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G ROW TH THROUG H
INNOVATI N &
TECHN LOGY
Annual report and accounts
2019
Carr’s is an international
business at the forefront of
innovation and technology.
The Group is a global leader
in the supply of value-adding
products and services to
customers in the Agriculture
and Engineering sectors.
Strategic Report
01 Highlights
02 At a Glance
04 Chairman’s Statement
06 Market Overview
08 Our Business Model
10 Our Strategy
14 Chief Executive’s Review
16 Financial Review
18 Divisional Review: Agriculture
24 Divisional Review: Engineering
30 Risk Management
33 Viability Statement
34 Corporate Responsibility
Corporate Governance
38 Board of Directors
40 Corporate Governance Report
46 Audit Committee Report
49 Nomination Committee Report
52 Remuneration Committee Report
65 Directors’ Report
Financial Statements
68 Independent Auditor’s Report
78 Consolidated Income Statement
79 Consolidated and Company
Statements of Comprehensive Income
80 Consolidated and Company
Balance Sheets
82 Consolidated Statement
of Changes in Equity
83 Company Statement of Changes in Equity
84 Consolidated and Company Statements
of Cash Flows
85 Principal Accounting Policies
93 Notes to the Financial Statements
132 Five Year Statement
134 Alternative Performance Measures
Glossary
135 Directory of Operations
136 Registered Office and Advisers
137 Dormant Subsidiaries at 31 August 2019
Agriculture
The Agriculture division includes a
livestock supplementation business
which manufactures feed blocks,
boluses and other trace element
supplements from locations across
the UK, US and Europe.
These products are supplied
through an extensive distribution
network to farming customers
across the globe.
In the UK the division also sells
animal feed, fertiliser, animal health
products, oil, farm machinery and
rural supplies from a network of
over 40 country stores and depots.
Engineering
The Engineering division designs
and manufactures specialist
equipment and components,
robotic goods and remote
handling equipment, and
provides technical services, from
five sites in the UK, one site in
Germany and, two sites in the
USA.
These highly specialised
products and services are
supplied predominately into the
nuclear, defence and oil and gas
markets.
See page 18
See page 24
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01
HIGHLIGHTS
A year of strong performance
FINANCIAL
£403.9m
Revenue
4.75p
Dividend Per Share
18
17
£403.2m
£346.2m
18
17
4.5p
4.0p
£18.9m
Adjusted Operating Profit*
£17.2m
Reported Operating Profit
18
17
£17.5m
18
17
£12.1m
£16.4m
£10.7m
£18.0m
Adjusted Profit Before Tax*
£16.3m
Reported Profit Before Tax
18
17
£16.6m
18
17
£11.4m
£15.5m
£10.0m
14.6p
Adjusted Earnings Per Share*
13.1p
Basic Earnings Per Share
18
17
13.9p
18
17
8.9p
13.0p
7.7p
*Adjusted results are after adding back amortisation of acquired intangible
assets and non-recurring items including acquisition costs.
OPERATIONAL HIGHLIGHTS
• Acquisition of Animax in September
2018, enhancing the range of animal
supplementation products offered by
the Group.
• Acquisition of NW Total in June 2019,
bringing further technical engineering
capabilities into the Group, achieving
synergies within the Engineering division
and adding new customers in the nuclear
defence sector.
• Acquisition of reputable Cumbrian
all-terrain vehicle dealership in July 2019,
increasing the range of specialist farming
machinery available to our core farming
customer base.
•
Implementation of new Engineering
divisional structure consisting of Global
Robotics, Global Technical Services and
UK Service and Manufacturing.
• Significant contract wins for our Global
Robotics business to supply equipment
into the USA.
• Award of significant funding from the US
Department of Energy to develop
‘passive cooling’ safety technology
carrying the potential to be retrofitted to
existing nuclear facilities.
To find out more
visit us online at
www.carrsgroup.com
CARR'S GROUP PLC Annual report and accounts 2019
02
AT A GLANCE
Carr’s Group plc is an international business operating
across Agriculture and Engineering sectors which
supplies products and services to over 50 countries
around the world.
AGRICULTURE
The Agriculture division develops and manufactures a range
of innovative livestock supplementation products under highly
regarded brands which are distributed to customers globally.
The division also services UK farming and rural communities
through a network of retail stores, supplies specialist equipment
and machinery, and distributes fuels.
Locations
Our Supplements business develops
and manufactures products from three
sites in the UK, six sites in the USA and
one site in Germany. These products are
sold through a vast distribution network
across the UK, Europe, North America,
South America and Australasia.
Our UK Agriculture business operates
predominantly across the north of
England and southern Scotland
from over 40 retail stores, machinery
distributorships and fuel depots.
Customer Base
Our customer base includes leading
livestock farmers across the globe
in the dairy, beef, sheep, pig and
equine sectors.
Brands
Our branded product ranges are
the result of extensive research and
development and include feed blocks
sold under the Crystalyx®, Horslyx®,
SmartLic® and Megastart® brands, and
boluses sold under the Tracesure® and
Allsure® brands.
Locations
54
UK
6
USA
1
Germany
CARR'S GROUP PLC Annual report and accounts 2019
See page 18
Revenue by division
Agriculture
Engineering
£357.4m
£46.5m
Adjusted operating profit
by division
Agriculture
Engineering
£13.6m
£5.3m
03
GROUP OVERVIEW
1831
Founded
1,241
Employees
71
Global locations*
* Including central offices
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ENG INEE RING
See page 24
The Engineering division designs and manufactures bespoke
equipment, and provides specialist technology and
engineering solutions, for the nuclear, oil and gas, defence and
petrochemical industries.
Its diverse range of products and services includes robotic
manipulators and remote handling equipment, life-of-plant
extension technologies, radiation protection and
decontamination services, equipment condition monitoring,
specialist design and fabrication and precision machining.
Product ranges
Our range of innovative products and
services include TELBOT® remote
handling equipment, MSIP® life-of-plant
extension technology, Power Fluidics™
waste mobilisation systems and nuclear
decontamination services. We also
supply specialist design, fabrication,
testing and precision machining services.
Locations
Our Engineering division is spread across
eight key sites globally; five in the UK,
two in the USA and one in Germany.
From these sites we supply products and
services worldwide across Europe, North
America, South America, Asia, Africa and
Australasia.
Customer Base
Our customers include global businesses
and government bodies across nuclear,
energy, pharmaceutical and utilities
industries worldwide.
Locations
5
UK
2
USA
1
Germany
CARR'S GROUP PLC Annual report and accounts 2019
04
CHAIRMAN’S STATEMENT
GR WTH
REMAINS ON TR ACK
We are pleased to have delivered
a strong performance for the year,
achieving record levels of
profitability and significant
strategic progress despite
challenging market conditions.
Review of the year
For the year ended 31 August 2019, the Group
delivered a financial performance moderately ahead
of the Board’s expectations.
The period saw further investment across both our
Agriculture and Engineering divisions to enhance
our capabilities and position the Group for further
growth. This investment was complemented
by acquisitions made in each division, and the
successful implementation of measures designed to
improve efficiencies across our businesses.
Our Agriculture division performed well in
challenging market conditions. Unseasonable
mild and dry weather during winter and spring
impacted sales volumes in the UK and across
Europe, which was in stark contrast to the colder
weather experienced during the spring of 2018.
Consistent wet weather in the USA also reduced
demand for feed blocks, impacting sales volumes.
Despite the challenging weather conditions, its
impact on profitability was substantially mitigated
through various cost savings, including lower
central costs, together with better procurement
and manufacturing efficiencies which, combined
with the contribution from Animax, acquired in
September 2018, enabled the division to report
increased profits. We were also able to make
good progress strengthening our research and
development capabilities, particularly through our
new facilities at Animax.
CHRIS HOLMES
Chairman
CARR'S GROUP PLC Annual report and accounts 2019
GR WTH
REMAINS ON TR ACK
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Our Engineering division delivered another strong performance,
building on the momentum of the previous year. Towards the end
of the year, we brought together our existing and recently acquired
businesses through the establishment of a new divisional structure
comprising Global Robotics, Global Technical Services and UK
Service and Manufacturing (replacing our Remote Handling, USA
Engineering and UK Manufacturing businesses respectively). The
new structure is designed to realise synergies, improve efficiencies
and better align our products and services with the markets in which
we operate.
This is my last set of financial results as Chairman of the Group. It has
been an honour and a privilege to work for Carr’s, first as Managing
Director of the Agriculture business, then as CEO of the Group, and for
the last six years to serve as Chairman. As announced on 9 October 2019,
following a comprehensive search process led by Senior Independent
Director John Worby, Peter Page will take over the role of Chairman
following our AGM in January 2020. I am confident Peter is an ideal
candidate to take over as Chairman and I wish him and the executive
management team the very best for the future. I know that under their
leadership Carr’s will continue to go from strength to strength.
In June 2019, we acquired NW Total, a service and manufacturing
company providing value-adding solutions to the nuclear defence,
nuclear decommissioning, nuclear power generation and other
highly regulated markets, for a total cash consideration of up to
£9.6 million. The acquisition enhances our offering and provides
significant opportunities, particularly in the nuclear defence market.
We will continue to assess acquisition opportunities across both of
our divisions, which align to our strategy.
Financial review
Revenue for the year increased by 0.2% to £403.9m (2018: £403.2m).
Adjusted operating profit, which is before amortisation of acquired
intangible assets and non-recurring items, was up 8.4% to £18.9m
(2018: £17.5m), with Agriculture contributing £13.6m (2018: £13.4m)
and Engineering £5.3m (2018: £4.1m). Reported operating profit was
up 4.8% to £17.2m (2018: £16.4m). Non-recurring items include past
service costs relating to pensions GMP equalisation totalling £1.1m,
amortisation of acquired intangible assets totalling £0.8m, acquisition
related costs totalling £0.5m, and restructuring costs totalling £0.4m.
These were offset by adjustments to contingent consideration
totalling £1.1m, giving a net total of £1.7m.
Adjusted profit before tax was up 9.0% to £18.0m (2018: £16.6m)
and reported profit before tax was up 5.2% at £16.3m (2018: £15.5m).
Basic earnings per share were up by 0.8% to 13.1p (2018: £13.0p), with
fully diluted earnings per share of 12.8p (2018: 12.7p) and adjusted
earnings per share, excluding amortisation of acquired intangible
assets and non-recurring items, up 5.0% to 14.6p (2018: 13.9p).
Net debt at 31 August 2019 was £23.8m (2018: £15.4m). Net debt has
increased by £12.0m in relation to the acquisition of Animax and NW
Total, which was offset by a small cash inflow of £3.6m for the Group.
Dividend
The Board is proposing a final dividend of 2.5p per ordinary share,
which together with the two interim dividends of 1.125p per ordinary
share paid on 31 May 2019 and 4 October 2019, make a total of 4.75p
per share for the year (2018: 4.5p). The final dividend, if approved by
the Shareholders, will be paid on 10 January 2020, to Shareholders
on the register on close of business 29 November 2019, and the
shares will go ex-dividend on 28 November 2019.
Corporate governance
During the year we continued to review our governance framework
in the light of the new Corporate Governance Code 2018, which
has applied to the Company from 1 September 2019. In readiness
for this, we took the decision that I would stand down from the
Board, which was announced in December 2018. We have also
reviewed our remuneration policies to ensure that these remain
in accordance with best practice and taken steps to enhance how
we engage with stakeholders and employees. As a result, we are
confident that we should be fully aligned with the requirements of
the new Code. As a Group, we remain committed to a robust and
transparent governance framework, which promotes the interests of
our stakeholders.
Outlook
The Group remains committed to delivering on its strategic objectives
of investing in its people and its asset base, whilst continuing to drive
innovation and expand the Group’s geographic footprint, delivering
growth across both divisions.
We remain confident in the prospects of the Agriculture division in
the medium term and continue to plan for Brexit with our customers,
suppliers and trading partners. In the UK, farmer confidence is
becoming increasingly impacted by uncertainty around Brexit, in
particular the future trade arrangements the UK will have with the EU
and the rest of the world. In the USA, while the wet weather conditions
this year impacted sales volumes, an emergence from longstanding
drought across large agricultural regions should be beneficial for feed
block sales in the medium term. We are pleased with the progress
made with the integration of Animax since its acquisition in September
2018 and are working towards establishing the business as a centre
of excellence for innovation and product development across
the division. We will continue to invest in the development of our
international supplements business delivering research based value-
enhancing products to farmers globally.
In our Engineering division, order books remain strong supported
by improved efficiencies and a strengthened management team.
This, combined with the strategic progress during the year, provides
confidence in the medium term. Due to contract phasing we expect
reduced activity in Global Technical Services in the coming year,
but confidence in the business is unaffected due to its strong order
book. We anticipate an improved performance in Global Robotics this
year, against reduced activity levels last year. The acquisition of NW
Total also provides new opportunities for the division, particularly in
the nuclear defence market. Our strategy for the division continues
to be the development of IP-rich businesses delivering high value
solutions into regulated markets, supplemented by acquisitions
where appropriate.
Trading in the new financial year has started in line with the Board’s
expectations in Agriculture. In Engineering, we have had a slower start
than expected due to contract phasing, however, order books are strong
and we remain confident in the full year outlook. Whilst we are fully
aware of the challenges in our global markets, investments in people,
facilities and new product development, supported by our strategic
acquisitions, position the Group well for sustained future growth.
Finally, on behalf of the Board I would like to thank our colleagues
across the Group who, alongside our strategic partners and other
supporting stakeholders, have been instrumental in helping to deliver
another strong performance.
CHRIS HOLMES DL
Chairman
20 November 2019
CARR'S GROUP PLC Annual report and accounts 2019
06
MARKET OVERVIEW
Our vision is to be recognised as a truly international
business at the forefront of technology and innovation
in our chosen markets.
AGRICULTURE
Market Trend
Production growth
In recent years production has
grown strongly across agricultural
commodities, reaching record
levels in many sectors. While global
consumption per capita of many
products is expected to remain flat
over the coming decade, an increasing
world population will continue to
underpin demand.
What this means for Carr’s
Global agricultural production is
projected to grow by around 20%
over the coming decade, but with
considerable variation across regions.
Carr’s is responding to this by building
a globalised business footprint
with manufacturing capability across
the USA and Europe, and increasing
market penetration worldwide.
20%
Forecast increase in
agriculture production
over the next decade
Food demand
Much of the additional food demand
will originate from regions with high
population growth such as Africa,
India, and the Middle East. Demand for
animal products such as dairy is set to
expand fastest in the coming decade.
There is a clear need to increase
global dairy production in a
sustainable manner. Carr’s
is positioning itself to lead in
dairy nutrition. While exploring
opportunities in the dairy sector across
the USA, EU and UK, the business is
focusing on improving the efficiency
of stock rearing in the sector.
2.5%
Forecast annual increase in
demand for dairy products
Resource constraints
In the coming decades, resource
constraints over water, soil,
biodiversity and land will increasingly
affect agricultural systems. If global
population and food consumption
trends continue, by 2050 the world will
need 60% more food than is available
today. Arable land is limited, and so
most of this additional production
will have to come from sustainable
agricultural intensification.
The efficiency with which animal
products can be produced is becoming
increasingly critical. In short, the
world needs to produce ‘more from
less’. Carr’s is increasingly focused on
sustainable intensification and some of
the key elements of precision farming
in livestock production. The Group is
investing into its global agricultural
research capability and developing a
range of animal supplements that can
help farmers deliver optimal efficiency.
60%
More food required by 2050
See page 18
CARR'S GROUP PLC Annual report and accounts 2019
07
ENGINEERING
Market Trend
Nuclear decommissioning
The requirement for nuclear
decommissioning and legacy waste
clean-up operations continues to grow
globally at approximately 12% per
annum. It is expected that hundreds
of nuclear reactors will be retired from
use in coming decades.
What this means for Carr’s
The increase in levels of
decommissioning and legacy clean-
up operations globally will provide
significant opportunities for Carr’s to
deliver innovative engineering solutions
worldwide. Continued growth in the
sector will enable investment in new
technologies which will ensure that
Carr’s remains at the forefront of
industry standards.
12%
Forecast annual global
growth spend in nuclear
decommissioning
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Defence
Investment is set to continue in the
UK defence sector through major
national projects such as the £31bn
Dreadnought programme, supporting
the UK’s nuclear deterrent, and
the ongoing nuclear submarine
decommissioning programme.
Continued long term investment by the
UK Government in defence provides
significant future opportunities to
utilise technologies across the Group.
Carr’s has acquired a track record of
delivering products and services into
this highly regulated market and is well
placed to further develop its divisional
capabilities to support customers in
the sector.
£31bn
Value of UK Dreadnought
nuclear submarines
programme
Oil and gas
There is now greater stability in oil and
gas markets, compared to the volatility
seen since the downturn in 2014/2015.
Improved confidence across oil and
gas markets has given rise to increased
upstream and downstream investment.
This provides significant opportunity for
Carr’s to deliver products and solutions
into the sector.
6%
Forecast annual capital
investment growth
in oil and gas
See page 24
CARR'S GROUP PLC Annual report and accounts 2019
08
OUR BUSINESS MODEL
Diversified, innovative, sustainable
Our resources
How we create value
We continue to grow by investing in our people and assets, and through
carefully considered acquisitions which align with our strategy. We apply
this approach across both our Agriculture and Engineering divisions, centred
around a strong focus on innovation and technology.
IN VESTMENT I N...
Innovation and technology
During the year we
invested in acquisitions
across both divisions
which have enhanced
the innovative range of
products and solutions
offered by the Group.
Talented people
We place great value in our 1,200 strong
workforce and are committed to continuous
development. People are critical to our success
and we strive to provide environments in which
our employees can reach their potential.
Global distribution network
As a Group we have a diverse customer base
spanning over 50 countries worldwide. Our
strategy is to target markets with the potential for
growth on an international scale.
Deep knowledge
We have a deep focus on innovation and
technology. Our businesses possess a wealth of
specialist knowledge and we continue to invest in
the development of new products and solutions
which can add value to our customer base.
Well invested
We continue to invest in our businesses to ensure
that they remain best placed to deliver our
strategic objectives.
Long-term, trusted relationships
We are proud to have built longstanding and
trusted relationships founded upon the quality of
our offering, our organisational culture and our
levels of customer service.
Market leading
Our businesses have market leading brands and
products which are recognised internationally
including Crystalyx®, AminoMax®, Horslyx®,
Tracesure® and Allsure® in Agriculture and
TELBOT®, MSIP® and Powerfluidics™ in Engineering.
Culture and values
As a Group we have a clear set of values and
are committed to investing in and engaging
with our employees and other stakeholders to
ensure that our businesses remain ethically and
sustainably managed.
CARR'S GROUP PLC Annual report and accounts 2019
09
Innovation and technology
Acquisitions
Agriculture
In September 2018 the Group acquired
Animax, a manufacturer of market leading
trace element supplementation products
for livestock. The business has increased
the range of value-adding products which
can be distributed to farming customers
globally.
See page 21
Engineering
The Group’s acquisition of NW Total
Engineered Solutions in June 2019 has
brought new technical competencies to
our Engineering division and opened up
significant opportunities, particularly in
nuclear defence markets.
See pages 12-13
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Who we create value for
Employees
We continue to expand
our employee training and
development offering and
enhance our engagement
initiatives.
Training days
delivered in 2019
722
Customers
Our success can be
measured by the level of
custom we continue to
attract and retain through
our leading product ranges
and excellent service levels.
Number of direct
UK Agriculture
customers
17,000
Investors
Our strategy is designed
to deliver sustainable
growth. During the year
we generated increased
earnings across the Group
which has enabled us to
increase the dividends
payable to our investors.
Partners
As a Group we enjoy
close relationships with a
range of trusted strategic
partners across the UK,
USA and Europe.
Dividend
per share
4.75p
5.6% increase
Number of
joint ventures
and associates
7
Communities
Across the Group we
believe in supporting
charitable initiatives and
the communities in which
we operate.
Charitable
donations
£41k
Environment
We believe in ethical
business practices
including taking
steps to minimise our
environmental impact.
Reduction in CO2
emissions globally
22%
per £m turnover
CARR'S GROUP PLC Annual report and accounts 2019
10
OUR STRATEGY
Our vision is to be recognised as a truly international business at the
forefront of innovation and technology in our chosen markets
Strategic objectives
2019 achievements
0
1
BUI LD BUSI NES S
VALUE BY FO CU SI NG
ON MARKE TS WIT H
GROWTH POT E NTI AL
0
2
GROW AND DIVE RSI FY
OUR INTERNATI ONAL
FOOTPRINT
0
3
DIFFER ENT IATE
OURSELVES THRO UGH
INNOVATION AND
TECHNOLO GY
0
4
LEAD IN OUR
CHOSEN MARK ETS
CARR'S GROUP PLC Annual report and accounts 2019
Our acquisition of Animax in September
2018 enhanced our position in the livestock
supplementation sector by increasing the
range of value-adding products we can
offer to farming customers. During the
year we also progressed the development
of our new Pick Block plant in Oldenburg,
Germany, which is expected to begin
manufacturing products for poultry farmers
during 2020.
In June 2019, we acquired NW Total
Engineered Solutions, which has brought
strong customer relationships to the Group
together with significant opportunities
in nuclear defence markets for our
Engineering division.
We have made good progress during the
year in developing our Supplements business
across Europe, and Canada and we continue
to build our presence in New Zealand. We
also enhanced our geographic reach in the
USA through our new manufacturing plant in
Tennessee.
The year has also seen our Global Robotics
business achieve significant success in the
USA building upon the reputation of our
Global Technical Services business.
In Agriculture, we have established a centre
of excellence for product development in
our new facilities at Animax. We have also
improved manufacturing processes to drive
efficiencies and improved product quality.
Collaborative innovation is also being driven
in our Engineering division through the
establishment of a central management
team. During the year we were awarded
significant funding by the US Department
of Energy for the development of the
Group’s passive cooling technology, which
represents a significant future opportunity.
Our acquisitions during the year have
brought new products and services to the
Group which complement our existing
offering of recognised industry leading
brands and value-add solutions.
During the year we strengthened
management teams across the Group with
a view to providing a platform for continued
international growth. We also restructured
our Engineering division to better align our
products and services with our chosen
markets to drive further growth.
11
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Future priorities
Key performance indicators
-1.8%
Underlying sales growth/decline
2018: 13.6%
13.4%
Gross margin
2018: 13.2%
4.7%
Adjusted Group operating margin
2018: 4.3%
£8.9m
Free cash flow
2018: £9.5m
13.8%
Return on net assets
2018: 13.7%
In Agriculture, we aim to increase sales volumes across our Supplements
business in the UK, Irish, European and New Zealand dairy sectors, and
to enhance our market share across beef sectors in the USA and Canada.
We are also looking forward to bringing our new Pick Block product to the
poultry market in 2020.
Our Engineering division continues to focus on global nuclear and oil and
gas markets, with a particular focus by our Global Robotics business on
opportunities in the USA, Europe and Japan. The acquisition of NW Total
provides a strong foothold into the UK nuclear defence market where we
consider significant opportunities exist.
We will continue to develop our international presence in Agriculture across Europe,
the USA, Canada, and Australasia through strategic partnerships and enhanced
business development initiatives focusing on building relationships and maintaining
excellent levels of customer service.
In Engineering we will continue to focus on global opportunities, particularly across the
USA, Europe and Asia. Our new divisional structure aligns our products and services with
customers in our chosen markets, and enhances our international offering.
Key to the Group’s future is our continuous investment in the development of our
intellectual property and product ranges, which is achieved through our culture of
collaboration and the sharing of know-how across each of our divisions.
We will also continue to identify suitable acquisitions which can be integrated to
achieve synergies and enhance the range of products and solutions we offer to
customers as a Group.
We will continue to invest in our people and in the development of new products
and technologies, and to identify strategic acquisitions, which complement
and enhance our range of products and services across both Agriculture and
Engineering. Our collaborative approach and organisational culture will ensure that
we continue to offer leading levels of service to our customer base globally.
CARR'S GROUP PLC Annual report and accounts 2019
12
STRAT EGY IN ACTION
EXPANDING O UR
EXPERTISE &
CAPABILITIES
The acquisition will also bring significant
synergy benefits. Being part of a larger group
will provide NW Total with access to specialist
manufacturing capabilities and greater financial
and technical resources. The acquisition will also
enable partnering with existing Carr’s businesses
on complex multi-disciplined projects, which
best utilise the innovative range of value-added
solutions offered by the Group.
In June 2019, the Group completed its
acquisition of NW Total Engineered Solutions
Ltd, a UK-based supplier of bespoke process
equipment packages and on-site technical
services to customers in the nuclear defence,
nuclear decommissioning, energy, utilities and
pharmaceutical sectors, for up to £9.6m.
Located in Barrow-in-Furness, Cumbria,
NW Total is a trusted partner to some of the
world’s largest companies across nuclear
sectors, having developed a reputation for
excellence over the last 25 years. The acquisition
complements the Group’s existing capabilities,
enhancing the range of services and depth of
knowledge within the Engineering division, and
brings long-standing relationships with key
customers, particularly in the nuclear
defence sector.
45
Employees
25 years
Long term customer relationships
To find out more visit
www.nwtotal.co.uk
CARR'S GROUP PLC Annual report and accounts 2019
13
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Being part of Carr’s Group will
provide NW Total with access
to specialist manufacturing
capabilities and greater
financial and technical
resources. We are looking
forward to helping drive further
growth across the division.
— Ian Brown
Managing Director, NW Total
CARR'S GROUP PLC Annual report and accounts 2019
14
CHIEF EXECUTIVE’S REVIEW
TIM DAVIES
Chief Executive Officer
We have seen a strong financial
performance this year across
both divisions against challenging
market conditions for Agriculture.
We are also pleased to report
significant strategic progress,
including acquisitions across both
Agriculture and Engineering.
DELIVERING
ON OUR
BJECTIVES
CARR'S GROUP PLC Annual report and accounts 2019
15
Introduction
Our financial performance during the year was
moderately ahead of our expectations. We have
made significant progress against our strategic
objectives, investing both in our facilities and in
our research and development capabilities, as
well as through acquisitions.
In the USA, following a period of sustained
drought, we expect the wetter weather this year
to provide a positive impact, as significant areas
in the USA become more capable of supporting
livestock grazing which is the primary
method of nutrition supported by our
range of supplementation products.
We remain committed to developing
our global supplements business,
which has been supported by our
acquisition of Animax. The acquisition
has enhanced our range of value-
adding products which can be distributed
internationally, has improved our ability
to innovate and develop new products,
and is enabling us to realise synergies
in our wider Agriculture division.
We continue to consider acquisition
opportunities which align with our strategy.
Engineering
We remain confident in the prospects for
the Engineering division. Our UK Service and
Manufacturing business continues to perform well,
and order books remain strong. The acquisition of
NW Total enhances the range of specialist services
we offer and provides good opportunities in the
nuclear defence market.
Following the award of a number of contracts in
the USA, the order book in our Global Robotics
business has strengthened and we expect an
improved performance in the current financial year.
We also see global opportunities, particularly in
Europe and Japan, over the short to medium term,
supporting our confidence in this business.
Following a very strong year for our Global
Technical Services business, with the award of two
significant MSIP® contracts, we expect a reduced
performance in the coming year owing to the
phasing of these multi-year projects. However,
in the medium term, the business has a strong
order book.
Our reorganised divisional structure provides
a better combined offering which is more
closely aligned to our customers and the markets
in which we operate, and the division is well
placed for further growth. We also continue
to consider acquisition opportunities that are
strategically aligned.
TIM DAVIES
Chief Executive Officer
20 November 2019
During the year we acquired Animax, expanding
our Supplements business, and NW Total, which
provides new opportunities, particularly in the
nuclear defence markets. Both businesses align
with our strategy to grow internationally in high
value, growing market sectors. We continue to
identify suitable value-enhancing acquisitions,
which complement our existing operations and
enable us to invest in technology and innovation.
Agriculture
In the context of a particularly challenging
market driven by unseasonal weather, in
marked contrast to the previous year, and
uncertainty created by Brexit, our Agriculture
division has delivered a robust performance.
During the year, revenue was down 0.6% to
£357.4m (2018: £359.6m). Adjusted operating
profit was up 1.6% to £13.6m (2018: £13.4m)
and reported operating profit was down 0.8%
to £12.9m (2018: £13.0m). This included the
contribution from Animax of £0.6m to adjusted
operating profit in its first year of trading.
Engineering
The Engineering division has seen another
strong financial performance. This has
been achieved alongside the delivery of
strategic objectives and supported by a new
organisational structure under the leadership
of the divisional Managing Director. The new
structure better aligns the division with our
customers and the markets in which we
operate, and the creation of a central divisional
management team brings closer collaboration
and improved business development.
During the year, revenue was up 6.7% to £46.5m
(2018: £43.6m). Adjusted operating profit was
up 30.6% to £5.3m (2018: £4.1m) and reported
operating profit was up 49.4% to £5.1m (2018:
£3.4m). This was led by improved performances
in UK Service and Manufacturing and Global
Technical Services offset by a weaker
performance in Global Robotics.
For further information on the performance
of our Agriculture and Engineering
divisions, see the divisional reviews on
pages 18 to 29.
Outlook
Agriculture
We remain confident in the medium-term
prospects of the UK Agriculture business.
In the short-term we continue to prepare for
Brexit given the ongoing uncertainty, which is
increasingly impacting farmer confidence and
delaying new investment decisions.
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New feed block plant
Tennessee, USA
This year was the first of full
production at our new low
moisture feed block plant in
Silver Springs, Tennessee.
The facility has increased
the geographic reach of our
unique range of feed block
products into cattle markets
across eastern and south
eastern states of the USA.
£18.9m
Group adjusted
operating profit
£403.9m
Group revenue
CARR'S GROUP PLC Annual report and accounts 2019
16
FINANCIAL REVIEW 2019
NEIL AUSTIN
Group Finance Director
STR NG
RESULTS
A robust performance in
Agriculture and further
improvements across
Engineering have
delivered a strong set of
results for the year.
3.8%
Agriculture adjusted operating margin
11.5%
Engineering adjusted operating margin
CARR'S GROUP PLC Annual report and accounts 2019
Current and Future Development and Performance
The key features of the year have been the robust performance in
Agriculture, given adverse weather conditions experienced in the UK and
USA, and further improvement in the performance in Engineering. The
results include 11 months of Animax, acquired in September 2018, and 2
months of NW Total, acquired in late June 2019.
Revenue
Reported revenues from continuing operations were £403.9m, 0.2% ahead of
last year (2018: £403.2m).
Alternative Performance Measures
This Financial Review and other parts of the strategic report include both
statutory and alternative performance measures (APMs). The principal
APMs measure profitability excluding amortisation of acquired intangibles
and items regarded by the Directors as non-recurring. In management’s
view, these APMs, which are generally referred to as ‘adjusted’ measures,
better reflect the underlying performance of the business. These ‘adjusted’
measures are used in the management and measurement of business
performance on a day-to-day basis and are also used in assessing
performance under the Group’s incentive plans. A glossary of APMs is
included towards the end of the report and accounts on page 134.
Operating Profit
Adjusted Group operating profit of £18.9m is up 8.4% on last year (2018:
£17.5m). As a percentage of revenues, the Group’s adjusted operating margin
is 4.7% compared to 4.3% in 2018. Reported operating profit was £17.2m
(2018: £16.4m).
These increases are principally due to a better contract mix in Engineering
together with the contributions from Animax and NW Total which helped
offset the impact of the weather in Agriculture.
Adjusted operating profits per division and as a percentage of divisional
revenues are as opposite:
17
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Adjusted Operating Profit
Agriculture
Engineering
Total
2019
%
3.8
11.5
2019
£m
13.6
5.3
18.9
2018
£m
13.4
4.1
17.5
2018
%
3.7
9.4
The Group’s share of the adjusted post-tax result in its associates
and joint ventures was £2.7m, compared to £3.2m in 2018. The result
reflected a fall in its associates’ profitability, driven by the adverse
winter conditions experienced in the UK, and an increase in joint
venture profitability, primarily driven by a strong full year performance
of the Group’s low moisture feed block facility in Tennessee.
Amortisation and Non-Recurring Items
The Group incurred £1.7m in respect of amortisation of acquired
intangibles and non-recurring items in the year. This included
acquisition costs of £0.5m, primarily related to the acquisitions of
Animax and NW Total. There was also a charge of £1.1m additional
pension costs relating to the equalisation of GMP, £0.3m of which
was in the Group’s associate, following the court case against Lloyds
as previously reported. Amortisation of acquired intangible assets
totalled £0.8m and restructuring and closure costs totalled £0.4m.
These changes were offset by a credit of £1.1m relating to adjustments
to contingent consideration, which reflects changes to estimates of
the amounts of contingent consideration payable primarily in relation
to the acquisitions of NuVision and Animax.
Finance Costs
Net finance costs of £0.9m were broadly similar to the prior year (2018:
£0.9m). Interest cover was 19.4 times based on reported profit (21.4
times on an underlying profit basis) compared to 18.2 times in 2018.
Profit Before Tax
Adjusted profit before tax at £18.0m was 9.0% higher than in the
previous year (2018: £16.6m). Reported profit before taxation was
£16.3m (2018: £15.5m).
Taxation
The Group’s effective tax charge on profit from activities after net
finance costs and excluding results from associates and joint ventures,
which are recorded after tax, was 19.3% (2018: 15.1%). A reconciliation of
the actual total tax charge to the standard rate of corporation tax in the
UK of 19% is given in note 8 to the financial statements. The prior year
benefited from a reduction in US tax rates.
Earnings Per Share
The profit attributable to the equity holders of the Company
amounted to £12.0m (2018: £11.9m), and basic earnings per share was
13.1p (2018: 13.0p), an increase of 0.8%.
Adjusted earnings per share of 14.6p (2018: 13.9p) is calculated by
dividing the adjusted profit attributable to equity holders for the year
by the weighted average number of shares in issue during the year.
The increase of 5% reflects the 9% growth in adjusted profit before
taxation partly offset by the higher effective tax rate in 2019.
Acquisitions
The Group has made two key acquisitions in the year.
Animax was acquired in September 2018 for a total potential cash
consideration of £8.5m, of which £6m was payable upfront with a
further amount of up to £2.5m to follow based on future financial
performance. The resulting excess consideration over tangible net
assets acquired of £4.8m was valued as £3.0m of acquired intangible
assets, predominantly intellectual property and brands, and £1.7m
of goodwill.
NW Total was acquired in June 2019 for a total potential cash
consideration of £9.6m, of which £6m was payable upfront with a
further amount of up to £3.6m to follow based on future financial
performance. The resulting excess consideration over tangible net
assets acquired of £9.8m was valued as £3.5m of acquired intangible
assets, predominantly customer relationships and brands, and £6.2m
of goodwill.
Further details on the acquisitions are given in note 30 to the financial
statements.
Cash Flow and Net Debt
A free cash flow of £8.9m was generated in the year, representing
a decrease of 6.2% on £9.5m in the previous year.
Headroom against existing facilities was £22.2m at the year end.
The Group’s main banking facilities were renewed in November 2018
for a five year period.
Cash flow and net debt
Operating profit
Depreciation and profit on disposal
Amortisation and impairment of goodwill
Associates and joint ventures
EBITDA (excluding associates and joint ventures)
Increase in working capital
Other
Net operating cash flow
Net interest
Taxation
Cash flow from continuing operations
Maintenance capex
Free cash flow
Expansionary capex
Acquisitions
Dividends received
Dividends paid
Loans, finance leases and financing costs
Other
Cash flows
Opening net debt
Closing net debt
2019
£’000
17,195
4,780
943
(2,377)
20,541
(5,001)
464
16,004
(1,098)
(2,306)
12,600
(3,670)
8,930
(2,111)
(10,707)
711
(4,761)
(1,766)
1,270
(8,434)
(15,359)
(23,793)
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 closed to future accrual. The scheme
currently has 84 deferred members and 227 current pensioners.
The valuation on an IAS 19 accounting basis showed a surplus before
the related deferred tax liability in the scheme at 31 August 2019 of
£7.8m (2018: £10.1m). This is after an actuarial loss of £1.8m (2018: gain
of £4.8m) which has been recognised in the Consolidated Statement
of Comprehensive Income.
The High Court ruling in the case of Lloyds Banking Group Pension
Trustees Ltd v Lloyds Bank plc in 2018 has led to an increase of £0.8m
being made to the scheme liabilities through the income statement
for past service costs.
NEIL AUSTIN
Group Finance Director
20 November 2019
CARR'S GROUP PLC Annual report and accounts 2019
18
DIVISIONAL REVIEW
AGRICULTURE
What we do
How we do it
The Group’s Agriculture division
manufactures and supplies feed blocks
and supplementation products for
livestock, distributes farm machinery,
and runs a UK network of rural stores,
providing a one-stop shop for the
farming community.
The Group’s Agriculture division
comprises two primary sub divisions:
Key brands
CRYSTALYX®
HORSLYX®
TRACESURE®
ALLSURE®
AMINOMAX®
SMARTLIC®
MEGALIC®
FLAXLIC®
FEED IN A DRUM®
CARRS BILLINGTON
WORKWARE
Geographic footprint
North America
UK and
Europe
New Zealand
CARR'S GROUP PLC Annual report and accounts 2019
UK Agriculture
We have a significant presence of over 40 country stores
across northern England and southern Scotland from
which we serve the needs of our core local farming
customer base providing a range of retail and animal
health products.
Our UK Agriculture business also supplies a broad range of
compound and blended feeds for livestock under a
number of well respected brands.
From a number of our retail sites we specialise in the
supply of farming machinery in the UK including all-terrain
vehicles, tractors and combine harvesters which we
distribute from seven sites.
The business also supplies
fuels across the region
from eight depots.
£296.3m
Revenues 2019
The Group’s Agriculture division
comprises two primary sub divisions:
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The value we create
£357.4m
Revenues
£13.6m
Adjusted operating
profit
17,000
UK farming customers
784
Employees globally
Agriculture revenues
UK
International
89.9%
10.1%
CARR'S GROUP PLC Annual report and accounts 2019
Supplements
We manufacture and supply a broad range of innovative
animal nutritional supplements under well-respected
brands. These include patent-protected feed blocks and
boluses which effectively release trace elements into
livestock consistently and over periods of up to six
months. These products help to maintain animal health
and improve performance.
Our feed blocks are manufactured at a variety of wholly-
owned and joint-venture facilities located across the UK,
Germany and the USA. We manufacture boluses from a
wholly owned facility in the UK.
These products are supplied through a large distribution
network across the UK, Europe, Middle East, New Zealand
and North America.
£61.1m
Revenues 2019
20
DIVISIONAL REVIEW
CONTINUED
The year in review
Performance against
group strategy
Supplements
Total global feed block sales volumes were
down 6.4% compared to last year.
Revenue by sub-division
UK Agriculture
Supplements
£296.3m
£61.1m
01
Build business value by
focusing on markets with
growth potential
• Acquisition of Animax
enhancing our range of
livestock supplements.
• Progress towards launch of
Pick Block product range.
02
Grow and diversify our
international footprint
• Continued international growth
with focus on Europe, USA and
New Zealand.
• Enhanced sales team across
Canada.
03
Differentiate ourselves
through innovation
and technology
• Improved manufacturing
efficiencies.
• Establishment of centre of
innovation excellence for the
division at Animax.
04
Lead in our chosen markets
• Added new Allsure® and
Tracesure® product ranges.
• Enhanced quality control in
Supplements business.
Following a strong first quarter for our USA
feed block business, short-term adverse
weather conditions impacted sales volumes
during the year. Consistently wet weather
conditions resulted in plentiful supplies of
forage during the year and more conservative
purchasing of supplements by farmers. As a
result, volumes including joint ventures were
down 2.5% on the prior year. In the medium-
term, we expect the widespread reduction in
drought to result in more land being available
for livestock grazing, which provides an
opportunity for us to increase feed block
volumes in the USA.
The impact from adverse weather conditions
on profitability in the USA during the year was
offset by two factors. Firstly, our low moisture
feed block plant in Shelbyville, Tennessee
delivered a strong performance during its first
full year of operation with volumes continuing
to grow. This facility has enabled us to expand
our geographic footprint and increase our sales
to customers across the eastern and south
eastern states of the USA. Secondly, we have
driven further efficiencies across the USA
business, improved procurement processes
and made significant improvements in
manufacturing efficiencies and quality control.
During the period we increased our presence
in the Canadian market, establishing
relationships with key distribution partners,
expanding our sales team and completing
key product registrations. This market can be
serviced out of our existing facility in Belle
Fourche, South Dakota.
UK feed blocks sales volumes were down
16.4% compared to the prior year, due to
unseasonably mild and dry weather
experienced during the period in marked
contrast to the same period last year. Despite
the challenging market conditions, we were
able to mitigate the financial impact of these
factors through improved efficiencies, strict
control of operating costs, including lower
central costs, and better procurement.
Feed block sales in our joint venture business
based in Germany, Crystalyx Products GmbH,
were impacted by similar weather conditions
to the UK, with volumes down 8.0% compared
to the prior year. During the period we made
further progress on our Pick Block plant in
Oldenburg, Germany, which will be fully
operational in calendar year 2020. This facility
produces products which improve poultry
welfare standards through environmental
enrichment, encouraging birds to demonstrate
a wider range of natural behaviours.
CARR'S GROUP PLC Annual report and accounts 2019
Our plans to grow our feed block business
internationally continue to progress with
emphasis on Europe, New Zealand and
North America where we see the greatest
potential for growth.
We have made significant strategic
progress since acquiring Animax Limited,
a manufacturer of trace element supplements
for livestock, in September 2018. As part of
the ongoing integration of the business, we
have strengthened the management team,
increased focus on new business development
and enhanced production efficiencies. A key
rationale for the acquisition was to bring
Animax’s research and development facility
into the Group. Through continued
integration, this facility will become a centre
of excellence in research and development
for the Group’s Supplements business.
UK Agriculture
Volumes in our feed and fuel businesses
declined during the period as a result of
the very mild weather reducing demand.
Consequently, total compound feed volumes
decreased by 10.0%, against a strong
comparative period last year. Similarly,
volumes in our fuel distribution business
were down 6.2% on last year. Effective
procurement and good forward positions
on raw materials has helped to mitigate the
negative impact on profitability of the weather.
Despite the unseasonal weather our network
of rural stores reported a 0.9% increase in
overall sales during the year, with like-for-like
sales increasing 2.1% owing to store
rationalisation following the acquisition of
Pearson Farm Supplies in October 2017.
In July 2019, we acquired Cumbria based Paul
Chuter Agricultural Services Ltd, a regional
supplier of all-terrain vehicles, which has
increased the range of specialist machinery
available to our core farming customers. The
business has been integrated into our country
store at Cockermouth, Cumbria, to maximise
footfall and levels of customer service.
Machinery revenues overall were down
2.8% against a record performance last year.
New machinery sales were, however, down
4.6% as ongoing Brexit negotiations continued
to impact farmer confidence.
As part of the Group’s orderly succession
planning, we appointed a new Managing
Director for the UK Agriculture business.
21
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Research and
development trials
underway across the
Group in 2019
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CASE STUDY:
Animax
In September 2018, the Group bolstered its position in animal
health through the acquisition of Animax. Based in Suffolk, UK,
the business has a strong focus on innovation and specialises in
the research, development and manufacture of highly effective
and patent-protected supplementation products for livestock.
As part of the Group’s integration strategy, Animax’s research
facility is being developed into a centre of excellence for product
development across the Agriculture division.
6
Leading product ranges acquired
CARR'S GROUP PLC Annual report and accounts 2019
22
STR ATEGY IN AC TION
G ROW TH THROUG H
INNOVATION
EXCELLENCE
Horslyx® Balancers are carefully formulated for
horses to balance the deficiencies in forage and
grazing.
Manufactured using the same patent protected
process as the Group’s Crystalyx® range of
products, Horslyx® Balancers ensure that horses
receive an ideal supply of vitamins, minerals
and trace elements to support optimum health
and vitality.
All Horslyx® products are NOPS and UFAS
accredited. Ingredients are fully traceable and
the Group’s manufacturing plant in Cumbria
maintains a minimal waste policy.
Carrying a well respected and market leading
brand, and with increased sales in the UK and
Europe in 2019, Horslyx® Balancers remain an
excellent range of products for the Group.
16%
Sales generated overseas
7
Product ranges
To find out more visit
www.horslyx.com
CARR'S GROUP PLC Annual report and accounts 2019
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Horslyx Balancers are made
using our innovative cooking
process and using the
highest quality ingredients.
They bring a range of
benefits and help ensure
that your horse remains in
optimum condition.
— Fiona Nellis
General Manager, Horslyx
CARR'S GROUP PLC Annual report and accounts 2019
24
DIVISIONAL REVIEW
ENG INEERING
What we do
How we do it
The Group’s Engineering division designs
and manufactures specialist precision
components, bespoke equipment,
robotic goods and remote handling
equipment, and provides technical
services, from five sites in the UK, one site
in Germany and, two sites in the USA.
These specialised products and services
are supplied to customers globally
including government bodies and some
of the world’s largest companies and
nuclear site operators.
Our brands
BENDALLS ENGINEERING
CHIRTON ENGINEERING
WÄLISCHMILLER ENGINEERING
HINDSBENDALLS
CARRSMSM
NUVISION ENGINEERING
NW TOTAL
Our global markets
We supply into highly regulated
markets including:
– Nuclear decommissioning
– Nuclear power generation
– Defence
– Pharmaceuticals
– Oil and gas
CARR'S GROUP PLC Annual report and accounts 2019
The Group’s Engineering division
comprises three sub divisions:
UK Service
and Manufacturing
We operate four facilities
across the north of England
which design, manufacture
and service complex and
bespoke equipment.
These facilities specialise in
equipment to be supplied
into regulated markets
including electro-mechanical
machinery, process
equipment packages,
pressure vessels and special
purpose fabrications. We also
supply a range of on-site
technical services through
teams of highly qualified
personnel.
Our businesses pride
themselves on their
reputation for quality and
service excellence which has
led to the establishment of
longstanding and trusted
customer relationships.
Global Robotics
Our Global Robotics
business comprises one
facility in the UK, one in
Germany and one in the
USA. These businesses
collectively design,
manufacture and supply a
broad range of complex
robotic and remote handling
equipment.
These highly innovative
products are delivered
predominantly into nuclear
markets and are designed to
withstand radioactive and
other challenging
environments.
Through sustained
investment in research and
development we ensure that
our Global Robotics business
remains at the forefront of
remote handling technology
and that our products
continue to provide
innovative solutions for our
global customer base.
The Group’s Engineering division
comprises three sub divisions:
Global Technical Services
From our two sites in the USA, we offer a range of
engineering applications and technical services which
provide innovative solutions across global nuclear
industries.
These services include our patent protected Mechanical
Stress Improvement Process (MSIP®), Power Fluidics™
technology and a range of decontamination services
which are supplied to utilities, OEMs and government
contractors worldwide.
Our Global Technical Services business focuses heavily
on research and development, and has been engaged by
governments to develop solutions to complex problems
affecting the nuclear industry.
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The value we create
£46.5m
Revenues
£5.3m
Adjusted operating
profit
410
Employees globally
Revenue by markets
Nuclear
Oil and gas
Defence
Other
70%
20%
3%
7%
CARR'S GROUP PLC Annual report and accounts 2019
26
DIVISIONAL REVIEW
CO N TI N U ED
The year in review
UK Service and Manufacturing
Our UK Service and Manufacturing business
performed well during the year, generating
revenues of £23.0m (2018: £18.4m).
The business was able to successfully
deliver a range of projects into the nuclear
market, including the significant contract
announced in July 2017 which is now
nearing completion. We also delivered a
strong performance in oil and gas markets,
building on momentum established last
year. The new management team has
overseen significant improvements in
business development, resulting in a more
effective approach to tender opportunities,
an increased conversion rate and a
strengthened order book.
In June 2019 we acquired NW Total
Engineered Solutions Limited, a service
and manufacturing company providing
value added solutions to the nuclear
defence, nuclear decommissioning,
nuclear power generation and other highly
regulated markets. Integration has
commenced, and the business has
performed well in its initial period of
ownership. The acquisition comes at a time
of significant opportunity in nuclear
defence, such as the £31 billion UK
Dreadnought submarine programme
which is expected to continue into the
longer term.
Global Robotics
As anticipated, our Global Robotics
business experienced lower levels of
activity during the year due to project
phasing, delivering revenues for the
financial year totalling £14.4m (2018:
£19.5m). The order book has improved, as
expected, during the year and we continue
to have confidence in the medium term.
The year was also one of strategic
progress, securing a number of contracts
to supply robotics equipment into the USA
including a major project to supply $8.5m
of equipment. Part of the strategic
rationale for the acquisition of NuVision
was to lever its strong foothold in the USA
nuclear sector.
Performance against
group strategy
01
Build business value by
focusing on markets with
growth potential
• Acquisition of NW Total brings
opportunities in defence.
• Strong order books across
nuclear and oil and gas
markets.
02
Grow and diversify our
international footprint
• Significant contract wins for
Global Robotics in USA.
• Significant MSIP® contracts
secured in Global Technical
Services.
03
Differentiate ourselves
through innovation
and technology
• Cross-divisional innovation
group established.
• $3m funding secured for
development of passive cooling
technology.
04
Lead in our chosen markets
• New structure for division to
align products and services
with markets.
• Enhanced efficiencies and
customer focus across division.
Revenue by sub-division
UK Service and
Manufacturing
Global Robotics
Global Technical
Services
49.5%
36.7%
13.8%
Revenue by location
UK
Germany
USA
54.7%
25.8%
19.5%
CARR'S GROUP PLC Annual report and accounts 2019
Establishing a Global Robotics business,
incorporating all of the remote handling
and robotics equipment previously
supplied by CarrsMSM, Wälischmiller, and
NuVision, has allowed us to bring together
IP and knowhow from across the Group,
positioning the business for further
product development and global growth.
As previously reported, the level of global
opportunities, particularly in the USA,
Europe and Japan, is increasing which
provides confidence in both the short and
longer term for this division.
Global Technical Services
Our Global Technical Services business
had a very strong year, generating
revenues of £9.1m (2018: £5.7m).
This business has a very strong order book
and opportunity pipeline, following the
award of a number of previously
announced contracts, including two
significant Mechanical Stress Improvement
Process (MSIP®) contracts, which will
mainly benefit the 2020/21 financial year.
Following the award of significant funding
from the US Department of Energy to
develop our passive cooling technology,
work has commenced on this project
and is progressing well. This technology
has the potential to be retrofitted on
existing nuclear power plants in order to
improve safety.
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CASE STUDY:
Passive Cooling Technology
In 2019, our Global Technical Services business was awarded
funding of up to $3m by the US Department of Energy towards the
development of its Passive Cooling technology in conjunction with
its strategic partner, DYNAC Systems LLC.
Passive Cooling represents an engineered solution designed to
reduce the risks associated with a loss in power at a nuclear
facility. The system operates independently of an electrical power
source and acts to redirect decay heat from a reactor core,
significantly reducing the risk of catastrophic incident.
$3m
Funding secured from US Department of Energy
CARR'S GROUP PLC Annual report and accounts 2019
28
STR ATEGY IN AC TION
G ROWING OUR
INTERNATIONAL
FOOTPRINT
The acquisition of NuVision Engineering, Inc. in
August 2017 provided the Group with a strong
foothold into nuclear markets in the USA and
represented an opportunity to market the
Group’s existing range of remote handling
equipment in North America.
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Since the acquisition, the Engineering division
has successfully developed a Global Robotics
business; combining the wealth of technology
and skills within its businesses with remote
handling capabilities: Wälischmiller, CarrsMSM
and NuVision. The initiative was designed to
enhance innovation in remote handling and best
develop opportunities to supply products into
the USA and globally.
In January 2019, the Group was pleased to
announce that the Engineering division had
secured its first contracts to supply
Wälischmiller products into the USA as part of
this initiative, including one major contract to
manufacture a bespoke double-arm TELBOT®
at a total value of $8.5m. This success
represents a significant strategic milestone for
the Group and provides the new Global
Robotics division with a strong platform from
which it can continue to grow.
$8.5m
Significant contract win
10
Robotics product ranges
To find out more visit
www.carrsengineering.com
CARR'S GROUP PLC Annual report and accounts 2019
CARR'S GROUP PLC Annual report and accounts 2019
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This success represents a
significant strategic
milestone for the Group and
provides the new Global
Robotics division with a
strong platform from which
it can continue to grow.
— Graham Hartley
Managing Director, Engineering Division
CARR'S GROUP PLC Annual report and accounts 2019
CARR'S GROUP PLC Annual report and accounts 2019
30
RISK MANAGEMENT
Our success as a Group depends upon our 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.
Our risk appetite and approach to
risk management
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.
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.
Our available capital and resources are
applied to underpin our strategy in
accordance with our business model.
The Board believes that in operating
the Group’s businesses it is critical to
strike the right balance between an
appropriate and comprehensive
control environment and encouraging
entrepreneurial behaviours required to
seek out and develop the business.
However well this is struck, the business
will always be subject to a number of
risks and uncertainties. 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.
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.
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 reviews 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 46 to 48. 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 significant 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.
CARR'S GROUP PLC Annual report and accounts 2019
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Change in risk:
Increase
No change
Decrease
Key risks
Risk
Brexit
Risk versus prior year
Description of the risk
What we are doing to manage the risk
The UK’s impending exit from the European Union
(EU) highlights a number of risks for the Group.
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 Agriculture businesses.
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,
together with any issues relating to availability of raw
materials, could impact the cost base of the Group or
its ability to service customers.
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 in the
Brexit process and incorporate steps into our future
business planning where these might be required
in order to mitigate any potentially adverse
consequences including any arising through changes
to agricultural subsidies and support or the imposition
of any tariffs.
IT and
Cyber-Security
Risk versus prior year
The Group relies on information technology and
key systems to support the business. In common
with other organisations, the Group undertakes
development of its IT systems and is susceptible
to cyber-attacks with the risk of financial loss and
threat to the overall confidentiality and availability
of data in systems.
Acquisitions
Risk versus prior year
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.
Managing Costs
Risk versus prior year
Margins may be affected by fluctuations in raw
material 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.
Reliance on Key
Customers
Risk versus prior year
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.
The Group has a comprehensive suite of IT security
solutions in place, which are reviewed and tested by
specialist third parties where appropriate. These have
been further updated and improved during the course
of 2018/19.
From a system development perspective,
major projects are subject to appropriate project
governance arrangements.
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.
Post-acquisition reviews are also undertaken to identify
any areas for improvement in future transactions.
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; and
• close monitoring of contract execution to ensure
supply is within agreed terms.
The businesses have established good long term
relationships with key customers to ensure that
demands and expectations are met. The Group
continues to invest 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.
CARR'S GROUP PLC Annual report and accounts 2019
32
RISK MANAGEMENT
CONTINUED
Key risks continued
Risk
People
Risk versus prior year
Description of the risk
What we are doing to manage the risk
The knowledge, experience and skills of our
employees are central to the success of the Group.
We must attract, integrate, and retain the talent
required to fulfil our strategic growth ambitions.
Inability to retain key knowledge and adequately plan
for succession could have a negative impact on the
Group’s performance.
The Group has remuneration policies designed to
attract and retain 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 Nomination Committee regularly.
The Group undertakes a range of employee
engagement initiatives with a view to maintaining
positive workplace cultures and good working
environments.
Strategic
Partners
Risk versus prior year
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 is 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.
Customer
Demand
Risk versus prior year
Changes in customer demand, be that retail,
commercial or government 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.
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.
Treasury
We are exposed to a variety of financial risks in
relation to treasury.
Risk versus prior year
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 must ensure that it has an adequate level
of facilities to provide sufficient funding to operate its
businesses and to develop growth opportunities.
The Group operates a treasury policy of hedging all
significant transactional currency exposures.
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
and joint ventures.
For interest rate risk on floating rate debt, we maintain
a mix of fixed rate debt, primarily finance leases, and
floating rate debt. These levels are monitored and
assessed against forecast changes in interest rates
and forward guidance from interest rate setting
authorities.
Business
Continuity
Risk versus prior year
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.
CARR'S GROUP PLC Annual report and accounts 2019
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VIABILIT Y STATEMENT
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 cashflows associated
with the risks highlighted above, with consumer demand
affecting all business units and additional impacts on
Agriculture business units from commodity costs, and from
strategic partners; and
• Interest costs increasing by a factor of two.
Particular attention was paid to potential uncertainties arising
from Brexit.
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.
The Group’s main banking facilities were renewed in November
2018 for a five year period. As this covers a period beyond the
three years of the viability assessment the inability to renew these
facilities has not been included in the stress testing scenarios.
Other facilities with renewal dates, or notice periods, of 12 months
or less have been assumed to be renewed on the same terms in
the three year financial forecasts.
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 2022.
The Directors also considered it appropriate to prepare the
financial statements on the going concern basis, as explained in
the Basis of accounting and going concern paragraphs in the
principal accounting policies on pages 85 to 92 of the accounts.
The Group’s business model and strategy are central to an
understanding of its prospects, and details can be found on
pages 8 to 13. The Group is very diverse, both operationally and
geographically. The Group set down a strategic plan a number of
years ago, which is subject to ongoing monitoring and
development as described below.
The Group’s focus is particularly on developing its Supplements
business, because of the opportunities for international expansion
and product development, and its Engineering business in
nuclear sectors because of the global expansion opportunities in
these and adjacent markets.
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 May 2019 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 business cycles in both Agriculture and
Engineering, it was decided that a period of three years to
31 August 2022 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 2022, 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 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 30 to 32. 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:
1. Brexit;
2. Managing costs;
3. Reliance on key customers;
4. Strategic partners;
5. Customer demand; and
6. Treasury.
It was determined that none of these individual risks would, in
isolation, compromise the Group’s viability.
CARR'S GROUP PLC Annual report and accounts 2019
34
CORPOR ATE RESPONSIBILIT Y
Stakeholders
The Group has a broad range of stakeholders with whom we
engage to provide information about developments across
our businesses and to understand stakeholder priorities and
perspectives. We adopt a number of initiatives which focus
on ensuring that a regular dialogue is maintained with our
stakeholders, some of which are carried out directly by the
Board whereas others are built into day-to-day management
across the Group.
Employees
Our people are central to our continuing success. For information on
how we engage with our employees, please see page 35 opposite.
Customers
We have a diverse range of customers across the Group. Our
businesses regularly engage with customers to understand
issues affecting them or their broader industry. Key customers
regularly attend meetings with executives and, from time to time,
are invited to take part in discussions with the Board. Reports
from key meetings with executives are given to the Board.
Strategic Partners
The Group includes a number of joint ventures with strategic
partners with whom an active dialogue is maintained. Regular
meetings take place with joint venture partners covering strategic,
operational and industry issues.
Investors
Community
We have a programme of announcements, presentations and
other events for shareholders and prospective investors
throughout the year. Each year, our preliminary results are
released in November and our interim results are released in
April. Each set of results is followed by an investor roadshow
which takes place in London and copies of presentations
delivered can be found on the Company’s website. In January,
in conjunction with our AGM, and in July each year we release
trading updates to investors.
In July 2019 we arranged a capital markets day at our
Wälischmiller site in Markdorf, Germany which provided
engagement with local management and demonstrations of
some of our robotics products. Throughout the year, the Chief
Executive and Group Finance Director regularly meet institutional
investors to discuss the Group’s strategy and market perceptions.
Board members and the Company Secretary also regularly
engage with investors to discuss governance issues arising from
time to time. At the last AGM in January 2019, all resolutions were
passed with proxy votes of at least 92.7% in favour.
The Board sets time aside during its meetings to discuss
feedback from shareholders, including that gathered by our
brokers and advisers. This allows all Directors to understand
major shareholders’ views which can inform Board decisions.
The Group seeks to encourage responsible behaviours at all
times and is committed to the communities in which it operates.
Details of some of the key community focused initiatives carried
out by Carr’s Group employees throughout the year are detailed
on page 37.
People
People are fundamental to the delivery of our strategy and
the long-term success of the Group. Continuing to identify
talent and develop our people remain key priorities across all of
our businesses.
We promote high levels of teamwork and co-operation and
consider these to be major contributing factors in the Group’s
success. Our organisational culture is led from the top-down and
places great value in the principles of trust, respect, and integrity.
We remain committed to providing a working environment that:
• is consistent and fair;
• is diverse and free from discrimination;
• encourages the development of skills; and
• supports employee engagement.
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Employee Engagement
We strive to ensure that employees across the Group are kept
informed about key developments and business performance.
This is achieved through the issue of regular briefing notes by the
Executive Directors and senior management which are circulated
regularly. Management within the Group are also kept informed
on issues that may affect employees which enables effective,
transparent communication and consultation where appropriate.
In 2018 we launched “Carr’sConnect”, an employee intranet for
the Group. Carr’sConnect provides an excellent platform for
communicating with our people more easily. The service not only
ensures that our employees are aware of developments across
the Group, but it also provides access to up to date resources.
We also ensure that our people are listened to. During the year
we formalised our approach to employee engagement,
appointing Non-Executive Director Alistair Wannop as the Board’s
representative for overseeing effective engagement with
personnel across the Group. Executive visits to site locations now
involve time being devoted to open employee discussion
sessions without management present. Feedback from visits to
date has been valuable in guiding management decisions. The
Board also attend regular site visits collectively each year during
which discussions take place with members of staff. Management
also engage with employees during training and induction
sessions which involve large numbers of staff annually.
Sharesave
The Group operates a Sharesave scheme, in which all UK-based
employees are entitled to participate. The Group recognises that
the scheme is a well-established method of employee
engagement, facilitating ownership across the Group.
Diversity and 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 the needs of the business
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
which values the benefits of diversity.
We remain committed to maintaining open, fair and non-
discriminatory recruitment and development processes across
the Group. We promote flexible working where possible and seek
to have full engagement in order to support any employee who
becomes disabled during their employment.
The Group is committed to continuing development and now
offers a broad range of courses and seminars which are delivered
in-house. The financial year ended 31 August 2019 saw record
numbers of people attending courses with 722 employee days’ of
training delivered. We also support a range of individuals across
the Group working towards professional qualifications or
accreditation.
Where high performing individuals are identified, we offer
Management and Leadership Development Programmes which
are designed to foster leadership skills and ensure that a pipeline
of talented individuals is developed from within.
In line with the Group’s focus on continuous health and safety
improvements, we have seen a significant increase in health and
safety training at all levels. We expect to see a continuation of this
trend over the next 12 months.
During 2019, we were pleased to introduce a new E-Learning
platform to complement our current range of classroom-based
courses. This is now available to all employees and provides a
large number of courses on a range of topics including health and
safety, business and leadership skills. The platform enables
convenient access to interactive training modules and allows
employees to track their own progress. It maximises our ability to
develop our people in a manner which is flexible, cost effective
and environmentally friendly. We will continue to develop our
E-Learning platform, which represents a significant development
in the training available to our people.
Anti Bribery and Corruption
Carr’s operates its businesses in a culture of honesty and
openness. The Group takes a very firm stance against unethical
behaviours including bribery and corruption which are prevented
through a robust framework of controls, including standardised
policies and transparent practices, which every employee is
made aware of and which are subject to regular review. The
Group’s policies require the regular declaration by all personnel
of gifts and hospitality and provide a whilstleblowing line which is
available to all for the reporting of concerns.
Human Rights
Carr’s is committed to the sustainable development of its
business and to improvement in its management of socio-ethical
issues, including ensuring that its business and its supply chains
remain free of modern slavery and human trafficking. Whilst the
risk of modern slavery and human trafficking within the Group
and its supply chains is assessed as low, Carr’s remains vigilant
and is aware that the risk of modern slavery appearing in supply
chains can increase, particularly as the Group continues to grow.
Carr’s will not deal with any third parties where concerns arise
and will accordingly report such circumstances to appropriate
authorities.
Year Overview 2019
We continue to provide extensive development opportunities for
all employees. Our standard induction programme is now
well-established and provides an excellent introduction to the
Group for all new starters, including employees of acquired
businesses as part of our integration process.
The Group operates internal policies which are supported by
training on the issue of modern slavery which both protect
against risks and promote awareness. A whistleblowing line is
also available for the reporting of concerns. We also carry out
appropriate due diligence on supply chains and engage with
suppliers in relation to their policies on tackling slavery and
human trafficking.
CARR'S GROUP PLC Annual report and accounts 2019
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CORPOR ATE RESPONSIBILIT Y
CONTINUED
Health & Safety
The diversity of businesses within the Group presents a broad
range of potential hazards, from slips and trips in an office,
machinery hazards and heavy lifting in engineering workshops,
manual handling and transport safety around members of the
public in retail branches, to the safe handling and storage of
component ingredients at manufacturing locations.
Environment
The Group remains committed to protecting the environment
and reducing the impact of its businesses through best practice.
We have an Environmental Committee which includes senior
members of management from across the Group and which
meets regularly to consider energy consumption, waste, and
opportunities including initiatives to make improvements.
Due to the varied risk profiles across the Group, safety
management systems are operated within the individual
businesses, and those who are accredited to internationally
recognised standards such as OHSAS1 18001 have succeeded in
retaining these during the year.
An updated Group Health and Safety Policy has been issued,
outlining the arrangements in place for ensuring that health and
safety standards are maintained. It is the responsibility of
individual business leaders to ensure that their organisations
comply with the policy.
During the year we adopted a new Group Environmental Policy
which makes subsidiary businesses and their leaders responsible
for making environmental improvements. Across the Group we
monitor energy consumption, carbon generation, water utilisation,
waste generation, recycling and transport fuel consumption.
We also monitor changes to legislation and best practice.
The Group’s second Energy Savings Opportunity Scheme audit
was carried out during the year. The recommendations from that
audit will be considered by the Environmental Committee in the
current year and any appropriate actions implemented.
The training programme continues, with IOSH2 accredited courses
being provided, and an E-Learning programme having been
launched to provide a blended approach for staff. A new Group
wide occupational health service is to be put into place to
increase the visibility and quality of service delivery.
Reported Incidents
Group
All injuries
RIDDOR3 injuries
All injuries average IFR
RIDDOR average IFR
2018
– 2019
2017
– 2018
78
5
522
20
56
4
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During the year, we have taken steps to increase safety
awareness across the Group which has resulted in greater
numbers of incidents being reported.
We have also adopted a practice of monitoring incident
frequency rates (IFRs) which enables incident numbers to be
reviewed consistently taking headcount changes into account.
IFRs are calculated on the basis adopted by the Health and Safety
Executive being number of incidents/headcount multiplied by a
factor of 100,000.
Over the last 12 months, an increase in IFRs has been seen, again
reflective of improved reporting, with a 12 month all injuries
average from September 2018 to August 2019 of 522, and RIDDOR
injuries of 20. This will continue to be calculated and monitored
within each business, division and across the Group into the next
financial year.
The Group remains fully committed to preventing accidents and
ill health, and will continue to strive to find new ways to enhance
safety standards, increase awareness and continually drive
a strong safety culture.
1
2
3
Occupational Health and Safety Assessment Series
Institute of Occupational Safety & Health
Reporting of Injuries, Diseases and Dangerous Occurrences Regulations
CARR'S GROUP PLC Annual report and accounts 2019
Our energy-intensive UK feed blocks business continues to benefit
under its Climate Change Discount Agreement having met its
carbon emission reduction targets during the year.
During the summer of 2019, we were delighted to install solar
panels on the roofspace at our Animax site in Suffolk, which will
meet the electrical requirements of the business going forwards
in an environmentally friendly way. We are currently considering
the viability of similar installations at other Group locations. We
have also taken similar steps to improve efficiencies such as the
installation of LED lighting at appropriate sites.
All UK Group locations purchase their energy from Haven Power
Limited which sources over 93% of its electricity supplies from
renewable resources4.
Packaging
The impact of packaging on the environment has come under
significant focus during the year. We recognise the challenges
posed by certain packaging types, single use plastics in
particular, and have formed a working group to look at alternative
packaging materials, considering how they can be practically
utilised. This work will take the output from materials research
being conducted in the UK and the USA and from customer-
facing trials.
Carbon Reduction Performance
CO2 tonnes
Agriculture, UK
Agriculture, overseas
Engineering, UK
Engineering, overseas
Head Office
Transport5
Group total
2018
– 2019
4,613
6,269
581
244
77
-
11,784
2017
– 2018
2,406
7,924
996
476
55
3,246
15,1036
The carbon reduction data has been reported in accordance with
environmental reporting guidelines including the Streamlined
Energy & Carbon guidance updated and re-issued in March 2019.
4
5
6
Haven Power Limited Annual Disclosure Statement 2019
Transport figures for 2018/19 have been included in the divisional splits
above
Reported incorrectly at 18,806 in 2017/18 owing to the incorrect reporting of
11,637 tonnes under Agriculture, overseas
37
For a fourth consecutive year, Carrs Billington is supporting
WellChild, the national charity for seriously ill children. The
business has so far donated over £30,000 through fundraising
and from the proceeds of purple wrap and netting, and from the
fundraising activities of its staff. Carrs Billington raises awareness
through its competition and social media campaign which
encourage customers to share pictures of eye-catching purple
hay bale displays.
Carr’s also continues to support Carlisle Youth Zone, which
provides a safe and fun environment designed to support the
social, recreational and emotional development of young people
in the area.
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The Group did not generate any additional gases other than
carbon dioxide during the year.
Data for Animax and Paul Chuter Agricultural Services, acquired
during the year, has been included. Data for Head Office has
shown an increase due to the inclusion of all company mileage.
The total amount of carbon dioxide generated across the Group
for the year was 11,784 tonnes, a significant reduction on the prior
year. The relative carbon footprint of the Group therefore equates
to 29.2 tonnes per £m turnover. By comparison the footprint for
the previous years was 37.5 tonnes per £m turnover. This equates
to an overall reduction of 22%.
Social Engagement
Carr’s takes an active role in supporting the communities in which
it operates. That support takes a variety of forms including
charitable monetary donations, fundraising, partnering initiatives
and voluntary work.
In 2019, Carr’s partnered with Yorkshire Dales Millennium Trust in
a three-year initiative to create a lasting legacy for agriculture in
the Yorkshire Dales and surrounding areas. The programme will
provide support for people, innovation and the environment to
deliver sustainable farm improvements. It will also see the
creation of new native broadleaf woodlands, which are not only
hugely valuable habitats for wildlife but also provide areas of
shelter for farm animals and help with flood risks and soil erosion.
Non-Financial Statement
Reporting requirement
Group policies and standards
Environmental matters
Environmental Policy
Additional information
See pages 36-37
Employees
Human rights
Employee Handbook, Health and Safety Policy
See pages 34-35
Employee Handbook, Modern Slavery Statement
and Policy
Social matters
Charitable Donations Policy
Anti-corruption and anti-bribery
Anti-Bribery Policy
See page 35
See page 37
See page 35
Policy implementation and due
diligence
Employee Handbook, financial and other controls
and internal due diligence/integration processes
See our Strategic Report on pages 1-37
Description of principal risks and
impact on business activity
Description of the business model
-
-
See pages 30-32
See pages 8-9
Non-financial key performance
indicators
Environmental Policy, Health and Safety Policy,
Employee Handbook
See our Strategic Report on pages 1-37
This Strategic Report was approved by the Board on 20 November 2019 and signed on its behalf by:
TIM DAVIES
Chief Executive Officer
CARR'S GROUP PLC Annual report and accounts 2019
38
BOARD OF DIRECTORS
Chris Holmes
Non-Executive 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 is currently Chairman of Carlisle Youth
Zone, having been appointed in 2013. Chris will be standing down as
Non-Executive Chairman and from the Board at the conclusion of the
Company’s AGM in January 2020.
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 was a Director of the Agricultural Industries
Confederation between 2003-2016.
N
—
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.
John Worby
Senior Independent Director
John was appointed a Non-Executive Director in April 2015. John is
currently Senior Independent Director and Chairman of the Audit
Committee of Hilton Food Group plc. He was previously the Finance
Director of Genus plc and a Non-Executive Director of Cranswick plc and
Fidessa Group plc. John is a chartered accountant and a member of the
Financial Reporting Review Panel.
—
N
R
A
CARR'S GROUP PLC Annual report and accounts 2019
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39
Committee membership
N
R
Nomination
A
Audit
—
None
Remuneration
Chairman
Alistair Wannop
Non-Executive Director
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 and
between 2017-2018 held office as High Sheriff of Cumbria. In 2019,
Alistair was appointed as the Board’s Non-Executive Director for Employee
Engagement.
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 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 and Chief Executive of Cumbria County
Holdings Ltd.
N
R
A
N
R
A
Peter Page
Non-Executive Director and Chairman Designate
Peter was appointed a Non-Executive Director in November 2019. Peter
will take over as Non-Executive Chairman upon Chris Holmes standing
down from the Board at the Company’s AGM in January 2020. Peter was
previously Chief Executive Officer of Devro plc, a position he held for
11 years until 2018, and brings to the Board his extensive international
experience and knowledge of agriculture sectors.
Matthew Ratcliffe
Company Secretary and Legal Counsel
Matthew joined Carr’s in November 2016 as Company Secretary and Legal
Counsel. Matthew is a solicitor with a breadth of experience working
alongside both international and local businesses in corporate,
commercial and contentious matters. He began his career with Pinsent
Masons before joining a Cumbrian law firm in 2009 and being appointed a
Director in 2014.
N
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CARR'S GROUP PLC Annual report and accounts 2019
40
CORPOR ATE GOVERNANCE REPORT
In readiness for the 2018 Code, the Board
has formalised its processes for engaging
with our growing workforce, with Alistair
Wannop taking on the role of Board
Representative for Employment
Engagement. The Board has also revisited
the Group’s policy on diversity and
inclusion, as we strive to ensure that
there is an appropriate balance of skills
and backgrounds both at Board level
and within management teams across
the Group.
Good governance is central to the integrity,
reputation and performance of the Group.
As best practice continues to develop, the
Board remains committed to maintaining
its high standards.
CHRIS HOLMES DL
Chairman
20 November 2019
Overview
The Group’s governance framework is
designed to safeguard its long-term
success for the benefit of shareholders
and other stakeholders. It continues to
evolve as the Group develops and
promotes transparency, respect and
accountability. It ensures that the Board
can operate in a culture of openness
which, coupled with its wealth of expertise
and the collaborative attitude which
permeates the Group, optimises its
effectiveness.
This report describes how the Group
adopts the principles of the UK Corporate
Governance Code 2016, which applied
to the Group in the financial year ended
31 August 2019, and I am pleased to
report that the Group remained in full
compliance throughout.
In this report we also describe the steps
that have been taken so far in order to
align the Group’s governance framework
with the Corporate Governance Code 2018.
The 2018 Code applies to the Group for
the financial year ending 2020 and will be
reported on fully in our Annual Report and
Accounts next year.
Given the new rules on Chairman tenure
set out in the 2018 Code, we announced in
December 2018 that I would be standing
down as Non-Executive Chairman, and
from the Board, at the conclusion of the
forthcoming AGM in January 2020. I am
delighted that the Board has been able to
appoint Peter Page to take on the role
when I step down, and I wish him well in
leading the Group as it continues to grow.
CHRIS HOLMES
Chairman
Dear Shareholder
On behalf of the
Board, I am pleased to
present our Corporate
Governance report for
the financial year
ended 31 August 2019.
Corporate Governance
Highlights
• Appointment of Alistair Wannop as
the Group’s Non-Executive Director
for Employee Engagement.
• Appointment of Peter Page as
Non-Executive Director and
Chairman Designate.
• KPMG’s first year as external
auditor to the Group following
appointment at January 2019 AGM.
• Alignment of the Group’s
governance framework with
the new Corporate Governance
Code 2018.
CARR'S GROUP PLC Annual report and accounts 2019
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Statement of Compliance with the UK Corporate Governance Code
The UK Corporate Governance Code 2016 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 explain any areas where compliance has not
been possible during the year.
The Board considers that the Company has, during the year ended 31 August 2019, complied with the requirements of the Code in
their entirety.
The Board
The Directors have a collective duty to promote the long term success of the Group 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 into six key areas as outlined below. A portion of their time is also spent on administrative matters.
Strategy
Risk
Governance
Setting strategic aims and objectives.
Setting organisational cultures and
behaviours.
Reviewing new business developments
and opportunities including potential
acquisitions.
Investing in research and technology.
Oversight of the Group’s risk and internal
control framework.
Compliance with legal, regulatory and
disclosure requirements.
Consideration of feedback from external
and internal audit.
Determination of matters reserved for the
Board and terms of reference for Board
Committees.
Board and Committee performance
evaluation.
Succession planning and Board
appointments.
Finance
Approving budgets.
Monitoring financial performance.
Stakeholder engagement
Health, Safety and Environmental
Engagement with employees,
shareholders and other stakeholders and
consideration of feedback.
Consideration of Health, Safety and
Environmental reports from management.
Oversight of the preparation and
management of the financial statements.
Approval of public announcements.
Providing support where appropriate to
drive continuous improvement.
Consideration of feedback from investor
meetings and roadshows.
Approving major capital projects or
materially significant contracts.
Determining dividend policy.
Determining pensions strategy.
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 31 August 2019, the Board comprised of two Executive Directors, a Non-Executive Chairman, and three Non-
Executive Directors. There is a Company Secretary to the Board. The biographies of the Board can be found on pages 38 to 39.
Subsequent to the year end, Peter Page was appointed to the Board as Non-Executive Director and Chairman Designate.
CARR'S GROUP PLC Annual report and accounts 2019
42
CORPOR ATE GOVERNANCE REPORT
CONTINUED
The Board met on 12 scheduled occasions throughout the year. In
addition to regular scheduled meetings, a number of conference
calls took place during the year in order to deal with specific
business arising. Board agendas are set by the Chairman in
consultation with the Executive Directors and with the assistance
of the Company Secretary. All Directors are expected to attend
scheduled Board meetings and relevant Committee meetings in
addition to the Annual General Meeting unless they are prevented
from doing so by prior work or extenuating personal
commitments. 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.
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 maintains a schedule of matters
reserved for the Board which is reviewed against best practice. A
summary of those matters is set out 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
•
The Chairman is responsible for:
• providing effective leadership of the Board;
• promoting ethical behaviours and high standards of corporate
governance;
• ensuring the effectiveness of the Board in determining and
developing strategy, and in fulfilling its responsibilities;
• setting the Board agenda;
• ensuring that members of the Board are well informed to
enable the Board to make sound and effective decisions and
ensure constructive discussion;
• ensuring effective communication with shareholders and other
•
stakeholders;
identifying and meeting (in conjunction with the Company
Secretary) the developments needs of the Board and for each
Director; and
• providing strategic insight and a sounding board for the Chief
Executive on key business decisions, and challenging
proposals where appropriate.
The Chief Executive is responsible for:
•
the executive management of the Group’s business, to deliver
the strategy and commercial objectives agreed by the Board;
researching and proposing the Group’s strategy and
commercial objectives, which are developed in conjunction
with the Chairman;
management;
• approval of budgets;
• general treasury policy;
• major capital expenditure projects;
• dividend policy; and
• monitoring the Group’s profit and cash flow performance.
• effecting the decisions of the Board and its Committees;
• maintaining and protecting the reputations of the Group and its
subsidiaries;
• establishing an annual budget consistent with the agreed
strategy to be agreed by the Board;
• managing the performance of the Group against the agreed
The Board has delegated authority to the Audit, Remuneration,
and Nomination Committees to carry out certain tasks as defined
in their written terms of reference approved by the Board; these
are also available on the Company’s website.
The Code stipulates that there should be a clear division of
responsibility between Board governance and executive
management.
budget;
• ensuring that dialogue is maintained with the Chairman on
important issues facing the Group;
• providing information and advice on succession planning to
the Board, and managing executive succession planning;
• providing information and advice to the Board on health, safety
and environmental issues and overseeing the Group’s strategy
on such matters; and
• setting the Group’s culture, values and behaviours and
conducting the affairs of the Group adhering to the highest
standards of integrity and good governance.
Elections
The Company’s Articles of Association provide that one third of
the Directors retire by rotation each year at the Annual General
Meeting. The Board consider it best practice however to require
all Directors to retire and stand for re-election annually.
CARR'S GROUP PLC Annual report and accounts 2019
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Attendance and Agenda
In advance of all Board meetings the Directors are supplied with detailed and comprehensive papers covering the Group’s strategy,
performance and operations. Members of the executive management team 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 scheduled meetings of, and members’ attendance at, the Board and the Audit, Remuneration and Nomination
Committees during the period are set out in the table below.
Meeting Attendance
No. of meetings
Chris Holmes
Tim Davies
Neil Austin
Alistair Wannop
John Worby
Ian Wood
* Attended meeting in full or part by invitation
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 across the Group 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
Audit
Committee
Remuneration
Committee
Nomination
Committee
12
12
12
12
12
12
12
3
3*
3*
3*
3
3
3
6
6*
N/A
N/A
6
6
6
5
5
5*
5*
5
5
5
Board Evaluation
Each year the Board undertakes a review of its effectiveness.
The Board last undertook an independent external review in 2017,
which was conducted by Independent Audit Limited. That review
covered the whole Board, together with its Audit, Nomination and
Remuneration Committees which were each considered
separately. Particular focus was given to the effectiveness and
appropriateness of the composition of the Board and of the
Committees. Scrutiny was also applied to the question of the
continued independence of Non-Executive Directors. The
external review drew positive conclusions including that the
Board and its Committees were performing effectively and were
appropriately constituted. The report went on to make certain
further recommendations including the planning of agendas to
include further business-specific reviews and increasing the
focus on succession planning and people issues more generally.
The 2017 external review was supplemented by an internal review
in 2018.
In 2019, the Board carried out a further internal review which built
upon the previous external and internal reviews. This was led by
the Chairman with the assistance of the Company Secretary. The
review commenced with discussions between the Chairman and
the Company Secretary, together with a review of the findings of
prior reviews and of progress made during the year against
recommendations for improvements. The discussions led to the
design of a questionnaire which was disseminated to members of
the Board. Responses to the questionnaires were collated by the
Company Secretary and a report presented to the Board detailing
any views expressed by members of the Board on an anonymous
basis, together with progress made to date against previous
recommendations. That report was the subject of a detailed and
constructive discussion by the Board.
CARR'S GROUP PLC Annual report and accounts 2019
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CORPOR ATE GOVERNANCE REPORT
CONTINUED
The 2019 review demonstrated that good progress had been
made towards addressing the recommendations previously
made. In particular, the Board agenda continues to include
regular site visits across the Group, which gives the Board greater
exposure to senior management and a deeper understanding
of operations. Greater focus is now also placed on succession,
diversity and people issues both by the Board and the Nomination
Committee. The 2019 review confirmed the conclusions drawn
in 2017 and 2018 that the Board and its Committees were
performing effectively and were appropriately constituted.
The review also noted the increased level of internal audit activity
and that financial KPIs in the Engineering division were now being
well reported, following the recommendation of the 2018 review.
Further actions agreed by the Board following the 2019 review
included continuing to place further emphasis on succession
planning, continuing the Board’s review of the Group’s corporate
governance framework in the light of the Corporate Governance
Code 2018 and increasing the level of internal audit activity across
the Group.
During the year, the Chairman also evaluated the performance of
the Directors through informal discussions and observations. The
Senior Independent Non-Executive Director and the other
Non-Executive Directors have met, without the Chairman present,
to appraise his performance.
Overall the Board considered the performance of each Director to
be effective and concluded that the Board and its Committees
provide effective leadership and that appropriate governance and
controls are in place. The Board will continue to review its
procedures, effectiveness and development in the future.
Non-Executive Director Independence
The Board’s views on Non-Executive Director independence were
also reconsidered as part of the 2019 internal review. This was
afforded greater focus owing to Alistair Wannop serving as a
Non-Executive Director for more than nine years. In carrying out a
detailed assessment, the Board considered the findings of the
previous external and internal Board evaluation reports which did
not highlight any issues or concerns. In particular, the Board again
noted that Alistair Wannop had no material business relationships
with the Company, does not hold a significant shareholding,
does not represent any shareholder, does not have any family
connections with the Company, and has not served the Company
in any capacity other than as a Non-Executive Director. The Board
accordingly determined that the independence of Alistair
Wannop was not compromised by his tenure, and that there were
no circumstances which could give rise to his independence
being questioned. The Board was entirely satisfied that Alistair
Wannop continued to exercise the level of objectivity and
challenge that would be expected of an independent Non-
Executive Director and that his knowledge of the Group and the
markets in which it operates remained of significant benefit to the
Board.
The Board is accordingly entirely satisfied that Alistair Wannop,
Ian Wood and John Worby are independent. Upon his
appointment as Non-Executive Director and Chairman Designate
on 1 November 2019, Peter Page was assessed by the Board to be
independent. The question of Non-Executive Director
independence is a matter which is kept under review and
thoroughly assessed annually by the Board.
CARR'S GROUP PLC Annual report and accounts 2019
Board Committees
Audit Committee
The Audit Committee’s key function is to review the effectiveness
of the Company’s financial reporting and performance of the
external auditor.
The Audit Committee comprises three independent Non-
Executive Directors: John Worby (Chairman), Ian Wood and Alistair
Wannop. The Board considers that the Committee meets the
requirements of the Code and is appropriate for a company its
size. In particular, the three members bring financial, agricultural
and engineering experience to the Committee together with a
good understanding of the businesses within the Group and the
risks that they face. The work, responsibilities and governance of
the Audit Committee are set out on pages 46 to 48. The Chairman
of the Audit Committee will be available at the AGM to answer
any shareholder questions on the Committee and its activities.
Remuneration Committee
The Remuneration Committee’s primary role is to review and set
the reward structures for Executive Directors and other senior
management to ensure that these promote the correct
behaviours and are appropriate when considered in conjunction
with the levels of pay and benefits offered across the Group.
During the year, the Remuneration Committee comprised three
independent Non-Executive Directors: Ian Wood (Chairman), John
Worby and Alistair Wannop. On 1 November 2019, Peter Page also
became a member of the Committee which accordingly now
comprises four independent Non-Executive Directors. The work,
responsibilities and governance of the Remuneration Committee
are set out on pages 52 to 64. The Chairman of the Remuneration
Committee will be available at the AGM to answer any
shareholder questions on the Committee and its activities.
Nomination Committee
The role of the Nomination Committee is to ensure that an
appropriate balance of skills, experiences and backgrounds is
achieved across the Board, and that the Group is properly
prepared for the succession of members of the Board and senior
management.
During the year the Nomination Committee comprised of Chris
Holmes (Chairman), Alistair Wannop, John Worby and Ian Wood.
The work, responsibilities and governance of the Nomination
Committee are set out on pages 49 to 51. On 1 November 2019,
Peter Page also became a member of the Committee. The Chair
of the Nomination 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 substantial and 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.
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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 Audit Committee
also reviewed the effectiveness of the risk management and
internal control systems. 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 30 to 32.
By order of the Board
MATTHEW RATCLIFFE
Company Secretary
Carlisle
CA3 9BA
20 November 2019
45
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 the
Company’s website.
The Annual General Meeting provides all shareholders with the
opportunity to develop further their understanding of the Group.
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 and time is set
aside following the meeting for shareholders to hold discussions
with Directors directly. 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 Group’s performance, business model
and strategy.
Internal Control
The Board of Directors has overall responsibility for the Group’s
systems of internal control and internal audit, and for reviewing
their effectiveness, including: financial, operational and
compliance controls and risk management, which safeguard the
shareholders’ investment and the Group’s assets. Such systems
can only provide reasonable and not absolute assurance against
material misstatement or loss, being 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 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.
CARR'S GROUP PLC Annual report and accounts 2019
46
AUDIT COMMIT TEE REPORT
Introduction
This has been the first year in which KPMG
LLP (‘KPMG’) has acted as the Group’s
auditor, having been appointed by
Shareholders at the AGM on 8 January 2019
following the recommendation of the
Board and the tender process conducted
by the Committee in the spring of 2018.
Composition of Committee
and Meetings
The Audit Committee comprises three
Non-Executive Directors, John Worby, who
is Chairman of the Committee and Ian
Wood and Alistair Wannop. The Chairman
of the Committee has recent and relevant
financial experience and collectively the
members of the Committee have
experience of the agricultural and
engineering industries. Details of
Committee members’ qualifications can
be found on pages 38 to 39.
The Audit Committee met three times
during the year, and has an agenda linked
to the Group financial calendar. It invites
the Chairman, the Chief Executive, the
Group Finance Director, the Head of Group
Finance, the Head of Business Finance, the
Head of Internal Audit and the external
auditor to attend its meetings. The
Committee met with the Head of Internal
Audit and the external auditor without the
Executive Directors being present.
The Committee has met once since the
end of the financial year to consider the
results and the Annual Report for the year
ended 31 August 2019.
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;
appraise the Board on how the
Company’s prospects are assessed;
oversee the relationship with
the external auditor, making
recommendations to the Board
in relation to its appointment,
remuneration and terms of
engagement;
monitor and review the effectiveness
of the external audit including the
external auditor’s independence,
objectivity and effectiveness
and to approve the policy on the
engagement of the external auditor
to supply non-audit services; and
review and approve the mandate of
the internal auditor, evaluate the work
and monitor the effectiveness of the
internal auditor, and approve the
appointment or removal of the Head
of Internal Audit.
The Committee’s terms of reference
can be found on the Company’s
website www.carrsgroup.com.
JOHN WORBY
Chair of the Audit Committee
Dear Shareholder
On behalf of the Audit
Committee, I am
pleased to present this
report to shareholders
which highlights the
areas of review during
the year and explains
how the Committee
has reviewed and
discharged its
responsibilities.
Audit Committee Highlights
• First full year of Group’s internal
audit function.
• KPMG’s first audit following its
appointment as external auditor at
the AGM in January 2019.
• New accounting standards IFRS 9
and IFRS 15 adopted in the financial
year and preparation for adoption
of IFRS 16.
CARR'S GROUP PLC Annual report and accounts 2019
47
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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 the Group Finance Director, the Head of
Internal Audit and the external auditor in respect of the half year
and annual financial report.
An important responsibility of the Audit Committee is to review
and agree significant estimates and judgements made by
management. To satisfy this responsibility, the Committee
reviewed a written formal update from the Group Finance Director
on such issues 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:
• Contract risks in the Engineering division, including the risks
associated with the judgemental nature of revenue and profit
recognition over time. The Committee reviewed a selection of
significant active contracts, challenging management’s
forecast outturns and profit recognition assessments and
examining commercial processes and controls in order to test
the recoverability of contract balances. The Committee
determined that the judgements adopted by management
were appropriate.
• Potential goodwill impairment. The Committee challenged the
reasonableness of the future business performance
assumptions adopted by management in the light of historical
performance and industry benchmarks, and determined that
no such impairment was necessary.
• Brexit and the associated increased levels of uncertainty of
outcomes. The Committee considered the Directors’
assessment of Brexit-related sources of risk and their potential
impact on the going concern assessment and viability
statement. Potential sensitivities were challenged against the
full range of reasonably possible scenarios, and adjustments
were considered to discount rates for forecast cash flows for
any residual uncertainties. The Committee also reviewed the
reasonableness of disclosures made in the strategic report
relating to Brexit. The Committee determined that the
assessments made by management were appropriate and that
the narrative disclosures were reasonable.
• Appropriateness of pension assumptions. The Committee
considered whether the assumptions used by the Company’s
adviser were appropriate to use to derive the assets, liabilities
and resultant net surplus in the Company’s defined benefit
pension scheme, and concluded that they were. The basis of
calculation for the additional cost relating to GMP equalisation
and its disclosure as non-recurring were also reviewed.
• Adoption of new accounting standards. The Committee
considered the impact of adopting the new accounting
standards IFRS 9 and IFRS 15, and concluded they had been
appropriately implemented and disclosed. In respect of IFRS
16, which will apply to the year ending 29 August 2020, the
Committee considered the intended method of adoption and
agreed it was appropriate. The Committee also reviewed the
disclosure in the 2019 annual report of the expected impact
and determined it was appropriate.
• Acquisition accounting, including the fair values attributed to
assets and liabilities. The Committee challenged
management’s assessments of fair value, identified intangibles
and the assessment of future liabilities, including the value
placed on the contingent consideration likely to be payable
as potential earn-out payments for the NuVision, Animax and
NW Total acquisitions and determined that such assessments
were appropriate.
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 relevant key
matters worthy of consideration. The Committee was satisfied
that, where relevant, all the key events and issues which have
been reported to the Board in the CEO’s monthly reports 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 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. As noted above, particular
attention was given to sensitivities relating to Brexit. The
Committee was comfortable with the disclosures made.
Internal Control and Risk Management
During the year the Committee continued to monitor the
effectiveness of the Group’s internal control and risk management
systems and at the end of the year carried out a review of the
effectiveness of such 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.
CARR'S GROUP PLC Annual report and accounts 2019
48
AUDIT COMMIT TEE REPORT
CONTINUED
There is a further category of services for which a case-by-case
decision is necessary. The policy can be viewed on the
Company’s website www.carrsgroup.com.
In order to ensure that the policy is effective, and the level of
non-audit fees is kept under review, all non-audit services must
be approved by the Group Finance Director and reported to the
Committee. Prior approval of the Committee is also required
before the external auditor is engaged to provide non-audit
services costing in excess of £25,000 in aggregate. During the
2019 financial year, there was no non-audit work undertaken by
the Group’s external auditor.
Internal Audit
Following the acquisitions of NuVision Engineering, Inc and
STABER GmbH it was determined in 2017 by the Committee to be
appropriate, given the increased diversity and geographic spread
of the Group’s engineering division, for an internal audit function
to be established.
In 2018, the Group appointed an individual to the position of Head
of Internal Audit and established the framework under which
internal audit will operate, including an internal audit charter and
a risk assessed internal audit plan which was approved by the
Committee. In the 2019 financial year, the three-year Internal
Audit Plan was reviewed and approved and the detailed plan for
work in 2019 was agreed. Reviews were received for Engineering
relating to UK Service & Manufacturing, and for Agriculture in UK
Agriculture and UK Supplements. While some areas for
improvement were identified, no significant control deficiencies
were noted from these reviews.
Other Activities
The Committee also reviewed its terms of reference, its
effectiveness, the Group’s policies on whistleblowing, business
ethics and on the prevention of bribery and modern slavery.
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.
JOHN WORBY
Audit Committee Chairman
20 November 2019
External Audit
KPMG was appointed as external auditor of the Group at the AGM
in January 2019. The appointment followed the proposal
of the Board and a competitive tender process managed by
the Audit Committee in the spring of 2018. KPMG’s current
engagement partner is Nick Plumb, who has been in place
since commencement of the audit for the 2019 financial year.
The Audit Committee assessed the qualifications, expertise and
independence of KPMG as auditors as part of the tender process
and updated its assessment during the year.
Following approval by shareholders to appoint KPMG in January
2019. the Audit Committee reviewed and approved the terms of
engagement and remuneration of the external auditors for the
2019 financial year.
Audit Effectiveness
The effectiveness of the external audit process is dependent on
appropriate audit risk identification at the start of the audit cycle.
KPMG presented its detailed audit plan to the Committee in June
2019, identifying their assessment of these key risks.
The 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. In addition, each
year, the Audit Committee assesses its performance and the
effectiveness of the external auditor through a questionnaire
completed by Audit Committee members and members of the
Group’s senior finance team. The output of that review in relation
to PwC’s final audit was considered in detail and any relevant
points were communicated to the new auditors, KPMG. The
Committee concluded that it was satisfied with the effectiveness
of the external audit. At the conclusion of KPMG’s first audit,
the Committee again reviewed and was satisfied with the
effectiveness of the external audit process.
Auditor Independence
The Group meets its obligations for maintaining an appropriate
relationship with the external auditor 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, the Group’s external auditor must implement rules and
requirements which include that none of their employees working
on our audit can hold any shares in the Company. The external
auditor is also required to tell us about any significant facts
and matters that may reasonably be thought to bear on their
independence or on the objectivity of the lead partner and the
audit team. The lead partner in the audit team must change every
five years.
The Audit Committee annually reviews the Company’s non-audit
services policy, updating and approving the policy where
appropriate. The objective of the policy is to ensure that the
provision of any such services does not impair, or is not perceived
to impair, the external auditors’ independence or objectivity.
The policy imposes guidance on the areas of work that the
external auditors may be asked to undertake and those
assignments where the external auditors should not be involved.
CARR'S GROUP PLC Annual report and accounts 2019
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49
NOMINATION COMMIT TEE REPORT
Role of the Committee
The primary responsibilities of the
Nomination Committee are:
•
reviewing the structure, size and
composition of the Board and
monitoring the range of skills,
knowledge and experience required for
the Board to operate effectively and to
deliver the Group’s strategy;
• overseeing Board and senior
management succession planning,
including setting objective selection
criteria and transparent recruitment
processes, and making
recommendations to the Board in
relation to the appointment of
Executive and Non-Executive Directors;
and
• setting the Group’s policy on diversity
and inclusion and overseeing its
implementation in succession planning
across the Group.
Activities of the Committee
The Committee met on five occasions
during the year to consider the following
matters:
•
the Committee’s terms of reference to
ensure they appropriately reflect the
Committee’s remit;
the succession plans in place for the
Board and senior management across
the Group;
the structure, size, composition and
diversity of the Board, its committees
and senior management across the
Group;
the Group’s policy on diversity and
inclusion; and
the Group’s talent management,
training and development programmes.
•
•
•
•
Introduction
The Nomination Committee plays an
important role in ensuring that the Board
and senior management teams possess
the right balance of skills, experience and
knowledge to support the Group’s
strategy. Central to this is making sure that
effective succession plans are in place to
fill vacancies on the Board, and in
management teams, alongside robust and
transparent procedures for identifying
suitable candidates.
This has been a busy year of succession
planning across the Group, with several
key management appointments being
made in both divisions. In December 2018,
the Board also announced that I would be
standing down as Chairman, and from the
Board, in January 2020. During 2019 the
Board’s Senior Independent Director, John
Worby, therefore chaired the Committee in
leading a recruitment process which led to
the appointment of Peter Page as a
Non-Executive Director and Chairman
Designate with effect from 1 November
2019. Subject to the approval of the
shareholders, Peter will take over as
Non-Executive Chairman and Chair of the
Nomination Committee when I stand down
in January 2020. More information about
the Committee’s process is set out below.
CHRIS HOLMES DL
Chair of the Nomination Committee
Dear Shareholder
On behalf of the
Nomination
Committee, I am
pleased to present
this report which
highlights the role of
the Committee and
its key activities
during the year.
Nomination
Committee Highlights
• Recruitment process completed
for successor Non-Executive
Chairman overseen by Senior
Independent Director.
• Consideration of diversity across
the Group and the Group’s policy
on diversity and inclusion.
• Another active year in senior
management succession across
the Group.
CARR'S GROUP PLC Annual report and accounts 2019
50
NOMINATION COMMIT TEE REPORT
CONTINUED
Since 2017, the Group has made significant progress in the
implementation of its senior management succession plans. This
progress continued during 2019, with the restructuring of our
Engineering division and the strengthening of its central
management team under the leadership of the divisional
Managing Director. Our Agriculture division also saw significant
change; strengthening business development in our
Supplements business and successfully appointing a new
Managing Director for our UK Agriculture business.
Across the Group our career pathway and employee
development initiatives continue to evolve which are designed to
attract, retain and develop the best talent. Further details of those
initiatives are described on page 35.
In December 2018, the Company announced that Chris Holmes
would stand down from the Board at the AGM in January 2020 as
part of the Board’s succession planning and in the light of changes
to the UK corporate governance framework introduced by the
2018 Code. During 2019, under the chairmanship of John Worby as
Senior Independent Director, the Nomination Committee therefore
planned and undertook a rigorous recruitment process involving
the development of suitable appointment criteria, the selection
of external recruitment consultants, the shortlisting of suitable
candidates and the arrangement of candidate meetings with
Board members. A number of external consultants were invited
to tender in connection with the process which ultimately resulted
in the appointment of Independent Search to advise and assist
the Committee.
In selecting candidates, the Committee considered a broad range
of important skills and characteristics. The Committee also
considered the balance of skills, experience and knowledge
present across the Board, the culture of the Group and the
benefits of diversity.
Following a rigorous process, the Committee recommended the
appointment of Peter Page to the position of Non-Executive
Director and Chairman Designate which was agreed by the Board
and announced on 9 October 2019. As a result, Peter Page was
appointed on 1 November 2019 and, subject to shareholder
approval at the AGM in January 2020, will take on the role of
Non-Executive Chairman and Chair of the Nomination Committee
immediately upon Chris Holmes standing down as proposed.
Attendance at meetings was as follows:
Members
Chris Holmes – Chair
John Worby
Ian Wood
Alistair Wannop
Meetings
attended
Percentage
attended
5
5
5
5
100%
100%
100%
100%
Changes to the Board and its Committees
There were no changes in the membership of the Board or its
committees during the year ended 31 August 2019. In May 2019,
the Board announced the appointment of Alistair Wannop to a new
role as the Board’s Representative for Employee Engagement.
In November 2019, Peter Page was appointed as a Non-Executive
Director and Chairman Designate, with a view to taking on the role
of Chairman upon Chris Holmes standing down in January 2020.
More information about this is set out below. Peter Page became
a member of the Nomination Committee on appointment to
the Board.
Board Evaluation
In 2017, the size, composition and effectiveness of the Board and
its Committees were the subject of an external evaluation
facilitated by corporate governance specialists, Independent
Audit Limited. That review, which generated positive feedback,
confirmed that the Board and its Committees were appropriately
constituted and provided effective management of the Group
as a whole. The review also involved a consideration of the
continued independence of the Non-Executive Directors and
the commitment required from each in order to properly fulfil
their duties. Following the review, and in consideration of all
circumstances, it was determined by the Board that all Directors
committed sufficient time to properly fulfil their responsibilities
and that John Worby, Ian Wood and Alistair Wannop were
considered to be independent.
In 2019, the Board conducted an internal review building upon the
2017 external evaluation and an internal review carried out in 2018.
This involved a detailed consideration of the effectiveness of
the Board and its committees together with a review of diversity
and the range of skills, knowledge and experience required to
effectively deliver the Group’s strategy. The 2019 review also
considered the continued independence of the Non-Executive
Directors. That review concluded that the Board and its
Committees are indeed appropriately constituted, and that John
Worby, Ian Wood and Alistair Wannop remain independent.
Succession Planning and Development
The Group’s succession strategy was developed in 2014. Efforts
have since focused upon ensuring that appropriate and sufficient
employees are recruited or developed internally to meet the
future management and leadership needs of the Group, taking
into account continued growth and Group strategy. Recruitment
processes for leadership and senior positions across the Group
are managed under the supervision of the Group’s Head of HR
inviting both internal and external candidates. Independent
recruitment consultants are also appointed where appropriate
taking into account the requirements of the Group.
CARR'S GROUP PLC Annual report and accounts 2019
51
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Diversity and Inclusion
The Group’s principal concern when making employment
decisions is ensuring that candidates possess the skills,
knowledge and experience, or the potential to develop the
required skills, knowledge and experience, to meet the
requirements of the Group. The Board also recognises the
benefits of diversity which are given due consideration when
determining the requirements of the Group and in reaching
recruitment decisions. Accordingly, every effort is made to ensure
that candidate lists suitably reflect diversity.
The Group operates a strict equal opportunities policy. All
appointments are made on the basis of merit and the
requirements of the Group regardless of factors such as race,
colour, nationality, religion or belief, gender, marital or civil
partnership status, family status, pregnancy, sexual orientation,
gender identity, gender reassignment, disability or age. There are
no differences in pay structures for persons of different genders
performing similar roles.
Re-Election
Save for Chris Holmes, who will stand down, and Peter Page, who
will strand for election for the first time since his appointment on
1 November 2019, all Board Directors will stand for re-election at
the Annual General Meeting on 7 January 2020 in accordance
with best practice under the Corporate Governance Code. The
Board will set out in the Notice of Annual General Meeting its
reasons for supporting the re-election of each Director. Their
biographical details on pages 38 to 39 demonstrate the range of
experience and skills which each brings to the benefit of the
Company.
The Chair of the Nomination 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 Nomination Committee
20 November 2019
Gender Breakdown
Group employees
Senior managers:
Direct reports to senior managers:
Total
Male
Female
Total
Male
Female
Total
Male
Female
1,241
904
337
13
9
4
49
31
18
The Board recognises the current absence of gender diversity at
Board level and is conscious that it was not possible to address
this during the succession process undertaken in 2019. Whilst the
Company is not currently subject to any requirements in this
regard, the Board is aware of the benefits of diversity, including
gender diversity, and of the recommendations of the Hampton
Alexander Review. The Committee and the Board will continue to
focus on the issue of gender diversity in their planning for future
Board succession.
CARR'S GROUP PLC Annual report and accounts 2019
52
REMUNER ATION COMMIT TEE REPORT
The Committee’s report is
presented in the following sections:
Section
Section
01
The Chair’s Annual Statement, which
summarises the key considerations of
the Committee during the year and
forms part of the Annual Report on
Remuneration.
02
The Directors’ Remuneration Policy, which
sets out the Policy for the Executive
Directors, Chairman and Non-Executive
Directors. The Directors’ Remuneration
Policy was approved at the AGM which
took place on 9 January 2018. There are
no changes to the Directors’ Remuneration
Policy proposed for 2019/20.
See page 53
See page 54
Section
03
The Annual Report on Remuneration,
which sets out how the Remuneration
Policy has been applied in 2018/19, the
remuneration received by Directors for
the year and how the policy will be
applied in 2019/20. The Annual Report
on Remuneration will be subject to an
advisory shareholder vote at the AGM. on 7
January 2020
IAN WOOD
Chair of the Remuneration Committee
Dear Shareholder
On behalf of the
Remuneration
Committee, I am
pleased to present
the Report of the
Remuneration
Committee for
the year ended
31 August 2019.
Remuneration
Committee Highlights
•
Introduction of CEO pay ratio
reporting.
• Preparation for the adoption of the
Corporate Governance Code 2018.
See page 60
• Appointment of Peter Page as
Non-Executive Director and
Chairman Designate.
CARR'S GROUP PLC Annual report and accounts 2019
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The current Directors’ Remuneration Policy was approved by
the shareholders at the AGM which took place on 9 January 2018.
The Remuneration Committee regularly reviews the Directors’
Remuneration Policy to ensure it promotes the attraction,
retention and incentivisation of high calibre executives to
deliver the Group’s strategy. The Committee is mindful of the
requirements under the 2018 Code, and calls from the Investment
Association, in relation to the alignment of pension contributions
for Executive Directors with those available to the wider
workforce. Whilst no change is proposed for the coming year,
the Committee will be considering the position further during
the course of the current financial year. A new Directors’
Remuneration Policy will be put to the shareholders for approval
at the AGM in January 2021. The Committee will also take the
opportunity this year to address other emerging aspects of
governance, including the requirement under the 2018 Code for
Executive Directors to retain shares after they leave the
Company’s employment.
No changes to the current Directors’ Remuneration Policy are
proposed this year.
For 2019/20, the maximum annual bonus for the Executive
Directors’ will remain 100% of salary, with 25% of any amount
being deferred for two years in the form of shares. The Committee
also intends to grant LTIP awards of 100% of salary, which will be
based upon stretching EPS targets.
Salary increases were awarded to the Executive Directors
effective 1 September 2019 of 2%, which is consistent with the
broader workforce.
I hope that you are able to support the Remuneration
Committee’s Report at the forthcoming AGM.
IAN WOOD
Chairman of the Remuneration Committee
20 November 2019
CARR'S GROUP PLC Annual report and accounts 2019
Section
01
Annual Statement from the Chair of the
Remuneration Committee
Performance and Remuneration in 2018/19
As described in the Strategic report, and despite some external
challenges affecting the Agriculture division, the Group’s overall
financial performance in the year under review was ahead of the
Board’s original expectations. In the year, adjusted1 profit before
tax was up to £18.0m (2018: £16.6m) and adjusted1 Earnings Per
Share was up to 14.6p (2018: 13.9p). In addition to this strong
financial performance, significant progress was also made in
delivering the Board’s strategy and positioning the business well
for future growth.
The financial and strategic targets set by the Remuneration
Committee, together with the resulting remuneration payable to
the Executive Directors, are detailed in the Remuneration
Committee’s Report which follows.
Key matters for consideration in 2018/2019
The Committee maintains a schedule of matters for consideration
which aligns with its terms of reference and ensures that changes
to the corporate governance framework and remuneration best
practice are considered by the Committee when appropriate. The
areas of focus for the Committee are set out in the Annual Report
on Remuneration set out on the pages which follow.
Key additional considerations for the Committee this year
included the impact of the Corporate Governance Code 2018,
which applies to the Group from 1 September 2019, and the new
requirement to report ratios comparing CEO remuneration to that
of the wider workforce. Whilst we are not required to report these
ratios until next year, the Committee has chosen to do so
voluntarily in this year’s report.
In November 2019 Peter Page was appointed to the Board as
Non-Executive Director and Chairman Designate with a view to
being appointed Non-Executive Chairman upon Chris Holmes
standing down at the forthcoming AGM. During the year, the
Remuneration Committee undertook a benchmarking exercise to
ensure that the remuneration payable to Peter Page was
appropriate when compared with similar businesses, the
remuneration offered to other Board members and the Group’s
broader workforce.
1. Adjusted results are after adding back amortistion of acquired intangible
assets and non-recurring items including acquisition costs.
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Considerations of conditions elsewhere in the Group
In determining the remuneration of the Group’s Directors, the
Committee takes into account the pay arrangements and terms
and conditions across the Group as a whole. The Committee
seeks to ensure that the underlying principles which form the
basis for decisions on Directors’ pay are consistent with those on
which pay decisions for the rest of the workforce are taken. For
example, the Committee takes into account the general salary
increase for the broader employee population when conducting
the salary review for the Executive Directors.
However, there are some differences in the Executive Directors’
Remuneration Policy compared to that for the wider workforce,
which the Committee believes are necessary to reflect the
differing levels of seniority and responsibility. A greater weight is
placed on performance-based pay through the quantum and
participation levels in incentive schemes to ensure the
remuneration of the Executive Directors is aligned with the
performance of the Group and the interests of shareholders.
Consideration of shareholder views
In formulating this policy, the Committee took into account
guidance issued by shareholders and proxy agencies. Detailed
discussions took place with certain major shareholders and proxy
agencies prior to the formulation of this policy and subsequently
when considering any changes that might be required to be
made to it. The views offered to the Committee have been taken
into account in the policy below. The Committee continues to
welcome feedback from shareholders received at each AGM in
addition to any feedback received throughout the year.
Section
02
Remuneration Policy
This part of the report sets out the remuneration policy for the
Group and has been prepared in accordance with The Large and
Medium sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013 (as amended).
The policy was approved by the shareholders at the AGM which
took place on 9 January 2018 and is therefore currently in effect.
No changes to the policy are proposed for approval at the
forthcoming AGM on 7 January 2020.
The role of the Committee
The primary role of the Remuneration Committee is to make
recommendations to the Board on the Company’s policy for executive
remuneration. The Committee also has delegated responsibility for
determining the remuneration and benefits of the Chairman, the
Executive Directors, the Secretary and senior management.
Key responsibilities include:
• determining the framework for the remuneration of the
Group’s Executive Directors, Chairman, Secretary and senior
management;
• determining the total remuneration packages, authorising
terms and conditions, and issuing contracts for the Board;
• approving the design and determining the targets for
•
performance related pay schemes of the Executive Directors;
reviewing the ongoing appropriateness and relevance of the
Remuneration Policy to ensure that is it aligned with the
strategy of the Group;
• ensuring that the Group rewards fairly and responsibly, with
•
clear links to both corporate and individual performance; and
reviewing the design of any share incentive plans for approval
by the Board and shareholders.
Overview of policy
When setting the policy for Directors’ remuneration, the
Committee takes into account the overall business strategy,
considering the long-term interests of the Group, with the aim of
delivering rewards to shareholders. The remuneration policy is
ultimately designed to appropriately incentivise Executive
Directors with a view to maximising stakeholder value.
The Group’s policy is that the overall remuneration packages
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 and views of stakeholders.
The remuneration package is split into two parts:
• a non-performance related element represented by basic
salary, benefit and pension; and
• a performance related element in the form of an annual bonus
and a Long Term Incentive Plan.
CARR'S GROUP PLC Annual report and accounts 2019
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Remuneration Policy
Element
Purpose and link to strategy
Policy and approach
Opportunity
Base salary
To attract and retain the best
talent.
Reflects an individual’s
experience, performance and
responsibilities within the
Group.
Pension
Provides a competitive and
appropriate pension package.
Benefits
To aid retention and remain
competitive in the market place.
Salary levels (and any subsequent increases)
are set taking into consideration a number of
factors, including:
•
level of skill, experience and scope of
responsibilities of individual;
• business performance, economic climate
•
and market conditions;
increases elsewhere in the
Group; and
• external comparator groups (used for
reference purposes only).
Salaries are normally reviewed annually with any
increase effective 1 September each year.
Executive Directors are entitled to participate in
a defined contribution pension arrangement or
to receive a cash alternative to those
contributions.
Company contributions are up to 15% of base
salary. To the extent that pension contributions
exceed annual tax-free allowances, Executive
Directors will be entitled to receive payment
through ordinary payroll in lieu of pension
contributions.
Benefits provided 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. The benefits provided may
be subject to minor amendment from time to
time by the Committee within this policy.
The Company may reimburse any reasonable
business related expenses incurred in
connection with their role (including tax thereon
if these are determined to be taxable benefits).
There is no formal maximum;
however, increases will normally
align with the general increase for
the broader employee population
of the Group. More significant
increases may be awarded from
time to time to recognise, for
example, development in role and
change in position or responsibility.
Current salary levels are disclosed
in the Annual Report on
Remuneration.
Up to 15% of base salary, being
the rate available to senior
management.
Market rate determines value.
There is no prescribed maximum
level but the Remuneration
Committee monitors the overall
cost of benefits to ensure that it
remains appropriate.
CARR'S GROUP PLC Annual report and accounts 2019
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REMUNER ATION COMMIT TEE REPORT
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Purpose and link to strategy
Policy and approach
Opportunity
Element
Annual
bonus
Designed to reward delivery of
key strategic priorities during
the year.
Maximum of 100% of base salary.
The schemes are subject to the
limits set by HMRC from time to
time.
Maximum of 100% of base salary.
Bonus levels and appropriateness of
performance measures and weighting are
reviewed annually to ensure they continue to
support our strategy. Bonuses are capped at
100% of base salary. 25% of any bonus earned
will be deferred into awards over shares, with
awards normally vesting after a two-year period.
Performance is measured against stretching
targets. These may include financial and
non-financial measures. Financial measures will
account for the majority and will typically include
a profit-related target. Performance targets will
be disclosed retrospectively. The threshold level
of bonus under each measure is 0%.
The cash element of the bonus is usually paid in
November each year for performance in the
previous financial year.
Dividends will accrue on deferral awards over
the vesting period and be paid out either as cash
or as shares on vesting and in respect of the
number of shares that have vested.
A malus and clawback mechanism applies in
specific circumstances including in the event of
a material misstatement of the Group’s accounts
and also for other defined reasons. These
provisions apply to both the cash and deferred
elements of the bonus.
A HMRC approved SAYE scheme is available to
eligible staff, including Executive Directors.
Annual awards of performance shares which
normally vest after three years subject to
performance conditions.
Award levels and performance conditions
required for 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.
Awards are based upon an EPS growth measure.
25% vests at threshold performance. There is
straight line vesting between threshold and
maximum.
Two year post-vesting holding period applies to
the net of tax shares for awards granted.
A malus and clawback mechanism applies in
specific circumstances including in the event of a
material misstatement of the Group’s accounts
and also for other defined reasons.
Save As You
Earn (SAYE)
To encourage employee
involvement and 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.
CARR'S GROUP PLC Annual report and accounts 2019
57
Element
Purpose and link to strategy
Policy and approach
Shareholding
guidelines
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.
Opportunity
N/A
Chairman and Non-Executive Director Remuneration
Non-
Executive
Director fees
To attract and retain a high-
calibre Chairman and Non-
Executive Directors by offering
market-competitive fee levels.
Non-Executive Directors receive
a single fee for all services to the
Company. Levels of fee are
reviewed annually with any
increases normally aligning with
general increases for the broader
employee population of the Group.
Remuneration reflects:
•
the time commitment and responsibility
of roles;
• market rate; and
•
that they do not participate in any bonus,
pension or share based scheme.
Our policy is for the Executive Directors to review
the remuneration of Non-Executive Directors
annually following consultation with the Chairman.
The Chairman’s remuneration is reviewed annually
by the Remuneration Committee.
The Chairman and the Non-Executive Directors are
entitled to reimbursement of reasonable expenses.
They may also receive limited travel or
accommodation-related benefits in connection
with their role as a Director.
The Non-Executive Directors will not participate in
the Group’s share, bonus or pension schemes.
Non-Executive Directors are engaged for terms
of one year subject to appointment and
reappointment at the Company’s AGM.
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Remuneration Committee discretions
The Committee will operate the annual bonus plan and LTIP
according to their respective rules. To ensure the efficient
operation and administration of these plans, the Committee
retains discretion in relation to a number of areas. This is
consistent with market practice and these include (but are not
limited to) the following:
the participants;
•
the timing of grant and/or payment;
•
the size of grants and/or payments (within the limits set out in
•
the Policy table);
the determination of vesting based on the assessment of
performance;
the determination of a “good leaver” and where relevant the
extent of vesting in the case of the share-based plans;
treatment in exceptional circumstances such as a change of
control;
•
•
•
• making the appropriate adjustments required in certain
circumstances (e.g. rights issues, corporate restructuring
events, variation of capital and special dividends);
• cash settling awards; and
•
the annual review of performance measures, weightings and
setting targets for the discretionary incentive plans from year
to year.
The Committee also retains the ability to adjust existing
performance conditions for exceptional events so that they can
still fulfil their original purpose. Any varied performance condition
would not be materially less difficult to satisfy in the
circumstances.
Performance measures and targets
Our Group strategy and business objectives are the primary
consideration when we are selecting performance measures for
incentive plans. The annual bonus is based on performance
against a stretching combination of financial and non-financial
measures. Adjusted profit before tax reflects the Group’s strategic
objective to increase profit. In addition, Executive Directors are
assessed on strategic objectives as agreed by the Committee at
the beginning of the year. The LTIP is assessed against growth in
adjusted Earnings Per Share as it rewards improvement in the
Group’s underlying financial performance and is a measure of the
Group’s overall financial success and is visible to shareholders.
Targets within incentive plans that are related to internal financial
measures, such as profit, are typically determined based on our
budgets. The threshold and maximum levels of performance are
set to reflect minimum acceptable levels at threshold and very
stretching but achievable levels at maximum. At the end of each
performance period we review performance against the targets,
using judgement to account for items such as foreign exchange
rate movements, changes in accounting treatment, and
significant one-off transactions. The application of judgement is
important to ensure that final assessments of performance are
fair and appropriate. In addition, the Remuneration Committee
reviews the bonus and incentive plan results before any
payments are made to Executive Directors or any shares vest
and has full discretion to adjust the final payment or vesting
downwards if they believe the circumstances warrant it.
CARR'S GROUP PLC Annual report and accounts 2019
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.
Executive Directors’ terms of employment and loss of
office
The Group’s current policy is not to enter into employment
contracts with any element of notice period in excess of one year.
All Non-Executives are appointed for terms of 12 months and
stand for re-election annually at the Company’s AGM. 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.
Dates of service contracts and first appointment to the Board for
all Directors are given above opposite.
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Date of service contract/
letter of appointment
Date first appointed to the
Board
Executive Directors
Tim Davies
Neil Austin
18 October 2012
1 January 2013
1 March 2013
1 May 2013
Non-Executive Directors
Chris Holmes
Alistair Wannop
John Worby
Ian Wood
Peter Page
1 September 2019
1 September 2019
1 September 2019
1 September 2019
8 October 2019
7 January 1992
1 September 2005
1 April 2015
1 October 2015
1 November 2019
Estimates of total future potential remuneration from
2019 pay packages
The tables below provide estimates of the potential future
remuneration of each Executive Director based on the
remuneration opportunity granted in the 2019/2020 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.
An Executive Director’s service contract may be terminated
summarily without notice and without any further payment or
compensation, except for sums accrued up to the date of
termination, if they are deemed to be guilty of gross misconduct
or for any other material breach of the obligations under their
employment contract.
The Group has the right to terminate contracts by making a
payment in lieu of notice. Any such payment will typically reflect
the individual’s salary, benefits and pension entitlements. The
Group has the ability to mitigate costs and phase payments, if
alternative employment is obtained.
There will be no automatic entitlement to a bonus if an Executive
Director has ceased employment or is under notice. However, the
Committee may at its discretion pay a pro-rated bonus in respect
of the proportion of the financial year worked. Such payment
could be payable in cash and not subject to deferral.
Any share-based entitlements granted to an Executive Director
under the Group’s share plans will be treated in accordance with
the relevant plan rules. Usually, any outstanding awards lapse on
cessation of employment. However, in certain prescribed
circumstances, such as death, ill-health, injury, disability,
redundancy, retirement with the consent of the Committee,
or any other circumstances at the discretion of the Committee,
“good leaver” status may be applied.
For good leavers under the LTIP, outstanding awards will vest at
the original vesting date to the extent that the performance
condition has been satisfied and be reduced on a pro-rata basis
to reflect the period of time which has elapsed between the
grant date and the date on which the participant ceases to be
employed by the Group. For good leavers under the deferred
bonus plan, unvested awards will usually vest in full
upon cessation.
Base salaries are as at 1 September 2019.
Benefits are valued using the figures in the total
remuneration for the 2019 financial year table,
adjusted for any benefits that will not be provided
during 2020.
Pensions are valued by applying the appropriate
percentage to the base salary.
Base
£’000
286
211
Benefits
£’000
Pension
£’000
1
1
43
32
Total
£’000
330
244
Based on what a Director would receive if
performance was in line with plan and the threshold
level was achieved under the LTIP.
Tim Davies
Neil Austin
On target
Maximum Assumes that the full stretch target for the LTIP are
achieved, and maximum performance is obtained
under both the financial and non-financial targets set
for the annual bonus scheme.
Tim Davies, Chief Executive Officer
Maximum
19
37%
32%
32%
Total: £902,000
On target
19
68%
18% 15%
Total: £488,000
Fixed
19
100%
Total: £330,000
In determining whether a departing Executive Director should be
treated as a “good leaver”, the Committee will take into account
the performance of the individual and Group over the whole
period of employment and the reasons for the individual’s
departure.
Neil Austin, Group Finance Director
Maximum
19
37%
32%
32%
Total: £666,000
In the event of a change of control resulting in termination of
office, the Executive Directors are entitled to 12 months’
base salary.
The Non-Executive Directors are not entitled to any
compensation for loss of office.
On target
19
68%
18% 15%
Total: £360,000
Fixed
19
100%
Total: £244,000
Salary and benefits
Annual bonus
LTIP
CARR'S GROUP PLC Annual report and accounts 2019
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Section
03
Annual Report on Remuneration
This part of the Directors’ Remuneration Report sets out a summary of how the Directors’ Remuneration Policy was applied during
2018/19.
Remuneration Committee
During the 2018/19 year, the Remuneration Committee comprised Ian Wood (Chairman), John Worby and Alistair Wannop. After the
year end, in November 2019, Peter Page became a member of the Committee. The Committee met on 6 occasions during the year with
all members in attendance (see page 43).
The Executive Directors and the Chairman may attend meetings of the Remuneration Committee by invitation and in an advisory
capacity only. No person attends any part of a meeting at which his or her own remuneration is discussed. The Chairman and the
Executive Directors determine the remuneration of the other Non-Executive Directors. The Chair of the Committee will be available at
the AGM to answer any shareholder questions on the Committee and its activities.
During the year the Committee considered:
the Committee’s terms of reference;
•
the new Corporate Governance Code 2018 and its impact on the activities of the Committee and future remuneration policy;
•
•
levels of basic pay for Executive Directors, the Chairman and senior management;
• performance targets, both financial and non-financial, for Executive Director variable pay;
• pay and benefits structures across the broader Group (including CEO pay ratios);
•
•
• overall remuneration of Executive Directors; and
• shareholder feedback relating to the Committee’s disclosures in relation to performance outcomes against strategic annual bonus
the outcome of bonus arrangements for Executive Directors and senior management;
the award, and vesting, of long term incentives for Executive Directors and senior management;
targets.
2019 Remuneration (Audited Information)
In this section we summarise the pay packages awarded to our Executive Directors for performance in the 2019 financial year versus
2018. 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.
£’000
Executive Directors
Tim Davies
Neil Austin
Non-Executive Directors
Chris Holmes
Alistair Wannop
John Worby
Ian Wood
Peter Page2
Salary/Fees
Benefits1
Bonus
LTIP
Pension
Total
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
280
207
82
39
39
39
N/A
274
202
80
38
38
38
N/A
1
1
–
–
–
–
–
1
1
–
–
–
–
–
169
131
274
202
271
200
271
200
42
31
41
30
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
763
570
82
39
39
39
N/A
861
635
80
38
38
38
N/A
1 Benefits consistent of private medical insurance.
2 Peter Page was appointed to the Board on 1 November 2019 receiving total fees at the rate of £90,000 per annum.
CARR'S GROUP PLC Annual report and accounts 2019
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2019 Annual Bonus Payout
The annual bonus is calculated using a combination of financial and strategic performance targets which are set with regard to Group
budget, historic performance, market outlook and future strategy.
80% of the bonus was based on Group adjusted profit before tax (PBT). Adjusted PBT is calculated as reported PBT after adding back
amortisation of acquired intangibles and non-recurring items that were not anticipated at the time the performance targets were set,
such as acquisition related costs. The Group is committed to disclosing its performance targets retrospectively save where this is
prevented due to commercial sensitivities. Financial targets are set on the basis that the performance of acquisitions made during the
year are excluded. For the year ending 31 August 2019, the PBT targets were set in accordance with the table below.
Threshold target (0%)
£’000
15,950
Basic target (30%)
£’000
16,790
Maximum target (80%)
£’000
17,630
Payments are adjusted on a straight-line basis between the targets set out above. For the year ended 31 August 2019, adjusted PBT for
the Group excluding acquisitions was £17.295m. This performance equated to 56.76% of the maximum available in connection with the
Group’s financial targets, being 45.41% of the available annual bonus.
Strategic targets, which account for 20% of the bonus, were set at the start of the year. Details of certain targets and their performance
against them is summarised below
Tim Davies
Objective
Outcome
Successful integration of Animax in
accordance with business plan approved
by the Board.
Good progress made against strategic plan in all areas including restructuring
management team, progressing international growth opportunities and improving
efficiencies. Weather in FY19 had the effect of reducing customer demand, which
delayed the realisation of some synergy benefits.
Identify and deliver suitable acquisitions
which align with the Board’s strategy.
Good pipeline of acquisition opportunities developed during the year which align with the
Board’s strategy. All opportunities subjected to detailed appraisal by the Board where
appropriate. Three acquisitions completed during financial year.
Continued international development of
Supplements business in line with Board
strategy.
Strategic plan developed and approved by the Board which will see focus on Europe,
North America and New Zealand, being markets in which greatest growth opportunities
are considered to exist.
Continuation of strategic developments
across Engineering.
Strong progress made on realisation of synergies between Wälischmiller and NuVision in
the USA. Good performance in UK Manufacturing and improved utilisation, measured
through KPIs.
Neil Austin
Objective
Outcome
Integration of Animax into Carr’s Group.
Successful integration of financial and support functions and alignment of systems
with Group.
Successful continuation of Group ERP
project.
Support CEO in developing and delivery
of acquisition pipeline.
Project progressing well and broadly in line with the business plan approved by the Board.
Good acquisition identification process in place. Detailed appraisals of acquisition
opportunities have been brought to the Board for consideration where appropriate.
Thorough due diligence processes in place. Acquisitions in the year have been
well executed.
Further develop financial reporting
including Engineering KPIs.
Engineering KPIs developed and incorporated into routine management accounts for the
Board. Cash flow reporting in Agriculture has improved and plans developed to improve cash
flow reporting in Engineering.
In addition to the above strategic performance indicators, the Committee has a discretion to consider matters such as good corporate
governance which can include environmental, social and governance considerations.
At the end of the financial year, the Committee undertook a detailed assessment of performance against the non-financial targets. The
outcomes from that review are set out above. The Committee accordingly determined that 75% of the available bonus would be payable
to Tim Davies (being 15% of the overall annual bonus) and 90% would be payable to Neil Austin (being 18% of the overall annual bonus).
CARR'S GROUP PLC Annual report and accounts 2019
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REMUNER ATION COMMIT TEE REPORT
CONTINUED
Long term incentive plan
The awards made to Executive Directors in 2016 were subject to Average EPS growth targets over the three year period ending on 31
August 2019. Threshold vesting was set at 3% average annual growth. The Average EPS growth over the three-year period was 14.6%
and, accordingly, 100% of shares under the long-term awards made to Executive Directors in 2016 vested.
Long term incentive plan awards during the year (audited)
Long-term awards for 2019 were made to the Executive Directors in line with the remuneration policy.
Tim Davies
Neil Austin
Number of shares
188,637
139,591
Basis on which
the award was made
100% of salary
100% of salary
Face Value
of the award
£’000
280
207
Threshold vesting
End of
performance
period
25% August 2021
25% August 2021
The performance conditions which govern the vesting of those shares are based on annual average growth in adjusted EPS over a
three year period.
Average annual growth %
3
10
% vesting
25
100
Nothing is payable below 3%, and a sliding scale operates between this and the maximum available.
All employee share plans
The Executive Directors are also eligible to participate in the UK all-employee plans.
The 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.
Total pension entitlements (audited)
The table below provides details of the Executive Directors’ pension benefits:
Tim Davies
Neil Austin
Normal retirement age
67
67
Total contributions to
DC-type pension plan
£’000
Cash in lieu of contributions
to DC-type pension plan
£’000
–
31
42
–
Each Executive Director has the right to participate in the Carr’s Group defined contribution pension plan or to elect to be paid some or
all of their contribution in cash. Pension contributions and/or cash allowances are capped at 15% of salary.
Payments to past Directors (Audited)
No payments to past Directors have been made to Directors during the year.
Payments for loss of office (Audited)
No payments for loss of office have been made to Directors during the year.
Ten year historical TSR performance
Carr’s Group plc
FTSE All-Share Price Index
Source: Thomson datastream
600
550
500
450
400
350
300
250
200
150
100
50
0
9
0
0
2
/
8
0
9
0
0
2
/
1
1
0
1
0
2
/
2
0
0
1
0
2
/
5
0
0
1
0
2
/
8
0
0
1
0
2
/
1
1
1
1
0
2
/
2
0
1
1
0
2
/
5
0
1
1
0
2
/
8
0
1
1
0
2
/
1
1
2
1
0
2
/
2
0
2
1
0
2
/
5
0
2
1
0
2
/
8
0
2
1
0
2
/
1
1
3
1
0
2
/
2
0
3
1
0
2
/
5
0
3
1
0
2
/
8
0
3
1
0
2
/
1
1
4
1
0
2
/
2
0
4
1
0
2
/
5
0
4
1
0
2
/
8
0
4
1
0
2
/
1
1
5
1
0
2
/
2
0
5
1
0
2
/
5
0
5
1
0
2
/
8
0
5
1
0
2
/
1
1
6
1
0
2
/
2
0
6
1
0
2
/
5
0
6
1
0
2
/
8
0
6
1
0
2
/
1
1
7
1
0
2
/
2
0
7
1
0
2
/
5
0
7
1
0
2
/
8
0
7
1
0
2
/
1
1
8
1
0
2
/
2
0
8
1
0
2
/
5
0
8
1
0
2
/
8
0
8
1
0
2
/
1
1
9
1
0
2
/
5
0
9
1
0
2
/
5
0
9
1
0
2
/
8
0
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Directors’ interests in the shares of the company (audited information)
A summary of interests in shares and scheme interests of the Directors as at 31 August 2019 is given below:
Executive Directors
Tim Davies
Neil Austin
Non-Executive Directors
Chris Holmes
Alistair Wannop
John Worby
Ian Wood
Total
number of
interests in
shares
Vested LTIP
Unvested
LTIP
SAYE
(unvested
without
performance
conditions)
Unvested
deferred
bonus
shares
% of
shareholding
guideline
achieved
245,929
202,054
185,159 409,035
137,018 302,686
16,965
16,965
43,312
35,051
92.8%
101.3%
749,000
22,610
25,000
20,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
n/a
n/a
n/a
n/a
Performance shares (audited information)
The maximum number of outstanding shares that have been awarded to directors under the LTIP are currently as follows:
Tim Davies
Neil Austin
2016/17
award
2017/18
award
2018/19
award
185,159 220,398
163,095
137,018
188,637
139,591
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.
Single figure of total remuneration (£’000)
Annual variable element (actual award versus maximum opportunity)
Long-term incentive (vesting versus maximum opportunity)
2015
Tim Davies
2016
Tim Davies
2017
Tim Davies
2018
Tim Davies
2019
Tim Davies
531
911
100%
55%
100% 37.45%
308
0%
0%
861
763
100% 60.41%
100%
100%
Change in Chief Executive’s Remuneration
In the table opposite we show the percentage change in the Chief Executive’s remuneration between 2018 and 2019 financial years
compared to the other employees.
Base pay
Benefits
Annual bonus
Tim Davies
Other UK
employees
2.0%
0%
2.0%
0%
-38.3% -64.5%
The Remuneration Committee considers pay across the entire Group when setting Executive Director remuneration. Annual
consultations take place across the Group between the Executive Directors, senior management and the Group Head of HR in relation
to employee pay. The outcome of that exercise, and any changes to employee pay levels, are considered when determining the
appropriateness to changes in Executive Director pay.
Chief Executive Officer Pay Ratio (unaudited)
The table below shows the pay ratio based on the total remuneration of the Chief Executive Officer to the employee on the 25th, 50th
and 75th percentile of all permanent UK employees of the Group.
25th
percentile
Median
75th
percentile
Total pay
Pay ratio
£18,595 £24,648 £34,048
22
41
31
The Group adopted Option A as defined in The Companies (Miscellaneous Reporting) Regulations 2018, as the calculation
methodology for the above ratios. The 25th, median and 75th percentile pay ratios were calculated using the full-time equivalent
remuneration for all UK employees as 31 August 2019 being the financial year end.
CARR'S GROUP PLC Annual report and accounts 2019
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REMUNER ATION COMMIT TEE REPORT
CONTINUED
Relative spend on pay
The table shows the relative importance of spend on pay
compared to distributions to shareholders.
Employee costs
Dividends paid to shareholders
48,397
4,173
43,673
3,770
2019
£’000
2018
£’000
% change
10.8%
10.7%
External appointments
The Executive Directors did not receive any remuneration in
respect of any external appointments in 2018/19.
Implementation of the policy in 2019/20
For 2019, the maximum annual bonus for the Executive Directors’
will remain 100% of salary. 25% of any bonus will be deferred for
two years in the form of shares. Performance will be assessed
against stretching targets which will be 80% financial and 20%
strategic. Financial targets will be based upon adjusted PBT for
the Group only and will not have any divisional splits. All annual
bonus targets will vest at thresholds of 0%. Targets will be
disclosed respectively in next year’s report.
The Committee intends to grant LTIP awards of 100% of salary,
with future vesting conditional upon stretching targets based
upon an adjusted EPS growth measure. Awards will vest at a
threshold of 25% for average growth of 3% per annum and will rise
on a straight line basis to the maximum 100% for average growth
of 10% per annum during the performance period.
Salary increases were awarded to the executive Directors
effective 1 September 2019 of 2%. This is consistent with the rest
of the workforce.
External advisors
During the year, it was not considered necessary for any external
consultants to be appointed to advise the Committee and so no
fees were incurred. In 2017/18, the Committee appointed New
Bridge Street (a part of AON) as an external consultant to advise
the Committee in connection with the current Directors’
Remuneration Policy. New Bridge Street is a signatory to the
Remuneration Consultants’ Code of Conduct, which requires that
its advice be objective and impartial. New Bridge Street has no
other connection with the Group and provides no other services
to the Group.
2019 AGM
At our AGM in January 2019, the Committee’s Annual Report on
Remuneration received a 99.8% vote in favour (43,461,299 votes),
with 0.1% against (141,679 votes) and 0.1% withheld (207,442 votes).
The Directors’ Remuneration Policy, which was approved at our
AGM in January 2018, received a 99.7% vote in favour (48,274,652
votes), with 0.2% against (138,890 votes) and 0.1% withheld
(74,059 votes).
By Order of the Board.
IAN WOOD
Chairman of the Remuneration Committee
20 November 2019
CARR'S GROUP PLC Annual report and accounts 2019
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DIRECTORS’ REPORT
The Directors submit their report and the audited accounts of the Company
for the year ended 31 August 2019.
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 16-17.
First Interim dividend per share paid
1.125p
1.075p
Second Interim dividend per share paid
1.125p
1.075p
Final dividend per share proposed
2.5p
2.35p
2019
2018
Subject to approval at the Annual General Meeting, the final
dividend will be paid on 10 January 2020 to members on the
register at the close of business on 29 November 2019. Shares will
be ex-dividend on 28 November 2019.
The Group profit from continuing activities before taxation was
£16.3 million (2018: £15.5 million). After taxation charge of £2.7
million (2018: £1.9 million), the profit for the year is £13.6 million
(2018: £13.6 million).
Pensions
Estimates of the amount and timing of future funding obligations
for the Group’s pension plans are based on various assumptions
including, among other things, the actual and projected market
performance of the pension plan assets, future long-term corporate
bond yields, longevity of members and statutory requirements.
The Group 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 27 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 34 to 35.
Environment
The Company’s report on sustainability including carbon footprint
is on pages 36 to 37.
Political and charitable donations
During the period ended 31 August 2019 the Group contributed
£41,000 (2018: £28,800) in the UK for charitable purposes. Further
details have been included with the Corporate Responsibility
statement on page 37. There were no political donations during
the year (2018: £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 28 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 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 7 January 2020, is limited to £758,430.44
which is approximately 33 percent of the nominal value of the
issued share capital on 22 November 2018. 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 7 January 2020.
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 without a pre-emptive offer to existing
shareholders, up to an aggregate nominal amount of £114,913.70,
representing approximately 5 percent of the Company’s issued
share capital as at 22 November 2018. This authority will
expire at the end of the Annual General Meeting to be held on
7 January 2020.
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 9,193,096 Ordinary
shares being approximately 10 per cent of the Company’s issued
share capital at 22 November 2018. The price to be paid for any
share must not be less than £0.025, 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
7 January 2020.
CARR'S GROUP PLC Annual report and accounts 2019
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DIRECTORS’ REPORT
CONTINUED
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 60 to 64), are as follows:
T J Davies
N Austin
C N C Holmes
A G M Wannop
J G Worby
I Wood
At
31 August
2019
Ordinary
Shares
At
1 September
2018
Ordinary
Shares
150,354
245,929
202,054
131,329
749,000 778,000
22,610
25,000
10,000
22,610
25,000
20,000
All the above interests are beneficial. There have been no
changes to the above interests in the period from 1 September
2019 to 15 November 2019.
To enable the vesting of shares under the Group’s Long Term
Incentive Plan, on 15 November 2019 a total of 513,607 ordinary
shares of 2.5 pence each 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.
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 7 January 2020 will be 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 has been informed of the following interests at
15 November 2019 in the 92,455,609 ordinary shares of the
Company, as required by the Companies Act 2006:
Number of
shares
% of issued
share capital
Heygate & Sons Ltd
BBHISL Nominees Ltd (130227)
Nortrust Nominees Ltd
Rathbone Nominees Ltd
Goldman Sachs Securities
(Nominees) Ltd (ILSEG)
12,652,870
4,270,320
4,166,105
2,951,780
2,794,894
13.69
4.62
4.51
3.19
3.02
Change of control
There are a number of significant agreements across the Group
with provisions that take effect, alter or terminate upon a change
of control of the Company, such as bank facility agreements,
agreements with strategic partners (including joint venture
agreements), employee share scheme rules and certain project
contracts within the Engineering division. The Directors are not
aware of any agreements between the Company and its Directors
or employees that provide for compensation for loss of office or
employment that occurs solely because of a change of control.
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.
Statement of directors’ responsibilities in respect of the
Annual Report and the financial statements
The Directors are responsible for preparing the Annual Report
and the Group and parent Company financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and parent
Company financial statements for each financial year. Under that
law they are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU) and
applicable law and have elected to prepare the parent Company
financial statements on the same basis.
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 parent Company and
of their profit or loss for that period. In preparing each of the
Group and parent Company financial statements, the Directors
are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and estimates that are reasonable, relevant
and reliable;
• state whether they have been prepared in accordance with
IFRSs as adopted by the EU;
• assess the Group and parent Company’s ability to continue as
a going concern, disclosing, as applicable, matters related to
going concern; and
• use the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to
cease operations,or have no realistic alternative but to do so.
CARR'S GROUP PLC Annual report and accounts 2019
67
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent
Company’s transactions and disclose with reasonable accuracy at
any time the financial position of the parent Company and enable
them to ensure that its financial statements comply with the
Companies Act 2006. They are responsible for such internal
control as they determine is necessary to enable the preparation
of financial statements that are free from material misstatement,
whether due to fraud or error, and have general responsibility for
taking such steps as are reasonably open to them to safeguard
the assets of the Group and to prevent and detect fraud and other
irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate Governance
Statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the
company’s website. Legislation in the UK governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Directors’ statement as to disclosure of information
to auditors
The Directors who were members of the Board at the time of
approving the Directors’ Report are listed on pages 38 to 39.
Having made enquiries of fellow Directors, each of the Directors
at the date of this report confirms that:
• he is not aware of any relevant audit information of which the
Company’s auditors are unaware; and
• he has taken all the steps that he ought to have taken as a
director in order to make himself aware of any relevant audit
information and to establish that the Company’s auditors are
aware of that information.
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Responsibility statement of the directors in respect of
the annual financial report
Each of the Directors confirms that, to the best of their
knowledge:
•
the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit or loss
of the company and the undertakings included in the
consolidation taken as a whole; and
the Strategic Report includes a fair review of the development
and performance of the business and the position of the
Company and the undertakings included in the consolidation
taken as a whole, together with a description of the principal
risks and uncertainties that they face.
•
Each of the Directors considers the annual report and accounts,
taken as a whole, to be fair, balanced and understandable and
provides the information necessary for shareholders to assess the
Group’s position and performance, business model and strategy.
By Order of the Boards
MATTHEW RATCLIFFE
Company Secretary
20 November 2019
CARR'S GROUP PLC Annual report and accounts 2019
68
INDEPENDENT AUDITOR'S REPORT
To the members of Carr’s Group plc
1. Our opinion is unmodified
We have audited the financial statements of Carr’s Group plc (“the Company”) for the year ended 31 August 2019 which comprise the
Consolidated Income Statement, Consolidated and Company Statements of Comprehensive Income, Consolidated and Company
Balance Sheets, Consolidated Statement of Changes in Equity, Company Statement of Changes in Equity, Consolidated and Company
Statements of Cash Flows, and the related notes, including the Principal Accounting Policies.
In our opinion:
•
the financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at 31 August 2019
and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU);
the parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU 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.
•
•
•
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our
opinion. Our audit opinion is consistent with our report to the audit committee.
We were first appointed as auditor by the shareholders on 8 January 2019. The period of total uninterrupted engagement is for the one
financial year ended 31 August 2019. We have fulfilled our ethical responsibilities under, and we remain independent of the Group in
accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities. No non-audit
services prohibited by that standard were provided.
Overview
Materiality:
£850,000
Group financial statements as a whole
4.9% of group profit before tax before non-recurring items
Coverage
92% of group profit before tax
Key audit matters
Risks
The impact of uncertainties due to the UK exiting the European Union on our audit
Going concern
Contract risk in Engineering on over time contracts
Parent Company: Valuation of Carr’s Group pension scheme defined benefit obligation
Parent Company: Valuation of certain Carr’s Group defined benefit pension scheme assets
Event driven
Acquisition accounting in respect of the acquisitions of Animax and NW Total Engineered
Solutions
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2. Key audit matters: including our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us,
including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the
efforts of the engagement team. We summarise below the key audit matters in arriving at our audit opinion above, together with our
key audit procedures to address those matters and, as required for public interest entities, our results from those procedures. These
matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our
audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and
we do not provide a separate opinion on these matters.
The risk
Our response
The impact of
uncertainties due to the
UK exiting the European
Union on our audit
Refer to page 31 (key risks),
page 33 (viability
statement) and page 47
(Audit Committee Report).
Unprecedented levels of uncertainty:
All audits assess and challenge the
reasonableness of estimates, in
particular as described in the Contract
Risk in Engineering on over time
contracts, Going Concern, Valuation of
Carr’s Group pension scheme defined
benefit obligation (Parent Company),
Valuation of certain Carr’s Group defined
benefit pension scheme assets (Parent
Company) and Acquisition accounting in
respect of the acquisitions of Animax
and NW Total Engineered Solutions key
audit matters below, related disclosures
and the appropriateness of the going
concern basis of preparation of the
financial statements (see below). All of
these depend on assessments of the
future economic environment and the
group’s future prospects and
performance.
In addition, we are required to consider
the other information presented in the
Annual Report including the principal
risks disclosure and the viability
statement and to consider the directors’
statement that the annual report and
financial statements taken as a whole is
fair, balanced and understandable and
provides the information necessary for
shareholders to assess the Group’s
position and performance, business
model and strategy.
Brexit is one of the most significant
economic events for the UK and at the
date of this report its effects are subject
to unprecedented levels of uncertainty
of outcomes, with the full range of
possible effects unknown.
We developed a standardised firm-wide approach to the
consideration of the uncertainties arising from Brexit in
planning and performing our audits. Our procedures
included:
• Our Brexit knowledge – We considered the directors’
assessment of Brexit-related sources of risk for the
group’s business and financial resources compared
with our own understanding of the risks. We considered
the directors’ plans to take action to mitigate the risks.
• Sensitivity analysis – When addressing the going
concern assessment and other areas that depend on
forecasts, we compared the directors’ analysis to our
assessment of the full range of reasonably possible
scenarios resulting from Brexit uncertainty and, where
forecast cash flows are required to be discounted,
considered adjustments to discount rates for the level
of remaining uncertainty.
• Assessing transparency – As well as assessing
individual disclosures as part of our procedures on the
going concern assessment, we considered all of the
Brexit related disclosures together, including those in
the strategic report, comparing the overall picture
against our understanding of the risks.
Our results – As reported under the Contract Risk in
Engineering on over time contracts, Going Concern,
Valuation of Carr’s Group pension scheme defined benefit
obligation (Parent Company), Valuation of certain Carr’s
Group defined benefit pension scheme assets (Parent
Company) and Acquisition accounting in respect of the
acquisitions of Animax and NW Total Engineered Solutions
key audit matters, we found the resulting estimates and
related disclosures in relation to going concern to be
acceptable. However, no audit should be expected to
predict the unknowable factors or all possible future
implications for a company and this is particularly the case
in relation to Brexit.
CARR'S GROUP PLC Annual report and accounts 2019
70
INDEPENDENT AUDITOR'S REPORT CONTINUED
to the members of Carr’s Group plc
The risk
Our response
Going concern
Disclosure quality
Our procedures included:
Refer to page 33 (viability
statement), page 47 (Audit
Committee Report) and
page 85 (accounting policy).
The financial statements explain how the
Board has formed a judgement that it is
appropriate to adopt the going concern
basis of preparation for the group and
parent company.
That judgement is based on an evaluation
of the inherent risks to the Group’s and
Company’s business model and how
those risks might affect the Group’s and
Company’s financial resources or ability to
continue operations over a period of at
least a year from the date of approval of
the financial statements.
The risks most likely to adversely affect
the Group’s and Company’s available
financial resources over this period were:
• The impact of Brexit on the Group’s
Agriculture customer base in the
United Kingdom linked to continued
uncertainty over the nature of any
future trade agreements and
agricultural subsidies; and
• The potential impacts of Brexit on the
Group’s supply chain.
There are also less predictable but realistic
second order impacts, such as the impact
of Brexit and the erosion of customer or
supplier confidence, which could result in
a rapid reduction of available financial
resources.
The risk for our audit was whether or not
those risks were such that they amounted
to a material uncertainty that may have
cast significant doubt about the ability to
continue as a going concern. Had they
been such, then that fact would have been
required to have been disclosed.
• Market analysis – We inquired of key management to
better understand the implications of the company’s share
price performance and implied market expectations on
the company’s going concern assessment.
• Assessment of forecast models – We assessed the
Group’s forecast models to identify and challenge the key
underlying inputs and assumptions, comparing the
group’s assumptions used in the cash flow projections to
externally derived data.
• Funding assessment – We assessed the current and
available committed facilities to understand the financial
resources available to the Group during the forecast
period from the balance sheet date and considered any
related covenants requirements and the evidence
available regarding whether they will be met.
• Historical comparisons – We assessed historical
forecasting accuracy by comparing forecast cash flows to
those actually achieved by the Group.
• Sensitivity analysis – We challenged the stress testing
performed by the directors with reference to our own
sensitivity analysis over the level of available financial
resources indicated by the Group’s financial forecasts
taking account of reasonably possible (but not unrealistic)
adverse effects (including the possible impact of Brexit)
that could arise from these risks individually and
collectively.
• Evaluating directors’ intent – We evaluated the intent of
the directors and the achievability of the actions they
would take to improve the position should certain risks
materialise.
• Assessing transparency – We assessed the
completeness and accuracy of the going concern
disclosures in the financial statements with reference to
our challenge of the directors’ going concern assessment
and considered whether they reflected the risks most
likely to adversely affect the Group’s and Company’s
available financial resources over the forecast period, and
the risks associated with the Group‘s ability to continue as
a going concern.
Our results – We found the going concern disclosure
without any material uncertainty to be acceptable.
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Contract risk in Engineering
on over time contracts
(Revenue: £27.8m)
Refer to page 47 (Audit
Committee Report), pages
86 and 92 (accounting policy)
and pages 95 and 108
(financial disclosures).
The risk
Our response
Subjective estimate
Our procedures included:
For a significant proportion of its contracts
in the Engineering division, the Group
recognises revenue and profit over time.
The recognition of contract revenue and
profit over time is dependent upon
estimates in relation to the estimated total
revenues and forecast total costs of each
performance obligation.
Areas impacting the recognition of
revenue and resulting profit include:
Contracts were selected for substantive audit procedures
based on quantitative factors, such as financial significance
and profitability, and qualitative factors, such as contracts
under increased management scrutiny, that we considered to
be indicative of risk. Our audit testing for the contracts
selected included the following:
• Contract documentation – We inspected the contract
documents and challenged the identification of
performance obligations and the method of revenue
recognition in accordance with IFRS 15.
• The identification of separate
performance obligations and
assessing whether each should be
recognised over time or at a point in
time;
• Contract clauses scrutiny – Our inspection of contract
documents included a search for relevant contractual
mechanisms such as pain/gain shares and liquidated
damages and we assessed how these were reflected in
the amounts recognised in the financial statements.
• Assessment of stage of completion,
estimated total revenues, and
forecast costs to complete for each
performance obligation;
• Consideration of the Group’s
performance against contractual
obligations and the impact on
revenue and costs of delivery;
• The recognition of contract revenue
variations, which should be
recognised only when evidence
supports the assessment that it is
highly probable that a significant
reversal in the amount of revenue
recognised will not occur; and
• The recognition and recoverability of
contract assets.
We also identified a risk that contract costs
could be reallocated between and from
contracts, which in turn could impact the
assessed stage of completion and related
revenue and margin recognition.
The effect of these matters is that, as part
of our risk assessment, we determined
that contract revenue, profit recognition
and the recoverability of contract assets
involve a high degree of estimation
uncertainty, with a potential range of
reasonable outcomes greater than our
materiality for the financial statements as a
whole.
• Challenge key judgements – For selected higher risk or
larger value contracts, we obtained the detailed project
review papers and challenged the Group’s judgements
in respect of contract forecasts, contingencies, and the
recoverability of contract assets via agreement to
third-party certifications and confirmations, challenge
of senior operational, commercial and financial
management and with reference to our own expertise.
We also performed corroborative inquiries of the
Group’s in-house legal counsel.
•
Independent re-performance – Where revenue is
recognised over time, we recalculated progress
towards satisfaction of the performance obligation to
assess the expected revenue and profit recognition and
compared this to the amounts recorded.
• Tests of detail – We inspected a sample of
correspondence with customers and third parties,
including in instances where contract variations have
arisen, to challenge the revenue and costs recorded.
• Physical inspection – We performed physical
inspections subsequent to the balance sheet date in
respect of selected contracts, physically inspecting the
job progress and challenging the stage of completion
and forecast cost to complete through observation and
discussion with key personnel.
• Cost allocation – We challenged the allocation of
contract costs through vouching costs to source
documentation and checking that those costs related
to the stated contract, reviewing certain controls
including timesheet authorisation, and assessing
instances where costs had been reallocated.
• Assessing transparency – We considered the adequacy
of the Group’s contract related disclosures including
those in respect of estimates and judgements relating
to contract revenues and profit recognition.
Our results – We found the revenues and profit recognised
on over time contracts to be acceptable.
CARR'S GROUP PLC Annual report and accounts 2019
72
INDEPENDENT AUDITOR'S REPORT CONTINUED
to the members of Carr’s Group plc
Acquisition accounting in
respect of the acquisitions
of Animax and NW Total
Engineered Solutions
Refer to page 31 (key risks),
page 47 (Audit Committee
Report), pages 85 and 92
(accounting policy) and
pages 125 to 126 (financial
disclosures).
The risk
Our response
Subjective estimate
Our procedures included:
• Assessment of experts – We assessed the competence,
capabilities and objectivity of the external valuation
experts engaged by the Group to assist in estimating
the fair value of material intangible assets acquired in
both transactions, and in estimating the purchase
consideration (including fair valuing the contingent
consideration).
•
Involvement of specialists – We involved our own
valuation specialists to review the approach and
valuation methodologies applied in identifying and
valuing the separately identifiable intangible assets,
and to assess the valuation approach in respect of the
contingent consideration.
• Test of detail – We inspected the share purchase
agreement documents and assessed the Group’s
acquisition workings and contingent consideration
calculations with reference to these documents.
• Assessing transparency – We considered the adequacy
of the Group’s business combination related
disclosures in respect of the disclosure requirements of
IFRS 3.
Our results – We found the identification and valuation of
other intangible assets and the valuation of contingent
consideration related to these acquisitions to be acceptable.
As described in Note 30 of the financial
statements, during the year the Group
completed the acquisitions of Animax
Limited (on 21 September 2018) and
NW Total Engineered Solutions Limited
(on 28 June 2019) for total cash
consideration of up to £8.5m and £9.6m
respectively.
These transactions have been accounted
for in accordance with IFRS 3 ‘Business
Combinations’, with goodwill arising on
both transactions.
The identified risks in respect of these
material acquisitions include:
• The identification, completeness and
valuation of separately identifiable
intangible assets recognised on
acquisition; and
• The estimation uncertainty
associated with the valuation of
contingent consideration included as
part of the transaction consideration
for both acquisitions.
The effect of these matters is that, as part
of our risk assessment, we determined
that the identification and valuation of
other intangible assets and the valuation
of continent consideration involve
estimation uncertainty, with a potential
range of reasonable outcomes greater
than our materiality for the financial
statements as a whole.
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Parent Company: Valuation
of Carr's Group Pension
Scheme defined benefit
pension obligation
(£68.0m)
Refer to page 47 (Audit
Committee Report), pages
87 and 92 (accounting
policy) and pages 117 to 121
(financial disclosures).
The risk
Our response
Subjective valuation
Our procedures included:
The Company operates a defined benefit
pension scheme, the Carr’s Group Pension
Scheme. The defined benefit obligation in
respect of this scheme is material in the
context of the overall balance sheet and
the results of the Company.
• Benchmarking assumptions – We challenged the key
actuarial assumptions applied (discount rate, inflation rate
and mortality rate) in estimating the defined benefit
obligation with the support of our own pension
specialists, including a comparison of the principal
assumptions against market data.
• Sensitivity analysis – We assessed the sensitivity of the
defined benefit obligation to changes in certain key
actuarial assumptions.
• Assessment of experts – We assessed the competence,
capabilities and objectivity of the external actuary
engaged by the Company.
• Assessing transparency – We considered the adequacy
of the Company’s disclosures in respect of the sensitivity
of the obligation to changes in key assumptions.
Our results – We found the valuation of the Carr’s Group
Pension Scheme defined benefit pension obligation to be
acceptable.
Significant estimates in respect of key
actuarial assumptions including the
discount rate, inflation rate and mortality
rate, are made in valuing the Company’s
defined benefit obligation (before
deducting the scheme’s assets).
The scheme is closed to future accrual,
but small changes in the assumptions and
estimates would have a material impact
on the financial position of the Company.
The Company engages external actuarial
specialists to assist in selecting
appropriate assumptions and to calculate
the obligation.
The effect of these matters is that, as part
of our risk assessment, we determined
that the valuation of the Carr’s Group
Pension Scheme defined benefit
obligation has a high degree of estimation
uncertainty, with a potential range of
reasonable outcomes greater than our
materiality for the Company’s financial
statements as a whole, and possibly many
times that amount. The financial
statements (Note 27) disclose the
sensitivities estimated by the Company.
Parent Company: Valuation
of certain Carr's Group
defined benefit pension
scheme assets
(£6.8m)
Refer to page 47 (Audit
Committee Report), pages
87 and 92 (accounting
policy) and pages 117 to 121
(financial disclosures).
Subjective valuation
Our procedures included:
The Company operates a defined benefit
pension scheme, the Carr’s Group Pension
Scheme.
The Carr’s Group Pension Scheme holds
assets for which quoted prices are not
available. The valuation of these assets
can have a significant impact on the
surplus. Valuations are prepared based on
most recent information available and are
updated where appropriate.
The effect of this matter is that, as part of
our risk assessment, we determined that
the valuation of those Carr’s Group
Pension Scheme assets for which quoted
prices are not available is subject to a high
degree of estimation uncertainty.
• Asset confirmations – We obtained valuation statements
in respect of the scheme’s investments directly from fund
managers. We compared those confirmations with
unaudited net asset value statements and assessed the
ability of fund managers to prepare accurate valuations
by performing a retrospective review, comparing to the
latest available audited financial statements, where
applicable.
• Assessment of the fund and fund manager – We
assessed the competence, capabilities, objectivity,
internal control environment and the relevant financial
regulation of the managers of the funds to assess the
ability of the fund managers to prepare accurate
valuations and honour prices provided.
• Assessing transparency – We considered the adequacy
of the disclosures in respect of the scheme assets.
Our results – We found the valuation of the assets for
which quoted prices were not available to be acceptable.
CARR'S GROUP PLC Annual report and accounts 2019
74
INDEPENDENT AUDITOR'S REPORT CONTINUED
to the members of Carr’s Group plc
3. Our application of materiality and an overview of the
scope of our audit
Materiality for the group financial statements as a whole was set
at £850,000, determined with reference to a benchmark of group
profit before tax, normalised to exclude this year’s non-recurring
items as disclosed in note 5, of which it represents 4.9%.
Materiality for the parent company financial statements as a
whole was set at £350,000, determined with reference to a
benchmark of company total assets, of which it represents 0.4%.
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £42,500, in
addition to other identified misstatements that warranted
reporting on qualitative grounds.
Of the group’s 52 reporting components, we subjected eight to
full scope audit for group purposes. We subjected two
components to specified risk-focused audit procedures over
property, plant and equipment (one component), revenue, cost of
sales, trade and other receivables, trade and other payables (one
component) and cash and cash equivalents (two components).
The latter were not individually financially significant enough to
require a full scope audit for group purposes, but did present
specific individual risks that needed to be addressed. For the
residual components, we performed analysis at an aggregated
group level to re-examine our assessment that there were no
significant risks of material misstatement within these.
The components within the scope of our work accounted for the
percentages illustrated opposite. The remaining 2% of total group
revenue, 8% of group profit before tax and 13% of total group
assets is represented by eleven reporting components, none of
which individually represented more than 5% of any of total group
revenue, group profit before tax or total group assets. For these
residual components, we performed analysis at an aggregated
group level to re-examine our assessment that there were no
significant risks of material misstatement within these.
The Group team instructed component auditors as to the
significant areas to be covered, including the relevant risks
detailed above and the information to be reported back. The
Group team approved the component materialities, which ranged
from £100,000 to £620,000, having regard to the mix of size and
risk profile of the Group across the components. The work on two
of the eight components subject to full scope audits for group
purposes was performed by component auditors and the rest,
including the audit of the parent company, was performed by the
Group team. The Group team performed procedures on the items
excluded from normalised group profit before tax.
The Group team held telephone conference meetings with the
component auditors. At these meetings, the findings reported to
the Group team were discussed in more detail, and any further
work required by the Group team was then performed by the
component auditor.
Profit before tax and
non-recurring items £17.2m
Group Materiality
£850,000
£850,000
Whole financial
statements materiality
£620,000
Range of materiality at
10 components
(£100,000 - £620,000)
£42,500
Misstatements reported
to the Audit Committee
Profit before tax before non-recurring items
Group materiality
Group revenue
Group profit before tax
0.5
8
98%
92%
98
92
Group total assets
3
87%
84
Full scope for group audit purposes 2019
Specified risk focused audit procedures 2019
Residual components
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4. We have nothing to report on going concern
The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or the
Group or to cease their operations, and as they have concluded that the Company’s and the Group’s financial position means that this
is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to
continue as a going concern for at least a year from the date of approval of the financial statements (“the going concern period”).
Our responsibility is to conclude on the appropriateness of the Directors’ conclusions and, had there been a material uncertainty
related to going concern, to make reference to that in this audit report. However, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were
made, the absence of reference to a material uncertainty in this auditor’s report is not a guarantee that the Group and the Company will
continue in operation.
We identified going concern as a key audit matter (see section 2 of this report). Based on the work described in our response to that
key audit matter, we are required to report to you if:
• we have anything material to add or draw attention to in relation to the directors’ statement in the Principal Accounting Policies to
the financial statements on the use of the going concern basis of accounting with no material uncertainties that may cast significant
doubt over the Group and Company’s use of that basis for a period of at least twelve months from the date of approval of the
financial statements; or
the same statement under the Listing Rules is materially inconsistent with our audit knowledge.
•
We have nothing to report in these respects.
5. We have nothing to report on the other information in the Annual Report
The directors are responsible for the other information presented in the Annual Report together with the financial statements.
Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or,
except as explicitly stated below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the
information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that
work we have not identified material misstatements in the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
• we have not identified material misstatements in the strategic report and the directors’ report;
•
•
in our opinion the information given in those reports for the financial year is consistent with the financial statements; and
in our opinion those reports have been prepared in accordance with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006.
Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial statements audit, we have nothing material to add or draw attention to in
relation to:
•
the directors’ confirmation within the Viability Statement 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 and liquidity;
the Principal Risks disclosures describing these risks and explaining how they are being managed and mitigated; and
the directors’ explanation in the Viability Statement of how they have assessed the prospects of the Group, over what period they
have done so and why they considered 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.
•
•
Under the Listing Rules we are required to review the Viability Statement. We have nothing to report in this respect.
Our work is limited to assessing these matters in the context of only the knowledge acquired during our financial statements audit.
As we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with
judgments that were reasonable at the time they were made, the absence of anything to report on these statements is not a guarantee
as to the Group’s and Company’s longer-term viability.
CARR'S GROUP PLC Annual report and accounts 2019
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INDEPENDENT AUDITOR'S REPORT CONTINUED
to the members of Carr’s Group plc
Corporate governance disclosures
We are required to report to you if:
• we have identified material inconsistencies between the knowledge we acquired during our financial statements audit and the
directors’ statement that they consider that the annual report and financial statements taken as a whole is fair, balanced and
understandable and provides the information necessary for shareholders to assess the Group’s position and performance, business
model and strategy; or
the section of the annual report describing the work of the Audit Committee does not appropriately address matters communicated
by us to the Audit Committee; or
•
• a corporate governance statement has not been prepared by the company.
We are required to report to you if the Statement of Compliance with UK Corporate Governance Code does not properly disclose a
departure from the eleven provisions of the UK Corporate Governance Code specified by the Listing Rules for our review.
We have nothing to report in these respects.
Based solely on our work on the other information described above:
• with respect to the Statement of Compliance with UK Corporate Governance Code disclosures about internal control and risk
management systems in relation to financial reporting processes and about share capital structures:
– we have not identified material misstatements therein; and
– the information therein is consistent with the financial statements; and
in our opinion, the Statement of Compliance with UK Corporate Governance Code has been prepared in accordance with relevant
rules of the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority.
•
6. We have nothing to report on the other matters on which we are required to report by exception
Under the Companies Act 2006, we are required to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received
•
from branches not visited by us; or
the parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
We have nothing to report in these respects.
7. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on pages 66 to 67, the directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable
the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group
and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the
going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or
have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or other irregularities (see below), or error, and to issue our opinion in an auditor’s report.
Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements can arise from fraud, other irregularities or error and are
considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.
Irregularities – ability to detect
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements
from our general commercial and sector experience and, through discussion with the directors and other management (as required by
auditing standards) and from inspection of the group’s legal correspondence and discussed with the directors and other management
the policies and procedures regarding compliance with laws and regulations. We communicated identified laws and regulations
throughout our team and remained alert to any indications of non-compliance throughout the audit. This included communication
from the group to component audit teams of relevant laws and regulations identified at group level.
The potential effect of these laws and regulations on the financial statements varies considerably.
CARR'S GROUP PLC Annual report and accounts 2019
77
Firstly, the Group is subject to laws and regulations that directly affect the financial statements including financial reporting legislation
(including related companies legislation), distributable profits legislation and taxation legislation and we assessed the extent of
compliance with these laws and regulations as part of our procedures on the related financial statement items.
Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a material
effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation. We identified the
following areas as those most likely to have such an effect: health and safety, anti-bribery, employment law, regulatory capital and
liquidity and certain aspects of company legislation, recognising the nature of the group’s activities. Auditing standards limit the
required audit procedures to identify non-compliance with these laws and regulations to enquiry of the directors and other
management and inspection of regulatory and legal correspondence, if any. Through these procedures, we became aware of actual or
suspected non-compliance and considered the effect as part of our procedures on the related financial statement items. The
identified actual or suspected non-compliance was not sufficiently significant to our audit to result in our response being identified as
a key audit matter.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements
in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For
example, the further removed non-compliance with laws and regulations (irregularities) is from the events and transactions reflected in
the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition,
as with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal controls. We are not responsible for preventing non-compliance and cannot
be expected to detect non-compliance with all laws and regulations.
8. The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have
formed.
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Nick Plumb
(Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
Quayside House
110 Quayside
Newcastle Upon Tyne
NE1 3DX
20 November 2019
CARR'S GROUP PLC Annual report and accounts 2019
78
CONSOLIDATED INCOME STATEMENT
For the year ended 31 August 2019
Continuing operations
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Adjusted1 share of post-tax results of associates
Non-recurring items
Share of post-tax results of associates
Share of post-tax results of joint ventures
Adjusted1 operating profit
Amortisation of acquired intangible assets and non-recurring items
Operating profit
Finance income
Finance costs
Adjusted1 profit before taxation
Amortisation of acquired intangible assets and non-recurring items
Profit before taxation
Taxation
Profit for the year
Profit attributable to:
Equity shareholders
Non-controlling interests
Earnings per ordinary share (pence)
Basic
Diluted
Adjusted1
Notes
2,3
2019
£’000
2018
£’000
403,905
(349,798)
403,192
(349,864)
54,107
(18,454)
(20,835)
53,328
(18,950)
(21,188)
5
2
5
2,4
7
7
2
5
2
8
10
10
10
1,230
(306)
924
1,453
18,930
(1,735)
17,195
463
(1,349)
18,044
(1,735)
16,309
(2,685)
1,634
–
1,634
1,581
17,464
(1,059)
16,405
358
(1,261)
16,561
(1,059)
15,502
(1,855)
13,624
13,647
12,049
1,575
13,624
13.1
12.8
14.6
11,892
1,755
13,647
13.0
12.7
13.9
1 Adjusted results are after adding back amortisation of acquired intangible assets and non-recurring items including acquisition costs.
CARR'S GROUP PLC Annual report and accounts 2019
79
CONSOLIDATED AND COMPANY STATEMENTS OF
COMPREHENSIVE INCOME
For the year ended 31 August 2019
Profit for the year
Other comprehensive income/(expense)
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation gains/(losses) arising on translation of
overseas subsidiaries
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 asset:
– Group
– Share of associate
Taxation credit/(charge) on actuarial (losses)/gains on retirement
benefit asset:
– Group
– Share of associate
Other comprehensive income/(expense) for the year, net of tax
Total comprehensive income for the year
Total comprehensive income attributable to:
Equity shareholders
Non-controlling interests
Group
2019
£’000
Company
2018
£’000
2019
£’000
Notes
13,624
13,647
6,768
2018
£’000
2,541
1,857
37
(7)
(505)
111
(21)
–
–
–
–
–
–
27
18
(1,845)
(88)
4,836
1,194
(1,845)
–
4,836
–
314
15
283
13,907
12,332
1,575
13,907
(822)
(203)
4,590
18,237
16,482
1,755
18,237
314
–
(1,531)
5,237
5,237
–
5,237
(822)
–
4,014
6,555
6,555
–
6,555
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CARR'S GROUP PLC Annual report and accounts 2019
80
CONSOLIDATED AND COMPANY BAL ANCE SHEETS
As at 31 August 2019
(Company Number 00098221)
Group
Company
Notes
2019
£’000
2018
£’000
2019
£’000
2018
£’000
11
11
12
13
14,17
14,15
14,16
14
32,877
9,318
41,917
164
–
13,392
9,671
76
24,272
2,223
38,484
170
–
13,129
8,004
74
–
376
158
–
26,538
245
272
–
–
328
155
–
26,561
245
272
–
15,405
10,146
233
21
27
18
19
20
21
22
26
23
22
7,769
410
21
10,146
–
16,413
7,769
285
115,616
96,523
52,056
53,345
46,270
9,466
56,349
–
42,371
–
67,516
119
–
–
36,185
840
–
–
22,515
1,360
–
28,649
26
24,632
–
6,778
–
4,955
140,734 134,664
43,803
28,830
256,350
231,187
95,859
82,175
25 (23,856)
20
(1,269)
24 (62,653)
(1,010)
(34,994)
–
(64,290)
(175)
(7,806)
–
(2,533)
–
(18,839)
–
(2,461)
–
(88,788)
(99,459)
(10,339)
(21,300)
25 (28,586)
(4,987)
18
(2,999)
24
(4,997)
(3,981)
(1,784)
(26,846)
(1,321)
–
(3,564)
(1,725)
–
(36,572)
(10,762)
(28,167)
(5,289)
(125,360)
(110,221)
(38,506)
(26,589)
130,990
120,966
57,353
55,586
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
Contract assets
Trade and other receivables
Current tax assets
Financial assets
– Derivative financial instruments
– Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Financial liabilities
– Borrowings
Contract liabilities
Trade and other payables
Current tax liabilities
Non-current liabilities
Financial liabilities
– Borrowings
Deferred tax liabilities
Other non-current liabilities
Total liabilities
Net assets
CARR'S GROUP PLC Annual report and accounts 2019
81
CONSOLIDATED AND COMPANY BAL ANCE SHEETS CONTINUED
As at 31 August 2019
(Company Number 00098221)
Shareholders’ equity
Share capital
Share premium
Other reserves
Retained earnings:
At beginning of the year
Effect of IFRS 15 adoption
Profit attributable to the equity shareholders
Other changes in retained earnings
Total shareholders’ equity
Non-controlling interests
Total equity
Notes
28
Group
Company
2019
£’000
2018
£’000
2019
£’000
2018
£’000
2,299
9,165
7,922
2,285
9,141
5,888
2,299
9,165
1,693
87,967
(124)
12,049
(5,028)
74,802
–
11,892
1,273
42,623
–
6,768
(5,195)
2,285
9,141
1,537
39,814
–
2,541
268
94,864
87,967
44,196
42,623
114,250
16,740
105,281
15,685
57,353
–
55,586
–
130,990
120,966
57,353
55,586
The financial statements set out on pages 78 to 131 were approved by the Board on 20 November 2019 and signed on its behalf by:
TIM J DAVIES
NEIL AUSTIN
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CARR'S GROUP PLC Annual report and accounts 2019
82
CONSOLIDATED STATEMENT OF CHANGES IN EQUIT Y
For the year ended 31 August 2019
Share
Capital
£’000
Share
Premium
£’000
Treasury
Share
Reserve
£’000
Equity
Compensation
Reserve
£’000
Foreign
Exchange
Reserve
£’000
Other
Reserve
£’000
Retained
Earnings
£’000
Total
Shareholders’
Equity
£’000
Non-
controlling
Interests
£’000
Total Equity
£’000
At 3 September 2017
2,285
9,130
Profit for the year
Other comprehensive
(expense)/income
Total comprehensive
(expense)/income
Dividends paid
Equity settled share-based
payment transactions
Excess deferred taxation on
share-based payments
Allotment of shares
Transfer
–
–
–
–
–
–
–
–
–
–
–
–
–
–
11
–
At 1 September 2018
2,285
9,141
As previously reported at
1 September 2018
Effect of IFRS 15 adoption
At 2 September 2018
(restated)1
Profit for the year
Other comprehensive
income/(expense)
Total comprehensive
income
Dividends paid
Equity settled share-based
payment transactions
Allotment of shares
Purchase of own shares
held in trust
Reclassified from liabilities
Transfer
2,285
–
9,141
–
2,285
9,141
–
–
–
–
–
14
–
–
–
–
–
–
–
–
24
–
–
–
At 31 August 2019
2,299
9,165
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(13)
–
13
–
386
4,674
205
74,802
91,482
14,441
105,923
–
–
–
–
1,041
–
–
–
–
(415)
(415)
–
–
–
–
–
–
–
–
–
–
–
–
(3)
11,892
11,892
1,755
13,647
5,005
4,590
–
4,590
16,897
(3,770)
16,482
(3,770)
1,755
(588)
18,237
(4,358)
8
27
–
3
1,049
76
1,125
27
11
–
1
–
–
28
11
–
1,427
4,259
202
87,967
105,281
15,685
120,966
1,427
–
4,259
–
202
–
87,967
(124)
105,281
(124)
15,685 120,966
(124)
–
1,427
4,259
202
87,843
105,157
15,685 120,842
–
–
–
–
53
–
–
97
–
–
1,887
1,887
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3)
12,049
12,049
1,575
13,624
(1,604)
283
–
283
10,445
(4,173)
12,332
(4,173)
1,575
(588)
13,907
(4,761)
759
–
–
–
(10)
812
38
(13)
97
–
68
–
–
–
–
880
38
(13)
97
–
1,577
6,146
199
94,864
114,250
16,740 130,990
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 £759,000 (2018: £8,000) was transferred from the equity compensation reserve to retained earnings in
respect of options exercised in the year.
The Group has opted to use previous revaluations of property made under UK GAAP as deemed cost. On adoption of IFRS the
revaluation reserve was reclassified to other reserves.
1 Restated for the adoption of IFRS 15 (note 37)
CARR'S GROUP PLC Annual report and accounts 2019
83
COMPANY STATEMENT OF CHANGES IN EQUIT Y
For the year ended 31 August 2019
At 3 September 2017
Profit for the year
Other comprehensive income
Total comprehensive income
Dividends paid
Equity settled share-based payment transactions
Excess deferred taxation on share-based payments
Allotment of shares
At 1 September 2018
At 2 September 2018
Profit for the year
Other comprehensive expense
Total comprehensive income
Dividends paid
Equity settled share-based payment transactions
Excess deferred taxation on share-based payments
Allotment of shares
Purchase of own shares held in trust
Reclassified from liabilities
Transfer
Share
Capital
£’000
Share
Premium
£’000
2,285
9,130
–
–
–
–
–
–
–
–
–
–
–
–
–
11
2,285
2,285
9,141
9,141
–
–
–
–
–
–
14
–
–
–
–
–
–
–
–
–
24
–
–
–
At 31 August 2019
2,299
9,165
Treasury
Share
Reserve
£’000
Equity
Compensation
Reserve
£’000
Retained
Earnings
£’000
Total
Equity
£’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(13)
–
13
–
424
39,814
51,653
–
–
–
–
1,113
–
–
2,541
4,014
2,541
4,014
6,555
6,555
(3,770)
2
22
–
(3,770)
1,115
22
11
1,537
42,623
55,586
1,537
42,623
55,586
–
–
–
–
59
–
–
–
97
–
6,768
(1,531)
6,768
(1,531)
5,237
5,237
(4,173)
520
2
–
–
–
(13)
(4,173)
579
2
38
(13)
97
–
1,693
44,196
57,353
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 £520,000 (2018: £2,000) was transferred from the equity compensation reserve to retained earnings and £301,000 (2018: £9,000)
was transferred from the equity compensation reserve to investment in subsidiaries in respect of options exercised in the year.
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CARR'S GROUP PLC Annual report and accounts 2019
84
CONSOLIDATED AND COMPANY STATEMENTS OF CASH FLOWS
For the year ended 31 August 2019
Cash flows from operating activities
Cash generated from/(used in) continuing operations
Interest received
Interest paid
Tax paid
Net cash generated from/(used in) operating activities
Cash flows from investing activities
Acquisition of subsidiaries (net of overdraft/cash acquired)
Contingent/deferred consideration paid
Net costs of disposal of associate
Dividends received from subsidiaries
Net (payment)/receipt of loans to subsidiaries
Dividend received from associate and 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
Net cash (used in)/generated from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary share capital
New bank loans and movement on RCF
Finance lease principal repayments
Repayment of borrowings
(Decrease)/increase in other borrowings
Dividends paid to shareholders
Dividends paid to related party
Net cash generated from/(used in) 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
Notes
31
14
28
9
Group
Company
2019
£’000
2018
£’000
2019
£’000
2018
£’000
16,004
178
(1,276)
(2,306)
14,980
226
(1,210)
(2,511)
(2,587)
1,765
(547)
492
(2,124)
1,711
(513)
(473)
12,600
11,485
(877)
(1,399)
(9,868)
(379)
–
–
–
711
–
79
(1,310)
831
(4,471)
(13)
–
(1,522)
(2,617)
(90)
–
–
704
1,008
59
(325)
189
(4,488)
–
20
–
–
–
6,805
(12,623)
588
–
–
(89)
–
(46)
(13)
–
–
–
–
4,625
787
588
–
–
(328)
–
(229)
–
–
(14,420)
(7,062)
(5,378)
5,443
38
14,430
(1,278)
(2,493)
(1,352)
(4,173)
(588)
11
(2,076)
(997)
(3,241)
8,934
(3,770)
(588)
38
13,763
–
(1,613)
–
(4,173)
–
11
(2,076)
–
(1,750)
–
(3,770)
–
4,584
(1,727)
8,015
(7,585)
526
(305)
63
2
3,290
21,005
2,391
18,614
23
24,295
21,005
1,823
4,955
6,778
(3,539)
8,494
4,955
CARR'S GROUP PLC Annual report and accounts 2019
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85
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, Cumbria 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
certain financial assets and financial liabilities (including derivative financial instruments) at fair value through profit or loss.
The accounting policies for the Group and Company are detailed below:
Going concern
The Directors have reviewed the Group’s operational forecasts and projections for the next 12 months, taking account of reasonably
possible changes in trading performance, together with the planned capital investment over that same period. The Group is expected
to have a sufficient level of financial resources available through operating cash flows and existing bank facilities.
The key risks to future performance are discussed on pages 30 to 32 in the strategic report. The financial position of the Group
including cash flows and borrowing facilities are described in the financial review on pages 16 to 17 in the strategic report.
After making enquiries, the Directors have a reasonable expectation that the Group and the Company have adequate resources to
continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing
the Annual Report and Accounts.
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.
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.
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 this definition of control.
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
associates’ and joint ventures’ post-tax results 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. Contingent
consideration is measured initially at fair value and is revalued to fair value at each subsequent period end until the period in which
it is settled.
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.
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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.
Revenue recognition
Revenue is recognised when the Group transfers control over a product or service to its customer. Revenue is measured based on the
consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. Inter segmental
transactions are on an arm’s length basis.
The Group recognises revenue both at a point in time and over time. Revenues generated by the Group’s Agriculture division are
recognised at a point in time. Revenues generated by the Group’s Engineering division are recognised over time where the contract
with the customer does not create an asset with an alternative use and where there is an enforceable right to payment for performance
completed to date. Where this is not the case revenue is recognised at a point in time.
In respect of contracts that meet the criteria to be recognised over time, revenue is calculated on the basis of the stage of completion
of each contract.
The Group applies a single method of measuring progress for each performance obligation satisfied over time and applies this method
consistently to similar performance obligations and in similar circumstances. Depending on the nature and circumstances of the
performance obligation, the stage of completion is determined with reference to either:
• The proportion that contract costs incurred for work performed to date bear to the total estimated contract costs; or
• The proportion that contract output is delivered towards complete satisfaction of the performance obligation with reference to
certified contract works.
Revenue is recognised for a performance obligation satisfied over time only if the Group can reasonably measure its progress towards
complete satisfaction of the performance obligation. In circumstances when it cannot reasonably measure the outcome, but expects
to recover the costs incurred in satisfying the performance obligation, the Group recognises revenue only to the extent of the costs
incurred. The Group would not be able to reasonably measure its progress towards complete satisfaction of a performance obligation
if it lacks reliable information that would be required to apply an appropriate method of measuring progress.
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.
Contract modifications such as variations to the original order are not accounted for until they are approved by the customer. Where a
modification to an existing contract occurs, the nature of the modification is assessed to determine whether it represents a separate
performance obligation required to be satisfied by the Group or whether it is a modification to the existing performance obligation.
The Group does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer
and payment by the customer exceeds one year. As a consequence, the Group does not apply the time value of money to its transaction prices.
Incremental costs of obtaining a contract with a customer are only recognised when it is expected that these costs will be recovered.
Costs to obtain a contract that would have been incurred regardless of whether the contract was obtained are recognised as an
expense when incurred, unless those costs are explicitly chargeable to the customer regardless of whether the contract is obtained.
Where the amortisation period of an asset that would otherwise have been recognised is one year or less, the incremental costs of
obtaining a contract are expensed when incurred.
IFRS 15 introduces new asset and liability categories, ‘Contract assets’ and ‘Contract liabilities’. Contract assets exist when the Group
has a right to consideration in exchange for goods or services transferred to a customer when that right is conditional on something
other than the passage of time (e.g. future performance). Contract liabilities exist when the Group has an obligation to transfer goods or
services to a customer for which the Group has already received consideration. The Group has adopted IFRS 15 with effect from 2
September 2018 and has applied the standard retrospectively.
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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
The asset recognised in the consolidated and Company balance sheet at the year end is the fair value of scheme assets at the balance
sheet date less the present value of the defined benefit obligation. 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 considered
recoverable, is 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. Following a review of the Scheme’s Trust deed the Directors believe there is a right to
recognise the IAS 19 pension surplus. At 31 August 2019 and 1 September 2018 the consolidated and Company balance sheet
recognises the full surplus on the Carr’s Group defined benefit pension scheme.
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 27 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.
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Non-recurring items
Non-recurring items that are material by size and/or by nature are presented within their relevant income statement category, but
highlighted separately on the face of the income statement. Items that management consider fall into this category are also disclosed
within a note to the financial statements. The separate disclosure of profit before 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, contingent consideration linked to continued employment of key personnel, adjustments to
contingent consideration arising from fair value revaluation, asset impairments including impairment of goodwill and the past service
costs in respect of GMP equalisation.
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.
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 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
Proprietary technology
Development costs
Patents and trademarks
Contract backlog
Software
1 – 10 years
6 – 25 years
15 years
5 – 13 years
5 – 15 years
contractual life
3 years
3 – 10 years
Intangible assets 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.
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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 inflows 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.
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.
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.
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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 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 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.
Classification of financial instruments issued by the Group and Company
Financial instruments issued by the Group and Company are treated as equity only to the extent that they meet the following two
conditions:
(a) they include no contractual obligations upon the Group or Company to deliver cash or other financial assets or to exchange
financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group or
Company; and
(b) where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that includes no
obligation to deliver a variable number of the Company’s own equity instruments or is a derivative that will be settled by the
Company’s exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so
classified takes the legal form of the Company’s own shares, the amounts presented in these financial statements for called up share
capital and share premium account exclude amounts in relation to those shares.
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.
Financial assets classified under IAS 39 as loans and receivables continue to be classified within the amortised cost category under
IFRS 9. This includes current trade and other receivables and non-current receivables on the Group and Company balance sheets.
The Group and Company classifies its financial assets under the measurement categories of amortised cost, for non-derivative
financial assets, or measured subsequently at fair value through either profit or loss or comprehensive income.
Non-derivative financial assets
Non-derivative financial assets include contract assets, trade and other receivables and non-current receivables. As these categories
of financial assets do not carry a significant financing element, expected credit losses are measured using the simplified impairment
approach. This requires expected lifetime losses to be recognised upon the initial recognition of the asset.
Non-derivative financial assets are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method.
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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. The Group continues to apply IAS 39 for the purposes of hedge accounting as
permitted by IFRS 9.
New standards and interpretations
From 2 September 2018 the following became effective and were adopted by the Group and Company:
IFRS 9 ‘Financial instruments’
IFRS 15 ‘Revenue from contracts with customers’
Clarifications to IFRS 15 ‘Revenue from contracts with customers’
Amendment to IFRS 15 – effective date of IFRS 15
Amendments to IFRS 2 Share-based payments on clarifying share-based payment transactions
Amendments to IFRS 4 ‘Insurance contracts’ regarding the implementation of IFRS 9 ‘Financial instruments’
IFRIC 22 Foreign currency transactions and advance consideration
Amendment to IAS 40 ‘Investment property’ relating to transfers of investment property
Annual improvements to IFRSs – 2014-2016 cycle
With the exception of IFRS 9 and IFRS 15, which are discussed further below, the adoption of the above amendments and
interpretations has had no impact on the Group or Company’s profit for the year or equity.
The Group and Company adopted IFRS 9 ‘Financial instruments’ retrospectively from 2 September 2018. There was no material impact
on adoption of this new standard.
The Group and Company adopted IFRS 15 with effect from 2 September 2018 and has applied the standard retrospectively with the
cumulative effect of initially applying the standard recognised at the date of initial application. The Group has restated its opening
equity position as at 2 September 2018 by a charge of £0.1m. Comparative information has not been restated and is therefore still
reported under IAS 11 and IAS 18. To assist comparability, note 37 shows the balance sheet as at 31 August 2019 had the Group
continued to adopt IAS 11 and IAS 18.
New standards, amendments and interpretations issued but not yet effective and not early adopted
IFRS 16 ‘Leases’
IFRIC 23 Uncertainty over income tax treatments
Amendment to IFRS 9 Financial instruments on prepayment features with negative compensation
Amendments to IAS 28 ‘Investment in associates’, on long term interests in associates and joint ventures
Annual improvements to IFRSs – 2015-2017 cycle
Amendments to IAS 19 ‘Employee Benefits’
IFRS 16, “Leases”, is effective for periods beginning on or after 1 January 2019, and will therefore first apply to Carr’s in the year ending
August 2020. Under IFRS 16, leases currently treated as operating leases such as property leases, company cars and some IT
equipment will be recorded as an asset and a lease liability.
The Group intends to apply the modified retrospective approach to transition and comparative amounts will not be restated. On
transition to IFRS 16 total assets will increase by approximately £8.2m-£13.6m with total liabilities increasing by approximately
£9.3m-£15.4m.
Significant judgements, key assumptions and estimates
Application of certain Group accounting policies requires management to make judgements, assumptions and estimates concerning
the future as detailed below.
The following is considered to be a significant judgement.
Recognition of pension scheme surplus
The balance sheet includes a retirement benefit asset of £7.8m (2018: £10.1m). Significant judgement is required over the right to
recognise this surplus under IFRIC 14. Following a review of the Scheme’s Trust deed the Directors believe there is a right to recognise
the IAS 19 pension surplus in full.
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Significant judgements, key assumptions and estimates continued
The following are considered to be accounting estimates.
Valuation of pension obligations
The valuation of the Group’s defined benefit pension scheme is determined each year following advice from a qualified 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 27 and actual returns on scheme assets compared to those predicted in the previous scheme valuation. In addition, for assets
falling within the IFRS 13 fair value hierarchy level 3 inputs category there is exposure to estimation uncertainty when estimating the
asset value. It is reasonably possible, on the basis of existing knowledge, that outcomes within the next financial year that are different
from the assumption could require a material adjustment to the carrying amount of the assets affected. An income statement charge
of £795,000 has been recognised in respect of the impact of GMP equalisation for the Carr's Group Pension Scheme. The carrying
value of the defined benefit pension scheme surplus at 31 August 2019 is £7.8m (2018: £10.1m). More information on the pension
scheme is given in note 27.
In addition, the associate’s defined benefit pension scheme is also subject to these estimation uncertainties. The surplus being recognised
by the associate is £1.9m (2018: £2.0m) of which the Group recognises 49% in its balance sheet within its ‘Investment in associate’.
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.
An impairment of £nil (2018: £0.5m) was identified. The carrying value of goodwill at 31 August 2019 is £32.9m (2018: £24.3m). Further
details of cash generating units and stress testing performed on the carrying values can be found in note 11.
Provision for impairment of trade receivables
The financial statements include a provision for impairment of trade receivables 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. The
carrying value of the provision for impairment of trade receivables at 31 August 2019 is £1.3m (2018: £1.7m). Further details of the
provision, including ageing profile, can be found in note 21.
Revenue recognition on contracts
For contracts recognised over time the Group recognises revenue and profits based on the stage of completion. This requires
management to make an assessment of performance obligations under each contract, the ability to reasonably estimate the outcome,
and the point at which those obligations have been fulfilled. Management use estimates and judgements when assessing the total
expected costs on a contract. The Group has controls in place to review and moniter the estimates used to ensure they are appropriate.
Disclosures relating to the disaggregation of revenue for revenues recognised at a point in time and revenues recognised over time can
be found in note 3. The Group has adopted IFRS 15 with effect from 2 September 2018 and has applied the retrospective approach.
Valuation of acquired intangible assets
IFRS 3 ‘Business combinations’ requires the acquiror to fair value identifiable assets of an acquired business including intangible
assets. The fair value of intangible assets is determined using valuation techniques such as relief-from-royalty, replacement cost and
multi-period excess earnings method. These techniques and models require inputs based on estimations such as forecasted profits,
technology obsolescence rates, royalty rates, discount rates and useful economic lives.
During the year the Group made acquisitions with a combined intangible asset fair value of £6.6m (note 30).
Valuation of contingent consideration
IFRS 3 ‘Business combinations’ requires contingent consideration to be measured initially at fair value and then subsequently revalued
to fair value at each period end. This involves an estimate of expected future payments based on profit forecasts and discount rates to
reflect the time value of money. The Group recognised in its acquisition accounting contingent consideration of £2.1m for Animax Ltd
and £3.2m for NW Total Engineered Solutions Ltd. Note 30 includes a table showing the consideration for each acquisition split
between initial cash consideration and contingent consideration.
CARR'S GROUP PLC Annual report and accounts 2019
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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 £6,768,000 (2018: £2,541,000).
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. 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, feed blocks and animal
health products together with retail sales of farm equipment, fuels and farm consumables.
Engineering derives its revenue from the provision of engineering services and the design and manufacture of bespoke equipment for
use in the nuclear, naval defence, oil and gas, and petrochemical industries. Products include manipulators, robotics, specialist
fabrication and precision machining.
Performance is assessed using operating profit. For internal purposes the CODM assesses operating profit before material non-
recurring items and amortisation of acquired intangible assets (note 5) consistent with the presentation in the financial statements.
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 31 August 2019 is as follows:
Total segment revenue
Inter segment revenue
Revenue from external customers
Adjusted1 EBITDA2
Depreciation, amortisation and profit/(loss) on disposal of property, plant and equipment
Share of post-tax results of associate (adjusted1) and joint ventures
Adjusted1 operating profit
Amortisation of acquired intangible assets and non-recurring items
Operating profit
Finance income
Finance costs
Adjusted1 profit before taxation
Amortisation of acquired intangible assets and non-recurring items
Profit before taxation
Agriculture
£’000
Engineering
£’000
357,399
(11)
46,556
(39)
IAS 19 past
service cost
£’000
Group
£’000
– 403,955
(50)
–
357,388
46,517
– 403,905
13,909
(3,000)
2,683
13,592
(701)
7,247
(1,909)
–
5,338
(239)
–
–
–
–
(795)
21,156
(4,909)
2,683
18,930
(1,735)
12,891
5,099
(795)
17,195
463
(1,349)
18,044
(1,735)
16,309
1 Adjusted results are after adding back amortisation of acquired intangible assets and non-recurring items including acquisition costs (note 5).
2 Earnings before interest, tax, depreciation, amortisation, profit/(loss) on the disposal of property, plant and equipment and share of post-tax results of associate
and joint ventures.
CARR'S GROUP PLC Annual report and accounts 2019
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NOTES TO THE FINANCIAL STATEMENTS
CO N TI N U ED
2 Segmental information continued
Assets
Segment gross assets
The segmental information for the year ended 1 September 2018 is as follows:
Total segment revenue
Inter segment revenue
Revenue from external customers
Adjusted1 EBITDA2
Depreciation, amortisation and profit/(loss) on disposal of property, plant and equipment
Share of post-tax results of associates and joint ventures
Adjusted1 operating profit
Amortisation of acquired intangible assets and non-recurring items
Operating profit
Finance income
Finance costs
Adjusted1 profit before taxation
Amortisation of acquired intangible assets and non-recurring items
Profit before taxation
Agriculture
£’000
Engineering
£’000
Group
£’000
168,342
88,008 256,350
Agriculture
£’000
Engineering
£’000
Group
£’000
359,620
(12)
43,618 403,238
(46)
(34)
359,608
43,584
403,192
12,751
(2,769)
3,396
13,378
(386)
6,000
(1,733)
(181)
4,086
(673)
18,751
(4,502)
3,215
17,464
(1,059)
12,992
3,413
16,405
358
(1,261)
16,561
(1,059)
15,502
1 Adjusted results are after adding back amortisation of acquired intangible assets and non-recurring items including acquisition costs (note 5).
2
Earnings before interest, tax, depreciation, amortisation, profit/(loss) on the disposal of property, plant and equipment and share of post-tax results of associates
and joint ventures.
Assets
Segment gross assets
Agriculture
£’000
Engineering
£’000
Group
£’000
159,305
71,882
231,187
Entity wide disclosures
Revenues from external customers are derived from the sale of products/services by individual business segment. The breakdown of
revenue by business segment is provided above.
Revenues from external customers:
UK
Europe
USA
New Zealand
Other
CARR'S GROUP PLC Annual report and accounts 2019
2019
£’000
2018
£’000
346,824
12,012
43,734
1,298
37
341,905
17,201
42,897
1,178
11
403,905
403,192
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2 Segmental information continued
Non-current 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
UK
£’000
17,855
7,516
25,690
164
13,392
2,470
50
–
7,769
Europe
£’000
5,997
560
8,629
–
–
3,102
1
–
–
2019
USA
£’000
9,025
1,242
7,561
–
–
4,099
25
22
–
New
Zealand
£’000
Total
£’000
UK
£’000
9,856
– 32,877
430
9,318
–
41,917 22,524
37
170
–
13,129
–
2,101
–
50
–
–
–
10,146
–
164
13,392
9,671
76
22
7,769
Europe
£’000
5,946
447
8,463
–
–
2,644
1
–
–
2018
USA
£’000
8,470
1,346
7,448
–
–
3,259
23
21
–
New
Zealand
£’000
Total
£’000
–
–
24,272
2,223
49 38,484
170
13,129
8,004
74
21
10,146
–
–
–
–
–
–
74,906
18,289
21,974
37 115,206 58,406
17,501
20,567
49
96,523
Major customers
There are no revenues from transactions with individual customers which amount to ten percent or more of Group revenue.
3 Revenue
Disaggregation of revenue
In accordance with IFRS 15 ‘Revenue from Contracts with Customers’ the following table presents the Group’s reported revenue for the
year ended 31 August 2019 disaggregated based on the timing of revenue recognition. The Group implemented the new standard on 2
September 2018.
Timing of revenue recognition
Over time
At a point in time
Transaction price allocated to the remaining performance obligations
Total
£’000
27,840
376,065
403,905
2020
£’000
2021
£’000
2022
onwards
£’000
Total
£’000
Total transaction price allocated to the remaining performance obligations
18,304
5,004
1,145
24,453
The total transaction price allocated to the remaining performance obligations represents the contracted revenue to be earned by the
Group for distinct goods and services which the Group has promised to deliver to its customers. These include promises which are
partially satisfied at the period end or those which are unsatisfied but which the Group has committed to providing. In deriving this
transaction price, any element of variable revenue is estimated at a value that is highly probable not to reverse in the future.
The transaction price above does not include any estimated revenue to be earned on framework contracts for which a firm order or
instruction has not been received by the customer.
CARR'S GROUP PLC Annual report and accounts 2019
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NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
4 Operating profit
Group operating profit is stated after (crediting)/charging:
Amortisation of grants
(Profit)/loss on disposal of property, plant and equipment
Depreciation of property, plant and equipment
Depreciation of owned investment property
Amortisation of intangible assets
Goodwill impairment (note 5)
Business combination expenses (note 5)
Restructuring/closure costs (note 5)
Foreign exchange (gains)/losses
Derivative financial instruments losses/(gains)
Operating lease charges
Research and development expense
Auditors’ remuneration:
Audit services (Company £16,719; 2018: £16,391)
The auditing of accounts of subsidiaries of the Company pursuant to legislation (including overseas)
Total 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
5 Amortisation of acquired intangible assets and non-recurring items
Amortisation of acquired intangible assets (i)
Past service cost – Group (ii)
Past service cost – share of associate (ii)
Goodwill impairment (iii)
Business combination expenses (iv)
Adjustments to contingent consideration (v)
Restructuring/closure costs (vi)
2019
£’000
2018
£’000
(54)
(30)
4,804
6
943
–
509
437
(153)
26
2,094
3,111
73
184
257
(54)
19
4,372
6
397
516
251
–
178
(31)
1,953
1,575
78
169
247
(40)
42
2
(44)
48
4
2019
£’000
814
795
306
–
509
(1,126)
437
2018
£’000
292
–
–
516
251
–
–
1,735
1,059
(i) Amortisation of acquired intangible assets which do not relate to the underlying profitability of the Group but rather relate to costs
arising on acquistion of businesses.
(ii) For further details of the past service costs see note 27.
(iii) The goodwill impairment recognised in the prior year was against the carrying value of goodwill in respect of the Bendalls
Engineering business.
(iv) Business combination expenses relate to acquisition costs incurred in the year, and in respect of prior years contingent
consideration in relation to the acquisitions of Phoenix Feeds Ltd and the business and certain assets of Mortimer Feeds Ltd which
is explained further below.
Phoenix Feeds Ltd was acquired on 1 June 2016. The consideration paid included £490,000 of contingent consideration linked to
the continued employment of key personnel and therefore in accordance with IFRS 3 this was not recognised as consideration in
the acquisition accounting in the year ended 3 September 2016. It is instead being recognised in the income statement over a two
year period with £nil (2018: £184,000) recognised in the current year. Given the nature of the payment it has been recognised as a
non-recurring item.
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Mortimer Feeds was acquired on 5 June 2017. The consideration paid included £30,000 of contingent consideration linked to the
continued employment of key personnel and therefore in accordance with IFRS 3 this was not recognised as consideration in the
acquisition accounting in the year ended 2 September 2017. It is instead being recognised in the income statement over a one year
period with £nil (2018: £30,000) recognised in the current year. Given the nature of this payment it has been recognised as a
non-recurring item.
(v) Adjustments to contingent consideration arise from the revaluation of contingent consideration in respect of acquisitions to fair
value at the year end. Any gain or loss related to the revaluation to fair value is recognised through the income statement. The
Group has recognised a gain on the revaluation to fair value of the contingent consideration payable to the vendors of NuVision
Engineering, Inc. and Animax Ltd. This gain arises from changes to the expected payments since the previous year end, or
acquisition date in respect of Animax Ltd, based on updated forecasts. As this gain does not relate to the underlying profitability of
the Group it has been recognised as a non-recurring item.
(vi) Restructuring/closure costs include redundancy costs.
6 Staff costs
The tables below include Directors.
Wages and salaries
Social security costs
Pension costs
Share based payments
2019
£’000
39,868
4,460
3,189
880
2018
£’000
36,467
3,946
2,135
1,125
48,397
43,673
Included within pension costs is a charge of £816,000 (2018: £24,000) in respect of the defined benefit pension scheme. This includes a
charge of £795,000 (2018: £nil) in respect of GMP equalisation. Further details of this charge can be found in note 27. The average
monthly number of employees during the year was made up as follows:
Sales, office and management
Manufacture and distribution
2019
Number
2018
Number
614
539
1,153
532
466
998
Key management are considered to be the Directors of the Group.
The following amounts are disclosed in accordance with Schedule 5 of the Large and Medium-Sized Companies and Groups
(Accounts and Reports) Regulations 2008.
Aggregate Directors’ remuneration1
Aggregate pension contributions2
Aggregate amount of gains on exercise of share options3
2019
£’000
1,012
20
471
1,503
2018
£’000
1,169
20
–
1,189
1 salary (after salary sacrifice of pension), fees, bonuses, pay in lieu of pension and benefits in kind
2 cash contributions paid in the year into the defined contribution pension scheme
3 gains realised in the year in respect of the LTIP
The number of directors in the defined contribution pension scheme during the year was two (2018: two).
Further details of the Directors’ emoluments, pension benefits and share options are given in the Remuneration Committee Report on
pages 52 to 64.
CARR'S GROUP PLC Annual report and accounts 2019
98
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
7 Finance income and finance costs
Finance income
Bank interest
Net interest on the net defined benefit retirement asset (note 27)
Interest on loan with associate
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
Total finance costs
8 Taxation
(a) Analysis of the charge in the year
Current tax:
UK corporation tax
Current year
Adjustment in respect of prior years
Foreign tax
Current year
Adjustment in respect of prior years
Group current tax
Deferred tax:
Origination and reversal of timing differences
Current year
Adjustment in respect of prior years
Group deferred tax (note 18)
Tax on profit
2019
£’000
127
284
–
52
463
(117)
(1,016)
(82)
(134)
2018
£’000
145
125
71
17
358
(177)
(832)
(75)
(177)
(1,349)
(1,261)
2019
£’000
2018
£’000
1,447
45
1,557
109
3,158
1,352
(228)
1,549
–
2,673
(357)
(116)
(473)
(796)
(22)
(818)
2,685
1,855
Deferred tax recognised in equity is disclosed in note 18.
(b) Factors affecting tax charge for the year
The tax assessed for the year is lower (2018: lower) than the rate of corporation tax in the UK of 19% (2018: 19%). The differences are
explained below:
Profit before taxation
Tax at 19% (2018: 19%)
Effects of:
Tax effect of share of results of associates 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 deferred tax rates
Unrecognised deferred tax on losses
Adjustment in respect of prior years
Total tax charge for the year
2019
£’000
2018
£’000
16,309
15,502
3,099
2,945
(452)
180
(482)
256
(24)
70
38
(611)
300
(310)
227
(490)
44
(250)
2,685
1,855
The tax effect of expenses that are not allowable in determining taxable profit includes the non-recurring items of business combination
expenses and, in respect of the prior year, goodwill impairment. These have been treated as disallowable for tax purposes.
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The tax effect of non-taxable income includes non-recurring items of adjustments to contingent consideration (note 5) and the effect
of income within the patent box regime.
The effect of changes in deferred tax rates in the prior year includes the effect on deferred tax balances following the reduction in US
Federal tax rates.
(c) Factors affecting future tax charges
The main rate of UK corporation tax has been reduced from 19% to 17% with effect from 1 April 2020. This rate reduction was
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 17%.
9 Dividends
Equity
Second interim paid for the year ended 1 September 2018 of 1.075p per 2.5p share (2017: 0.95p)
Final dividend for the year ended 1 September 2018 of 2.35p per 2.5p share (2017: 2.1p)
First interim paid for the year ended 31 August 2019 of 1.125p per 2.5p share (2018: 1.075p)
2019
£’000
983
2,156
1,034
4,173
2018
£’000
868
1,919
983
3,770
Since the year end a second interim dividend of £1,034,348, being 1.125p per share, has been paid. The financial statements do not
reflect the dividend payable.
The proposed final dividend for the year ended 31 August 2019 to be considered by shareholders at the Annual General Meeting is
£2,310,140 being 2.5p per share, making a total for the year of 4.75p (2018: 4.5p). Shares held in treasury do not carry entitlement to a
dividend. The financial statements do not reflect this proposed final dividend as payable.
10 Earnings per ordinary share
Earnings per share are calculated by reference to a weighted average of 91,828,015 shares (2018: 91,402,338) in issue during the year.
Amortisation of acquired intangible assets and non-recurring items that are charged or credited to profit do not relate to the underlying
profitability of the Group. The Board believes adjusted profit before these items provides a useful measure of business performance.
Therefore an adjusted earnings per share is presented as follows:
Earnings per share – basic
Amortisation and non-recurring items:
Amortisation of acquired intangible assets
Past service cost – Group
Past service cost – share of associate
Goodwill impairment
Business combination expenses
Adjustments to contingent consideration
Restructuring/closure costs
Taxation effect of the above
Non-controlling interest in the above
Earnings per share – adjusted
2019
2018
Earnings
£’000
12,049
814
795
306
–
509
(1,126)
437
(367)
(57)
Earnings
per share
pence
13.1
0.9
0.9
0.3
–
0.6
(1.2)
0.5
(0.4)
(0.1)
Earnings
£’000
11,892
292
–
–
516
251
–
–
(60)
(145)
13,360
14.6
12,746
Earnings
per share
pence
13.0
0.3
–
–
0.6
0.3
–
–
(0.1)
(0.2)
13.9
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 29.
CARR'S GROUP PLC Annual report and accounts 2019
100
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
10 Earnings per ordinary share continued
Earnings per share
Effect of dilutive securities:
Share save scheme
Long term incentive plan
Diluted earnings per share
2019
Weighted
average
number of
shares
Earnings
£’000
Earnings
per share
pence
Earnings
£’000
2018
Weighted
average
number of
shares
12,049 91,828,015
13.1
11,892 91,402,338
–
–
748,265
1,771,378
12,049 94,347,658
(0.1)
(0.2)
12.8
–
–
405,079
1,631,190
11,892 93,438,607
Adjusted
earnings
£’000
Weighted
average
number of
shares
Earnings
per share
pence
Adjusted
earnings
£’000
Weighted
average
number of
shares
Diluted adjusted earnings per share
13,360 94,347,658
14.2
12,746 93,438,607
11 Goodwill and other intangible assets
Earnings
per share
pence
13.0
(0.1)
(0.2)
12.7
Earnings
per share
pence
13.6
Company
Know-how,
technology and
development
costs
£’000
Group
Brands,
patents and
trademarks
£’000
Goodwill
£’000
Customer
relationships
£’000
Contract
back-log
£’000
Software
£’000
Total
£’000
Software
£’000
Cost
At 3 September 2017
Exchange differences
Subsidiaries acquired
Additions
Transfers from group companies
Disposals
At 1 September 2018
Exchange differences
Subsidiaries acquired
Additions
At 31 August 2019
Accumulated amortisation and
impairment
At 3 September 2017
Exchange differences
Charge for the year
Impairment
Disposals
At 1 September 2018
Exchange differences
Charge for the year
At 31 August 2019
Net book amount
At 2 September 2017
At 1 September 2018
At 31 August 2019
26,318
(163)
658
–
–
–
26,813
606
7,999
–
35,418
2,025
–
–
516
–
2,541
–
–
2,541
24,293
24,272
36
–
53
–
–
–
89
–
3,303
–
3,392
–
–
89
–
–
89
–
122
211
36
–
442
(7)
–
95
–
–
530
7
1,999
178
2,714
22
–
54
–
–
76
1
461
538
420
454
32,877
3,181
2,176
1,705
(11)
–
6
–
(1)
1,699
96
1,302
8
3,105
343
(1)
120
–
(1)
461
26
205
692
1,362
1,238
2,413
236
(1)
–
–
–
–
235
15
–
–
250
7
2
76
–
–
85
9
80
174
229
150
76
893
(17)
–
224
–
–
1,100
8
–
1,165
29,630
(199)
711
325
–
(1)
30,466
732
14,603
1,351
2,273
47,152
674
(13)
58
–
–
719
7
75
801
3,071
(12)
397
516
(1)
3,971
43
943
4,957
219
381
26,559
26,495
1,472
42,195
–
–
–
199
129
–
328
–
–
89
417
–
–
–
–
–
–
–
41
41
–
328
376
During the year goodwill of £7,999,000 arose on acquisitions (note 30).
CARR'S GROUP PLC Annual report and accounts 2019
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11 Goodwill and other intangible assets continued
During the prior year goodwill of £658,000 arose on acquisitions. 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.
During the prior year an impairment of £516,000 was recognised against the carrying value of goodwill in respect of the Bendalls
engineering business.
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.
The carrying value of goodwill has been allocated to the following cash generating units:
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/Pearsons 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 – Morpeth profit centre
Carrs Billington Agriculture (Sales) Ltd – Phoenix profit centre
Carrs Billington Agriculture (Sales) Ltd – Mortimer profit centre
Carrs Billington Agriculture (Sales) Ltd – Cockermouth profit centre
Carrs Agriculture Ltd – UK feed blocks
Animal Feed Supplement, Inc.
Wälischmiller Engineering GmbH
Carr’s Engineering Ltd – Chirton profit centre
NuVision Engineering, Inc.
Animax Ltd
NW Total Engineered Solutions Ltd
2019
£’000
781
264
369
568
783
626
873
80
703
215
23
2,068
21
5,997
2,526
9,004
1,742
6,234
2018
£’000
781
264
369
568
783
626
873
80
703
215
–
2,068
19
5,946
2,526
8,451
–
–
32,877
24,272
Goodwill arising on the acquisition of overseas subsidiaries has been retranslated at the balance sheet date.
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. 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 2020, which has been approved by the
Board and forecast information for the four years to August 2024 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 are in the range 3.42 %– 10.29% (2018: 5.23% – 10.82%).
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.
Amortisation and impairment charges are recognised within administrative expenses and have been highlighted separately within
amortisation of acquired intangible assets and non-recurring items (note 5) where they relate to acquired intangible assets.
There is no goodwill in the Company (2018: none).
CARR'S GROUP PLC Annual report and accounts 2019
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NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
11 Goodwill and other intangible assets continued
Significant cash generating units
The following key assumptions have been used in the impairment testing for goodwill with a significant carrying value:
Cash generating unit
NuVision Engineering, Inc.
NW Total Engineered Solutions Ltd
Wälischmiller Engineering GmbH
Carr’s Engineering Ltd – Chirton profit centre
Carrs Agriculture Ltd – UK feed blocks
Goodwill
carrying
value
£’000
Pre-tax
discount rate
%
9,004
6,234
5,997
2,526
2,068
10.29
10.29
10.29
10.29
3.42
Long term
average
annual
change in
cash flows
%
Long term
growth rate
%
–
3.4
3.1
–
2.8
2
2
2
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 51% in NuVision Engineering Inc, by 53% in NW Total Engineered Solutions Ltd, by 59% in
Wälischmiller Engineering GmbH, by 41% in Carr’s Engineering Ltd – Chirton profit centre and by 99% in Carrs Agriculture Ltd –
UK feed blocks.
12 Property, plant and equipment
Cost
At 3 September 2017
Exchange differences
Subsidiaries acquired
Additions
Transfers from group companies
Disposals
Reclassifications
At 1 September 2018
Exchange differences
Subsidiaries acquired
Additions
Disposals
Reclassifications
At 31 August 2019
Accumulated depreciation
At 3 September 2017
Exchange differences
Charge for the year
Transfers from group companies
Disposals
Reclassifications
At 1 September 2018
Exchange differences
Charge for the year
Disposals
At 31 August 2019
Net book amount
At 2 September 2017
At 1 September 2018
At 31 August 2019
CARR'S GROUP PLC Annual report and accounts 2019
Group
Land and
buildings
£’000
Plant and
equipment
£’000
Assets in the
course of
construction
£’000
26,243
(166)
–
755
–
–
1,393
28,225
366
1,405
626
–
1,796
42,991
(117)
267
3,163
–
(1,136)
201
45,369
763
811
4,796
(3,187)
104
1,201
(9)
–
1,581
–
–
(1,091)
1,682
17
–
944
–
(1,942)
Total
£’000
70,435
(292)
267
5,499
–
(1,136)
503
75,276
1,146
2,216
6,366
(3,187)
(42)
32,418
48,656
701
81,775
6,433
(11)
823
–
–
127
7,372
118
983
–
26,853
(28)
3,549
–
(827)
(127)
29,420
530
3,821
(2,386)
8,473
31,385
–
–
–
–
–
–
–
–
–
–
–
33,286
(39)
4,372
–
(827)
–
36,792
648
4,804
(2,386)
39,858
19,810
16,138
1,201
37,149
20,853
15,949
1,682
38,484
23,945
17,271
701
41,917
Company
Plant and
equipment
£’000
–
–
–
–
713
(108)
–
605
–
–
46
(11)
–
640
–
–
15
483
(48)
–
450
–
43
(11)
482
–
155
158
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12 Property, plant and equipment continued
Freehold land amounting to £2,994,878 (2018: £2,979,029) has not been depreciated.
The net book amount of plant and equipment includes £3,937,393 (2018: £3,673,849) in respect of assets held under finance leases. This
consists of cost of £5,711,100 (2018: £5,351,435) less accumulated depreciation of £1,773,707 (2018: £1,677,586). 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
£1,504,000 (2018: £1,558,000).
Included in the above table in respect of assets held under floating charges are assets with a net book amount of £7,668,000 (2018:
£7,507,000). This excludes specific assets under legal charge and assets secured under finance leases both of which are separately
disclosed above.
Depreciation is recognised within the Consolidated Income Statement as shown below:
Group
Company
Cost of sales
Distribution costs
Administrative expenses
13 Investment property
Group
Cost
At 3 September 2017, 1 September 2018 and 31 August 2019
Accumulated depreciation
At 3 September 2017
Charge for the year
At 1 September 2018
Charge for the year
At 31 August 2019
Net book amount
At 2 September 2017
At 1 September 2018
At 31 August 2019
2019
£’000
3,696
8
1,100
4,804
2018
£’000
3,594
16
762
4,372
2019
£’000
2018
£’000
–
–
43
43
–
–
15
15
Total
£’000
299
123
6
129
6
135
176
170
164
The fair value of investment properties at 31 August 2019 is £360,000 (2018: £360,000). Investment properties were valued by
independent professionally qualified valuers in October 2016. The Directors are satisfied that there has been no significant change in
fair value since that date.
There is no investment property in the Company (2018: none).
CARR'S GROUP PLC Annual report and accounts 2019
104
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
14 Investments
Group
Cost
At 3 September 2017
Exchange difference
Disposals
Redemption of preference shares
Share of post-tax result
Share of gains recognised directly in equity
Dividend paid by associate and joint ventures
At 1 September 2018
Exchange difference
Share of post-tax result
Share of (losses)/gains recognised directly in equity
Dividend paid by associate and joint ventures
At 31 August 2019
Accumulated provision for impairment
At 3 September 2017, 1 September 2018 and 31 August 2019
Net book amount
At 2 September 2017
At 1 September 2018
At 31 August 2019
Associates
£’000
Joint
ventures
£’000
Other
investments
£’000
11,443
(18)
(333)
–
1,634
991
(588)
13,129
–
924
(73)
(588)
6,590
(34)
–
(20)
1,581
3
(116)
8,004
194
1,453
143
(123)
13,392
9,671
–
–
11,443
6,590
13,129
8,004
13,392
9,671
82
1
–
–
–
–
–
83
2
–
–
–
85
9
73
74
76
Total
£’000
18,115
(51)
(333)
(20)
3,215
994
(704)
21,216
196
2,377
70
(711)
23,148
9
18,106
21,207
23,139
In 2017 Mid Columbia Engineering, Inc. was brought into the Group as an associate following the acquisition of NuVision Engineering, Inc.
which held 49% of the issued share capital of Mid Columbia Engineering, Inc. During the prior year NuVision Engineering, Inc., disposed
of its investment in Mid Columbia Engineering, Inc.
Other investments comprise shares in several private limited companies.
Company
Cost
At 3 September 2017
Share based payment credit in respect of employees of subsidiary undertakings
At 1 September 2018
Share based payment charge in respect of employees of subsidiary undertakings
At 31 August 2019
Accumulated provision for impairment
At 3 September 2017, 1 September 2018 and 31 August 2019
Net book amount
At 2 September 2017
At 1 September 2018
At 31 August 2019
Shares in
subsidiaries
£’000
Associate
£’000
Joint
ventures
£’000
30,986
369
31,355
(23)
31,332
245
–
245
–
245
272
–
272
–
272
Total
£’000
31,503
369
31,872
(23)
31,849
4,794
–
–
4,794
26,192
26,561
26,538
245
245
245
272
272
26,709
27,078
272
27,055
CARR'S GROUP PLC Annual report and accounts 2019
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15 Investment in associate
The associated undertaking at 31 August 2019 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 investment in Carrs Billington Agriculture (Operations) Ltd is held directly by the Company. The registered office of the associate is
Cunard Building, Water Street, Liverpool L3 1EL.
The Group does not have the ability to control the financial and operating policies of its associate. The Group has a 49% shareholding
and a 43% representation on the Board of Directors of Carrs Billington Agriculture (Operations) Ltd.
The associate is accounted for using the equity method.
At the year end Carrs Billington Agriculture (Operations) Ltd had capital commitments of £1,269,000 (2018: £70,000). 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
16 Interest in joint ventures
The joint ventures at 31 August 2019 are:
Group
Name
Crystalyx Products GmbH
Bibby Agriculture Ltd
Afgritech Ltd
Afgritech LLC
Gold-Bar Feed Supplements LLC
ACC Feed Supplement LLC
Silloth Storage Company Ltd
2019
£’000
2018
£’000
43,407
(16,076)
134,758
1,885
44,818
(18,024)
138,401
3,335
Interest held
Equity
%
50
26
50
50
50
50
50
Country of
incorporation
Country of
operation
Germany1
Germany
England2
England2
USA3
USA4
USA5
England6
UK
UK
USA
USA
USA
UK
Activity
Manufacture of animal
feed blocks
Sale of agricultural products
Holding company
Producers of ingredients
of animal feed
Manufacture of animal
feed blocks
Manufacture of animal
feed blocks
Storage of molasses
1 Registered Office address: Industrieweg 110, 48155 Munster, Germany
2 Registered Office address: Old Croft, Stanwix, Carlisle, Cumbria CA3 9BA
3 Registered Office address: 810 Waterman Drive, Watertown, New York 13601, USA
4 Registered Office address: 783 Eagle Boulevard, Shelbyville, Tennessee 37160, USA
5 Registered Office address: 5101 Harbor Drive, Sioux City, Iowa 51111, USA
6 Registered Office address: 3-5 College Street, Burnham on Sea, Somerset TA8 1AR
Crystalyx Products GmbH and Silloth Storage Company Ltd have a 31 December accounting year end.
The Company directly holds the interest in Crystalyx Products GmbH and Afgritech Ltd. Afgritech Ltd has 100% control of Afgritech
LLC. Carrs Billington Agriculture (Sales) Ltd directly holds the interest in Bibby Agriculture Ltd. Animal Feed Supplement, Inc. directly
holds the interest in Gold-Bar Feed Supplements LLC and ACC Feed Supplement LLC. Carrs Agriculture Ltd directly holds the interest
in Silloth Storage Company Ltd.
Joint ventures are accounted for using the equity method.
CARR'S GROUP PLC Annual report and accounts 2019
106
NOTES TO THE FINANCIAL STATEMENTS
CO N TI N U ED
16 Interest in joint ventures continued
At the year end the joint ventures had capital commitments of £291,553 (2018: £54,000). 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
2019
£’000
2018
£’000
9,133
7,616
(5,356)
(1,739)
40,735
(38,880)
(94)
8,195
7,662
(6,987)
(883)
38,656
(36,514)
(119)
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.
17 Investment in subsidiary undertakings
Name
Carrs Agriculture Ltd
Carrs Billington Agriculture (Sales) Ltd
Animal Feed Supplement, Inc.
Carr’s Supplements (NZ) Ltd
Conegar S.A.
Carr’s Supplements (Brasil) Nutrição Animal Ltda
Carr’s Engineering Ltd
Wälischmiller Engineering GmbH
Carr’s Engineering (US), Inc.
NuVision Engineering, Inc.
B.R.B Trust Ltd
Carrs Properties Ltd
Carr’s International Finance Ltd
Animax Ltd
Animax NZ Ltd
Clinimax Ltd
NW Pump & Valve Ltd
NW Total Engineered Solutions Ltd
Proportion of
shares held
Ordinary
%
Country of
incorporation
Country of
operation
Activity
100
England1
England1
51
UK
USA2
100
USA
100 New Zealand3 New Zealand
100
Uruguay
100
Brazil
100
UK
100
Germany
100
USA
100
USA
100
UK
100
UK
100
UK
100
UK
Uruguay6
Brazil7
England1
Germany4
USA5
USA5
England1
England1
England1
England8
100 New Zealand9 New Zealand
100
100
100
England8
England1
England1
UK
Manufacture of
animal feed/mineral blocks and
ingredients of animal feed
Agricultural retailers
Manufacture of animal feed blocks
Distributor of animal feed blocks
Distributor of animal feed blocks
Distributor of animal feed blocks
Engineering
Engineering
Holding Company
Engineering
Financial Services
Property holding
Finance Company
Manufacture of animal
health products
Distributor of animal
health products
UK Manufacture of specialist disinfectants
Holding company
UK
Engineering
UK
1 Registered Office address: Old Croft, Stanwix, Carlisle, Cumbria CA3 9BA
2 Registered Office address: 101 Roanoke Avenue, Poteau, Oklahoma 74953, USA
3 Registered Office address: 515a Wairakei Road, Burnside, Christchurch 8053, New Zealand
4 Registered Office address: Schießstattweg 16, 88677 Markdorf, Germany
5 Registered Office address: 2403 Sidney Street, Suite 700, Pittsburgh, Pennsylvania 15203, USA
6 Registered Office address: Juncal 1305, Piso 18, Montevideo, Uruguay
7 Registered Office address: Avenida Bernardino de Campos, 98, Andar 7, Sala 47, Paraiso, São Paulo – SP, 04.004-040, Brasil
8 Registered Office address: Shepherds Grove West, Stanton, Bury St Edmunds, Suffolk IP31 2AR
9 Registered Office address: RSM New Zealand (Auckland), Level 2, Building 5, 60 Highbrook Drive, East Tamaki, Auckland 2013, New Zealand
Dormant subsidiaries are listed on page 137 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 investment in Wälischmiller Engineering GmbH and NW Pump and Valve Ltd; Carrs Agriculture Ltd holds 100% of
the investment in Carr’s Supplements (NZ) Ltd, Conegar S.A., Carr’s Supplements (Brasil) Nutrição Animal Ltda, Animax Ltd and
Clinimax Ltd; Carr’s Engineering (US), Inc. holds 100% of the investment in NuVision Engineering, Inc.; Animax Ltd holds 100% of the
investment in Animax NZ Ltd; and NW Pump & Valve Ltd holds 100% of the investment in NW Total Engineered Solutions Ltd.
CARR'S GROUP PLC Annual report and accounts 2019
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18 Deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Group
Accelerated tax depreciation
Employee benefits
Other
Tax assets/(liabilities)
Assets
Liabilities
Net
2019
£’000
–
–
410
410
2018
£’000
–
–
–
–
2019
£’000
(2,934)
(1,321)
(732)
2018
£’000
(1,604)
(1,725)
(652)
2019
£’000
(2,934)
(1,321)
(322)
2018
£’000
(1,604)
(1,725)
(652)
(4,987)
(3,981)
(4,577)
(3,981)
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
Assets:
Other
Liabilities:
Accelerated tax depreciation
Employee benefits
Other
Net Liabilities
At
2 September
2018
£’000
Exchange
differences
£’000
In respect of
acquisitions
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
–
–
(1,604)
(1,725)
(652)
(3,981)
(3,981)
–
–
(56)
–
1
(55)
(55)
30
30
(1,381)
–
23
(1,358)
(1,328)
380
380
107
90
(104)
93
473
–
–
–
314
–
314
314
At
31 August
2019
£’000
410
410
(2,934)
(1,321)
(732)
(4,987)
(4,577)
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.
Movement in deferred tax during the prior year
Liabilities:
Accelerated tax depreciation
Employee benefits
Other
Company
Accelerated tax depreciation
Employee benefits
Other
Tax assets/(liabilities)
Movement in deferred tax during the year
Assets:
Accelerated tax depreciation
Other
Liabilities:
Employee benefits
Net liabilities
At
3 September
2017
£’000
Exchange
differences
£’000
In respect of
acquisitions
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
At
1 September
2018
£’000
(2,118)
(886)
(1,006)
(4,010)
28
–
17
45
(35)
–
(5)
(40)
521
(17)
314
818
–
(822)
28
(794)
(1,604)
(1,725)
(652)
(3,981)
Assets
Liabilities
Net
2019
£’000
20
–
265
285
2018
£’000
16
–
217
233
2019
£’000
–
(1,321)
–
2018
£’000
–
(1,725)
–
2019
£’000
20
(1,321)
265
2018
£’000
16
(1,725)
217
(1,321)
(1,725)
(1,036)
(1,492)
At
2 September
2018
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
At
31 August
2019
£’000
16
217
233
(1,725)
(1,725)
(1,492)
4
46
50
90
90
140
–
2
2
314
314
316
20
265
285
(1,321)
(1,321)
(1,036)
CARR'S GROUP PLC Annual report and accounts 2019
108
NOTES TO THE FINANCIAL STATEMENTS
CO N TI N U ED
18 Deferred tax assets and liabilities continued
Movement in deferred tax during the prior year
Assets:
Accelerated tax depreciation
Other
Liabilities:
Employee benefits
Net liabilities
At
3 September
2017
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
At
1 September
2018
£’000
8
51
59
(886)
(886)
(827)
8
144
152
(17)
(17)
135
–
22
22
16
217
233
(822)
(822)
(1,725)
(1,725)
(800)
(1,492)
Tax of £53,000 (2018: £53,000) in respect of tax losses has not been recognised as a deferred tax asset in the Group balance sheet. Tax
of £nil (2018: £nil) in respect of tax losses has not been recognised as a deferred tax asset in the Company balance sheet.
19 Inventories
Group
Raw materials and consumables
Work in progress
Finished goods and goods for resale
2019
£’000
12,813
3,887
29,570
2018
£’000
10,536
3,414
28,421
46,270
42,371
Inventories are stated after a provision for impairment of £912,000 (2018: £588,000). The amount recognised as an expense in the year
in respect of the write down of inventories is £416,000 (2018: £75,000). The amount recognised as a credit in the year in respect of
reversals of write downs of inventories is £55,000 (2018: £nil).
The cost of inventories recognised as an expense and included in cost of sales is £348,430,000 (2018: £347,585,000).
The Company has no inventories (2018: none).
20 Contract balances
The timing of revenue recognition, billings and cash collection results in trade receivables (billed amounts), contracts assets (unbilled
amounts) and customer advances and deposits (contract liabilities) on the Group’s balance sheet. For services in which revenue is
earned over time, amounts are billed in accordance with contractual terms, either at periodic intervals or upon achievement of
contractual milestones. The timing of revenue recognition is measured in accordance with the progress of delivery on a contract which
could either be in advance or in arrears of billing, resulting in either a contract asset or a contract liability.
Contract assets
At transition date 2 September 2018 (note 37)
Exchange differences
Subsidiaries acquired
Transfers from contract assets recognised at the beginning of the year to receivables
Increase related to services provided in the year
At 31 August 2019
Contract liabilities
At transition date 2 September 2018 (note 37)
Exchange differences
Subsidiaries acquired
Revenue recognised against contract liabilities at the beginning of the year
Increase due to cash received, excluding any amounts recognised as revenue during the year
At 31 August 2019
The Company has no contract assets or contract liabilities.
CARR'S GROUP PLC Annual report and accounts 2019
£’000
6,909
125
102
(5,711)
8,041
9,466
£’000
1,458
11
573
(1,601)
828
1,269
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Company
2019
£’000
2018
£’000
2019
£’000
2018
£’000
51,438
(1,285)
58,261
(1,747)
50,153
–
–
1,997
–
376
1,661
2,162
56,514
4,711
–
1,963
79
1,109
1,299
1,841
88
–
88
–
33,097
1,764
–
13
824
399
98
(98)
–
–
20,185
1,677
–
328
98
227
56,349
67,516
36,185
22,515
–
22
22
–
21
21
16,413
–
15,405
–
16,413
15,405
21 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 36)
Amounts owed by other related parties (note 36)
Loans receivable
Other taxes and social security receivable
Other receivables
Prepayments and accrued income
Non-current:
Amounts owed by Group undertakings (note 36)
Other receivables
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.
During the year a credit of £316,000 (2018: charge of £84,000) 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 4.50%
or Bank of England base rate + 2.50%. Such amounts are unsecured and repayable on demand.
Interest bearing, non-trading amounts owed by Group undertakings within non-current receivables carry interest at 6.25%. Such
amounts are unsecured and have a term of 5 years.
Group
The ageing of trade receivables is as follows:
Not past due
Past due 1 – 30 days
Past due 31 – 60 days
Past due 61 – 90 days
Past due 91 – 120 days
Past 121 days
2019
2018
Gross
£’000
Impairment
£’000
33,451
5,713
4,345
1,729
1,703
4,497
(193)
(20)
(47)
(40)
(47)
(938)
Past due
but not
impaired
£’000
N/A
5,693
4,298
1,689
1,656
3,559
Gross
£’000
Impairment
£’000
34,810
10,650
4,282
2,500
1,592
4,427
(101)
(37)
(77)
(75)
(47)
(1,410)
Past due
but not
impaired
£’000
N/A
10,613
4,205
2,425
1,545
3,017
51,438
(1,285)
16,895
58,261
(1,747)
21,805
CARR'S GROUP PLC Annual report and accounts 2019
110
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
21 Trade and other receivables continued
Company
The ageing of trade receivables is as follows:
Past due 91 – 120 days
Past 121 days
2019
2018
Gross
£’000
Impairment
£’000
–
88
88
–
–
–
Past due
but not
impaired
£’000
–
88
88
Gross
£’000
Impairment
£’000
17
81
98
(17)
(81)
(98)
Past due
but not
impaired
£’000
–
–
–
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 (2018: none).
The carrying value of trade receivables are denominated in the following currencies:
Sterling
US Dollar
Euro
New Zealand Dollar
Other
22 Current tax assets
Corporation tax recoverable
Group taxation relief
23 Cash and cash equivalents and bank overdrafts
Cash and cash equivalents per the balance sheet
Bank overdrafts (note 25)
Cash and cash equivalents per the statement of cash flows
Group
Company
2019
£’000
2018
£’000
2019
£’000
2018
£’000
46,251
1,326
2,023
544
9
45,853
860
9,385
416
–
50,153
56,514
88
–
–
–
–
88
–
–
–
–
–
–
Group
Company
2019
£’000
–
–
–
2018
£’000
119
–
119
2019
£’000
840
–
840
2018
£’000
886
474
1,360
Group
Company
2019
£’000
2018
£’000
28,649
(4,354)
24,632
(3,627)
24,295
21,005
2019
£’000
6,778
–
6,778
2018
£’000
4,955
–
4,955
CARR'S GROUP PLC Annual report and accounts 2019
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Current:
Trade payables
Payments on account
Amounts owed to Group undertakings (note 36)
Amounts owed to other related parties (note 36)
Other taxes and social security payable
Contingent, deferred and unpaid cash consideration
Other payables
Accruals and deferred income
Non-current:
Contingent consideration
Accruals and deferred income
Group
Company
2019
£’000
2018
£’000
16,564
–
–
24,654
1,970
5,271
9,338
4,856
13,793
5,023
–
25,084
1,431
2,371
9,771
6,817
2019
£’000
600
–
2
–
741
–
354
836
62,653
64,290
2,533
2,835
164
2,999
1,576
208
1,784
–
–
–
2018
£’000
–
–
9
–
691
–
438
1,323
2,461
–
–
–
Amounts owed to Group undertakings and other related parties are interest free, unsecured and repayable on demand.
During the year contingent consideration arose on acquisitions (note 30). In addition there remained initial cash consideration unpaid at
the balance sheet date together with deferred and contingent consideration on prior year acquisitions. After retranslation at the
balance sheet date of foreign currency denominated amounts, £5,271,000 (2018: £2,371,000) of these outstanding payables are
recognised within current liabilities and £2,835,000 (2018: £1,576,000) are recognised within non-current liabilities.
Contingent consideration includes amounts of earn out relating to acquisitions in escrow pending settlement of warranty claims.
Included within accruals and deferred income is the following in respect of government grants:
At the beginning of the year
Exchange differences
Subsidiaries acquired
Amortisation in the year
At the end of the year
Included within:
Current liabilities
Non-current liabilities
Group
Company
2019
£’000
214
(2)
11
(54)
169
5
164
169
2018
£’000
269
(1)
–
(54)
214
6
208
214
2019
£’000
2018
£’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
CARR'S GROUP PLC Annual report and accounts 2019
112
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
25 Borrowings
Current:
Bank overdrafts
Bank loans and other borrowings
Loans from Group undertakings (note 36)
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
Group
Company
2019
£’000
2018
£’000
2019
£’000
2018
£’000
4,354
18,319
–
1,183
3,627
30,444
–
923
–
2,340
5,466
–
–
13,378
5,461
–
23,856
34,994
7,806
18,839
26,846
1,740
3,564
1,433
26,846
–
28,586
4,997
26,846
3,564
–
3,564
23,856
3,295
25,291
34,994
1,916
3,081
7,806
2,340
24,506
18,839
1,188
2,376
52,442
39,991
34,652
22,403
Group and Company borrowings are shown in the balance sheet net of arrangement fees of £241,000 (2018: £53,000) of which £60,000
(2018: £17,000) is deducted from current liabilities and £181,000 (2018: £36,000) is deducted from non-current liabilities.
The net borrowings are:
Borrowings as above
Cash and cash equivalents
Net borrowings
Group
Company
2019
£’000
2018
£’000
2019
£’000
2018
£’000
52,442
(28,649)
39,991
(24,632)
34,652
(6,778)
22,403
(4,955)
23,793
15,359
27,874
17,448
Bank loans and other borrowings includes an amount of £14,570,000 (2018: £15,922,000) which is secured on trade receivables and
represents the amount drawn down on an invoice discounting facility with The Royal Bank of Scotland PLC. 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. The bank loans are
repayable by instalments and the overdraft is repayable on demand.
Non-current bank loans (2018: current bank loans) includes a drawn down revolving credit facility of £19.8m (2018: £11.8m) which is
repayable in November 2023. At the year end the Group had £7.2m of undrawn revolving credit facilities (2018: £12.7m).
CARR'S GROUP PLC Annual report and accounts 2019
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26 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.
Currency rate risk – Financial Instruments by currency
2019
2018
Sterling
£’000
US
Dollar
£’000
Euro
£’000
NZ
Dollar
£’000
Other
£’000
Total
£’000
Sterling
£’000
US
Dollar
£’000
Euro
£’000
NZ
Dollar
£’000
Other
£’000
Total
£’000
–
–
–
–
–
74
21
–
64,566
26
94
94
24,632
89,319
–
–
–
–
–
–
34,994
–
62,853
4,997
1,576
104,420
–
–
–
416
–
281
697
–
–
93
–
–
93
2018
Group
Assets
Other investments
Non-current receivables
Contract assets
Current trade and other
receivables
Current derivatives
Cash and cash
equivalents
Liabilities
Current borrowings
Contract liabilities
Current trade and other
50
–
4,455
25
22
1,590
1
–
3,421
–
–
–
–
–
–
76
22
9,466
50
–
–
23
21
–
1
–
–
46,975 4,239 2,033
–
–
–
544
–
20
–
53,811 50,535
–
–
4,154
13
9,461
13
18,787
7,537
1,711
592
22 28,649
16,761
6,792
704
70,267 13,413
7,166
1,136
42 92,024 67,346
11,003
10,179
22,307
699
141
401
1,408
169
–
–
122
–
– 23,856 29,326
–
–
1,269
148
–
5,520
–
7 60,678 50,623
4,997
– 28,586
4,957
–
7,180
–
payables
53,374
Non-current borrowings 23,759
Other non-current
5,311
1,864
– 4,827
liabilities
2,835
–
–
–
–
2,835
–
1,576
–
102,974 5,853 8,268
122
7 117,224 84,946
6,681
12,700
2019
Company
Assets
Non-current receivables
Current trade and other receivables
Cash and cash equivalents
Liabilities
Current borrowings
Current trade and other payables
Non-current borrowings
Sterling
£’000
US Dollar
£’000
Euro
£’000
Total
£’000
Sterling
£’000
US Dollar
£’000
Euro
£’000
Total
£’000
–
24,157
6,206
16,413
1,993
120
–
9,623
452
16,413
35,773
6,778
–
12,308
3,765
15,405
1,239
1,185
–
8,413
5
15,405
21,960
4,955
30,363
18,526
10,075
58,964
16,073
17,829
8,418
42,320
7,806
1,792
22,019
31,617
–
–
–
–
–
–
4,827
7,806
1,792
26,846
14,056
1,770
3,564
4,827
36,444
19,390
–
–
–
–
4,783
–
–
4,783
18,839
1,770
3,564
24,173
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% (2018: 10%) weakening or strengthening in Sterling against other currencies represents reasonable
possible changes.
Impact on profit after taxation
Impact on total equity
2019
2018
10%
weakening
£’000
10%
strengthening
£’000
10%
weakening
£’000
10%
strengthening
£’000
860
5,731
(703)
(4,689)
861
4,940
(704)
(4,042)
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.
CARR'S GROUP PLC Annual report and accounts 2019
114
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
26 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
Finance lease liabilities
Fixed rate
Floating rate
2019
2018
Weighted
average
effective
interest rate
%
2.57
2.14
2.82
Weighted
average
effective
interest rate
%
2.70
2.13
2.39
£’000
4,354
45,165
2,923
52,442
2,923
49,519
52,442
£’000
3,627
34,008
2,356
39,991
2,356
37,635
39,991
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; Bank of England base rate + 1.7% margin
Libor + 1.7%; Libor + 1.8%; Euribor + 1.7%; Bank of England base rate + 1.15% margin; 1.3%
Company
Bank loans
Loans from Group undertakings
Floating rate
2019
2018
Weighted
average
effective
interest rate
%
2.30
–
Weighted
average
effective
interest rate
%
2.18
–
£’000
29,186
5,466
34,652
£’000
16,942
5,461
22,403
The Company’s floating rate financial liabilities bear interest determined as follows:
Bank loans
Libor + 1.7%; Libor + 1.8%; Euribor + 1.7%
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.
Impact on profit after taxation
Impact on total equity
2019
2018
1% decrease
£’000
1% increase
£’000
1% decrease
£’000
1% increase
£’000
396
396
(396)
(396)
415
415
(415)
(415)
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.
CARR'S GROUP PLC Annual report and accounts 2019
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26 Derivatives and other financial instruments continued
Group
Bank overdrafts
Bank loans and other borrowings
Finance lease liabilities
Contract liabilities
Trade and other payables
Other non-current liabilities
Company
Bank loans
Loans from Group undertakings
Trade and other payables
One to
two years
£’000
Two to
five years
£’000
2019
2018
Total
£’000
4,354
47,717
3,111
1,269
60,678
3,010
Within
one year
£’000
4,354
19,023
1,263
1,269
60,678
–
One to
two years
£’000
–
2,984
1,016
–
–
1,700
Two to
five years
£’000
–
25,710
832
–
–
1,310
Total
£’000
3,627
34,534
2,537
–
62,853
1,657
Within
one year
£’000
3,627
30,790
992
–
62,853
–
–
1,279
786
–
–
1,657
120,139
86,587
5,700
27,852 105,208
98,262
3,722
2019
Within
one year
£’000
3,045
5,466
1,792
One to
two years
£’000
2,984
–
–
Total
£’000
31,739
5,466
1,792
Two to
five years
£’000
25,710
–
–
Total
£’000
17,467
5,461
1,770
2018
Within
one year
£’000
13,723
5,461
1,770
38,997
10,303
2,984
25,710
24,698
20,954
One to
two years
£’000
1,279
–
–
1,279
–
2,465
759
–
–
–
3,224
Two to
five years
£’000
2,465
–
–
2,465
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.
Future minimum lease payments of finance leases
Group
Amount payable:
Within one year
In the second year
In the third to fifth years inclusive
Less: future finance charges
Present value of lease obligations
The Company has no finance lease obligations (2018: none).
Repayment profile
2019
£’000
2018
£’000
2019
£’000
2018
£’000
1,263
1,016
832
992
786
759
1,183
955
785
923
728
705
2,923
2,356
3,111
(188)
2,537
(181)
2,923
2,356
Borrowing facilities
The Group has various undrawn facilities. The undrawn facilities available at 31 August 2019, in respect of which all conditions
precedent had been met, were as follows:
2019
Floating
rate
£’000
Expiring in one year or less
Expiring within two and five years inclusive
3,565
18,626
2018
Floating
rate
£’000
14,868
12,374
22,191
27,242
Undrawn facilities include overdraft facilities of £2.5m (2018: £2.5m) that are renewable on an annual basis.
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.
CARR'S GROUP PLC Annual report and accounts 2019
116
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
26 Derivatives and other financial instruments continued
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 31 August 2019 the Group had net debt of £23.8m (2018: £15.4m). Gearing was 18.2% at the year end (2018: 12.7%).
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. The Group’s bankers provide the valuations for the
derivative financial instruments at each reporting period end based on mark to market valuation techniques.
Contingent consideration is measured at fair value using Level 3 inputs such as entity projections of future profitability.
Transfers between levels are deemed to have occurred at the end of the reporting period. There were no transfers between levels in
the above hierarchy in the period.
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 £81,000
(2018: pre-tax loss of £4,000) was recognised in equity during the year on translation of US dollar denominated loans with a fair value of
$1,608,000 (2018: $1,608,000) to sterling. A foreign exchange pre-tax loss of £44,000 (2018: pre-tax gain of £115,000) was recognised in
equity during the year on translation of Euro denominated loans with a fair value of €5,330,000 (2018: €5,330,000) 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 to manage exchange risk exposure. At the balance sheet date, the fair
value of outstanding forward foreign currency contracts are as below:
Group
At beginning of the year
(Losses)/gains during the year
At end of the year – included within current assets
The Company has no forward foreign currency contracts (2018: none).
2019
2018
Fair
value
£’000
13
(13)
–
Contractual
or notional
amount
£’000
1,206
(1,206)
–
Fair
value
£’000
Contractual
or notional
amount
£’000
(3)
16
13
2,821
(1,615)
1,206
CARR'S GROUP PLC Annual report and accounts 2019
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26 Derivatives and other financial instruments continued
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 – included within current assets
The Company has no currency swaps (2018: none).
2019
2018
Contractual
or notional
amount
£’000
Fair value
£’000
Contractual
or notional
amount
£’000
Fair value
£’000
13
(13)
–
124
(124)
–
(2)
15
13
146
(22)
124
Fair value has been determined by reference to the value of equivalent forward foreign currency contracts and currency swaps at the
balance sheet date.
Gains and losses on currency related derivatives are included within administrative expenses.
27 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 Pension Scheme (Group and Company)
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 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. There
were no pension contributions made by the Group over the year to the defined benefit section (2018: £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 2017 and updated on an approximate basis to 31
August 2019 by a qualified independent actuary.
Major assumptions:
Inflation (RPI)
Inflation (CPI)
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
2019
%
3.00
2.10
1.80
3.00
3.50
2018
%
3.00
2.10
2.80
3.00
3.50
The mortality tables used in the valuation as at 31 August 2019 are 100% of S2PA with allowance for mortality improvements
using CMI_2018 with a 1.25%pa underpin. The mortality assumptions adopted imply the following life expectancies at age 65 as at
31 August 2019:
Males currently age 45
Females currently age 45
Males currently age 65
Females currently age 65
At
31 August
2019
At
1 September
2018
23.2 years 23.4 years
25.2 years 25.4 years
21.8 years 22.0 years
23.7 years 23.9 years
CARR'S GROUP PLC Annual report and accounts 2019
118
NOTES TO THE FINANCIAL STATEMENTS
CO N TI N U ED
27 Retirement benefits continued
Amounts recognised in the Income Statement in respect of defined benefit schemes:
Administrative expenses
Past service cost
Net interest on the net defined benefit asset
Total expense/(income)
2019
£’000
21
795
(284)
532
2018
£’000
24
–
(125)
(101)
In October 2018 the High Court ruled on the case of Lloyds Banking Group Pensions Trustees Ltd v Lloyds Bank plc and others. The
ruling required all UK defined benefit pension schemes to equalise Guaranteed Minimum Pensions (GMPs) between males and
females. The scheme’s actuary has estimated the effect on the Carr’s Group Pension Scheme to be a £795,000 increase in liabilities
and this has been recognised as a past service cost through the Income Statement and disclosed as a non-recurring item (note 5).
It is expected that there will be further court hearings from which clarity over the practical application of the ruling will arise. There is
also the possibility of the case being taken to appeal.
The expense/(income) is recognised within the Income Statement as shown below:
Within operating profit:
Administrative expenses
Within interest:
Finance income
Total expense/(income)
Remeasurements of the net defined benefit asset to be shown in the Statement of Comprehensive Income:
Actual gains and losses arising from changes in:
Financial assumptions
Demographic assumptions
Experience adjustments
Return on assets, excluding interest income
Total remeasurement of the net defined benefit asset
Amounts included in the Balance Sheet:
Present value of funded defined benefit obligations
Fair value of scheme assets
Surplus in funded scheme
Reconciliation of opening and closing balances of the present value of the defined benefit obligation:
Benefit obligation at the beginning of the year
Past service cost
Interest cost
Net measurement losses/(gains) – financial
Net measurement gains – demographic
Net measurement gains – experience
Benefits paid
Benefit obligation at the end of the year
CARR'S GROUP PLC Annual report and accounts 2019
2019
£’000
2018
£’000
816
24
(284)
532
(125)
(101)
2019
£’000
2018
£’000
(9,373)
589
–
6,939
4,716
486
1,353
(1,719)
(1,845)
4,836
2019
£’000
2018
£’000
(68,037)
75,806
(60,488)
70,634
7,769
10,146
2019
£’000
60,488
795
1,642
9,373
(589)
–
(3,672)
2018
£’000
69,921
–
1,624
(4,716)
(486)
(1,353)
(4,502)
68,037
60,488
119
27 Retirement benefits continued
Benefit obligation by participant status:
Vested deferreds
Retirees
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
Benefits paid
Scheme administrative cost
Fair value of scheme assets at the end of the year
Analysis of the scheme assets and actual return:
Equity instruments
Property
Bonds
Cash
Other
Actual return on scheme assets
1 Restated following re-interpretation of the classifications.
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£’000
22,930
45,107
2018
£’000
19,181
41,307
68,037
60,488
2019
£’000
70,634
1,926
6,939
(3,672)
(21)
2018
£’000
75,130
1,749
(1,719)
(4,502)
(24)
75,806
70,634
Fair value of assets
2019
£’000
11,753
2,388
57,153
70
4,442
20181
£’000
13,204
2,907
48,618
44
5,861
75,806
70,634
8,865
30
Equity instruments, bonds and 'other' assets are held in unquoted Mercer fund portfolios and are not held directly by the Pension
Scheme. These Mercer portfolios in turn invest in a mix of quoted and unquoted underlying assets. Property assets are held by Legal &
General Investment Management. 'Other' assets relate to assets held in the Mercer's Alternative Strategies funds within the Scheme's
growth portfolio.
In accordance with IAS 19 Scheme assets must be valued at the fair value at the balance sheet date. The following applies to the
assets in the Scheme:
Asset
Equity instruments
Property
Bonds
Other
Valuation
Fair value being the net asset value provided by the investment manager
Closing bid price for unit holdings in managed property fund
Fair value being the net asset value provided by the investment manager
Fair value being the net asset value provided by the investment manager
Sensitivity analysis
A sensitivity analysis of the principal assumptions used to measure the scheme liabilities:
Discount rate
Price inflation rate
Post – retirement mortality assumption
Change in assumption
-25 basis points
+25 basis points
-25 basis points
+25 basis points
-1 year age rating
+1 year age rating
Present value of defined
benefit obligation
£’000
70,743
65,482
66,564
69,575
70,874
65,259
CARR'S GROUP PLC Annual report and accounts 2019
120
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
27 Retirement benefits continued
The sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. It is not an indication of
actual results which may materially differ, for example, changes in some assumptions may actually be correlated. When calculating the
sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit
obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating
the defined benefit liability recognised in the balance sheet.
The methodology and principal assumptions used in preparing the sensitivity analysis did not change compared to the prior year.
The weighted average duration of the defined benefit obligation is approximately 16-17 years (2018: 15-16 years).
Expected cash flows for the following year:
Expected employer contributions
Expected contributions to reimbursement rights
Expected total benefit payments by the scheme:
Year 1
Year 2
Year 3
Year 4
Year 5
Next 5 years
Characteristics and the risks associated with the Scheme
Information about the characteristics of the Scheme:
£’000
–
–
3,777
3,885
3,996
4,110
4,228
23,022
The Scheme provides pensions in retirement and death benefits to members. Pension benefits are linked to a member’s final salary at
31 December 2015 (or date of leaving, if earlier) and their length of service. Since 31 December 2015 the Scheme has been closed to
future accrual.
The Scheme is a registered scheme under UK legislation.
The Scheme is subject to the scheme funding requirements outlined in UK legislation. As at 31 December 2017, being the date of the
most recent finalised actuarial valuation, the scheme funding valuation of the Scheme revealed a surplus of £7.7m equating to a
funding level of 112%. On a solvency basis the scheme had a deficit of £18.8m equating to a funding level of 80%. The purpose of the
scheme funding valuation is to monitor the progress towards achieving the Trustees’ funding objectives and to determine the past
service contributions and future service contributions that may be required. The solvency valuation provides an indication of the
financial impact on members were the scheme to wind up with no money recoverable from the employer. The Trustees agreed that
deficit contributions were not required and therefore contributions to the Scheme by the Group and Company in the year ending
August 2020 are expected to be £nil. The next full triennial actuarial valuation will be as at 31 December 2020 at which point the funding
requirements will be revisited.
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 Company.
Risk exposure and investment strategy
The Scheme’s investment strategy is to invest in return seeking assets and matching assets. This strategy reflects the Scheme’s
liability profile and the Trustees’ attitude to risk. The objective is to achieve a 110% funding level on a gilts +0.25% p.a. basis by 2026.
The Trustees have a fiduciary management arrangement with Mercer who have certain delegated responsibilities over investment
decisions within parameters set by the Trustees. These parameters are reviewed on a regular basis to ensure they are still appropriate.
Assets are invested in Mercer portfolios and in respect of property, Legal & General Investment Management. The Scheme aims to
reduce risks such as market (investment) risk, interest rate risk, inflation risk, currency risk and longevity risk through liability hedging,
diversification and de-risking triggers. Where de-risking triggers are met assets are transferred from growth asset portfolios to
matching asset portfolios. The objective of the matching asset portfolio is to manage the impact on the funding level of interest rate
risk and inflation risk such that the majority of the Scheme’s risk is allocated to the growth portfolio.
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 £1,647,000 (2018: £1,485,000).
CARR'S GROUP PLC Annual report and accounts 2019
121
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27 Retirement benefits continued
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 surplus,
calculated in accordance with IAS 19, of £1.9m (2018: £2.0m). 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 finalised
actuarial valuation, the buy-out deficit was £15.7m and the Group’s estimated liability on the wind up of the scheme was £7.6m.
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 (2018:
£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 finalised triennial valuation of the scheme as at 31 December
2015, which showed that the scheme had a deficit of £4.4m on a technical provisions basis. The triennial valuation of the scheme as at
31 December 2018 has not yet been 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 surplus calculated on an IAS
19 accounting basis within its ‘Investment in Associate’ in its consolidated balance sheet.
Included in the Group's 'Share of post-tax results of associates' is £306,000 in respect of the effect of the GMP equalisation on the Carrs
Billington Agriculture Pension Scheme's liabilities. This has also been disclosed as a non-recurring item (note 5).
Other pension schemes
The pension expense in respect of defined contribution pension arrangements in foreign subsidiaries during the year was £526,000
(2018: £466,000).
Pension contributions into NEST during the year amounted to £84,000 (2018: £62,000).
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 £64,000 (2018: £17,000).
28 Share capital
Group and Company
Allotted and fully paid ordinary shares of 2.5p each:
At start of the year
Allotment of shares
At end of the year
The table above includes 3 (2018: 2) shares held in treasury.
2019
2018
Shares
£’000
Shares
£’000
91,403,112
538,893
2,285
14
91,395,541
7,571
91,942,005
2,299
91,403,112
2,285
–
2,285
The consideration received on the allotment of shares during the year was £37,787 (2018: £11,292).
For details of share based payment schemes see note 29.
Since the year end, to enable vesting of the Group’s long term incentive plan, 513,604 shares with a nominal value of £12,840 were allotted
and held initially in treasury. At the date of signing these financial statements 49,993 shares are still held in treasury.
CARR'S GROUP PLC Annual report and accounts 2019
122
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
29 Share-based payments
Group
The Group operates three active share based payment schemes at 31 August 2019.
The Executive Directors participate in a deferred bonus share plan under which 25% of any bonus earned will be deferred into awards
over shares in the Company, with awards subject to a two year post-vesting holding period.
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 November 2016, December 2017 and
December 2018 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 3 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 for Long Term Incentive Plans and Share
Shemes are as follows:
Long Term
Incentive Plan
December 2018
Long Term
Incentive Plan
December 2017
Long Term
Incentive Plan
November 2016
Share Save
Scheme
(3-Year Plan
2019)
Share Save
Scheme
(3-Year Plan
2018)
Grant date
Share price at grant date (weighted average)
Exercise price (weighted average)
Fair value per option at grant
Number of employees at grant
Shares under option at grant
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
14/11/16
£1.440
£0.00
£1.324
7
541,574
3
19/12/18
£1.485
£0.00
£1.348
8
579,788
3
22/12/17
£1.240
£0.00
£1.119
7
611,596
3
17/12/18
£1.44
£1.275
£0.36
153
420,851
3
Market value* Market value* Market value* Black Scholes
34.8%
3.65
3.4
0.81%
2.56%
95%
–
10
6.5
–
2.05%
75%
–
10
6.5
–
1.68%
100%
–
10
6.5
–
1.78%
100%
18/12/17
£1.20
£1.061
£0.280
290
1,465,455
3
Binomial
32.7%
3.5
3.25
0.6%
2.7%
95%
* Discounted for dividends forgone over the three year vesting period.
The fair value of the deferred bonus plan offered to the Executive Directors is calculated with reference to the market value of the
shares under award discounted to reflect illiquidity during the post vesting two year holding 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.
CARR'S GROUP PLC Annual report and accounts 2019
123
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29 Share-based payments continued
Number of options (LTIP and Share Save)
Long Term
Incentive Plan
December 2018
Number ’000
Long Term
Incentive Plan
December 2017
Number ’000
Long Term
Incentive Plan
November 2016
Number ’000
Long Term
Incentive Plan
November 2015
Number ’000
Share Save
Scheme (3-Year
Plan 2019)
Number ’000
Share Save
Scheme (3-Year
Plan 2018)
Number ’000
Share Save
Scheme (5-Year
Plan 2014)
Number ’000
Outstanding:
At 2 September 2017
Granted in the year
Forfeited in the year
At 1 September 2018
Granted in the year
Exercised in the year
Forfeited in the year
At 31 August 2019
Exercisable:
At 1 September 2018
At 31 August 2019
Weighted average:
Remaining contractual
life (years)
Remaining expected
life (years)
–
–
–
–
580
–
–
580
–
–
–
612
–
612
–
–
–
612
–
–
542
–
–
542
–
–
–
542
–
–
9.00
8.00
7.00
5.50
4.50
3.50
512
–
–
512
–
(512)
–
–
–
–
–
–
–
–
–
–
421
–
(43)
378
–
–
3.07
2.82
The total expense recognised for the year arising from share based payments are as follows:
Deferred Bonus Share Plan 2019
Long Term Incentive Plan December 2018
Long Term Incentive Plan December 2017
Long Term Incentive Plan November 2016
Long Term Incentive Plan November 2015
Share Save Scheme (3-Year Plan 2019)
Share Save Scheme (3-Year Plan 2018)
Share Save Scheme (5-Year Plan 2014)
–
1,465
(128)
1,337
–
(8)
(140)
1,189
–
–
1.83
1.58
2019
£’000
75
175
228
227
22
32
113
8
880
199
–
(124)
75
–
(11)
(53)
11
–
11
0.25
–
2018
£’000
–
–
228
350
435
–
86
26
1,125
CARR'S GROUP PLC Annual report and accounts 2019
124
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
29 Share-based payments continued
Company
The movement in the number of outstanding options under the share schemes for the Company is shown below.
Number of options (LTIP and Share Save)
Long Term
Incentive Plan
December 2018
Number ’000
Long Term
Incentive Plan
December 2017
Number ’000
Long Term
Incentive Plan
November 2016
Number ’000
Long Term
Incentive Plan
November 2015
Number ’000
Share Save
Scheme (3-Year
Plan 2019)
Number ’000
Share Save
Scheme (3-Year
Plan 2018)
Number ’000
Share Save
Scheme (5-Year
Plan 2014)
Number ’000
Outstanding:
At 2 September 2017
Granted in the year
Forfeited in the year
At 1 September 2018
Granted in the year
Exercised in the year
Forfeited in the year
At 31 August 2019
Exercisable:
At 1 September 2018
At 31 August 2019
Weighted average:
Remaining contractual
life (years)
Remaining expected
life (years)
–
–
–
–
470
–
–
470
–
–
–
486
–
486
–
–
–
486
–
–
381
–
–
381
–
–
–
381
–
–
9.00
8.00
7.00
5.50
4.50
3.50
368
–
–
368
–
(368)
–
–
–
–
–
–
–
–
–
–
58
–
–
58
–
–
3.07
2.82
The total expense recognised for the year arising from share based payments are as follows:
Deferred Bonus Share Plan 2019
Long Term Incentive Plan December 2018
Long Term Incentive Plan December 2017
Long Term Incentive Plan November 2016
Long Term Incentive Plan November 2015
Share Save Scheme (3-Year Plan 2019)
Share Save Scheme (3-Year Plan 2018)
Share Save Scheme (5-Year Plan 2014)
–
206
(3)
203
–
–
(5)
198
–
–
1.83
1.58
2019
£’000
75
133
181
168
22
4
17
2
602
1
–
–
1
–
–
(1)
–
–
–
0.25
–
2018
£’000
–
–
179
255
299
–
12
1
746
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 December 2018
Long Term Incentive Plan December 2017
Long Term Incentive Plan November 2016
Long Term Incentive Plan November 2015
Share Save Scheme (3-Year Plan 2019)
Share Save Scheme (3-Year Plan 2018)
Share Save Scheme (5-Year Plan 2014)
Total carrying amount of investments
CARR'S GROUP PLC Annual report and accounts 2019
2019
£’000
43
94
178
–
21
146
2
2018
£’000
–
48
118
183
–
74
84
484
507
125
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30 Acquisitions
Animax Ltd
On 21 September 2018 Carrs Agriculture Ltd acquired the entire issued share capital of Animax Ltd ("Animax") a producer of market-
leading animal health products, for a total cash consideration of up to £8.5m. As part of the acquisition, Carrs Agriculture Ltd also
acquired the entire issued share capital of Animax’s related party, Clinimax Ltd. Clinimax Ltd is a manufacturer of specialist disinfectant
products for use in the medical industry.
Both businesses were acquired for an initial cash consideration of £6.0m, with an additional cash consideration of up to a maximum of
£2.5m payable over the period to November 2020, based on the achievement of agreed financial targets.
The acquisition of Animax aligns with the Group’s stated strategy of investing in growing agriculture markets in the UK and internationally.
NW Total Engineered Solutions Ltd
On 28 June 2019 Carr’s Engineering Ltd acquired the entire issued share capital of NW Pump & Valve Ltd, the holding company of NW
Engineered Solutions Ltd ("NW Total"), a service and manufacturing company providing value added solutions to the nuclear defence,
nuclear decommissioning, nuclear power generation and other highly regulated markets, for a total cash consideration of up to £9.6m.
NW Total has been acquired for an initial cash consideration of £6.0m, with further contingent cash consideration of up to a maximum
of £3.6m payable over the next three years, based on the achievement of agreed financial targets.
The acquisition of NW Total adds a specialist engineering solutions provider to the Group’s Engineering division and will bring a range
of benefits and synergies. NW Total will also benefit significantly from being part of a larger group with access to increased
manufacturing capacity alongside greater financial and technical resources.
Other
On 8 July 2019 Carrs Billington Agriculture (Sales) Ltd acquired the entire issued share capital of Paul Chuter Agricultural Services Ltd
("Paul Chuter") for a cash consideration of £0.4m.
The acquisition expands the existing Agriculture business.
All of the above purchases have been accounted for as acquisitions.
Aggregate disclosures
The total goodwill arising from acquisitions in the year amounts to £7,999,000. Goodwill 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 amounts have been recognised within the consolidated income statement in respect of acquisitions made in the year:
Revenue
Profit before taxation
Animax
£’000
6,148
429
NW Total
£’000
1,880
352
Other
£’000
117
(34)
Total
£’000
8,145
747
There were no other recognised gains and losses other than the results shown above.
Total acquisition related costs amounted to £630,000, which have been recognised within administrative expenses in the consolidated
income statement and have been included in business combination expenses within non-recurring items (note 5). £509,000 has been
charged to the income statement in the current year and £121,000 has been recognised in prior years as incurred.
CARR'S GROUP PLC Annual report and accounts 2019
126
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
30 Acquisitions continued
The assets and liabilities recognised in the acquisition accounting are set out below.
Intangible assets
Property, plant and equipment
Inventories
Receivables
Cash at bank
Payables
Bank loans
Taxation
– Current
– Deferred
Net assets acquired
Goodwill
Satisfied by:
Cash consideration
Contingent consideration
Initial cash consideration comprises:
Enterprise value
Adjustments for:
Profit and normalised working capital
Cash and debt like items
Total initial cash consideration
Fair
value
Animax
£’000
3,017
1,868
948
1,355
1,430
(1,268)
(340)
34
(680)
6,364
1,742
Fair
value
NW Total
£’000
3,520
279
267
1,210
4,246
(2,571)
(120)
(333)
(633)
5,865
6,234
Fair
value
Other
£’000
67
69
258
132
147
(189)
–
(54)
(15)
415
23
Total
fair
value
£’000
6,604
2,216
1,473
2,697
5,823
(4,028)
(460)
(353)
(1,328)
12,644
7,999
8,106
12,099
438
20,643
6,000
2,106
8,868
3,231
438
–
15,306
5,337
8,106
12,099
438
20,643
Fair value
Animax
£’000
Fair value
NW Total
£’000
Fair value
Other
£’000
Total
fair value
£’000
6,000
6,000
438
12,438
–
–
555
2,313
–
–
555
2,313
6,000
8,868
438
15,306
The contingent consideration and £124,000 of cash consideration remains unpaid at the year end. Intangible assets represents the fair
value of IP, brand names and customer relationships.
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 2 September 2018.
The pro forma amounts include the results of the acquisitions and the interest expense on the increase in net debt as a result of the
acquisitions. The pro forma amounts do not include any possible synergies from the acquisition. The pro forma information is provided
for comparative purposes only and does not necessarily reflect the actual results that would have occurred, nor is it necessarily
indicative of future results.
Revenue
Profit before taxation
£’000
414,536
17,406
CARR'S GROUP PLC Annual report and accounts 2019
127
31 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
Dividends received from associate and joint ventures
Depreciation of property, plant and equipment
Depreciation of investment property
Goodwill impairment
Intangible asset amortisation
(Profit)/loss on disposal of property, plant and equipment
Business combination expenses
Adjustments to contingent consideration
Net fair value expense on share based payments
Other non-cash adjustments
Finance costs:
Interest income
Interest expense and borrowing costs
Share of results of associates and joint ventures
IAS19 income statement charge (excluding interest):
Administrative expenses (note 27)
Past service cost (note 27)
Changes in working capital (excluding the effects of acquisitions):
Increase in inventories
(Increase)/decrease in receivables
(Decrease)/increase in payables
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Company
2019
£’000
2018
£’000
2019
£’000
2018
£’000
13,624
13,647
6,768
2,541
2,685
(526)
–
–
4,804
6
–
943
(30)
509
(1,126)
880
(139)
1,855
(451)
–
–
4,372
6
516
397
19
251
–
1,125
107
(89)
–
(6,805)
(588)
43
–
–
41
–
–
–
602
(1,384)
(463)
1,399
(2,377)
(358)
1,357
(3,215)
(2,055)
666
–
21
795
24
–
(670)
(1,008)
(3,323)
(5,106)
(7,015)
7,449
21
795
–
(804)
202
(642)
–
(4,625)
(588)
15
–
–
–
59
–
–
746
276
(1,836)
610
–
24
–
–
300
996
Cash generated from/(used in) continuing operations
16,004
14,980
(2,587)
(2,124)
32 Analysis of net debt
Group
Cash and cash equivalents
Bank overdrafts
Loans and other borrowings:
– Current
– Non-current
Finance leases:
– Current
– Non-current
Net debt
At
2 September
2018
£’000
Cash flow
£’000
Other
non-cash
changes
£’000
Exchange
movements
£’000
24,632
(3,627)
3,491
(727)
21,005
2,764
–
–
–
526
–
526
At
31 August
2019
£’000
28,649
(4,354)
24,295
(30,444)
(3,564)
858
(11,443)
11,285
(11,795)
(18)
(44)
(18,319)
(26,846)
(923)
(1,433)
1,278
–
(1,538)
(307)
–
–
(1,183)
(1,740)
(15,359)
(6,543)
(2,355)
464 (23,793)
Other non-cash changes relate to finance leases, debt acquired with subsidiaries and transfers between categories of borrowings.
It also includes the release of deferred borrowing costs to the consolidated income statement.
CARR'S GROUP PLC Annual report and accounts 2019
128
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
32 Analysis of net debt continued
Company
Cash and cash equivalents
Loans and other borrowings:
– current
– non-current
Net debt
At
2 September
2018
£’000
Cash flow
£’000
Other
non-cash
changes
£’000
Exchange
movements
£’000
At
31 August
2019
£’000
4,955
1,760
–
63
6,778
(18,839)
(3,564)
(712)
(11,443)
11,745
(11,795)
–
(44)
(7,806)
(26,846)
(17,448)
(10,395)
(50)
19
(27,874)
Other non-cash changes relate to the release of deferred borrowing costs to the consolidated income statement and transfers
between categories of borrowings.
33 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 (2018: none).
34 Other financial commitments
Group
At 31 August 2019 the Group had commitments under non-cancellable operating leases as follows:
2019
£’000
2018
£’000
173
621
Within one year
Within two and five years inclusive
After five years
Group
Company
2019
2018
2019
2018
Land and
buildings
£’000
1,379
3,514
6,556
Other
£’000
634
805
29
Land and
buildings
£’000
1,190
3,448
5,443
11,449
1,468
10,081
Other
£’000
595
666
–
1,261
Other
£’000
87
177
–
264
Other
£’000
73
198
–
271
35 Financial guarantees and contingent liabilities
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 31 August 2019 amounted to £2,582,000 (2018:
£nil).
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 31 August 2019 was £4,386,000 (2018: £4,359,000).
The Company has provided specific guarantees to certain customers of subsidiaries. These are in place to guarantee the completion of
the contract in any event. The contracts under these guarantees had a total contract value of £14,070,000 (2018: £12,181,000) and as at
31 August 2019 £1,572,000 (2018: £5,064,000) remained uncompleted.
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 31 August 2019 the cumulative rent payable over the remaining
term of the lease is £1,040,000 (2018: £1,227,000).
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 (2018: £1,500,000).
CARR'S GROUP PLC Annual report and accounts 2019
129
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35 Financial guarantees and contingent liabilities continued
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 £7.6m
(2018: £7.6m).
From time to time the Company, or its subsidiaries, may be required to participate or otherwise become involved in legal proceedings,
including those brought by government or regulatory bodies, which could potentially give rise to a contingent liability. At this time there
is no expectation that any liabilities or other financial loss will be incurred in connection with any such proceedings.
The Group and Company does not expect any of the above to be called in.
36 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.
Transactions with key management personnel
Key management personnel are considered to be the Directors and their remuneration is disclosed within the Remuneration
Committee Report.
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
Revenue
Transactions with subsidiaries
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
Purchases
Group
Company
2019
£’000
2018
£’000
2019
£’000
2018
£’000
18
72
144
166
–
–
–
–
Company
2019
£’000
2018
£’000
49,231
279
35,510
80
49,510
35,590
(5,466)
(2)
(5,461)
(9)
(5,468)
(5,470)
2,967
6,805
1,725
(1)
2,360
4,625
1,643
(2)
CARR'S GROUP PLC Annual report and accounts 2019
130
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
36 Related parties continued
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
Dividends received
Interest receivable
Management charges payable
Purchases
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
Company
2019
£’000
2018
£’000
2019
£’000
2018
£’000
185
85
(24,628)
(25,072)
695
20
166
–
–
(153)
(116,074)
758
20
110
–
71
(97)
(114,350)
45
–
–
–
113
588
–
–
–
18
–
–
–
110
588
–
–
–
Group
Company
2019
£’000
2018
£’000
2019
£’000
2018
£’000
1,794
1,734
1,719
1,659
(3)
(12)
–
–
Included within Group and Company trade and other receivables is £1,717,000 (2018: £1,659,000) in respect of loans owed by joint
ventures.
Transactions reported in the Income Statement
Revenue
Management charges receivable
Purchases
Group
Company
2019
£’000
2018
£’000
2019
£’000
2018
£’000
836
165
(310)
696
152
(1,138)
–
–
–
–
–
–
Other related parties
NW Total Engineered Solutions Ltd occupies its premises under a 15 year lease with Ironworks Properties LLP. The owners of Ironworks
Properties LLP are employed by NW Total Engineered Solutions Ltd. At the year end £23,000 was owed to Ironworks Properties LLP.
CARR'S GROUP PLC Annual report and accounts 2019
131
37 Adoption of IFRS 15 ‘Revenue from contracts with customers’
The Group adopted IFRS 15 with effect from 2 September 2018 and has applied IFRS 15 retrospectively with the cumulative effect of
initially applying the standard recognised at the date of initial application. Comparative information has not been restated and is
therefore still reported under IAS 11 and IAS 18. The adoption of IFRS 15 has had no impact on the Company.
Adjustments to the opening balance sheet arising from adoption of IFRS 15 are as follows:
Current assets
Inventories
Contract assets
Trade and other receivables
Current liabilities
Contract liabilities
Trade and other payables
Equity
Retained earnings
Headline figures
Non-current assets
Current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Total shareholders’ equity
Total equity
1 September
2018
£’000
Adjustments
£’000
2 September
2018
£’000
42,371
–
67,516
43,813
1,442
6,909
6,909
(12,128) 55,388
–
(64,290)
(1,458)
5,111
(1,458)
(59,179)
87,967
(124) 87,843
96,523
134,664
231,187
(99,459)
(10,762)
(110,221)
120,966
105,281
120,966
96,523
–
(3,777)
130,887
(3,777) 227,410
3,653 (95,806)
(10,762)
3,653 (106,568)
120,842
105,157
120,842
(124)
(124)
(124)
–
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The adjustments to the opening position reflect the transition impact of £124,000 reduction in retained earnings together with the
reclassification of amounts to the new asset and liability categories of ‘contract assets’ and ‘contract liabilities’.
To enable users of these accounts to compare the periods presented in the financial statements the following table shows the balance
sheet of the Group as at 31 August 2019 as though IAS 11 and IAS 18 still applied.
Current assets
Inventories
Contract assets
Trade and other receivables
Current liabilities
Contract liabilities
Trade and other payables
Equity
Retained earnings
Headline figures
Non-current assets
Current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Total shareholders’ equity
Total equity
31 August
2019
(as reported)
£’000
Adjustments
£’000
31 August
2019
(IAS 11 &
IAS 18)
£’000
46,270
9,466
56,349
–
(9,466)
9,466
46,270
–
65,815
(1,269)
(62,653)
1,269
(1,269)
–
(63,922)
94,864
–
94,864
115,616
140,734
256,350
(88,788)
(36,572)
(125,360)
130,990
114,250
130,990
115,616
–
–
140,734
– 256,350
(88,788)
–
(36,572)
–
(125,360)
–
130,990
–
114,250
–
130,990
–
The adjustments reflect the reclassification of amounts to the new asset and liability categories of ‘contract assets’ and
‘contract liabilities’.
CARR'S GROUP PLC Annual report and accounts 2019
132
FIVE YE AR STATEMENT
Continuing operations
Revenue and Results
Revenue
Operating profit
Analysed as:
Operating profit before amortisation and non-recurring items
Amortisation and non-recurring items
Operating profit
Finance income
Finance costs
Profit before taxation
Analysed as:
Profit before taxation before amortisation and non-recurring items
Amortisation and non-recurring items
Profit before taxation
Taxation
Profit for the year from continuing operations
Profit for the year from discontinued operations
Profit for the year
Ratios (continuing operations)
Operating margin (excluding non-recurring items and amortisation)9
Return on net assets (excluding non-recurring items and amortisation)
Earnings per share – basic2
– adjusted2
Dividends per ordinary share2
(Restated)1,3
2015
£’000
(Restated)3
2016
£’000
(Restated)3
2017
£’000
2018
£’000
2019
£’000
331,285
314,907 346,224
403,192 403,905
14,397
14,851
10,690
16,405
17,195
14,648
(251)
15,063
(212)
12,091
(1,401)
17,464
(1,059)
18,930
(1,735)
14,397
14,851
10,690
16,405
17,195
338
(1,045)
236
(1,009)
176
(864)
358
(1,261)
463
(1,349)
13,690
14,078
10,002
15,502
16,309
13,941
(251)
13,690
(3,010)
10,680
3,013
14,290
(212)
14,078
(2,907)
11,171
2,817
11,403
(1,401)
10,002
(1,707)
16,561
(1,059)
15,502
(1,855)
18,044
(1,735)
16,309
(2,685)
8,295
13,647
13,624
–
–
–
13,693
13,988
8,295
13,647
13,624
4.4%
14.1%
10.0p
10.2p
3.7p
4.8%
13.0%
10.7p
10.9p
3.8p
3.5%
10.8%
7.7p
8.9p
4.0p
4.3%
13.7%
13.0p
13.9p
4.5p
4.7%
13.8%
13.1p
14.6p
4.75p
Revenue and results included in the table above have been restated to reflect the disposal of Carr’s Flour Mills Ltd in the year ended
3 September 2016. The profit after taxation from this business has been included within profit for the year from discontinued operations
in the table above.
1 Restated for the reclassification to interest income of the net interest on the net defined benefit retirement asset previously recognised within operating profit.
2 Restated for the effect of the 10:1 share split in January 2015.
3 Restated for the reclassification to operating profit of the share of post-tax results of the associates and joint ventures.
CARR'S GROUP PLC Annual report and accounts 2019
133
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a
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s
(Restated)1
2015
£’000
2016
£’000
(Restated)2
2017
£’000
2018
£’000
2019
£’000
10,849
448
58,385
636
13,530
50
1,767
861
11,440
286
35,811
182
14,996
50
311
–
24,293
2,266
37,149
176
18,106
444
5,209
–
24,272
2,223
38,484
170
21,207
21
10,146
–
32,877
9,318
41,917
164
23,139
22
7,769
410
86,526
63,076
87,643
96,523
115,616
35,031
–
64,454
839
33,423
–
56,940
303
37,023
–
59,723
297
42,371
–
67,516
119
46,270
9,466
56,349
–
50
20,052
–
48,411
13
23,887
26
24,632
–
28,649
120,426
139,077
120,943
134,664 140,734
206,952
202,153 208,586
231,187 256,350
(18,721)
(72)
–
(54,496)
(472)
(21,642)
(20)
–
(46,823)
(470)
(17,060)
(18)
–
(56,181)
(673)
(34,994)
–
–
(64,290)
(175)
(23,856)
–
(1,269)
(62,653)
(1,010)
(73,761)
(68,955)
(73,932)
(99,459)
(88,788)
(25,744)
(4,184)
(4,300)
(18,625)
(1,817)
(2,668)
(20,966)
(4,010)
(3,755)
(4,997)
(3,981)
(1,784)
(28,586)
(4,987)
(2,999)
(34,228)
(23,110)
(28,731)
(10,762)
(36,572)
(107,989)
(92,065)
(102,663)
(110,221) (125,360)
98,963
110,088
105,923
120,966 130,990
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
Contract assets
Trade and other receivables
Current tax assets
Financial assets
– Derivative financial instruments
– Cash and cash equivalents
Total assets
Current liabilities
Financial liabilities
– Borrowings
– Derivative financial instruments
Contract liabilities
Trade and other payables
Current tax liabilities
Non-current liabilities
Financial liabilities
– Borrowings
Deferred tax liabilities
Other non-current liabilities
Total liabilities
Net assets
1 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.
2 Restated for the finalisation of the fair value acquisition accounting for NuVision Engineering, Inc.
CARR'S GROUP PLC Annual report and accounts 2019
ALTERNATIVE PERFORMANCE ME ASURES GLOSSARY
134
The Annual Report and Accounts include both statutory and Alternative Performance Measures (APMs). The principal APMs measure
profitability excluding amortisation of acquired intangibles and items regarded by the Directors as non-recurring. In management's view,
these APMs, which are generally referred to as 'adjusted' measures, better reflect the underlying performance of the business and
therefore provide valuable additional information on the performance of the business. These 'adjusted' measures are used in the
management and measurement of business performance on a day-to-day basis and are also used in assessing performance under the
Group's incentive plans.
Alternative performance measure
Definition and comments
Adjusted EBITDA
Adjusted operating profit
Adjusted profit before taxation
Adjusted earnings per share
Earnings before interest, tax, depreciation, amortisation, profit/(loss) on the disposal of property,
plant and equipment, share of post-tax results of the associate and joint ventures and excluding
non-recurring items. This measure is reconciled to statutory operating profit and statutory profit
before taxation in note 2. EBITDA allows the user to assess the profitability of the Group's core
operations before the impact of capital structure, debt financing and non-cash items such as
depreciation and amortisation.
Operating profit after adding back items regarded by the Directors as non-recurring and
amortisation of acquired intangible assets. This measure is reconciled to statutory operating profit
in the income statement and note 2. Adjusted results excluding non-recurring items and
amortisation of acquired intangible assets are presented because if included, these items could
distort the understanding of the Group's performance for the year and the comparability between
the years presented.
Profit before taxation after adding back items regarded by the Directors as non-recurring and
amortisation of acquired intangible assets. This measure is reconciled to statutory profit before
taxation in the income statement and note 2. Adjusted results excluding non-recurring items and
amortisation of acquired intangible assets are presented because if included, these items could
distort the understanding of the Group's performance for the year and the comparability between
the years presented.
Profit attributable to the equity holders of the Company after adding back items regarded by the
Directors as non-recurring and amortisation of acquired intangible assets after tax divided by the
weighted average number of ordinary shares in issue during the year. This is reconciled to basic
earnings per share in note 10.
Adjusted diluted earnings per share Profit attributable to the equity holders of the Company after adding back items regarded by the
Directors as non-recurring and amortisation of acquired intangible assets after tax divided by the
weighted average number of ordinary shares in issue during the year adjusted for the effects of
any potentially dilutive options. Diluted earnings per share is shown in note 10.
Free cash flow
Net Debt
Cash generated from operating activities less maintenance capital expenditure. The calculation of
free cash flow is shown on page 17 in the Strategic Report. Free cash flow indicates how much
cash is available for the Group to utilise for expansionary capital investment, paying dividends, or
financing/repaying borrowings.
The net position of the Group's and Company’s cash at bank and borrowings including finance
leases. Details of the movement in net debt is shown in note 32.
CARR'S GROUP PLC Annual report and accounts 2019
135
DIRECTORY OF OPER ATIONS
Carr’s Group plc
Old Croft, Stanwix, Carlisle,
Cumbria CA3 9BA
Tel: 01228 554600
Web: www.carrsgroup.com
Agriculture
ACC Feed Supplement LLC*
5101 Harbor Drive,
Sioux City, Iowa 51111 USA
Tel: 001 712 255 6927
Afgritech LLC*
810 Waterman Drive,
Watertown, New York 13601
USA
Tel: 001 315 785 3625
AminoMax
Lansil Way, Lancaster, LA1 3QY
Tel: 01524 597 200
Animal Feed Supplement, Inc
East Highway 212, PO Box 188,
Belle Fourche, South Dakota
57717 USA Tel: 001 605 892 3421
Animal Feed Supplement, Inc
PO Box 105, 101 Roanoke
Avenue, Poteau, Oklahoma
74953 USA
Tel: 001 918 647 8133
Animal Feed Supplement, Inc
PO Box 569, 1700 US, 50 East,
Silver Springs, Nevada 89429
USA
Tel: 001 775 577 2002
Animax Limited
Shepherds Grove West,
Stanton, Bury St Edmund’s,
Suffolk IP31 2AR
Tel: 01359 252 181
Animax NZ Limited
86 Highbrook Drive, Auckland
2013, New Zealand
Bibby Agriculture*
Priory House, Priory Street,
Carmarthen, SA31 1NE
Tel: 01267 232 041
Bibby Agriculture*
1A Network House, Badgers
Way, Oxon Business Park,
Shrewsbury,
Shropshire, SY3 5AB
Tel: 01743 237 890
Caltech
Solway Mills, Silloth, Wigton,
Cumbria CA7 4AJ
Tel: 016973 32592
Carrs Billington Agriculture
(Operations)**
Warren Road, Brecon,
Powys, LD3 8EF
Tel: 01874 623470
Carrs Billington Agriculture
(Operations)**
Parkhill Road, Kingstown
Industrial Estate, Carlisle
CA3 0EX
Tel: 01228 518860
Carrs Billington Agriculture
(Operations)**
Lansil Way, Lancaster LA1 3QY
Tel: 01524 597 200
Carrs Billington Agriculture
(Operations)**
High Mill, Langwathby, Penrith
CA10 1NB
Tel: 01228 518 860
Carrs Billington Agriculture
(Operations)**
Lion Works, Pool Road,
Newtown, Powys, SY16 3AG
Tel: 01686 626680
Carrs Billington Agriculture
(Operations)**
Cold Meece, Stone,
Staffordshire, ST15 0QW Tel:
01785 760 535
Carrs Billington Agriculture
(Sales), Hawes
Burtersett Road, Hawes, North
Yorkshire DL8 3NP
Tel: 01969 667334
Carrs Billington Agriculture
(Operations)**
Micklow House Farm, Eccleshall
Road, Stone, Staffordshire,
ST15 0BY Tel: 01782 374387
Carrs Billington Agriculture
(Operations)**
Cilherwydd Store, Llanboidy,
Whitland, Carmarthenshire,
SA34 0LL
Tel: 01994 448209
Carrs Billington Agriculture
(Operations)**
Pow Hill, Kirkbride, Wigton,
Cumbria, CA7 5LF
Tel: 01697 352229
Carrs Billington Agriculture
(Sales), Annan
2 Annan Business Park, Annan,
Dumfriesshire
DG12 6TZ
Tel: 01461 202772
Carrs Billington Agriculture
(Sales), Appleby
Crosscroft Industrial Estate,
Appleby, Cumbria CA16 6HX
Tel: 01768 352999
Carrs Billington Agriculture
(Sales), Ayr
1A Whitfield Drive, Heathfield
Ind Est, Ayr, Ayrshire, KA8 9RX
Tel: 01292 263635
Carrs Billington Agriculture
(Sales), Bakewell
Unit 4-6, Kingfisher Building,
Buxton Road, Bakewell,
Derbyshire DE45 1GZ
Tel: 01629 814126
Carrs Billington Agriculture
(Sales), Barnard Castle
Montalbo Road, Barnard Castle,
Durham DL12 8ED
Tel: 01833 637537
Carrs Billington Agriculture
(Sales), Berwick upon Tweed
29 Northumberland Road,
Berwick upon Tweed,
Tweedmouth, Northumberland
TD15 2AS
Tel: 01289 307 245
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
Carrs Billington Agriculture
(Sales), Carlisle
Montgomery Way, Rosehill
Estate, Carlisle CA1 2UY
Tel: 01228 520212
Carrs Billington Agriculture
(Sales), Cockermouth
Unit 5, Lakeland Agricultural
Centre, Cockermouth CA13 0QQ
Tel: 01900 824 105
Carrs Billington Agriculture
(Sales), Gisburn
Pendle Mill, Mill Lane, Gisburn,
Clitheroe, Lancashire BB7 4ES
Tel: 01200 445 491
Carrs Billington Agriculture
(Sales), Stirling
Stirling Agricultural Centre,
Stirling FK9 4RN
Tel: 01786 474826
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 281567
Carr’s Supplements (NZ)
Limited
515a Wairakei Road, Burnside,
Christchurch, 8053,
New Zealand
Tel: 0064 03 974 9274
Crystalyx Products GmbH*
Am Stau 199-203, 26122,
Oldenburg, Germany
Tel: 00 49 441 2188 92142
Carrs Billington Agriculture
(Sales), Hexham
Tyne Mills Industrial Estate,
Hexham, Northumberland
NE46 1XL
Tel: 01434 605371
Carrs Billington Agriculture
(Sales), Jedburgh
Mounthooly, Crailing, Jedburgh,
TD8 6TJ
Tel: 01835 850250
Carrs Billington Agriculture
(Sales), Kendal
Unit 1, J36, Rural Auction
Centre, Crooklands, Milnthorpe,
Kendal, Cumbria LA7 7FP
Tel: 01539 566035
Carrs Billington Agriculture
(Sales), Leek
Macclesfield Road, Leek,
Staffordshire ST13 8NR
Tel: 01538 383277
Carrs Billington Agriculture
(Sales), Malton
31 Horsemarket, Malton, North
Yorkshire YO17 7NB
Tel: 01653 600328
Gold-Bar Feed Supplements
LLC*
783 Eagle Boulevard,
Shelbyville TN 37160, USA
Tel: 001 877 618 6455
Carrs Billington Agriculture
(Sales), Milnathort
Stirling Road, Milnathort,
Kinross KY13 9UZ
Tel: 01577 862381
Carrs Billington Agriculture
(Sales), Morpeth
Unit 20c, Coopies Lane
Industrial Estate, Morpeth,
Northumberland NE61 6JN
Tel: 01670 503930
Carrs Billington Agriculture
(Sales), Morpeth (Greens)
Old Station Buildings, Coopies
Lane, Morpeth,
Northumberland, NE61 2SL Tel:
01670 518474
Johnstone Wallace Fuels,
Castle Douglas
Abercromby Industrial Park,
Castle Douglas, Dumfriesshire,
DG7 1BA
Tel: 01387 750747
Johnstone Wallace Fuels,
Dumfries
Dargavel Stores, Lockerbie
Road, Dumfries, Dumfriesshire
DG1 3PG
Tel: 01387 750747
Johnstone Wallace Fuels,
Stranraer
Droughduil, Dunragit, Stranraer
DG9 8QA
Tel: 01387 750747
Carrs Billington Agriculture
(Sales), Penicuik
4 Eastfield Park Road, Penicuik,
Midlothian, EH26 8EZ
Tel: 01968 707040
Carrs Billington Agriculture
(Sales), Ludlow
Weeping Cross Lane, Ludlow
Shropshire SY8 1JH
Tel: 01584 233109
Carrs Billington Agriculture
(Sales), Penrith
Haweswater Road, Penrith
Industrial Estate, Penrith,
Cumbria CA11 9EU
Tel: 01768 866354
Carrs Billington Agriculture
(Sales), Rothbury
The Store, Coquet View,
Rothbury, Morpeth,
Northumberland, NE65 7RZ
Tel: 01669 620320
Carrs Billington Agriculture
(Sales), Selkirk
Dunsdale Haugh, Selkirk,
Selkirkshire, TD7 5EF
Tel: 01750 720734
Carrs Billington Agriculture
(Sales), Skipton
Skipton Auction Mart, Gargrave
Road, Skipton, North Yorkshire
BD23 1UD Tel: 01756 792166
Carrs Billington Agriculture
(Sales), Spennymoor
Southend Works, Byers Green,
Spennymoor, Durham,
DL16 7NL
Tel: 01388 662266
Phoenix Feeds, a division
of Carrs Billington Agriculture
(Sales) Ltd
1 Station Park, Ramsgreave
Road, Blackburn, Lancashire
BB1 9BH
Tel: 01254 240888
Reid & Robertson, a division of
Carrs Billington Agriculture
(Sales) Ltd
Livestock Auction Mart,
Whiteford Hill, Ayr, KA6 5JW
Tel: 01292 619229
Reid & Robertson, a division of
Carrs Billington Agriculture
(Sales) Ltd
Ballagan, Stirling Road, Balloch,
G83 8LY
Tel: 01389 752800
Reid & Robertson, a division of
Carrs Billington Agriculture
(Sales) Ltd
Unit 3 Oban Livestock Centre
Soroba, Oban, Argyll
Tel: 01631 566279
Scotmin
13 Whitfield Drive, Heathfield
Industrial Estate, Ayr KA8 9RX
Tel: 01292 280 909
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Silloth Storage Company*
Station Road, Silloth,
Wigton, Cumbria, CA7 4JQ
Wallace Oils
Kingstown Broadway,
Kingstown Industrial Estate,
Carlisle CA3 0HA
Tel: 01228 534 342
Wallace Oils
Tyne Mills Industrial Estate,
Hexham, Northumberland,
NE46 1XL
Tel: 01434 600404
Wallace Oils
Lancaster Mill, Lansil Way
Lancaster, Lancashire, LA1 3QY
Tel: 01524 599333
Wallace Oils
Lakeland Agricultural Centre
Cockermouth, Cumbria,
CA13 0QQ
Tel: 01900 828800
Wallace Oils
High Mill, Langwathby, Penrith,
Cumbria, CA10 1NB
Tel: 01768 889899
Workware
Kingstown Broadway,
Kingstown Industrial Estate,
Carlisle CA3 0HA
Tel: 01228 591 091
Engineering
Carr’s Engineering
Innovation Centre
Westlakes, Moor Row, Cumbria
CA24 3TP Tel: 01946 313160
Bendalls Engineering
Brunthill Road, Kingstown
Industrial Estate, Carlisle
CA3 0EH
Tel: 01228 526 246
Carrs MSM
Unit 1 Spitfire Way, Hunts Rise,
South Marston Park, Swindon,
Wiltshire SN3 4TX
Tel: 01793 824 891
Chirton Engineering
Unit 4A, High Flatworth,
Tyne Tunnel Trading Estate,
North Shields, Tyne & Wear,
NE29 7SW
Tel: 0191 296 2020
NuVision Engineering, Inc
2403 Sidney Street, Suite 700,
Pittsburgh, Pennsylvania 15203,
USA
Tel: 001 888 748 8232
NuVision Engineering, Inc
184 B Rolling Hill Road,
Mooresville, North Carolina
28117, USA
Tel: 001 704 799 2707
NW Total Engineered
Solutions Limited
Andrews Way, Barrow in
Furness, Cumbria LA14 2UE
Tel: 01229 811000
R Hind Bendalls
Kingstown Broadway,
Kingstown Industrial Estate,
Carlisle CA3 0HA
Tel: 01228 523 647
Wälischmiller
Engineering GmbH
Schießstattweg 16, 88677
Markdorf, Germany
Tel: 0049 7544 95140
joint venture company
*
** associate company
CARR'S GROUP PLC Annual report and accounts 2019
136
REGISTERED OFFICE AND ADVISERS
Registered Office
Carr’s Group plc
Old Croft, Stanwix,
Carlisle
CA3 9BA
Registered No. 98221
Chartered Accountants and Statutory Auditors
KPMG LLP
Quayside House,
110 Quayside,
Newcastle upon Tyne
NE1 3DX
Bankers
Clydesdale Bank PLC
82 English Street,
Carlisle
CA3 8HP
The Royal Bank of Scotland PLC
37 Lowther Street,
Carlisle
CA3 8EL
Financial Adviser and Broker
Investec Bank (UK) Ltd
30 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
Registrar
Link Asset Services
The Registry,
34 Beckenham Road,
Beckenham,
Kent
BR3 4TU
CARR'S GROUP PLC Annual report and accounts 2019
DORMANT SUBSIDIARIES AT 31 AUGUST 2019
Company Name
B. E. Williams Ltd
Caltech Biotechnology Ltd
Carrs Animal Feed Supplements Ltd
Carrs Feeds Ltd
Carrs Fertilisers Ltd
Carr’s Group Corporate Trustee 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
Horse and Pet Warehouse Ltd
Johnstone Fuels and Lubricants Ltd
Paul Chuter Agricultural Services Ltd
Pearson Farm Supplies Ltd
Phoenix Feeds Ltd
R Hind Ltd
Reid and Robertson Ltd
Robert Hutchison Ltd
Safe at Work Ltd
Scotmin Nutrition Ltd
Simarghu Ltd
Walischmiller Solutions Ltd
Wallace Oils Ltd
WM. Nicholls and Company (Crickhowell) Ltd
Registered and Located
Ownership
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Scotland
Scotland
England and Wales
England and Wales
England and Wales
England and Wales
Scotland
England and Wales
England and Wales
Scotland
England and Wales
England and Wales
England and Wales
England and Wales
51%1
100%
100%
51%1
100%
100%
100%
100%
100%
100%
100%
51%1
100%
51%1
51%1
51%1
51%1
51%1
100%
51%1
100%
51%1
100%
51%1
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 and 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, with the exception of Horse and
Pet Warehouse Ltd which has a registered office of 1a Whitfield Drive, Heathfield Ind. Est., Ayr KA8 9RX.
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1
9
Carr’s Group plc
Old Croft
Stanwix
Carlisle CA3 9BA
United Kingdom