FOCUSING ON
GROWTH
MARKETS
WORLDWIDE
ANNUAL REPORT AND ACCOUNTS
2016
STRATEGIC REPORT
THE GROUP
CARR’S GROUP PLC IS FOCUSSED ON THE
PRINCIPAL ACTIVITIES OF AGRICULTURE
AND ENGINEERING.
Carr’s Group plc is an international
business. During the year it
operated across Agriculture, Food
and Engineering, supplying over
35 countries around the world.
On 3 September 2016 the Food
division was sold* and the Group
continues with two divisions
Agriculture and Engineering.
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 40 locations.
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
01 Highlights
02 Group at a Glance
04 Chairman’s Statement
06 Group Strategy
07 Business Strategies
08 Chief Executive’s Review
14 Risk Management
17 Viability Statement
18 Financial Review
20 Key Performance Indicators
21 The Board
22 Corporate Responsibility
*For further details of the disposal see page 4.
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
45 Consolidated Income Statement
46 Consolidated and Company Statements
of Comprehensive Income
47 Consolidated and Company Balance Sheets
48 Consolidated Statement of Changes in Equity
49 Company Statement of Changes in Equity
50 Consolidated and Company Statements of Cash Flows
51 Principal Accounting Policies
56 Notes to the Financial Statements
94 Five Year Statement
96 Directory of Operations
IBC Registered Office and Advisers
FINANCIAL HIGHLIGHTS
Continuing operations only
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REVENUE
PROFIT BEFORE TAX
EARNINGS PER SHARE**
DIVIDEND PER SHARE**
£314.9m
£14.1m
10.7p
3.8p
4.9% DOWN FROM 2015
2.8% UP FROM 2015
7.0% UP FROM 2015
2.7% UP FROM 2015
* restated for IAS 19 Revised
** restated for the effect of the 10:1 share split in January 2015
2016 HIGHLIGHTS
View this report online
www.carrsgroup.com
ENGINEERING
SIGNIFICANT CONTRACT WINS
FOOD
DISPOSAL OF FOOD DIVISION
FURTHER INVESTMENT IN OUR RETAIL NETWORK
01
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT 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. During the year the Group consisted of three divisions, however, on 3 September 2016 the
Food division was sold leaving the Agriculture and Engineering divisions, which operate in markets that offer growth
prospects. Our diverse geographic and divisional exposure provides strength in an increasingly volatile global
economic environment.
AGRICULTURE
OVERVIEW AND MARKETS
EMPLOYEES TOTAL: 594
427
167
ENGINEERING
OVERVIEW AND MARKETS
EMPLOYEES TOTAL: 296
247
49
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.
Customer Base
Leading livestock farmers across the globe
in the dairy, beef, sheep, pig and equine sectors.
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.
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.
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.
Customer Base
Key players across the worldwide nuclear,
research, oil and gas, and petrochemical
industries.
FOOD
OVERVIEW AND MARKETS
EMPLOYEES TOTAL: 218
181
37
The Food division supplied bakeries, food
manufacturers and multiples across the
UK, using the latest milling technologies
and sourcing the best wheat either from
the UK or overseas.
Operational Locations
The division operated 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.
Disposal
On 3 September 2016 the division was sold to
Whitworths Holdings Ltd, for more information
see page 4.
02
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT INTERNATIONAL
DISTRIBUTION
CANADA
RUSSIA
ICELAND
UK
USA
KAZAKHSTAN
GERMANY
CYPRUS
TURKEY
JORDAN
IRAN
KUWAIT
PAKISTAN
EGYPT
QATAR
UNITED ARAB
EMIRATES
CHINA
SOUTH KOREA
JAPAN
TAIWAN
Our Engineering and Agriculture
divisions distribute to customers
all over the world.
ARGENTINA
MAURITIUS
SOUTH AFRICA
INDONESIA
AUSTRALIA
NEW ZEALAND
UK
LOCATIONS
AGRICULTURE
EUROPEAN DISTRIBUTION
NORWAY
SWEDEN
UK
DENMARK
NETHERLANDS
BELGIUM
GERMANY
FRANCE
SWITZERLAND
POLAND
CZECH
REPUBLIC
AUSTRIA
CROATIA
FINLAND
ESTONIA
LATVIA
LITHUANIA
BELARUS
SLOVAKIA
UKRAINE
ROMANIA
HUNGARY
SERBIA
ITALY
GREECE
BULGARIA
IRELAND
PORTUGAL
SPAIN
ENGINEERING
EUROPEAN DISTRIBUTION
NORWAY
SWEDEN
NETHERLANDS
UK
BELGIUM
GERMANY
CZECH
REPUBLIC
AUSTRIA
FRANCE
SWITZERLAND
ITALY
03
HEAD OFFICE
FOOD
AGRICULTURE
ENGINEERING
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT
CHAIRMAN’S STATEMENT
“
I am pleased to report that the Group
has delivered a solid set of results in the
context of a challenging market.
”
STRATEGIC REFOCUSING
Following an approach by Whitworths Holdings
Ltd for the acquisition of Carr’s Flour Mills
Ltd (the Food division), the Board undertook a
strategic review of the Group’s three divisions.
It concluded that the nature of the offer presented
an excellent opportunity to realise the value
of the Food division, whilst allowing the Group
to further strengthen its focus on growing both
the Agriculture and Engineering divisions in
a way that could enhance shareholder value.
A decision was therefore taken by the Board
to dispose of the Food division for a gross
consideration of £36.0m on a cash and debt
free basis (the Disposal). The purchase price
was subject to an adjustment based on actual
working capital at the date of sale compared
to the agreed average working capital. After
adjustment for the carrying value of net debt
amounting to £7.9m and the allowance for an
estimated working capital adjustment of £3.2m,
the Group received £24.9m in cash.
Given the significant amount of cash realised
from the Disposal, the Board decided to return
£16.0m of the net proceeds of the Disposal to
shareholders in the form of a special dividend,
which took place on 7 October 2016. The
Group’s modest debt position after the special
dividend enables it to pursue acquisition
opportunities as and when appropriate. The
Board believes that taking into account the
£16.0m returned to shareholders and the
potential investment in growth opportunities
utilising the £8.9m cash retained from the net
proceeds of the Disposal, the transaction should
contribute to an increase in shareholder value.
Consistent with the above, on 24 October 2016,
the Group has recently acquired a German
engineering company, STABER GmbH (formerly
called Städele GmbH), a long term supplier to
our German remote handling business, for a
gross consideration of €7.85m. This acquisition
will enhance the intellectual property and
growth potential of the existing German remote
handling business.
On behalf of the Board I would like to thank
the employees of Carr’s Flour Mills Ltd for all
of their support and dedication over the years.
I am pleased that in joining Whitworths
Holdings Ltd, they have joined a company that
is fully committed to continuing to build on
the strong foundations laid out by Jonathan
Dodgson Carr when he started the business
back in 1831. I would also like to welcome
the employees of STABER to the Group.
BUSINESS REVIEW
In Agriculture, our international feedblock
business has delivered another excellent
performance, driven by a strong performance
in the USA where we have seen a significant
increase in demand. Sales volumes have
increased as a result of the strength of our
branded product offering and the rebuilding
of beef herds. In accordance with our strategy,
we continue to invest in our production facilities
and R&D programme, both in the UK and
internationally, to drive future growth in existing
markets and expansion into new geographies.
Our UK retail business continued to build on
the momentum established in previous years,
with the expansion of the Country Store network
into new territories both organically and through
acquisitions. I am pleased that by the end of
this calendar year we will be operating from
41 locations across the UK. In the financial
CHRIS HOLMES
CHAIRMAN
STRATEGIC DELIVERY
It has been a significant year in the strategic
development of the Group with the disposal
of the Food division at the end of the year. As
discussed below, we believe this action by the
Group enhances shareholder value as a result
of having a much stronger focus on growing
both the Agriculture and Engineering divisions.
In trading terms, the year has seen depressed
farmgate milk prices, which for most of the
year adversely impacted our farming customers.
The Engineering division also continues to
be negatively impacted by the current low oil
price. In addition, the North of England was
affected by severe floods during December
2015. Despite these challenges, the Group
has delivered a robust performance ahead of
last year. The Board recognises this strong
performance and thanks every one of our
employees and our management team for
their expertise, dedication and support.
Revenue for the year from continuing operations
fell by 4.9% to £314.9m (2015: £331.3m).
Profit before tax from continuing operations,
excluding a profit from discontinued operations
of £2.8m, was up 2.8% to £14.1m (2015:
£13.7m). This comprised an 8.6% increase in
Agriculture operating profit to £10.3m (2015:
£9.4m), and a 4.9% reduction in Engineering
operating profit to £2.5m (2015: £2.6m).
Basic earnings per share from continuing
operations were up by 7.0% to 10.7 pence per
share (2015: 10.0 pence), with fully diluted
earnings per share of 10.5 pence (2015:
9.7 pence) and adjusted earnings per share,
excluding non-recurring items and amortisation
of intangibles, of 10.9 pence (2015: 10.2
pence). Net cash at the year end was £8.1m
(2015: net debt of £24.4m).
04
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT year we acquired Green (Agriculture) Co in
Northumberland and Phoenix Feeds Ltd
in Lancashire, expanding our customer base in
both regions. We welcome our new colleagues.
We are grateful to our customers who have
continued to support our business during
this challenging year. We believe our strong
geographic presence, the relevance of our
product offering, and continued excellent
customer service will be key requirements in
supporting them over the forthcoming year.
Our Engineering division has had another tough
year, impacted by the continuing downturn
in the oil and gas market and several contract
delays. The division is beginning to see the
benefit of the resurgence in the UK nuclear
market with several new contract wins, in
particular the largest ever contract secured
by the division awarded by Sellafield with a
value of approximately £48m over the next
ten years. We remain confident in the medium
term prospects of the division as we continue
to focus on nuclear and adjacent markets.
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 10 January 2017.
DIVIDEND
The Board is proposing a 2.7% increase in the
final dividend to 1.9 pence per ordinary share,
which together with the two interim dividends
of 0.95 pence per ordinary share paid on
13 May and 7 October 2016, make a total of
3.8 pence per share for the year (2015: 3.7
pence), representing an increase of 2.7%. The
final dividend, if approved by the Shareholders,
will be paid on 13 January 2017 to Shareholders
on the register on close of business 16 December
2016, and the shares will go ex-dividend on
15 December 2016.
This final dividend and the two interim
dividends are in addition to the special dividend
of 17.54 pence per ordinary share paid on
7 October 2016 following the disposal of
Carr’s Flour Mills Ltd.
THE BOARD
Last 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. The Board
has been further strengthened this year with
the appointment of Non-Executive Director
Ian Wood, who has extensive experience in
the engineering and energy sectors, previously
working for Centrica plc.
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 30 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
The disposal of the Food division will support the
Group’s ambition to achieve further growth and
development in line with its strategic objectives
across its remaining two divisions, Agriculture
and Engineering. The Board sees opportunities
for international growth of our feedblock business
and to further build on our nuclear business
capability in the short and medium term, as well
as continuing to strengthen our UK Agricultural
business. We will continue to identify acquisition
opportunities while investing in our existing
business for the future.
The Board’s expectations for the current
financial year remain unchanged. Trading in
the first quarter has started positively with a
continued stabilising of farmgate milk prices.
The climate of uncertainty relating to the UK’s
exit from the European Union will continue
in the short term, and there is medium term
risk associated with UK Agriculture which is
dependent on future Government policy and
the terms of exit from the EU. In overall terms,
some of the difficulties experienced in the UK
as a result of Brexit have been offset as a result
of the exchange rate benefit from overseas
operations. The Board will continue to monitor
the position and believe that the Group is
well placed to respond to any challenges and
opportunities that may arise.
CHRIS HOLMES DL
Chairman
16 November 2016
05
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT 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
T
N
E
VEST M
IN
P
E
O
P
L
E
AGRICULTURE
ENGINEERING
T
E
C
H
N
O
L
O
G
Y
E
U
L
A
A D DED V
Q
C
A
U I SITIONS
Investing in people that
will shape the business in
ten years’ time
Delivering growth through
acquisition aligned
to strategy
STRATEGIC OBJECTIVES
Build business value by focussing on markets with growth potential
Grow and diversify our international footprint
Differentiate ourselves through innovation and technology
Lead in our chosen markets
•
•
•
•
06
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT
BUSINESS STRATEGIES
FOCUSED ON GROWTH MARKETS
We aim to succeed by being selective in what we do. We constantly strive
to build deep and long lasting relationships with customers across a range
of carefully chosen markets.
OUR KEY STRENGTHS
Global Markets
Wide range of export markets across the globe
supplied from key manufacturing plants in UK,
mainland Europe and across the United States.
Market Leading Products
Leading branded products such as Crystalyx®
and SmartLic® in Agriculture and Telbot®
and A1000 robots in Engineering.
Core Competencies
Deep industry knowhow delivering market
leading solutions backed up with world leading
engineering capability.
Doing the Right Thing
Management style that encourages
entrepreneurial drive and innovation backed
up by key values – respect, trust and integrity.
AGRICULTURE
ENGINEERING
The last two years have been tough across the global
agricultural market as the farming commodity cycle moves
towards a cyclical low. However, the medium to long term
outlook remains bright. The world’s population is expected
to reach over nine billion people by 2050, an increase of over
two billion on the current level. This growth combined with
continued urbanisation particularly in emerging economies
will drive demand for both food and agricultural products
and the need for technologies to drive productivity.
A resurgent UK nuclear industry offers a range of exciting
opportunities both in new build and decommissioning.
In oil and gas, global markets have been challenging and
this is set to continue through the next year. Opportunities
are emerging in other related markets such as defence
and aerospace.
• Increased UK feed volumes against a national average
• New products such as the Demo 2000 Telbot®
decline and growth of 10.2% in USA block sales
• Closer integration and marketing of combined offerings
• Retail development and growth
across the Engineering division
• New block plant in Silver Springs, USA®
• New products – Megastart® and Piglyx®
• New markets – New Zealand and South America
• Development of design department that is driving new
contract wins
• New markets – USA
07
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT CHIEF EXECUTIVE’S REVIEW
OPERATING PROFIT BY SECTOR
AGRICULTURE
£10.3m
8.6% UP
FROM 2015
ENGINEERING
£2.5m
4.9% DOWN
FROM 2015
Our investment in the business has continued
to be a priority. Major projects commenced and
completed in the year include:
• £0.9m reconfiguration of feedblock site at Ayr;
• £0.5m new silos at feedblock site in Silloth;
• £1.7m acquisition of Phoenix Feeds Ltd
OUTLOOK
The disposal of the Food division leaves
the Group well placed to capitalise on the
opportunity it presents by pursuing further
organic and acquisitive growth in its two
remaining higher margin divisions.
in June 2016;
• €1.0m high moisture feedblock plant in
Oldenburg commissioned;
• £0.3m acquisition of Green (Agriculture)
Co September 2015;
• £0.2m on new and redeveloped country
stores at:-
– Wigton
– Leek
– Penicuik
• $0.5m office expansion at AFS;
• €0.9m commencement of Wälischmiller
showroom; and
• £0.5m additional fuel tankers across the
existing fuel depots.
After the year end the Group acquired
STABER GmbH, formerly called Städele GmbH,
a family owned engineering business located
near the Group’s existing German operations in
Markdorf. STABER has designed and developed
specialised intellectual property, which will be
strategically beneficial to the Group’s German
operations in both the near and long term. This
purchase is fully aligned with the Engineering
division’s growth strategy of capitalising on the
global resurgence of nuclear decommissioning
as well as the use of robotic technologies in
highly explosive environments.
The Board is keen to pursue opportunities on
the international expansion of the feedblock
division into new territories and pursue further
opportunities in animal supplementation. In
Engineering, there will be a focus on expanding
the markets, territories and capabilities of the
highly specialised remote handling engineering
business, both organically and acquisitively,
as well as pursuing complementary acquisitions
that are strategically aligned to that division.
The Group is operating in challenging global
markets and as a result of the decision to leave
the EU, the UK faces a period of uncertainty
in the short-term. The Group is well placed to
capitalise on any opportunities this presents,
and with its inherent operational and geographical
diversity is in a strong position to deal with
this uncertainty. The current financial year has
started positively and trading is in line with the
Boards’ expectations.
“
We have once again
delivered another
record year of profit
for the Group.
”
TIM DAVIES
CHIEF EXECUTIVE OFFICER
INTRODUCTION
2016 was the beginning of a transformational
period for the Group culminating at the end
of the financial year with the disposal of the
Food division. The Group sold Carr’s Flour
Mills Ltd (the Food division) to Whitworths
Holdings Ltd, representing an exciting stage
in the Group’s strategic development. The
disposal enables the Group to focus on the
Agriculture and Engineering divisions to drive
future growth and improve the financial returns
for our shareholders. Both of these divisions are
internationally recognised for manufacturing
value added and technologically advanced
products with market leading brands.
Our strategy remains centred around four
key pillars:
• investing in our people, who are vital to
the long term success of the business;
• investing in our asset base, to ensure we
retain our competitive advantage;
• driving product innovation across each
of our divisions; and
• delivering growth through acquisitions
and organic expansion.
These strategic pillars are at the heart of each
division, and their continued implementation
has ensured we have once again delivered
another record year of profit for the Group.
08
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT
AGRICULTURE
Operating profit for the year increased by 8.6%
to £10.3m (2015: £9.4m) on revenue down
by 4.4% to £284.8m (2015: £297.7m).
This will extend our ability to supply low
moisture blocks to the significant market of
the eastern states of the USA, which cannot
be reached by our existing operations.
The exportation of Horslyx®, a product for
the equine leisure market, into the USA has
continued, with the business now working
with several new distributors down the East
Coast. We have continued with our UK
research into the benefits of Megastart®
and, following the successful conclusion of
University trials, it has been demonstrated
that Megastart® significantly increases
production of colostrum, which will improve
the profitability of our UK dairy farm
and suckler herd customers.
The Agriculture division has reported another
record year, driven by its operational and
geographic diversity.
FEEDBLOCKS
Overall our global feedblock sales volumes
were up 6.0% on last year.
Sales of feedblocks in the USA were at
unprecedented levels with sales volumes,
excluding joint ventures, up 5.1% on last year.
Record production levels have been driven by
an increase in market size with the continued
rebuilding of the beef herds across our key
territories, in addition to market share gains.
The new SmartLic® feedblock plant at Silver
Springs, Nevada, was commissioned in the
year with the first product being produced in
January 2016. This plant will significantly
extend the market reach and penetration in the
western states of the USA, and alleviate the
capacity pressure currently experienced by the
Belle Fourche plant, South Dakota, which has
been operating at capacity throughout the year.
The Silver Springs plant is expected to make
a full contribution in the current financial year,
with the primary feedblock season in the
region being August to February.
Sales of feedblocks in the USA through
our joint venture operations at Shelbyville,
Tennessee and Sioux City, Iowa were up
34.2% on last year. As a result of the success
of the joint venture at Shelbyville, the Board
has decided to expand our operations with the
construction of a $4.6m new low moisture
feedblock plant alongside the existing high
moisture feedblock facility. It is anticipated
that this will be completed within the current
financial year ahead of the main feedblock
season at the start of the 2018 financial year.
m
3
.
0
1
£
m
4
.
9
£
OPERATING PROFIT
£10.3m
8.6% UP FROM 2015
5
1
0
2
6
1
0
2
We continue to develop opportunities to
expand geographically. The first shipment of
Crystalyx® into South America occurred in the
year to facilitate the commencement of trials
at FAI Farms (a commercial research institute
in Brazil) and the Instituto de Zootecnia near
Ribeirao Preto, Sao Paulo State.
The opportunities for expansion in New
Zealand continue to be assessed, although
progress was delayed during the year as a
result of the adverse impact of the depressed
global milk market on dairy farming in New
Zealand. However, the New Zealand market
continues to be a promising expansion
opportunity for the feedblock business, and
our medium term objective of building a low
moisture block plant remains unchanged.
09
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT CHIEF EXECUTIVE’S REVIEW CONTINUED
UK AGRICULTURE
The retail business has delivered a record
performance, with the Country Store network
across Northern England and Southern
Scotland delivering a 5.0% increase in
like for like sales and a 16.0% increase in
total sales following the integration of the
acquisitions of Green (Agriculture) Co and
Reid and Robertson Ltd in September 2015
and June 2015 respectively.
The strategy for the retail business has been
to expand the geographic reach into adjacent
territories, redevelop existing facilities and
expand the product offering for the benefit
of rural communities. During the year the
product offer at the Balloch, Oban and Ayr
stores has been extended, the Leek store has
been refurbished and a new store at Wigton,
Cumbria, has been opened. A new Country
Store at Penicuik, Midlothian, is due to
open on 1 December 2016 and will have a
significant focus on the local equine market
in addition to supplying our normal range
of products and services. The opening of
Penicuik will bring our total retail footprint
to 41 locations.
In September 2015, Green (Agriculture) Co,
an agricultural merchant business based at
Morpeth, Northumberland was acquired. This
retail business is situated near the existing
machinery only Country Store and enhances
the offering to the local community. It has
been successfully integrated into the network
of Country Stores and has made a positive
contribution during the year.
In June 2016, Phoenix Feeds Ltd, an
agricultural merchant business specifically
retailing animal feed and based in
Lancashire, was acquired and has been
successfully integrated.
During the year, compound feed volumes
increased by 2.1% as a result of market
share gains. This is a particularly robust
performance against a market backdrop
that declined by 4% nationally. However,
due to the pressure on dairy farm incomes
and the competitive nature of the feed
market, margins were significantly reduced
year on year.
Total machinery sales have been severely
impacted by the downturn in farm incomes
with sales declining 8.1% year on year.
National tractor sales have declined 14.8%.
The oil distribution business has performed
well with sales volumes increasing 7.1%
year on year. This is a result of market share
gains and the corresponding increase in
the truck fleet.
The flooding in December 2015 in the North
of England had a significant impact on the
Lancaster feed mill and the AminoMax®
manufacturing facility. Global sales volumes
of AminoMax®, the patented animal bypass
protein product for dairy cows, are down
3.9% as a result of the pressure on dairy
farm incomes and the downtime at the
UK manufacturing facility resulting from
the floods.
MARKET CONDITIONS
Farmer confidence remained low during
the year with the farmgate milk price only
stabilising towards the end of the financial
year, causing significant pressure on farm
incomes which is set to continue through
the current financial year. The uncertainty
following the outcome from the EU
referendum, particularly relating to the future
of the single farm payment and support for UK
farmers in general, is likely to result in volatile
market conditions for the foreseeable future.
However, in the short-term UK livestock and
dairy prices have responded positively due
to the devaluation of Sterling.
The division is well placed both operationally
and geographically to adapt to future variable
market conditions whilst continuing to
support our farming customers.
10
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT
ENGINEERING
Operating profit for the year decreased by
4.9% to £2.5m (2015: £2.6m) on revenue
down by 10.2% to £30.1m (2015: £33.5m).
m
6
.
2
£
m
5
.
2
£
OPERATING PROFIT
£2.5m
4.9% DOWN FROM 2015
5
1
0
2
6
1
0
2
This year the Engineering division has
made significant progress in its objective to
reposition its focus on nuclear and adjacent
markets, such as defence. This is evidenced
by a number of significant contract wins and
strengthening of the management teams in
the UK, along with increased coordination
and integration of activities within the
division. Unfortunately, the benefits from
these actions have been offset in the short
term by customer delays in the awarding of
some nuclear contracts and the continued
depressed oil and gas market. Nevertheless,
the division’s performance for the full year
was satisfactory in the context of challenging
market conditions. The overall split of nuclear
and non-nuclear work of the division in 2016
was 69% nuclear (2015: 62% nuclear).
UK MANUFACTURING BUSINESS
Revenues have declined in the year following
the completion of the large BP contract in
2015 and as a result of contract delays,
however, the outlook looks more promising
in the nuclear market following a number
of sizeable contact wins.
The UK manufacturing business was
awarded The Sellafield Vessels and Tanks
Category Management Framework contract.
This contract, with a value of £48m at the
time of the tender, was won through an open
European Tendering process. The Framework
contract secures a position of exclusivity to
design and manufacture Sellafield’s highest
complexity vessels for the next 10 years. This
is a significant milestone for the Engineering
division, being the largest ever contract
secured by the business, and underpins the
growth and development of our Engineering
division over the medium term.
retrieval and removal of radioactive waste from
one of the storage ponds in Sellafield.
Despite the partial recovery of the oil price
towards the end of the 2016 financial year,
the oil and gas market remains depressed,
particularly in the exploration and production
sector, which has consequently had an adverse
impact on the business during the year. The
focus on the nuclear industry has continued
although, as previously reported, the transition
by part of the manufacturing business away
from oil and gas to nuclear has been slower
than initially anticipated due to contract delays.
During 2015 the business created a new
design department, to further enhance services
available to customers for the design of a wide
range of mission critical equipment, including
steel fabrications and pressure vessels. The
design business is integrated with the business’
production capability to maximise innovation
and improve efficiency. During the year it
concluded an important design and build
project for a skip conveyor system for the First
Generation Magnox Storage Pond (FGMSP)
project in Sellafield. This system is the first of
its kind, and is fundamental to assisting in the
The UK nuclear industry has benefited
from the Government’s commitment to both
the on-going decommissioning process
and nuclear new build, and as a result the
division is seeing an increase in the number
of tenders and subsequent contract wins.
The Government and international investor
commitment to the Hinkley C power station
is a significant vote of confidence in new
nuclear in the UK and will have boosted the
potential for the other developments, not
least with the Horizon project in North Wales
and the NuGEN project in Cumbria.
11
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT CHIEF EXECUTIVE’S REVIEW CONTINUED
REMOTE HANDLING BUSINESS
During the year the remote handling
business performed in line with the Board’s
expectations with several major projects
completed. The Demo 2000 Telbot® project,
for the inspection of oil and gas tanks in
Norway, completed successfully in December
2015. This project developed a robotic system
for vessel inspection and cleaning, the first in
the world to be certified for use in the most
highly explosive of environments. Statoil,
a partner in the project, has subsequently
invested further in the business to develop
a lighter weight version of the Demo 2000
Telbot® for use on off-shore platforms, where
there are strict machinery weight restrictions.
The business has completed two major
contracts for Sellafield, one for the Silo
Direct Encapsulation (SDP) project and the
other for the Box Encapsulation Plant (BEP)
project. In early 2015, Sellafield awarded
a contract for the design and production of
a robot to assist in the removal of high-
level toxic nuclear waste on the site in the
SDP project. This robot, Sally Telbot®, was
successfully tested in Germany for 1200hrs
without failure and proved to perform the
tasks 40% faster than the previously tested
hydraulic arms. Following its success, an
order was placed for a second Sally Telbot®,
which has been manufactured during
the year with successful factory testing
completed before the year-end and delivery
to Sellafield in November 2016.
Completion of the contract for two A1000
power manipulators for the nuclear facility
at Dounreay in Scotland was completed in
the year. An A1000 has also been delivered
to Mitsui in Japan for trial work in a future
decommissioning project to be undertaken
at the Fukushima nuclear facility, and the
business was also awarded a contract for
the design and manufacture of the highly
specialised A1000 power manipulator to
Sellafield for the BEP project. Production
has almost completed and factory acceptance
tests will commence in January 2017.
Following on from the development and
extensive trials in Japan and Germany of
Robbie, the V1000 robot, a remote controlled
handling vehicle, the business has received
its first order for delivery in 2017. Robbie
will be used in the vitrification plant on the
WAK GmbH Karlsruhe site in Germany. The
plant contains high level toxic waste and dust
particles making it too hazardous for human
presence. Robbie will assist the A1000
power manipulators already in the plant
to continue with their decommissioning.
A major contract, of c£1.8m in value, with
Cavendish Nuclear for the supply of Master
Slave Manipulators into Sellafield was
completed successfully during the year.
Further progress was made in the USA nuclear
market, with two small orders for Master
Slave Manipulators received in the year, one
for the USA National Laboratory at Idaho and
the other for the USA National Laboratory
at Oakridge, both due in November 2016.
Although small, these orders demonstrate
further progress being made by the business
in the penetration of the US market.
The business continues to face the ongoing
macroeconomic pressures resulting from the
political issues in Russia and the delay in
funding in Japan in the short term. This
is offset by the on-going resurgence in the
UK nuclear market.
On 24 October 2016, the German remote
handling business acquired one of its
primary suppliers, STABER GmbH, formerly
called Städele GmbH, including all of its
associated intellectual property for a total
cash consideration of @7.85m. STABER
and Wälischmiller, a subsidiary of Carr’s
Engineering Ltd, have been working together
closely for over 50 years and most recently
STABER has been a key supplier of parts for
the remote handling business. During 2014
and 2015 STABER was intrinsic in assisting
Wälischmiller in the development of the
Demo 2000 Telbot®, a robotic system for
vessel inspection and cleaning in the oil and
gas market, and the first in the world to be
certified for use in the most highly explosive
of environments. STABER has designed and
developed specialised intellectual property
(“IP”) which will be strategically beneficial to
Wälischmiller in both the near and long term.
This IP will accelerate the ongoing strategic
development work on the Telbot® and the
Demo 2000 Telbot® by Wälischmiller.
The Engineering division is a well-established
supplier of high integrity equipment to the
nuclear industry. With agreements in place
with leading UK and Global nuclear
companies, it is well positioned to secure
high value, long term contracts to build on
its existing decommissioning portfolio and
potential defence opportunities through the
UK Successor and Defence programmes.
12
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT FOOD
Profit for the year from discontinued
operations was £2.8m (2015: £3.0m).
The floods in December 2015 in Cumbria
directly affected one of the Food division’s
major customers, which had a consequential
impact on sales volumes in the year. Due to
appropriate and comprehensive insurance
cover, the floods had no financial impact
on the business.
Underlying sales volumes grew 3.54%, in
spite of the changes in the consumer market,
notably the decline in consumption of the
traditional sliced loaf and the concurrent
increase in the consumption of bake-off
products. The division’s performance has
also been supported by the investment made
by the Group in the mill at Kirkcaldy and
excellent long term relationships
with customers.
The 2015 UK wheat harvest was in excess
of 16 million tonnes, although the quality
was variable. The wheat price volatility in
the market has continued, with significant
price falls experienced in early 2016. Carr’s
approach to risk management, which seeks
to match sales contracts with raw materials
commitments, served to minimise the impact
of that volatility.
The flour market continues to decline, is over
supplied and is operating in a challenging
consumer environment with limited growth
opportunities for the Group. This, coupled
with the need for significant future capital
investment, resulted in the Group being
exposed to an increased risk profile.
m
0
.
3
£
m
8
.
2
£
PROFIT FROM
DISCONTINUED
OPERATIONS
£2.8m
6.5% DOWN FROM 2015
5
1
0
2
6
1
0
2
At the year-end we announced the disposal of
the Food division to Whitworths Holdings Ltd.
TIM DAVIES
Chief Executive Officer
16 November 2016
13
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC 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:
acquisitions, people, investment and innovation.
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
and all relevant information is disclosed and
reported to 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 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,
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.
This review is undertaken quarterly.
For each of our principal risks we have a
risk management framework detailing 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.
BOARD’S ASSESSMENT OF COMPLIANCE
WITH THE RISK MANAGEMENT FRAMEWORK
The Board review the principal risks quarterly.
This is supported by an annual review of the risk
management system undertaken by the Audit
Committee. 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.
Decisions that could have a material impact
on the Group are reviewed as and when required
at Board meetings.
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.
Additionally, the Board receives and reviews a Health and Safety report at each
Board meeting, and also meets annually with the Health and Safety Manager
to discuss the Group’s safety performance and areas for improvement.
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.
14
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT DESCRIPTION OF THE RISK
WHAT WE ARE DOING TO MANAGE THE RISK
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.
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 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.
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.
15
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT RISK MANAGEMENT CONTINUED
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,
or an inappropriate deal structure.
Failure to effectively integrate acquired businesses could
also undermine any expected synergies.
A thorough and careful due diligence process is undertaken, utilising relevant
skilled internal personnel, as well as external expertise when required.
Individual business unit and Group resource is 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 and proposed financing arrangements are
determined on a case by case basis.
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 in 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.
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.
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 harvest, this could adversely
affect business 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 impact by a natural disaster. In addition, research remains
underway to establish alternative ingredients to molasses.
The scheme closed to future accrual on 31 December 2015. As at the last
triennial actuarial valuation, the scheme was fully funded. This funding level is
monitored on a quarterly basis by both the Company and the scheme Trustees.
The scheme also has a dynamic de-risking programme in place, with an
investment strategy designed to reduce the volatility of the funding level in
changeable markets.
The Group benefits from its operational and geographic diversity and is not
substantially dependent on the EU for either raw materials or revenues.
We will continue to monitor developments and incorporate these into our
future business planning.
Defined Benefit Pension Scheme
The Group operates one defined benefit pension scheme.
The funding of the scheme could be adversely affected by a
number of factors including: investment returns, interest rate
fluctuations, members’ longevity and government gilt rates
that are used to determine the value of liabilities. Changes
in all or some of these inputs could increase the cost to the
Group of funding this scheme in the future.
Brexit
The UK’s impending exit from the European Union (EU)
highlights a number of risks for the Group, particularly in the
Agriculture division.
Part of our customer base is inherently reliant on agricultural
subsidies from the EU, and therefore future government
policy and support for the agricultural sector will potentially
impact on our customers with a knock on effect to our
agricultural business.
Similarly, for some areas of the business the Group imports raw
materials from within the EU. The imposition of tariffs or other
related cost increases could impact the cost base of the Group.
16
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT VIABILITY STATEMENT
The Group’s business model and strategy are
central to an understanding of its prospects,
and details can be found on pages 6 to 7.
The Group is very diverse both operationally
and geographically. The Group set down
a strategic plan two years ago, which is subject
to ongoing monitoring and development as
described below.
The Group’s focus is particularly on developing
the supplements business, because of the
opportunities for international expansion
and product development, and its nuclear
engineering business because of the global
expansion opportunities in the nuclear sector
and adjacent markets.
budget and is subject to a re-forecast process
at the half-year. The second and third years are
in a similar level of detail.
The Group’s principal risks are set out on
pages 14 to 16. The purpose of the principal
risks table is primarily to summarise those
matters that could prevent the Group from
delivering on its strategy. A number of other
aspects of the principal risks – because of their
nature or potential impact – could also threaten
the Group’s ability to continue in business in
its current form if they were to occur. Of the
principal risks identified, the following are
the most important to the assessment of the
viability of the Group:
The Group’s prospects are assessed primarily
through its strategic planning process. This
process is led by the Chief Executive across all
aspects of the Group. The Board participates
fully in the annual process through an annual
strategy day, detailed strategic presentations
on all areas of the business by business leaders
throughout the year, and an annual half-year
strategic update. Part of the Board’s role is
to consider whether the plan continues to
take appropriate account of the changing
external environment.
The output of the strategic planning process
is a set of Group strategic objectives and
a number of strategic priorities for the
forthcoming financial year. The latest updates
to the strategic plan were finalised in July
2016 following this year’s review. This
considered the Group’s current position and the
development of the business as a whole over
the next three years.
Given the nature of the business cycles in both
Agriculture and Engineering, it was decided
that a period of three years to 31 August 2019
was the most appropriate for the purpose of a
viability assessment. The Group has prepared
detailed financial forecasts for the 3 year
period to 31 August 2019, so that 2 years
10 months remains at the time of approval of
this year’s annual report. The first year of the
financial forecasts form the Group’s operating
1. Treasury;
2. Commodity costs;
3. Reliance on key ingredients;
4. Strategic partners; and
5. Consumer demand
It was determined that none of these individual
risks would, in isolation, compromise the
Group’s viability.
Although the strategic plan reflects the
Directors’ best estimate of the future prospects
of the business, they have also tested the
potential impact on the Group of a number of
scenarios over and above those included in
the plan by quantifying their financial impact
and overlaying this on the detailed financial
forecasts in the plan. These scenarios represent
‘severe but plausible’ circumstances that the
Group could experience.
The scenarios tested included:
• Significant reductions in profitability and
associated cashflows associated with the risks
highlighted above, with consumer demand
affecting all business units and additional
impacts on Agriculture business units from
commodity costs, reliance on key ingredients,
and from strategic partners; and
• Interest costs increasing by a factor of two.
The results of this stress testing showed
that, due to the stability of the core business,
the Group would be able to withstand the
impact of these scenarios occurring over the
period of the financial forecasts by making
adjustments to its operating plans within
the normal course of business.
The Group also considered a number of
scenarios that would represent serious threats
to its liquidity. None of these was considered
to be plausible.
Based on their assessment of prospects and
viability above, the Directors confirm that they
have a reasonable expectation that the Group
will be able to continue in operation and meet
its liabilities as they fall due over the three
year period ending 31 August 2019.
The Directors also considered it appropriate
to prepare the financial statements on the
going concern basis, as explained in the Basis
of accounting paragraph in the principal
accounting policies.
17
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT FINANCIAL REVIEW
NEIL AUSTIN
GROUP FINANCE DIRECTOR
CURRENT AND FUTURE DEVELOPMENT
AND PERFORMANCE
REVENUE
Reported revenues from continuing operations
were £314.9m, 4.9 per cent behind last year
(2015: £331.3m).
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, and also because of a
reduced level of activity in Engineering.
OPERATING PROFIT
Group operating profit from continuing
operations of £12.8m is up 5.6 per cent
on last year (2015: £12.1m). As a percentage
of revenues, Group operating margin is 4.1
per cent compared to 3.6 per cent in 2015.
Following the disposal of the Food division,
the results of the Food division for the year
of £2.8m (2015: £3.0m) are shown separately
in the results of discontinued operations.
Operating profits from continuing operations
per division and as a percentage of divisional
revenues are as follows:
Operating Profit
Agriculture
Engineering
2016
£m
10.3
2.5
2016
%
3.6
8.3
2015
£m
9.4
2.6
2015
%
3.2
7.9
“
The key features
of the year have
been the record
profit before tax
for the Group, for
another successive
year, continued
capital investment
across all three
divisions and the
disposal of the
Food division.
”
SHARE OF ASSOCIATE AND JVS
The Group’s share of the post-tax result
in its associate and joint ventures was
£2.1m, compared to £2.3m in 2015. The
result reflected a decrease in its associate’s
profitability, primarily due to reduced feed
margins, offset by a slight increase in
aggregated joint venture profitability with
a strong US performance offsetting a
reduction in European feed blocks caused
by the ongoing issues in the dairy sector.
FINANCE COSTS
Net finance costs of £0.8m were higher than the
previous year (2015: £0.7m), reflecting lower
interest receivable in the year. Interest cover was
19.2 times compared to 20.4 times in 2015.
PROFIT BEFORE TAX
Profit before tax from continuing operations
at £14.1m was 2.8 per cent higher than in
the previous year (2015: £13.7m).
18
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT TAXATION
The Group’s effective tax charge on profit from
activities after net finance costs and excluding
profits from associate and joint ventures
was 24.2 per cent (2015: 26.4 per cent).
A reconciliation of the actual total tax charge
to the standard rate of corporation tax in the
UK of 20 per cent is given in note 6 to the
financial statements.
EARNINGS PER SHARE
The profit attributable to the equity holders
of the Company amounted to £12.5m (2015:
£12.0m), and basic earnings per share from
continuing operations was 10.7p (2015:
10.0p), an increase of 7 per cent.
Adjusted earnings per share of 10.9p (2015:
10.2p) is calculated by dividing the profit
attributable to equity holders for the year,
before non-recurring items and amortisation
of intangible assets, by the weighted average
number of shares in issue during the year.
ACQUISITIONS AND DISPOSALS
The Group acquired the business and assets
of Green (Agriculture) Co in September 2015
for a consideration of £0.3m.
In June 2016 the Group acquired the entire
issued share capital of Phoenix Feeds Ltd
for a consideration of £1.7m, including
contingent consideration of £0.5m. This
business was hived up on acquisition into
our UK Agriculture business.
On 3 September 2016 the Group disposed of
its Food division for a gross consideration of
£36m, receiving net proceeds of £24.9m after
adjusting for net debt and working capital.
Consequently the segmental analysis presented
in the financial statements has been restated
to reallocate central costs previously borne
by the Food division to alternative segments.
The disposal resulted in a small profit on sale
of £39,000, which has been included in the
results of discontinued operations.
CASH FLOW AND NET DEBT
Due to the disposal of the Food division and
the special dividend not being paid until post
year end, the Group was in a net cash position
at 3 September 2016.
A free cash flow of £6.5 million was generated
in the year, representing an increase of 11.9
per cent on £5.8 million in the previous year.
Headroom against existing facilities was
£23.0m at the year end. Other than the
Group’s overdraft, which is renewable annually,
the Group’s existing facilities are due for
renewal in July 2019.
Cash flow and net (debt)/cash
Operating profit from continuing operations
Depreciation and profit on disposal
Amortisation
EBITDA (excluding associate and joint ventures)
Increase in inventories
Increase in receivables
Decrease in payables
Other
Net operating cash flow
Net interest
Taxation
Cash flow from continuing operations
Maintenance capex
Net cash from discontinued operations
Free cash flow
Expansionary capex
Acquisitions/disposals
Dividends
Loans and Finance leases received/paid
Other
Increase in cash and cash equivalents
Opening cash and cash equivalents
Closing cash and cash equivalents
Opening net debt
Increase in cash and cash equivalents
Change in borrowings
Closing net cash
2016
£’000
12,770
3,504
205
16,479
(1,620)
(3,606)
(3,226)
(1,770)
6,257
(518)
(1,098)
4,641
(1,764)
3,620
6,497
(4,024)
22,664
(3,347)
(3,078)
4,800
23,512
16,275
39,787
(24,413)
23,512
9,045
8,144
PENSIONS
The Group operates its current pension
arrangements on a defined benefit and defined
contribution basis. The defined benefit scheme
is closed to new members and during the year
was closed to future accrual. The closure
resulted in a negative past service cost, net
of associated costs, of approximately £0.3m.
The scheme currently has 112 deferred
members and 224 current pensioners.
It received £0.8 million during the year in
additional deficit reduction contributions
from the Group in accordance with the 2011
actuarial valuation as agreed between the
Company and the Trustees. Deficit reduction
contributions ceased on 31 December 2015
as per the agreed recovery plan.
The valuation on an IAS 19 accounting basis
showed a surplus before the related deferred
tax liability in the scheme at 3 September 2016
of £0.3m (2015: £1.8m). Actuarial losses
of £2.7m (2015: £2.8m) 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
16 November 2016
19
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT
KEY PERFORMANCE INDICATORS
We monitor our performance against the strategy by means of key performance indicators (‘KPIs’):
%
)
5
.
5
(
6
1
0
2
%
1
.
3
1
6
1
0
2
%
1
.
4
6
1
0
2
m
5
.
6
£
6
1
0
2
%
9
8
1
.
%
)
4
.
4
(
5
1
0
2
%
9
.
2
1
5
1
0
2
%
7
.
3
5
1
0
2
m
8
.
5
£
5
1
0
2
%
9
7
1
.
UNDERLYING SALES
GROWTH/DECLINE
(5.5)%
Financial Review
Pages 18 to 19
GROSS MARGIN
13.1%
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 growth. 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.
The reduction in the year reflected lower commodity prices
in Agriculture and contract delays in Engineering.
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 from
continuing operations grew to 13.1% in the current year, which
highlights how we continue to manage input price volatility.
ADJUSTED GROUP
OPERATING MARGIN
4.1%
Definition
Operating profit before
non-recurring items
and amortisation, as a
percentage of revenue.
Comments
The underlying 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 underlying
operating margin from continuing operations to 4.1% relates
to both of these aspects.
Financial Review
Pages 18 to 19
FREE CASH FLOW
£6.5m
Financial Review
Pages 18 to 19
RETURN ON NET ASSETS
18.9%
Definition
Cash generated from
operating activities
including all cashflows
from discontinued
operations, less
maintenance capital
expenditure.
Comments
This KPI indicates how much cash has been generated by
the Group’s operations that is available for expansionary
capital investment, paying dividends, or financing/repaying
borrowings. The increase in FY16 is predominantly due
to an increase in EBITDA year on year.
Definition
Profit before tax,
non-recurring items
and amortisation
as a percentage of
net assets.
Comments
Return on net assets increased to 18.9% this year. This has
been calculated after adjusting year end net assets for the
£16m special dividend arising from the disposal of the Food
business. That disposal reduced the Group’s asset base in
the year.
5
1
0
2
6
1
0
2
Financial Review
Pages 18 to 19
20
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC 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. Robert retired
from the Board on 30 April 2016.
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, Senior Independent
Director of Hilton Food Group plc and Chairman of the audit committee
of both companies. 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 retired as the
Commercial Director, International Business Development for Centrica
(previously British Gas) in January 2016 and having 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. Ian is a Director of Talkin Energy Ltd.
8 KATIE WOOD
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 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT 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.
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.
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.
22
The Group employs, 1,139 people.
The split is as follows:
24%
76%
871 Men
268 Women
Senior Managers and Executives,
male and female:
27%
73%
11 Men
4 Women
Employees with disabilities
It is our policy that people with disabilities
should have full and fair consideration for
all vacancies. We remain committed to
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.
Year overview
This year has seen significant delivery in
development at all levels.
We have successfully delivered a Group Wide
Senior Leadership Development Programme
over the last 12 months with the participants
now working on Strategic Business Projects
ready for delivery in January 2017.
This programme has been run with one of our
development partners, the Brathay Trust. The
Trust was founded in 1946 and is a registered
Charity with the principal business activities
comprising of Professional Development,
Children and Young People’s Services, and
the Brathay Research and Evaluation Hub.
As a social enterprise, Brathay is committed to
a policy of Corporate Social Responsibility. All
profits from Brathay Professional Development
are utilised by the Brathay Trust to carry out
youth development work – this work focuses
on young people from all backgrounds and
aims to help them cultivate a positive sense
of themselves and others that allows them
to succeed and flourish.
The Programme Objectives have been:
• To provide participants with an increased
self-awareness around their working style
and impact on others to improve their overall
effectiveness as leaders of the future.
• To gain feedback on performance and
leadership style and to explore how
leadership and organisational climate
drives business performance.
• To challenge current leadership style and to
develop new ways of working, by employing
an active, experiential learning approach.
• To increase participants management and
leadership skills, knowledge and awareness.
• To create opportunities to learn from key
business managers and to share best practice
across the Group’s businesses.
A full review of the programme will take place
on completion of the business projects but the
Group has already seen significant development
of the participants with many positive examples
of personal and professional progression.
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT
In January 2016 Carrs Billington Agriculture
(Sales) Ltd commenced a Branch Supervisors’
Development Programme:
• To provide supervisors with the necessary
knowledge, skills and behaviours to increase
their effectiveness in their current roles.
• To equip supervisors with the managerial
skills necessary for them to adapt to
changing demands.
• To provide a structured development
programme which will enable supervisors
to fulfil their potential within the company.
This programme has successfully combined
learning managerial skills along with the
operational and product knowledge required
to be successful in this role. Feedback has
been obtained throughout the programme
providing real time opportunity to adapt and
amend the programme and its content to
ensure appropriate learning and development
is adding value and enabling line management
to respond effectively and efficiently.
Based on the success of this programme so
far, we have adapted the content and run this
programme within Carr’s Engineering Ltd.
Bendalls, part of Carr’s Engineering Ltd,
has undergone a significant culture change
programme this year focussing on motivation,
change and growth. The feedback from this
programme has identified many aspects
of business improvement and personal
developmental goals as well as identifying
further development requirements in the areas
of engagement, quality and Health & Safety.
HEALTH & SAFETY
The Group is committed to the maintenance
of high standards of health and safety for all
its employees, visitors, customers, and others
who may be affected by its business activities.
There is also recognition of the need to
continually improve safety performance.
The CEO, Group FD and Group Risk Manager
meet monthly in advance of each Board meeting
to review Health and Safety. It is a standard
Board meeting agenda item and 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.
Arrangements have been further improved by
the appointment of Non-Executive Director Ian
Wood, who has the Board oversight for health
and safety. This is a significant step and builds
on our arrangements to ensure they are more in
line with the recommendations of the Institute
of Directors and HSE.
A comprehensive Branch Supervisor training
programme was conducted throughout the year
and this included a health and safety module.
The Group Risk Manager continuously monitors
safety performance to ensure there is a high
standard of health and safety management
across all Group businesses. This year the
programme of audits was extended to include
the wholly-owned USA businesses.
The overall number of accidents across the UK
Group companies was 41, a 19.6% reduction
on the 51 recorded in the previous year. The
number of RIDDOR reportable injuries has also
reduced 16.7%, from 6 to 5.
In terms of the Group as a whole, including
the overseas businesses, the total number of
accidents was 59, a reduction of 14.5% on
the 69 the previous year.
In addition the number of days lost in the
year arising from RIDDOR reportable injuries
and overseas equivalents was 119, a 7.0%
reduction from 128 the previous year.
The Board is committed to improving standards
of health and safety and remains confident the
overall trend of reduction in accident numbers
will continue.
SUSTAINABILITY
The Group continues to make progress
towards its target of obtaining 25% of
the Group’s energy from carbon neutral
sources by 2020.
Continued investment in energy efficient
lighting and processes continues to reduce
the carbon generation. The Group wide
Environmental Reporting System is fully
operational for both UK and overseas
subsidiaries and each location reports the
following monthly data and performance
against pre set benchmarks.
• Energy and Carbon Generation
• Water Utilisation
• Waste Generation and Recycling
• Transport Fuels
• Environmental Legislation / Compliance
Environment Legislation & Compliance
All of the UK Group Engineering sites
are now utilising green renewable grid
supplied electricity.
During 2015 the Group undertook a full
Energy Audit in accordance with the
mandatory Energy Savings Opportunity
Scheme, and the findings and energy saving
opportunities identified from the audit were
presented to the CEO and duly signed off
as required by the statutory legislation.
Carbon Generation Report
The Group did not generate any additional
greenhouse gases other than C02 from the
utilisation of grid supplied electricity and
natural gas during 2016.
The energy intensive operations of the Food
division and the UK feedblock business
continued to be in receipt of Climate Change
Discount Agreements in exchange for target
carbon reductions. As a result of the sale
of the Food division on 3 September 2016,
energy consumption will reduce in 2017.
Detailed below is the C02 generation for all
of the Group’s subsidiary companies and
compares actual volume against previous year.
It should be noted that this does not include
transport C02 generated for the period
2015/16 and depicts manufacturing and
retail carbon footprint data from utilities only.
This is reported separately in this statement.
CARR’S GROUP CARBON C02 GENERATION 2015/16 V 2014/15
Division
CO2 Tonnes 2015/16
CO2 Tonnes 2014/15
Food
UK Agriculture
USA Agriculture
Engineering
Head Office
Sub Total
Transport
Total
12,242
4,699
6,050
273
21
23,285
4,405
27,690
14,256
3,970
7,052
821
51
26,150
5,038
31,188
23
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT
CORPORATE RESPONSIBILITY CONTINUED
Electricity and Gas Utilisation
Annual UK Group Electricity Consumption for 2015 /16
Group Overseas Electricity Consumption for 2015 /16
Annual UK Group Gas Consumption for 2015 /16
Group Overseas Gas Consumption for 2015 /16
Total Other Fossil Fuel Consumption for 2015 /16
30,893,521 Kwh
6,877,221 Kwh
8,885,006 Kwh
6,015.602 Kwh
1,554,112 Kwh
Transport Fuels
During 2016 the Group utilised
1,643,993 litres of Diesel Fuel for
Own Fleet Vehicles and Company Cars
throughout its UK operations.
The C02 generated from this fuel
consumption during 2016 is 4,405
tonnes, down 12.6% (2015: 5,038).
CARR’S GROUP PLC TOTAL UK ENERGY
BY SUBSIDIARY
1.1% 6.6%
2.5% 0.3%
2.3%
5.1%
5.2%
12.5%
12.5%
27.6%
24.3%
Flour: Kirkcaldy
Flour: Silloth
Flour: Maldon
Caltech
CBAS
Commercial Fleet
Wallace Oils
Commercial Fleet
JWF Commercial
Fleet
Scotmin
Commercial Fleet
Company Cars
CBAS Sites
Old Croft
Total CO2 Generated by the Group
Combining the C02 generated through
operation and fuel consumption the total Group
C02 Generation for the year is 27,690 tonnes.
On a like for like basis this resulted in an
annual decrease 11.3%.
Intensity Metric
Due to the diverse nature of the operations
of the Group it was decided that people were
the best measure for the intensity metric.
The 2016 intensity metric is 24.3 C02 tonnes
per employee, being 27,690 C02 Tonnes /
1,134 employees, down 16.2% from 29 C02
tonnes per employee in 2015.
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 and multiplied by relevant
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.
Environmental Compliance
There have been no breaches of environmental
legislation during the year and the large
manufacturing sites continued to operate within
the emission levels set by the UK Environment
Agency and their current permit conditions.
All sites operate within the framework of
a full Environmental Management System.
Waste Reduction and Recycling targets have
been set for each subsidiary for 2017.
All Group employees are actively encouraged to
reduce waste and improve energy efficiencies.
COMMUNITY
Supporting the communities in which we
operate is exceptionally important to the Group.
The support that has been provided throughout
the year has been varied, from charitable
donations to volunteer work.
24
During the year one of our Agriculture
businesses Carrs Billington Agriculture (Sales)
Ltd became part of a global project launched
by Zeus Packaging Group to support children’s
charities in Ireland, the UK, Spain, Portugal,
New Zealand and Australia. The initiative saw
Carrs be provided with the exclusive distribution
rights of Zeus Purple Silage wrap and Purple
Netwrap in the UK to support WellChild, the
national charity for sick children.
In addition, to the proceeds Carrs raised, it
launched a competition to support WellChild.
Farmers were challenged to create eye-catching
displays from their purple hay bales. They
could customise their bales with special
packs provided by Carrs. Farmers taking part
submitted photos of their creation, which
were then displayed on social media. The
best display received two tickets for the
prestigious WellChild Awards 2016 which took
place in London in October. This was a star
studded event, which was attended by a host
of celebrities, and WellChild Patron Prince
Harry, with awards being given to inspirational
children coping with serious illness,
caring children and to dedicated child
health professionals.
During the year we continued to contribute to
the Cumbria Community Foundation, which
during the year, supported those in Cumbria
badly affected by the floods of winter 2015.
Carr’s also maintained its relationship with
Carlisle Youth Zone, which continues to serve
the social, recreational and emotional needs
of young people in the Carlisle area.
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORT
CORPORATE GOVERNANCE REPORT
CHRIS HOLMES
CHAIRMAN
CHAIRMAN’S OVERVIEW
Significant changes made to the UK Corporate
Governance Code 2014 have applied to the
Group for the first time this year. These changes
have facilitated an overarching review of how
the Group approaches risk management. Risk
management is underpinned by Carr’s core values
of openness, respect and a can-do attitude.
An overview of the revised risk management
process now in place and the principal risks
of the Group are on pages 14 to 16.
Carr’s approach to governance is outlined in
the following report, which describes how the
Group has integrated the main principles of
the UK Corporate Governance Code 2014.
The Board considers that it complied with the
Code throughout the year, with the exception
of B.1.1 as set out on page 27.
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 DL
Chairman
16 November 2016
“
Governance plays a vital role,
and the Board is committed
to maintaining high standards
of corporate governance.
”
Statement by the Directors on compliance
with the provisions of the UK Corporate
Governance Code 2014.
UK CORPORATE GOVERNANCE CODE
The UK Corporate Governance Code dated
September 2014 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; and
• relationships with shareholders.
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 3 September 2016, complied
with the requirements of the Code, save for
provision B.1.1.
The Company is aware of its ongoing corporate
governance obligations and appointed a new
independent Non-Executive Director, Ian Wood,
who commenced on 1 October 2015 and is
a member of the Remuneration, Audit and
Nominations Committees.
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.
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.
Strategy
Setting strategic targets.
Reviewing new business
developments, including
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
Budget approval.
Oversight 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 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 3 September 2016,
the Board comprised two Executive Directors,
a Chairman, and at least three Non-Executive
Directors (Ian Wood from 1 October 2015, Bob
Heygate retired on 30 April 2016). There is a
Company Secretary to the Board. The biographies
of the Board can be found on page 21.
25
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE GOVERNANCE CORPORATE GOVERNANCE REPORT CONTINUED
The Board met 13 times throughout the
year. In addition to the regular scheduled
meetings throughout the year, unscheduled
supplementary meetings may also take place
as and when necessary. During this financial
year there were three unscheduled meetings
in relation to the disposal of the Food division.
Directors who are unable to attend a 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 there were
no Director absences from the Board meetings.
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.
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; and
• monitoring the Group’s profit and cash
flow performance.
The Board has delegated authority to the Audit,
Remuneration, and Nominations 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.
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.
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; and
• 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;
26
• leading the management team in the
implementation of the Group’s strategy; and
• bringing matters of particular significance
to the Chairman for discussion and
consideration by the Board if appropriate.
Elections
The Company’s Articles of Association provide
that one third of the Directors retire by rotation
each year at the Annual General Meeting, however,
the Company has deemed it best practice to
require all the Directors to retire annually.
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 Board. The Company Secretary is
responsible to the Board for the timeliness
and quality of information.
Details of the number of meetings of, and
members’ attendance at, the Board, Audit,
Remuneration and Nominations 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.
BOARD EVALUATION
This year the Board conducted an internal
evaluation. Improvements have continued to be
implemented throughout the year following last
year’s evaluation. One of the areas highlighted
for focus in the next financial year was for Board
meetings to take place at different operational
sites, to provide the Non-Executive Directors
with a greater opportunity to meet employees
and see the diverse nature of the Group’s
operations first hand. An agenda for Board
meetings has been set for the current year
which incorporates these visits. The Board
will undertake an externally facilitated
evaluation in the financial year ending 2017.
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.
Meetings Attendance
No. of meetings
Chris Holmes
Tim Davies
Neil Austin
Alistair Wannop
John Worby
Ian Wood**
Robert Heygate***
Board
Audit
Committee
Remuneration
Committee
Nominations
Committee
13
13
13
13
13
12
8
4
4
4
3
4
4
1
3
* 2
* 2
3
3
2
3
1
* 1
*
* 1
*
1
1
1
–
* part of the meetings by invitation
** attended all meetings since his appointment
*** attended all meetings up until his retirement
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016CORPORATE GOVERNANCE The Audit Committee comprised of four Non-
Executive Directors: John Worby (Chairman),
Chris Holmes, Robert Heygate (up until 30 April
2016), Ian Wood (from 1 October 2015) and
Alistair Wannop. 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 (up until 30 April
2016), John Worby, and Ian Wood (from
1 October 2015). The work, responsibilities and
governance of the Remuneration Committee
are set out on pages 30 to 35. The Chair of the
Remuneration Committee will be available at
the AGM to answer any shareholder questions
on the Committee and its activities.
Nominations Committee
During the year the Nominations Committee
comprised of Chris Holmes (Chairman), Alistair
Wannop, Robert Heygate (up until 30 April
2016), John Worby and Ian Wood (from
1 October 2015). The work, responsibilities
and governance of the Nominations Committee
are set out on page 36. The Chair of the
Nominations 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 half year
statement, and we produce trading updates
during the year. All reports and updates are
made available on our website.
The Annual General Meeting 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 Annual
General Meetings 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.
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 14 to 16.
COMPLIANCE WITH THE CODE
The Board considers that it complied with the
Code throughout the year, with the exception
of the following:
• B.1.1 requires all Non-Executive Directors to
serve for less than 9 years. Alistair Wannop
commenced as a Non-Executive Director in
2005 and therefore during the year he ceased
to be deemed as independent in accordance
with the Code. Alistair’s agricultural
knowledge, expertise and work in some of the
communities in which we operate has resulted
in him making very valuable contributions to
the Board over the last 9 years. The Board
consider that notwithstanding his length of
service, his professionalism and actions show
him to be independent.
• B.1.1. The Board considered Bob Heygate
to be independent during his time on the
Board in the year, notwithstanding his long
directorship and substantial shareholding.
Bob Heygate’s wealth of knowledge of the
flour milling industry has been valuable to
the Board. Despite being on the Board for
25 years, Bob continued to question with
the impartiality expected of a Non-Executive
Director. In addition, his shareholding aligns
his interests with other shareholders.
By order of the Board
KATIE WOOD
Company Secretary
Carlisle
CA3 9BA
16 November 2016
27
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE GOVERNANCE AUDIT COMMITTEE REPORT
JOHN WORBY
CHAIRMAN OF THE AUDIT COMMITTEE
INTRODUCTION
On behalf of the Audit Committee, I am
pleased to present this report to shareholders.
The purpose of the report is to highlight the
areas that the Committee has reviewed 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
was 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; and
• 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.
28
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 to consider the results
and Annual Report for the year ended
3 September 2016.
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.
During the year the Group also received and
responded to a letter from the FRC in relation
to the 2015 Annual Report and Accounts.
All questions raised were discussed with
the Committee and the response was approved
by the Committee prior to submission. The
FRC subsequently confirmed it was satisfied
with the responses, which included clarifying
some disclosures in the 2016 Annual Report
and Accounts.
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
at the two meetings that reviewed the half year
and year end results, 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:
• 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
Engineering given the continued issues
in the oil and gas 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 3 September 2016;
• Provisioning policies in relation to
contractual disputes. The Committee
determined that the judgements made were
appropriate to justify the provisions held at
3 September 2016;
• The treatment of certain bid costs in the
Engineering division in relation to a large
contract win in the year. The Committee
concluded it was satisfied with the
accounting treatment;
• Accounting treatment of the disposal of the
Food division, and associated disclosures.
The Committee concluded that the
disclosures and accounting treatment were
appropriate; and
• Revenue recognition in the Engineering
division, particularly in relation to part
completed contracts at the year end.
The Committee focussed on the recognition
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016CORPORATE GOVERNANCE 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’.
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 further
inclusion of additional non-financial KPIs. 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.
The Committee has also reviewed the Group’s
disclosures in relation to the Group’s going
concern and viability statement disclosures.
It received a written report prepared by the
Group Finance Director which enabled it to
review the base assumptions and various
sensitised scenarios throughout the forecast
period. The Committee was comfortable with
the disclosures made.
INTERNAL CONTROL AND RISK MANAGEMENT
During the year the Committee reviewed the
effectiveness of the Group’s internal control
and risk management systems.
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. During
2016/17 the Group will aim to develop a more
integrated risk and assurance framework as
a further improvement to the 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.
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. This will comply
with the EU/FRC rotation requirements
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.
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 2016 financial
year end, the non-audit to audit services ratio
was 0.4. Note 3 on page 58 provides further
detail on non-audit service fees.
Previously, PwC had undertaken our tax
compliance activities in addition to their role
as auditors. Rule changes meant that this
was no longer possible for our 2016 year end
and beyond, so with effect from 1 September
2016 PwC are no longer undertaking any
tax compliance activities and the Group has
appointed an alternative adviser.
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 2017.
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 absence of any significant control
issues having arisen no such internal audit
function was required. The Committee will
keep this under review.
OTHER ACTIVITIES
The Committee also reviewed its terms of
reference, its effectiveness, and the Group’s
whistleblowing policy.
As Chairman of the Committee, I will be
available at the Annual General Meeting to
respond to any shareholder questions that
might be raised on the Committee’s activities.
PricewaterhouseCoopers LLP (PwC) and its
predecessor firms have been the Auditor for
Carr’s Group plc since the Company first listed
The Audit Committee reviewed and approved
the non-audit services policy, the objective of
which is to ensure that the provision of such
JOHN WORBY
Audit Committee Chairman
16 November 2016
29
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE GOVERNANCE 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 3 September 2016.
”
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.
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 Committee is authorised by the Board to:
• determine the total remuneration packages,
authorise terms and conditions, and issue
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
2015/16. From 2016/17, it is our intention
to amend the policy in relation to pension
contributions to enable the Group to pay cash in
lieu of pension contributions following changes
to the UK tax regime for pensions. In addition,
the Executive Directors’ bonus will now include
an element connected to strategic objectives
as well as profit before tax. We will continue
to review the policy each year to ensure it
continues to support the Group’s strategy.
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.
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
• potential alternative arrangements for
Directors following changes to tax rules in
relation to pension contributions.
The Remuneration Committee currently
comprises Alistair Wannop (Chairman), Chris
Holmes, 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 is
30
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016CORPORATE 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;
•
• external comparator groups (used for reference purposes only).
increases elsewhere in the Group; and
CHANGE
OF POLICY
VERSUS
2015?
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 or to receive a cash alternative to those contributions.
15% of base
salary.
Yes.
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.
No.
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 achievement of strategic objectives, 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.
Yes.
Maximum of
100% of base
salary.
Save As
You Earn
(SAYE)
To encourage employee
involvement and
encourage greater
shareholder alignment.
Long Term
Incentive
Plan (LTIP)
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 remain unvested: one maturing in 2016, one in 2017
and one in 2018. The awards vest 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 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE GOVERNANCE 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 shareholding equivalent to 200% of base
salary over a five year period. This guideline was
introduced in 2015.
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 2017 PAY PACKAGES
The tables below provide estimates of the potential future remuneration of each Executive
Director based on the remuneration opportunity granted in the 2017 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 2016.
Benefits are valued using the figures in the total remuneration for the
2016 financial year table, adjusted for any benefits that will not be provided
during 2017.
Pensions are valued by applying the appropriate percentage to the base salary.
Tim Davies
Neil Austin
Base
£’000
267
197
Benefits
£’000
Pension
£’000
1
1
40
30
Total
£’000
308
228
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.
32
800
600
400
200
0
Tim Davies, Chief Executive Officer
Total:
£842,000
267
267
Total:
£492,000
67
Total:
£308,000
117
308
308
308
Fixed
On target
Maximum
Neil Austin, Group Finance Director
800
600
400
200
0
Total:
£364,000
49
87
228
Total:
£228,000
228
Total:
£622,000
197
197
228
Fixed
On target
Maximum
LTIP
Annual bonus
Salary and benefits
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016CORPORATE 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 2016 financial year.
2016 AGM
The 2015 remuneration report received a
99.52% vote in favour, with 0.48% 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
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
15 September 2016
15 September 2016
15 September 2016
15 September 2016
7 January 1992
1 September 2005
1 April 2015
1 October 2015
The performance period for the 2013 LTIP
awards has completed, and the awards vested
at 37.45% on the expiry of the three year
period, which was on 14 November 2016.
Therefore, the share price used to value the
awards in the table below has been taken as
the average price in the final quarter of the
2015/16 financial year.
2016 Remuneration (Audited Information)
In this section we summarise the pay packages
awarded to our Executive Directors for
performance in the 2016 financial year versus
2015. 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
2016
£’000
2015
£’000
2016
£’000
2015
£’000
2016
£’000
2015
£’000
2016
£’000
2015
£’000
2016
£’000
2015
£’000
2016
£’000
2015
£’000
Executive Directors
Tim Davies
Neil Austin
Non-Executive Directors
Chris Holmes
Alistair Wannop
John Worby
Ian Wood2
Robert Heygate
264
195
261
193
1
1
77
37
37
34
24
77
36
15
—
3 36
—
—
1 —
—
—
35
1
—
—
—
—
—
145
107
261
193
—
—
—
—
—
—
—
—
—
—
81
60
—
—
—
—
—
315
233
—
—
—
—
—
40
29
—
—
—
—
—
39
29
—
—
—
—
—
531
392
911
649
77
37
37
34
24
77
36
15
—
36
1
2
3
Represents a 5 month period – pro rata would be £36,000
Represents an 11 month period – pro rata would be £37,000
Represents an 8 month period – pro rata would be £37,000
33
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE GOVERNANCE
REMUNERATION COMMITTEE REPORT CONTINUED
2016 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.
LONG TERM INCENTIVE PLAN AWARDS DURING
THE YEAR
The 2016 long-term awards were made
in line with the remuneration policy as
disclosed in our 2015 remuneration report.
The performance conditions are based on
annual average growth in adjusted EPS over
a three year period.
Agriculture
Food
Engineering
Group
20%
20%
20%
40%
Average annual growth %
3
10
% vesting
25
100
ALL EMPLOYEE SHARE PLANS
The Executive Directors are also eligible to
participate in the UK all-employee plans.
The Carr’s Group Sharesave Scheme 2016 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.
Nothing is payable below 3%, and a sliding scale
operates between this and the maximum available.
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.
In the 2016 financial year the adjusted PBT
target for the Group was set at £18.4m for
maximum pay-out. The target for maximum
pay-out was not reached, and accumulating
divisional performance versus targets and the
Group performance versus the target equated
to a total pay-out of 55%.
TEN YEAR HISTORICAL TSR PERFORMANCE
500
450
400
350
300
250
200
150
100
50
0
34
/
6
0
8
0
1
3
/
/
6
0
1
1
0
3
/
/
7
0
2
0
8
2
/
/
7
0
5
0
1
3
/
/
7
0
8
0
1
3
/
/
7
0
1
1
0
3
/
/
8
0
2
0
9
2
/
/
8
0
5
0
1
3
/
/
8
0
8
0
1
3
/
/
8
0
1
1
0
3
/
/
9
0
2
0
8
2
/
/
9
0
5
0
1
3
/
/
9
0
8
0
1
3
/
/
9
0
1
1
0
3
/
/
0
1
2
0
8
2
/
/
0
1
5
0
1
3
/
/
0
1
8
0
1
3
/
/
0
1
1
1
0
3
/
/
1
1
2
0
8
2
/
Carr’s Group plc
Source: Thomson Datastream
FTSE All-Share Price Index
/
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
/
/
5
1
5
0
1
3
/
/
5
1
8
0
1
3
/
/
5
1
1
1
0
3
/
/
6
1
2
0
9
2
/
/
6
1
5
0
1
3
/
/
6
1
8
0
1
3
/
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016CORPORATE GOVERNANCE DIRECTORS’ INTERESTS IN THE SHARES
OF THE COMPANY (AUDITED INFORMATION)
A summary of interests in shares and
scheme interests as at 3 September 2016,
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
Vested
LTIP
Unvested
LTIP
SAYE (unvested
without performance
conditions)
20,000
20,000
247,131
182,874
344,174
254,692
5,328
8,881
1,230,000
22,610
25,000
1,000
452,250
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Executive Directors
Tim Davies
Neil Austin
Non-Executive Directors
Chris Holmes
Alistair Wannop
John Worby
Ian Wood
Bob Heygate
2013/14 award
2014/15 award
2015/16 award
Tim Davies
Neil Austin
152,260
112,670
163,360
120,890
180,814
133,802
Single figure of total remuneration
Annual variable element (actual award
versus maximum opportunity)
Long-term incentive (vesting versus
maximum opportunity)
2012
Chris
Holmes
£’000
2013
Tim
Davies
£’000
2014
Tim
Davies
£’000
2015
Tim
Davies
£’000
2016
Tim
Davies
£’000
573
2831
559
911
531
100%
100%
100%
100%
55%
N/A
N/A
N/A
100%
37.45%
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 2015 and 2016 financial years
compared to the other UK employees.
Base pay
Benefits
Annual bonus
RELATIVE SPEND ON PAY
The table shows the relative importance
of spend on pay compared to distributions
to shareholders.
By order of the Board
Employee costs
Dividends paid to shareholders
2016
£’000
38,390
3,347
Tim Davies Other UK employees
1%
0%
-45%
2015
£’000
39,148
3,110
1%
0%
-39%
% change
-1.9%
7.6%
ALISTAIR WANNOP
Chairman of the Remuneration Committee
16 November 2016
35
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE GOVERNANCE NOMINATIONS COMMITTEE REPORT
BOARD SUCCESSION PLANNING
Ian Wood joined the Board on 1 October 2015.
The appointment was made after conclusion of
a process which included using independent
external search consultants. Biographical details
are set out on page 21.
The Chair of the Nominations Committee will
attend the Annual General Meeting to respond
to any shareholder questions that might be
raised on the Committee’s activities.
On behalf of the Board
CHRIS HOLMES DL
Chair of the Nominations Committee
16 November 2016
At the end of April 2016 one Board member,
Bob Heygate, resigned following 25 years
of service to the Board. Bob Heygate had
previously been the Chairman of the Audit
Committee, which he relinquished for this
financial year, enabling John Worby to take
over that role. Biographical details can be
found on page 21.
As a result of the succession planning over the
last two years, the Board’s size has increased to
4 Non-Executive Directors from 3 Non-Executive
Directors. The number of Executive Directors
remains unchanged.
RE-ELECTION
At the Annual General Meeting on 10 January
2017 all the Directors will stand for re-election
in accordance with best practice under the UK
Corporate Governance Code 2014.
The Board has set out in the Notice of Annual
General Meeting its reasons for supporting the
re-election of the Directors at the forthcoming
Annual General Meeting. Their biographical
details on page 21 demonstrate the range of
experience and skills which each brings to the
benefit of the Company.
CHRIS HOLMES
CHAIR OF THE NOMINATIONS COMMITTEE
DEAR SHAREHOLDER
This year the Committee continued to focus on
Board succession plans and the outcomes are
set out in this report.
COMPOSITION AND CONSTITUTION
The Nominations 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.
ACTIVITIES OF THE COMMITTEE
The Committee met on two occasions in the year
to consider the following matters:
• the Committee’s Terms of Reference to ensure
they reflect the Committee’s remit;
• the succession plans in place for senior
management across the Group; and
• the structure, size, composition and diversity
of both the Board and its Committees.
36
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016CORPORATE GOVERNANCE DIRECTORS’ REPORT
THE DIRECTORS SUBMIT THEIR REPORT AND THE AUDITED ACCOUNTS
OF THE COMPANY FOR THE YEAR ENDED 3 SEPTEMBER 2016.
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 13 May 2016
Second Interim dividend per
share paid on 7 October 2016
Final dividend per share
proposed
2016 2015
0.950p
0.925p
0.950p
0.925p
1.9p
1.85p
Subject to approval at the Annual General Meeting,
the final dividend will be paid on 13 January
2017 to members on the register at the close
of business on 16 December 2016. Shares
will be ex-dividend on 15 December 2016.
The Group profit from continuing activities
before taxation was £14.1m (2015: £13.7m).
After taxation charge of £2.9m (2015: £3.0m),
the profit from continuing operations for the
year is £11.2m (2015: £10.7m).
Future developments of the Group have
been discussed in the Strategic Report on
pages 8 to 13.
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 £0.8m in the
year, which ended 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
25 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 to 24.
POLITICAL AND CHARITABLE DONATIONS
During the year ended 3 September 2016 the
Group contributed £32,175 (2015: £43,920)
in the UK for charitable purposes. Further
details have been included with the Corporate
Responsibility statement on pages 22 to 24.
There were no political donations during the
year (2015: £Nil).
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 26
to the financial statements.
At the last Annual General Meeting 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 Annual General Meeting to be held on
10 January 2017, is limited to £741,020.61
which is equal to 33 percent of the nominal
value of the issued share capital on 11 November
2015. 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 Annual General Meeting to be held
on 10 January 2017.
37
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE GOVERNANCE DIRECTORS’ REPORT CONTINUED
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 £112,275.85, representing 5 percent
of the Company’s issued share capital as at
11 November 2015. This authority will expire
at the end of the Annual General Meeting to
be held on 10 January 2017.
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 per cent 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 percent 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 Annual
General Meeting to be held on 10 January
2017. 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:
Interest of the Directors
T J Davies
N Austin
C N C Holmes
A G M Wannop
J G Worby
I Wood
All the above interests are beneficial.
All the above interests are beneficial.
The following transactions took place after
3 September 2016: I. Wood acquiring 9,000
shares on 12 September; T. Davies exercising
options over 190,110 and selling 89,896
shares; N. Austin exercising options over
140,680 and selling 66,559 shares, on
5 September 2016.
TREASURY SHARES
To enable vesting of the Group’s long term
incentive plan, on 14 November 2016
178,027 ordinary 2.5 pence shares were
held in treasury.
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.
At 3 September 2016
Ordinary
Shares
At 29 August 2015
Ordinary
Shares
20,000
20,000
1,230,000
22,610
25,000
1,000
20,000
20,000
1,252,500
22,610
25,000
—
Full details of the deadlines for exercising
voting rights in respect of the resolutions to
be considered at the Annual General Meeting
to be held on 10 January 2017 are set out
in the Notice of Annual General Meeting.
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 is aware of the following interests
at 14 November 2016 in the 91,377,291
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 (928488)
12,652,870
4,550,000
3,746,500
3,240,650
2,968,940
13.85
4.98
4.10
3.55
3.25
38
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016CORPORATE GOVERNANCE 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 WOOD
Company Secretary
16 November 2016
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 to prepared
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;
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.
The Directors consider that the annual
report and accounts, taken as a whole is fair,
balanced and understandable and provides
the information necessary for shareholders
to assess a company’s performance, business
model and strategy.
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:
• make judgements and accounting estimates
• he is aware there is no relevant audit
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.
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.
39
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSCORPORATE GOVERNANCE 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 3 September 2016
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.
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 3 September 2016;
• the Consolidated Income Statement and the
Consolidated and Company Statements of
Comprehensive Income for the year
then ended;
• the Consolidated and Company Statements
of Cash Flows for the year then ended;
• the Consolidated and Company Statements
of Changes in Equity for the year then ended;
• the accounting policies; and
• the notes to the financial statements, which
include other explanatory information.
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 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, and
applicable law.
OUR AUDIT APPROACH
Overview
Materiality
• Overall Group materiality: £845,000 which represents slightly below 5% of profit before tax from
continuing and discontinued operations.
Audit scope
Area of
focus
• We identified six reporting units within the Agriculture, Food and Engineering divisions alongside
the Company, which in our view required an audit of their complete financial information. Four 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, fraud in revenue recognition, and of the profit from the associate.
• Specific audit procedures on certain balances and transactions were performed on two further
reporting units based in the UK, in order to gain coverage of individually material financial
statement line items.
• Goodwill impairment in Chirton Engineering
• Defined benefit pension scheme surplus
• Receivable provisioning
• Disposal of the Food division
• Fraud risk in revenue recognition
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 2016FINANCIAL STATEMENTS AREA OF FOCUS
HOW OUR AUDIT ADDRESSED THE AREA OF FOCUS
Goodwill impairment in Chirton Engineering
Refer also to the significant judgements, key assumptions and
estimates within the principal accounting policies and note 10.
The Group has a material goodwill balance in respect of the
acquisition in 2014 of Chirton Engineering. The downturn in
the oil and gas market has adversely affected the expected
performance of this business giving rise to an increased risk
of impairment. The Directors’ assessment of the ‘value in use’
of the Cash Generating Unit involves judgements about the
future results of the business and the discount rates applied
to future cash flow forecasts.
Defined benefit pension scheme surplus
Refer also to the significant judgements, key assumptions and
estimates within the principal accounting policies and note 25.
The Group has a defined benefit pension scheme with
post-retirement assets of £73.7m and post-retirement
liabilities of £73.4m. The valuation of the Group surplus
is sensitive to changes in key assumptions such as the
discount rate, inflation and mortality estimates. The setting
of these assumptions is complex and an area of judgement.
Changes in any of these assumptions could lead to a material
movement in the net surplus.
We reviewed the composition of future cash flows to ensure that all relevant
elements were included or excluded as appropriate. We compared current
year actual results with the FY16 figures included in the prior year forecast
to assess the accuracy of management’s historic forecasts. We challenged
management’s assumptions within the forecasts for short and mid-term growth
by comparing to the previous performance of the business and understanding
and validating the measures implemented by management to achieve this
growth. We considered the suitability of the discount rate by assessing the
cost of capital for the company and comparable businesses. We assessed
the sensitivity analysis performed by management and determined that the
calculations were most sensitive to the assumptions regarding profits in the
terminal period. We reviewed the adequacy of the disclosures given in note 10
in respect of the impairment assessment performed by management.
We tested the membership census data used in the valuation of the scheme
to payroll information. We benchmarked and performed sensitivity analysis
on key variables in the valuation model including salary increases, mortality
rates, inflation and discount rates. We obtained third party confirmations
over ownership and valuation of pension scheme assets. We ensured that the
Company is entitled to recognise any surplus by examining the Trust Deed
and Rules documentation.
Receivable provisioning
Refer also to the significant judgements, key assumptions and
estimates within the principal accounting policies and note 19.
Within the Agriculture division there are material amounts
of trade receivables that are past due and there has historically
been a slower collection pattern within this division.
Management’s provisions in respect of these amounts are
an area of subjectivity with respect to the recoverability
of balances.
We understood management’s receivables provisioning policy and tested
the accuracy of the aging of balances in order to recalculate management’s
provision. We analysed the provision to identify significant balances for which
the methodology had not been applied and understood and validated any such
exceptions. We performed testing over the operating effectiveness of controls with
respect to approval of credit limits and monthly reviews of the receivables ledger.
For individually significant aged receivables balances, we understood the rationale
for management’s provision by considering historic payment patterns and other
supporting information. We tested the levels of cash received after the year end
on overdue receivables balances to assess the adequacy of the provision made.
Disposal of the Food division
The sale of the Food division on 3 September 2016 represented
a significant transaction in the year and triggered disclosure
requirements to present discontinued operations. We focussed
on ensuring the completeness and accuracy of these disclosures.
As the sale took place on the last day of the financial year, we
also considered cut-off to be a relevant risk.
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.
We reviewed the disclosures presented for discontinued operations and
ensured that these only related to the Food division. We reviewed the sale
documentation to ensure that the disposal took place before year end. We
performed testing over the profit from discontinued operations line by testing
the revenue and expenses of the division prior to disposal and the profit on
disposal calculation.
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 in certain components,
as well as substantively testing that revenue agreed to accounts receivable and
cash received. Where revenue did not directly agree to accounts receivable or
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.
41
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL 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 two business divisions,
Agriculture and Engineering. The Food division
is a discontinued operation within the year. The
Group financial statements are a consolidation
of 14 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.
Within the Agriculture division significant
operations include subsidiaries Carrs Billington
Agriculture (Sales) Ltd and Carrs Agriculture
Ltd as well as an associate Carrs Billington
Agriculture (Operations) Ltd all located within
the UK. Animal Feed Supplement, Inc is also a
significant operation located in the USA. Within
Food the only operation was Carr’s Flour Mills Ltd,
located in the UK, this was disposed of within
the year. Finally within the Engineering division
Wälischmiller Engineering GmbH, located in
Germany, is the largest contributor to profit
before tax.
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.
The Senior Statutory Auditor visited six of the
nine reporting units located in both the UK and
in the USA. For another two he attended the
clearance meeting. The final reporting unit was
audited by another firm operating under our
instruction and the clearance meeting was
attended by conference call by a senior member
of the audit team.
These 9 reporting units accounted for 100%
of revenue and 89% of PBT.
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. Based
on our professional judgement, we determined
materiality for the financial statements as a
whole as follows:
As noted in the Directors’ statement, the
Directors have concluded that it is appropriate
to adopt the going concern basis in preparing
the financial statements. 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
statements were signed. As part of our audit we
have concluded that the Directors’ use of the
going concern basis 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.
Overall Group
materiality
£845,000 (2015: £875,000).
How we
determined it
5% of profit before tax from continuing and discontinued operations based
on preliminary numbers.
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 component in our audit scope, we allocated a materiality that is less
than our overall group materiality. The range of materiality allocated across
components was between £300,000 and £800,000. Certain components
were audited to a local statutory audit materiality that was also less than our
overall group materiality.
We agreed with the Audit Committee that we
would report to them misstatements identified
during our audit above £42,000 (2015:
£44,000) as well as misstatements below
that amount that, in our view, warranted
reporting for qualitative reasons.
Going concern
Under the Listing Rules we are required to
review the Directors’ statement, set out on
page 17, in relation to going concern. We have
nothing to report having performed our review.
Under ISAs (UK & Ireland) we are required
to report to you if we have anything material
to add or to draw attention to in relation to
the directors’ statement about whether they
considered it appropriate to adopt the going
concern basis in preparing the financial
statements. We have nothing material to
add or to draw attention to.
OTHER REQUIRED REPORTING
Consistency of other information
Companies Act 2006 reporting
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.
In our opinion:
• 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.
42
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL 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 position and performance, business model and
strategy is materially inconsistent with our knowledge of the Group and Company acquired in the course of performing our audit.
We have no
exceptions to
report.
• the section of the Annual Report on pages 28 and 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.
The Directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency or liquidity of the Group
Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to:
• the Directors’ confirmation on pages 14 to 16 of the Annual Report, in accordance with provision C.2.1 of the Code,
that they have carried out a robust assessment of the principal risks facing the Group, including those that would
threaten its business model, future performance, solvency or liquidity.
We have nothing
material to add or to
draw attention to.
• the disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.
• the Directors’ explanation on page 17 of the Annual Report, in accordance with provision C.2.2 of the Code, as to
how they have assessed the prospects of the Group, over what period they have done so and why they consider that
period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will
be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including
any related disclosures drawing attention to any necessary qualifications or assumptions.
We have nothing
material to add or to
draw attention to.
We have nothing
material to add or to
draw attention to.
Under the Listing Rules we are required to
review the Directors’ statement that they have
carried out a robust assessment of the principal
risks facing the Group and the Directors’
statement in relation to the longer-term viability
of the Group. Our review was substantially less
in scope than an audit and only consisted of
making inquiries and considering the Directors’
process supporting their statements; checking
that the statements are in alignment with the
relevant provisions of the Code; and considering
whether the statements are consistent with
the knowledge acquired by us in the course
of performing our audit.
We have nothing to report having performed
our review.
43
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF CARR’S GROUP PLC CONTINUED
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 further provisions
of the Code. We have nothing to report having
performed our review.
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;
• the reasonableness of significant accounting
estimates made by the Directors;
and the overall presentation of the
financial 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
16 November 2016
44
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 3 SEPTEMBER 2016
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 from continuing operations
Discontinued operations
Profit for the year from discontinued operations
Profit for the year
Profit attributable to
Equity shareholders
Non-controlling interests
Basic earnings per ordinary share (pence)
Profit from continuing operations
Profit from discontinued operations
Diluted earnings per ordinary share (pence)
Profit from continuing operations
Profit from discontinued operations
2016
£’000
314,907
(273,712)
41,195
(15,975)
(12,450)
12,770
236
(1,009)
1,239
842
14,078
(2,907)
(Restated)
2015
£’000
331,285
(288,553)
42,732
(15,580)
(15,062)
12,090
338
(1,045)
1,500
807
13,690
(3,010)
11,171
10,680
2,817
3,013
13,988
13,693
12,455
1,533
13,988
10.7
3.1
13.8
10.5
3.0
13.5
11,989
1,704
13,693
10.0
3.4
13.4
9.7
3.2
12.9
Notes
2
3
5
5
2
6
7
9
9
45
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS
CONSOLIDATED AND COMPANY STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 3 SEPTEMBER 2016
Profit for the year
13,988
13,693
26,362
Notes
Group
2016
£’000
2015
£’000
Company
2016
£’000
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
Net investment hedges
Taxation charge on net investment hedges
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
25
17
Other comprehensive income/(expense) for the year,
net of tax
2015
£’000
2,870
—
—
—
2,860
687
(137)
(249)
338
(69)
—
—
—
(2,725)
(1,216)
(2,848)
70
(2,725)
—
(2,848)
—
490
205
164
570
(14)
490
—
570
—
(2,202)
(2,235)
(2,278)
Total comprehensive income for the year
14,152
11,491
24,127
Total comprehensive income attributable to:
Equity shareholders
Non-controlling interests
12,619
1,533
14,152
9,787
1,704
11,491
24,127
—
24,127
592
592
—
592
46
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS
CONSOLIDATED AND COMPANY BALANCE SHEETS
AS AT 3 SEPTEMBER 2016
Group
Company
Notes
10
10
11
12
13,16
13,14
13,15
13
19
25
17
18
19
20
24
21
23
24
22
23
17
22
26
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
Treasury share reserve
Equity compensation reserve
Foreign exchange reserve
Other reserve
Retained earnings
Total shareholders’ equity
Non-controlling interests
Total equity
2016
£’000
11,440
286
35,811
182
—
8,667
6,257
72
50
311
—
(Restated)
2015
£’000
10,849
448
58,385
636
—
8,439
5,012
79
50
1,767
861
63,076
86,526
33,423
56,940
303
—
48,411
35,031
64,454
839
50
20,052
139,077
120,426
202,153
206,952
(21,642)
(20)
(46,823)
(470)
(18,721)
(72)
(54,496)
(472)
(68,955)
(73,761)
2016
£’000
2015
£’000
—
—
—
—
11,478
245
272
—
17,486
311
2
29,794
—
18,831
922
—
37,945
57,698
87,492
(5,974)
—
(2,214)
—
(8,188)
—
—
—
—
12,205
245
272
—
—
1,767
3
14,492
—
36,845
1,564
30
8,973
47,412
61,904
(690)
—
(1,915)
—
(2,605)
(18,625)
(1,817)
(2,668)
(25,744)
(4,184)
(4,300)
(15,889)
(56)
—
(16,414)
(353)
—
(23,110)
(34,228)
(15,945)
(16,767)
(92,065)
(107,989)
(24,133)
(19,372)
110,088
98,963
63,359
42,532
2,280
9,111
(8)
706
2,895
207
81,540
96,731
13,357
110,088
2,244
8,615
—
1,138
(515)
862
74,706
87,050
11,913
98,963
2,280
9,111
(8)
759
—
—
51,217
63,359
—
63,359
2,244
8,615
—
1,239
—
—
30,434
42,532
—
42,532
47
The financial statements set out on pages 45 to 93 were approved by the Board on 16 November 2016 and signed on its behalf by:
Tim J Davies
Neil Austin
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 3 SEPTEMBER 2016
Share
Capital
£’000
Share
Premium
£’000
At 31 August 2014
2,235
8,453
Profit for the year
Other comprehensive
income/(expense)
Total comprehensive
income
Dividends paid
Equity settled share-
based payment
transactions, net of tax
Allotment of shares
Transfer
—
—
—
—
—
9
—
—
—
—
—
—
162
—
At 29 August 2015
2,244
8,615
At 30 August 2015
2,244
8,615
Profit for the year
Other comprehensive
income/(expense)
Total comprehensive
income
Dividends paid
Equity settled share-
based payment
transactions, net of tax
Allotment of shares
Purchase of own shares
held in trust
Dissolution of
dormant subsidiaries
Transfer
—
—
—
—
—
36
—
—
—
—
—
—
—
—
496
—
—
—
At 3 September 2016
2,280
9,111
Treasury
Equity
Share Compensation
Reserve
£’000
Reserve
£’000
Foreign
Exchange
Reserve
£’000
Total
Non-
Other Retained Shareholders’ controlling
Interests
£’000
Earnings
£’000
Equity
£’000
Reserve
£’000
Total
Equity
£’000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(12)
—
4
(8)
640
(535)
875
67,996
79,664
10,163
89,827
—
—
—
—
498
—
—
—
20
20
—
—
—
—
—
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)
—
—
(13)
40
—
13
538
171
—
46
—
—
584
171
—
1,138
(515)
862
74,706
87,050
11,913
98,963
1,138
(515)
862
74,706
87,050
11,913
98,963
—
—
—
—
(432)
—
—
—
—
—
3,410
3,410
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(655)
12,455
12,455
1,533
13,988
(3,246)
164
—
164
9,209
(3,347)
12,619
(3,347)
1,533
—
14,152
(3,347)
321
—
—
—
651
(111)
532
(12)
15
—
—
—
—
(104)
—
(96)
532
(12)
(104)
—
706
2,895
207
81,540
96,731
13,357
110,088
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
£264,000 (2015: £40,000) was transferred from the equity compensation reserve to retained earnings in respect of options exercised in the year
and £57,000 was also transferred on the disposal of Carr’s Flour Mills Ltd.
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.
During the year £642,000 (2015: £nil) was transferred from other reserves to retained earnings in respect of previous revaluations of property
owned by Carr’s Flour Mills Ltd, a subsidiary undertaking which was sold during the year.
An adjustment of £104,000 (2015: £nil) has been made to remove balances in respect of dormant subsidiaries dissolved in the year from
non-controlling interests.
48
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 3 SEPTEMBER 2016
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
At 29 August 2015
At 30 August 2015
Profit for the year
Other comprehensive expense
Total comprehensive income
Dividends paid
Equity settled share-based payment
transactions, net of tax
Allotment of shares
Purchase of own shares held in trust
Transfer
Share
Capital
£’000
Share
Premium
£’000
2,235
8,453
—
—
—
—
—
9
—
—
—
—
—
162
2,224
8,615
2,244
8,615
—
—
—
—
—
36
—
—
—
—
—
—
—
496
—
—
At 3 September 2016
2,280
9,111
Treasury
Share
Reserve
£’000
Equity
Compensation
Reserve
£’000
Retained
Earnings
£’000
Total
Equity
£’000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(12)
4
(8)
699
32,956
44,343
—
—
—
—
540
—
2,870
(2,278)
592
(3,110)
(4)
—
2,870
(2,278)
592
(3,110)
536
171
1,239
30,434
42,532
1,239
30,434
42,532
—
—
—
—
(480)
—
—
—
26,362
(2,235)
24,127
(3,347)
7
—
—
(4)
26,362
(2,235)
24,127
(3,347)
(473)
532
(12)
—
759
51,217
63,359
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 £7,000 (2015: £4,000) was transferred
from the equity compensation reserve to retained earnings and £321,000 (2015: £45,000) was transferred from the equity compensation reserve to
investment in subsidiaries in respect of options exercised in the year.
49
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS
CONSOLIDATED AND COMPANY STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 3 SEPTEMBER 2016
Group
Company
Notes
29
Cash flows from operating activities
Cash generated from/(used in) continuing operations
Interest received
Interest paid
Tax (paid)/recovered
Net cash generated from/(used in) operating activities
in continuing operations
Net cash generated from operating activities in
discontinued operations
Net cash generated from/(used in) operating activities
Cash flows from investing activities
Acquisition of subsidiaries (net of overdraft/cash acquired)
Disposal of subsidiary, net of costs (including cash disposed)
Dividends received from subsidiaries
Net receipt/(payment) of loans to subsidiaries
Return of investment in joint venture
Dividend received from joint venture
Loans 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
Purchase of own shares held in trust
Redemption of preference shares in joint venture
13
Net cash generated from/(used in) investing activities
in continuing operations
Net cash used in investing activities in discontinued operations
2016
£’000
6,257
155
(673)
(1,098)
4,641
5,477
10,118
(1,258)
23,922
—
—
—
113
2,332
500
(20)
(62)
349
(5,788)
(12)
150
20,226
(449)
2015
£’000
9,120
194
(685)
(3,853)
4,776
5,200
9,976
(1,749)
—
—
—
488
—
129
500
220
(15)
436
(4,621)
—
150
(4,462)
(1,323)
Net cash generated from/(used in) investing activities
19,777
(5,785)
28,002
Cash flows from financing activities
Proceeds from issue of ordinary share capital
Net proceeds from loans from subsidiaries
Net proceeds/(costs) from issue of new bank loans
Finance lease principal repayments
Repayment of loan from related party
Repayment of borrowings
Decrease in other borrowings
Dividends paid to shareholders
Receipt of grant income
26
8
Net cash (used in)/generated from financing activities in
continuing operations
Net cash used in financing activities in discontinued operations
Net cash (used in)/generated from financing activities
Effects of exchange rate changes
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
21
21
532
—
153
(925)
(500)
(1,614)
(192)
(3,347)
—
(5,893)
(1,408)
(7,301)
918
23,512
16,275
39,787
171
—
9,061
(990)
(500)
(4,880)
(3,638)
(3,110)
200
(3,686)
(1,105)
(4,791)
(150)
(750)
17,025
16,275
532
5,368
(15)
—
—
(550)
—
(3,347)
—
1,988
—
1,988
47
28,972
8,973
37,945
50
2016
£’000
(2,299)
877
(420)
777
2015
£’000
(2,915)
884
(359)
(92)
(1,065)
(2,482)
—
—
(1,065)
(2,482)
—
6,685
4,802
14,259
—
—
1,768
500
—
—
—
—
(12)
—
28,002
—
—
—
4,200
(2,602)
—
—
—
500
—
—
—
—
—
—
2,098
—
2,098
171
—
4,854
—
—
(1,383)
—
(3,110)
—
532
—
532
3
151
8,822
8,973
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS
PRINCIPAL ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The consolidated and Company 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 and Company 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.
The prior year consolidated income statement has been restated for the
reclassification to interest income of the net interest on the net defined
benefit retirement asset previously recognised within operating profit.
Comparatives at 29 August 2015 have been restated by £141,000,
increasing finance income and reducing operating profit with no
impact to profit before tax.
The prior year balance sheet has been restated for the grossing up
of cash and cash equivalents and bank overdrafts, included within
current borrowings, for accounts with right of offset within the same
banking facility. Comparatives at 29 August 2015 have been restated
by £3,564,000, increasing both cash and cash equivalents and current
borrowings with no impact to net assets.
The accounting policies for the Group and Company are as follows:
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 or disposed of during the current
and prior financial year were included in the financial statements from
the effective date of control or up to the date of cessation 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 introduced 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 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 and Company
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.
51
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS PRINCIPAL ACCOUNTING POLICIES CONTINUED
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.
In respect of construction contracts, revenue is calculated on the basis
of the stage of completion and the total sales value of each contract.
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 ASSET/OBLIGATIONS
The Group offers various pension schemes to employees including a
defined benefit pension scheme and several defined contribution schemes.
The assets of the Group’s pension 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.
Carr’s Group Pension Scheme (defined benefit section)
The asset recognised in the consolidated and Company balance sheet
at the year end 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 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 credit is made within interest 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 at the beginning of the year. The net
interest amount also takes into account changes to the net asset during
the year.
Actuarial gains and losses arising from experience adjustments and
changes in actuarial assumptions are recognised in the consolidated
and Company statement of comprehensive income. The pension scheme
deficit or surplus, 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 3 September 2016 and 29 August 2015 the
consolidated and Company balance sheet recognises the full surplus
on the Carr’s Group defined benefit pension scheme.
52
Carrs Billington Agriculture Pension Scheme
One of the Group’s subsidiaries is a participating employer in the Carrs
Billington Agriculture Pension Scheme, which is a multi-employer defined
benefit pension scheme. Note 25 provides further information on this
scheme and how it has been accounted for in the consolidated accounts.
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
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.
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 and Engineering.
The previously recognised Food segment was disposed of during the year.
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 subsidiaries/
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.
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS 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.
53
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS
PRINCIPAL ACCOUNTING POLICIES CONTINUED
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.
Directly attributable, and separately identifiable, costs of bidding for
contracts are included in contract costs after the point in time at which
it is considered probable that the contract will be obtained.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents for the purposes of the consolidated and
Company 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 and Company balance sheet.
In March 2016, the IFRS Interpretations Committee (IFRS IC) issued
an agenda decision regarding the treatment of offsetting and cash-
pooling arrangements in accordance with IAS 32: ‘Financial instruments:
Presentation’. This provided additional guidance on when bank overdrafts
in cash-pooling arrangements would meet the requirements for offsetting
in accordance with IAS 32. Following this additional guidance, the
Group has reviewed its cash-pooling arrangements and has revised its
presentation of bank overdrafts and has recognised £8.4m of bank
overdrafts within current borrowings at the current year end that would
previously have been offset against cash balances. Comparatives at 29
August 2015 have been restated by £3.6m.
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.
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 and Company 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
54
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.
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 and Company statement of comprehensive income.
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.
FINANCIAL INSTRUMENTS
Financial assets and liabilities are recognised on the consolidated and
Company balance sheet when the Group and Company becomes a party
to the contractual provisions of the instrument.
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.
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS 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.
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.
The Group’s policy is to hedge its international assets and it has
designated foreign currency loans 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.
NEW STANDARDS AND INTERPRETATIONS
From 30 August 2015 the following became effective and were adopted
by the Group and Company:
Amendment to IAS 19 regarding defined benefit plans
Annual improvements to IFRSs 2012 and 2013
The adoption of these standards and interpretations has had no impact
on the Group or Company’s profit for the year or equity.
NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS ISSUED BUT NOT
YET EFFECTIVE AND NOT EARLY ADOPTED
Amendments to IFRS 2, ‘Share based payments’ on clarifying how to
account for certain types of share based payment transactions
IFRS 9 ‘Financial instruments’
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’
IFRS 16 ‘Leases’
Amendment to IAS 1 ‘Presentation of financial statements’
on the disclosure initiative
Amendments to IAS 7, Statement of cash flows on disclosure initiative
Amendments to IAS 12, ‘Income taxes’ on recognition of deferred tax
assets for unrealised losses
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
Amendments to IAS 27, ‘Separate financial statements’
on the equity method
Annual improvements to IFRSs 2014
It is considered that the above standards and amendments, with the
exception of IFRS 15 ‘Revenue from contracts with customers’ and
IFRS 16 ‘Leases’, will not have a significant effect on the results
or net assets of the Group or Company.
IFRS 15 is effective for accounting periods beginning on or after
1 January 2018. The Directors are currently reviewing the impact
this standard may have, which is of particular relevance to the
construction contracts within the Group’s Engineering businesses.
IFRS 16 is effective for accounting periods beginning on or after
1 January 2019. The Directors are currently reviewing the level of
the Group’s leasing arrangements that would be brought within the
scope of IFRS 16.
At the date of signing the financial statements the Directors are not
yet in a sufficiently advanced stage of their reviews to be able to
quantify any financial impact from either of these two standards.
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.
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 25 and actual returns on scheme assets compared to those
predicted in the previous scheme valuation.
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 10).
Provision for impairment of trade receivables
The financial statements include a provision for impairment of trade
receivables (note 19) 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.
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.
55
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL 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 £26,362,000 (2015: £2,870,000).
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 and Engineering. The previously recognised Food operating segment was disposed of
during the year. 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.
Engineering derives its revenue from the design and manufacture of bespoke equipment for use in the nuclear, oil and gas, and petrochemical
industries. Products include manipulators, robotics, specialist fabrication and precision machining.
Performance is assessed using operating profit. For internal purposes operating profit 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.
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 3 September 2016 is as follows:
Total segment revenue
Inter segment revenue
Revenue from external customers
EBITDA1
Depreciation of property, plant and equipment
Depreciation of investment property
Profit on the disposal of property, plant and equipment
Amortisation of intangible assets
Operating profit
Finance income
Finance costs
Share of post-tax profit of associate
Share of post-tax profit of joint ventures
Profit before taxation from continuing operations
1 Earnings before interest, tax, depreciation and amortisation (and before profit/(loss) on the disposal of property, plant and equipment)
Agriculture
£’000
Engineering
£’000
Group
£’000
284,836
(63)
30,192
(58)
315,028
(121)
284,773
30,134
314,907
12,924
(2,539)
(6)
12
(133)
3,555
(1,043)
—
72
(72)
10,258
2,512
16,479
(3,582)
(6)
84
(205)
12,770
236
(1,009)
11,997
1,239
842
14,078
56
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS
2 Segmental information (continued)
Assets
Segment gross assets
The segmental information for the year ended 29 August 2015 (restated) is as follows:
Total segment revenue
Inter segment revenue
Revenue from external customers
Agriculture
£’000
Engineering
£’000
Group
£’000
149,777
52,376
202,153
Agriculture
£’000
Engineering
£’000
Group
£’000
297,858
(115)
33,588
(46)
331,446
(161)
297,743
33,542
331,285
EBITDA1
11,882
3,573
15,455
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
Finance income
Finance costs
Share of post-tax profit of associate
Share of post-tax profit of joint ventures
Profit before taxation from continuing operations
Assets
(2,365)
(6)
38
(100)
(815)
—
(24)
(93)
9,449
2,641
(3,180)
(6)
14
(193)
12,090
338
(1,045)
11,383
1,500
807
13,690
Agriculture
£’000
Food
£’000
Engineering
£’000
Group
£’000
Segment gross assets
125,057
35,225
46,670
206,952
The Food operating segment was disposed in the year ended 3 September 2016.
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:
Continuing operations
UK
Europe
USA
2016
£’000
269,109
13,343
32,455
2015
£’000
287,727
13,759
29,799
314,907
331,285
57
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
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
2016
UK
£’000
Europe
£’000
11,108
—
22,821
182
8,667
1,717
50
50
311
313
257
6,642
—
—
2,554
—
—
—
USA
£’000
19
29
6,348
—
—
1,986
22
—
—
Total
£’000
UK
£’000
Europe
£’000
2015
11,440
286
35,811
182
8,667
6,257
72
50
311
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
10,849
448
58,385
636
8,439
5,012
79
50
1,767
44,906
9,766
8,404
63,076
71,650
8,664
5,351
85,665
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
2016
£’000
2015
£’000
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 (gains)/losses
Derivative financial instruments losses
Operating lease charges
Research and development expense
Auditors’ remuneration:
Audit services (Company £15,450; 2015: £15,300)
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
Continuing
operations
(53)
(84)
3,582
6
205
(383)
70
556
1,320
76
159
235
27
70
6
103
(42)
44
2
58
Discontinued Continuing Discontinued
operations
operations
operations
(100)
(6)
1,875
13
14
(206)
74
730
1,046
—
21
21
—
—
—
—
(13)
22
9
(20)
(14)
3,180
6
193
50
(65)
377
1,423
75
121
196
33
35
19
87
(41)
42
1
(100)
(11)
1,879
14
15
—
72
700
1,201
—
30
30
—
—
—
—
(13)
22
9
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS
4 Staff costs
Group
Wages and salaries
Social security costs
Other pension costs
Share based payments
2016
2015
Continuing
operations
£’000
Discontinued
operations
£’000
(Restated)
Continuing
operations
£’000
Discontinued
operations
£’000
27,321
3,065
1,478
(99)
31,765
5,643
581
473
3
6,700
27,114
2,933
1,681
520
32,248
5,896
603
478
64
7,041
The prior year has been restated by £141,000 for the reclassification to interest income of the net interest on the net defined benefit retirement asset
previously recognised within operating profit.
Included within other pension costs is a credit of £287,000 (2015: charge of £261,000) in respect of the defined benefit pension scheme (note 25).
The average monthly number of employees, including Directors, during the year was made up as follows:
Group
Sales, office and management
Manufacture and distribution
2016
2015
Continuing
operations
Number
Discontinued
operations
Number
Continuing
operations
Number
Discontinued
operations
Number
504
401
905
70
102
172
495
384
879
71
107
178
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
Continuing operations
Finance income
Bank interest
Net interest on the net defined benefit retirement asset (note 25)
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
2016
£’000
126
94
16
236
(130)
(735)
(78)
(66)
(Restated)
2015
£’000
187
141
10
338
(114)
(763)
(98)
(70)
Total finance costs
(1,009)
(1,045)
The prior year has been restated for the reclassification to interest income of the net interest on the net defined benefit retirement asset previously
recognised within operating profit.
59
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
6 Taxation
(a) Analysis of the charge in the year
Continuing operations
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 17)
Tax on profit from ordinary activities
2016
£’000
952
173
680
—
2015
£’000
1,104
137
621
(33)
1,805
1,829
1,177
(75)
1,102
2,907
1,199
(18)
1,181
3,010
(b) Factors affecting tax charge for the year
The tax assessed for the year is higher (2015: higher) than the rate of corporation tax in the UK of 20% (2015: 20.58%). The differences are
explained below:
Continuing operations
Profit before taxation
Tax at 20% (2015: 20.58%)
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
2016
£’000
2015
£’000
14,078
13,690
2,816
2,817
(416)
—
(105)
704
(190)
98
(475)
148
(31)
478
(13)
86
Total tax charge for the year
2,907
3,010
(c) Factors affecting future tax charges
The main rate of UK corporation tax has been reduced from 20% to 19% with effect from 1 April 2017 and from 19% to 18% with effect from
1 April 2020. These rate reductions were substantively enacted before the year end and as the Directors consider the deferred tax balances are
expected to reverse after 1 April 2020 the tax rate used for deferred tax at the year end is 18%.
During the year the UK government proposed that the main rate of UK corporation tax would be further reduced to 17% instead of 18% with effect
from 1 April 2020. This has not been substantively enacted prior to the balance sheet date. The overall effect of the further change from 18% to 17%,
if this was applied to the deferred tax balance at 3 September 2016, would be to reduce the deferred tax liability by approximately £68,000.
60
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS
7 Discontinued operations
On 3 September 2016 Carr’s Group plc disposed of its entire shareholding in Carr’s Flour Mills Ltd for a gross consideration of £36m on a cash
and debt free basis, less costs to sell.
An analysis of the result of discontinued operations, and the gain recognised on the re-measurement to fair value less costs to sell, is as follows:
Revenue
Expenses
Profit before taxation of discontinued operations
Taxation
Profit after taxation of discontinued operations
Pre-taxation gain recognised on the measurement to fair value less costs to sell
Taxation
After taxation gain recognised on the measurement to fair value less costs sell
2016
£’000
71,440
(67,950)
3,490
(712)
2,778
39
—
39
2015
£’000
80,280
(76,503)
3,777
(764)
3,013
—
—
—
Profit for the year from discontinued operations
2,817
3,013
8 Dividends
Equity
Second interim paid for the year ended 29 August 2015 of 0.925p per 2.5p share (2014: 0.85p)
Final dividend for the year ended 29 August 2015 of 1.85p per 2.5p share (2014: 1.7p)
First interim paid for the year ended 3 September 2016 of 0.95p per 2.5p share (2015: 0.925p)
2016
£’000
830
1,662
855
3,347
2015
£’000
760
1,520
830
3,110
Since the year end a second interim dividend of £866,393, being 0.95p per share, has been paid. A special dividend of £15,996,351, being 17.54p
per share, was paid in October following the disposal of Carr’s Flour Mills Ltd. The financial statements do not reflect these dividends payable.
The proposed final dividend for the year ended 3 September 2016 to be considered by shareholders at the Annual General Meeting is £1,732,786,
being 1.9p per share, making a total for the year, excluding the special dividend, of 3.8p (2015: 3.7p). Shares held in treasury do not carry entitlement
to a dividend. The financial statements do not reflect this proposed final dividend as payable.
61
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
9 Earnings per ordinary share
Earnings per share are calculated by reference to a weighted average of 90,087,357 shares (2015: 89,574,461) 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:
Continuing operations
Earnings per share – basic
Amortisation and non-recurring items:
Amortisation of intangible assets
Taxation relief on amortisation
Acquisition related costs1
Earnings per share – adjusted
Discontinued operations
Earnings per share – basic
Amortisation and non-recurring items:
Amortisation of intangible assets
Taxation relief on amortisation
Profit on disposal of subsidiary
Earnings per share – adjusted
Total (basic)
Total (adjusted)
2016
Earnings
per share
pence
Earnings
£’000
2015
Earnings
per share
pence
Earnings
£’000
9,638
205
(47)
7
9,803
2,817
14
—
(39)
2,792
12,455
12,595
10.7
0.2
—
—
10.9
3.1
—
—
—
3.1
13.8
14.0
8,976
193
(49)
58
9,178
3,013
15
(3)
—
3,025
11,989
12,203
10.0
0.2
(0.1)
0.1
10.2
3.4
—
—
—
3.4
13.4
13.6
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 27.
2016
Weighted
average number
of shares
Earnings
£’000
Earnings
per share
pence
2015
Weighted
average number
of shares
Earnings
£’000
Earnings
per share
pence
9,638
90,087,357
10.7
8,976
89,574,461
10.0
Diluted earnings per share
9,638
92,034,155
—
—
—
78,032
1,317,329
551,437
—
(0.2)
—
10.5
—
—
—
332,332
1,288,785
1,476,960
8,976
92,672,538
2,817
90,087,357
3.1
3,013
89,574,461
Continuing operations
Earnings per share
Effect of dilutive securities:
Share option scheme
Share save scheme
Long term incentive plan
Discontinued operations
Earnings per share
Effect of dilutive securities:
Share option scheme
Share save scheme
Long term incentive plan
—
—
—
78,032
1,317,329
551,437
Diluted earnings per share
2,817
92,034,155
12,455
92,034,155
1 Disallowable for tax purposes
62
—
(0.1)
—
3.0
13.5
—
—
—
332,332
1,288,785
1,476,960
3,013
92,672,538
11,989
92,672,538
—
(0.1)
(0.2)
9.7
3.4
—
(0.1)
(0.1)
3.2
12.9
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS
9 Earnings per ordinary share (continued)
Continuing operations
Diluted adjusted
earnings per share
Discontinued operations
Diluted adjusted
earnings per share
Adjusted
earnings
£’000
2016
Weighted
average number
of shares
Earnings
per share
pence
Adjusted
earnings
£’000
2015
Weighted
average number
of shares
Earnings
per share
pence
9,803
92,034,155
10.7
9,178
92,672,538
9.9
2,792
92,034,155
12,595
92,034,155
3.0
13.7
3,025
92,672,538
12,203
92,672,538
3.3
13.2
Goodwill
£’000
Customer
relationships
£’000
Brands
£’000
Know-how
£’000
Patents and
trademarks
£’000
Software
£’000
Total
£’000
10 Goodwill and other intangible assets
Group
Cost
At 30 August 2014
Exchange differences
Subsidiaries acquired
Additions
At 29 August 2015
Exchange differences
Subsidiaries/businesses acquired
Additions
Subsidiary disposed
Disposals
10,123
1
1,050
—
11,174
3
783
—
—
(195)
3,209
—
162
—
3,371
—
39
—
(2,094)
—
At 3 September 2016
11,765
1,316
Accumulated amortisation
and impairment
At 30 August 2014
Exchange differences
Charge for the year
At 29 August 2015
Exchange differences
Charge for the year
Subsidiary disposed
At 3 September 2016
Net book amount
At 30 August 2014
At 29 August 2015
At 3 September 2016
325
—
—
325
—
—
—
325
9,798
10,849
11,440
3,209
—
81
3,290
—
120
(2,094)
1,316
—
81
—
594
(16)
—
—
578
31
—
—
(357)
—
252
337
(6)
30
361
15
30
(280)
126
257
217
126
240
—
—
—
240
—
—
—
—
—
240
240
—
—
240
—
—
—
240
—
—
—
145
13
—
5
163
25
—
8
—
—
196
105
9
19
133
21
13
—
167
40
30
29
590
(40)
—
10
560
77
—
54
—
—
691
388
(26)
78
440
64
56
—
560
202
120
131
14,901
(42)
1,212
15
16,086
136
822
62
(2,451)
(195)
14,460
4,604
(23)
208
4,789
100
219
(2,374)
2,734
10,297
11,297
11,726
During the year goodwill of £783,000 arose on acquisitions (note 28).
During the year there was a disposal of £195,000 (2015: £nil) in respect of the dissolution of dormant subsidiaries. This was partially offset by an
adjustment to non-controlling interests of £104,000.
During the prior year goodwill totalling £1,050,000 arose on the acquisitions of WM. Nicholls & Company (Crickhowell) Ltd and Reid and Robertson
Ltd. 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.
63
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
10 Goodwill and other intangible assets (continued)
The carrying value of goodwill has been allocated to the following cash generating units:
Carrs Billington Agriculture (Sales) Ltd
Carrs Billington Agriculture (Sales) Ltd – Johnstone Wallace Oils profit centre
Carrs Billington Agriculture (Sales) Ltd – Borders profit centre
Carrs Billington Agriculture (Sales) Ltd – Wooler profit centre
Carrs Billington Agriculture (Sales) Ltd – Safe at Work profit centre
Carrs Billington Agriculture (Sales) Ltd – Laycocks profit centre
Carrs Billington Agriculture (Sales) Ltd – Wales profit centre
Carrs Billington Agriculture (Sales) Ltd – Reid and Robertson profit centre
Carrs Billington Agriculture (Sales) Ltd – Greens profit centre
Carrs Billington Agriculture (Sales) Ltd – Phoenix profit centre
Carrs Agriculture Ltd – Scotmin profit centre
Animal Feed Supplement, Inc. – Silver Springs profit centre
Wälischmiller Engineering GmbH
Carr’s Engineering Ltd – Bendalls Engineering profit centre
Carr’s Engineering Ltd – Chirton profit centre
3 September
2016
£’000
29 August
2015
£’000
—
781
264
369
568
125
626
783
80
703
2,068
18
313
516
4,226
195
781
264
369
568
125
626
783
—
—
2,068
15
313
516
4,226
11,440
10,849
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 those 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 the levels
of future cash flows, particularly in the perpetuity period, and the discount rate. 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 2017, which has been approved by the Board and
forecast information for the four years to August 2021 based on medium term business plans and an assumption for long term growth of between
1-3% excluding inflation. The pre-tax discount rates used to discount the forecast cash flows for all cash generating units is 5.43% - 10.38%
(2015: 7.73% - 12.76%).
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 (2015: none).
Significant cash generating units
The following key assumptions have been used in the impairment testing for goodwill with a significant carrying value:
Goodwill
carrying value
£’000
Pre-tax
discount rate
%
Long term
average annual
change in
cash flows
%
Long term
growth rate
%
Cash generating unit
Carr’s Engineering Ltd – Chirton profit centre
Carrs Agriculture Ltd – Scotmin profit centre
4,226
2,068
10.38
5.43
12
13
2
2
Stress testing of the future cash flows generated from these cash generating units shows that an impairment of goodwill would potentially arise
should cash flows fall by 40% in the Chirton profit centre and by 96% in the Scotmin profit centre.
64
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS
11 Property, plant and equipment
Group
Cost
At 30 August 2014
Exchange differences
Subsidiaries acquired
Additions
Disposals
Reclassifications
At 29 August 2015
Exchange differences
Subsidiaries/businesses acquired
Additions
Subsidiary disposed
Disposals
Reclassifications
At 3 September 2016
Accumulated depreciation
At 30 August 2014
Exchange differences
Subsidiaries acquired
Charge for the year
Disposals
At 29 August 2015
Exchange differences
Charge for the year
Subsidiary disposed
Disposals
At 3 September 2016
Net book amount
At 30 August 2014
At 29 August 2015
At 3 September 2016
Land and
buildings
£’000
Plant and
equipment
£’000
Assets in the
course of
construction
£’000
35,461
(198)
14
710
(51)
133
36,069
1,023
—
1,512
(14,648)
(5)
1,721
72,012
300
178
4,410
(1,419)
175
75,656
1,167
25
4,791
(41,704)
(1,607)
104
25,672
38,432
6,981
42
14
817
(14)
7,840
193
917
(3,273)
—
5,677
44,469
301
60
4,242
(1,136)
47,936
885
4,540
(27,590)
(1,312)
24,459
603
(2)
—
2,143
—
(308)
2,436
284
—
948
—
—
(1,825)
1,843
—
—
—
—
—
—
—
—
—
—
—
28,480
27,543
28,229
19,995
27,720
13,973
603
2,436
1,843
Total
£’000
108,076
100
192
7,263
(1,470)
—
114,161
2,474
25
7,251
(56,352)
(1,612)
—
65,947
51,450
343
74
5,059
(1,150)
55,776
1,078
5,457
(30,863)
(1,312)
30,136
56,626
58,385
35,811
Freehold land amounting to £3,008,879 (2015: £3,569,135) has not been depreciated.
The net book amount of plant and equipment includes £3,206,805 (2015: £12,261,842) in respect of assets held under finance leases. This consists
of cost of £5,046,733 (2015: £16,603,001) less accumulated depreciation of £1,839,928 (2015: £4,341,159). The finance lease lessors hold
security over the assets held under finance leases.
Under the Group’s banking facilities the lenders have legal charges over certain properties together with floating charges over the assets of certain
businesses. The net book amount of specific assets held under legal charges at the balance sheet date was £1,667,000 (2015: £1,721,000).
Included in the above table in respect of assets held under floating charges are assets with a net book amount of £6,327,000 (2015: £23,431,000).
This excludes specific assets under legal charge and assets secured under finance leases both of which are separately disclosed above. The prior year
included assets within Carr’s Flour Mills Ltd which was sold during the year ended 3 September 2016.
65
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
11 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 (2015: none).
12 Investment property
Group
Cost
At 30 August 2014 and 29 August 2015
Subsidiary disposed
At 3 September 2016
Accumulated depreciation
At 30 August 2014
Charge for the year
At 29 August 2015
Charge for the year
Subsidiary disposed
At 3 September 2016
Net book amount
At 30 August 2014
At 29 August 2015
At 3 September 2016
2016
£’000
4,896
46
515
5,457
2015
£’000
4,373
76
610
5,059
Total
£’000
922
(623)
299
266
20
286
19
(188)
117
656
636
182
Included within investment property at the prior year end are properties occupied by life tenants. The net book amount of these properties at
3 September 2016 is £nil (2015: £145,000).
The fair value of investment properties at 3 September 2016 is £360,000 (2015: £1,065,000). Investment properties were valued by
independent professionally qualified valuers in October 2016.
There is no investment property in the Company (2015: none).
66
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS
13 Investments
Group
Cost
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
Exchange difference
Disposals
Redemption of preference shares
Share of post-tax profit
Share of (losses)/gains recognised directly in equity
Dividend paid by joint venture
At 3 September 2016
Associate
£’000
Joint
ventures
£’000
Other
investments
£’000
6,883
—
—
—
1,500
56
8,439
—
—
—
1,239
(1,011)
—
8,667
4,836
(71)
(488)
(150)
807
78
5,012
472
—
(150)
842
194
(113)
6,257
Total
£’000
11,805
(69)
(488)
(150)
2,307
134
13,539
475
(10)
(150)
2,081
(817)
(113)
15,005
9
11,796
13,530
14,996
86
2
—
—
—
—
88
3
(10)
—
—
—
—
81
9
77
79
72
Accumulated provision for impairment
At 30 August 2014, 29 August 2015 and 3 September 2016
—
—
Net book amount
At 30 August 2014
At 29 August 2015
At 3 September 2016
6,883
8,439
8,667
4,836
5,012
6,257
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.
67
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
13 Investments (continued)
Company
Cost
At 30 August 2014
Recapitalisation
Share based payment expense
in respect of employees of
subsidiary undertakings
At 29 August 2015
Subsidiary disposed
Subsidiaries dissolved
Share based payment credit
in respect of employees of
subsidiary undertakings
At 3 September 2016
Accumulated provision for impairment
At 30 August 2014
Impairment in the year
At 29 August 2015
Subsidiaries dissolved
At 3 September 2016
Net book amount
At 30 August 2014
At 29 August 2015
At 3 September 2016
Shares in
subsidiaries
£’000
Associate
£’000
Joint
ventures
£’000
18,142
74
222
18,438
(264)
(1,605)
(297)
16,272
5,387
846
6,233
(1,439)
4,794
12,755
12,205
11,478
245
—
—
245
—
—
—
245
—
—
—
—
—
245
245
245
272
—
—
272
—
—
—
272
—
—
—
—
—
272
272
272
Total
£’000
18,659
74
222
18,955
(264)
(1,605)
(297)
16,789
5,387
846
6,233
(1,439)
4,794
13,272
12,722
11,995
During the year several dormant companies with a combined cost of £1,605,000 and a combined accumulated provision for impairment of
£1,439,000 were dissolved. In the prior year an impairment of £846,000 was recognised to impair the investment in certain dormant subsidiaries
down to their net realisable amount. These dormant subsidiaries were dissolved in the year ended 3 September 2016.
14 Investment in associate
The associated undertaking at 3 September 2016 is:
Group and Company
Name
Proportion
of shares held
Ordinary
%
Country of
incorporation
Country of
operation
Activity
Carrs Billington Agriculture (Operations) Ltd
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) Ltd. 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 £177,966 (2015: £187,000). 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
68
2016
£’000
37,438
(19,751)
98,445
2,528
2015
£’000
34,199
(16,977)
105,162
3,061
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS
15 Interest in joint ventures
The joint ventures at 3 September 2016 are:
Group
Name
Interest held
Equity
%
Non-equity
%
Country of
incorporation
Country of
operation
Crystalyx Products GmbH
Bibby Agriculture Ltd
Afgritech Ltd
Afgritech LLC
50
26
50
50
Gold-Bar Feed Supplements LLC
50
ACC Feed Supplement LLC
Silloth Storage Company Ltd
50
50
—
26
—
—
—
—
—
Germany
Germany
England
England
USA
USA
USA
England
UK
UK
USA
USA
USA
UK
Crystalyx Products GmbH has a 31 December accounting year end.
Silloth Storage Company Ltd has a 30 June accounting year end.
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 molasses
Interests in the joint ventures listed above are held directly by the holding Company with the following exceptions: Carrs Billington Agriculture (Sales)
Ltd holds 50% of the ordinary share capital and 50% of the preference share capital in Bibby Agriculture Ltd. Carrs Agriculture Ltd holds 50% of the
ordinary share capital in Silloth Storage Company Ltd. Animal Feed Supplement, Inc. holds the interest in Gold-Bar Feed Supplements LLC and ACC
Feed Supplement LLC. Afgritech Ltd has 100% control of Afgritech LLC. The preference shares in Bibby Agriculture Ltd 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 the joint ventures had no capital commitments (2015: £nil). 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
2016
£’000
6,232
6,144
(4,268)
(2,038)
24,204
(23,202)
(52)
2015
£’000
5,737
5,643
(5,930)
(775)
24,607
(23,618)
(12)
Goodwill of £17,000 arose on the investment in Silloth Storage Company Ltd. 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 £170,000 (2015: £320,000) which relates to the Group’s interest in the preference share
capital of Bibby Agriculture Ltd.
69
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
16 Investment in subsidiary undertakings
Name
Proportion
of shares held
Ordinary
%
Country of
incorporation
Country of
operation
Carrs Agriculture Ltd
100
England
Carrs Billington Agriculture (Sales) Ltd
Animal Feed Supplement, Inc.
Horslyx LLC
Carr’s Engineering Ltd
Wälischmiller Engineering GmbH
B.R.B. Trust Ltd
Carrs Properties Ltd
51
100
100
100
100
100
100
England
USA
USA
England
Germany
England
England
UK
UK
USA
USA
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
Engineering
Engineering
Financial services
Property holding
During the year the Company disposed of its investment in Carr’s Flour Mills Ltd (Note 7). Dormant subsidiaries are listed on the inside back cover
of this Annual Report and Accounts.
Investments in the subsidiaries listed above are held directly by the Company with the following exceptions: Carr’s Engineering Ltd holds 100%
of the ordinary share capital in Wälischmiller Engineering GmbH and Carrs Agriculture Ltd holds 100% of the investment in Horslyx LLC.
17 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
2016
£’000
2015
£’000
—
—
—
—
—
—
861
861
Liabilities
Net
2016
£’000
(1,230)
(56)
(531)
(1,817)
2015
£’000
(2,996)
(353)
(835)
(4,184)
2016
£’000
(1,230)
(56)
(531)
(1,817)
2015
£’000
(2,996)
(353)
26
(3,323)
Deferred tax net liabilities are expected to reverse after more than one year from the balance sheet date.
Movement in deferred tax during the year
At
30 August
2015
£’000
861
861
(2,996)
(353)
(835)
(4,184)
(3,323)
Assets:
Other
Liabilities:
Accelerated tax depreciation
Employee benefits
Other
Net liabilities
Exchange
differences
£’000
In respect of
acquisitions
£’000
In respect of
disposals
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
At
3 September
2016
£’000
38
38
(42)
—
(35)
(77)
(39)
—
—
(8)
—
—
(8)
(8)
(22)
(22)
1,995
—
192
2,187
2,165
(877)
(877)
(179)
(193)
147
(225)
(1,102)
—
—
—
490
—
490
490
—
—
(1,230)
(56)
(531)
(1,817)
(1,817)
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.
70
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS
17 Deferred tax assets and liabilities (continued)
Movement in deferred tax during the prior 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
At
29 August
2015
£’000
118
118
(10)
—
10
—
118
(32)
(32)
(39)
—
—
(39)
(71)
(732)
(732)
(15)
(511)
(78)
(604)
(1,336)
—
—
—
570
—
570
570
Deferred tax recognised in income includes £155,000 in respect of Carr’s Flour Mills Ltd which was disposed in the current year.
Company
Accelerated tax
depreciation
Employee benefits
Tax assets/(liabilities)
Assets
2016
£’000
2015
£’000
2
—
2
3
—
3
Movement in deferred tax during the year
Assets:
Accelerated tax depreciation
Liabilities:
Employee benefits
Net liabilities
Movement in deferred tax during the prior year
2016
£’000
—
(56)
(56)
At
30 August
2015
£’000
3
(353)
(350)
At
31 August
2014
£’000
Liabilities
Net
2015
£’000
—
(353)
(353)
2016
£’000
2
(56)
(54)
Recognised
in income
£’000
Recognised
in equity
£’000
At
3 September
2016
£’000
(1)
(193)
(194)
—
490
490
Recognised
in income
£’000
Recognised
in equity
£’000
Assets:
Accelerated tax depreciation
Liabilities:
Employee benefits
Net liabilities
3
—
(412)
(409)
(511)
(511)
—
570
570
Tax of £120,000 (2015: £133,000) in respect of tax losses has not been recognised as a deferred tax asset in the Group balance sheet.
Tax of £39,000 (2015: £43,000) in respect of tax losses has not been recognised as a deferred tax asset in the Company balance sheet.
861
861
(2,996)
(353)
(835)
(4,184)
(3,323)
2015
£’000
3
(353)
(350)
2
(56)
(54)
At
29 August
2015
£’000
3
(353)
(350)
71
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
18 Inventories
Group
Raw materials and consumables
Work in progress
Finished goods and goods for resale
2016
£’000
8,377
2,800
22,246
33,423
2015
£’000
10,060
2,382
22,589
35,031
Inventories are stated after a provision for impairment of £651,000 (2015: £414,000). The amount recognised as an expense in the year in respect
of the write down of inventories is £237,000 (2015: £66,000). The amount recognised as a credit in the year in respect of reversals of write downs
of inventories is £nil (2015: £9,000).
The cost of inventories recognised as an expense and included in cost of sales is £272,341,000 (2015: £354,656,000).
The Company has no inventories (2015: none).
Construction contracts disclosures
Contract costs incurred plus recognised profits less recognised losses to date
Contract advances received
Work in progress on construction contracts
2016
£’000
3,014
(1,257)
1,757
2015
£’000
2,691
(1,679)
1,012
Revenue from construction contracts
21,332
23,678
19 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 34)
Amounts owed by other related parties (note 34)
Loans receivable
Other taxes and social security receivable
Other receivables
Prepayments and accrued income
Non-current:
Amounts owed by Group undertakings (note 34)
Other receivables
Group
Company
2016
£’000
46,980
(2,100)
44,880
5,733
—
1,901
50
625
1,121
2,630
56,940
—
50
50
2015
£’000
53,428
(2,070)
51,358
3,985
—
4,343
—
1,141
1,379
2,248
64,454
—
50
50
2016
£’000
—
—
—
—
16,494
1,640
—
—
370
327
18,831
17,486
—
17,486
2015
£’000
—
—
—
—
32,740
3,651
—
—
234
220
36,845
—
—
—
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.
72
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS
19 Trade and other receivables (continued)
During the year a charge of £50,000 (2015: credit of £307,000) 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 within current trade and other receivables carry interest at Bank of England
base rate + 2.50%, 4.50% or 4.88%. Such amounts are unsecured and repayable on demand.
Interest bearing, non-trading amounts owed by Group undertakings within non-current receivables carry interest at 4.88% and 6.25%.
Such amounts are unsecured and have a term of 5 years.
2016
2015
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
23,273
9,354
3,876
3,569
2,184
4,724
46,980
(57)
(23)
(27)
(115)
(69)
(1,809)
(2,100)
N/A
9,331
3,849
3,454
2,115
2,915
35,236
6,800
3,724
2,667
1,282
3,719
(123)
(82)
(110)
(104)
(83)
(1,568)
N/A
6,718
3,614
2,563
1,199
2,151
21,664
53,428
(2,070)
16,245
The Company has no trade receivables (2015: none).
In relation to trade receivables, the major source of estimation uncertainty is the recoverable value of those receivables. The judgements applied
to this include the credit quality of customers, taking into account their financial positions, past experiences and other relevant factors. Individual
customer credit limits are imposed based on these factors, and provisions for impairment are made using those judgements. Provisions for impairment
are reviewed monthly by divisional management.
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 (2015: none).
The carrying value of trade receivables are denominated
in the following currencies:
Sterling
US Dollar
Euro
New Zealand Dollar
20 Current tax assets
Corporation tax recoverable
Group taxation relief
Group
2016
£’000
2015
£’000
Company
2016
£’000
2015
£’000
38,404
1,823
4,281
372
44,880
2016
£’000
303
—
303
47,443
630
2,937
348
51,358
—
—
—
—
—
Group
Company
2015
£’000
839
—
839
2016
£’000
710
212
922
—
—
—
—
—
2015
£’000
1,256
308
1,564
73
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
21 Cash and cash equivalents and bank overdrafts
Group
Company
Cash and cash equivalents per the balance sheet
Bank overdrafts (note 23)
2016
£’000
48,411
(8,624)
(Restated)
2015
£’000
20,052
(3,777)
Cash and cash equivalents per the statement of cash flows
39,787
16,275
The prior year has been restated by £3,564,000 to gross up bank balances with right of offset within the same facility.
22 Trade and other payables
2016
£’000
37,945
—
37,945
Current:
Trade payables
Payments on account
Amounts owed to Group undertakings (note 34)
Amounts owed to other related parties (note 34)
Other taxes and social security payable
Deferred employee incentive plan
Other payables
Accruals and deferred income
Non-current:
Contingent consideration
Accruals and deferred income
Group
Company
2016
£’000
13,568
2,497
—
20,676
1,073
—
4,193
4,816
46,823
2,394
274
2,668
2015
£’000
20,655
1,279
—
18,045
1,162
2,324
5,836
5,195
54,496
2,394
1,906
4,300
2016
£’000
—
—
37
—
442
—
355
1,380
2,214
—
—
—
2015
£’000
8,973
—
8,973
2015
£’000
—
—
27
1
683
—
241
963
1,915
—
—
—
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 Ltd in year ended 2014 remains potentially payable subject
to certain earnings criteria being met. As at 3 September 2016 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 2017. The contingent
consideration has not been discounted as the impact of discounting is not material.
Included within accruals and deferred income is the following in respect of government grants:
At the beginning of the year
Subsidiaries disposed
Received in the year
Amortisation in the year
At the end of the year
Included within:
Current liabilities
Non-current liabilities
74
Group
2016
£’000
2,008
(1,581)
—
(153)
274
—
274
274
2015
£’000
1,628
—
500
(120)
2,008
102
1,906
2,008
Company
2016
£’000
2015
£’000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS
23 Borrowings
Current:
Bank overdrafts
Bank loans and other borrowings
Loans from Group undertakings (note 34)
Other loans from related parties (note 34)
Finance leases
Non-current:
Bank loans
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
2016
£’000
8,624
12,376
—
—
642
21,642
17,108
1,517
18,625
21,642
1,942
16,670
13
40,267
(Restated)1
2015
£’000
3,777
12,270
—
500
2,174
18,721
18,444
7,300
25,744
18,721
3,229
22,467
48
44,465
2016
£’000
—
513
5,461
—
—
5,974
15,889
—
15,889
5,974
513
15,376
—
21,863
2015
£’000
—
517
173
—
—
690
16,414
—
16,414
690
517
15,897
—
17,104
Group and Company borrowings are shown in the balance sheet net of arrangement fees of £110,000 (2015: £132,000) of which £37,000
(2015: £33,000) is deducted from current liabilities and £73,000 (2015: £99,000) is deducted from non-current liabilities.
The net (cash)/borrowings are:
Borrowings as above
Cash and cash equivalents
Net (cash)/borrowings
Group
Company
2016
£’000
(Restated)1
2015
£’000
2016
£’000
2015
£’000
40,267
(48,411)
44,465
(20,052)
21,863
(37,945)
17,104
(8,973)
(8,144)
24,413
(16,082)
8,131
Bank loans and other borrowings includes an amount of £9,791,000 (2015: £9,984,000) 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 has legal charges over certain
properties. Finance lease obligations are secured on the assets to which they relate.
Loans from Group undertakings are non-interest bearing. Such amounts are unsecured and repayable on demand.
Other loans from related parties 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 £15.0m (2015: £15.0m) which is repayable in June 2019. At the year
end the Group had £4.5m of undrawn revolving credit facilities (2015: £2.0m).
1 The prior year has been restated by £3,564,000 for the grossing up of cash and cash equivalents and bank overdrafts for accounts with right of offset within the same banking facility.
75
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24 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.
Throughout this note the prior year has been restated by £3,564,000 for the grossing up of cash and cash equivalents and bank overdrafts for
accounts with right of offset within the same banking facility.
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
US
Dollar
£’000
2016
Euro
£’000
NZ
Dollar
£’000
Total Sterling
£’000 £’000
2015 (Restated)
US
Dollar
£’000
NZ
Dollar
£’000 £’000
Euro
Total
£’000
22
—
3,282
—
1,319
—
—
4,292
—
2,823
—
—
61
72
50
50
372 53,685 53,596
—
—
531 48,411 15,322
—
18
—
4,177
14
3,080
—
—
2,944
36
1,222
—
—
79
50
348 61,065
50
428 20,052
—
Sterling
£’000
50
50
45,739
—
43,738
89,577
4,623
7,115
903 102,218 69,029
7,289
4,202
776 81,296
20,179
—
39,697
18,625
2,394
205
11
1,692
—
—
1,258
9
4,361
—
—
— 21,642 17,551
—
20
—
— 45,750 45,904
— 18,625 25,744
2,394 2,394
—
213
72
3,847
—
—
957
—
3,481
—
—
— 18,721
—
72
— 53,232
— 25,744
2,394
—
80,895
1,908
5,628
— 88,431 91,593
4,132
4,438
— 100,163
2016
US
Dollar
£’000
Euro
£’000
Sterling
£’000
2015
US
Total Sterling Dollar
£’000
£’000
£’000
Euro
Total
£’000 £’000
— 17,486
1,207
—
210
15,829
—
37,463
— 17,486
—
1,468 18,504 30,697
—
8,173
—
272 37,945
—
—
4,824
14
687
—
—
1,104 36,625
30
113 8,973
16
53,292 18,903
1,740 73,935 38,870
5,525
1,233 45,628
5,974
1,772
15,889
23,635
—
—
—
—
5,974
1,772
690
—
1,232
—
— 15,889 16,414
— 23,635 18,336
—
—
—
—
—
690
— 1,232
— 16,414
— 18,336
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. Deferred income
in respect of government grants is excluded as it is not a financial liability.
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% (2015: 10%) weakening or strengthening in Sterling against other currencies represents reasonable possible changes.
Impact on profit after taxation (continuing operations)
Impact on total equity
10%
weakening
£’000
709
3,012
2016
10%
strengthening
£’000
(579)
(2,463)
2015
10%
weakening
£’000
480
2,521
10%
strengthening
£’000
(353)
(1,993)
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.
76
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS
24 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
%
2.12
2.04
—
2.60
Weighted
average
effective
interest rate
%
2.45
2.16
—
2.21
2016
£’000
8,624
29,484
—
2,159
40,267
2,159
38,108
—
40,267
(Restated)
2015
£’000
3,777
30,714
500
9,474
44,465
9,474
34,491
500
44,465
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; Bank of England base rate +1.8% margin
Libor + 1.8%; Libor + 2.0%; Bank of England base rate + 1.25% margin; 1.3%
Company
Bank loans
Loans from Group undertakings
Floating rate
Weighted
average
effective
interest rate
%
2.18
—
Weighted
average
effective
interest rate
%
2.39
—
2016
£’000
16,402
5,461
21,863
2015
£’000
16,931
173
17,104
The Company’s floating rate financial liabilities bear interest determined as follows:
Bank loans
Libor + 1.8%
77
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24 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 a reasonable possible change.
2016
2015
1% decrease
£’000
1% increase
£’000
1% decrease
£’000
1% increase
£’000
Impact on profit after taxation (continuing operations)
Impact on total equity
366
366
(366)
(366)
328
328
(328)
(328)
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.
Group
Bank overdrafts
Bank loans and other
borrowings
Other loans
Finance lease liabilities
Derivatives
Trade and other
payables
Other non-current
liabilities
Within
one
year
£’000
Total
£’000
2016
One to
two
years
£’000
Two to
five
years
£’000
Over
five
years
£’000
Total
£’000
2015 (Restated)
One to
two
years
£’000
Within
one
year
£’000
Two to
five
years
£’000
Over
five
years
£’000
8,624
8,624
—
—
30,632
—
2,362
20
12,807
—
705
20
1,726
—
668
—
16,099
—
972
—
—
—
—
17
—
3,777
3,777
—
—
32,445
500
10,338
72
12,768
500
2,482
72
1,793
—
2,131
—
17,884
—
5,666
—
45,750
45,750
2,394
—
—
—
—
—
53,232
53,232
—
2,394
—
2,394
—
2,394
—
—
89,782
67,906
2,394
19,465
17 102,758
72,831
6,318
23,550
—
—
—
59
—
—
—
59
Company
Bank loans
Loans from Group undertakings
Trade and other payables
2016
Within
one
year
£’000
906
5,461
1,772
One to
two
years
£’000
895
—
—
Two to
five
years
£’000
15,690
—
—
Total
£’000
17,491
5,461
1,772
2015
Within
one
year
£’000
952
173
1,232
One to
two
years
£’000
Two to
five
years
£’000
939
—
—
16,642
—
—
Total
£’000
18,533
173
1,232
24,724
8,139
895
15,690
19,938
2,357
939
16,642
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. Deferred income in respect of government grants has also been excluded as it does not give rise to a contractual obligation
to pay cash.
78
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS
24 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
2016
£’000
705
668
972
17
2015
£’000
2,482
2,131
5,666
59
2016
£’000
642
616
888
13
2,362
10,338
2,159
(203)
2,159
(864)
9,474
2015
£’000
2,174
1,900
5,352
48
9,474
The Company has no finance lease obligations (2015: none).
Borrowing facilities
The Group has various undrawn facilities. The undrawn facilities available at 3 September 2016, 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
2016
Floating rate
£’000
2015
Floating rate
£’000
18,514
4,500
23,014
17,007
2,000
19,007
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 3 September 2016 the Group had net cash of £8.1m (2015: net debt of £24.4m). Gearing was 24.7% at the prior year end.
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.
79
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24 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 loans against its investment in foreign subsidiaries. A foreign exchange pre-tax gain of £504,000
(2015: £373,000) was recognised in equity during the year on translation of US dollar denominated loans with a fair value of $24,908,000
(2015: $7,408,000) to sterling. A foreign exchange pre-tax gain of £183,000 (2015: pre-tax loss of £35,000) was recognised in equity during
the year on translation of Euro denominated loans with a fair value of €1,750,000 (2015: €1,500,000) to sterling. The Group’s net investment
hedge was fully effective in both the current and prior year and therefore no gain or loss is recognised in the consolidated income statement.
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
Subsidiaries disposed
Losses during the year
At end of the year
Included within:
Current assets
Current liabilities
Company
At beginning of the year
(Losses)/gains during the year
At end of the year (current assets)
2016
2015
Contractual
or notional
amount
£’000
Fair
value
£’000
Contractual
or notional
amount
£’000
7,402
(1,305)
(4,635)
1,462
—
1,462
1,462
(15)
—
(17)
(32)
40
(72)
(32)
515
—
6,887
7,402
5,193
2,209
7,402
2016
2015
Contractual
or notional
amount
£’000
5,066
(5,066)
—
Fair
value
£’000
—
30
30
Contractual
or notional
amount
£’000
—
5,066
5,066
Fair
value
£’000
(32)
146
(134)
(20)
—
(20)
(20)
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
(Losses)/gains during the year
At end of the year (current assets)
The Company has no currency swaps (2015: none).
2016
2015
Fair
value
£’000
10
(10)
—
Contractual
or notional
amount
£’000
394
(394)
—
Fair
value
£’000
—
10
10
Contractual
or notional
amount
£’000
—
394
394
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.
80
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS
25 Retirement benefits
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 offered 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.
From 1 September 2015 the defined contribution section was closed. Members of that section were enrolled in a new defined contribution scheme,
the Carr’s Group Retirement Savings Scheme (‘Carr’s Group RSS’), set up under a Master Trust arrangement. The pension expense for the defined
contribution section of the Carr’s Group Pension Scheme for the year was £nil (2015: £751,000). Contributions totalling £nil (2015: £47,000)
were payable to the fund at the year end and are included in other payables.
The defined benefit section of the scheme was previously closed to new members, and has closed to future accrual with effect from 31 December
2015. Members of this section became entitled to become members of the Carr’s Group RSS from 1 January 2016. The pension contribution made
by the Group over the year to the defined benefit section was £888,000 (2015: £2,679,000). Contributions to the scheme for the year ending
August 2017 are expected to be £nil.
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 2014 and updated on an approximate basis to 3 September 2016 by a
qualified independent actuary.
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
2016
%
2.80
1.90
n/a
2.05
2.80
3.50
2015
%
3.00
2.10
2.55
3.80
2.90
3.50
The mortality tables used in the valuation as at 3 September 2016 are 100% of S2PMA (males) and S2PFA (females) with allowance for mortality
improvements using CMI_2015 with a 1.25%pa underpin. The mortality assumptions adopted imply the following life expectancies at age 65 as at
3 September 2016:
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 (income)/expense
At
3 September
2016
23.9 years
26.1 years
22.2 years
24.2 years
At
29 August
2015
24.2 years
26.6 years
22.5 years
24.7 years
2016
£’000
(426)
139
(94)
(381)
2015
£’000
31
230
(141)
120
As a result of the closure to future accrual on 31 December 2015 a negative past service cost, net of associated costs, of approximately £350,000
has been recognised in the income statement.
81
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
25 Retirement benefits (continued)
The (income)/expense is recognised within the Income Statement as shown below:
Within operating profit:
Cost of sales
Administrative expenses
Within interest:
Finance income
Total (income)/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
2016
£’000
(124)
(163)
(94)
(381)
2016
£’000
(16,623)
1,051
2,012
10,835
(2,725)
2016
£’000
(73,355)
73,666
2015
£’000
120
141
(141)
120
2015
£’000
(1,700)
—
(699)
(449)
(2,848)
2015
£’000
(60,352)
62,119
Surplus in funded scheme
311
1,767
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 (gains)/losses – 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
2016
£’000
60,352
89
2,239
61
16,623
(1,051)
(2,012)
(2,431)
(515)
2015
£’000
61,948
301
2,346
190
1,700
—
699
(6,562)
(270)
73,355
60,352
2016
£’000
62,119
2,333
10,835
888
61
(2,431)
(139)
2015
£’000
64,004
2,487
(449)
2,679
190
(6,562)
(230)
Fair value of scheme assets at the end of the year
73,666
62,119
82
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS
25 Retirement benefits (continued)
Analysis of the scheme assets and actual return:
Equity instruments
Property
Bonds
Cash
Actual return on scheme assets
Fair value of assets
2016
£’000
34,771
5,449
33,401
45
73,666
13,168
2015
£’000
28,476
5,637
27,177
829
62,119
2,038
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
3 September 2016
Decrease by £2.9m
Increase by £1.9m
Increase by £2.3m
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
31 December 2015 (or date of leaving, if earlier) revalued up to the members’ retirement date, 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 Scheme is subject to the scheme funding requirements outlined in UK legislation. The scheme funding valuation of the Scheme at
31 December 2014 revealed a deficit, and the existing recovery plan was continued to 31 December 2015.
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 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.
83
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
25 Retirement benefits (continued)
Carr’s Group Retirement Savings Scheme
The Company offers membership in a Master Trust arrangement, Carr’s Group RSS, following the closure of both sections of the Carr’s Group Pension
Scheme. The pension expense for this scheme for the year was £902,000, including £189,000 in respect of Carr’s Flour Mills Ltd (2015: £nil).
Carrs Billington Agriculture Pension Scheme
One of the Group’s subsidiaries, Carrs Billington Agriculture (Sales) Ltd, is a participating employer in the Carrs Billington Agriculture Pension Scheme,
which is a multi-employer defined benefit pension scheme. For the reasons explained below this scheme is accounted for as a defined contribution scheme.
The scheme is closed to new entrants and has been closed to future accrual since 1 December 2007. There is currently a deficit, calculated in
accordance with IAS 19, of £5.1m (2015: £3.2m). The sponsoring employer, Carrs Billington Agriculture (Operations) Ltd, is currently paying £0.8m per
annum under the terms of the recovery plan agreed between them and the Trustees of the scheme.
Under the rules of the scheme, any employer wishing to exit the scheme would trigger a partial wind-up of the scheme and would therefore be responsible
for their s75 debt. A full wind-up of the plan would also trigger s75 debts for each participating employer.
The history of the scheme is that it was brought together from many other pension schemes and employers following multiple acquisitions over several
years. Many of those acquisitions had little or no records of employee histories. Because of this, approximately 85% of the scheme liabilities are ‘Orphan
Liabilities’. Under the rules of the scheme, on a wind-up the orphan liabilities would be split between the participating employers in the same proportion
as their calculated share of non-orphan liabilities. At the last actuarial valuation, the buy-out d eficit was £15.5m and the Group’s estimated liability on
the wind up of the scheme was £7.5m.
Because of the scheme history described above, it is not possible to calculate the Group’s share of the assets and liabilities of the scheme, and
consequently despite it being a defined benefit pension scheme the Group treats it as a defined contribution pension scheme for accounting purposes.
The Group does not expect to pay any contributions to the scheme in the next reporting period (2015: £nil). Currently the deficit repair contributions are
being funded solely by the sponsoring employer and this is expected to remain the case in the future. Those deficit repair contributions are based on the
last triennial valuation of the scheme as at 31 December 2012, which showed that the scheme had a deficit of £6.8m on a technical provisions basis.
The actuarial valuation as at 31 December 2015 is not yet finalised.
The Group’s level of participation in the scheme is estimated at 48.5%, which is based on its estimated share of the total buy-out liabilities. The Group
has a 49% shareholding in its associate company which is the sponsoring company of the pension scheme. As a result of equity accounting for its share of
the net assets of the associate the Group recognises 49% of the deficit calculated on an IAS 19 accounting basis within its ‘Investment in Associate’
in its consolidated balance sheet.
Other pension schemes
Carrs Billington Agriculture (Sales) Ltd offers a Group Personal Pension Plan to some of its employees and the pension expense for this plan in the year
was £508,000 (2015: £451,000).
In addition, the Group offered a Group Personal Pension plan to certain employees of Carr’s Flour Mills Ltd. The pension expense for this scheme
for the year up to the date of disposal of the subsidiary was £205,000 (2015: £208,000).
The pension expense in respect of defined contribution pension arrangements in foreign subsidiaries during the year was £215,000 (2015: £156,000).
Pension contributions into NEST during the year amounted to £45,000 (2015: £38,000).
The Group also pays contributions into various defined contribution schemes acquired through business combinations. The pension expense during the
year in respect of these schemes was £101,000 (2015: £91,000).
26 Share capital
Group and Company
Authorised:
Ordinary shares of 2.5p each
2016
Shares
2016
£’000
2015
Shares
2015
£’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
89,760,090
1,432,714
2,244
36
89,401,900
358,190
At end of the year
91,192,804
2,280
89,760,090
2,235
9
2,244
The consideration received on the allotment of shares during the year was £532,000 (2015: £171,000).
For details of share based payment schemes see note 27.
Since the year end there was a further allotment of 6,460 shares with a nominal value of £162 due to the exercise of share options. In addition, to
enable vesting of the Group’s long term incentive plan, on 14 November 2016 178,027 shares with a nominal value of £4,451 were held in treasury.
84
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS
27 Share-based payments
Group
The Group operates two active share based payment schemes at 3 September 2016.
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, November 2014 and November 2015 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 fair value per option granted and the assumptions used in the calculation of fair values are as follows:
Long Term
Incentive Plan
November 2015 November 2014 November 2013 May 2013
Long Term
Incentive Plan
Long Term
Incentive Plan
Long Term
Incentive Plan
Share Save
Scheme
(3-Year Plan
2014)
Share Save
Scheme
(5-Year Plan
2014)
Share Save
Scheme
(5-Year Plan
2011)
Grant date
Share price at grant date
(weighted average)
Exercise price
(weighted average)
Fair value per option at grant
Number of employees
Shares under option
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
9/11/15
10/11/14
11/11/13
1/5/13
9/6/14
9/6/14
10/5/11
£1.460
£1.600
£1.683
£1.315
£1.870
£1.870
£0.720
£0.00
£1.344
10
624,787
3
Market value1
—
10
6.5
—
£0.00
£1.504
8
512,200
3
£0.00
£1.597
8
475,790
3
£0.00
£1.237
2
330,790
3
£1.520
£0.490
167
428,410
3
£1.520
£0.529
57
281,950
5
£0.572
£0.156
4
19,390
5
Market value1 Market value1 Market value1 Black Scholes Black Scholes Black Scholes
—
10
6.5
—
—
10
6.5
—
—
10
6.5
—
30.0%
3.5
3.25
1.51%
26.9%
5.5
5.25
2.07%
24.00%
5.5
5.25
2.450%
2.54%
0%
2.81%
0%
3.02%
25%
2.42%
100%
1.93%
95%
1.93%
95%
3.90%
95%
1 discounted for dividends forgone over the three year vesting period
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.
85
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
27 Share-based payments (continued)
Number of options
Long Term
Incentive Plan
Long Term
Long Term
Incentive Plan
Incentive Plan
November 2015 November 2014 November 2013
Number
’000
Number
’000
Number
’000
Long Term
Incentive Plan
May 2013
Number
’000
Share Save
Scheme
(3-Year Plan
2014)
Number
’000
Scheme
Share Save Share Save
Scheme
Approved
Executive
Share
Option
(5-Year Plan (5-Year Plan Scheme
2011) 2006
Number Number
’000
2014)
Number
’000
’000
Outstanding:
At 30 August 2014
Granted in the year
Exercised in the year
Forfeited in the year
At 29 August 2015
Granted in the year
Exercised in the year
Forfeited in the year
At 3 September 2016
Exercisable:
At 29 August 2015
At 3 September 2016
Weighted average:
Remaining contractual
life (years)
Remaining expected
life (years)
—
—
—
—
—
625
—
—
625
—
—
—
512
—
—
512
—
—
—
512
—
—
475
—
—
—
475
—
—
—
475
—
—
489
—
—
—
489
—
(158)
—
331
544
—
—
(40)
504
—
—
(76)
428
324
—
—
—
778
—
—
(43)
735
—
(710)
(6)
324
—
—
(42)
282
710
—
(350)
(150)
210
—
(210)
—
19
—
—
—
—
—
210
331
—
—
19
—
9.00
8.00
7.00
6.00
1.25
3.25
0.25
5.50
4.50
3.50
2.50
1.00
3.00
—
The total (income)/expense recognised for the year arising from share based payments are as follows:
Long Term Incentive Plan November 2015
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 (5-Year Plan 2011)
2016
£’000
—
(128)
(63)
—
52
23
20
(96)
86
—
—
2015
£’000
—
128
127
202
77
33
17
584
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS
27 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 2015
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 (5-Year Plan 2011)
2016
£’000
—
(84)
(41)
—
3
2
1
(119)
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 2015
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 (5-Year Plan 2011)
Approved Executive Share Option Scheme 2006
Total carrying amount of investments
2016
£’000
2015
£’000
—
—
49
—
104
48
3
—
204
—
45
88
195
83
39
87
21
558
28 Acquisitions
Green (Agriculture) Co
On 4 September 2015 Carrs Billington Agriculture (Sales) Ltd acquired the business and certain assets of Green (Agriculture) Co for net cash
consideration of £265,000.
The principal activity of the business acquired is that of an agricultural merchant.
The primary reason for the business combination was the expansion of the existing agriculture business.
Phoenix Feeds Ltd
On 1 June 2016 Carrs Billington Agriculture (Sales) Ltd acquired the entire issued share capital of Phoenix Feeds Ltd for cash consideration of
£1,744,000 including £490,000 of contingent consideration. The contingent consideration is linked to the continued employment of key personnel
and therefore in accordance with IFRS 3 this has not been recognised as consideration in the acquisition accounting and is instead being recognised
in the income statement over a two year period. Given the nature of the payment it is intended to recognise this as a non-recurring item.
The principal activity of Phoenix Feeds Ltd is that of an agricultural merchant.
The primary reason for the business combination was the expansion of the existing agriculture business.
WM. Nicholls & Company (Crickhowell) Ltd
In the prior year Carrs Billington Agriculture (Sales) Ltd acquired the entire issued share capital of WM. Nicholls & Company (Crickhowell) Ltd.
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) Ltd is that of an agricultural merchant.
The primary reason for the business combination was the expansion of the existing agriculture business.
87
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
28 Acquisitions (continued)
Reid and Robertson Ltd
In the prior year Carrs Billington Agriculture (Sales) Ltd acquired the entire issued share capital of Reid and Robertson Ltd for cash
consideration of £869,000.
The principal activity of Reid and Robertson Ltd is that of an agricultural merchant.
The primary reason for the business combination was the expansion of the existing agriculture business.
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 £783,000 (2015: £1,050,000). 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
2016
£’000
1,868
76
2015
£’000
3,589
85
There were no other recognised gains and losses other than the profit shown above.
Acquisition related costs amounted to £7,000 (2015: £58,000), 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
Inventories
Receivables
Assets held for resale
Cash at bank
Bank overdraft
Payables
Finance Leases
Taxation
– Current
– Deferred
Net assets acquired
Goodwill
Satisfied by:
Cash consideration
2016
Fair value
£’000
2015
Fair value
£’000
39
25
118
1,144
—
—
(12)
(541)
—
(29)
(8)
736
783
1,519
162
118
549
1,493
116
150
—
(1,431)
(37)
(200)
(71)
849
1,050
1,899
1,519
1,899
Intangible assets represents the fair value of customer relationships of Phoenix Feeds Ltd. The fair value exercise on the acquisition of the business
of Greens (Agriculture) Co. in the 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 prior year end.
88
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS
28 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 30 August 2015 (2015: 31 August 2014).
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.
Continuing operations
Revenue
Profit before taxation
29 Cash generated from/(used in) continuing operations
Profit for the year from continuing operations
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
Loss on disposal of investment
Loss on dissolution of dormant subsidiary
Profit on disposal of subsidiary
Impairment of investment
Amortisation of grants
Net fair value (gain)/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 (credit)/charge (excluding interest)
(note 25)
Changes in working capital (excluding the effects of
acquisitions and disposals):
Increase in inventories
(Increase)/decrease in receivables
(Decrease)/increase in payables
Cash generated from/(used in) continuing operations
2016
£’000
318,672
14,172
2015
£’000
335,014
14,243
Group
2016
£’000
2015
£’000
Company
2016
£’000
11,171
10,680
26,362
2,907
(176)
—
3,582
6
205
(84)
10
—
—
—
(53)
(99)
(383)
70
(236)
1,045
(2,081)
(780)
(108)
(287)
(1,620)
(3,606)
(3,226)
6,257
3,010
(292)
—
3,180
6
193
(14)
—
—
—
—
(20)
520
53
(65)
(338)
1,077
(2,307)
(2,340)
(339)
261
(1,886)
63
(2,322)
9,120
58
—
(19,935)
—
—
—
—
—
85
(6,478)
—
—
(119)
(732)
30
(959)
464
—
(780)
(108)
(287)
—
(193)
293
2015
£’000
2,870
232
—
(4,200)
—
—
—
—
—
—
—
846
—
317
(341)
(30)
(1,028)
435
—
(2,340)
(339)
261
—
(162)
564
(2,299)
(2,915)
89
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
30 Analysis of net (debt)/cash
Group
Cash and cash equivalents
Bank overdrafts
Loans and other borrowings:
– current
– non-current
Finance leases:
– current
– non-current
Net (debt)/cash
At
30 August
2015
£’000
20,052
(3,777)
16,275
(12,770)
(18,444)
(2,174)
(7,300)
Cash flow
£’000
27,441
(4,847)
22,594
1,902
—
2,333
—
(24,413)
26,829
Other
non-cash
changes
£’000
Exchange
movements
£’000
At
3 September
2016
£’000
—
—
—
(1,374)
1,336
(801)
5,783
4,944
918
—
918
(134)
—
—
—
784
48,411
(8,624)
39,787
(12,376)
(17,108)
(642)
(1,517)
8,144
Cash and cash equivalents and bank overdrafts at 30 August 2015 have been restated for the grossing up of accounts with right of offset within
the same banking facility.
Other non-cash changes relate to finance leases, including finance leases disposed with a subsidiary, and transfers between categories of borrowings.
It also includes the release of deferred borrowing costs to the consolidated income statement.
Company
At
30 August
2015
£’000
Cash flow
£’000
Other
non-cash
changes
£’000
Exchange
movements
£’000
Cash and cash equivalents
8,973
28,925
—
Loans and other borrowings:
– current
– non-current
(690)
(16,414)
(4,803)
—
Net (debt)/cash
(8,131)
24,122
(481)
525
44
47
—
—
47
At
3 September
2016
£’000
37,945
(5,974)
(15,889)
16,082
Other non-cash changes relate to the release of deferred borrowing costs to the consolidated income statement and transfers between categories
of borrowings.
31 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 (2015: none).
2016
£’000
2015
£’000
56
22
32 Other Financial Commitments
Group
At 3 September 2016 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 (2015: none).
90
2016
£’000
453
748
1,201
2015
£’000
695
1,104
1,799
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS
33 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 3 September 2016 amounted to £3,980,000 (2015: £8,152,000).
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 3 September 2016 was
£3,284,000 (2015: £1,453,000).
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 3 September 2016 the contracts under guarantee that have still to be completed and delivered have a total contract value of £nil
(2015: £9,521,000).
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 3 September 2016 the cumulative rent payable over the remaining term of the lease
is £1,455,000 (2015: £1,494,000).
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
(2015: £1,500,000).
One of the Group’s subsidiary undertakings is a participating employer in the Carrs Billington Agriculture Pension Scheme. On a wind-up of the
scheme the buy-out deficit would be split between the participating employers with the Group’s level of participation in the scheme estimated at
48.5%. At the last actuarial valuation, the Group’s estimated liability on the wind-up of the scheme was £7.5m (2015: £7.6m).
The Group and Company does not expect any of the above guarantees to be called in.
34 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
2016
£’000
2015
£’000
Company
2016
£’000
2015
£’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
75
109
Revenue
167
204
—
—
—
—
91
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
34 Related parties (continued)
Transactions with subsidiaries
Company
2016
£’000
2015
£’000
33,861
119
33,980
(5,461)
(37)
(5,498)
2,489
19,935
756
32,602
138
32,740
(173)
(27)
(200)
2,520
4,200
744
Group
2016
£’000
2015
£’000
Company
2016
£’000
2015
£’000
152
623
(20,665)
(18,036)
647
19
45
(202)
(99,192)
967
19
91
(189)
(92,235)
12
—
—
—
45
—
—
555
(1)
—
—
44
(8)
—
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
Transactions with associate
Balances reported in the Balance Sheet
Amounts owed by associate:
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
92
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS
34 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
2016
£’000
2015
£’000
Company
2016
£’000
2015
£’000
1,674
3,611
1,628
3,096
(11)
(9)
—
—
Included within Group trade and other receivables is £1,627,000 (2015: £3,584,000) in respect of loans owed by joint ventures.
Included within Company trade and other receivables is £1,627,000 (2015: £3,095,000) in respect of loans owed by joint ventures.
Transactions reported in the Income Statement
Revenue
Management charges receivable
Purchases
Group
2016
£’000
2015
£’000
Company
2016
£’000
2015
£’000
56
125
(1,116)
147
110
(1,093)
—
—
—
—
—
—
Transactions with other related parties
Other loans of £nil (2015: £500,000) included within current borrowings is in respect of a loan from Edward Billington and Son Ltd to Carrs
Billington Agriculture (Sales) Ltd. This loan is interest free and unsecured. Edward Billington and Son Ltd has a 49% shareholding in Carrs Billington
Agriculture (Sales) Ltd.
35 Post balance sheet event
On 24 October 2016, after the year end, the Group acquired the entire issued share capital of STABER GmbH, one of the primary suppliers
to its German engineering business, including all of its associated intellectual property for €7.85 million of which €2.0 million will be deferred,
until at the latest 30 June 2018.
The acquisition will provide the Group with specialised IP relating to high quality, niche robotics and design technology and will further enhance
the capability of the German business and its long term operational performance.
Given that this has been a recent acquisition the identifiable assets and liabilities at completion and goodwill have yet to be finalised. The Directors
therefore consider it impracticable to be able to disclose this information in these financial statements.
93
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS
FIVE YEAR STATEMENT
Continuing operations
Revenue and Results
(Restated)
2012
£’000
(Restated)1
2013
£’000
(Restated)
2014
£’000
(Restated)2
2015
£’000
2016
£’000
Revenue
323,581
373,906
341,849
331,285
314,907
Group operating profit
11,153
11,529
11,638
12,090
12,770
Analysed as:
Operating profit before non-recurring items
and amortisation
Non-recurring items and amortisation
11,388
(235)
11,763
(234)
11,937
(299)
12,341
(251)
Group operating profit
11,153
11,529
11,638
12,090
Profit on the disposal of property and investment
Finance income
Finance costs
Share of post-tax profit in associate
and joint ventures
237
673
(1,168)
—
513
(1,379)
—
264
(1,171)
—
338
(1,045)
1,381
2,819
2,486
2,307
Profit before taxation
Taxation
12,276
(2,938)
13,482
(2,989)
13,217
(2,873)
13,690
(3,010)
Profit for the year from continuing operations
9,338
10,493
10,344
10,680
Profit for the year from discontinued operations
565
1,822
2,549
3,013
Profit for the year
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 – basic3
Dividends per ordinary share3
– adjusted3
3.5%
19.9%
9.0p
9.1p
2.9p
3.1%
19.7%
9.7p
9.9p
3.2p
3.5%
18.8%
9.9p
10.2p
3.4p
3.7%
17.9%
10.0p
10.2p
3.7p
12,982
(212)
12,770
—
236
(1,009)
2,081
14,078
(2,907)
11,171
2,817
13,988
4.1%
18.9%
10.7p
10.9p
3.8p
Revenue and results included in the table above have been restated to reflect the disposal of Carr’s Flour Mills Ltd. The profit after taxation from this
business has been included within profit for the year from discontinued operations.
1 Restated for IAS 19 revised
2 Restated for the reclassification to interest income of the net interest on the net defined benefit retirement asset previously recognised within operating profit
3 Restated for the effect of the 10:1 share split in January 2015
94
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL 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
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
(Restated)
2015
£’000
10,849
448
58,385
636
13,530
50
1,767
861
2016
£’000
11,440
286
35,811
182
14,996
50
311
—
54,653
72,013
83,439
86,526
63,076
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
20,052
33,423
56,940
303
—
48,411
110,073
122,943
114,253
120,426
139,077
Total assets
164,726
194,956
197,692
206,952
202,153
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
(14,176)
(309)
(56,108)
(1,552)
(15,545)
(8)
(58,282)
(1,639)
(19,688)
(15)
(54,236)
(1,631)
(18,721)
(72)
(54,496)
(472)
(21,642)
(20)
(46,823)
(470)
(72,145)
(75,474)
(75,570)
(73,761)
(68,955)
(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)
(18,625)
—
(1,817)
(2,668)
(24,721)
(41,441)
(32,295)
(34,228)
(23,110)
(96,866)
(116,915)
(107,865)
(107,989)
(92,065)
67,860
78,041
89,827
98,963
110,088
The prior year has been restated for the grossing up of cash and cash equivalents and bank overdrafts, included within current borrowings, for accounts
with right of offset within the same banking facility.
95
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSFINANCIAL STATEMENTS
DIRECTORY OF OPERATIONS
Carr’s Group plc
Old Croft, Stanwix, Carlisle,
Cumbria CA3 9BA
Tel: 01228 554600
Fax: 01228 554601
Web: 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
Scotmin
13 Whitfield Drive,
Heathfield Ind Est,
Ayr KA8 9RX
Tel: 01292 280 909
Fax: 01292 280 919
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
(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
96
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
2 Annan Business Park,
Annan, Dumfriesshire
DG12 6TZ
Tel: 01461 202 772
Fax: 01461 202 712
Carrs Billington Agriculture
(Sales), Appleby
Crosscroft Industrial Estate,
Appleby, Cumbria CA16 6HX
Tel: 01768 352 999
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
Carrs Billington Agriculture
(Sales), Brecon
Warren Road Stores,
Warren Road, Brecon,
Powys, LD3 8EF
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), Gisburn
Pendle Mill, Mill Lane,
Gisburn, Clitheroe,
Lancashire BB7 4LN
Tel: 01200 445 491
Fax: 01200 445 305
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), 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
Unit 20c Coopies Lane
Industrial Estate, Morpeth,
Northumberland NE61 6JN
Tel: 01670 503 930
Fax: 01670 504 404
Carrs Billington Agriculture
(Sales), Morpeth (Greens)
Old Station Buildings,
Coopies Lane, Morpeth,
Northumberland, NE61 2SL
Tel: 01670 518474/84
Carrs Billington Agriculture
(Sales), Penicuik
Unit 2, 4 Eastfield Farm
Road, Penicuik,
Midlothian EH26 8EZ
Tel: 01968 707 040
Carrs Billington Agriculture
(Sales), Penrith
Haweswater Road, Penrith
Industrial Estate, Penrith,
Cumbria CA11 9EU
Tel: 01768 866 354
Fax: 01768 899 345
Carrs Billington Agriculture
(Sales), Perth
17/18 Arran Place, Arran
Road, Perth PH1 3RN
Tel: 01738 866 354
Fax: 01738 442 122
Carrs Billington Agriculture
(Sales), Rothbury
The Store, Coquet View,
Rothbury, Morpeth,
Northumberland, NE65 7RZ
Tel: 01669 621150
Carrs Billington Agriculture
(Sales), Selkirk
The Former Baxter’s Unit,
Dunsdale Haugh, Selkirk,
Selkirkshire, TD7 5EF
Tel: 01750 720 734
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
Pheonix Feeds, a division
of Carrs Billington Agriculture
(Sales)
1 Station Park, Ramsgreave
Road, Blackburn,
Lancashire BB1 9BH
Tel: 01254 240 888
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
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
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
Silloth Storage Company*
Station Road, Silloth,
Wigton, Cumbria, CA7 4JQ
* joint venture company
** associate company
CARR’S GROUP PLCANNUAL REPORT AND ACCOUNTS 2016FINANCIAL STATEMENTS
FINANCIAL 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
B. E. Williams Ltd
Caltech Biotechnology Ltd
Carrs Animal Feed Supplements Ltd
Carrs Feeds Ltd
Carrs Fertilisers Ltd
Carr’s International Industries Ltd
Carr’s Milling Industries Ltd
Carrs Milling Ltd
Carrs Natural Feeds Ltd
Chirton Engineering Ltd
Forsyths of (Wooler) Ltd
Greens Flour Mills Ltd
Johnstone Fuels and Lubricants Ltd
Phoenix Feeds Ltd
R Hind Ltd
Reid and Robertson Ltd
Robert Hutchison Ltd
Safe at Work Ltd
Scotmin Nutrition Ltd
Walischmiller Solutions Ltd
Wallace Oils Ltd
WM. Nicholls & Company (Crickhowell) Ltd
Financial Adviser and Broker
Investec Bank (UK) Ltd
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
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Scotland
England & Wales
England & Wales
Scotland
England & Wales
England & Wales
Scotland
England & Wales
England & Wales
England & Wales
Ownership
51%1
100%
100%
51%1
100%
100%
100%
100%
100%
100%
51%1
100%
51%1
51%1
100%
51%1
100%
51%1
100%
100%
51%1
51%1
1 100% owned by Carrs Billington Agriculture (Sales) Ltd which is a 51% subsidiary of Carr’s Group plc.
Companies registered in England & Wales have a registered office of Old Croft, Stanwix, Carlisle, Cumbria, CA3 9BA. Companies registered in Scotland
have a registered office of 13 Whitfield Drive, Heathfield Ind. Est., Ayr, KA8 9RX.
Designed and produced by corporateprm, Edinburgh and London. www.corporateprm.co.uk
Old Croft, Stanwix, Carlisle CA3 9BA
www.carrsgroup.com