cash flows
to their present value. Each unit or group of units to which goodwill is allocated represents the lowest level within the entity at which the goodwill is
monitored for internal management purposes. Goodwill is monitored at operating segment level. The key assumptions in this calculation are in respect
of discount rates used and the change in cash flows. Management estimates discount rates using pre-tax rates that reflect current market assessments
of the time value of money and the risks specific to the cash generating units.
Cash flows are estimated using the most recent budget information for the year to August 2016, which has been approved by the Board and
forecast information for the four years to August 2020 based on medium term business plans and an assumption for long term growth of between
1-3% excluding inflation. The pre-tax discount rate used to discount the forecast cash flows for all cash generating units is 7.73% - 12.76%
(2014: 5.97% - 11.41%).
The Directors consider the assumptions adopted in calculating the cash flows to be consistent with historical performance and to be reasonable given
current market conditions.
Significant headroom exists in each of the cash generating units and, based on the stress testing performed, reasonable possible changes in the
assumptions would not cause the carrying amount of the cash generating units to equal or to exceed their recoverable amount. Given the current
state of the oil market the Directors placed particular attention to the impairment review on the carrying value of goodwill relating to the Chirton
profit centre. The Directors reviewed the assumptions used and the impact of sensitivities and agreed that no provision for impairment was required.
Amortisation and impairment charges are recognised within administrative expenses.
There is no goodwill or intangible assets in the Company (2014: none).
62
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
10 Property, plant and equipment
Group
Cost
At 1 September 2013
Exchange differences
Subsidiaries acquired
Additions
Disposals
Reclassifications
At 30 August 2014
Exchange differences
Subsidiaries acquired
Additions
Disposals
Reclassifications
At 29 August 2015
Accumulated depreciation
At 1 September 2013
Exchange differences
Subsidiaries acquired
Charge for the year
Disposals
Reclassifications
At 30 August 2014
Exchange differences
Subsidiaries acquired
Charge for the year
Disposals
At 29 August 2015
Net book amount
At 31 August 2013
At 30 August 2014
At 29 August 2015
Land and
buildings
£’000
Plant and
equipment
£’000
Assets in the
course of
construction
£’000
32,138
(402)
—
3,656
(85)
154
35,461
(198)
14
710
(51)
133
67,680
(501)
1,963
3,252
(1,253)
871
72,012
300
178
4,410
(1,419)
175
506
(12)
—
1,134
—
(1,025)
603
(2)
—
2,143
—
(308)
Total
£’000
100,324
(915)
1,963
8,042
(1,338)
—
108,076
100
192
7,263
(1,470)
—
36,069
75,656
2,436
114,161
6,408
(56)
—
730
(85)
(16)
6,981
42
14
817
(14)
7,840
40,848
(312)
822
4,152
(1,057)
16
44,469
301
60
4,242
(1,136)
47,936
25,730
26,832
28,480
27,543
—
—
—
—
—
—
—
—
—
—
—
—
506
603
28,229
27,720
2,436
47,256
(368)
822
4,882
(1,142)
—
51,450
343
74
5,059
(1,150)
55,776
53,068
56,626
58,385
Freehold land amounting to £3,569,135 (2014: £3,322,460) has not been depreciated.
The net book amount of plant and equipment includes £12,261,842 (2014: £12,722,306) in respect of assets held under finance leases. This consists
of cost of £16,603,001 (2014: £16,260,825) less accumulated depreciation of £4,341,159 (2014: £3,538,519).
The Group’s bankers hold legal charges over certain properties.
63
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
10 Property, plant and equipment (continued)
Depreciation is recognised within the Consolidated Income Statement as shown below:
Cost of sales
Distribution costs
Administrative expenses
The Company has no property, plant and equipment (2014: none).
11 Investment property
Group
Cost
At 1 September 2013, 31 August 2014 and 29 August 2015
Accumulated depreciation
At 31 August 2013
Charge for the year
At 30 August 2014
Charge for the year
At 29 August 2015
Net book amount
At 31 August 2013
At 30 August 2014
At 29 August 2015
2015
£’000
4,373
76
610
5,059
2014
£’000
4,246
92
544
4,882
Total
£’000
922
247
19
266
20
286
675
656
636
Included within investment property are properties occupied by life tenants. The net book amount of these properties at 29 August 2015 is
£145,000 (2014: £150,000).
The fair value of investment properties at 29 August 2015 is £1,065,000 (2014: £1,065,000). Investment properties were valued by independent
professionally qualified valuers in 2011. The Directors have reviewed the valuations and are satisfied there are no significant changes to the
assumptions and the valuations. The Directors have therefore not sought updated professional valuations at 29 August 2015.
There is no investment property in the Company (2014: none).
64
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
12 Investments
Group
Cost
At 1 September 2013
Exchange difference
Subsidiaries acquired
Additions
Disposals
Redemption of preference shares
Reclassification
Share of post-tax profit
Share of losses recognised directly in equity
At 30 August 2014
Exchange difference
Return of capital invested
Redemption of preference shares
Share of post-tax profit
Share of gains recognised directly in equity
At 29 August 2015
Associate
£’000
Joint
ventures
£’000
Other
investments
£’000
7,024
—
—
—
—
—
(1,225)
1,579
(495)
6,883
—
—
—
1,500
56
8,439
3,299
(143)
—
965
—
(150)
—
907
(42)
4,836
(71)
(488)
(150)
807
78
5,012
Total
£’000
10,404
(144)
10
965
(4)
(150)
(1,225)
2,486
(537)
11,805
(69)
(488)
(150)
2,307
134
13,539
9
10,395
11,796
13,530
81
(1)
10
—
(4)
—
—
—
—
86
2
—
—
—
—
88
9
72
77
79
Accumulated provision for impairment
At 1 September 2013, 30 August 2014 and 29 August 2015
—
—
Net book amount
At 31 August 2013
At 30 August 2014
At 29 August 2015
7,024
6,883
8,439
3,299
4,836
5,012
During the prior year £1,225,000 was reclassified to receivables. At the prior year end £1,000,000 of this receivable was outstanding. £500,000 was
included within current receivables and £500,000 was included within non-current receivables. At 29 August 2015 £500,000 of this receivable is
outstanding and is included within current receivables.
Other investments comprise shares in several private limited companies. These investments have been classified as unquoted investments for which
fair value cannot be reliably measured and are held at cost less accumulated impairment.
65
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
12 Investments (continued)
Company
Cost
At 1 September 2013
Share based payment expense
in respect of employees of
subsidiary undertakings
Reclassification
At 30 August 2014
Recapitalisation
Share based payment expense
in respect of employees of
subsidiary undertakings
At 29 August 2015
Accumulated provision for impairment
At 1 September 2013
Disposals
At 30 August 2014
Impairment in the year
At 29 August 2015
Net book amount
At 31 August 2013
At 30 August 2014
At 29 August 2015
Shares in
subsidiaries
£’000
Associate
£’000
Joint
ventures
£’000
Total
£’000
18,028
1,470
272
19,770
114
—
18,142
74
222
18,438
5,381
6
5,387
846
6,233
12,647
12,755
12,205
—
(1,225)
245
—
—
245
—
—
—
—
—
1,470
245
245
—
—
272
—
—
272
—
—
—
—
—
272
272
272
114
(1,225)
18,659
74
222
18,955
5,381
6
5,387
846
6,233
14,389
13,272
12,722
During the prior year £1,225,000 was reclassified to receivables. At the prior year end £1,000,000 of this receivable was outstanding. £500,000 was
included within current receivables and £500,000 was included within non-current receivables. At 29 August 2015 £500,000 of this receivable is
outstanding and is included within current receivables.
13 Investment in associate
The associated undertaking at 29 August 2015 is:
Group and Company
Name
Proportion
of shares held
Ordinary
%
Country of
incorporation
Country of
operation
Activity
Carrs Billington Agriculture (Operations) Limited
49
England
UK
Manufacture of animal feed
The Group does not have the ability to control the financial and operating policies of Carrs Billington Agriculture (Operations) Limited. The Group
has a 49% shareholding and a 43% representation on the Board of Directors of this associate.
Associates are accounted for using the equity method.
At the year end the associate had capital commitments of £187,000 (2014: £nil). No contingent liabilities exist within the associate.
The aggregate amounts relating to the associate, of which the Group recognises 49% in the net investment in associate, are:
Total assets
Total liabilities
Revenues
Profit after tax
66
2015
£’000
34,199
(16,977)
105,162
3,061
2014
£’000
33,244
(19,197)
113,984
3,223
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
14 Interest in joint ventures
The joint ventures at 29 August 2015 are:
Group
Name
Interest held
Equity
%
Non-equity
%
Country of
incorporation
Country of
operation
Crystalyx Products GmbH
Bibby Agriculture Limited
Afgritech Limited
Afgritech LLC
50
26
50
50
Gold-Bar Feed Supplements LLC
50
ACC Feed Supplement LLC
50
Silloth Storage Company Limited
50
—
26
—
—
—
—
—
Germany
Germany
England
England
USA
USA
USA
England
UK
UK
USA
USA
USA
UK
Activity
Manufacture of animal
feed blocks
Sale of agricultural products
Holding company
Producers of ingredients
of animal feed
Manufacture of animal
feed blocks
Manufacture of animal
feed blocks
Storage of cane derived
livestock feed supplement
Crystalyx Products GmbH has a 31 December accounting year end.
Silloth Storage Company Limited has a 30 June accounting year end.
Interests in the joint ventures listed above are held directly by the holding Company with the following exceptions: Carrs Billington Agriculture (Sales)
Limited holds 50% of the ordinary share capital and 50% of the preference share capital in Bibby Agriculture Limited. Carrs Agriculture Limited
holds 50% of the ordinary share capital in Silloth Storage Company Limited. Animal Feed Supplement, Inc. holds the interest in Gold-Bar Feed
Supplements LLC and ACC Feed Supplement LLC. Afgritech Limited has 100% control of Afgritech LLC. The preference shares in Bibby Agriculture
Limited are redeemable with three months notice, carry no dividend entitlement except at the Directors’ discretion, and no voting rights.
Joint ventures are accounted for using the equity method.
At the year end Afgritech LLC had capital commitments of £nil (2014: £580,000). The prior year capital commitment was in respect of replacement
silos. No contingent liabilities exist within the joint ventures.
The aggregate amounts included in the financial statements relating to the Group’s share of joint ventures are:
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Income
Expenses
Net finance (cost)/income
2015
£’000
5,737
5,643
(5,930)
(775)
24,607
(23,618)
(12)
2014
£’000
5,222
5,102
(5,594)
(381)
27,212
(26,072)
14
Goodwill of £17,000 arose on the investment in Silloth Storage Company Limited. This is included in the carrying amount of the Group’s interest
in joint ventures and is not shown as a separate asset.
Included within interest in joint ventures is an amount of £320,000 (2014: £470,000) which relates to the Group’s interest in the preference share
capital of Bibby Agriculture Limited.
67
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
15 Investment in subsidiary undertakings
Name
Proportion
of shares held
Ordinary
%
Country of
incorporation
Country of
operation
Carrs Agriculture Limited
100
England
Carrs Billington Agriculture (Sales) Limited
Animal Feed Supplement, Inc.
Horslyx LLC
Carr’s Flour Mills Limited
Carrs Engineering Limited
Wälischmiller Engineering GmbH
B.R.B. Trust Limited
Carrs Properties Limited
Dormant subsidiaries are listed on page 96.
51
100
100
100
100
100
100
100
England
USA
USA
England
England
Germany
England
England
UK
UK
USA
USA
UK
UK
Germany
UK
UK
Activity
Manufacture of
animal feed/mineral blocks and
ingredients of animal feed
Agricultural retailers
Manufacture of
animal feed blocks
Distributor of
animal feed blocks
Flour milling
Engineering
Engineering
Financial services
Property holding
Investments in the subsidiaries listed above are held directly by the Company with the following exceptions: Carrs Engineering Limited holds 100% of
the ordinary share capital in Wälischmiller Engineering GmbH and Carrs Agriculture Limited holds 100% of the investment in Horslyx LLC.
16 Deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Group
Accelerated tax
depreciation
Employee benefits
Other
Tax assets/(liabilities)
Assets
Liabilities
Net
2015
£’000
—
—
861
861
2014
£’000
—
—
1,507
1,507
2015
£’000
(2,996)
(353)
(835)
(4,184)
2014
£’000
(2,932)
(412)
(767)
(4,111)
2015
£’000
(2,996)
(353)
26
(3,323)
Movement in deferred tax during the year
At
31 August
2014
£’000
1,507
1,507
(2,932)
(412)
(767)
(4,111)
(2,604)
Assets:
Other
Liabilities:
Accelerated tax depreciation
Employee benefits
Other
Net liabilities
Exchange
differences
£’000
In respect of
acquisitions
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
118
118
(10)
—
10
—
118
(32)
(32)
(39)
—
—
(39)
(71)
(732)
(732)
(15)
(511)
(78)
(604)
(1,336)
—
—
—
570
—
570
570
2014
£’000
(2,932)
(412)
740
(2,604)
At
29 August
2015
£’000
861
861
(2,996)
(353)
(835)
(4,184)
(3,323)
Other deferred tax assets and liabilities includes deferred tax on short term timing differences, rolled over capital gains, trading losses, capital losses,
business combinations and overseas deferred tax.
68
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
16 Deferred tax assets and liabilities (continued)
Movement in deferred tax during the prior year
At
1 September
2013
£’000
654
1,390
2,044
(2,964)
—
(801)
(3,765)
(1,721)
—
(91)
(91)
8
—
12
20
(71)
Assets
2015
£’000
2014
£’000
3
—
3
3
—
3
Assets:
Employee benefits
Other
Liabilities:
Accelerated tax depreciation
Employee benefits
Other
Net liabilities
Company
Accelerated tax
depreciation
Employee benefits
Tax assets/(liabilities)
Movement in deferred tax during the year
Assets:
Accelerated tax depreciation
Liabilities:
Employee benefits
Net liabilities
Movement in deferred tax during the prior year
Assets:
Accelerated tax depreciation
Employee benefits
Liabilities:
Employee benefits
Net liabilities
Exchange
differences
£’000
In respect of
acquisitions
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
—
(10)
(10)
(198)
—
160
(38)
(48)
2015
£’000
—
(353)
(353)
Liabilities
(654)
218
(436)
222
230
(138)
314
(122)
2014
£’000
—
(412)
(412)
—
—
—
—
(642)
—
(642)
(642)
2015
£’000
3
(353)
(350)
Net
At
31 August
2014
£’000
3
(412)
(409)
Recognised
in income
£’000
Recognised
in equity
£’000
—
(511)
(511)
—
570
570
At
1 September
2013
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
1
654
655
—
—
655
2
(654)
(652)
230
230
(422)
—
—
—
(642)
(642)
(642)
At
30 August
2014
£’000
—
1,507
1,507
(2,932)
(412)
(767)
(4,111)
(2,604)
2014
£’000
3
(412)
(409)
At
29 August
2015
£’000
3
(353)
(350)
At
30 August
2014
£’000
3
—
3
(412)
(412)
(409)
69
Tax of £133,000 (2014: £133,000) in respect of tax losses has not been recognised as a deferred tax asset in the Group balance sheet.
Tax of £43,000 (2014: £43,000) in respect of tax losses has not been recognised as a deferred tax asset in the Company balance sheet.
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
17 Inventories
Group
Raw materials and consumables
Work in progress
Finished goods and goods for resale
2015
£’000
10,060
2,382
22,589
35,031
2014
£’000
10,968
1,633
20,714
33,315
Inventories are stated after a provision for impairment of £414,000 (2014: £396,000). The amount recognised as an expense in the year in respect
of the write down of inventories is £66,000 (2014: £52,000). The amount recognised as a credit in the year in respect of reversals of write downs
of inventories is £9,000 (2014: £nil).
The cost of inventories recognised as an expense and included in cost of sales is £354,656,000 (2014: £376,529,000).
The Company has no inventories (2014: none).
Construction contracts disclosures
Contract costs incurred plus recognised profits less recognised losses to date
Contract advances received
Work in progress on construction contracts
2015
£’000
2,691
(1,679)
1,012
2014
£’000
3,862
(3,239)
623
Revenue from construction contracts
23,678
19,858
18 Trade and other receivables
Current:
Trade receivables
Less: provision for impairment of trade receivables
Trade receivables – net
Amounts recoverable on contracts
Amounts owed by Group undertakings (note 33)
Amounts owed by other related parties (note 33)
Loans receivable
Other taxes and social security receivable
Other receivables
Prepayments and accrued income
Non-current:
Amounts owed by other related parties (note 33)
Other receivables
Group
Company
2015
£’000
53,428
(2,070)
51,358
3,985
—
4,343
—
1,141
1,379
2,248
64,454
—
50
50
2014
£’000
57,830
(3,065)
54,765
806
—
4,200
270
838
736
2,008
63,623
500
1
501
2015
£’000
—
—
—
—
32,740
3,651
—
—
234
220
36,845
—
—
—
2014
£’000
—
—
—
—
29,983
3,417
—
—
210
202
33,812
500
—
500
The movement in the provision for impaired trade receivables consists of increases for additional provisions offset by receivables written off and
unused provision released back to the consolidated income statement. The provision is utilised when there is no expectation of recovering
additional cash.
70
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
18 Trade and other receivables (continued)
During the year a credit of £307,000 (2014: £17,000) has been recognised within administrative expenses in the consolidated income
statement in respect of the movement in provision for impairment of trade receivables.
No impairment of other receivables has been recognised in the current or preceding year.
Interest bearing, non-trading amounts owed by Group undertakings carry interest at Bank of England base rate + 2.50%, 4.50% or 4.88%.
Such amounts are unsecured and repayable on demand.
2015
2014
Gross
£’000
Impairment
£’000
Past due but
not impaired
£’000
Gross
£’000
Impairment
£’000
Past due but
not impaired
£’000
The ageing of trade
receivables is as
follows:
Not past due
Past due 0 – 30 days
Past due 31 – 60 days
Past due 61 – 90 days
Past due 91 – 120 days
Past 121 days
35,236
6,800
3,724
2,667
1,282
3,719
53,428
(123)
(82)
(110)
(104)
(83)
(1,568)
(2,070)
N/A
6,718
3,614
2,563
1,199
2,151
40,529
7,187
1,921
2,367
1,702
4,124
(359)
(221)
(109)
(321)
(246)
(1,809)
N/A
6,966
1,812
2,046
1,456
2,315
16,245
57,830
(3,065)
14,595
The Company has no trade receivables (2014: none).
The credit quality of customers is assessed at subsidiary and Group level, taking into account their financial positions, past experiences and other
relevant factors. Individual customer credit limits are imposed based on these factors.
It is Group policy that overdue accounts are reviewed monthly at divisional management meetings to mitigate exposure to credit risk and are provided
for where appropriate.
The maximum exposure to credit risk at the year end is the carrying value, net of provision for impairment, of each receivable. The Group and
Company do not hold any significant collateral as security (2014: none).
The carrying value of trade receivables are denominated
in the following currencies:
Sterling
US Dollar
Euro
New Zealand Dollar
19 Current tax assets
Corporation tax recoverable
Group taxation relief
Group
2015
£’000
2014
£’000
Company
2015
£’000
2014
£’000
47,443
630
2,937
348
51,358
2015
£’000
839
—
839
50,812
413
3,540
—
54,765
—
—
—
—
—
Group
Company
2014
£’000
47
—
47
2015
£’000
1,256
308
1,564
—
—
—
—
—
2014
£’000
639
553
1,192
71
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
20 Cash and cash equivalents and bank overdrafts
Group
Company
Cash and cash equivalents per the balance sheet
Bank overdrafts (note 22)
2015
£’000
16,488
(213)
2014
£’000
17,268
(243)
Cash and cash equivalents per the statement of cash flows
16,275
17,025
21 Trade and other payables
Current:
Trade payables
Payments on account
Amounts owed to Group undertakings (note 33)
Amounts owed to other related parties (note 33)
Other taxes and social security payable
Deferred employee incentive plan
Other payables
Accruals and deferred income
Non-current:
Deferred employee incentive plan
Contingent consideration
Accruals and deferred income
Group
2015
£’000
20,655
1,279
—
18,045
1,162
2,324
5,836
5,195
54,496
—
2,394
1,906
4,300
2014
£’000
20,808
3,027
—
16,072
1,175
2,217
6,978
3,959
54,236
1,973
2,394
1,628
5,995
2015
£’000
8,973
—
8,973
2014
£’000
8,822
—
8,822
Company
2015
£’000
2014
£’000
—
—
27
1
683
—
241
963
—
—
29
2
447
—
203
621
1,915
1,302
—
—
—
—
—
—
—
—
Amounts owed to Group undertakings and other related parties are interest free, unsecured and repayable on demand.
The contingent consideration of £2,394,000 on the acquisition of Chirton Engineering Limited in year ended 2014 remains potentially payable subject
to certain earnings criteria being met. As at 29 August 2015 this criteria was not met and therefore none of this contingent consideration is payable
within one year of the balance sheet date. The earliest that any consideration may fall due would be subsequent to year end 2016.
Included within accruals and deferred income is the following in respect of government grants:
Group
2015
£’000
1,628
—
500
(120)
2,008
102
1,906
2,008
2014
£’000
1,180
52
450
(54)
1,628
—
1,628
1,628
Company
2015
£’000
2014
£’000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
At the beginning of the year
Subsidiaries acquired
Received in the year
Amortisation in the year
At the end of the year
Included within:
Current liabilities
Non-current liabilities
72
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
22 Borrowings
Current:
Bank overdrafts
Bank loans and other borrowings
Loans from Group undertakings (note 33)
Other loans from related parties (note 33)
Finance leases
Non-current:
Bank loans
Other loans from related parties (note 33)
Finance leases
Borrowings are repayable as follows:
On demand or within one year
In the second year
In the third to fifth years inclusive
Over five years
Group
Company
2015
£’000
213
12,270
—
500
2,174
15,157
18,444
—
7,300
25,744
15,157
3,229
22,467
48
40,901
2014
£’000
243
16,711
—
500
2,234
19,688
13,427
500
8,262
22,189
19,688
4,349
16,382
1,458
41,877
2015
£’000
—
517
173
—
—
690
16,414
—
—
16,414
690
517
15,897
—
17,104
2014
£’000
—
1,380
173
—
—
1,553
12,047
—
—
12,047
1,553
546
11,501
—
13,600
Group and Company borrowings are shown in the balance sheet net of arrangement fees of £132,000 (2014: £19,000) of which £33,000
(2014: £4,000) is deducted from current liabilities and £99,000 (2014: £15,000) is deducted from non-current liabilities.
The net borrowings are:
Borrowings as above
Cash and cash equivalents
Net borrowings
Group
2015
£’000
2014
£’000
Company
2015
£’000
2014
£’000
40,901
(16,488)
41,877
(17,268)
17,104
(8,973)
13,600
(8,822)
24,413
24,609
8,131
4,778
Bank loans and other borrowings includes an amount of £9,984,000 (2014: £13,622,000) which is secured on trade receivables. The Company,
together with certain subsidiaries, act as guarantors on the bank loans. In addition, The Royal Bank of Scotland PLC and Clydesdale Bank PLC have
legal charges over certain properties. Finance lease obligations are secured on the assets to which they relate.
Interest bearing loans from Group undertakings carry interest at Bank of England base rate + 2.50%. Such amounts are unsecured and repayable on
demand.
Other loans are non-interest bearing. The bank loans are repayable by instalments and the overdraft is repayable on demand.
Bank loans includes a drawn down revolving credit facility of £15.0 million (2014: £10.0 million) which is repayable in June 2019. At the year
end the Group had £2.0 million of undrawn revolving credit facilities (2014: £5.0 million). Since the period end the Group has increased its revolving
credit facilities by £2.5 million.
73
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
23 Derivatives and other financial instruments
The Group’s activities expose it to a variety of financial risks. The Board reviews and agrees policies for managing its risk. These policies have
remained unchanged throughout the year.
Financial Instruments by currency
Group
Assets
Other investments
Non-current receivables
Current trade and other receivables
Current derivatives
Cash and cash equivalents
Liabilities
Current borrowings
Current derivatives
Current trade and other payables
Non-current borrowings
Other non-current liabilities
Company
Assets
Non-current receivables
Current trade and other receivables
Current derivatives
Cash and cash equivalents
Liabilities
Current borrowings
Current trade and other payables
Non-current borrowings
Sterling
£’000
61
50
53,596
—
11,758
US
Dollar
£’000
18
—
4,177
14
3,080
2015
Euro
£’000
—
—
2,944
36
1,222
NZ
Dollar
£’000
US
Total Sterling
£’000
£’000
Dollar
Euro
£’000 £’000
Total
£’000
2014
—
—
61
79
50
501
348 61,065 53,272
50
—
428 16,488 13,136
—
—
—
16
—
77
501
3,958 3,547 60,777
—
2,996 1,136 17,268
—
—
65,465
7,289
4,202
776 77,732 66,970
6,970 4,683 78,623
13,987
—
46,006
25,744
4,300
213
72
3,847
—
—
957
—
3,481
—
—
— 15,157 19,445
—
72
—
— 53,334 45,094
— 25,744 22,189
4,022
—
4,300
243
8
— 19,688
15
7
3,047 4,920 53,061
— 22,189
5,995
—
—
1,973
90,037
4,132
4,438
— 98,607 90,750
5,271 4,927 100,948
2015
US
Dollar
£’000
Euro
£’000
Sterling
£’000
2014
US
Total Sterling Dollar
£’000
£’000
£’000
Euro
£’000
Total
£’000
—
30,697
—
8,173
—
4,824
14
687
—
—
500
1,104 36,625 28,922
—
8,368
30
8,973
16
113
—
4,451
—
399
—
500
237 33,610
—
8,822
—
55
38,870
5,525
1,233 45,628 37,790
4,850
292 42,932
690
1,232
16,414
18,336
—
—
—
—
690
1,232
1,553
—
855
—
— 16,414 12,047
— 18,336 14,455
—
—
—
—
1,553
—
—
855
— 12,047
— 14,455
Other taxes and social security receivable and prepayments are excluded from trade and other receivables in the tables above as they are not financial
instruments. For this same reason other taxes and social security payable is excluded from trade and other payables.
The Group and Company have right of offset on certain bank accounts.
Sensitivity analysis
The impact of a weakening or strengthening in Sterling against other currencies at the balance sheet date is shown in the table below.
The Directors consider that a 10% (2014: 5%) weakening or strengthening in Sterling against the Euro and a 10% (2014: 10%) weakening or
strengthening in Sterling against other currencies represents reasonable possible changes.
Impact on profit after taxation
Impact on total equity
10%
weakening
£’000
480
2,521
2015
10%
strengthening
£’000
(353)
(1,993)
2014
5%/10%
weakening
£’000
389
1,502
5%/10%
strengthening
£’000
(333)
(1,275)
This sensitivity analysis is not an indication of actual results, which may materially differ. For the purposes of this sensitivity analysis all other variables
have been held constant.
74
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
23 Derivatives and other financial instruments (continued)
Interest rate risk
The Group finances its operations through a mixture of retained earnings and bank borrowings. The Group borrows in the desired currencies at fixed
and floating rates of interest.
Group
Bank overdrafts
Bank loans and other borrowings
Other loans
Finance lease liabilities
Fixed rate
Floating rate
Non-interest bearing
Weighted
average
effective
interest rate
%
4.65
2.16
—
2.21
Weighted
average
effective
interest rate
%
5.08
2.13
—
2.10
2015
£’000
213
30,714
500
9,474
40,901
9,474
30,927
500
40,901
The Group’s floating rate financial liabilities bear interest determined as follows:
Bank overdrafts
Bank loans and other borrowings
US prime rate + 1.0% margin; US prime rate + 1.6% margin
Libor + 1.8%; Libor + 2.0%; Bank of England base rate + 1.25% margin
Company
Bank loans
Loans from Group undertakings
Floating rate
Weighted
average
effective
interest rate
%
2.39
—
Weighted
average
effective
interest rate
%
2.40
3.00
2015
£’000
16,931
173
17,104
The Company’s floating rate financial liabilities bear interest determined as follows:
Bank loans
Libor + 1.8%
2014
£’000
243
30,138
1,000
10,496
41,877
10,496
30,381
1,000
41,877
2014
£’000
13,427
173
13,600
75
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
23 Derivatives and other financial instruments (continued)
Sensitivity analysis
The impact of a decrease or increase in interest rates during the year is shown in the table below. The Directors consider that a 1% movement in
interest rates represents reasonable possible changes.
2015
2014
1% decrease
£’000
1% increase
£’000
1% decrease
£’000
1% increase
£’000
Impact on profit after taxation
Impact on total equity
383
383
(383)
(383)
312
312
(312)
(312)
This sensitivity analysis is not an indication of actual results, which may materially differ. For the purposes of this sensitivity analysis all other variables
have been held constant.
Liquidity risk
The Group’s policy throughout the year has been to maintain a mix of short and medium term borrowings. Short-term flexibility is achieved
by overdraft facilities. In addition it is the Group’s policy to maintain committed undrawn facilities in order to provide flexibility in the management
of the Group’s liquidity.
The tables below analyse the Group and Company’s financial liabilities which will be settled on a net basis into relevant maturity groupings based on
the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the tables are the contractual undiscounted
cash flows which have been calculated using spot rates at the relevant balance sheet date.
Within
one
year
£’000
Total
£’000
2015
One to
two
years
£’000
Two to
five
years
£’000
Over
five
years
£’000
Total
£’000
Within
one
year
£’000
2014
One to
two
years
£’000
Two to
five
years
£’000
Over
five
years
£’000
213
213
—
—
32,445
500
10,338
72
12,768
500
2,482
72
1,793
—
2,131
—
17,884
—
5,666
—
—
—
—
59
—
31,530
1,000
11,590
15
17,068
500
2,602
15
2,227
500
2,196
—
12,235
—
5,312
—
243
243
—
—
—
53,334
53,334
—
—
—
53,061
53,061
—
—
4,300
120
2,514
1,666
—
5,995
—
4,367
1,628
—
—
1,480
—
—
—
Group
Bank overdrafts
Bank loans and other
borrowings
Other loans
Finance lease liabilities
Derivatives
Trade and other
payables
Other non-current
liabilities
101,202
69,489
6,438
25,216
59 103,434
73,489
9,290
19,175
1,480
Company
Bank loans
Loans from Group undertakings
Trade and other payables
2015
Within
one
year
£’000
952
173
1,232
One to
two
years
£’000
939
—
—
Two to
five
years
£’000
16,642
—
—
Total
£’000
18,533
173
1,232
2014
Within
one
year
£’000
1,380
173
855
One to
two
years
£’000
Two to
five
years
£’000
546
—
—
11,501
—
—
Total
£’000
13,427
173
855
19,938
2,357
939
16,642
14,455
2,408
546
11,501
Trade and other payables in the tables above exclude other taxes and social security which do not meet the definition of financial liabilities
under IFRS 7.
76
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
23 Derivatives and other financial instruments (continued)
Future minimum lease payments of finance leases
Group
Amount payable:
Within one year
In the second year
In the third to fifth years inclusive
Over five years
Less: future finance charges
Present value of lease obligations
Repayment profile
2015
£’000
2,174
1,900
5,352
48
9,474
2014
£’000
2,234
1,923
4,881
1,458
10,496
2015
£’000
2,482
2,131
5,666
59
2014
£’000
2,602
2,196
5,312
1,480
10,338
11,590
(864)
(1,094)
9,474
10,496
The Company has no finance lease obligations (2014: none).
Borrowing facilities
The Group has various undrawn facilities. The undrawn facilities available at 29 August 2015, in respect of which all conditions precedent had been
met, were as follows:
Expiring in one year or less
Expiring within two and five years inclusive
2015
Floating rate
£’000
2014
Floating rate
£’000
17,007
2,000
19,007
12,449
5,000
17,449
The Company’s overdraft is within a Group facility and it is therefore not possible to determine the Company’s undrawn facilities at the balance sheet
date.
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an efficient capital structure to optimise the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares or sell assets to reduce debt.
The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total equity. Net debt is calculated
as total borrowings (including current and non-current borrowings) as shown in the consolidated balance sheet less cash and cash equivalents.
Total equity is as shown in the consolidated balance sheet.
At 29 August 2015 the Group had net debt of £24.4 million (2014: £24.6 million) and gearing of 24.7% (2014: 27.4%).
The Group monitors cash balances and net debt on a daily basis to ensure adequate headroom exists on banking facilities and that it is compliant
with banking covenants.
Fair value hierarchy
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
All derivative financial instruments are measured at fair value using Level 2 inputs. There were no transfers between levels in the above hierarchy
in either the current or prior year.
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.
77
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
23 Derivatives and other financial instruments (continued)
Fair values of financial assets and liabilities
The fair value of Group and Company financial assets and liabilities are not materially different to book value.
Derivative financial instruments
Hedge of net investment in foreign subsidiaries
The Group hedges foreign denominated borrowings against its investment in foreign subsidiaries. A foreign exchange pre-tax gain of £373,000 (2014:
pre-tax loss of £174,000) was recognised in equity during the year on translation of US dollar denominated borrowings to sterling. A foreign exchange
pre-tax loss of £35,000 (2014: £2,000) was recognised in equity during the year on translation of Euro denominated borrowings to sterling.
Currency derivatives
The Group and Company use forward foreign currency contracts and options to manage exchange risk exposure. At the balance sheet date, the fair
value of outstanding forward foreign currency contracts and options are as below:
Group
At beginning of the year
Losses during the year
At end of the year
Included within:
Current assets
Current liabilities
Company
At beginning of the year
Gains during the year
At end of the year (current assets)
2015
2014
Contractual
or notional
amount
£’000
515
6,887
7,402
5,193
2,209
7,402
Fair
value
£’000
(6)
(9)
(15)
—
(15)
(15)
2015
2014
Contractual
or notional
amount
£’000
—
5,066
5,066
Fair
value
£’000
—
—
—
Contractual
or notional
amount
£’000
2,120
(1,605)
515
—
515
515
Contractual
or notional
amount
£’000
—
—
—
Fair
value
£’000
(15)
(17)
(32)
40
(72)
(32)
Fair
value
£’000
—
30
30
The Group uses currency swaps to manage exchange risk exposure. At the balance sheet date, the fair value of outstanding currency swaps are as below:
Group
At beginning of the year
Gains during the year
At end of the year (current assets)
The Company has no currency swaps (2014: none).
2015
2014
Fair
value
£’000
—
10
10
Contractual
or notional
amount
£’000
—
394
394
Fair
value
£’000
—
—
—
Contractual
or notional
amount
£’000
—
—
—
Fair value has been determined by reference to the value of equivalent forward foreign currency contracts, options and currency swaps at the balance
sheet date.
All forward foreign currency contracts, options and currency swaps have a maturity of less than one year after the balance sheet date. Gains and losses
on currency related derivatives are included within administrative expenses.
78
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
24 Retirement benefit obligation
The Group participates in two defined benefit pension schemes, Carr’s Group Pension Scheme and Carrs Billington Agriculture Pension Scheme.
Carr’s Group
The Company sponsors the Carr’s Group Pension Scheme and offers a defined contribution and a defined benefit section. The assets of the scheme
are held separately from those of the Group and are invested with independent investment managers.
The pension expense for the defined contribution section of the scheme for the year was £751,000 (2014: £635,000). Contributions totalling
£47,000 (2014: £41,000) were payable to the fund at the year end and are included in other payables.
The defined benefit section of the scheme is closed to new members. The pension contribution made by the Group over the year to the defined
benefit section was £2,679,000 (2014: £2,806,000). Contributions to the scheme for the year ending August 2016 are expected to be
£1,128,000.
In addition, the Group offers a Group Personal Pension plan to certain employees of Carr’s Flour Mills Limited. The pension expense for this scheme
for the year was £208,000 (2014: £229,000).
The following disclosures relate to the defined benefit section of the Carr’s Group Pension Scheme. The last full actuarial valuation of this scheme
was carried out by a qualified independent actuary as at 31 December 2011 and updated on an approximate basis to 29 August 2015 by a qualified
independent actuary. The actuarial valuation as at 31 December 2014 is not yet finalised.
Major assumptions:
Inflation (RPI)
Inflation (CPI)
Salary increases
Rate of discount
Pension in payment increases:
RPI or 5.0% per annum if less
RPI or 5.0% per annum if less, minimum 3.0% per annum
2015
%
3.00
2.10
2.55
3.80
2.90
3.50
2014
%
3.00
2.10
2.55
4.00
2.90
3.50
The mortality tables used in the valuation as at 29 August 2015 are 100% of S2PMA (males) and S2PFA (females) with allowance for mortality
improvements using CMI_2013 with a 1.25%pa underpin. The mortality assumptions adopted imply the following life expectancies at age 65 as at
29 August 2015:
Males currently age 45
Females currently age 45
Males currently age 65
Females currently age 65
Amounts recognised in the Income Statement in respect of defined benefit schemes:
Service cost – including current service costs, past service costs and settlements
Service cost – administrative cost
Net interest on the net defined benefit asset
Total expense
At
29 August
2015
24.2 years
26.6 years
22.5 years
24.7 years
At
30 August
2014
24.1 years
26.5 years
22.4 years
24.6 years
2015
£’000
31
230
(141)
120
2014
£’000
430
170
87
687
79
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24 Retirement benefit obligation (continued)
The expense is recognised within the Income Statement as shown below:
Cost of sales
Administrative expenses
Total expense
Remeasurements of the net defined benefit asset to be shown in the Statement of Comprehensive Income:
Net measurement – financial
Net measurement – demographic
Net measurement – experience
Return on assets, excluding interest income
Total remeasurement of the net defined benefit asset
Amounts included in the Balance Sheet:
Present value of funded defined benefit obligations
Fair value of scheme assets
Surplus in funded scheme
Reconciliation of opening and closing balances of the present value of the defined benefit obligation:
Benefit obligation at the beginning of the year
Service cost
Interest cost
Contributions by scheme participants
Net measurement losses – financial
Net measurement gains – demographic
Net measurement losses/(gains) – experience
Benefits paid
Past service cost
Benefit obligation at the end of the year
Reconciliation of opening and closing balances of the fair value of scheme assets:
Fair value of scheme assets at the beginning of the year
Interest income on scheme assets
Return on assets, excluding interest income
Contributions by employers
Contributions by scheme participants
Benefits paid
Scheme administrative cost
2015
£’000
55
65
120
2015
£’000
(1,700)
—
(699)
(449)
(2,848)
2014
£’000
306
381
687
2014
£’000
(3,147)
1,667
335
4,354
3,209
2015
£’000
(60,352)
62,119
2014
£’000
(61,948)
64,004
1,767
2,056
2015
£’000
61,948
301
2,346
190
1,700
—
699
(6,562)
(270)
2014
£’000
59,509
430
2,696
266
3,147
(1,667)
(335)
(2,098)
—
60,352
61,948
2015
£’000
64,004
2,487
(449)
2,679
190
(6,562)
(230)
2014
£’000
56,237
2,609
4,354
2,806
266
(2,098)
(170)
Fair value of scheme assets at the end of the year
62,119
64,004
80
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
24 Retirement benefit obligation (continued)
Analysis of the scheme assets and actual return:
Equity instruments
Debt instruments
Property
Other assets
Actual return on scheme assets
Fair value of assets
2015
£’000
28,476
27,177
5,637
829
62,119
2,038
2014
£’000
32,524
26,276
5,038
166
64,004
6,963
Sensitivity analysis
A sensitivity analysis of the principal assumptions used to measure the scheme liabilities:
Discount rate
Rate of inflation
Assumed life expectancy at age 65
Change in
assumption
Increase by 0.25%
Increase by 0.25%
Increase by 1 year
Impact on
scheme
liabilities
29 August 2015
Decrease by £2.2 million
Increase by £1.7 million
Increase by £1.9 million
Extrapolation or combination of the sensitivity analysis beyond the ranges shown may not be appropriate.
Characteristics of the Scheme and the risks associated with the Scheme
a) Information about the characteristics of the Scheme
i. The Scheme provides pensions in retirement and death benefits to members. Pension benefits are linked to member’s final salary at retirement
and their length of service.
ii. The Plan is a registered scheme under UK legislation and is contracted out of the State Second Pension.
The plan is subject to the scheme funding requirements outlined in UK legislation. The scheme funding valuation of the Scheme as at
31 December 2011 revealed a deficit of £9.9 million. In the recovery plan dated August 2012 the Employer agreed to pay contributions
of £195,000 per month with the view to eliminating the shortfall by 31 December 2015.
In line with previous years there is no additional liability recognised on the balance sheet as a result of the recovery plan dated August 2012.
iii. The Scheme was established under trust and is governed by the Scheme’s trust deed and rules dated June 2008. The Trustees are responsible
for the operation and the governance of the Scheme, including making decisions regarding the Scheme’s funding and investment strategy in
conjunction with the Employer.
b) Information about risks of the Scheme to the Employer
In general, the risk to the Employer is that the assumptions underlying the disclosures, or the the calculation of contribution requirements are not borne
out in practice and the cost to the Employer is higher than expected. This could result in higher contributions required from the Employer and a higher
deficit disclosed. This may also impact the Employer’s ability to grant discretionary benefits or other enhancements to members.
i. The return on the Scheme’s assets being lower than assumed, resulting in an unaffordable increase in the required Employer contribution rate.
ii. Falls in asset values (particularly equities) not being matched by similar falls in the value of liabilities.
iii. Unanticipated future changes in mortality patterns leading to an increase in the Scheme’s liabilities. Future mortality rates cannot be predicted
with certainty. This is especially so bearing in mind that the youngest Scheme members could be expected to still be alive in 50 years or more
and it is not possible to reliably predict what medical advances may or may not have occurred by this time. The average duration of the Scheme’s
liabilities is approximately 16 years.
iv. The potential exercise (by members or others) of options against the Scheme for example taking early retirement or exchanging a portion of
pension for a cash lump sum.
81
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24 Retirement benefit obligation (continued)
Carrs Billington Agriculture
Carrs Billington Agriculture (Sales) Limited, one of the Group’s subsidiary undertakings, is a participating employer of the Carrs Billington Agriculture
Pension Scheme, another funded defined benefit scheme. On 30 November 2007, following consultation with the active members, the Company and
Trustees agreed to close the scheme to future service accrual. The most recent actuarial assessment of the scheme was at 31 December 2012.
The pension contribution made by Carrs Billington Agriculture (Sales) Limited over the year to the Carrs Billington Agriculture Pension Scheme
was £nil (2014: £nil).
It is not possible to identify the underlying share of the pension scheme assets and liabilities that relate to the Group. At inception in June 2000
approximately 50% of the assets and liabilities of the pension scheme related to the Group and under IFRS approximately 50% of the assets and
liabilities are included in the Group’s financial statements through the investment in associate, which is the sponsoring employer of the scheme.
Details and disclosures in respect of the scheme are provided in the financial statements of Carrs Billington Agriculture (Operations) Limited which
are publicly available.
Carrs Billington Agriculture (Sales) Limited offers a Group Personal Pension Plan to its employees and the pension expense for this plan in the year
was £451,000 (2014: £414,000).
During the year contributions were also payable to a defined contribution pension scheme for certain employees of Carrs Billington Agriculture (Sales)
Limited. The pension expense for this scheme for the year was £32,000 (2014: £23,000).
25 Share capital
Group and Company
Authorised:
Ordinary shares of 2.5p each
2015
Shares
2015
£’000
2014
Shares1
2014
£’000
140,000,000
3,500
140,000,000
3,500
Allotted and fully paid ordinary shares of 2.5p each:
At start of the year
Allotment of shares
89,401,900
358,190
2,235
9
88,902,300
499,600
At end of the year
89,760,090
2,244
89,401,900
2,223
12
2,235
1 Restated for the effect of the 10:1 share split in January 2015
The consideration received on the allotment of shares during the year was £171,000 (2014: £283,000).
For details of share based payment schemes see note 26.
Since the year end there was a further allotment of 60,590 shares with a nominal value of £1,515 due to the exercise of share options.
82
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
26 Share-based payments
Group
The Group operates three active share based payment schemes at 29 August 2015.
Under the long term incentive plan shares will be awarded to eligible individuals subject to an earnings per share (EPS) target measured against
average annual increases over a three year period. For the awards granted in May 2013 an average annual growth of EPS must exceed 7.0% for
25% of the awards to vest, 50% vest at 8.1% and 100% vest at 10.2%, with a straight line calculation between 25%, 50% and 100% of the award.
For the awards granted in November 2013 and November 2014 an average annual growth of EPS must exceed 3.0% for 25% of the awards to vest
and 100% vest at 10.0%, with a straight line calculation between 25% and 100% of the award.
All employees, subject to eligibility criteria, may participate in the share save scheme. Under this scheme employees are offered savings contracts
for both 3 year and 5 year vesting period plans. The exercise period is 6 months from the vesting date.
The approved share options were granted to certain senior employees and Directors. Options are exercisable between three and ten years from the
date of grant, subject to the movement of the Group’s adjusted earnings per share over the three years to 31 August 2008 exceeding that of
the RPI by an average of 2% per annum.
The fair value per option granted and the assumptions used in the calculation of fair values are as follows:
Long Term
Incentive Plan
November 2014 November 2013 May 2013
Long Term
Incentive Plan
Long Term
Incentive Plan
Share Save
Scheme
(3-Year Plan
2014)
Share Save
Scheme
(5-Year Plan
2014)
Approved
Share Save Executive Share
Scheme
(5-Year Plan
2011)
Option
Scheme
2006
10/11/14
11/11/13
1/5/13
9/6/14
9/6/14
10/5/11
24/2/06
£1.600
£1.683
£1.315
£1.870
£1.870
£0.720
£0.476
£0.00
8
512,200
3
Market value1
—
10
6.5
—
£0.00
8
475,380
3
£0.00
5
489,380
3
£1.520
192
504,040
3
Market value1 Market value1 Black Scholes Black Scholes Black Scholes
30.0%
3.5
3.25
1.51%
£1.520
63
323,960
5
£0.572
71
734,760
5
24.00%
5.5
5.25
2.450%
26.9%
5.5
5.25
2.07%
—
10
6.5
—
—
10
6.5
—
2.81%
100%
50%
£1.504
3.02%
100%
50%
£1.597
2.42%
100%
100%
£1.237
1.93%
95%
N/A
£0.490
1.93%
95%
N/A
£0.529
3.90%
95%
N/A
£0.156
£0.476
5
210,000
3
Binomial
22.44%
10
6.5
4.224%
3.36%
100%
100%
£0.099
Grant date
Share price at grant date
(weighted average)2
Exercise price
(weighted average)2
Number of employees
Shares under option2
Vesting period (years)
Model used for valuation
Expected volatility
Option life (years)
Expected life (years)
Risk-free rate
Expected dividends
expressed as a
dividend yield
Expectations of vesting
Expectations of meeting
performance criteria
Fair value per option2
1 discounted for dividends forgone over the three year vesting period
2 restated for the effect of the 10:1 share split in January 2015
The expected volatility has been calculated using historical daily data over a term commensurate with the expected life of each option.
The expected life is the midpoint of the exercise period. The risk-free rate of return is the implied yield of zero-coupon UK Government bonds
with a remaining term equal to the expected term of the award being valued.
83
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
26 Share-based payments (continued)
Number of options
Long Term
Incentive Plan
Long Term
Incentive Plan
November 2014 November 2013
Number3
’000
Number3
‘000
Long Term
Incentive Plan
May 2013
Number3
’000
Share Save
Scheme
(3-Year Plan
2014)
Number3
’000
Share Save
Scheme
(5-Year Plan
2014)
Number3
’000
Share Save
Scheme
(5-Year Plan
2011)
Number3
’000
Outstanding:
At 1 September 2013
Granted in the year
Exercised in the year
Forfeited in the year
At 30 August 2014
Granted in the year
Exercised in the year
Forfeited in the year
At 29 August 2015
Exercisable:
At 30 August 2014
At 29 August 2015
—
—
—
—
—
512
—
—
512
—
—
Weighted average:
Remaining contractual life (years)
9.00
Remaining expected life (years)
5.50
3 Restated for the effect of the 10:1 share split in January 2015
—
475
—
—
475
—
—
—
475
—
—
8.00
4.50
489
—
—
—
489
—
—
—
489
—
—
7.00
3.50
—
544
—
—
544
—
—
(40)
504
—
—
2.25
2.00
—
324
—
—
324
—
—
—
324
—
—
4.25
4.00
The total expense recognised for the year arising from share based payments are as follows:
Long Term Incentive Plan November 2014
Long Term Incentive Plan November 2013
Long Term Incentive Plan May 2013
Share Save Scheme (3-Year Plan 2014)
Share Save Scheme (5-Year Plan 2014)
Share Save Scheme (3-Year Plan 2011)
Share Save Scheme (5-Year Plan 2011)
84
Approved
Executive
Share
Option
Scheme
2006
Number3
’000
740
—
(30)
—
710
—
(350)
(150)
210
778
—
—
—
778
—
—
(43)
735
—
710
—
210
1.25
1.00
0.50
—
2015
£’000
128
127
202
77
33
—
17
584
2014
£’000
—
127
202
21
8
20
23
401
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
26 Share-based payments (continued)
Company
The movement in the number of outstanding options under the share schemes for the company is not shown as it is immaterial and disclosure
would be excessively lengthy.
The total expense recognised for the year arising from share based payments are as follows:
Long Term Incentive Plan November 2014
Long Term Incentive Plan November 2013
Long Term Incentive May Plan 2013
Share Save Scheme (3-Year Plan 2014)
Share Save Scheme (5-Year Plan 2014)
Share Save Scheme (3-Year Plan 2011)
Share Save Scheme (5-Year Plan 2011)
2015
£’000
84
83
137
11
1
—
1
317
Share based payments awarded to employees of subsidiary undertakings and recognised as an investment in subsidiary undertakings in the
Company are as follows:
Long Term Incentive Plan November 2014
Long Term Incentive Plan November 2013
Long Term Incentive Plan May 2013
Share Save Scheme (3-Year Plan 2014)
Share Save Scheme (5-Year Plan 2014)
Share Save Scheme (3-Year Plan 2011)
Share Save Scheme (5-Year Plan 2011)
Approved Executive Share Option Scheme 2006
Total carrying amount of investments
2015
£’000
45
88
195
83
39
—
87
21
558
2014
£’000
—
83
137
3
—
5
1
229
2014
£’000
—
44
130
18
8
1
74
64
339
27 Acquisitions
WM. Nicholls & Company (Crickhowell) Limited
On 20 October 2014 Carrs Billington Agriculture (Sales) Limited acquired the entire issued share capital of WM. Nicholls & Company (Crickhowell)
Limited. As a condition of this acquisition the assets and liabilities not required by the Group were sold back to the vendor. The net cash
consideration for this entire transaction was £1,030,000.
The principal activity of WM. Nicholls & Company (Crickhowell) Limited is that of an agricultural merchant.
The primary reason for the business combination was the expansion of the existing agriculture business.
Reid and Robertson Limited
On 12 June 2015 Carrs Billington Agriculture (Sales) Limited acquired the entire issued share capital of Reid and Robertson Limited for cash
consideration of £869,000.
The principal activity of Reid and Robertson Limited is that of an agricultural merchant.
The primary reason for the business combination was the expansion of the existing agriculture business.
Chirton Engineering Limited
In the prior year Carrs Engineering Limited acquired the entire issued share capital of Chirton Engineering Limited for cash consideration of £5,300,000.
£2,394,000 of this was contingent consideration and is payable subject to certain growth criteria being met subsequent to the acquisition.
The principal activity of Chirton Engineering Limited is that of precision engineering.
The primary reason for the business combination was that the acquired business complimented the existing engineering business enabling
a wider set of skills to be offered to customers.
B.E. Williams Limited
In the prior year Carrs Billington Agriculture (Sales) Limited acquired the entire issued share capital of B.E. Williams Limited for cash consideration
of £1,096,000.
The principal activity of B.E. Williams Limited is that of the supply and haulage of agricultural feed.
The primary reason for the business combination was that the acquired business complimented the existing agriculture business.
85
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
27 Acquisitions (continued)
All of the above purchases have been accounted for as acquisitions. Given the size of the acquisitions no separate disclosure has been presented on
the face of the consolidated income statement as the impact would not be material.
Aggregate disclosures
The total goodwill arising from acquisitions in the year amounts to £1,050,000 (2014: £4,585,000). Goodwill, in both the current and prior year,
represents the excess of the consideration paid over the Group’s interests in the net fair value of the net identifiable assets, liabilities and contingent
liabilities acquired.
The following aggregated amounts have been recognised within the consolidated income statement in respect of acquisitions made in the year:
Revenue
Profit before taxation
2015
£’000
3,589
85
2014
£’000
2,312
129
There were no other recognised gains and losses other than the profit shown above.
Acquisition related costs amounted to £58,000 (2014: £123,000), which have been recognised within administrative expenses in the consolidated
income statement.
The aggregate assets and liabilities recognised in the acquisition accounting are set out below:
Intangible assets
Property, plant and equipment
Investment
Inventories
Receivables
Assets held for resale
Cash at bank
Payables
Finance Leases
Grants
Taxation
– Current
– Deferred
Net assets acquired
Goodwill
Satisfied by:
Cash consideration
Contingent consideration
Total consideration
2015
Fair value
£’000
2014
Fair value
£’000
162
118
—
549
1,493
116
150
(1,431)
(37)
—
(200)
(71)
849
1,050
1,899
1,899
—
1,899
51
1,141
10
677
1,390
439
222
(1,468)
(555)
(52)
4
(48)
1,811
4,585
6,396
4,002
2,394
6,396
Intangible assets represents the fair value of customer relationships of WM. Nicholls & Company (Crickhowell) Limited and Reid and Robertson
Limited. The fair value exercise on the acquisition of Chirton Engineering Limited in the prior year resulted in no significant intangible assets being
identified other than the value of employees, which is not permitted to be recognised on the balance sheet.
Assets held for resale were sold before the year end.
86
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
27 Acquisitions (continued)
Pro forma full year information
IFRS3 (revised) requires disclosure of information as to the impact on the financial statements if the acquisitions had occurred at the beginning of the
accounting year.
The unaudited pro forma summary below presents the Group as if the acquisitions had been acquired on 31 August 2014 (2014: 1 September 2013).
The pro forma amounts include the results of the acquisitions and the interest expense on the increase in net debt as a result of the acquisitions.
The pro forma amounts do not include any possible synergies from the acquisition. The pro forma information is provided for comparative purposes
only and does not necessarily reflect the actual results that would have occurred, nor is it necessarily indicative of future results.
Revenue
Profit before taxation
28 Cash generated from/(used in) operations
Profit for the year
Adjustments for:
Tax
Tax credit in respect of R & D
Dividends received from subsidiaries
Depreciation of property, plant and equipment
Depreciation of investment property
Intangible asset amortisation
Profit on disposal of property, plant and equipment
Impairment of investment
Amortisation of grants
Net fair value loss on share based payments
Net foreign exchange differences
Net fair value losses/(gains) on derivative financial instruments
in operating profit
Finance costs:
Interest income
Interest expense and borrowing costs
Share of profit from associate and joint ventures
Pension contributions – deficit reduction
– ongoing
IAS19 income statement charge (note 24)
Changes in working capital (excluding the effects of acquisitions):
(Increase)/decrease in inventories
Decrease/(increase) in receivables
(Decrease)/increase in payables
Group
2015
£’000
2014
£’000
13,693
12,893
3,774
(623)
—
5,059
20
208
(26)
—
(120)
584
53
7
(197)
1,445
(2,307)
(2,340)
(339)
120
(967)
320
(3,237)
3,660
(102)
—
4,882
19
193
(104)
—
(54)
401
160
9
(264)
1,679
(2,486)
(2,340)
(466)
687
807
4,880
(7,329)
2015
£’000
415,295
18,019
2014
£’000
435,441
16,600
Company
2015
£’000
2,870
232
—
(4,200)
—
—
—
—
846
—
317
(341)
(30)
(887)
435
—
(2,340)
(339)
120
—
(162)
564
2014
£’000
2,021
(127)
—
(3,516)
—
—
—
—
6
—
229
246
—
(822)
531
—
(2,340)
(466)
687
—
101
(227)
Cash generated from/(used in) operations
15,127
17,125
(2,915)
(3,677)
87
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
29 Analysis of net debt
Group
Cash and cash equivalents
Bank overdrafts
Loans and other borrowings:
– current
– non-current
Finance leases:
– current
– non-current
Net debt
At
31 August
2014
£’000
17,268
(243)
17,025
(17,211)
(13,927)
(2,234)
(8,262)
(24,609)
Cash flow
£’000
(630)
30
(600)
6,327
(6,370)
2,395
—
1,752
Other
non-cash
changes
£’000
—
—
—
(1,886)
1,853
(2,335)
962
(1,406)
Exchange
movements
£’000
(150)
—
(150)
—
—
—
—
At
29 August
2015
£’000
16,488
(213)
16,275
(12,770)
(18,444)
(2,174)
(7,300)
(150)
(24,413)
Other non-cash changes relate to finance leases, including finance leases acquired with subsidiaries, and transfers between categories of borrowings.
It also includes the release of deferred borrowing costs to the consolidated income statement.
Company
At
31 August
2014
£’000
Cash flow
£’000
Other
non-cash
changes
£’000
Exchange
movements
£’000
Cash and cash equivalents
8,822
148
—
Loans and other borrowings:
– current
– non-current
Net debt
(1,553)
(12,047)
(4,778)
1,529
(5,000)
(3,323)
(666)
633
(33)
3
—
—
3
At
29 August
2015
£’000
8,973
(690)
(16,414)
(8,131)
Other non-cash changes relate to the release of deferred borrowing costs to the consolidated income statement and transfers between categories
of borrowings.
30 Capital Commitments
Group
Capital expenditure on property, plant and equipment that has been contracted
for but has not been provided for in the accounts
The Company has no capital commitments (2014: none).
2015
£’000
2014
£’000
22
—
31 Other Financial Commitments
Group
At 29 August 2015 the Group had commitments, other than land and buildings, under non-cancellable operating leases as follows:
Within one year
Within two and five years inclusive
The Company has no commitments under non-cancellable operating leases (2014: none).
88
2015
£’000
695
1,104
1,799
2014
£’000
520
1,024
1,544
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
32 Financial guarantees
The Company, together with certain subsidiary undertakings, has entered into a guarantee with Clydesdale Bank PLC in respect of the Group loans,
overdraft, asset finance and guarantee facilities with that bank, which at 29 August 2015 amounted to £8,152,000 (2014: £10,609,000).
Certain subsidiary undertakings utilise guarantee facilities with financial institutions which include their own bankers. These financial institutions in
the normal course of business enter into certain specific guarantees with some of the subsidiaries’ customers. All these guarantees allow the financial
institutions to have recourse to the subsidiaries if a guarantee is enforced. The total outstanding of such guarantees at 29 August 2015 was
£1,453,000 (2014: £1,267,000).
The Company has provided specific guarantees to certain customers of a subsidiary. These are in place to guarantee the completion of the contract in
any event. At 29 August 2015 the contracts under guarantee that have still to be completed and delivered have a total contract value of £9,521,000
(2014: £8,430,000).
The Company has provided a guarantee over the lease of a premises occupied by a subsidiary. The guarantee is in respect of prompt and full
payment of rents due throughout the term of the lease. As at 29 August 2015 the cumulative rent payable over the remaining term of the lease is
£1,494,000 (2014: £nil).
The Company has entered into a guarantee with the Trustees of the Carrs Billington Agriculture Pension Scheme in respect of the punctual payment
of obligations due to the pension scheme by the participating employers of the scheme. The Company’s total liability shall not exceed £1,500,000
(2014: £1,500,000).
The Group and Company does not expect any of the above guarantees to be called in.
33 Related parties
Group and Company
Identity of related parties
The Group has a related party relationship with its subsidiaries, associate and joint ventures and with its Directors. The balances and transactions
shown below were all undertaken on an arm’s length basis in the normal course of business.
Transactions with key management personnel
Key management personnel are considered to be the Directors and their remuneration is disclosed within the Remuneration Committee Report.
Group
2015
£’000
2014
£’000
Company
2015
£’000
2014
£’000
Balances reported in the Balance Sheet
Amounts owed by businesses controlled by key management
personnel (in a trading capacity):
Trade receivables
Transactions reported in the Income Statement
109
84
Revenue
204
329
—
—
—
—
89
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
33 Related parties (continued)
Transactions with subsidiaries
Company
2015
£’000
2014
£’000
32,602
138
32,740
(173)
(27)
(200)
2,520
4,200
744
—
29,869
114
29,983
(173)
(29)
(202)
2,351
3,516
652
(2)
Group
2015
£’000
2014
£’000
Company
2015
£’000
2014
£’000
—
623
623
500
619
1,119
(18,036)
(16,067)
967
19
91
(189)
(92,235)
1,148
19
107
(149)
(98,526)
—
555
555
(1)
—
—
44
(8)
—
500
522
1,022
(2)
—
—
58
—
—
Balances reported in the Balance Sheet
Amounts owed by subsidiary undertakings:
Loans
Other receivables
Amounts owed to subsidiary undertakings:
Loans
Other payables
Transactions reported in the Income Statement
Management charges receivable
Dividends received
Interest receivable
Interest payable
Transactions with associate
Balances reported in the Balance Sheet
Amounts owed by associate:
Non-current receivables
Trade and other receivables
Amounts owed to associate:
Trade and other payables
Transactions reported in the Income Statement
Revenue
Rental income
Management charges receivable
Management charges payable
Purchases
90
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
33 Related parties (continued)
Transactions with joint ventures
Balances reported in the Balance Sheet
Amounts owed by joint ventures:
Trade and other receivables
Amounts owed to joint ventures:
Trade and other payables
Group
2015
£’000
2014
£’000
Company
2015
£’000
2014
£’000
3,611
3,497
3,096
2,895
(9)
(5)
—
—
Included within Group trade and other receivables is £3,584,000 (2014: £3,459,000) in respect of loans owed by joint ventures.
Included within Company trade and other receivables is £3,095,000 (2014: £2,888,000) in respect of loans owed by joint ventures.
Transactions reported in the Income Statement
Revenue
Management charges receivable
Purchases
Group
2015
£’000
2014
£’000
Company
2015
£’000
2014
£’000
147
110
(1,093)
114
146
(274)
—
—
—
—
—
—
Transactions with other related parties
Other loans of £nil (2014: £500,000) included within non-current borrowings and £500,000 (2014: £500,000) included within current borrowings
is in respect of a loan from Edward Billington and Son Limited to Carrs Billington Agriculture (Sales) Limited. This loan is interest free and unsecured.
Edward Billington and Son Limited has a 49% shareholding in Carrs Billington Agriculture (Sales) Limited.
34 Post balance sheet event
On 4 September 2015, after the year end, the Group completed the acquisition of the business and related assets of Green (Agriculture) Co, an
agricultural merchant.
The net cash consideration paid was £0.3 million.
The primary reason for the business combination was the expansion of the existing agriculture business.
The provisional fair value of assets acquired are set out below:
Property, plant and equipment
Inventories
Receivables
Assets acquired
Goodwill
Satisfied by cash consideration
Provisional
Fair value
£’000
23
112
55
190
80
270
91
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
FIVE YEAR STATEMENT
Continuing operations
Revenue and Results
2011
£’000
2012
£’000
(Restated)1
2013
£’000
2014
£’000
2015
£’000
Revenue
373,318
404,058
468,083
428,956
411,565
Group operating profit
9,156
12,071
13,337
15,427
16,375
Analysed as:
Operating profit before non-recurring items
and amortisation
Non-recurring items and amortisation
10,387
(1,231)
12,517
(446)
13,353
(16)
15,743
(316)
Group operating profit
9,156
12,071
13,337
15,427
Profit on the disposal of property and investment
Finance income
Finance costs
Share of post-tax profit in associate
and joint ventures
—
410
(1,332)
282
673
(1,348)
—
513
(1,318)
—
264
(1,624)
1,776
1,381
2,819
2,486
Profit before taxation
Taxation
10,010
(1,973)
13,059
(2,954)
15,351
(3,036)
16,553
(3,660)
Profit for the year from continuing operations
8,037
10,105
12,315
12,893
Profit/(loss) for the year from discontinued operations
16,598
(202)
—
—
16,641
(266)
16,375
—
197
(1,412)
2,307
17,467
(3,774)
13,693
—
Profit for the year
24,635
9,903
12,315
12,893
13,693
Ratios (continuing operations)
Operating margin (excluding non-recurring items
and amortisation)
Return on net assets (excluding non-recurring
items and amortisation)
Earnings per share – basic2
Dividends per ordinary share2
– adjusted2
1 Restated for IAS 19 revised
2 Restated for the effect of the 10:1 share split in January 2015
2.8%
17.9%
7.7p
8.8p
2.6p
3.1%
19.9%
9.8p
10.2p
2.9p
2.9%
19.7%
12.4p
12.4p
3.2p
3.7%
18.8%
12.8p
13.1p
3.4p
4.0%
17.9%
13.4p
13.6p
3.7p
92
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
Net assets employed
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Investment property
Investments
Financial assets
– Non-current receivables
Retirement benefit asset
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Current tax assets
Financial assets
– Derivative financial instruments
– Cash and cash equivalents
2011
£’000
4,558
1,029
31,519
764
6,832
2
—
2,519
2012
£’000
5,199
728
37,158
1,005
8,081
2
—
2,480
2013
£’000
5,215
615
53,068
675
10,395
1
—
2,044
2014
£’000
9,798
499
56,626
656
11,796
501
2,056
1,507
2015
£’000
10,849
448
58,385
636
13,530
50
1,767
861
47,223
54,653
72,013
83,439
86,526
22,793
56,988
9
—
33,282
27,128
59,651
—
—
23,294
33,445
66,434
178
2
22,884
33,315
63,623
47
—
17,268
35,031
64,454
839
50
16,488
113,072
110,073
122,943
114,253
116,862
Total assets
160,295
164,726
194,956
197,692
203,388
Current liabilities
Financial liabilities
– Borrowings
– Derivative financial instruments
Trade and other payables
Current tax liabilities
Non-current liabilities
Financial liabilities
– Borrowings
Retirement benefit obligation
Deferred tax liabilities
Other non-current liabilities
Total liabilities
Net assets
(26,436)
—
(53,469)
(1,688)
(14,176)
(309)
(56,108)
(1,552)
(15,545)
(8)
(58,282)
(1,639)
(19,688)
(15)
(54,236)
(1,631)
(15,157)
(72)
(54,496)
(472)
(81,593)
(72,145)
(75,474)
(75,570)
(70,197)
(2,274)
(5,960)
(4,007)
(3,617)
(11,573)
(5,351)
(3,733)
(4,064)
(29,448)
(3,272)
(3,765)
(4,956)
(22,189)
—
(4,111)
(5,995)
(25,744)
—
(4,184)
(4,300)
(15,858)
(24,721)
(41,441)
(32,295)
(34,228)
(97,451)
(96,866)
(116,915)
(107,865)
(104,425)
62,844
67,860
78,041
89,827
98,963
93
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
DIRECTORY OF OPERATIONS
Carr’s Group plc
Old Croft, Stanwix, Carlisle,
Cumbria CA3 9BA
Tel: 01228 554600
Fax: 01228 554601
Website: www.carrsgroup.com
Animal Feed Supplement, Inc
East Highway 212,
PO Box 188, Belle Fourche,
South Dakota 57717 USA
Tel: 001 605 892 3421
Fax: 001 605 892 3473
Animal Feed Supplement, Inc
PO Box 105, 101 Roanoke
Avenue, Poteau,
Oklahoma 74953 USA
Tel: 001 918 647 8133
Fax: 001 918 647 7318
Animal Feed Supplement, Inc
PO Box 569, 1700 US 50 East,
Silver Springs, Nevada 89429
Tel: 001 775 577 2002
Fax: 001 775 577 4625
Caltech
Solway Mills, Silloth, Wigton,
Cumbria CA7 4AJ
Tel: 016973 32592
Fax: 016973 32339
Carrs Billington Agriculture
(Operations)**
Parkhill Road, Kingstown Ind Est,
Carlisle CA3 0EX
Tel: 01228 529 021
Fax: 01228 554 397
Carrs Billington Agriculture
(Operations)**
Lansil Way, Lancaster LA1 3QY
Tel: 01524 597 200
Fax: 01524 597 229
Carrs Billington Agriculture
(Operations)**
High Mill, Langwathby,
Penrith CA10 1NB
Tel: 01768 889 800
Fax: 01768 889 887
Carrs Billington Agriculture
(Operations)**
Cold Meece, Stone ST15 0QW
Tel: 01785 760 535
Fax: 01785 760 888
Carrs Billington Agriculture
(Sales), Annan
Annan Business Park, Annan,
Dumfriesshire DG12 6TZ
Tel: 01461 202 772
Fax: 01461 202 712
Scotmin
13 Whitfield Drive, Heathfield
Ind Est, Ayr KA8 9RX
Tel: 01292 280 909
Fax: 01292 280 919
Carrs Billington Agriculture
(Sales), Appleby
Crosscroft Industrial Estate,
Appleby, Cumbria CA16 6HX
Tel: 01768 352 999
Aminomax
Old Croft, Stanwix, Carlisle
Tel: 01228 554 600
Fax: 01228 554 601
Horslyx LLC
810 Waterman Drive, Watertown
New York 13601, USA
Tel: 001 315 785 3625
Fax: 001 315 785 3627
Gold-Bar Feed Supplements LLC*
783 Eagle Boulevard, Shelbyville,
TN 37160, USA
Tel: 001 877 618 6455
Fax: 001 877 618 6489
Crystalyx Products GmbH*
Am Stau 199-203, 26122,
Oldenburg, Germany
Tel: 00 49 441 2188 92142
Fax: 00 49 441 2188 92177
ACC Feed Supplement LLC*
5101 Harbor Drive,
Sioux City, Iowa 51111
Tel: 001 712 255 6927
Fax: 001 712 252 4845
Carrs Billington Agriculture
(Sales), Askrigg
Uredale Mill, Askrigg, Leyburn,
North Yorkshire DL8 7HZ
Tel: 01969 650 229
Fax: 01969 650 770
Carrs Billington Agriculture
(Sales), Barnard Castle
Montalbo Road, Barnard Castle,
Co Durham DL12 8ED
Tel: 01833 637 537
Fax: 01833 638 010
Carrs Billington Agriculture
(Sales), Bakewell
Unit 4-6, Kingfisher Building,
Buxton Road, Bakewell,
Derbyshire DE45 1GZ
Tel: 01629 814 126
Fax: 01629 814 804
Carrs Billington Agriculture
(Sales), Berwick upon Tweed
29 Northumberland Road,
Berwick upon Tweed,
Northumberland TD15 2AS
Tel: 01289 307 245
Fax: 01289 305 727
94
Carrs Billington Agriculture
(Sales), Brecon
Warren Road Stores, Warren Road,
Brecon, Powys, LD3 8FF
Tel: 01874 623470
Carrs Billington Agriculture
(Sales), Brock
Brockholes Way, Claughton
Trading Estate, Lancaster Old
Road, Claughton on Brock,
Preston PR3 0PZ
Tel: 01995 643 200
Fax: 01995 643 220
Carrs Billington Agriculture
(Sales), Carlisle
Montgomery Way, Rosehill Estate,
Carlisle CA1 2UY
Tel: 01228 520 212
Fax: 01228 817 800
Carrs Billington Agriculture
(Sales), Cockermouth
Unit 5, Lakeland Agricultural
Centre, Cockermouth CA13 0QQ
Tel: 01900 824 105
Fax: 01900 826 860
Carrs Billington Agriculture
(Sales), Leek
Macclesfield Road, Leek,
Staffordshire ST13 8NR
Tel: 01538 383 277
Fax: 01538 385 731
Carrs Billington Agriculture
(Sales), Malton
31 Horsemarket, Malton,
North Yorkshire YO17 7NB
Tel: 01653 600 328
Fax: 01653 690 338
Carrs Billington Agriculture
(Sales), Milnathort
Stirling Road, Milnathort,
Kinross KY13 9UZ
Tel: 01577 862 381
Fax: 01577 863 057
Carrs Billington Agriculture
(Sales), Morpeth
20c Coopies Lane
Industrial Estate, Morpeth,
Northumberland NE61 6JN
Tel: 01670 503 930
Fax: 01670 504 404
Carrs Billington Agriculture
(Sales), Gisburn
Pendle Mill, Mill Lane, Gisburn,
Clitheroe, Lancashire BB7 4LN
Tel: 01200 445 491
Fax: 01200 445 305
Carrs Billington Agriculture
(Sales), Morpeth (Greens)
Old Station Buildings, Coopies
Lane, Morpeth, Northumberland,
NE61 2SL
Tel: 01670 518474/84
Carrs Billington Agriculture
(Sales), Hawes
Burtersett Road, Hawes,
North Yorkshire DL8 3NP
Tel: 01969 667 334
Fax: 01969 667 335
Carrs Billington Agriculture
(Sales), Hexham
Tyne Mills Industrial Estate,
Hexham, Northumberland
NE46 1XL
Tel: 01434 605 371
Fax: 01434 608 938
Carrs Billington Agriculture
(Sales), Jedburgh
Mounthooly, Crailing,
Jedburgh, TD8 6TJ
Tel: 01835 850 250
Fax: 01835 850 748
Carrs Billington Agriculture
(Sales), Kendal
Unit 1, J36, Rural Auction
Centre, Crooklands, Kendal,
Cumbria LA7 7FP
Tel: 01539 566 035
Fax: 01539 566 042
Carrs Billington Agriculture
(Sales), Penrith
Haweswater Road, Penrith
Industrial Estate, Penrith,
Cumbria CA11 9EH
Tel: 01768 862 160
Fax: 01768 899 345
Carrs Billington Agriculture
(Sales), Perth
17/18 Arran Place, Arran Road,
Perth PH1 3RN
Tel: 01738 643 022
Fax: 01738 442 122
Carrs Billington Agriculture
(Sales), Rothbury
The Store, Coquet View,
Rothbury, Morpeth,
Northumberland, NE64 7RZ
Tel: 01669 621150
Carrs Billington Agriculture
(Sales), Selkirk
The Former Baxter’s Unit,
Dunsdale Haugh,
Selkirk, Selkirkshire, TD7 5EF
Tel: 01750 720 734
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
Chirton Engineering
Unit 4A, High Flatworth,
Tyne Tunnel Trading Estate,
North Shields, Tyne & Wear,
NE29 7SW
Tel: 0191 296 2020
Wälischmiller Engineering
GmbH
Schießstattweg 16, 88677
Markdorf, Germany
Tel: 0049 7544 95140
Fax: 0049 7544 951499
Carr’s Flour, Silloth
Solway Mills, Silloth, Wigton,
Cumbria CA7 4AJ
Tel: 01697 333 700
Fax: 01697 332 543
Carr’s Flour, Maldon
Station Road, Maldon,
Essex CM9 4LQ
Tel: 01621 852 696
Fax: 01621 854 525
Carr’s Flour, Scotland
East Bridge, Kirkcaldy,
Fife KY1 2SR
Tel: 01592 267 191
Fax: 01592 641 805
Silloth Storage Company*
Station Road, Silloth,
Wigton, Cumbria, CA7 4JQ
* joint venture company
** associate company
Carrs Billington Agriculture
(Sales), Settle
Unit 6, The Sidings Industrial
Estate, Settle, North Yorkshire
BD24 9RP
Tel: 01729 825 812
Fax: 01729 825 812
Carrs Billington Agriculture
(Sales), Skipton
Skipton Auction Mart,
Gargrave Road, Skipton,
North Yorkshire BD23 1UD
Tel: 01756 792 166
Fax: 01756 701 008
Carrs Billington Agriculture
(Sales), Spennymoor
Southend Works, Byers Green,
Spennymoor, Co. Durham,
DL16 7NL
Tel: 01388 662 266
Fax: 01388 603 743
Carrs Billington Agriculture
(Sales), Stirling
Stirling Agricultural Centre,
Stirling FK9 4RN
Tel: 01786 474 826
Fax: 01786 472 933
Carrs Billington Agriculture
(Sales), Wigton
Hopes Auction Co Ltd.,
Skye Road, Wigton,
Cumbria, CA7 9NS
Tel: 016973 45874
Carrs Billington Agriculture
(Sales), Wooler
Bridge End, South Road,
Wooler, Northumberland,
NE71 6QE
Tel: 01668 281 567
Fax: 01668 283 453
Reid & Robertson, a division of
Carrs Billington Agriculture (Sales)
Ballagan, Stirling Road,
Balloch, G83 8LY
Tel: 01389 752800
Workware
Kingstown Broadway,
Kingstown Industrial Estate,
Carlisle CA3 0HA
Tel: 01228 591 091
Fax: 01228 590 026
Wallace Oils, Carlisle
Kingstown Broadway,
Kingstown Industrial Estate,
Carlisle CA3 0HA
Tel: 01228 534 342
Fax: 01228 590 820
Johnstone Wallace Fuels,
Castle Douglas
Abercromby Industrial Park,
Castle Douglas, Dumfriesshire,
DG7 1BA
Johnstone Wallace Fuels,
Dumfries
Dargavel Stores, Lockerbie Road,
Dumfries, Dumfriesshire DG1 3PG
Tel: 01387 750 747
Fax: 01387 750 747
Johnstone Wallace Fuels,
Stranraer
Droughduil, Dunragit,
Stranraer DG9 8QA
Tel: 01581 400 356
Fax: 01581 400 356
Afgritech LLC*
810 Waterman Drive, Watertown,
New York 13601, USA
Tel: 001 315 785 3625
Fax: 001 315 785 3627
Bibby Agriculture*
Priory House, Priory Street,
Carmarthen SA31 1NE
Tel: 01267 232 041
Fax: 01267 232 374
Bibby Agriculture*
1A Network House,
Badgers Way,
Oxon Business Park,
Shrewsbury, Shropshire,
SY3 5AB
Tel: 01743 237 890
Fax: 01743 351 552
Bendalls
Brunthill Road,
Kingstown Industrial Estate,
Carlisle CA3 0EH
Tel: 01228 526 246
Fax: 01228 525 634
R Hind
Kingstown Broadway,
Kingstown Industrial Estate,
Carlisle CA3 0HA
Tel: 01228 523 647
Fax: 01228 512 712
Carrs MSM
Unit 1 Spitfire Way, Hunts Rise,
South Marston Park, Swindon,
Wiltshire SN3 4TX
Tel: 01793 824 891
Fax: 01793 824 894
95
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS
REGISTERED OFFICE AND ADVISERS
Registered Office
Carr’s Group plc
Old Croft, Stanwix,
Carlisle,
CA3 9BA
Registered No. 98221
Chartered Accountants and Statutory Auditors
PricewaterhouseCoopers LLP
Central Square South,
Orchard Street,
Newcastle upon Tyne,
NE1 3AZ
Bankers
Clydesdale Bank PLC
82 English Street,
Carlisle,
CA3 8HP
The Royal Bank of Scotland PLC
37 Lowther Street,
Carlisle,
CA3 8EL
DORMANT SUBSIDIARIES
Company Name
A C Burn Limited
B. E. Williams Limited
Bowie & Aram Limited
Caltech Biotechnology Limited
Carrs Animal Feed Supplements Limited
Carrs Blends Limited
Carrs Feeds Limited
Carrs Fertilisers Limited
Carrs Foodtech Limited
Carr’s International Industries Limited
Carr’s Milling Industries Limited
Carrs Milling Limited
Carrs Natural Feeds Limited
Chirton Engineering Limited
Forsyths of (Wooler) Limited
George Shackleton & Sons Limited
Greens Flour Mills Limited
J M Raine Limited
Johnstone Fuels and Lubricants Limited
Northern Feeds Solutions Limited
R Hind Limited
Reid and Robertson Limited
Robert Hutchison Limited
Robertsons (Bakers) Limited
Safe at Work Limited
Scotmin Nutrition Limited
Scotphos Limited
Walischmiller Solutions Limited
Wallace Oils Holdings Limited
Wallace Oils Limited
WM. Nicholls & Company (Crickhowell) Limited
Financial Adviser and Broker
Investec Bank (UK) Limited
2 Gresham Street,
London,
EC2V 7QP
Financial and Corporate PR Advisers
Powerscourt
1 Tudor Street,
London,
EC4Y 0AH
Solicitors
Hill Dickinson LLP
1 St Paul’s Square,
Liverpool,
L3 9SJ
Registrars
Capita Registrars
The Registry,
34 Beckenham Road,
Beckenham,
Kent,
BR3 4TU
Registered and Located
England & Wales
England & Wales
Scotland
England & Wales
England & Wales
Scotland
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Ireland
England & Wales
Scotland
Scotland
England & Wales
England & Wales
Scotland
England & Wales
England & Wales
England & Wales
Scotland
Scotland
England & Wales
Scotland
England & Wales
England & Wales
1 100% owned by Carrs Billington Agriculture (Sales) Limited which is a 51% subsidiary of Carr’s Group plc.
96
Ownership
100%
51%1
100%
100%
100%
100%
51%1
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100%
100%
100%
100%
100%
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51%1
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51%1
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96%
51%1
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CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2015FINANCIAL STATEMENTS
STRATEGIC REPORT
THE
GROUP
CARR’S GROUP PLC IS FOCUSSED ON THE
PRINCIPAL ACTIVITIES OF AGRICULTURE,
FOOD AND ENGINEERING.
Carr’s Group plc is an international
business operating across
Agriculture, Food and Engineering,
supplying over 35 countries around
the world.
The Agriculture division comprises
an international feed block
supplement business with
manufacturing locations in the
USA, UK and Europe. In the UK
the division also sells animal feed,
fertiliser, animal health products, oil,
farm machinery and rural supplies
from its 30 Country Stores.
The Food division produces flour
from three strategically located mills
in the UK to the bread, biscuit and
retail markets.
The Engineering division designs,
manufactures and supplies
specialist precision parts,
equipment, robotics and remote
handling products from three
sites in the UK and one site in
Germany. These highly specialised
products and services are supplied
predominately into the nuclear and
oil and gas markets.
The Group is listed on the London
Stock Exchange.
CONTENTS
STRATEGIC REPORT
1 Highlights
2 Group at a Glance
4 Chairman’s Statement
6 Group Strategy
7 Divisional Highlights
8 Strategy in Action
10 Chief Executive’s Review
15 Risk Management
18 Financial Review
20 Key Performance Indicators
21 The Board
22 Corporate Responsibility
CORPORATE GOVERNANCE
25 Corporate Governance Report
28 Audit Committee Report
30 Remuneration Committee Report
36 Nominations Committee Report
37 Directors’ Report
FINANCIAL STATEMENTS
40 Independent Auditors’ Report to the Members
of Carr’s Group plc
44 Consolidated Income Statement
45 Consolidated and Company Statements
of Comprehensive Income
46 Consolidated and Company Balance Sheets
47 Consolidated Statement of Changes in Equity
48 Company Statement of Changes in Equity
49 Consolidated and Company Statements of Cash Flows
50 Principal Accounting Policies
55 Notes to the Financial Statements
92 Five Year Statement
94 Directory of Operations
96 Registered Office and Advisers
Designed and produced by corporateprm, Edinburgh and London. www.corporateprm.co.uk
ANNUAL REPORT AND ACCOUNTS
2015
AGRICULTURE | FOOD | ENGINEERING
DIVERSITY STRENGTHENS PERFORMANCE
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Old Croft, Stanwix, Carlisle CA3 9BA
www.carrsgroup.com