RISING TO THE
CHALLENGE
Annual Report and Accounts 2021
Introduction
What we do
CARR’S IS AN INTERNATIONAL
GROUP INVESTING IN THE
AGRICULTURAL AND
ENGINEERING SECTORS.
OUR VISION
To build an innovative and
successful group of market-
leading businesses.
OUR PURPOSE
In Agriculture, our core purpose is to
enable more productive and
sustainable farming.
In Engineering, our core purpose is to
provide specialist engineering services
to create and maintain critical operating
assets for our customers.
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What’s in our report
What’s in our report
Strategic Report
Our Group
Highlights
At a Glance
Chairman’s Statement
2
3
4
6
8 Market Overview
10 Our Business Model
12 Group Performance Review
14 Strategic Framework
16 Our Key Performance Indicators
18 Financial Review
20 Our Strategy In Action:
Speciality Agriculture
22 Our Strategy In Action:
Agricultural Supplies
24 Our Strategy In Action:
Engineering
26 Divisional Review: Speciality Agriculture
28 Divisional Review: Agricultural Supplies
30 Divisional Review: Engineering
32 Risk Management
37 Viability Statement
38 Stakeholder Engagement
40 Responsible Business: Developing our
Sustainability Strategy
42 Responsible Business Review
47 Non-Financial Information Statement
Corporate Governance
48 The Board
50 Corporate Governance Report
51 Overview of Group Governance
56 Nomination Committee Report
60 Audit Committee Report
64 Remuneration Committee Report
84 Directors’ Report
Financial Statements
Independent Auditor’s Report
88
97 Consolidated Income Statement
98 Consolidated and Company Statements of
Comprehensive Income
99 Consolidated and Company Balance Sheets
101 Consolidated Statement of Changes
in Equity
102 Company Statement of Changes in Equity
103 Consolidated and Company Statements of
Cash Flows
104 Principal Accounting Policies
113 Notes to the Financial Statements
157 Five-Year Statement
159 Alternative Performance Measures Glossary
161 Directory of Operations
162 Dormant Subsidiaries
163 Registered Office and Advisers
Carr's Group plc Annual Report and Accounts 2021
1
Overview
Our Group
Speciality Agriculture
Speciality Agriculture comprises our
feed blocks, mineral supplements and
animal health businesses in the UK,
Europe, North America, and New
Zealand.
Read more on page 00-00
Agricultural Supplies
Agricultural Supplies comprises our
Carr’s Billington branded agricultural
stores, machinery, fuel and compound
feed business, and our joint venture
business Bibby Agriculture.
Read more on page 00-00
Read more on page 00-00
Engineering
Engineering comprises our businesses
across the UK, Europe and USA which
manufacture complex equipment and
remote handling products, and supply
specialist technical services, to
customers predominantly in nuclear,
defence, and oil and gas industries.
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Carr's Group plc Annual Report and Accounts 2021
Highlights
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Financial
£417.3m
Revenue
5.00p
Dividend Per Share
2020
2019
£395.6m
£403.9m
2020
2019
4.75p
4.75p
£17.6m
Adjusted Operating Profit*
£13.0m
Reported Operating Profit
Commercial and strategic
• Results ahead of Board’s improved
expectations, despite COVID-19 and oil
price volatility
• Substantial increase in profitability of
both Agriculture divisions:
− Strong performance in Speciality
Agriculture assisted by livestock
prices in the UK and USA
− Successful year in Agricultural
Supplies with feed volumes,
machinery revenues, and retail sales
all improved
• Engineering adjusted operating profit
marginally higher, despite lower oil
prices and COVID-19 impact in Q1
2020 (restated)**
2019 (restated)**
£16.3m
£19.0m
2020 (restated)**
2019 (restated)**
£12.3m
• Year-end Engineering order book 15.9%
£16.0m
higher than prior year
• Very strong cash and net debt position
• Board remains confident in prospects
of all divisions
£16.6m
Adjusted Profit Before Tax*
£12.1m
Reported Profit Before Tax
2020 (restated)**
2019 (restated)**
£15.0m
£18.1m
2020 (restated)**
2019 (restated)**
£10.9m
£15.1m
13.2p
Adjusted Earnings Per Share*
8.3p
Basic Earnings Per Share
2020 (restated)**
2019 (restated)**
12.0p
14.6p
2020 (restated)**
2019 (restated)**
9.1p
12.1p
*
Adjusted results are consistent with how business performance is measured
internally and are presented to aid comparability of performance.
** See note 36 for details of the prior year restatement in respect of the IFRIC
agenda decision in April 2021 on cloud configuration and customisation costs.
Carr's Group plc Annual Report and Accounts 2021
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Strategic Report
At a Glance
Carr’s Group plc is an international
leader in manufacturing and
supplying value-adding products
and solutions, with market-leading
brands and robust market
positions in Agriculture and
Engineering. We supply
customers in over 50 countries
around the world.
The Group operates a
decentralised model which
empowers operating subsidiaries,
enabling them to be competitive,
agile and effective in their
individual markets whilst setting
overall standards and goals.
Speciality Agriculture
Locations
3
UK
6
USA
1
Germany
Agricultural Supplies
Locations
40
UK
Engineering
Locations
4
UK
2
USA
1
Germany
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Carr's Group plc Annual Report and Accounts 2021
Speciality Agriculture
The Speciality Agriculture division
manufactures and supplies
supplementation products for livestock
including patented feed blocks and
trace element boluses which are
designed to improve animal
performance.
These products are developed and manufactured
from three sites in the UK, six sites in the USA and
one site in Germany. Our customers are farmers
across the UK, Europe, North America, South
America and Australasia who are supplied through
our extensive global distribution and support
network.
Key brands include:
• Crystalyx®, Horslyx® and SmartLic® feed blocks
• Tracesure® boluses
• AminoMax® bypass protein products
Revenue
Adjusted operating profit
£68.5m
£9.5m
£6.7m
Reported operating profit
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Agricultural Supplies
Engineering
The Agricultural Supplies division
manufactures compound animal feed
products, distributes fuels and farm
machinery, and runs a network of
country stores across the UK which
provide a one-stop-shop for farming
and rural communities.
Our businesses work closely with our farming
customers, providing specialist advice and support
through trusted and longstanding relationships,
and pride themselves on excellent customer
service levels.
Key brands include:
• Carr’s Billington: our animal feeds, agricultural
stores, machinery and fuels business
• Bibby Agriculture: our joint venture animal feeds,
minerals and forage additives business
The Engineering division designs and
manufactures bespoke equipment, and
provides specialist engineering
solutions, for the nuclear, oil and gas,
defence and petrochemical industries.
It operates from four sites in the UK, two in the USA
and one in Germany, and serves a global customer
base which includes government bodies, utilities
providers, and large corporations.
Its products and services include robotic
manipulators and remote handling equipment,
life-of-plant extension technologies, radiation
protection and decontamination services, design
and fabrication, and precision machining.
Key brands include:
• TELBOT® robotic manipulators
• MSIP® life-of-plant extension technology
• Power FluidicsTM, waste mobilisation systems
Revenue
Revenue
£297.5m
£6.7m
£5.0m
Adjusted operating profit
Adjusted operating profit
Reported operating profit
Reported operating profit
£51.3m
£3.9m
£4.0m
Carr's Group plc Annual Report and Accounts 2021
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Strategic Report
Chairman’s Statement
Peter Page
Chairman
“On behalf of the Board,
I thank all colleagues for
their positive approach to
dealing with a constantly
changing situation,
including working from
home with all the issues
this brings such as poor
broadband or lack of
space, often coping with
home schooling and
caring for family at the
same time.”
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Carr's Group plc Annual Report and Accounts 2021
OverviewCarr’s Group plc made good progress in the year ended 28 August 2021, financially, operationally, and in development of the organisation. Each of our divisions performed well. The Group delivered results ahead of the Board’s expectations.In the year, we separated the reporting of our Agricultural businesses into Speciality Agriculture and Agricultural Supplies to enable greater visibility on the key drivers of growth and the performance of each business. All colleagues have been impressively resilient and committed throughout the year, despite the COVID-19 pandemic. They have dealt constructively with customer project delays and travel restrictions in the Engineering businesses, and worked hard to keep stores, fuel depots and manufacturing plants operating in the Agricultural businesses, whilst complying with new practices to minimise health risks. Many went to extraordinary lengths in support of customers. On behalf of the Board, I thank all colleagues for their positive approach to dealing with a constantly changing situation, including working from home with all the issues this brings such as poor broadband or lack of space, often coping with home schooling and caring for family at the same time.Financial performanceRevenue for the year increased by 5.5% to £417.3m (2020: £395.6m). Adjusted operating profit increased by 7.9% to £17.6m (2020: restated £16.3m), with Speciality Agriculture contributing £9.5m (2020: restated £7.6m), Agricultural Supplies contributing £6.7m (2020: £5.8m), and Engineering contributing £3.9m (2020: £3.8m). Further details of the prior year restatement can be found in note 36.Reported operating profit increased by 6.1% to £13.0m (2020: restated £12.3m). Adjusted operating profits are before amortisation of acquired intangible assets totalling £1.2m, restructuring and closure costs of £0.2m, ERP system implementation costs of £1.9m, an impairment charge of £2.1m, and the effect of the deferred rate tax change in the share of the associate’s results of £0.2m, offset by adjustments to contingent consideration totalling £1.0m, giving a net total adjusting items of £4.6m.Adjusted profit before tax increased 11.1% to £16.6m (2020: restated £15.0m) and reported profit before tax increased 10.3% to £12.1m (2020: restated £10.9m). Basic earnings per share decreased 8.8% to 8.3p (2020: restated 9.1p) and adjusted earnings per share increased 10.0% to 13.2p (2020: restated 12.0p). Net debt at 28 August 2021, excluding leases, was £10.0m (2020: £18.9m), driven by improved cash flow from operating activities. i
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depots, stores and manufacturing plants in
the UK, meeting employees, customers, and
strategic partners. I have also held
discussions with a range of shareholders to
ensure that the Board has a clear sense of
stakeholder views. Our aim is that Directors
will continue to visit locations individually to
meet directly with our people, to
complement feedback the Board receives
from the Non-Executive Director responsible
for employee engagement.
Due to COVID-19 restrictions, our AGM in
January 2021 was held with the Directors in
attendance only. To help keep shareholders
informed, we released a video statement
after the AGM which included an update on
business performance and responses to
questions submitted prior to the meeting. We
plan to return to an ordinary AGM in January
2022, giving all shareholders the opportunity
to engage with the Board directly.
In the spring of 2021, we consulted widely
on executive remuneration following our
AGM in January. Whilst our remuneration
report was approved by a majority at the
AGM, there was a high level of votes against
approval. The Chair of the Remuneration
Committee conducted a thorough
engagement process. Feedback received
and our response has been published on
our website. More detail on this is covered
in the Directors’ Remuneration Report.
Environment, Social, Governance
The Board recognises the importance of
Environmental, Social and Governance
issues to all stakeholders and has begun the
work needed to develop a comprehensive
strategy at Group level. Whilst we have a
strong foundation for governance and have
made good progress in developing our
social contribution, we are at the beginning
of our environmental development as a
Group. Several of our individual businesses
have already made sound progress, which
we will continue to build on. Sustainability
will become integral to the Group’s core
values and is being integrated into our
strategy and the way we conduct business.
We outline how our approach is developing in
the Responsible Business Report and will build
upon this in future reports.
We conducted an externally facilitated Board
evaluation during the year. It was reassuring to
hear that we are working well in line with the
requirements of the Corporate Governance
Code in general, with some areas for
improvement. This is covered in more detail in
our Corporate Governance Report. I am
committed to maintaining high standards of
governance and to ensure that the Board is
functioning as effectively as possible.
In April 2021 the Audit Committee commenced
a competitive tender process relating to the
appointment of the Group’s external auditor for
the 2021/22 financial year. That process, which
involved five firms and included incumbent
auditor KPMG LLP, resulted in the Committee’s
recommendation that Grant Thornton UK LLP
be appointed. That recommendation has now
been approved by the Board, which will
propose the appointment of Grant Thornton
UK LLP as the Group’s external auditor at the
Group’s next Annual General Meeting to be
held in January 2022.
Development of future strategy
The Group’s strategy is being developed
against a backdrop of uncertainty, including
the impact of COVID-19, raw material and
energy price inflation, labour shortages, and
global supply chain disruption.
Factors such as a diminishing geopolitical
enthusiasm for global trade, the
generational shift being seen in labour
market dynamics, and real concern over
the environmental impact of business in
general, particularly ruminant agriculture,
all herald a point of change.
We will incorporate environmental and
social issues into the Group’s strategy to
ensure that we sustain the value we deliver
to stakeholders in the long term. The need
to reduce the impact of livestock farming
on the environment is clear, providing
opportunities for the Group’s Agriculture
businesses. Across Engineering, attractive
opportunities in civil and defence sectors
will become clearer as key decisions and
commitments are confirmed by
governments.
For our Agriculture and Engineering
divisions, we are looking at the potential for
growth alongside the skills and experience
needed to manage them successfully.
Outlook
The Group is well-positioned in attractive
markets for both Agriculture and
Engineering, with good opportunities to
grow in the UK and internationally. We
continue to improve efficiency with
investment in manufacturing processes and
IT infrastructure.
Whilst all businesses face inflation headwinds
in raw material supply chains, we see a positive
outlook for the Group based upon the strength
of livestock and milk prices across Agriculture
and a growing order book in Engineering.
The Board remains confident in the Group’s
prospects across all divisions.
Peter Page
Chairman
7 December 2021
Carr's Group plc Annual Report and Accounts 2021
7
DividendThe Board is proposing a final dividend of 2.65 pence per share which, together with the interim dividends of 1.175 pence per share declared in April 2021 and 1.175 pence per share declared in July 2021, makes a total dividend for the year of 5.0 pence per share, 5.3% up on the prior year (2020: 4.75p). The final dividend, if approved by shareholders, will be paid on 26 January 2022, to shareholders on the register at close of business on 17 December 2021, and the shares will go ex-dividend on 16 December 2021.Board changesTim Davies concluded his appointment as CEO at the AGM in January 2021. Subsequently, he continued to provide support during a valuable handover period. On behalf of the Board, I thank Tim for his substantial contribution during seven years leading the Group.In succession, Hugh Pelham joined as CEO, bringing experience in the engineering sector and in international markets. An initial review of the Group followed which confirmed the underlying strengths of its businesses and identified opportunities for growth, leading to the separate reporting of our Agriculture businesses. In October 2021, it was agreed that Hugh Pelham would leave the Company. The Board appreciates his contribution since January. On an interim basis, at the request of the Board, I have assumed the role of Executive Chairman, providing direction and strategic support to Neil Austin and the wider management team. The Board expects to appoint a new CEO during the current financial year, whereupon it is anticipated that I will revert to Non-Executive Chairman.I would also like to thank Alistair Wannop for his service to the Group as a Non-Executive Director over the last 16 years. Alistair has continued to make his valuable knowledge of the agricultural sector and experience with Carr’s available to the Board during a period of transition in the last year. We wish him well for the future as he leaves the Board at the AGM in January 2022.In September 2021, we announced that Kristen Eshak Weldon will not be standing for re-election at the January 2022 AGM, due to changes in her full-time role. The Board has initiated a process to identify and recruit a suitably qualified Non-Executive Director to join the Board in the early part of 2022.Stakeholder engagementDuring the year, each of the Non-Executive Directors visited different sites around the business and met with senior managers. During the summer of 2021, following the lifting of COVID-19 restrictions, I visited many
Strategic Report
Market Overview
We are focused on three key market sectors: Speciality
Agriculture, Agricultural Supplies and Engineering,
each of which have distinct characteristics and present
different opportunities.
Market sector
Market trend
Speciality
Agriculture
Production growth
Agricultural production is expected to continue to increase, linked to a growing global
population and an ongoing transition towards higher consumption of animal products,
particularly dairy. On account of an expected 11% expansion in the global population,
together with notable per capita gains over the next ten years, total livestock production is
expected to rise by 14% globally.
Agricultural
Supplies
Sustainable intensification
In the coming years, a growing global population will increasingly affect agricultural
systems and drive an intensification of livestock production.
It is expected that if population trends continue, by 2050 the world will need c. 60% more
food than is available today.
Agricultural reform
Significant shifts in UK agricultural policy are expected over the next decade as the
Government transitions towards sustainable farming and its target of becoming carbon neutral.
Key changes include the phasing out of Basic Payments and the introduction of
Environmental Land Management Schemes, linking support payments to the delivery of
environmental and animal welfare benefits.
Raw materials
Almost all supply chains experienced rising raw material costs throughout 2021. Such
increases have led to margin pressures and increased customer prices. It is expected that
this will continue to rise in the medium term, causing challenges for all businesses.
Engineering
Nuclear power
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
old nuclear reactors will be retired from use in coming decades.
This is alongside an expected increase in the construction of Small Modular Reactors as
governments look towards cleaner energy solutions.
Defence
Global investment in defence is expected to remain strong. Major projects such as the
UK’s £31bn Dreadnought programme and the Aukus partnership between the UK, USA
and Australia will continue into the coming decades.
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Carr's Group plc Annual Report and Accounts 2021
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What this means for Carr’s
An increasing global demand presents an opportunity for the Group, particularly overseas
in growing markets.
The Group is positioning itself to lead in dairy nutrition across the USA, UK and Europe,
focusing on enhancing the efficiency of stock rearing in the sector.
The efficiency of farming operations is becoming increasingly critical.
Our Speciality Agriculture product ranges are supported by research which demonstrates
how they can help farmers produce more efficiently.
The reforms are expected to drive changes in farming behaviours and priorities in the
coming years.
Helping our farming customers to navigate these changes will be a key priority, and we remain
ideally placed to provide the necessary support to enable farmers to remain profitable.
Whilst agricultural markets are expected to remain strong, it will become increasingly
important for our business, and those of our customers, to invest in efficiencies to remain
profitable.
We will continue to focus on enhancing procurement, and in delivering efficiencies across
our business, and remain well placed to support our farmers in developing their businesses.
The increase in levels of decommissioning and legacy clean-up operations globally,
together with an expected shift towards Small Modular Reactors, will provide significant
opportunities for Carr’s to deliver its range of specialist and innovative engineering solutions.
Continued long-term investment in defence provides significant future opportunities to
utilise technologies across the Group. Carr’s has a track record of delivering products and
services into this market and is well placed to further develop its divisional capabilities to
support customers in the sector.
14%
Forecast increase in livestock
production over the next decade
11%
Forecast expansion of global
population over the next decade
£2.4bn
Current level of annual UK
farming subsidies
12%
Annual global growth spend in
nuclear decommissioning
£31bn
Value of UK Dreadnought nuclear
submarines programme
Carr's Group plc Annual Report and Accounts 2021
9
Strategic Report
Our Business Model
Diversified, innovative,
sustainable
Our resources
How we create value
Investment
in innovation
& technology
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 to each of our
divisions, centred around a strong focus
on adding value through innovative
products and solutions.
Talented
people
Global
distribution
network
Deep
knowledge
We place great value in our global
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.
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.
We have a strong 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
Culture and
values
Our businesses have developed
products and services which are
recognised as market-leading on a
global scale across both Agriculture
and Engineering.
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.
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Carr's Group plc Annual Report and Accounts 2021
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Diversified, innovative,
sustainable
How we create value
Who we create value for
Speciality Agriculture
• Ten manufacturing sites across the UK, USA
and Europe
• Patented products and manufacturing processes
• Research proven to add value
• Globally respected brands
Agricultural Supplies
• 40 sites across the UK including retail stores,
machinery branches and fuel depots
• Deep technical expertise
• Priority service levels and trusted relationships
• Supporting 17,000 UK farmers
Engineering
• Seven sites across the UK, USA and Europe
• Unique products and innovative solutions
• Customer-focused delivery
• Global customer base
Employees
We continue to expand our employee
training and development offering and
enhance our engagement initiatives.
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.
Investors
Our strategy is designed to deliver
sustainable growth. During the last five
years, we have been able to increase the
dividends we pay to investors by 32%.
Partners
As a Group we enjoy close relationships
with a range of trusted strategic partners
across the UK, USA and Europe.
Communities
Across the Group we believe in supporting
charitable initiatives and the communities
in which we operate.
1,165
Training days
delivered to
employees in
the year
17,000
Number of
direct farming
customers in
the UK
5.00p
Dividend per
share
7
Number of
joint venture
and associate
businesses
£52k
Charitable
donations in
the year
Environment
We believe in ethical business practices
and are developing a sustainability strategy
which will help minimise our environmental
impact.
2040
The Group’s
Net Zero
intention
Carr's Group plc Annual Report and Accounts 2021
11
Strategic Report
Group Performance Review
Peter Page
Chairman
“I am grateful for the
contributions of all
employees who
continued to meet
the challenges of
working in a pandemic
environment during the
year, and who have
enabled the Group
to deliver a strong
set of results.”
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Carr's Group plc Annual Report and Accounts 2021
OverviewThe Group delivered improved results, ahead of the Board’s expectations, despite a backdrop of COVID-19 and oil price volatility. A substantial increase in profitability in the Speciality Agriculture and Agricultural Supplies divisions mitigated the impact of challenges seen in the early part of the year in our Engineering division due to low oil prices, travel restrictions and customer project delays.Our health and safety performance improved with reductions in key indicators. This year we appointed a new Group HSE Director and engaged Marsh to undertake an external audit assessing safety standards and risks at a range of Group sites across all divisions and geographies. The audit identified that standards and reporting levels were good but recommended greater levels of consistency across the Group which will be a key objective in the year ahead.Operational reviewThe Group is now managed in three operating divisions – Speciality Agriculture, Agricultural Supplies and Engineering – to give greater strategic and operational focus and to provide investors and other stakeholders with more insight to the financial performance of various parts of the Group.The Speciality Agriculture division traded very well throughout the year, with strong livestock prices in the UK and the US underpinning demand. Feed block volumes were significantly ahead of the prior year, as were sales from the Animax product lines. Adjusted operating profit was £9.5m, up 25.0% on the prior year (2020: restated £7.6m). For more information on the performance of the division in the year see pages 26 to 27.Agricultural Supplies had a strong year. Conclusion of the agreement for the terms of the UK’s exit from the European Union in late 2020 gave the market confidence. i
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Carr's Group plc Annual Report and Accounts 2021
13
All elements of the business performed well. Adjusted operating profit was £6.7m, up 15.7% on the prior year (2020: £5.8m). For more information on the performance of the division in the year see pages 28 to 29.The Engineering division experienced some difficulties in the first quarter, with depressed oil prices reducing order intake in one part of the division, and lockdowns and international travel restrictions impacting the timing of on-site works and delivery on some contracts. Despite these challenges, adjusted operating profit was £3.9m, up marginally on the prior year (2020: £3.8m). For more information on performance of the division in the year see pages 30 to 31.Central costs of £2.6m at adjusted operating profit level were £1.6m higher than the prior year. This was due to a change in provision for a non-recoverable debt, increased costs for performance-based remuneration, and CEO handover costs.I am grateful for the contributions of all employees who continued to meet the challenges of working in a pandemic environment during the year, and who have enabled the Group to deliver a strong set of results.Trading in the current financial year has started positively. We look forward to updating shareholders further at the AGM in January 2022. Peter PageChairman 7 December 2021
Strategic Report
Strategic Framework
Over the past year, we
have continued to pursue
our four strategic
objectives. Our progress
is described opposite.
2021 Objectives
1. Build value by focusing on
markets with growth
potential
2. Grow and diversify our
international footprint
3. Differentiate through
innovation and technology
4. Lead in our chosen markets
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Carr's Group plc Annual Report and Accounts 2021
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2021 achievements
Development of our future strategy
The Group’s strategy is being developed
against a backdrop of uncertainty, including
the impact of COVID-19, raw material and
energy price inflation, labour shortages,
and global supply chain disruption.
Factors such as a diminishing geopolitical
enthusiasm for global trade, the generational
shift being seen in labour market dynamics,
and real concern over the environmental
impact of business in general, particularly
ruminant agriculture, all herald a point
of change.
We will incorporate environmental and social
issues into the Group’s strategy to ensure that
we sustain the value we deliver to stakeholders
in the long term. The need to reduce the
impact of livestock farming on the environment
is clear, providing opportunities for the Group’s
Agriculture businesses. Across Engineering,
attractive opportunities in civil and defence
sectors will become clearer as key decisions
and commitments are confirmed by
governments.
For our Agriculture and Engineering divisions,
we are looking at the potential for growth
alongside the skills and experience needed
to manage them successfully.
Our Speciality Agriculture division has well-established businesses which
manufacture and supply ruminant feed supplements in the form of feed
blocks, manufactured from a mix of molasses, vegetable oils, fibres and
trace elements.
As a result of sales development initiatives and close collaboration with
distributors, volumes of feed blocks sold increased by 12.3%. During 2021 we
focused on increasing sales volumes further, with the extension of our direct
sales team in the USA to new states and into Canada, and with the launch of a
new range of dairy products in the UK.
Closer collaboration between businesses in our Engineering division, coupled
with a recovery in oil and gas prices from 2020 lows, has led to a growing
international opportunity pipeline.
Investments made in the development of new robotics products in 2021 are
also expected to open new opportunities from 2022 across Europe and Asia.
In the year, we published our research demonstrating the effectiveness of our
dairy feed blocks range as part of its launch. We also continued to invest in
manufacturing processes and expect to have fully automated bolus
manufacturing in 2022.
In the Engineering division, our new collaboration to develop Hot Isostatic
Pressing technology, coupled with our range of established technologies such
as MSIP® and Power FluidicsTM, is expected to present global opportunities in
nuclear industries into the long term.
Our Agricultural Supplies division works in close collaboration with customers,
combining personal service with expert knowledge to support thousands of
farmers in providing a full range of products and services, from feed to
tractors. The business is now the UK’s largest franchise for the market-leading
Massey Ferguson tractor range.
Specialist capabilities across our Engineering division in building equipment
and providing solutions for the handling and safe storage of nuclear waste is
becoming increasingly relevant to the civil and defence sectors, where
opportunities are expected to grow for several decades.
Carr's Group plc Annual Report and Accounts 2021
15
Strategic Report
Our Key Performance Indicators
We monitor our growth and health as a business, and our performance
against strategy, using the following key performance indicators.
Financial KPIs
Underlying sales
growth/decline
Revenues are indicative of business activity but
are not in isolation an indicator of performance.
Our volume driven businesses are subject to
raw material price variations which are largely
passed through in selling prices, affecting
revenues. The increase during 2020/21 is
largely driven by increases in sales across our
Agriculture divisions.
+5.5%
2020: -4.5%
2021
2020
2019
+5.5%
-4.5%
-1.8%
Free cash flow
Free cash flow demonstrates how much cash
is available for the Group to utilise for
expansionary capital investment, paying
dividends, or financing/repaying borrowings.
The increase year-on-year was driven by
improved cash flow from operating activities
and lower spend on capital expenditure.
£17.3m
2020: restated* £12.7m
2021
2020 (restated)*
2019
£17.3m
£12.7m
£8.9m
Non-financial KPIs
Number of training
days delivered
We are committed to providing a variety of
development opportunities for our people.
Since 2020, our ability to deliver face-to-face
training across the Group has been impacted
by the COVID-19 pandemic, but employee
engagement in our development
programmes has remained strong through
the use of online training.
1,165
2020: 823
2021
2020
2019
1,165
823
722
* See note 36 for details of the prior year restatement in
respect of the IFRIC agenda decision in April 2021 on
cloud configuration and customisation costs.
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Gross margin
Gross margin is a reflection of how
successfully we manage raw material price
volatility and our selling prices in competitive
markets. Our gross margin fell to 12.5% in the
year, largely reflecting conditions across
agriculture in the UK.
Adjusted Group
operating margin
Our underlying operating margin is reflective
of the gross margin, but also indicates the
efficiency of our operations. The slight
increase in the year is reflective of the fixed
nature of some of our costs combined with
increased levels of activity.
12.5%
2020: 13.2%
2021
2020
2019
12.5%
13.2%
13.4%
4.2%
2020: restated* 4.1%
2021
2020 (restated)*
2019
Return on net
assets
The Group’s overall return on net assets
increased slightly to 12.3% this year.
Ratio of net debt to
EBITDA
This measures the Group’s leverage and
reflects its ability to service its debt. The
reduction in the year is primarily due to
working capital management in our
Agricultural Supplies division.
12.3%
2020: restated* 11.4%
2021
2020 (restated)*
2019 (restated)*
12.3%
11.4%
14.1%
0.48
2020: 0.91
2021
2020
2019
**Not adjusted to reflect IFRS 16
4.2%
4.1%
4.7%
0.48
0.91
0.99**
Injury incident
frequency rate
We ensure that information relating to all
injuries and potential incidents, no matter how
serious, is properly captured and reported to
enable us to continually improve the health
and safety of our people whilst at work. The
reduction seen in the year is encouraging as
we continue to focus on employee safety.
CO2 intensity metric
We carefully monitor our carbon emissions
and are developing a strategy to ensure that
these continue to reduce as we work towards
achieving net zero status in the long term.
2.03
2020: 3.76
Total injuries/average headcount x
100,000
2021
2020
2019
2.03
3.76
3.31
22.6
2020: 25.1
Tonnes CO2/£m turnover
2021
2020***
2019***
22.6
25.1
24.6
***Restated to reflect emissions by Group
controlled entities only (see page 42 for more
information).
Carr's Group plc Annual Report and Accounts 2021
17
Strategic Report
Financial Review
Neil Austin
Chief Financial Officer
“The key features of
the year have been the
buoyant agricultural
markets in the UK and
USA, and the impact
of low oil prices and
COVID-19 on the
business in
engineering.”
18
Carr's Group plc Annual Report and Accounts 2021
Revenue
Reported revenues from continuing
operations were £417.3m, 5.5% ahead of
last year (2020: £395.6m).
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 items regarded by
the Directors as adjusting items (note 5).
These APMs, generally referred to as
‘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 and reconciliation of
APMs is included towards the end of the
report and accounts on pages 159 to 160.
Operating margin
Adjusted
operating margin
Reported
operating margin
Speciality
Agriculture
13.9%
9.7%
Agricultural
Supplies
2.3%
1.7%
Engineering
7.7%
7.8%
Prior year restatement
In April 2021, the IFRS Interpretations Committee (IFRIC) published
an agenda decision on the clarification of accounting in relation to
the configuration and customisation costs incurred in implementing
Software-as-a-Service (SaaS), Following the publication of this
agenda decision the Group and Company’s accounting policy has
been reviewed for the costs incurred in respect of the configuration
and customisation of the cloud hosted ERP system which has been
implemented across several of the Group’s businesses. It was
concluded that the Group did not have substantive control over all
aspects of the ERP system and it was therefore determined that
previously capitalised costs should be expensed. As these costs do
not relate to the underlying trading performance they have been
treated as adjusting items (note 5). Further details of the prior year
restatement can be found in note 36.
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Operating profit
Adjusted Group operating profit of £17.6m is up 7.9% on last year
(2020: restated £16.3m). As a percentage of revenues, the Group’s
adjusted operating margin is 4.2%, a slight increase on the prior
year. Reported operating profit was £13.0m (2020: restated £12.3m).
Adjusted operating profits per division and as a percentage of
divisional revenues are as follows:
Adjusted* Operating Profit 2021
Adjusted Operating Profit
Speciality Agriculture
Agricultural Supplies
Engineering
Central
Total
2021
£m
9.5
6.7
3.9
(2.6)
17.6
2021
%
13.9
2.3
7.7
2020
(restated)
£m
2020
(restated)
%
12.3
2.1
7.2
7.6
5.8
3.8
(0.9)
16.3
* Segmental reported profit figures can be found in note 2 to the financial statements.
The Group’s share of the adjusted post-tax result in its associate
and joint ventures was £2.9m, up 11.9% (2020: £2.6m).
Adjusting items
The Group incurred £4.6m (2020: restated £4.0m) in respect of
adjusting items recognised above the tax line. This year’s charge
included amortisation of acquired intangibles of £1.2m,
restructuring and closure costs of £0.2m, ERP system
implementation costs of 1.9m, an impairment charge of £2.1m and the
effect of the deferred tax rate change in the share of the
associate’s results of £0.2m, offset by a credit of £1.0m in relation to
contingent consideration on historic acquisitions. The taxation
effect of the above items of £0.5m has been included as an
adjusting item to profit for the year. In addition, the effect of the
increase to the deferred tax rate on the tax charge for the parent
Company and its UK subsidiaries, totalling £1.0m, has been
included as an adjusting item to profit for the year. Further details
of these adjusting items are set out in note 5.
Finance costs
Net finance costs of £1.0m were 27.6% lower than in the previous
year, principally due to lower debt levels throughout the year.
Interest cover was 13.4 times based on reported profit (18.1 times
on an adjusted profit basis) compared to 9.1 times (restated) in
2020.
Profit before tax
Adjusted profit before tax at £16.6m was 11.1% higher than in the
previous year (2020: restated £15.0m). Reported profit before
taxation was £12.1m (2020: restated £10.9m).
Taxation
The Group’s effective tax charge on profit from activities after net
finance costs and excluding results from associate and joint ventures,
which are recorded after tax, was 24.5% (2020: restated 15.5%). The
increase in the effective tax rate is driven by the substantively enacted
increase to the UK tax rate which has increased the deferred tax
charge in the year by £1.0m. 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. .
Earnings per share
The profit attributable to the equity holders of the Company
amounted to £7.7m (2020: restated £8.4m), and basic earnings per
share was 8.3p (2020: restated 9.1p), a decrease of 8.8%.
Adjusted earnings per share of 13.2p (2020: restated 12.0p) 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 10.0% reflects the better
trading performance across the year.
Cash flow and net debt
A free cash flow of £17.3m was generated in the year, representing
an increase of 36.1% on £12.7m in the previous year. This was driven
by improved cash flow from operating activities, which increased
from £16.6m (restated) to £18.9m and lower spend on capital
expenditure.
Headroom against existing facilities was £36.0m at the year end.
The Group’s main banking facilities were renewed in November
2018 for a five-year period, together with its invoice discounting
facility which was renewed for a three-year period in August 2020.
Cash flow and net debt
Cash flow from operating activities
Net debt (excluding leases)
2021
£m
18.9
10.0
2020
(restated)
£m
16.6
18.9
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 72 deferred members and 220 current pensioners.
The valuation on an IAS 19 accounting basis showed a surplus
before the related deferred tax liability in the scheme at 28 August
2021 of £9.4m (2020: £8.0m). This is after an actuarial gain of £1.2m
(2020: £0.1m) which has been recognised in the Consolidated
Statement of Comprehensive Income.
Neil Austin
Chief Financial Officer
7 December 2021
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19
Strategic Report
Our Strategy In Action
Speciality Agriculture
Our Speciality Agriculture division
manufactures and supplies feed
blocks, minerals and boluses
containing trace elements and
minerals for livestock.
Dairy Crystalyx®
UK Dairy Day 2021 saw the launch of a new range
of Crystalyx® feed blocks; our first specifically
designed for dairy farmers.
Manufactured using our unique patented process,
the dairy range is designed to improve animal
performance during the entire dairy cycle from
pregnancy, through transition, and into milk
production. The range also promotes early rumen
development in young calves, and improved health
in growing heifers.
In extensive research trials carried out by Dr Peter
Ball across five commercial dairy farms, the benefits
of Crystalyx® were significant:
• The average time taken for cows to conceive after
calving reduced by 21 days
• The proportion of cows pregnant at 100 days
improved from 37% to 62%
• The proportion of cows not pregnant at 200 days
reduced from 26% to 8%
Decades of research continues to show that Crystalyx®
feed blocks add significant value to livestock farmers.
Feed blocks and animal supplementation products
remain the core of our Speciality Agriculture division
and central to our Group strategy.
68%
Increase in the proportion of
cows pregnant at 100 days
69%
Reduction in the number of
cows not pregnant at 200 days
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Carr's Group plc Annual Report and Accounts 2021
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“The Crystalyx® fed cows
performed better than the controls
in all measured parameters of
reproduction.”
Dr Peter Ball
Internationally recognised dairy fertility specialist
and former Head of Dairy Fertility Research at SRUC
Carr's Group plc Annual Report and Accounts 2021
21
Strategic Report
Our Strategy In Action
Agricultural Supplies
Our Agricultural Supplies
division comprises our Carr’s
Billington branded stores,
machinery, fuel and compound
feed business, plus our joint
venture business, Bibby
Agriculture.
Carr’s Billington
In September 2021 Carr’s Billington announced its
acquisition of a 2.5-acre site at Stranraer, to be
developed into a new machinery depot and
country store.
Due to open in December 2021, the Stranraer site
will expand our machinery coverage across South
West Scotland and build upon our status as the UK’s
leading distributor of Massey Ferguson tractors by
sales revenue. In the last year, we also opened our new
machinery branch at Skipton, which helped to achieve
an 8.3% increase in machinery revenues for the
division.
Opening the site creates skilled jobs in the area
including sales specialists, agricultural advisors,
management, and machinery technicians, and will
enhance the levels of service we offer to farmers
across the region.
9th
Machinery depot to open in the UK
8.3%
Increase in machinery revenues in FY21
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“The Stranraer site will
expand our machinery
coverage across South
West Scotland.”
Mark Cole
Managing Director, Carr’s Billington
Agriculture (Sales)
Carr's Group plc Annual Report and Accounts 2021
23
Strategic Report
Our Strategy In Action
Engineering
Our Engineering division
comprises our fabrication and
precision engineering business
in the UK, robotics business in
the UK and Europe and
engineering solutions business in
the UK and USA.
HIP Collaboration
In April this year NuVision, our US engineering business,
entered into a five-year collaboration with GeoRoc
International to develop Hot Isostatic Pressing (HIP)
technology for radioactive waste treatment.
Using proprietary technology, HIP applies high pressure
and temperature to alter the properties of radioactive
materials, transforming them into synthetic rock or
ceramic, and rendering them safe for long-term
storage. HIP offers significant benefits over traditional
waste treatment methods and has been identified as a
preferred technology for dealing with waste clean-up
challenges by nuclear authorities and regulators in
both the UK and USA.
This new collaboration builds upon an existing
partnership from 2018 and has been successful
in attracting substantial government development
funding. Over the next five years, NuVision and GeoRoc
plan to develop, commercialise and demonstrate the
technology, with a view to securing long-term
opportunities in the worldwide nuclear industry.
Five-year
Collaboration to develop HIP technology
40%
Reduction in volume of
stored nuclear waste
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“We are excited to play a central role in
the development of HIP, which will offer
significant benefits over traditional
waste treatment methods and which
represents a significant long-term
opportunity for Carr’s.”
Erich Keszler
President, NuVision Engineering
Carr's Group plc Annual Report and Accounts 2021
25
Strategic Report
Divisional Review
Speciality Agriculture
Speciality Agriculture
comprises our
businesses which
manufacture and supply
feed blocks, mineral
supplements and trace
element boluses to a
global customer base
from sites in the UK,
Europe and USA.
Financial performance
£68.5m
Revenue
+10.6%
2020: £61.9m
£9.5m
Adjusted Operating Profit
+25.0%
2020: restated £7.6m
Revenue split:
UK
International
38.2%
61.8%
26
Carr's Group plc Annual Report and Accounts 2021
Our
brands
CRYSTALYX®
HORSLYX®
TRACESURE®
ALLSURE®
AMINOMAX®
SMARTLIC®
MEGALIC®
FLAXLIC®
FESCOOL®
FEED IN A DRUM®
Our geographic
footprint
UK
Europe
USA
Canada
New Zealand
Overview
This year saw a very strong performance for
the division across all geographies. Overall,
sales of feed blocks (including JVs)
increased 12.3% compared to the prior year.
Sales of equine products, including
Horslyx®, generated the highest revenue
growth rates in the division, albeit from a
smaller base. The equine market is
becoming increasingly important for the
Group, in all territories.
Animax performed well in the year, and
ahead of the Board’s expectations, driven
by business development initiatives and
cost efficiencies following two challenging
years since its acquisition in 2018.
USA
Feed block volumes sold increased by
13.4% compared to the prior year. The
impact of drought on farm incomes was
mitigated by the easing of COVID-19
restrictions which increased demand for
beef and helped firm up livestock prices.
The USA is a fragmented market, providing
opportunities to increase market share in
our core territories through the strength of
our brands. We are developing
opportunities in Canada for beef and
equine products.
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We continue to invest in product innovation,
particularly to incorporate novel ingredients
into our products and in the development
of environmentally friendly packaging. The
introduction of vacuum control technology
in our manufacturing process has enhanced
product consistency and we are investing in
a new ERP system which will be going live
in 2022.
Europe
Our joint venture business in Germany,
Crystalyx Products GmbH, performed in
line with management expectations, with
sales volumes growth of 6.0% versus the
prior year. Following its launch into the
poultry sector last year, Pick BlockTM sales
continue to grow, underpinned by an
efficient and automated production
process.
Outlook
Demand for our products is robust
underpinned by good livestock prices in the
UK and USA and stable milk prices in the
UK, which continues to drive farmer
confidence.
There remains substantial opportunity to
expand sales in North America and Europe,
a strategic priority for the Group.
New Zealand
Sales volumes continued to grow in New
Zealand, with a 12.4% increase seen
compared to the prior year. Increasing
freight costs and travel restrictions
presented challenges in the year, but the
region remains an attractive market
opportunity which will continue to be
developed.
UK and Ireland
Lamb and beef prices remained strong in
the UK, driven by greater certainty over
Brexit combined with an increase in eating
at home during COVID-19 restrictions.
These factors, combined with more typical
winter weather patterns during the year,
have contributed to a significant growth in
volumes for all products. Total sales
volumes of feed blocks increased 10.8%
versus the prior year.
At UK Dairy Day in September 2021, we
launched a new range of Crystalyx® dairy
feed block products. These are Crystalyx®
products specifically formulated for dairy
cattle, which deliver value to farmers by
enhancing the performance of livestock
from calf rearing through to milking.
The project to automate production at
Animax is nearing completion and is
expected to be fully operational in the
current financial year. This will enhance
product quality and production efficiency.
“This year saw a very
strong performance
for the division across
all geographies.”
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Strategic Report
Divisional Review
Agricultural Supplies
Our Agricultural Supplies
division includes our
Carr’s Billington branded
agricultural stores,
machinery, fuel and
compound feed business
together with our joint
venture business,
Bibby Agriculture.
Financial performance
Our brands
CARR'S BILLINGTON
BIBBY AGRICULTURE
Our geographic
footprint
UK
£297.5m
Revenue
+6.0%
2020: £280.7m
£6.7m
Adjusted Operating Profit
+15.7%
2020: £5.8m
Revenue growth:
Feed volumes
Fuel volumes
Machinery revenues
Retail revenues
+2.6%
-5.6%
+8.3%
+1.6%
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Carr's Group plc Annual Report and Accounts 2021
Overview
It’s been a successful year for the
Agricultural Supplies division, with a 15.7%
growth in adjusted operating profit, despite
significant increases in commodity prices.
Total feed volumes, machinery revenues,
and retail sales were all ahead of the
prior year. An ongoing programme of
modernisation and simplifying the product
range continues to help margin improvement.
Financial performance
Revenue
Adjusted operating
profit
Operating margin
FY21
£m
FY20
£m
Change
%
297.5 280.7
+6.0
6.7
+15.7
5.8
2.3% 2.1% +0.2
Feed
Total feed volumes sold were 2.6% up on
the prior year. Strong beef and lamb prices,
resulting from an increase in home
consumption of UK-sourced products,
together with better milk prices, contributed
to a favourable environment for our
customers which helped in the recovery of
higher raw material costs through increased
pricing.
Machinery
An exceptionally good year for machinery
sales delivered revenue growth of 8.3%
against last year. We are now the leading
seller of Massey Ferguson tractors in the
UK following our focus on this brand, the
strengthening of our sales team and
enhanced after-sales service offering. The
reach of our franchise was extended this
year to include southern Scotland and we
will be opening a new machinery depot and
retail store in Stranraer in the current year.
In 2021, a new machinery sales operation
was opened at our retail premises at
Skipton Auction Mart. This full-service
combination of machinery, retail and fuels
has increased activity at the stores.
Fuel
Overall volumes sold during the year were
5.6% down on the record performance seen
in 2020. The business, however, focused on
margin management and delivered a
strong overall performance.
Retail
Retail stores remained open throughout the
year, even when auction markets were closed
due to COVID-19 restrictions, utilising phone
and collect/delivery services to support
farmers safely. Overall sales increased 1.6% on
the prior year with like-for-like sales also
increasing by 6.3%. A focus on cost has
delivered a strong margin improvement,
including the introduction of standardised
pricing across all stores and the recruitment of
a central buying team dedicated to controlling
the costs across our supply chain. Following a
review of store profitability, the retail estate
was reduced by four outlets, with existing
customers transferred to adjacent branches
where possible. This leaves us with 37 retail
sites, including eight machinery branches,
which will increase further with the opening of
Stranraer this year.
Outlook
Customers are at the centre of our
business. We remain committed to
supporting UK farmers and always strive to
provide the best levels of service.
To develop the business for the future, we
continue to invest in IT, people and
processes. We continue to embed our new
ERP system, which went live on
1 September 2021, and we introduced a
new CRM system to enhance our offering
to new and existing customers. Our future
strategy includes the development of an
e-commerce solution.
In addition to our new central buying team,
we have recruited new sales managers in
feed, fuels, machinery, and retail. We also
introduced a scheme to ensure that our
management teams spend as much time
as possible out with our customers.
Our focus on costs and margins means we
are well placed for the year ahead and we
will continue to strengthen our business,
building upon our unique combination of
feed, machinery, fuel and retail stores.
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“Total feed volumes, machinery
revenues, and retail sales were
all ahead of the prior year.”
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Strategic Report
Divisional Review
Engineering
Engineering comprises
fabrication and precision
engineering in the UK,
robotics in the UK, USA
and Europe and
engineering solutions in the
UK and USA.
Financial performance
Our brands
£51.3m
Revenue
-3.2%
2020: £53.0m
£3.9m
Adjusted Operating Profit
+3.0%
2020: £3.8m
£38.8m
Order book
+15.9%
2020: £33.5m
Revenue split:
WÄLISCHMILLER ENGINEERING
NUVISION ENGINEERING
NW TOTAL
BENDALLS ENGINEERING
CHIRTON ENGINEERING
CARRSMSM
Our global markets
We supply into highly
regulated markets
including:
– Nuclear decommissioning
– Nuclear power generation
– Defence
– Oil and gas
– Pharmaceuticals
Nuclear
Defence
Oil and Gas
Other
66%
17%
12%
5%
* Restated from the figure of £37m reported in
the half-year results to exclude the value of
intra-group contracts, which more accurately
reflects the position.
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Overview
This was a positive year for our Engineering
division, with profitability increasing 3.0% to
£3.9m (2020: £3.8m) and confirmed orders
at the year end up by 15.9%. The key drivers
of improved performance were in remote
handling and robotics, offset by a much
more difficult year in our precision
engineering business due to the impact
of COVID-19 and low oil and gas prices.
Financial performance
Revenue
Adjusted operating
profit
Order book
FY21
£m
FY20
£m
Change
%
51.3
53.0
-3.2
3.9
3.8
38.8 33.5*
+3.0
+15.9
UK: Fabrication and
precision engineering
Our precision engineering business was
challenged by lower oil and gas prices
which impacted order intake in the first half
of the year. Within fabrication, both revenue
and profitability increased driven by a
higher level of nuclear work. Total
combined revenues were down 10.8% to
£15.8m (2020: £17.7m).
Over £19m of new contracts were secured
in the year, and our order book for specialist
fabrication stood at £13.0m at the financial
year end (2020: £2.5m). During the year, we
formed the Cumbria Manufacturing Alliance
in collaboration with the Shepley Group,
which secured a significant nuclear
decommissioning contract. That contract
will utilise the £1.3m investment made in
state-of-the-art capability at our Carlisle
facility in 2020.
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Although challenged this year, our precision
engineering business recovered well in the
second half, with £5.2m in new orders
secured resulting in an order book of £3.3m
at year end (2020: £2.1m).
UK and USA: Engineering solutions
NW Total, our UK engineering solutions
business acquired in 2019, made good
progress on a major design and build
defence contract, with completion
expected in FY22. On-site works supporting
the UK government’s submarine defence
programme also progressed well. Several
major contracts were secured in the year,
including a £4.5m defence contract to
upgrade testing facilities which will run over
the next two years. The business enters
FY22 with a strong order book of £6.8m
(2020: £6.7m).
Our engineering solutions business in the
USA, NuVision, also delivered a good
performance. In the year, a $4m contract
was secured to supply MSIP® in Slovenia in
late 2022.
We also entered into a five-year agreement
with GeoRoc International, world-leading
innovators in advanced materials and
process engineers for the nuclear,
aerospace and defence sectors, to jointly
develop and commercialise Hot Isostatic
Pressing (HIP) technology for radioactive
waste treatment. HIP has been identified as
a preferred solution for high profile global
waste clean-up challenges and the project
has attracted government funding in the UK
and USA.
UK, USA and Europe: Remote
handling and robotics
Our remote handling and robotics
businesses performed well in the year
despite travel restrictions and on-site works
being impacted by COVID-19 in the first
half. Revenues in the year improved 10.0%
to £16.3m (2020: £14.8m). The order book at
year end was £10.4m (2020: £12.2m).
During the year we also invested in the
development of a new product: the A150; a
telescopic manipulator for smaller sized hot
cells, which enhances our product range
and strengthens our competitive position.
outages at nuclear sites impacting the
timing of MSIP® works. Long-term
prospects remain strong however, and the
business is developing opportunities to trial
HIP technology in the USA.
Across the division, order books grew in the
year to £38.8m at the year end, 15.9% higher
than the prior year (2020: £33.5m). Since
year end, order books have grown further
to £44.6m at the end of October 2021.
Outlook
Enquiry levels remain strong across
civil nuclear markets globally, with
decommissioning spend expected to
increase, creating opportunity for our
fabrication and robotics businesses into
the long term. A much higher and stable oil
price has increased order intake in our
precision engineering business.
Prospects in UK defence remain strong
going forward, and the UK government’s
programme to replace the current
submarine fleet is expected to provide
opportunities for the next two decades.
Our Engineering business in the USA is
likely to see a lower level of activity in the
current financial year, due to the phasing of
“Order books across the
division continue to build.”
Carr's Group plc Annual Report and Accounts 2021
31
Strategic Report
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 strategy. 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.
Organisation and process
The Board assumes overall responsibility
for the management of risk and for
reviewing the effectiveness of the
Group’s risk management and internal
control systems.
The Board has established a clear
organisational structure with well-
defined accountabilities for the principal
risks the Group faces in the short,
medium, and long term, across all
divisions together with emerging risks.
This is overseen by the Executive
Directors, who have an active
responsibility for focusing on those areas
of risk. The Board reviews these risks,
including consideration of environmental,
social, and governance matters. This
review is undertaken quarterly.
For each of our principal and emerging
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 carries out a robust
assessment of the principal risks
quarterly together with any emerging
risks. 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 60 to 63. 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.
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Task Force on Climate-Related Financial Disclosures
In last year’s Strategic Report, we included information on the emerging risks being faced by the Group associated with climate change,
including its potential impact on raw material supplies, agricultural operations, and customer demand for our product ranges. We also
reported on the steps being taken to address those risks.
This year, our focus on environmental issues has intensified. Work is underway as part of our strategy development to ensure our
businesses continue to deliver sustainable value to stakeholders in conjunction with our strategic partners (for more information, see our
Responsible Business Report on pages 40 to 46). We recognise the importance of this to our colleagues, partners, customers, investors,
and communities. ESG is now a regular item on our Board agenda.
Recognising the medium to long-term potential risks presented by climate change, we have committed to disclosing against the
recommendations of the Task Force on Climate-Related Disclosures (“TCFD”). We recognise that there is much to do and will be
undertaking a rigorous assessment of the climate-related risks and opportunities facing our businesses during the current year as we
continue to develop our strategy.
We are fully supportive of TCFD’s aims. Climate change requires a long-term approach, and we anticipate that it may take some time to
fully integrate the TCFD’s recommendations with the way we operate and report. Processes are currently being developed to accurately
collect and report a wider range of information across our sites, and to determine the broader carbon impact of our businesses and
strategic partners. We also aim to develop goals for improving our carbon impact and to mitigate the risks presented by climate change,
together with metrics to monitor our performance and provide updates to stakeholders.
The Board will report in more detail against the recommendations of the TCFD in our 2022 Annual Report and Accounts.
▲ ▼
: Change in risk (increase/decrease/no change)
Risk
Description of the risk
What we are doing to manage the risk
Post-Brexit
agricultural
and trade
policy
▲
Part of our customer base is inherently reliant on
agricultural subsidies, 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. There are also
increased inflationary pressures in relation to wages and
other parts of supply chains.
The Group benefits from its operational and
geographic diversity.
We will continue to monitor developments in
government policy and incorporate steps into our
future business planning where these might be
required to mitigate any potentially adverse
consequences.
Similarly, the agreement of trade deals that permit
agricultural imports with lower welfare standards than
those required by UK farmers could put UK customers
at a cost disadvantage, which could impact our
Agriculture businesses.
Managing
costs
▲
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.
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.
Carr's Group plc Annual Report and Accounts 2021
33
Strategic Report
Risk Management continued
▲ ▼
: Change in risk (increase/decrease/no change)
Risk
Description of the risk
What we are doing to manage the risk
COVID-19
▼
Our business may be impacted through disruption
caused by COVID-19.
In Agriculture, our businesses were able to remain open
during 2021 and were not subject to restrictions or
closures. Their biggest risk is a loss of staff due to a
widespread outbreak at a production facility, or a wider
requirement to self-isolate, that causes us to be unable
to produce or deliver goods.
Within Engineering, the same risk applies. Additionally,
broader travel restrictions or customer-specific site
restrictions may impact our ability to deliver projects
where site-based engineering or installation is required.
At a Group level, any disruption to our businesses could
have an impact on cash flows.
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.
Growth through acquisition is a key part of our strategy.
The Group 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.
IT and cyber-
security
Acquisitions
Reliance on
key customers
Some businesses within the Group have a significant
proportion of their revenue generated from a small
number of key customers. A loss of a number of these
customers could adversely affect the performance of a
division and in turn the Group.
We continue to monitor for further impacts on our
business and maintain COVID-19 protocols, which
enabled the businesses to continue to operate with
relatively little impact.
Cash flows also continue to be frequently monitored.
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 2020/21.
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 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.
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Carr's Group plc Annual Report and Accounts 2021
Risk
People
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.
The Group has remuneration policies designed to
attract and retain employees with the ability and
experience to execute the Group’s strategy.
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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 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.
Management development programmes are in place,
alongside detailed succession planning across the
Group. Succession plans for senior management and
other key 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.
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.
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.
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Strategic
partners
Customer
demand
Treasury
We are exposed to a variety of financial risks in relation
to treasury. The Group must ensure that it has an
adequate level of facilities to provide sufficient funding
to operate its businesses and to develop growth
opportunities.
Changes to the value of currencies can fluctuate widely
and could have a significant impact on a division’s
results. Furthermore, because the Group has
international businesses, it is subject to exchange risks
in the translation of the underlying net assets and
earnings of its foreign subsidiaries and joint ventures.
Business
continuity
The operation of manufacturing plants involves many
risks that could cause a temporary or permanent
stoppage in production and could have a material
adverse effect on the Group.
The levels of facilities are regularly reviewed by the
Chief Financial Officer, and these are also regularly
reported to and discussed by the Board.
The Group operates a treasury policy of hedging all
significant transactional currency exposures.
To manage the risk of interest rate changes, 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.
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.
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Strategic Report
Risk Management continued
▲ ▼
: Change in risk (increase/decrease/no change)
Emerging
risks
Climate
change
▲
Description of the risk
What we are doing to manage the risk
Operating in the Agriculture sector, climate change, raw
material sustainability and regulatory requirements can
have an impact on the performance of the Group. Such
impact can include the cost of raw materials and the
sustainability of raw material supplies, farming and
manufacturing operations, and customer demand for
the Group’s products.
The impact of climate change has also been considered
in our Engineering business where our precision
engineering business currently operates in the oil and
gas sector, a sector in which there are longer term risks
as a result of climate change.
The Group is geographically and operationally diverse
and has a focus on international growth markets. The
Group carefully manages its procurement of raw
materials, utilising ethically managed and sustainable
sources, and invests in the development of products
which are tailored to different farming conditions, and
which incorporate alternative ingredients to reduce
reliance on imported soya for feed products.
In light of the longer term risks in the oil and gas
sector, we have been cautious in estimating the
business' future cash flows when assessing the risk of
goodwill impairment.
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Viability Statement
The Group is very diverse both operationally and geographically. In
the last 12 months, the Group updated its strategic plan which is
subject to ongoing monitoring and development as described
below.
1. Managing costs;
2. Reliance on key customers;
3. Strategic partners; and
4. Customer demand.
The Group’s funding arrangements are a combination of bank
facilities and leasing arrangements secured on particular assets.
The bank facilities have a range of maturity/renewal dates, some
of which fall within the 3 year period covered by the viability review.
In undertaking this assessment, it has been assumed that the
facilities are renewed as they fall due for review on the same terms
as the existing agreements.
The Group’s focus is particularly on developing the agricultural
supplements business, because of the opportunities for
international expansion and product development, and its nuclear
engineering business because of the global expansion
opportunities in the nuclear sector and adjacent markets.
The Group’s prospects are assessed primarily through its strategic
planning process. This process is led by the Chief Executive and
covers 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 the 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 August 2021 following this year’s review. This
considered the Group’s current position and the development of
the business as a whole over the next three years.
Given the nature of the business cycles in both the Agriculture and
Engineering sectors, it was decided that a period of three years to
31 August 2024 was the most appropriate for the purpose of a viability
assessment. The Group has prepared detailed financial forecasts for
the three-year period to 31 August 2024, so that two years and ten
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 33 to 36. 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:
From the detailed modelling undertaken, it was determined that
none of these risks, either in isolation or in aggregation, would
compromise the Group’s viability.
Although the strategic plan reflects the Directors’ best estimate of
the future prospects of the business, they have also tested the
potential impact on the Group of a number of scenarios over and
above those included in the plan by quantifying their financial
impact and overlaying this on the detailed financial forecasts in the
plan. These scenarios represent ‘severe but plausible’
circumstances that the Group could experience.
The scenarios tested included significant reductions in profitability
and associated cashflows associated with the risks highlighted
above. 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. In the event that these
measures were insufficient, levels of capital expenditure and
dividend payments could be reduced to ensure the Group’s
viability.
The Group also considered a number of scenarios that would
represent serious threats to its liquidity. None of these were
considered to be plausible. The Group’s main banking facilities are
due for renewal in 2023. Given the strength of the balance sheet,
and expected performance, it has been assumed that there would
be no difficulty renewing these, and any other required facilities, on
similar terms to those currently in place.
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 2024.
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 page 104 of the accounts.
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Strategic Report
Stakeholder Engagement:
Our Section 172 Responsibilities
At Carr’s Group we believe in fairness and acting responsibly in everything
we do, so that we can continue to make a positive impact on our people,
partners, investors, customers and the communities in which we operate.
We recognise that proper consideration of the interests and views of our
broader stakeholders produces better outcomes and enhances the
sustainability of our businesses.
We have 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.
Customers
How we engage
Staying in touch with our customers and
suppliers has never been more important. Our
management teams maintain regular and
open dialogue with those we do business with
which helps build long lasting and trusted
relationships. That dialogue is reported to the
Board regularly to ensure that customer
perspectives are properly understood as part
of the Board’s decision-making process.
Stakeholder interests
Customers want to work with businesses who
can meet demands and deliver on promises,
who treat them fairly, and who can be trusted
to put their interests first. Customers also
expect us to manage our business in a
sustainable manner.
Outcomes
Good open communication with customers
remained crucial during the pandemic. We
are in constant dialogue with our customers
to understand their developing needs,
particularly on large-scale projects being
delivered in our Engineering division where
travel restrictions presented challenges, to
help reduce risks, plan for contingencies and
offer support where appropriate. We also
maintain close and trusted relationships with
our farming customers across Agriculture to
provide support and expertise, and add real
value to their businesses.
People
How we engage
We use a variety of methods to ensure that our
people remain engaged from regular briefing
notes, announcements and vlogs, through to
informal meetings with Directors and our
annual Employee Engagement Survey. In 2021
our Non-Executive Directors visited Group sites
individually to better understand the views
of our people together with the issues and
opportunities for them and their businesses.
Stakeholder interests
We strive to ensure that our people remain an
active part of our businesses, can shape the
future of the Group, have opportunities to
develop their skills and experiences, and feel
properly valued and rewarded for their
contributions. We are also committed to
ensuring that our people remain safe, and that
our sites are places in which people can reach
their potential.
Outcomes
Our people remain a primary consideration
in everything we do. We have a strong
commitment to health and safety, where our
incident rates fell significantly during the year
despite operations fully resuming as COVID-19
restrictions were reduced (see page 17). We also
offer broad training and development
opportunities, and increased the amount of
internal training delivered in the year (see page
16). Our annual employee survey generated
positive feedback and identified areas where
we can improve (see page 44). We continue to
use CarrsConnect and notice boards for regular
communications to ensure that our people remain
informed about key developments.
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On these pages, we identify our various stakeholders,
explain how we engage as a business, and describe
the positive outcomes this brings. These disclosures
demonstrate how we have regard to the matters set
out in section 172(1) of the Companies Act 2006.
"Understanding the needs
of our various stakeholder
groups through open
communication helps
in the development of
Group strategy and our
goal of greater
sustainability."
Peter Page
Chairman
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Partners
How we engage
The Group includes a number of joint ventures
and one associate with strategic partners with
whom we maintain an active dialogue. Regular
formal and informal meetings take place with
our partners involving both Board members
and senior management covering strategic,
operational and industry issues, which are
regularly reported to the Board to ensure that
it remains fully appraised.
Investors
How we engage
We maintain a regular calendar of
announcements and events for investors. The
Executive Directors frequently communicate
with institutional investors to discuss strategy
and broader markets. The Chairman, Non-
Executives and Company Secretary also
regularly engage with investors on
governance issues and other matters
concerning the Board.
Stakeholder interests
Our strategic partnerships are founded upon
mutual trust and strategic alignment. Our
partners value long-term commitment, open
communication and diligence so that we can
effectively pursue jointly developed strategic
goals.
Outcomes
Our joint venture boards and management
teams work very closely to understand risk
and opportunities, and in the development of
business strategy. These longstanding and
trusted relationships are a foundation for the
success of those businesses and help build
strength and resilience into our business
model, which proved valuable as we
continued to deal with the challenges
associated with COVID-19.
Stakeholder interests
Our investors trust us to manage their assets
and execute the Board’s strategy. In so doing,
we must act ethically, in a sustainable manner,
and in accordance with good governance. Our
investors expect us to remain open about the
Group’s current and expected performance so
that they can properly assess risks and
opportunities when making investment
decisions.
Outcomes
In addition to our regular investor engagement,
during the year we liaised with key investors
on matters such Executive remuneration (see
page 65). In the year, the Chairman engaged
directly with a large number of shareholders
on broader topics and to understand their
views more broadly. The Board agenda
includes a specific item for considering the
views of shareholders, with the involvement of
the Group’s brokers.
Communities
How we engage
We practice responsible behaviours at all
times and are committed to the communities
where we have an impact. We encourage
active participation in community initiatives
and continue to support a range of selected
charitable causes. We are also party to raw
material sustainability programmes. Reports
on significant community issues and
sustainability programmes are delivered to the
Board from time to time.
Stakeholder interests
Our various community stakeholders have
broad interests ranging from the provision
of jobs and investment in local economies,
to supporting vulnerable people and
environmental and charitable initiatives.
Outcomes
The Group is committed to ethical and
responsible business practices and adheres
to a policy framework on matters such as
modern slavery and the sustainable sourcing
of raw materials. We also ensure that
environmental considerations feature
prominently on the Board’s agenda and are
developing our sustainability strategy. Across
the Group, our people devote considerable
time and resources to good causes and
community initiatives. For more information,
see our Responsible Business Report on
pages 45 to 46.
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Strategic Report
Responsible Business
Developing our
sustainability
strategy
“We promote a supportive
culture of engagement,
transparency and fairness.
We take great pride in doing
what we can to ensure the
health, safety and wellbeing
of our people and that we
adhere to ethical and
sustainable business
practices.”
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Developing our sustainability strategy
Central to our strategy are considerations of
our environmental impact, stakeholder value,
and good governance.
Our intention is to create a Group that
generates net zero carbon by 2040.
We aim to achieve this through the
development of a responsible business
framework and through achieving realistic
targets which align with our strategy. We
recognise that as a business we have much
to do but consider this an area of opportunity
which will help safeguard the future success
of the Group.
During the year our Board held detailed
discussions on ESG topics and completed
the self-evaluation tool published by
Chapter Zero to help identify where the
Group can enhance its focus as part of its
long-term strategy.
Over the next year, we will identify and
address areas of the Group which have
a carbon impact and build a framework with
targets which our colleagues can relate to.
We will set goals in relation to carbon
emissions, waste, and water consumption,
and determine appropriate performance
indicators to track the progress we make
towards achieving our objectives.
We will update investors on our plans, and
on the progress we make towards our goals.
Some initiatives currently underway across
the Group are set out below, centred around
four themes: Buying; Producing; Operating;
and Living.
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Strategic Report
Responsible Business Review
Buying:
Sourcing materials ethically and in a
sustainable manner.
In the year we commenced an initiative to
standardise procurement across the Group to
drive best practice. We are now a member of
Sedex, one of the world’s leading platforms
providing supply chain visibility to improve global
working conditions. Membership will help to
ensure that we source raw materials responsibly
and reduce the risk of modern slavery in our
supply chains.
In the current year we will launch our Green Car
Scheme, providing our UK employees with the
opportunity to purchase electric vehicles through
salary sacrifice and supporting the transition away
from reliance on fossil fuels. We also plan to install
charging stations at several of our UK sites.
The Group sources its entire electricity supply in
the UK from Drax, which generates its power using
100% renewable sources. Solar panels have been
installed at our Animax site and we are exploring
opportunities for expanding the use of solar and
other renewable energies in conjunction with
steps to save energy identified through the
Group’s Energy Savings Opportunities Scheme
audit.
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Producing:
Maximising opportunities to reduce consumption
and waste.
In recent years, and through various initiatives, we have explored
alternatives to plastic packaging. Most notably, we are nearing
completion of the development phase in a project to create
environmentally friendly and biodegradable packaging for feed blocks
in our Speciality Agriculture business in the USA. We hope to be in full
scale testing in 2022, in what could be a positive step for our business.
A significant portion of our Engineering operations support the
safe clean-up of nuclear waste (see page 30). As part of a
collaboration with GeoRoc International (see pages 24 to 25), we are
working to develop Hot Isostatic Press technology; a safe,
environmentally friendly and permanent means of disposing of
nuclear waste.
Streamlined energy and carbon reporting (SECR):
Our carbon generation as a Group (Scope 1 and Scope 2 emissions)
are as follows:
Division
Agriculture, UK
Agriculture, O/S
Engineering, UK
Engineering, O/S
Head Office
Group Total
Intensity metric
(tonnes CO2e per
£m turnover)
Tonnes CO2e
2020/2021
2019/2020*
2018/2019*
2,536
6,120
485
206
73
9,420
2,575
6,240
753
253
103
9,924
2,768
6,269
581
244
77
9,939
22.6
25.1
24.6
* Restated to reflect emissions by Group controlled entities. Emissions from joint
venture and associate businesses will be disclosed as Scope 3 emissions in future
reports.
We report CO2 in terms of CO2e (Carbon Dioxide Equivalent) which
includes CO2 and other greenhouse gases, which enables reporting
based on their relative global warming potential. Reporting in this way
provides a fuller picture of the Group’s impact.
Total electricity use across the Group in the year totalled 11,681,072
kWh. Solar panels across the roofline of our Animax site in Suffolk
generated over 250,000 kWh of electricity in the year, of which 93%
was used by our own operations with the balance being supplied to
the grid. How we will approach reporting in relation to the risks and
opportunities presented by climate change in accordance with TCFD
recommendations is set out on page 33.
We are also developing reporting systems to collect our Scope 3
emissions so that we can fully assess the environmental impact of our
operations, and to enable us to develop specific initiatives to improve
our performance as we head towards our net zero goal. We will report
on progress in the future.
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Operating:
Conducting business responsibly
and with accountability.
Environmental and social considerations feature heavily in Group
decision-making processes, and we are committed to high
standards of governance. The Board is ever mindful of its duties to
stakeholders, including its employees, customers, strategic
partners, investors and its communities. More information on how
the Board discharges these duties is set out in our Stakeholder
Engagement report on pages 38 to 39 and in the Corporate
Governance Report on pages 50 to 55.
The Group is committed to tax transparency. We aim to comply
fully with all tax disclosure, payment, and filing requirements in
every country in which we operate and to paying appropriate
amounts of tax. Our Tax Strategy and Tax Code of Conduct is
published online at www.carrsgroup-ir.com.
During the year, we engaged SeeHearSpeakUp, an independent
whistleblowing service, to enable people at any of our locations
globally to report concerns easily, anonymously, and in total
confidence. The service was launched with an announcement from
the Chief Executive and posters are displayed at all sites with clear
contact information. Training on whistleblowing is included in our
employee induction programme.
Living:
Keeping our employees safe.
Safety is one of our core commitments, and a high-agenda item at
every Board and management meeting. Ensuring that we maintain
safe environments is a priority.
Mandatory safety training is included for all employees through the
Group’s e-learning platform. Safety performance is monitored
weekly, and we have an annual health and safety plan which drives
progress against initiatives as part of our strategy of continuous
improvement.
Earlier in the year, we engaged Marsh to carry out independent
audits at a range of sites across the Group to identify risks, raise
awareness and enhance safety. We were pleased to receive
positive feedback, including that safety standards and levels of
incident reporting were generally good. Our HSE strategy is one of
continuous improvement, and we have developed individual safety
plans for each site. Areas for improvements identified in the audit
included a lack of consistent approach, noting that the Group’s
operations included certain high-risk activities, which we will
address through the adoption of consistent Group standards.
In the year, there was a reduction in incident rates at a time when
normal levels of activity resumed across the Group following the
COVID-19 pandemic. Our goal is to have zero accidents. We are
constantly working to improve performance.
All injuries
RIDDOR injuries
All injuries average IFR*
RIDDOR average IFR*
FY2019
FY2020
FY2021
78
5
3.31
0.21
83
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3.76
0.41
46
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2.03
0.18
If you are aware of any wrongdoing in your
*
workplace, call us and report the matter
on our confidential hotline
UK 800 988 6818 Germany 0800 723 5206
IFR = number of incidents / average headcount x 100,000
Over the last 12 months, we have seen a decrease in incidents
including RIDDOR. With no significant change in risk profile, the
significant reduction in incidents in the year is encouraging as we
strive to continually improve safety at all sites.
New Zealand 800 446 198 USA 1 855 290 6405
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Alternatively report to us confidentially by providing information on our
website at www.seehearspeakup.co.uk/en/file-a-concern
or by emailing us at report@seehearspeakup.co.uk
SeeHearSpeakUp is an independent external service that allows you to report your
concerns in an anonymous manner. We are available 24/7, 365 days a year
Strategic Report
Responsible Business Review continued
Our people.
Our ability to attract, retain and develop people is fundamental
to the delivery of our strategic goals and the long-term success
of the Group. We aim to recruit and retain the best people and
build a supportive culture where our employees can develop
their skills and careers.
This year we continued our careful approach to managing
COVID-19, which helped our people remain safe and enabled
us to continue trading. Our manufacturing plants maintained
redesigned shift patterns, our retail stores remained open, and
our on-site activities were able to continue.
Hybrid working arrangements remained commonplace across
the Group as large numbers of employees continued to work
from home. In Engineering, employees at our specialist
fabrication business in Carlisle, UK were also consulted at
length in relation to the introduction of more flexible working
arrangements, with a decisive vote being cast in favour of
moving from a five-day to a four-day working week.
We ended the year with 1,149 employees, slightly down on last
year, largely attributed to the closure of four low-performing
retail sites. Due to COVID-19, a small number of people were
placed on paid leave, whether due to reduced operational
activities or to protect vulnerable individuals, but no support
was utilised under the UK Government’s Coronavirus Job
Retention Scheme in the year.
In 2021, we launched an Employee Assistance Programme
covering all UK employees (local healthcare packages are also
in place in the USA and Germany). The programme provides
improved support for mental health and also broader financial,
legal and medical advice, signposting where professional help
is available.
Employee engagement
Our first ever annual employee survey in 2020 secured an
encouraging response rate of 59%. Feedback showed that our
people felt going the extra mile was recognised and
appreciated, that HSE was taken very seriously and that our
people felt safe at work.
Areas for improvement included career development,
communications, and pay and benefits. Taking on board
employee feedback, individual business plans were developed
in the year focusing on these areas which included the roll-out
of performance development reviews for every employee and
performance development training for managers.
Communication plans have also been developed in each
business which have led to the introduction of weekly bulletins
containing information on business performance and key
developments, town hall meetings, and vlogs published on our
intranet, CarrsConnect. Recognising that engagement can be
driven by direct dialogue, we also encourage our businesses to
increase the visible presence of management at sites.
Representatives from the Board also visited sites individually
during 2021 to help encourage more dialogue and a better
understanding of the Group’s operations. In 2021, employee
remuneration structures have been the subject of review,
which led to the introduction of bonus structures to reward
individuals making a significant contribution during the
pandemic.
Employee development
We offer broad training and development opportunities to
employees through seminars and online courses delivered
in-house. In the year, total in-house employee development
increased by 41% to 1,165 training days. We also support a
range of individuals across the Group working towards external
professional qualifications. In the year, our e-learning capability
continued to expand. This now comprises 65 modules on a
variety of topics including management, HSE, data protection
and cyber security. 43% of the training we deliver in-house is
now provided online. Certain modules are mandatory for
employees following induction. Our management and
leadership development programme ran twice in the year and
was well attended.
Diversity and equal opportunities
We actively promote an environment free from discrimination,
harassment or victimisation, and where everyone receives
equal treatment and opportunities regardless of matters such
as gender, race, colour, nationality, religion or belief, marital or
civil partnership status, family status, pregnancy or maternity,
sexual orientation, gender reassignment, disability or age.
Our policy remains that all decisions relating to employment
practices will be objective, free from bias and based upon the
individual needs of the business and merit. Our interview and
recruitment training aligns with this policy and focuses on
ensuring that we select the right person for the role. Our
gender statistics are reflective of broader engineering and
agriculture industries which currently contain a predominately
male workforce. As a Group, we recognise the benefits of
attracting the broadest range of candidates, and the range of
skills and experiences brought by a diverse workforce, and we
continue to enhance our recruitment practices. For more
information about the Board’s policy on diversity and inclusion,
please see the Nomination Committee Report on page 58.
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Our Values
Our values are critical to our long-term success. Every
decision we make is guided by our core values, which help
ensure we retain our reputation as being trusted, reliable and
committed to excellent service levels. We carefully consider
our core values to help drive a positive and open culture, and
strive to act consistently with these at all times.
Trust
we do what we say we will do
Respect
we treat everyone with respect
Integrity
we do the right thing
Carr's Group plc Annual Report and Accounts 2021
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Our communities.
As a responsible business, and a significant
employer in the areas where we operate,
we are embedded in our local communities.
The support we provide takes a variety of
forms including charitable monetary
donations, fundraising, partnering initiatives
and voluntary work.
In 2021 we completed another year in
partnership with Yorkshire Dales Millennium
Trust, a three-year initiative to help create a
legacy for agriculture in the Yorkshire Dales
and surrounding areas. Throughout the
initiative, the programme has provided
support for people, innovation, and the
environment by delivering sustainable farm
improvements. In addition, it has also
created new native broadleaf woodlands,
which are valuable habitats for wildlife
providing areas of shelter for farm animals
and helping with flood risks and soil
erosion.
Carr’s Group continues to support Cumbria
Community Foundation, part of a national
and international network of community
foundations which provides a means by
which people and organisations can make
a difference to the most disadvantaged
people in the community. The Group has
also supported the High Sheriff of
Cumbria’s ‘Better Tomorrows’ programme, a
three-year project to increase the number
of young people having access to support
from youth workers to help them reach
their full potential. In 2021 we also
supported efforts to retain Cumbrian
agricultural college, Newton Rigg.
For a sixth consecutive year Carr’s Billington
has supported WellChild, the UK charity for
seriously ill children which relies almost
entirely on voluntary donations. In the year,
the business raised £45,000 for WellChild
through various initiatives including the sale
of purple bale wrap. Carr’s Billington also
raises awareness through social media,
encouraging customers to share pictures of
decorated purple hay bale displays.
Strategic Report
Responsible Business Review continued
Our communities continued
Carr’s remains committed to helping young people in the local
community. The Group 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.
In the year, Bendalls Engineering supported the Business and
Schools Collaboration Project (BSCP). The BSCP is a
collaboration across Cumbria which seeks to engage with and
develop young people, providing valuable experiences in
industry to help guide career choices. Research shows that
people who are provided with experiences whilst at school are
less likely to remain out of employment, education, or training,
and have improved career prospects. The initiative has so far
helped provide experiences for over 7,000 young people in the
area. The business also supported Inspira in Carlisle by
attending and presenting at STEM and Apprenticeship events.
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We also provided support in connection with the lighthouse
renovation project in West Cumbria. Whitehaven Harbour
Commissioners successfully secured funding to fully restore
the harbour’s two iconic 19th century lighthouses. In addition to
a financial donation, Bendalls was proud to support the initiative
by supplying new and replacement metalwork to be used in
the renovation.
Ethical business practices
Anti bribery, corruption and conflicts of interest
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 other 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, which are the subject of strict
parameters, and of any matters which could give rise to a
conflict of interest for consideration approval.
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 chain remain free from modern slavery and human
trafficking. Whilst the risk of modern slavery and human
trafficking within the Group and its supply chain 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. The Group operates
internal policies which are supported by training on the issue of
modern slavery which both protect against risks and promote
awareness. We are also a member of Sedex and carry out
appropriate due diligence on supply chains and engage with
suppliers in relation to their policies on tackling slavery and
human trafficking.
ESG and Executive Director remuneration
For information on how environmental, social and governance
issues will be considered and prioritised through Executive
remuneration structures, see the Directors’ Remuneration
Report from page 64.
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Non-Financial Information Statement
Reporting requirement
Group policies and standards
Additional information
Environmental matters
Environmental Policy
See pages 40 to 43
Employees
Human rights
Employee Handbook, Health and Safety Policy
See pages 43 to 44
Employee Handbook, Modern Slavery Statement
and Policy
See pages 44 to 46
Social matters
Charitable Donations Policy
See pages 45 to 46
Anti-corruption and anti-bribery
Anti-Bribery Policy
See page 46
Policy implementation and due diligence Employee Handbook, financial and other controls
and internal due diligence/integration processes
See our Strategic Report on pages 1 to
46
Description of principal risks and impact
on business activity
Description of the business model
–
–
Non-financial key performance
indicators
Environmental Policy, Health and Safety Policy,
Employee Handbook
See pages 32 to 36
See pages 10 to 11
See pages 16 to 17
This Strategic Report was approved by the Board on 7 December 2021 and signed on its behalf by
Peter Page
Chairman
Carr's Group plc Annual Report and Accounts 2021
47
Governance
The Board
N
N
N
R
A
Peter Page
Chairman
Peter joined Carr’s in November 2019 and
became Non-Executive Chairman in January
2020. Peter was formerly Chief Executive of
Devro plc, one
of the world’s leading manufacturers of collagen
casings for the food industry, a position which
he held for 11 years during which time he
transformed the company’s international
manufacturing capabilities. Peter is currently
serving as Executive Chairman under interim
arrangements announced on 12 October 2021.
John Worby
Senior Independent Director
John was appointed a Non-Executive Director in
April 2015. John is a chartered accountant and 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.
Committee membership
N
R
A
Nomination
Remuneration
Audit
Chair
—
None
N
N
R
A
—
Ian Wood
Non-Executive Director
Employee Engagement Representative
Ian was appointed to the Board in 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 a
Non-Executive Director of Cumbria County
Holdings Ltd.
Neil Austin
Chief Financial Officer
Neil joined Carr’s in January 2013 and became
Chief Financial Officer 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 working alongside FTSE 350
companies and multi national organisations.
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Kristen Eshak Weldon
Non-Executive Director
Kristen was appointed as a Non-Executive
Director in October 2020. Kristen was until
recently a member of the Executive Group at
Louis Dreyfus Company, where she focused on
innovation and forward-looking investments
across global agriculture. Kristen will stand
down from the Board at the AGM in January 2022
due to taking a role at a financial services
organisation which prevents her remaining on
the board of any publicly quoted company.
Matthew Ratcliffe
Group Legal Director and Company
Secretary
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
R
A
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 and 2018
held office as High Sheriff of Cumbria. Alistair
will stand down from the Board after 16 years’
service at the AGM in January 2022.
Carr's Group plc Annual Report and Accounts 2021
49
Governance
Corporate Governance Report
Introduction from the Chairman
This report describes how Carr’s Group plc adopts the UK
Corporate Governance Code 2018. In preparation, the Board
considered each Principle of the Code to review how it is
applied and how it relates directly to Carr’s Group plc.
The Board is mindful of its responsibility to consider the
interests of all stakeholders, particularly in ensuring that section
172 matters are properly considered when significant decisions
are proposed and agreed. One area of particular focus is ESG,
where the Executive Directors have been tasked with
developing a coherent, well-researched strategy for the
long-term benefit of all stakeholders, incorporating
environmental, social and sustainability factors as they apply
specifically to the sectors in which the Group operates.
Information on progress will be included in future reports.
In January 2021 Tim Davies retired from the Board after seven
years as CEO. Tim made a substantial contribution to the
business, completing significant acquisitions in Agriculture and
Engineering, recruiting several external candidates for senior
management roles as part of our succession process and, in his
final period, leading the business through the COVID-19
pandemic with sensitivity and determination. Hugh Pelham
joined the Board as CEO in succession to Tim, subsequently
leaving the business by mutual agreement in October 2021. As
a consequence, I have taken on the role of Executive Chairman
on an interim basis, providing strategic support to Neil Austin
and the senior managers. We look forward to the appointment
of a permanent CEO in due course, which is expected to take
place during the current financial year.
Alistair Wannop leaves the Board at the AGM in January 2022,
after 16 years’ service as a Non-Executive Board member. Alistair
has provided pertinent insight on the agriculture sector, has
always maintained an independent view and has been a
steadfast representative for the business in the local community.
The Board is grateful for Alistair’s significant contribution.
In September 2021 we announced that, as a result of a change
in her full-time role, Kristen Eshak Weldon is not able to serve
on the boards of public companies, and accordingly will not be
standing for re-election at the AGM in January 2022. We wish
Kristen all success in her future career. As announced on
16 November 2021, Ian Wood has been appointed as the
Board’s Representative for Employee Engagement, taking over
from Kristen in overseeing our efforts in this important area.
Following the AGM, the Board will comprise two Executive
Directors, one being myself as Executive Chairman on an
interim basis, and two independent Non-Executive Directors.
This is in line with Provision 11 of the Code which requires that at
least half the Board, excluding the Chairman, should be
independent Non-Executive Directors. The board recognises
the need to address gender diversity on the Board, which will
be addressed in due course. We have reviewed Board
composition, along with forthcoming succession requirements
and the skills and experience best suited to support the
strategy, in advance of a recruitment and selection process for
a new Non-Executive Director to join the Board in the first half
of 2022.
At the AGM in January 2021, the Remuneration Report was
approved with a majority but did receive a high level of votes
against approval. As a result, the Chair of the Remuneration
Committee conducted a thorough process of engagement with
those shareholders who voted against and subsequently
published a report on the engagement process, the
conclusions drawn by the Committee and proposals for the
future. More detail is provided in the Remuneration Committee
Report, but in summary the Board is satisfied that we have
heard, understood, and addressed the valid issues raised.
During 2021, we conducted an externally facilitated Board
assessment process, the first in four years. The brief to the
external assessor was to help us identify gaps between current
performance and what might reasonably be considered the
level attained by a good board. This has proved to be extremely
helpful, with reassurance regarding the level of compliance as
well as constructive recommendations for improvement.
I recognise that Carr’s Group plc has a diverse shareholder base
representing a range of interests. We endeavour to make all
relevant information available in a timely manner, keeping
shareholders well-informed to enable balanced judgements
about their investments. Maintaining good governance is
central to my role as Chairman of the Board. I am committed to
achieving the highest standards.
Peter Page
Chairman
7 December 2021
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Governance
Overview of Group Governance
Governance structures
The Group’s primary governance structures are as follows:
The Board
The Board is responsible for promoting the long-term sustainable
success of the Group, creating value for its shareholders and
supporting its broader stakeholders. The Board determines the
Group’s purpose and strategy, ensuring that these remain aligned
with a clear set of values and a positive culture. It provides
entrepreneurial leadership within a framework of risk management
controls.
The Board also reviews business performance and monitors the
delivery of the Group’s strategic objectives. It consists of Senior
Executive Management together with experienced Non-Executive
Directors. All Non-Executive Directors are considered by the Board
to be independent.
The Board meets regularly in accordance with its planned
agenda, and otherwise as may be required. During the year, owing
to the COVID-19 outbreak, most of the scheduled Board meetings
took place by videoconferencing, although it was possible for
three meetings to take place in person. All Directors have full and
timely access to relevant information. The Board maintains a
schedule of matters reserved for its approval, which is regularly
reviewed and made available on the Group’s website.
Board Committees
The Board delegates certain matters to its Audit, Remuneration,
and Nomination Committees. Written terms of reference govern
the responsibilities of the Committees, which are reviewed
regularly by the Board and made available on the Group’s website.
The Committees ensure that there is independent oversight of
the matters within their remit and assist the Board in fulfilling its
responsibilities. Full reports from each of the Committees,
detailing their responsibilities, key considerations and actions
during the year, are set out from pages 56, 60 and 64.
Executive Leadership Team
The Executive Leadership Team consists of the Executive
Directors, Managing Directors of individual businesses and Group
functional directors for safety, HR, legal and IT. Meetings to
discuss operational performance and commercial developments
take place weekly, with focused strategic discussions taking
place in person twice yearly. Feedback from meetings is shared
with the Board.
Subsidiary and joint-venture operating boards
Operating boards for subsidiary and joint-venture businesses
include Managing Directors together with other subsidiary
management. Meetings take place monthly, which include
subsidiary management together with Executive Directors,
leaders of Group functions and – where appropriate – executives
from joint venture partners, to discuss operational performance
and commercial developments. Feedback on business
performance and key developments is shared with the Board.
Division of responsibilities
The Code requires there to be a clear division of responsibilities
between the leadership of the Board and Executive leadership of
the Group’s businesses. The roles of the Chief Executive Officer,
Chairman, Senior Independent Director and Non-Executive
Directors are reviewed regularly by the Board and details are set
out on the Group’s website.
A summary of key responsibilities is set out below:
Chairman
• The effective running of the Board demonstrating objective
judgement
• Promoting openness and debate on the Board
• Ensuring the Board is well informed to enable constructive
discussion and sound decision making
• Ensuring the effectiveness of the Board in the development of
the Group’s strategy and the monitoring of performance
• Promoting ethical behaviours and high standards of corporate
governance
• Setting the Board’s agenda in conjunction with the CEO and
Company Secretary
• Ensuring effective communication with shareholders and other
stakeholders
• Leading the performance evaluation of the Board
• Providing a sounding board for the CEO on key business
decisions and challenging proposals where appropriate
Chief Executive Officer
• Developing and implementing the Group’s strategy and
commercial objectives with input from the Board and advisors
• Health and Safety across the Group
• The overall management of the Group’s businesses
• 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
• Ensuring that dialogue is maintained with the Chairman on
important issues facing the Group
• Developing and overseeing the Group’s Environmental, Social
and Governance work, and sustainability strategy
• Promoting the Group’s culture, values and behaviours, and
adhering to the highest standards of integrity and governance
Carr's Group plc Annual Report and Accounts 2021
51
Governance
Overview of Group Governance continued
Senior Independent Director (“SID”)
• Acting as a sounding board for the Chairman and providing support in the delivery of his objectives
• Working closely with the Chairman and other Directors, and/or shareholders to resolve significant issues as may be required
from time to time
• Leading the evaluation of the Chairman on behalf of the other Directors
• Ensuring an orderly succession process for the Chairman
Non-Executive Directors (including the Chairman and SID)
• Bringing complementary skills, knowledge and experience to the Board
• Constructively challenging the Executive Directors and helping develop Group strategy with an independent outlook
• Devoting time to developing and refreshing their knowledge and skills, to ensure that they are well-informed about the Group
and make a positive contribution
• Satisfying themselves as to the accuracy of the Group’s financial performance and the effectiveness of controls and systems of
risk management
• Determining appropriate levels of remuneration of Executive Directors and having a prime role in succession planning
Interim Executive arrangements
On 12 October 2021, it was announced that Peter Page, Non-Executive Chairman, had become Executive Chairman on an interim
basis upon Hugh Pelham leaving the business and the Board. In addition to the responsibilities of the Chairman set out above,
Peter Page takes on the following responsibilities of the Chief Executive Officer during the interim period:
• Developing and implementing the Group’s strategy and commercial objectives with input from the Board and advisors
• Developing and overseeing the Group’s Environmental, Social and Governance work and sustainability strategy
• Promoting the Group’s culture, values and behaviours, and adhering to the highest standards of integrity and governance
• Effecting the decisions of the Board and its Committees
• Health and Safety across the Group
The remaining key responsibilities of the Chief Executive Officer pass to Neil Austin, Chief Financial Officer, during the interim
period as follows:
• The overall management of the Group’s businesses
• Maintaining and protecting the reputations of the Group and its subsidiaries
• Monitoring the Group’s performance against the agreed budget
• Ensuring that dialogue is maintained with the Chairman on important issues facing the Group
Other arrangements have been put in place, including the delegation of certain of the Chief Financial Officer’s responsibilities to
senior finance personnel, to ensure that the Group continues to be managed effectively. The Board is confident that these interim
arrangements will ensure robust governance, and enable the Group’s strategy to be delivered, during the interim period. Subject
to being satisfied of his independence, it is the Board’s intention that Peter Page reverts to the role of Non-Executive Chairman
upon the appointment of a permanent CEO.
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Board activities
Key areas
The Board’s principal activities can be grouped into the six key areas as outlined below.
Strategy
Risk
Governance
Setting strategic aims and objectives,
including those relating to Environmental,
Social and Governance considerations.
Setting organisational cultures and
behaviours.
Reviewing new business developments
and opportunities including potential
acquisitions.
Investing in research and technology.
Overseeing the Group’s risk and internal
control framework.
Ensuring compliance with legal,
regulatory and disclosure requirements.
Considering feedback from external and
internal audit.
Reviewing financial forecasts and other
considerations in support of the viability
statement.
Determining Group delegations of
authority, including matters reserved for
the Board, and terms of reference for
Board Committees.
Reviewing potential conflicts of interest.
Overseeing Board and Committee
performance evaluation.
Succession planning and Board
appointments.
Finance
Stakeholder engagement
Health, Safety and Environmental
Approving budgets.
Monitoring financial performance.
Approving strategy for stakeholder
engagement and social policy.
Approving Health, Safety and
Environmental strategy, and monitoring
performance.
Overseeing preparation and
management of the financial statements.
Approving major capital projects or
materially significant contracts.
Determining dividend policy.
Determining pensions strategy.
Ensuring that effective engagement with
employees, shareholders and other
stakeholders is carried out, and
considering feedback.
Considering Health, Safety and
Environmental reports from
management.
Approval of public announcements.
Considering feedback from investor
meetings and roadshows.
Providing support where appropriate to
drive continuous improvement.
Composition and changes
During the year ended 28 August 2021, the Board comprised of two Executive Directors1, a Non-Executive Chairman, and four
independent Non-Executive Directors2. There is also a Company Secretary to the Board. Biographies of Board members are set out on
pages 48 to 49.
In accordance with the Corporate Governance Code, all Directors stand for re-election annually at the Group’s AGM. On 22 November
2020, the Group announced that Alistair Wannop would not be standing for re-election at the Group’s AGM taking place in January
2022 as part of the Board’s planning for Non-Executive Director succession. On 24 September 2021, the Group also announced that
Kristen Eshak Weldon would not stand for re-election at the Group’s AGM taking place in January 2022, due to a change in her full-time
role which required her to stand down from appointments at any publicly quoted company. From 24 September 2021, arrangements
were put in place to ensure that no conflict of interest could arise in connection with Kristen’s new position. On 12 October 2021, it was
agreed that Hugh Pelham would leave the business and the Board, with the interim arrangements set out above taking immediate
effect.
1 Tim Davies stood down as Chief Executive Officer at the conclusion of the AGM on 12 January 2021. Hugh Pelham was appointed to the Board on 4 January 2021
and as Chief Executive Officer on 12 January 2021 in succession to Tim Davies.
2 Kristen Eshak Weldon was appointed as an independent Non-Executive Director on 1 October 2020. Prior to her appointment, there were three other Non-
Executive Directors (excluding the Chairman).
Carr's Group plc Annual Report and Accounts 2021
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Governance
Overview of Group Governance continued
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
matters with the Chairman or other Directors.
Attendance and agenda
The Board met on eight scheduled occasions throughout the
year. In addition to regular scheduled meetings, a number of
additional meetings took place during the year in order to
deal with specific business arising from time to time.
In advance of all Board meetings the Directors are supplied
with papers covering the matters to be addressed. Members
of the Executive Leadership Team or other third parties may
also attend meetings, or parts of meetings, where
appropriate from time to time by invitation. Executive
Directors may attend Committee meetings (or parts of such
meetings) by invitation where required. The Company
Secretary is responsible to the Board for the timeliness and
quality of information.
Details of Director attendance at scheduled Board and
Committee meetings are set out below:
No. of scheduled meetings
Peter Page
Tim Davies
Hugh Pelham
Neil Austin
Alistair Wannop
John Worby
Ian Wood
Kristen Eshak Weldon
Board
8
8
3*
6*
8
8
8
8
8
Audit
Com
4
N/A
N/A
N/A
N/A
4
4
4
4
Rem
Com
4
4**
N/A
N/A
N/A
4
4
4
4
Nom
Com
2
2
N/A
N/A
N/A
2
2
2
2
of the Board.
* Being 100% of the meetings scheduled to take place whilst a member
N/A Not applicable (where a Director is not a member of a Committee).
** Peter Page stood down from the Remuneration Committee on
16 November 2021.
Support
Directors can obtain independent professional advice at the
Group’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 and access to senior
management across the Group where required.
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Directors’ conflicts of interest
The Companies Act 2006 and the Company’s Articles of
Association require the Board to consider any actual or potential
conflicts of interest. The Board has a policy for managing and,
where appropriate, authorising actual or potential conflicts of
interest, or related party transactions. Under that policy, Directors
are required to declare any interests they or close family
members have in any organisations which are not part of the
Group, as well as other circumstances which could give rise to a
conflict of interest. At the outset of every Board meeting,
Directors are required to declare any actual or potential conflicts
in relation to matters on the agenda.
The Board regularly reviews its registers of related parties and
third-party interests. Directors are required to seek clearance
from the Chairman before taking on any new appointments 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 the financial year ended
28 August 2021, there were no declared conflicts of interest.
Board effectiveness review
During the year, the Board engaged Sam Allen Associates to
conduct an independent review of the effectiveness of the Board
and its Committees. Details of that process, and its outcomes, are
set out in the Nomination Committee Report on pages 56 to 59..
The Board carries out an external effectiveness review
regularly, the previous external review taking place in 2017, with
annual internal reviews facilitated by the Company Secretary
on behalf of the Chairman being carried out in between
external reviews.
During the year, the Chairman evaluated the performance of
the Non-Executive Directors through discussions with Board
members and the Company Secretary, and informal
observations. The Senior Independent Director also held
discussions with Board members and the Company Secretary,
without the Chairman present, to appraise the Chairman’s
performance. Feedback was provided following such
evaluations and reviewed by the Board.
Non-Executive Director independence
Taking into account all circumstances, including those factors set
out in the Corporate Governance Code, the Board considers all
Non-Executive Directors to be independent. Peter Page was
considered independent upon appointment as Non-Executive
Chairman. On 12 October 2021, Peter Page stepped into the role
as Executive Chairman on an interim basis. The Board expects
Peter Page to return to the position of Non-Executive Chairman
upon the appointment of a permanent Chief Executive Officer,
subject to being satisfied as to his independence.
Whilst it is acknowledged that Alistair Wannop has served on
the Board in excess of nine years, the Board considers that this
alone has not compromised his independence, and that no
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other circumstances exist which would give rise to a conflict of
interest. In particular, Alistair has never been an employee of the
Group, no other Board member has been present on the Board in
conjunction with Alistair for in excess of nine years, no
shareholder is represented by Alistair, no material business
relationships exist between Alistair (or any related person) and
the Group, and no remuneration (other than NED fees) or other
benefits are provided by the Group.
Stakeholder engagement
The Board has developed processes for enabling effective
engagement with the Group’s stakeholders, and to ensure that
stakeholder interests and views are fully considered in making key
business decisions. Ian Wood is currently the Board’s Non-
Executive Director for Employee Engagement, with oversight of
Group initiatives, responsibility for reporting on matters to
the Board, and ensuring that employee interests are properly
considered in Board decision making. Further information on how
the Board engages with stakeholders and discharges its Section
172 responsibilities is set out on pages 38 to 39.
Internal controls and risk management
The Board is responsible for overseeing the Group’s systems of
internal control and internal audit, and for reviewing their effectiveness
(including financial, operational, and compliance controls) together
with processes for risk management which collectively safeguard the
Group’s assets. The Audit Committee supports the Board in this
process by reviewing the principal risks, and the report on pages 60 to
63 provides further information. 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 Group’s organisational structure is designed to effectively
plan and implement the Group’s objectives, to monitor progress,
and to ensure that robust controls become embedded in
operations. The Group’s internal risk-based control systems have
been fully operative throughout the year and up to the date of this
Annual Report and Accounts.
The Group’s internal controls include financial reporting processes,
including monthly reporting from subsidiaries, its associate and
joint ventures. This reporting is subject to detailed review by the
Chief Financial Officer 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.
Key risks to the Group and its businesses are identified and reviewed
during regular reviews which take place between Executive Directors,
Managing Directors and business unit management teams.
Such reviews consider the financial and other implications of such
risks and assess the effectiveness of mitigation controls. The Audit
Committee also reviews the effectiveness of risk management and
internal control systems. Reports on risk are delivered to the
Board regularly which – together with direct involvement in
strategy, investment appraisal and budgeting – enable the
Board to report on the overall effectiveness of internal controls.
A summary of the risk management framework and key risks to
the business are set out on pages 32 to 36.
Confidential reporting of concerns
The Group maintains various channels through which people can
report concerns or suspicions of wrongdoing within the workplace,
including anonymous reporting via an independent whistleblowing
service operated by SeeHearSpeakUp. The Board regularly
reviews the Group’s Whistleblowing Policy which is implemented
by the Company Secretary as the Group’s Whistleblowing Officer.
Statement of compliance
Save in relation to the following items, the Board considers that
the Company has, during the year ended 28 August 2021,
complied with the requirements of the Corporate Governance
Code 2018 in their entirety.
Code Provision 38: alignment of Executive Director pension
contributions
A firm commitment was made in the 2020 Annual Report and
Accounts that employer pension contributions for Executive
Directors would be aligned with those available to the majority
of the Group’s workforce by the end of the financial year ending
28 August 2021. As planned, such alignment was achieved in
January 2021. Tim Davies – who stood down as CEO in January
2021 – continued to receive his contractual entitlement of 15%
until leaving the Group on 22 August 2021.
Code Provision 41: workforce engagement on Executive
remuneration
Whilst the Group’s employee engagement survey in 2020 sought
feedback in relation to remuneration and benefits, this was not
directly in relation to the alignment of Executive remuneration
with broader Group remuneration policy. The Remuneration
Committee does however evaluate broader Group remuneration
such as basic pay increases, bonuses and share awards, when
determining remuneration levels for Executive Directors and
Senior Management. Further details on the considerations of the
Remuneration Committee are set out on pages 64 to 83.
Code Provision 9: interim arrangements
The Board recognises that the interim executive arrangements,
announced on 12 October 2021, include the Chairman acting in an
executive capacity which is not consistent with Code Provision 9.
It is the Board’s intention that Peter Page reverts to acting as
Non-Executive Chairman upon the appointment of a new CEO for
the Group.
Matthew Ratcliffe
Company Secretary
Carlisle
CA3 9BA
7 December 2021
Carr's Group plc Annual Report and Accounts 2021
55
Governance
Nomination Committee Report
Introduction
The Nomination Committee ensures that
the Board and senior management team
possess the right balance of skills,
experience and knowledge to support the
Group’s strategy and to meet the
requirements of good governance. The
Committee monitors succession plans for
the Board and senior management to
anticipate future vacancies arising due to
promotion or retirement along with
developments in the business. The
Committee has robust and transparent
procedures for identifying suitable
candidates, using external consultants
where appropriate.
After more than seven years at Carr’s
Group plc, Tim Davies retired as CEO,
leaving the Board at the AGM on
12 January 2021. I am most grateful to Tim
for his contribution to the Group’s growth
and diversification into new geographical
markets. Tim’s resilience and dedication
were particularly valuable as he steered
the Group through the most difficult
period of the recent COVID-19 pandemic.
Hugh Pelham joined the Group in January
2021, taking on the role of CEO at the AGM.
Whilst Hugh brought experience and
energy to the role, it was mutually agreed
in October that he would stand down as
CEO and from the Board. I am grateful for
the constructive way Hugh transferred
responsibilities.
Since October, I have taken on the role of
Chairman in an executive capacity,
committing all my working time to the
business, focusing on strategic priorities
with the support of senior managers. Neil
Austin, CFO, manages the day-to-day
trading activities of the business. The
Committee and the Board are satisfied
that this is the optimum arrangement for
an interim period.
On 1 October 2020, Kristen Eshak Weldon
joined the Board as a Non-Executive
Director. In September 2021, Kristen took
up a new role as Global Head of
Sustainable Investing at a financial
services organisation, a condition of which
precludes her from holding Non-Executive
roles on the boards of public companies
due to the potential for a conflict of
interest. As a result, Kristen will not be
standing for re-election at the forthcoming
AGM. We are all grateful for Kristen’s
contribution during her time on the Board.
Currently, the Nomination Committee is
planning succession to ensure a measured
programme of recruitment and induction
for new Non-Executive Directors over the
next three years.
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.
Peter Page
Nomination Committee Chair
Dear Shareholder
I present this report
on the role of the
Nomination Committee
and its activities during
the year.
Nomination Committee
Highlights
• Changes to Board membership
• External Board evaluation
completed
• NED and CEO succession
processes commenced
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Activities of the Committee
Details of the planned meetings of the Committee and
attendance are set out on page 54. In the year, the
Committee’s primary areas of focus were:
recruitment for Board appointments;
•
the succession plans in place for the Board and senior
•
management across the Group;
the Group’s policy on diversity and inclusion;
the structure, size, composition and diversity of the Board,
its Committees and senior management across the Group;
the Group’s talent management, training and development
programmes; and
the Committee’s terms of reference to ensure they
appropriately reflect the Committee’s remit.
•
•
•
•
Board evaluation
During the year, the Board facilitated an external review of its
effectiveness. A tender process was carried out by the Chairman
and Company Secretary on behalf of the Board which led to the
appointment of Sam Allen of Sam Allen Associates, an
experienced and independent provider of board evaluations.
Neither Sam Allen nor Sam Allen Associates have provided
services to the Group or otherwise had any connections to the
Group previously.
The evaluation process was agreed with the Chairman and
involved virtual meetings with all Board members, the collation
of responses to questionnaires focused on key areas, a review of
previous Board papers and minutes, and attendance at a Board
and Remuneration Committee meeting. The initial evaluation
report and analysis were presented to the Chairman and Senior
Independent Director, with the full results discussed with the full
Board at a later meeting.
The evaluation provided a valuable external perspective on
Board governance and effectiveness, including several
recommendations which the Board plans to implement,
including the following:
Recommendation
Specific actions
Increase focus
on strategy
development
Determine risk
appetite of
Board
Reduce level
of operational
detail
Enhance
purpose of
Board meetings
Embed ESG
considerations
Complete a review of market insights and
core Group competencies to support
development of strategy which will be the
subject of regular review.
A separate and specific review of the
Board’s risk appetite will be arranged to
provide clarity and to assist with the
development of strategy.
The presentation of management
information and Board papers will be
reviewed to enhance the availability of key
information such as KPI and trend reporting,
linked to strategy, performance and
governance.
Ensure that Board papers include sufficient
forward-looking information.
The Board will regularly review
stakeholder issues as a separate item to
enable consideration of issues such as
climate change, stakeholder engagement,
culture, diversity and inclusion. The
Remuneration Committee will also
consider ESG targets and progress in
determining executive rewards.
The Company will update shareholders on the progress made in
relation to the matters identified above in its 2022 Annual Report.
Carr's Group plc Annual Report and Accounts 2021
57
Governance
Nomination Committee Report continued
Group succession planning and development
The Group’s succession strategy focuses upon ensuring
that sufficient appropriately qualified and experienced
employees are recruited or developed internally to meet the
future management and leadership needs of the business.
Recruitment processes for leadership and senior positions
across the Group are managed under the supervision of the
Group’s HR Director, inviting both internal and external
candidates. Independent recruitment consultants are also
appointed where appropriate.
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 from
page 44.
Board succession
The Nomination Committee led two recruitment exercises
during 2020 which led to the appointment of two Directors
in the year ended 28 August 2021. Details of the recruitment
exercises were set out in our Annual Report and Accounts 2020.
Kristen Eshak Weldon joined the Board on 1 October 2020 as
an independent Non-Executive Director and as a member of
the Audit, Remuneration and Nomination Committees. On
21 April 2021, we announced that Kristen had also taken over
from Alistair Wannop as the Board’s Representative for
Employee Engagement. On 24 September 2021, due to a
change in her full-time role, we announced that Kristen
would leave the Board following the AGM in January 2022.
The Board is grateful for Kristen’s contribution and wishes her
success in the future. On 16 November 2021 we announced
that Ian Wood had been appointed as the Board’s
Representative for Employee Engagement.
Hugh Pelham joined the Board on 4 January 2021, becoming
Chief Executive at the Group’s AGM on 12 January 2021. We
announced on 12 October 2021 that Hugh Pelham would
leave the Board and his role as Chief Executive with
immediate effect, by mutual agreement. For an interim
period, I have taken on the role of Executive Chairman,
working full time in the business alongside Neil Austin and
the management team. On an interim basis, Neil has taken on
day-to-day management of the Group’s operations, with
certain of his financial responsibilities delegated to senior
finance employees. It is anticipated that I will revert to being
Non-Executive Chairman upon the appointment of a new Chief
Executive Officer.
The Committee is currently recruiting for a Non-Executive
Director and has commenced the process for a CEO.
Shareholders will be kept informed of progress.
At the AGM in January 2022, Alistair Wannop leaves the Board,
having served as a Non-Executive Director since 2005. The
Board is extremely grateful for Alistair’s insight, particularly in
UK agriculture, his extensive understanding of the Group’s
operations, and his significant support and contribution towards
the Board’s effectiveness over the last 16 years.
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. All appointments, whether external
recruitments or internal promotions, are based on merit, and
are not influenced or affected by race, colour, nationality,
religion or belief, gender, marital status or civil partnership,
family status, pregnancy or maternity, sexual orientation,
gender reassignment, disability or age. There are no
differences in pay structures for persons of different genders
performing similar roles.
The Nomination Committee recognises that diversity
strengthens the Board, and that it is important to ensure that it
is not solely comprised of like-minded individuals with similar
backgrounds. The Group’s policy is to improve diversity at all
levels of the organisation.
Successful delivery of the Group’s strategy depends on the
recruitment and retention of a motivated and skilled workforce
in an increasingly competitive labour market. The Board
recognises that steps taken to improve diversity in the
workplace can increase the attractiveness of the Group to
prospective employees and enhance the available talent pool.
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Gender breakdown
Group employees
Senior managers
Direct reports to senior managers
Total
Male
Female
Total
Male
Female
Total
Male
Female
1,153
846
307
13
10
3
60
45
15
Re-election
At the AGM on 11 January 2022, Peter Page, Neil Austin, John
Worby and Ian Wood will stand for re-election to the Board 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 48 to 49 demonstrate
the range of experience and skills which each brings to the
benefit of the Group.
The Chair of the Nomination Committee will attend the Annual
General Meeting to respond to any Shareholder questions that
might be raised on the Committee’s activities.
On behalf of the Board.
Peter Page
Nomination Committee Chair
7 December 2021
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59
Governance
Audit Committee Report
Introduction
This report details the principal activities
of the Audit Committee during the year,
together with information on its governance.
This has been the third year in which KPMG
LLP (KPMG) has acted as the Group’s
auditor, having been first appointed by
shareholders at the AGM on 8 January 2019.
In 2021, the Committee carried out an
external audit tender with the result
that the Committee recommended the
appointment of Grant Thornton UK LLP
as the Group’s auditor for the 2021/22
financial year. Further details of that
process and the reasons for the
Committee’s recommendation are
set out later in this report.
Composition of Committee
and Meetings
In the year, the Audit Committee comprised
four Non-Executive Directors: John Worby,
who is Chair of the Committee; Ian Wood;
Alistair Wannop; and, from 1 October 2020,
Kristen Eshak Weldon.
The Chair of the Committee has recent and
relevant financial experience and
collectively members of the Committee
have in-depth knowledge and experience
of agricultural and engineering industries,
and a good understanding of the Group’s
undertakings. Details of Committee
members’ qualifications can be found on
pages 48 to 49.
The Audit Committee met on four
scheduled occasions during the year, and
has an agenda linked to the Group financial
calendar. Additional meetings took place
relating to the external audit tender
undertaken in the year.
The Committee invites the Chairman, the
Chief Executive, the Chief Financial Officer,
the Finance Director – Group, Finance
Director – Engineering, Head of Group
Finance, the Head of Internal Audit and the
external auditor to attend its meetings.
John Worby
Audit Committee Chair
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
• Effectiveness of internal and
external audit reviewed
• External audit tender
completed
• Evaluation of ongoing
impact of COVID-19
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Carr's Group plc Annual Report and Accounts 2021
During the year, the Committee met with
each of the Head of Internal Audit and the
external auditor without the Executive
Directors or other senior management
being present.
The Committee has met three times since
the end of the financial year to review and
recommend the proposal to change
auditors, and to consider internal audit work
and the results and Annual Report for the
year ended 28 August 2021.
Responsibilities
The key responsibilities of the Committee are
to provide effective governance over the
integrity of the Company’s financial reporting
and the effectiveness of its systems of
internal control and risk management.
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;
Keep under review and evaluate the
effectiveness of the Company’s internal
financial control, 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;
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; and
Review the adequacy of the Company’s
whistleblowing and anti-bribery
arrangements.
•
•
•
•
•
•
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The Committee’s terms of reference can be found on the
Company’s website www.carrsgroup.com.
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 Chief Financial Officer and the external
auditor in respect of the half year and full year results, and the
Annual Report and Accounts.
An important responsibility of the Audit Committee is to review and
agree significant estimates and judgements made by management.
To satisfy this responsibility, the Committee reviewed a written
formal update from the Chief Financial Officer on such issues at the
two meetings to consider 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 areas of judgement across the Group.
The key areas of judgement in the year were as follows:
• Capitalisation of cloud hosted software. The Committee
reviewed judgements taken when applying the new accounting
policy in relation to the IFRIC agenda decision regarding
configuration and customisation costs incurred in implementing
Software-as-a-Service (SaaS). This resulted in a change in the
accounting policy for such costs which involved a prior year
restatement. For further details see note 36. The Committee
was satisfied with the judgements made.
• Contract risks in Engineering, 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 to test the recoverability
of contract balances. The Committee determined that the
judgements adopted by management were appropriate.
• The valuation of the Carr’s Group defined benefit pension
scheme assets and obligations. The Committee reviewed
valuations of the Carr’s Group scheme’s investments, and the
key actuarial assumptions used to value the scheme
obligations. The assumptions made were reviewed against
market data in conjunction with independent actuarial
specialists to assess their appropriateness, and the disclosures
on the sensitivity of the obligations to changes in such
assumptions were reviewed. The Committee was satisfied that
the scheme’s assets were appropriately valued, that the
assumptions adopted in relation to the scheme’s liabilities were
appropriate, and that disclosures made in relation to the scheme
were appropriate. The Committee also reviewed and was
satisfied in relation to the surplus arising on the Carrs Billington
Agriculture (Operations) Ltd defined benefit scheme.
• Estimates of the recoverability of trade receivables in the
Agricultural Supplies division. The Committee reviewed key
controls within credit control processes, the estimates and
policies adopted in relation to debtors, and the adequacy of the
Company’s disclosures relating to provisions for receivables.
The Committee determined that the estimates and disclosures
made were appropriate.
• Going concern. The Committee considered various reviews
including market analyses, funding availability, forecast
modelling, sensitivity analyses and historical comparisons to
assess the ongoing risk. and was satisfied that it was
appropriate to adopt the going concern basis of accounting for
the preparation of the accounts.
• Potential goodwill impairment. The Committee challenged the
reasonableness of the future business performance
assumptions adopted by management for those businesses
that had underperformed against expectations. Factors
considered included historical performance, industry
benchmarks and where relevant the likely long-term impact of
the COVID-19 pandemic. The Committee agreed with
management’s view that an impairment was necessary in
relation to the Group’s investment in Afgritech LLC but that no
other impairments were necessary.
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 Chief Financial Officer outlining the relevant key
matters worthy of consideration. The Committee noted and
concurred with the revised segmental disclosure to show separately
the financial performance of Speciality Agriculture and Agricultural
Supplies. The Committee was satisfied that, where relevant, all the
key events and issues which have been reported to the Board in the
CEO’s 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 Chief Financial Officer which enabled it to review
the base assumptions and various sensitised scenarios throughout
the forecast period. The Committee was comfortable with the
disclosures made.
Internal control and risk management
During the year the Committee 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.
Carr's Group plc Annual Report and Accounts 2021
61
Governance
Audit Committee Report continued
The Committee reported to the Board that it had reviewed,
and was satisfied with, the effectiveness of the Company’s
internal control and risk management systems.
External audit
KPMG was appointed as external auditor of the Group at the
AGM in January 2021, having first been appointed at the AGM
in January 2019. KPMG’s engagement partner is Nick Plumb,
who has been in place since commencement of the audit for
the 2019 financial year.
Following approval by shareholders to appoint KPMG in
January 2021, the Audit Committee reviewed and approved
the terms of engagement and remuneration of the external
auditors for the 2021 financial year.
The Audit Committee assessed the qualifications, expertise
and independence of KPMG as auditors as part of the tender
process which led to its appointment and updated its
assessment during the 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 2021, identifying their assessment of these
key risks.
The assessment of the effectiveness and quality of the audit
process and in addressing these key risks is formed by,
amongst other things, the reporting from the auditors.
Each year, following completion of the audit, 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. Feedback from that process is reported
to the Committee.
In last year’s annual report, the Committee reported concerns
with efficiencies during completion of the 2018/19 audit. Such
concerns were the subject of a debrief with KPMG which
resulted in agreed improvements for the 2019/20 audit.
Following the 2019/20 audit, a similar review took place.
Whilst the Committee remained satisfied with the robustness
of the audit, and the relationship between the Committee and
external auditor, the review highlighted further concerns in
relation to costs and efficiencies which were the subject of
detailed discussions with KPMG. Whilst it was agreed that
improvements would be made for the 2020/21 audit, the
Committee separately determined it to be appropriate to carry
out an external audit tender relating to the 2021/22 audit.
Audit tender and Committee recommendation
For the reasons set out above, the Committee completed a
tender exercise in 2021 relating to the appointment of the
Group’s external auditor for the 2021/22 financial year.
Seven firms were invited to tender, which included a mix of three
‘Big Four’ firms and four other firms. KPMG, the incumbent
auditor, was invited to tender, having been first appointed as the
Group’s external auditor in 2019. PwC was not eligible to tender,
having been the Group’s external auditor for a significant period
until 2019.
Of the seven firms invited to tender, five, including KPMG,
participated in the process. Two firms declined owing to capacity
constraints. Following execution of a non-disclosure agreement,
access was granted to Group materials via a secure data room.
Presentations from tendering firms took place before a panel
including John Worby (Audit Committee Chair), Ian Wood (Audit
Committee Member), Neil Austin (Chief Financial Officer) and
other senior finance personnel.
Comprehensive and transparent criteria were used by the panel
to score tendering firms which covered (amongst others) the
following topics:
• Experience, credentials, cultural fit, and enthusiasm of audit
team
• Understanding of the Group
• Service approach, and proposals for transition and delivery
• Approach to quality assurance
• Value for money and fee transparency
• Clarity of communication
• Ability to add value
The respective merits of the tendering firms were subsequently
considered at length by the panel and Committee. Ultimately,
the Committee recommended the appointment of Grant
Thornton UK LLP, with Mick Frankish as lead audit partner, to the
Board. The Committee’s recommendation was driven by,
amongst other factors, the quality of Grant Thornton’s
presentation and proposition for audit combined with a good
cultural fit, strong audit quality results, and a competitive and
transparent fee structure.
The proposed appointment will be put to shareholders at the
AGM in January 2022. In preparation for engagement as the
Group’s external auditors, Grant Thornton attended the 2020/21
year-end Committee meeting.
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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’s 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.
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 Chief Financial Officer 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 2021 financial
year, there was no non-audit work undertaken by the Group’s
external auditor.
The Committee concluded that it was satisfied with the
independence of KPMG as auditors, and of Grant Thornton UK LLP
as the proposed auditors for 2021/22.
During the year, the Committee reviewed and approved the internal
audit plan which is devised from assessments across the Group’s
operations and aligned to the Group risk framework as well as
business-specific risks. On an annual basis, the Committee also
reviews and approves the Group’s internal audit charter which
describes the role and mandate of the internal audit function.
Whilst the internal audit plan continued to be impacted in 2021 by
COVID-19 restrictions, particularly owing to the Group’s imposition
of travel restrictions, the Committee was satisfied with the work
done during the year which included considering the design and
operating effectiveness of financial controls, the integrity of
financial reporting, contract accounting and monitoring,
environmental controls and processing controls.
At each of the Committee’s meetings during the year, the Group’s
Head of Internal Audit provided updates on internal audit activities.
Internal audit findings, together with responses from management,
were considered by the Committee and, where appropriate,
challenged.
The Committee also keeps the performance and effectiveness of
the internal audit function under review and in doing so it also
assesses the quality, experience, and expertise within the internal
audit function. The Committee was satisfied that the internal audit
function continues to operate effectively, despite the challenges
brought by COVID-19, and that the expertise and level of resource
available to internal audit were appropriate.
Since the year end, the Committee has agreed the internal audit
plan for 2022, which will continue to be reviewed on a quarterly
basis to be able to respond in the event that further challenges are
experienced in connection with COVID-19.
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.
Conclusion
The Committee considers that the work performed above
demonstrates that the Committee continues to operate
effectively and fulfil its responsibilities.
Internal audit
The Committee is responsible for monitoring the performance and
effectiveness of the Company’s internal audit activities.
I will be available to shareholders at the forthcoming AGM to
respond to any questions relating to the Audit Committee’s work.
John Worby
Audit Committee Chair
7 December 2021
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63
Governance
Remuneration Committee Report
Ian Wood
Remuneration Committee Chair
Dear Shareholder
I am pleased to
present the Report of
the Remuneration
Committee for the year
ended 28 August 2021.
Remuneration Committee
Highlights
• Approval of Remuneration
Policy
• Consultation with shareholders
on FY20 Remuneration Report
• Alignment of Executive Director
pension contributions
1. Annual Statement
Introduction to the report
The Committee’s report is presented in the
following sections:
1. This Annual Statement, which
summarises the key considerations
of the Committee during the year.
2. The Directors’ Remuneration Policy,
which was approved at the AGM which
took place on 12 January 2021. No
changes to the Remuneration Policy
are proposed this year.
3. The Annual Report on Remuneration,
which sets out how the Remuneration
Policy was applied in 2020/21, the
remuneration received by Directors
relating to 2020/21, and how the policy
will be applied during 2021/22. The
Annual Report on Remuneration will be
subject to an advisory shareholder vote
at the AGM.
Performance and remuneration in
2020/21
The Group’s financial performance in the
year was strong. Adjusted profit before tax
was ahead of the Board’s original
expectations at £16.6m and 11.1% ahead of
the prior year (2020: restated £15.0m).
Adjusted earnings per share increased
10.0% to 13.2p (2020: restated 12.0p).
Progress also was made against the
Group’s long-term goals, with the
development of strategy under the
leadership of the Executive Directors
including work towards the development
of an environmental and sustainability
framework, the identification of suitable
acquisition opportunities, and the
commencement of several initiatives to
standardise Group practices, improve
governance and realise efficiencies.
Taking into consideration the Group’s
financial performance and strategic
development in the year, the Committee
determined that targets set in respect of
annual bonuses had been met1.
Owing to the performance of the Group
over the last three financial years, no
award shares granted to Executive
Directors under the Group’s Long-Term
Incentive Plan will vest in 2021.
The Committee is satisfied that the
Remuneration Policy operated as intended
in 2020/21, and that remuneration
outcomes for Executive Directors were
well aligned with Group strategy and
shareholder interests.
Full details of the remuneration targets set
by the Committee, together with
performance against those targets and the
remuneration outcomes, are set out in the
Annual Report on Remuneration which
follows from page 74.
Committee focus in 2020/21
This was a busy year for the Committee.
Key areas of focus included:
• A review of Executive Director
remuneration2 and setting remuneration
for Executive Directors, the Chairman
and Senior Management.
• Overseeing wider workforce
remuneration in the context of fairness.
• Developing and agreeing performance-
related targets for Executive Directors
in line with strategy, and monitoring
outcomes.
• A review of the Directors’ Remuneration
Policy, which was put to shareholders at
the AGM on 12 January 2021 receiving a
99.7% vote in favour.
• The completion of a shareholder
consultation exercise in relation to the
Committee’s Annual Report on
Remuneration for 2019/20.
• The alignment of Executive Director
pension contributions with the wider
workforce, in line with best practice
under the Corporate Governance Code.
Further information on each of the above
matters is set out on the pages which follow.
1 No annual bonus was paid to Hugh Pelham, who
stood down from the Board on 11 October 2021.
2 Full details of the Committee’s review of
Executive Director remuneration, and of
changes made to Executive remuneration as a
consequence, were included in the Committee’s
report for the prior year.
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Interim arrangements
On 11 October 2021, Hugh Pelham stepped down from his role as
CEO and left the Group with immediate effect. As a consequence,
and on an interim basis until the Board appoints a CEO in succession,
Peter Page (Chairman) became Executive Chairman and Neil Austin
(CFO) took on additional operational responsibilities. Further details
on roles and responsibilities during the interim period is set out in the
Corporate Governance Report on page 52. Details of Hugh Pelham’s
remuneration on departure are set out on page 79. Following the year
end a consultation exercise took place with certain major
shareholders prior to finalising remuneration arrangements for Peter
Page during the interim period until the appointment of a permanent
CEO for the Group. Details of such arrangements are set out on the
pages which follow.
Shareholder consultation
At the AGM on 12 January 2021, whilst the Directors’ Remuneration
Policy received overwhelming support (99.7%), the Committee’s
Annual Report on Remuneration was approved with the support of
just 54.5% of proxy votes cast.
To deepen our understanding of investor concerns, the Committee
contacted investor advisory bodies and shareholders representing
97.0% of the votes cast against the Report. Feedback was received
from over 80% of the organisations contacted, which was given
either in writing or through virtual meetings which I attended
together with the Company Secretary.
That feedback identified the following key concerns with the
Committee’s Report:
1. That the Group’s CEO had been appointed with a base salary
which was 16.6% greater than his predecessor. During 2020, an
increase of 17.5% was also applied to the base salary of the
Company’s CFO.
2. That annual bonuses were paid to Executive Directors in
relation to the achievement of non-financial targets
notwithstanding that some support had been taken in the year
by the Group under the UK Government’s Coronavirus Job
Retention Scheme.
The Committee notes shareholder feedback on the incoming
remuneration package of the CEO. The Board recognises the
importance of recruiting, retaining and motivating an executive
team who can drive the Group’s strategy and grow shareholder
value as a priority. When recruiting the CEO, the Board carried out
an extensive search of the market, with the remuneration package
offered being reflective of the outcome of this process in relation
to the calibre of candidate required. As such, our remuneration
philosophy remains that the overall remuneration package
offered should be sufficiently competitive to attract, retain and
motivate high-quality executives, whilst not being excessive.
since 2013. It was noted that, following this adjustment,
shareholder concerns were not raised in relation to the overall
levels of remuneration paid to Executive Directors. However,
the Committee will take on board feedback from a number of
shareholders around the need for more regular and incremental
salary reviews in future and for any above-inflationary increases
to be accompanied by a compelling rationale such as where
Executive Directors develop in role.
When reviewing payments under the annual bonus plan, the
Committee took into account alignment with the wider workforce
and broader stakeholders, including shareholders. Employees
across the Group continued to receive bonuses in relation to
performance during the year and investment in training initiatives
increased on the prior year. Shareholders continued to receive
dividends, and charitable donations from the Company were
maintained. Bonuses were paid in respect of non-financial targets
only, and no relief was given against targets despite the challenges
associated with COVID-19 during 2019/20.
The Group published the outcome of its shareholder consultation
on its website on 22 April 2021. A copy was also added to the Public
Register maintained by the Investment Association and provided to
all shareholders who provided feedback.
During the year, the Committee reviewed the Remuneration Policy
to ensure it remained fit for purpose and determined that no
changes were required at this time. The Committee remains
cognisant of shareholder feedback in implementing the Policy. For
the 2020/21 financial year, the Group did not utilise any support
from the Coronavirus Job Retention Scheme.
It is important that the Committee fully understands stakeholder
views so that it can be sure these are properly considered in
reaching decisions. On behalf of the Committee, I am very grateful
for the engagement and feedback offered during this process.
Remuneration in 2021/22
For 2021/22, the maximum annual bonus for the Executive
Directors will remain 100% of salary, with 25% of any amount
awarded being deferred for two years in the form of shares.
Non-financial targets for the annual bonus also incorporate ESG
considerations, which focus upon developing the Group’s ESG
strategy. The Committee also intends to grant LTIP awards of 100%
of salary, which will be based upon stretching EPS targets. Under
the interim arrangements described above, and in his capacity as
Executive Chairman, Peter Page will receive no performance-
related remuneration.
I hope that you are able to support the Remuneration Committee’s
Report at the forthcoming AGM on 11 January 2022.
In 2020, the Committee looked to review salaries in the market. As
part of this review, the Committee realigned salaries to market
levels, including the CFO’s salary, which was below the market
competitive level, having not been reviewed against the market
Ian Wood
Remuneration Committee Chair
7 December 2021
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Governance
Remuneration Committee Report continued
2. Remuneration Policy
Introduction
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 current policy was approved by the shareholders at the
AGM which took place on 12 January 2021, receiving a 99.7%
proxy vote in favour. No changes are proposed to the policy
this year.
The role of the Committee
The primary role of the Remuneration Committee is to make
recommendations to the Board on the Group’s policy for
Executive Director remuneration. The Committee also has
delegated responsibility for determining the remuneration
and benefits of the Chairman, the Executive Directors and
senior management including the Company Secretary.
Key responsibilities include:
• Determining the Executive Directors’ Remuneration Policy
to ensure that it aligns with Group culture and strategy,
and to ensure that the Group rewards fairly and
responsibly
• Reviewing remuneration trends, employment conditions
and policies across the Group
• Determining the broad policy on executive remuneration,
and setting remuneration for the Chairman, Executive
Directors and senior management
• Determining targets and outcomes for performance-
related pay schemes of the Executive Directors and senior
management
• Reviewing the design of any share incentive plans for
approval by the Board and/or shareholders
• Engaging with stakeholders on matters within its remit
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 incentivising the delivery of rewards to the Group’s
shareholders, workforce and broader stakeholders.
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 shareholders.
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The remuneration package is split into two parts:
•
a non-performance-related element represented by basic
salary, benefits and pension; and
a performance-related element in the form of an annual
bonus (including a Deferred Share Bonus Plan) and a Long
Term Incentive Plan.
•
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 scope of 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 has taken into
consideration the views and policies of shareholders and proxy
agencies. Proposed changes to the policy were communicated
to major shareholders prior to its formation in 2020, and all
feedback taken into consideration. Advice was also taken on
best practice from appropriately qualified remuneration advisers
Aon plc and PricewaterhouseCoopers LLP. The views offered to
the Committee were taken into account in developing the policy
below, which received overwhelming support (99.7% of proxy
votes cast by shareholders) at the AGM on 12 January 2021.
In 2021, a consultation exercise was undertaken in connection
with the Committee’s Annual Report on Remuneration. For
further information please see the Annual Statement at the
outset of this Report on page 64. The Committee reviewed the
Directors’ Remuneration Policy during the year in the light of its
consultation, determining that no changes were required at this
time but remaining cognisant of shareholder views.
The Committee welcomes feedback from all stakeholders at all
times.
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Remuneration policy table
Element
Purpose and link to strategy
Policy and approach
Opportunity
EXECUTIVE DIRECTORS
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 that is
aligned with
arrangements
across the Group.
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 a maximum rate not
exceeding that available to the
majority of the UK workforce
(currently 4%).
Salary levels (and subsequent salary 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.
Subject to as provided below, Company contributions
for all Executive Directors are at a rate which does
not exceed the contribution rate available to the
majority of the UK workforce (currently 4%).
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
To aid retention and
remain competitive
in the market place.
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.
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.
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).
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Governance
Remuneration Committee Report continued
Remuneration policy table continued
Element
Purpose and link to strategy
Policy and approach
Opportunity
EXECUTIVE DIRECTORS
Annual bonus Designed to reward
delivery of key
strategic priorities
during the year.
Save As You
Earn (SAYE)
To encourage
employee
involvement and
encourage greater
shareholder
alignment.
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, given
commercial sensitivities of disclosing targets. 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 including material financial
misstatement, reputational damage, gross misconduct,
fraud, error in the assessment of performance
measures and corporate failure. These provisions apply
to both the cash and deferred elements of the bonus.
An HMRC approved SAYE scheme is available to
eligible staff, including Executive Directors.
Maximum of 100% of base
salary.
The schemes are subject to
the limits set by HMRC from
time to time.
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Element
Purpose and link to strategy
Policy and approach
Opportunity
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.
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. Annual awards are
capped at the equivalent of 100% of base salary at the
date of award.
Maximum of 100% of base
salary for annual awards.
Exceptional awards can be
made of up to 200% of base
salary.
In accordance with the rules of the LTIP, which were
approved by shareholders at the AGM on 8 January
2013, in circumstances considered by the Committee to
be exceptional, single awards in excess of 100% of base
salary can be made, up to a maximum of 200% of base
salary at the date of the award.
Awards are currently based solely upon an EPS growth
measure, although the Committee reserves the right to
introduce further or alternative performance measures
where considered appropriate from time to time and
following consultation with major shareholders.
25% vests at threshold performance. There is straight-
line vesting between threshold and maximum.
A two-year post-vesting holding period applies to the
net of tax shares for awards granted in 2018 and beyond.
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.
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.
Post-
cessation
shareholding
To provide alignment
with shareholder
interests in the
long term.
Executive Directors are required to retain all shares
acquired on vesting under the Company’s LTIP, up to a
value equal to 200% of their basic salary, for a period of
two years following the cessation of their employment
with the Company for any reason.
N/A
N/A
This requirement will apply to all shares which vest
after the Policy took effect on 12 January 2021,
regardless of when awards were made under the
Company’s LTIP.
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Governance
Remuneration Committee Report continued
Remuneration policy table continued
Element
Purpose and link to strategy
Policy and approach
Opportunity
NON-EXECUTIVE DIRECTORS
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:
•
• market rate; and
•
the time commitment and responsibility of their roles;
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.
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. Such areas include (but are not limited to):
•
•
•
•
•
•
• making the appropriate adjustments required in certain circumstances (e.g. rights issues, corporate restructuring events,
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;
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.
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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.
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.
Approach to recruitment remuneration
The remuneration package for a new Executive Director would
be set in accordance with the terms of the Group’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 ordinarily be limited to
200% of base salary (i.e. 100% annual bonus plus 100% Long Term
Incentive Plan). This can be increased to 300% in exceptional
circumstances (i.e. 100% annual bonus plus 200% 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.
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.
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 prorated bonus in respect
of the proportion of the financial year worked. Such payment
could be payable in cash and not subject to deferral.
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Remuneration Committee Report continued
Directors’ terms of employment and loss of office continued
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.
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.
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.
Dates of service contracts and appointment to the Board for all Directors are given below:
Date of service contract/letter of
appointment
Date of first appointment to the Board
Date stood/standing down
Executive Directors
Hugh Pelham
Neil Austin
Tim Davies
Non-Executive Directors
Peter Page*
John Worby
Ian Wood
Alistair Wannop
Kristen Eshak Weldon
23 August 2020
1 January 2013
18 October 2012
1 September 2021
1 September 2021
1 September 2021
1 September 2021
1 September 2021
4 January 2021
1 May 2013
1 March 2013
1 November 2019
1 April 2015
1 October 2015
1 September 2005
1 October 2020
11 October 2021
12 January 2021
11 January 2022
11 January 2022
* Executive Chairman under interim arrangements from 11 October 2021.
Estimates of total future potential remuneration from 2021 pay packages
The tables below provide estimates of the potential future remuneration of each Executive Director based on the remuneration
opportunity granted in the 2021/22 financial year. Potential outcomes based on different scenarios are provided for each Executive
Director.
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The assumptions underlying each scenario are described below.
Fixed
Consists of base salary, pension and other benefits.
Save as otherwise stated, base salaries are as at 1 September 2021.
Benefits are valued using the figures in the total remuneration for the 2021 financial year table,
adjusted for any benefits that will not be provided during 2022.
Pensions are valued by applying the appropriate percentage to the base salary.
Peter Page
Hugh Pelham
Neil Austin
Base
£’000
293**
208*
256
Benefits
£’000
Pension
£’000
–
1
1
–
5
10
Total
£’000
293
214
267
On target
Maximum
Based on what a Director would receive if performance was in line with plan, and if the threshold level
was achieved under the LTIP.
Assumes that the full stretch target for the LTIP is achieved, and maximum performance is obtained
under both the financial and non-financial targets set for the annual bonus scheme.
Maximum with 50% share
price appreciation
Assumes maximum remuneration outcomes are achieved and a 50% increase in the value of share-
based remuneration.
* Reflecting the total remuneration payable in respect of the financial year comprising basic salary, pension and other benefits for the period to 11 October 2021
together with a payment in lieu of notice of £170,000 which was payable upon Hugh Pelham stepping down from the Board.
** Reflective of £91,800 per annum as Non-Executive Chairman until 11 October 2021 and £340,000 per annum thereafter as Executive Chairman under interim
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arrangements.
Remuneration estimates based upon outcomes
Peter Page
Chairman
Maximum with 50% share price appreciation
100%
Maximum
On Target
Fixed
100%
100%
100%
Total
£293,000
£293,000
£293,000
£293,000
0
50
100
150
200
250
300
Neil Austin
Chief Financial Officer
Total
29%
27%
27%
17%
£939,000
Maximum with 50% share price appreciation
34%
33%
33%
£779,000
Hugh Pelham
Chief Executive Officer
Total
Maximum with 50% share price appreciation
100%
52%
£214,000
Maximum
On Target
Fixed
0
100%
100%
100%
£214,000
£214,000
£214,000
50
100
150
200
250
Salary and benefits
Annual bonus
LTIP
Share price growth
Maximum
On Target
Fixed
0
58%
28%
14%
100% 0%
£459,000
£267,000
200
400
600
800
1000
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Governance
Remuneration Committee Report continued
3. Annual Report on Remuneration
This part of the Directors’ Remuneration Report sets out a summary of how the Directors’ Remuneration Policy was applied during
the 2020/21 financial year.
Remuneration Committee
During the 2020/21 year, the Remuneration Committee comprised Ian Wood (Chair), John Worby, Alistair Wannop, Peter Page and, from
1 October 2020, Kristen Eshak Weldon. The Committee held four scheduled meetings during the year with all members in attendance
(see page 54).
Peter Page stepped down from the Remuneration Committee upon assuming the role of Executive Chairman on an interim basis in
October 2021.
The Executive Directors 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.
During the year the Committee considered:
•
•
•
•
•
•
•
•
the Directors’ Remuneration Policy;
levels of basic pay and remuneration structures for Executive Directors, the Chairman and senior management;
variable pay performance targets for Executive Directors, both financial and non-financial;
outcomes under variable pay arrangements for Executive Directors and senior management;
shareholder feedback relating to Executive Director remuneration;
pay and benefits structures across the Group (including gender pay gap reporting and CEO pay ratios);
the Committee’s terms of reference; and
the Corporate Governance Code and developing remuneration trends, and their impact on the activities of the Committee and
remuneration policy.
2021 remuneration (audited information)
In this section we summarise the pay packages awarded to our Executive Directors for performance in the 2021 financial year versus
2020. 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
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Salary/Fees
Benefits
Pension
Total fixed pay
Bonus
LTIP
Total variable pay
Executive Directors
Hugh Pelham1
Neil Austin
Tim Davies4
Non-Executive
Directors
Peter Page
Alistair Wannop
John Worby
Ian Wood
Kristen Eshak Weldon
225
245
120
–
211
286
90
40
40
40
373
752
40
40
40
–
1
2
1
–
–
–
–
–
–
1
1
–
–
–
–
–
9
14
18
–
–
–
–
–
–
32
43
235
261
139
–
244
330
–5
242
120
–
38
43
–
–
–
–
–
90
40
40
40
373
752
40
40
40
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
98
135
–
242
120
–
136
178
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Reflective of 8 months’ service in the year following appointment on 4 January 2021.
2 Reflective of 10 months’ service in the year following appointment on 1 November 2019.
3 Reflective of 11 months’ service in the year following appointment on 1 October 2020.
4 Figures for 2021 are reflective of 5 months’ service in the year.
5 Owing to the anticipated financial performance of the Group, an accrual of £207,000 was made in the Group’s accounts on the expectation that such sum
would be payable in bonus following the end of the financial year to Hugh Pelham. Following Hugh Pelham standing down from the Board after the financial
year end, no bonus was ultimately paid.
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2021 annual bonus pay out
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.
Notwithstanding the Group’s performance, no bonus was paid under either financial or non-financial targets to Hugh Pelham who
stood down from the Board on 11 October 2021.
Financial targets
80% of the bonus was based on Group adjusted profit before tax (“PBT”). Adjusted PBT is calculated as reported PBT after adding back
or deducting any one-off items outside of normal trading that were not anticipated at the time the performance targets were set, such
as acquisition-related costs. The Group is committed to disclosing its performance targets retrospectively save where this is prevented
due to commercial sensitivities. For the year ended 28 August 2021, the PBT targets were set in accordance with the table below.
Threshold target (0%)
£’000
14,629
Basic target (40%)
£’000
15,399
Maximum target (80%)
£’000
16,169
Payments are adjusted on a straight-line basis between the targets set out above, although the Committee determined that no annual
bonus would be payable in the event of a performance which failed to exceed performance in the prior year at £14.938m.
For the year ended 28 August 2021, adjusted PBT for the Group was £16.6m with the result that the maximum annual bonus would be
payable to the Executive Directors under the financial targets.
Strategic targets
Strategic targets, which account for 20% of the bonus, were set at the start of the year. Strategic targets would be assessed independently
of financial performance, but the Committee determined that no more than 50% of the bonus available for the strategic targets would
become payable if financial performance did not at least meet the basic target.
Details of certain key strategic targets set by the Committee are provided in the tables on the following pages.
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Remuneration Committee Report continued
Neil Austin:
Objective
Support
onboarding of
incoming CEO
ERP project
Performance Measure
Performance Outcome
Committee’s assessment of achievement
Support with familiarisation with
Group structure.
Support in relationship building
across subsidiaries, joint venture, and
strategic partners.
Support in review and further
development of Group strategy.
Support with familiarisation of
corporate governance.
Progress Group’s ERP project in line
with approved budget and delivery
programme.
Successful go-live within Carr’s
Billington business during financial
year.
Programme on track for go-live in US
Speciality Agriculture during FY22.
90% achieved
Provided appropriate support during
onboarding and facilitated relationship
building across the Group and with all
key stakeholders.
Provided sound advice and assistance
in connection with the management of
the transition to new management.
Go-live achieved in Carr’s Billington as
planned on 1 September 2021, subject
to certain minor issues to be resolved in
the new financial year.
85% achieved
Programme on track and
implementation within US Speciality
Agriculture expected during FY22.
Board well appraised of progress during
year with regular updates.
Support CEO
in improving
performance in
certain Group
businesses
Personal
development
Keep Board appraised of progress
and seek timely approvals in
connection with required changes.
Costs slightly in excess of approved
budget.
Supporting development of specific
business improvement initiatives.
Appropriate support provided in the
development of business improvement
initiatives.
85% achieved
Continued skills and knowledge
development through completion of
Harvard Business School modules.
Take on operational responsibility for
areas of the Group.
Good personal development in the year,
despite postponement of certain
Harvard Business School modules due
to COVID-19. Plan established for taking
on operational responsibility in FY22.
70% achieved
Committee’s assessment of total opportunity to be awarded:
83%
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Tim Davies:
Objective
CEO handover
Build and develop
market, customer
and competitor
analyses across
the Group in
support of
handover
Performance Measure
Performance Outcome
Committee’s assessment of achievement
Develop handover plan in
conjunction with incoming CEO.
Introduction to key contacts within
and outside the Group.
Develop calendar of key dates to
enable smooth transition.
Development of materials.
Introduction of incoming CEO to
strategy mapping information
together with reference library.
Clear handover plan developed and
well-implemented in a timely manner.
Board satisfied smooth handover
achieved.
100% achieved
Analysis of relevant materials
developed across each Group business
and detailed induction meetings took
place involving third party market
specialists. Programme of discussing
data mapping and works developed.
100% achieved
Committee’s assessment of total opportunity to be awarded:
100%
Hugh Pelham:
Objective
Performance Measure
Performance Outcome
Committee’s assessment of achievement
Group initiatives
Development of Group strategy.
N/A
N/A
Completion of market research and
identification of acquisition targets.
Development of business
improvement plans.
Development of sales training
programme.
Establishment of divisional structure
together with consistent operating,
commercial and financial standards.
N/A
Development of marketing plan.
Development of plan to optimise joint
venture structure.
N/A
Development of plan to enhance
operational efficiencies.
Implementation of consistent
operating standards.
N/A
Completion of key partnering
agreements.
Completion of customer surveys and
development of follow-up plans.
Divisional
initiatives:
Speciality
Agriculture
Divisional
initiatives:
Agricultural
Supplies
Divisional
initiatives:
Engineering
N/A
N/A
N/A
Committee’s assessment of total opportunity to be awarded:
N/A
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Remuneration Committee Report continued
Following the year end, the Committee considered outcomes against the strategic targets. The tables above summarise the
Committee’s assessment of performance against the targets together with the resulting bonus assessed as payable for each of the
Executive Directors.
In addition to the above financial and strategic performance indicators, the Committee retains full discretion when assessing
performance outcomes to consider other factors which may include environmental, social and governance considerations and in
order to avoid formulaic outcomes where these would not be appropriate.
Long Term Incentive Plan
The awards made to Executive Directors in 2018 were subject to average annual adjusted EPS growth targets over the three-year
period ending on 28 August 2021 and from a base adjusted EPS of 15.2p. Threshold vesting was set at 3% average annual growth (at
which level 25% of award shares would vest), with maximum vesting achieved at 10% average annual growth.
The average EPS growth over the three-year period from the base adjusted EPS was -4.4% and, accordingly, 0% of shares under the
long-term awards made to Executive Directors in 2018 vested.
Long Term Incentive Plan awards during the year (audited)
Long-term awards were made to the Executive Directors during the 2020/21 financial year in line with the Directors’ Remuneration
Policy as follows:
Hugh Pelham
Neil Austin
Number of shares
Basis on
which the
award was made
272,3241
200,800
100% of salary2
100% of salary3
Face value
of the award
(£’000)
337,000
251,000
Threshold
vesting
End of performance
period
25%
25%
August 2023
August 2023
1
It was determined that the award relating to 272,324 shares under the Long Term Incentive Plan would lapse without vesting upon Hugh Pelham standing
down from the Board on 11 October 2021.
2 Awarded on 12 January 2021 using a share price of £1.2375.
3 Awarded on 23 November 2020 using a share price of £1.2500.
The performance conditions which govern the vesting of those shares are based on annual average growth in adjusted EPS over a
three-year period. The Committee regularly reviews the performance measures it adopts to incentivise long-term incentives and
considers growth in adjusted EPS to be appropriate because it directly measures the Group’s underlying financial performance and
is visible to shareholders.
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 an 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.
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Total pension entitlements (audited)
The table below provides details of the Executive Directors’ pension benefits:
Neil Austin
Hugh Pelham
Tim Davies
Total
contributions
to DC-type
pension plan
£’000
Cash in lieu
of contributions
to DC-type
pension plan
£’000
–
–
–
10
9
18
Normal
retirement age
67
67
67
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.
Until 31 December 2020, pension contributions and/or cash allowances in the year were capped at 15% of salary for Executive
Directors. From 1 January 2021, such allowances were reduced to 4% of salary for existing Executive Directors to align with the majority
of the Group’s UK workforce. Tim Davies stood down from the Board in January 2021 but continued to receive a cash allowance equal
to 15% of salary until his employment contract terminated on 22 August 2021.
Payments to past Directors (audited)
Tim Davies stood down from the Board at the conclusion of the Group’s AGM on 12 January 2021. His employment contract provided
for 12 months’ notice of termination which expired on 22 August 2021. In accordance with his contract of employment, Tim Davies
continued to receive salary and benefits in respect of the period from 12 January 2021 until 22 August 2021, and a prorated bonus to
reflect the period until 31 January 2021.
Hugh Pelham stood down from the Board on 11 October 2021 with immediate effect receiving a payment of £170,000 in lieu of notice.
Cash in lieu
of pension
contribution
£’000
26
–
Salary
£’000
176
170*
Bonus
£’000
120
–
Total
£’000
322
170
Tim Davies
Hugh Pelham
* Payment made in lieu of notice.
No other payments to past Directors have been made during the year.
Payments for loss of office (audited)
No payments for loss of office have been made to Directors during the year.
Directors’ interests in the shares of the Company (audited information)
A summary of interests in shares and scheme interests of the Directors (as at the date of this report) is given below.
Executive Directors
Neil Austin
Peter Page
Non-Executive Directors
Alistair Wannop
John Worby
Ian Wood
Kristen Eshak Weldon
Total number
of interests
in shares
370,896
90,000
22,610
32,500
30,000
10,000
Vested
LTIP
Unvested
LTIP
SAYE
(unvested without
performance
conditions)
Unvested
deferred bonus
shares
% of salary
held in
shares*
–
–
–
–
–
–
348,659
–
17,647
–
29,891
–
217%
39%
–
–
–
–
–
–
–
–
–
–
–
–
n/a
n/a
n/a
n/a
* Based upon the average share price over the three months of the year ended 28 August 2021.
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Remuneration Committee Report continued
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
Hugh Pelham
2018/19 award
2019/20 award
2020/21 award
188,637
139,591
N/A
199,810
147,859
N/A
N/A
200,800
N/A*
*
It was determined that the award to Hugh Pelham made in the year would lapse without vesting upon him standing down from the Board on 11 October 2021.
Assessing pay and performance
In the table below we summarise the Chief Executive’s single remuneration figure over the past ten years, as well as how variable
pay plans have paid out in relation to the maximum opportunity.
2012
Chris
Holmes
2013
Chris
Holmes
2013
Tim
Davies
2014
Tim
Davies
2015
Tim
Davies
2016
Tim
Davies
2017
Tim
Davies
2018
Tim
Davies
2019
Tim
Davies
2020
Tim
Davies
2021
Tim
Davies4
2021
Hugh
Pelham3
Single figure of total
remuneration
Annual variable element
(actual award versus
maximum opportunity)
Long-term incentive
(vesting versus
maximum opportunity)
573
2861
2832
559
911
531
308
861
764
508
259
244
100% 100% 100% 100% 100%
55%
0% 100% 60.41%
15% 100%
0%
N/A
N/A
N/A
N/A
100% 37.45%
0% 100% 100% 51.64%
N/A
0%
1 Reflective of a six-month period.
2 Reflective of a six-month period.
3 Reflective of an eight-month period.
4 Reflective of a four-month period.
Ten-year historical TSR performance
350
300
250
200
150
100
50
0
Aug 11
Carr’s Group plc
FTSE All-Share Price Index
Source: Thomson Datastream
Aug 12
Aug 13
Aug 14
Aug 15
Aug 16
Aug 17
Aug 18
Aug 19
Aug 20
Aug 21
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Change in Directors’ remuneration
In the table below we show the percentage change in the Directors’ remuneration between the 2020 and 2021 financial years
compared to the other employees.
Hugh Pelham
Neil Austin
Peter Page
John Worby
Ian Wood
Alistair Wannop
Other UK employees
Base pay/fees
Benefits
Annual bonus
16.6%1
16.1%2
2%
2%
2%
2%
2%
N/A
-68%
N/A
N/A
N/A
N/A
0%
N/A
637%
N/A
N/A
N/A
N/A
138%
1 When compared with the remuneration of of the previous CEO as disclosed in the 2019/20 Remuneration Report.
2 As disclosed in the 2019/20 Remuneration Report.
Other UK employees
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 HR Director in relation to employee pay.
The outcome of that exercise, and any changes to employee pay levels, are considered when determining the appropriateness of any
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 25th, 50th and 75th
percentile of all permanent UK employees of the Group.
Total pay (£’000)
Pay ratio
CEO pay
25th percentile
Median
75th percentile
2021
351*
–
2020
508
–
2021
20
18
2020
21
24
2021
27
13
2020
25
17
2021
36
10
2020
36
14
* Annualised figure on the basis of Hugh Pelham’s fixed remuneration.
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 at 28 August 2021.
Carr's Group plc Annual Report and Accounts 2021
81
Governance
Remuneration Committee Report continued
Gender pay gap
The Group’s gender pay gap reporting information was as follows for the snapshot period ending 5 April 2020 (being the most recent
data available). For information on the Group’s approach to equal opportunities and diversity, please see our Responsible Business
Report on page 44 and the Nomination Committee Report on pages 56 to 59:
Difference between men and women
Hourly pay
Bonus
Proportion of people awarded a bonus
Men
Women
Mean
Median
2020
29%
73%
2019
28%
63%
2020
25%
90%
2020
40%
36%
Percentage of men/women in each pay quartiles
Men
Women
Lowest
2020
53%
47%
2019
51%
49%
Q2
2020
64%
36%
2019
67%
33%
Q3
2020
82%
18%
2019
80%
20%
Highest
2020
84%
16%
Relative spend on pay
The table shows the relative importance of spend on pay compared to distributions to shareholders.
2019
25%
63%
2019
48%
35%
2019
86%
14%
Employee costs
Dividends paid to shareholders
2021
£’000
50,796
5,490
2020
£’000
52,218
3,344
% change
-2.7%
+64.2*
* The significant change shown in dividends paid in the year is due to the deferral of the interim dividend announced on 15 April 2020. That interim dividend was
reinstated and declared on 15 July 2020 (and paid following the year end on 2 October 2020). But for the deferral of that interim dividend, the increase in
dividends in the year amounts to 5.3% compared with the prior year.
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External appointments
The Executive Directors did not receive any remuneration in respect of any external appointments in 2020/21.
Implementation of the policy in 2021/22
For 2021/22, 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%. Due to commercial sensitivity, targets will be disclosed retrospectively in next year’s report.
Non-financial targets for Executive Director annual bonuses in the 2021/22 financial year include ESG targets covering the
development of goals for the Group, planning towards achieving those goals, and the determination of measures to track progress.
The Committee intends to grant LTIP awards of 100% of salary to Neil Austin, 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.
Inflationary salary increases were awarded to the Executive Directors effective 1 September 2021, of 2%, which is consistent with the
broader workforce.
External advisors
During the year, external advisers PricewaterhouseCoopers LLP (“PwC”) were engaged to advise the Committee on remuneration
issues, most notably in connection with the preparation of the Directors’ Remuneration Report and in connection with the shareholder
engagement exercise undertaken in early 2021. PwC is a signatory to the Remuneration Consultants’ Code of Conduct, which requires
that its advice be objective and impartial. Total fees paid for the services provided amounted to £5,250. PwC provides other services to
the Company, in relation to accounting. The Committee is satisfied that no conflicts of interest exist in relation to advice provided to the
Committee. It is also satisfied that the members of PwC teams do not have connections with the Company which might impair their
independence.
2021 AGM
At our AGM in January 2021, the Directors’ Remuneration Policy was approved with 99.7% of proxy votes being cast in favour.
The Annual Report on Remuneration was also approved, with 54.5% of proxy votes being cast in favour. Further information on the
shareholder engagement exercise which took place following the AGM is set out on page 65.
By order of the Board
Ian Wood
Remuneration Committee Chair
7 December 2021
Carr's Group plc Annual Report and Accounts 2021
83
Governance
Directors’ Report
The Directors submit their report and the audited accounts of
the Group for the year ended 28 August 2021.
Carr’s Group plc is a public limited company incorporated in
England and Wales and whose shares are listed and traded
on the London Stock Exchange Main Market. Its registered
office is at Old Croft, Stanwix, Carlisle, CA3 9BA.
Results and dividends
A review of the results can be found on pages 18 to 19.
Member
Aggregate interim dividends
Final dividend per share
proposed
2021
2.35p
2020
2.25p
2.65p
2.50p
Subject to approval at the Annual General Meeting, the final
dividend will be paid on 26 January 2022 to members on the
register at the close of business on 17 December 2021.
Shares will become ex-dividend on 16 December 2021.
The Group profit from continuing activities before taxation
was £12.1m (2020: restated £10.9m). After a taxation charge of
£2.4m (2020: restated £1.3m), the profit for the year is £9.7m
(2020: restated £9.6m).
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 28 of 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 Responsible Business Report from page 44.
Environment
The Company’s report on sustainability, and on environmental,
social and governance considerations is set out from page 40.
Political and charitable donations
During the year ended 28 August 2021, the Group contributed
£52,000 (2020: £81,000) in the UK for charitable purposes.
Further details have been included within our Responsible
Business Report on pages 45 to 46. There were no political
donations during the year (2020: £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 29 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 in January 2022, is
limited to £762,843.10 which represented approximately 33%
of the nominal value of the issued share capital on
21 November 2020. 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 in January
2022.
• 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:
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•
•
for general purposes, up to an aggregate nominal amount
of £115,582.25, which represented approximately 5% of the
Company’s issued share capital on 21 November 2020; and
in connection with acquisitions or other capital
development, up to a further aggregate nominal amount of
£115,582.25, which represented approximately 5% of the
Company’s issued share capital on 21 November 2020,
This authority will expire at the end of the Annual General
Meeting to be held in January 2022.
• 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 9,246,582
Ordinary Shares which represented approximately 10% of the
Company’s issued share capital on 21 November 2020. 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%
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 five 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 undertakes 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
in January 2022. 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 64 to 83, are as follows:
Member
H M Pelham
N Austin
P W B Page
A G M Wannop
J G Worby
I Wood
K E Weldon
At 28 August
2021
Ordinary Shares
At 29 August
2020
Ordinary Shares
265,468
370,896
90,000
22,610
32,500
30,000
10,000
N/A
291,729
40,000
22,610
25,000
30,000
N/A
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All the above interests are beneficial. There have been no other
changes to the above interests in the period from 28 August 2021
to 30 November 2021.
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 there 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 in January 2022 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
30 November 2021 in the 93,741,420 Ordinary Shares of the
Company, as required by the Companies Act 2006:
Number of
shares
% of issued share
capital
12,652,870
Member
Heygate and Sons Limited
Nortrust Nominees Limited
(BAEMNL)
5,564,726
BBHISL Nominees Limited (130227) 4,270,000
3,876,254
Chase Nominees Limited (ELUCIT)
3,423,738
Rock (Nominees) Limited
13.5
5.9
4.6
4.1
3.7
Carr's Group plc Annual Report and Accounts 2021
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Governance
Directors’ Report continued
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
accounting standards in conformity with the requirements of
the Companies Act 2006 and applicable law and have
elected to prepare the parent Company financial statements
on the same basis. In addition the Group financial statements
are required under the UK Disclosure Guidance and
Transparency Rules to be prepared in accordance with
International Financial Reporting Standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union.
Under company law the Directors must not approve the
financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group and
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
international accounting standards in conformity with the
requirements of the Companies Act 2006 and, as regards
the group financial statements, International Financial
Reporting Standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union;
• 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.
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.
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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 48 to 49.
Having made enquiries of fellow Directors, each of the Directors
at the date of this report confirms that:
•
they are not aware of any relevant audit information of which
the Company’s auditors are unaware; and
they have taken all the steps that they ought to have taken as a
Director in order to make themself aware of any relevant audit
information and to establish that the Company’s auditors are
aware of that information.
•
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 Board
Matthew Ratcliffe
Company Secretary
7 December 2021
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Carr's Group plc Annual Report and Accounts 2021
87
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 28 August 2021 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 28 August 2021
and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006;
the parent Company financial statements have been properly prepared in accordance with international accounting standards in
conformity with the requirements of, 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 to the extent applicable.
•
•
•
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
three financial years ended 28 August 2021. 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:
Group financial statements
as a whole
£1.7m (2020: £1.5m)
0.4% of Group revenue
(2020: 0.4% of Group revenue)
Coverage
87% (2020: 93%) of total profits and losses that made up Group profit before tax
Key audit matters
Recurring risks
Contract risk in Engineering on over time contracts
Provision for trade receivables in Agriculture
Parent Company: Valuation of Carr’s Group defined benefit pension obligation
New: Valuation of the recoverable amount of certain cash generating units
vs 2020
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, 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 decreasing order of audit significance, 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.
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The risk
Our response
Contract risk in
Engineering on over time
contracts
Contract revenue over
time (£36.4m; 2020:
£34.8m)
Refer to page 61 (Audit
Committee Report), pages
105 to 106 and 112
(accounting policy) and
pages 115 and 132 (financial
disclosures).
Subjective estimate
For a significant proportion of its
contracts in the Engineering division,
the Group recognises revenue and
profit over time. Depending on the
nature of the performance obligation,
the Group measures progress based
either on the input method (by
considering the proportion of contract
costs incurred relative to the estimated
total forecast costs at completion), or
the output basis (with reference to a
valuation of contract work performed to
date).
The recognition of contract revenue
and profit over time for performance
obligations measured on the input basis
is dependent upon estimates in relation
to the forecast total costs of each
performance obligation, which inform
the percentage of completion
calculation.
The recognition of contract revenue
and profit over time is also dependent
upon estimates in relation to forecast
total revenues, including an assessment
of contract revenue variations, which
should be recognised only when
evidence supports the conclusion that
it is highly probable that a significant
reversal of revenue recognised will not
occur.
For certain contracts, typically those of
a bespoke and/or complex nature,
estimates of forecast costs can include
a high degree of estimation uncertainty.
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 for certain ongoing
contracts which are not substantially
complete, involves a high degree of
estimation uncertainty, with a potential
range of reasonable outcomes greater
than our materiality for the financial
statements as a whole.
Our procedures included:
Contracts were selected for substantive audit procedures
based on quantitative factors, such as financial significance
and stage of completion, and qualitative factors, such as
bespoke and/or complex contracts and contracts under
increased management scrutiny, that we considered to be
indicative of risk. Our procedures for the contracts selected
included:
• Contract documentation – We inspected the contract
documents and challenged the identification of
performance obligations, contract clauses and the
method of revenue recognition in accordance with IFRS
15.
• Challenge key judgements – We obtained the latest
forecasts of contract revenues and costs, and challenged
the Group’s estimates in respect of contract forecasts,
costs to complete and the recoverability of contract
assets via agreement to third-party certifications,
confirmations and other documentation, challenge of
senior operational and financial management, and with
reference to our own expertise. We also performed
corroborative inquiries of the Group’s in-house legal
counsel.
• Site visits – For a selection of contracts and locations,
performing site visits to inspect the job progress around
the year-end point, and to challenge the stage of
completion and forecast costs to complete through
observation and discussion with key personnel.
Involvement of specialists – For one contract in the
Group with a higher degree of complexity, we involved
our own quantity surveyor specialists to challenge the
underlying contract estimates and judgements compared
to our knowledge of the business and industry norms.
Independent re-performance – We recalculated
progress towards satisfaction of performance obligations
to assess the expected revenue and profit recognition
and compared this to the amounts recorded.
•
•
• Tests of detail – We inspected correspondence with
customers and third parties, including in instances where
contract variations had arisen, to challenge the revenue
and costs recorded.
• Historical comparisons – We assessed the Group’s
historical contract forecasting accuracy by comparing
prior year forecasts for certain contracts with the actual
margin achieved when the contracts completed during
the current year.
• 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 revenue and profit margin recognised on
over time contracts to be acceptable (2020 result:
acceptable).
Carr's Group plc Annual Report and Accounts 2021
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Independent Auditor’s Report continued
to the Members of Carr’s Group plc
The risk
Our response
Valuation of the
recoverable amount of
certain cash generating
units
Goodwill: £31.6m; with the
specific risk being
associated with the
Wälischmiller Engineering
GmbH (£5.7m), NuVision
Engineering Inc. (£8.0m)
and Carr’s Engineering Ltd
– Chirton Profit Centre
(£2.5m) cash generating
units.
Refer to page 61 (Audit
Committee Report), pages
107 and 112 (accounting
policy) and pages 121 to 122
(financial disclosures).
Provision for trade
receivables in Agriculture
Trade receivables
(£58.0m; 2020: £49.1m)
Provision
(£2.0m; 2020: £1.9m)
Refer to page 61 (Audit
Committee Report), page
112 (accounting policy) and
pages 133 to 134 (financial
disclosures).
Forecast-based assessment
The carrying value of goodwill is
significant for the Group. The estimated
recoverable amount of the goodwill for
each of the Group’s cash generating units,
assessed with reference to value in use
calculations, is subjective due to the
inherent uncertainty involved in
forecasting and discounting future cash
flows.
The impairment tests for the Wälischmiller
Engineering GmbH, NuVision Engineering
Inc. and Carr’s Engineering Ltd – Chirton
Profit Centre cash generating units indicates
that the headroom in the impairment tests
for these cash generating units is more
sensitive to small changes in the
assumptions and estimates applied in the
value in use calculations. The risk is greater
in the Engineering division which is more
susceptible to the potential impacts of
COVID-19 on trading performance.
The effect of these matters is that, as part
of our risk assessment, we determined
that the value in use of goodwill for the
Wälischmiller Engineering GmbH,
NuVision Engineering Inc. and Carr’s
Engineering Ltd – Chirton Profit Centre
cash generating units has a high degree
of estimation uncertainty, with a potential
range of reasonable outcomes greater
than our materiality for the financial
statements as a whole.
The financial statements (note 11) disclose
the sensitivity estimated by the Group.
Subjective estimate
There are material amounts of trade
receivables within the Carrs Billington
Agriculture (Sales) component, where
historically there has been a slower
collection pattern and for which the
predominant customer base of UK
farmers may be subject to continued
economic uncertainties caused by the
ongoing impacts of COVID-19 and Brexit.
The associated provision for trade
receivables involves estimation
uncertainty, which increases the risk of
bias in forming the accounting estimate.
The effect of these matters is that,
as part of our risk assessment, we
determined that the provision for
trade receivables has a high degree of
estimation uncertainty, with a potential
range of reasonable outcomes greater
than our materiality for the financial
statements as a whole.
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Our procedures included:
• Assessing methodology – We obtained the
discounted value in use cash flow models and
assessed the methodology, principles and integrity of
each model.
• Benchmarking assumptions – We compared the
Group’s assumptions to externally derived data in
relation to key inputs such as projected economic
growth and discount rates.
• Historical comparisons – We assessed the Group’s
historical forecasting accuracy by comparing forecasts
from prior years with actual results in those years.
• Sensitivity analysis – We performed sensitivity and
breakeven analysis on the key forecast cashflows,
long-term growth and discount rate assumptions.
• Assessing transparency – We assessed whether the
Group’s disclosures about the sensitivity of the
outcome of the impairment assessment to changes in
key assumptions reflected the risks inherent in the
valuation of goodwill.
Our results
We found the Group’s conclusions in respect of the
valuation of the recoverable amount of the Wälischmiller
Engineering GmbH, NuVision Engineering Inc. and Carr’s
Engineering Ltd – Chirton Profit Centre cash generating
units to be acceptable.
Our procedures included:
• Assessing assumptions – We assessed
management’s assumptions behind the provision
against trade receivables and related expected credit
losses estimate calculations, and tested the accuracy
of the ageing calculations in order to recalculate
management’s provision.
• Historical comparisons – We assessed historical trade
receivable collection patterns in the Carrs Billington
Agriculture (Sales) component and compared these to
current trends.
• Tests of detail – We assessed the amount of cash
received against trade receivables at year-end,
investigating significant, overdue amounts where cash
has not been received and for which no provision has
been recognised.
• Assessing transparency – We assessed the adequacy
of the Group’s disclosures about the degree of
estimation involved in arriving at the provision.
Our results
We found the provision for trade receivables to be
acceptable (2020 result: acceptable).
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The risk
Our response
Our procedures included:
• 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 (2020 result: acceptable).
Parent Company:
Valuation of Carr’s Group
Pension Scheme defined
benefit pension
obligation
(£66.3m; 2020: £65.8m)
Subjective valuation
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 of the Company.
Refer to page 61 (Audit
Committee Report), pages
106 and 112 (accounting
policy) and pages 142 to
147 (financial disclosures).
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 28) disclose
the sensitivities estimated by the
Company.
For each of the key audit matters reported above, we performed the tests above rather than seeking to rely on any of the Group’s
controls because the nature of the balance is such that we would expect to obtain audit evidence primarily through the detailed
procedures described.
We continue to perform procedures over the impact of uncertainties due to the UK exiting the European Union on our audit, and going
concern. However, following a reduction in the levels of uncertainty in respect of the Brexit and COVID-19 related impacts on the
Group, we have not assessed either of these areas as one of the most significant risks in our current year audit and, therefore, they are
not separately identified in our report this year.
Carr's Group plc Annual Report and Accounts 2021
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Group revenue
£417.3m
(2020: £395.6m)
Group materiality
£1,700,000
(2020: £1,500,000)
£1,700,000
Whole financial
statements materiality
(2020: £1,500,000)
£1,300,000
Range of materiality
at 11 components
£107,000 to £1,300,000
(2020: £110,000 to
£900,000)
£59,500
Misstatements reported
to the Audit Committee
(2020: £52,500)
Revenue
Group materiality
Group revenue
Total profits and losses that made
up Group profit before tax
1
13
7
2
87%
(2020: 93%)
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1 1
2
99%
(2020: 100%)
98
98
Group total assets
4 1
13
99%
(2020: 99%)
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Full scope for Group audit purposes 2021
Specified risk-focused audit procedures 2021
Full scope for Group audit purposes 2020
Specified risk-focused audit procedures 2020
Residual components
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 £1,700,000 (2020: £1,500,000), determined with reference to a
benchmark of Group revenue, of which it represents 0.4% (2020:
0.4%). We consider Group revenue to be the most appropriate
benchmark as it provides a more stable measure year on year
than Group profit before tax, and is reflective of the size and
complexity of the Group.
Materiality for the parent Company financial statements as a
whole was set at £800,000 (2020: £600,000), determined with
reference to a benchmark of Company total assets, of which it
represents 0.9% (2020: 0.7%).
In line with our audit methodology, our procedures on individual
account balances and disclosures were performed to a lower
threshold, performance materiality, so as to reduce to an
acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a material
amount across the financial statements as a whole.
Performance materiality was set at 75% (2020: 65%) of materiality
for the financial statements as a whole, which equates to
£1,275,000 (2020: £975,000) for the Group and £600,000 (2020:
£390,000) for the parent Company. We applied this percentage in
our determination of performance materiality because we did not
identify any factors indicating an elevated level of risk.
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £59,500 (2020:
£52,500), in addition to other identified misstatements that
warranted reporting on qualitative grounds.
Of the Group’s 30 (2020: 53 reporting components), we subjected
9 (2020: 9) to full scope audits for Group purposes and 2 (2020: 2)
to specified risk-focused audit procedures. 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. We conducted reviews of financial
information (including enquiry) at these non-significant
components to re-examine our assessment that there were no
significant risks of material misstatement.
The components within the scope of our work accounted for the
percentages illustrated opposite.
The remaining 1% (2020: 0%) of Group revenue, 13% (2020: 7%) of
Group profit before tax and 1% (2020: 1%) of total Group assets is
represented by 14 (2020: 14) reporting components, none of which
individually represented more than 3% (2020: 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 £107,000 to £1,300,000
(2020: £110,000 to £900,000), having regard to the mix of size and
risk profile of the Group across the components.
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The work on 2 of the 9 components (2020: 2 of the 9 components)
was performed by component auditors and the rest, including the
audit of the parent Company, was performed by the Group team.
account of reasonably possible (but not unrealistic) adverse
effects that could arise from these risks individually and
collectively;
The Group team held video and telephone conference meetings
with the component auditors to assess the audit risks and
strategy. 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.
4. Going concern
The Directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the Group
or the Company or to cease their operations, and as they have
concluded that the Group’s and the Company’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”).
We used our knowledge of the Group, its industry, and the
general economic environment to identify the inherent risks to its
business model and analysed how those risks might affect the
Group’s and Company’s financial resources or ability to continue
operations over the going concern period. The risks that we
considered most likely to adversely affect the Group’s and
Company’s available financial resources and/or metrics relevant
to debt covenants over this period were:
•
the potential impacts of COVID-19 on the Group’s customer
base; and
the potential impacts of agricultural reform post-Brexit on the
Group’s UK Agriculture customer base.
•
We also considered less predictable but realistic second order
impacts, such as reduced demand from key customers or a
significant financial deterioration in a long-term contract in
Engineering, which could result in a rapid reduction of available
financial resources.
We considered whether these risks could plausibly affect the
liquidity or covenant compliance in the going concern period by
assessing the Directors’ sensitivities over the level of available
financial resources and covenant thresholds indicated by the
Group’s financial forecasts taking account of severe, but plausible
adverse effects that could arise from these risks individually and
collectively.
Our procedures also included:
• Assessing 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;
• Critically assessing assumptions in the Directors’ initial
downside scenarios relevant to liquidity and covenant
compliance, in particular in relation to profitability, by
comparing to historical trends and our knowledge of the entity
and the sector in which it operates;
• Considering sensitivities over the level of available financial
resources indicated by the Group’s financial forecasts taking
• Assessing 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
any related covenant requirements and the evidence available
regarding whether they will be met; and
• Assessing the Group’s historical forecasting accuracy by
comparing forecasts from prior years with actual results in
those years.
We considered whether the going concern disclosure in the
principal accounting policies on page 104 gives a full and
accurate description of the Directors’ assessment of going
concern, including the identified risks and, dependencies, and
related sensitivities. We assessed the completeness of the going
concern disclosure.
Our conclusions based on this work:
• we consider that the Directors’ use of the going concern basis
of accounting in the preparation of the financial statements is
appropriate;
• we have not identified, and concur with the Directors’
assessment that there is not, a material uncertainty related to
events or conditions that, individually or collectively, may cast
significant doubt on the Group’s or Company’s ability to
continue as a going concern for the going concern period;
• we have nothing material to add or draw attention to in relation
to the Directors’ statement in the principal accounting policies
on page 104 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 the going concern period, and we found the going
concern disclosure on page 104 to be acceptable; and
the related statement under the Listing Rules set out on page
37 is materially consistent with the financial statements and
our audit knowledge.
•
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 above conclusions are not a guarantee that
the Group or the Company will continue in operation.
5. Fraud and breaches of laws and regulations – ability
to detect
Identifying and responding to risks of material misstatement
due to fraud
To identify risks of material misstatement due to fraud (“fraud
risks”) we assessed events or conditions that could indicate an
incentive or pressure to commit fraud or provide an opportunity to
commit fraud. Our risk assessment procedures included:
• Enquiring of Directors, the Audit Committee, internal audit and
the Group’s in-house legal counsel, and inspection of policy
documentation as to the Group’s high-level policies and
procedures to prevent and detect fraud, including the internal
audit function, and the Group’s channel for “whistleblowing”, as
well as whether they have knowledge of any actual, suspected
or alleged fraud;
Carr's Group plc Annual Report and Accounts 2021
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• Reading Board and Remuneration Committee meeting minutes;
• Considering remuneration incentive schemes and
management the policies and procedures regarding compliance
with laws and regulations.
performance targets for management and the Directors,
including the adjusted profit before tax target for management
remuneration; and
• Using analytical procedures to identify any unusual or
unexpected relationships.
As the Group is regulated, our assessment of risks involved
gaining an understanding of the control environment including
the entity’s procedures for complying with regulatory
requirements.
We communicated identified fraud risks throughout the audit
team and remained alert to any indications of fraud throughout
the audit. This included communication from the Group to full
scope component audit teams of relevant fraud risks identified at
the Group level and request to full scope component audit teams
to report to the Group audit team any instances of fraud that
could give rise to a material misstatement at Group level.
As required by auditing standards, and taking into account
possible pressures to meet profit targets, we perform procedures
to address the risk of management override of controls and the
risk of fraudulent revenue recognition, in particular the risk that
inappropriate contract estimates or judgements result in an over
or understatement of revenue on over time contracts in the
Engineering division, the risk that Group and component
management may be in a position to make inappropriate
accounting entries, and the risk of bias in accounting estimates
and judgements such as for cost to complete estimates for
contracts in Engineering.
We also identified a fraud risk related to the risk of bias in the
accounting estimates relating to provisions against trade
receivables in Agriculture, in response to possible pressures to
meet profit targets.
Further detail in respect of the contract risk in Engineering on
over time contracts, and the provision for trade receivables in
Agriculture, is set out in the key audit matter disclosures in section
2 of this report.
In determining the audit procedures we took into account the
results of our evaluation and testing of the operating
effectiveness of some of the Group-wide fraud risk management
controls.
We also performed procedures including:
•
Identifying journal entries to test for all full scope components
based on risk criteria and comparing the identified entries to
supporting documentation. These included unexpected
journal pairings for revenue, pension scheme and treasury
related journals.
• Assessing significant accounting estimates for bias.
We discussed with the Audit Committee and those charged with
governance matters related to actual or suspected fraud, for
which disclosure is not necessary, and considered any
implications for our audit.
Identifying and responding to risks of material misstatement
due to non-compliance with laws and regulations
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 discussed with the Directors and other
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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 full-scope component audit teams of relevant
laws and regulations identified at the Group level, and a request
for full scope component auditors to report to the Group team
any instances of non-compliance with laws and regulations that
could give rise to a material misstatement at Group level.
The potential effect of these laws and regulations on the financial
statements varies considerably.
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, taxation legislation and pensions 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 and
corruption, employment law, data protection regulations and
trading standards, 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. Therefore if a breach of
operational regulations is not disclosed to us or evident from
relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches of
law or regulation
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 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 fraud, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal controls. Our audit procedures are designed to detect
material misstatement. We are not responsible for preventing
non-compliance or fraud and cannot be expected to detect
non-compliance with all laws and regulations.
6. We have nothing to report on the other information in
the Annual Report and Accounts
The Directors are responsible for the other information presented
in the Annual Report and Accounts 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 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 judgements 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.
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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 emerging and principal risks and longer-term
viability
We are required to perform procedures to identify whether there
is a material inconsistency between the Directors’ disclosures in
respect of emerging and principal risks and the viability
statement, and the financial statements and our audit knowledge.
•
•
Based on those procedures, we have nothing material to add or
draw attention to in relation to:
•
the Directors’ confirmation within the Viability Statement (page
37) that they have carried out a robust assessment of the
emerging and 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 how
emerging risks are identified, 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.
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Corporate governance disclosures
We are required to perform procedures to identify whether there
is a material inconsistency between the Directors’ corporate
governance disclosures and the financial statements and our
audit knowledge.
Based on those procedures, we have concluded that each of the
following is materially consistent with the financial statements
and our audit knowledge:
•
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;
the section of the Annual Report describing the work of the
Audit Committee, including the significant issues that the Audit
Committee considered in relation to the financial statements,
and how these issues were addressed; and
the section of the Annual Report that describes the review of
the effectiveness of the Group’s risk management and internal
control systems.
•
•
We are required to review the part of the Corporate Governance
Report relating to the Group’s compliance with the provisions of
the UK Corporate Governance Code specified by the Listing
Rules for our review, and to report to you if a corporate
governance statement has not been prepared by the Company.
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 the 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 the UK
Corporate Governance Code has been prepared in accordance
with relevant rules of the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority.
We are also required to review the Viability Statement, set out on
page 37 under the Listing Rules. Based on the above procedures,
we have concluded that the above disclosures are materially
consistent with the financial statements and our audit knowledge.
Carr's Group plc Annual Report and Accounts 2021
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7. 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
9. 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.
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
7 December 2021
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.
8. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 86, 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 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 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.
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Consolidated Income Statement
For the year ended 28 August 2021
Continuing operations
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Adjusted1 share of post-tax results of associate
Adjusting items
Share of post-tax results of associate
Share of post-tax results of joint ventures
Impairment of joint venture (adjusting item)
Adjusted1 operating profit
Adjusting items
Operating profit
Finance income
Finance costs
Adjusted1 profit before taxation
Adjusting items
Profit before taxation
Taxation
Adjusted1 profit for the year
Adjusting items
Profit for the year
Profit attributable to:
Equity shareholders
Non-controlling interests
Earnings per ordinary share (pence)
Basic
Diluted
Adjusted1
2021
£’000
2020
(restated)2
£’000
417,254
(365,174)
395,630
(343,381)
52,080
(18,434)
(20,784)
52,249
(19,507)
(22,901)
1,525
(694)
831
1,421
(2,090)
17,585
(4,561)
13,024
260
(1,232)
16,613
(4,561)
12,052
(2,400)
14,675
(5,023)
1,191
(202)
989
1,442
—
16,293
(4,021)
12,272
313
(1,656)
14,950
(4,021)
10,929
(1,316)
12,727
(3,114)
9,652
9,613
7,712
1,940
9,652
8.3
8.1
13.2
8,422
1,191
9,613
9.1
9.0
12.0
Notes
2,3
5
5
2
5
2,4
7
7
2
5
2
8
5
10
10
10
1 Adjusted results are consistent with how business performance is measured internally and is presented to aid comparability of performance. Adjusting items are
disclosed in note 5. Adjustments made to calculate adjusted earnings per share can be found in note 10. An alternative performance measures glossary can be
found on pages 159 to 160.
2 See note 36 for an explanation of the prior year restatement recognised in relation to the adoption of the IFRIC agenda decision on cloud configuration and
customisation costs.
Carr’s Group plc Annual Report and Accounts 2021
97
Consolidated and Company Statements
of Comprehensive Income
For the year ended 28 August 2021
Profit for the year
Other comprehensive (expense)/income
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation losses arising on translation of overseas
subsidiaries
Net investment hedges
Taxation (charge)/credit on net investment hedges
Items that will not be reclassified subsequently to profit or loss:
Actuarial gains on retirement benefit asset:
– Group
– Share of associate
Taxation charge on actuarial gains on retirement benefit asset:
– Group
– Share of associate
Other comprehensive (expense)/income for the year, net of tax
Total comprehensive income for the year
Total comprehensive income attributable to:
Equity shareholders
Non-controlling interests
Notes
Group
Company
2021
£’000
9,652
2020
(restated)1
£’000
9,613
2021
£’000
6,261
2020
(restated)1
£’000
6,773
—
—
—
142
—
(27)
—
115
(1,781)
165
(31)
(2,552)
(54)
10
—
—
—
28
19
1,205
578
(301)
(144)
(309)
9,343
7,403
1,940
9,343
142
408
1,205
—
(27)
(96)
(2,169)
7,444
6,253
1,191
7,444
(301)
—
904
7,165
6,888
7,165
—
7,165
6,888
—
6,888
1
See note 36 for an explanation of the prior year restatement recognised in relation to the adoption of the IFRIC agenda decision on cloud configuration and
customisation costs.
98
Carr’s Group plc Annual Report and Accounts 2021
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a
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m
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n
t
s
Consolidated and Company Balance Sheets
As at 28 August 2021
(Company Number 00098221)
Assets
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Right-of-use assets
Investment property
Investment in subsidiary undertakings
Investment in associate
Interest in joint ventures
Other investments
Contract assets
Financial assets
– Non-current receivables
Retirement benefit asset
Deferred tax asset
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
– Leases
Contract liabilities
Trade and other payables
Current tax liabilities
Non-current liabilities
Financial liabilities
– Borrowings
– Leases
Deferred tax liabilities
Other non-current liabilities
Total liabilities
Net assets
Notes
11
11
12
13
14
15,18
15,16
15,17
15
21
22
28
20
21
22
23
27
24
26
13
21
25
26
13
19
25
Group
2020
(restated)1
£’000
32,041
6,365
38,259
14,856
158
—
14,042
10,551
73
—
20
8,037
—
2021
£’000
31,560
5,151
36,198
16,777
152
—
14,268
9,482
72
312
20
9,371
—
2019
(restated)1
£’000
2021
£’000
Company
2020
(restated)1
£’000
2019
(restated)1
£’000
32,877
7,878
37,325
16,086
164
—
13,329
9,671
76
—
—
—
85
346
—
32,461
245
172
—
—
22
7,769
410
33,494
9,371
—
—
—
118
457
—
32,568
245
272
—
—
34,735
8,037
—
—
—
158
267
—
26,538
245
272
—
—
16,413
7,769
285
123,363
124,402
125,607
76,174
76,432
51,947
43,226
7,202
61,735
2,669
—
24,309
40,961
8,114
51,686
2,068
46,270
9,466
55,573
—
3
17,571
—
28,649
—
—
2,279
2,586
—
11,063
—
—
2,617
2,017
—
7,984
—
—
36,185
911
—
6,778
139,141
120,403
139,958
15,928
12,618
43,874
262,504
244,805
265,565
92,102
89,050
95,821
S
h
a
r
e
h
o
d
e
r
l
I
n
f
o
r
m
a
t
i
o
n
(11,113)
(2,967)
(2,447)
(69,526)
(42)
(11,420)
(2,778)
(1,061)
(55,522)
(33)
(22,673)
(2,801)
(1,269)
(62,424)
(736)
(2,341)
(98)
—
(2,395)
—
(2,450)
(97)
—
(1,660)
—
(7,806)
(95)
—
(2,533)
—
(86,095)
(70,814)
(89,903)
(4,834)
(4,207)
(10,434)
(23,159)
(12,458)
(5,503)
(55)
(25,021)
(11,171)
(4,783)
(1,385)
(26,846)
(12,777)
(4,721)
(2,999)
(21,906)
(250)
(2,201)
—
(22,947)
(354)
(1,365)
—
(26,846)
(180)
(1,320)
—
(41,175)
(42,360)
(47,343)
(24,357)
(24,666)
(28,346)
(127,270)
(113,174)
(137,246)
(29,191)
(28,873)
(38,780)
135,234
131,631
128,319
62,911
60,177
57,041
1 See note 36 for an explanation of the prior year restatement recognised in relation to the adoption of the IFRIC agenda decision on cloud configuration and
customisation costs.
Carr’s Group plc Annual Report and Accounts 2021
99
Consolidated and Company Balance Sheets continued
As at 28 August 2021
(Company Number 00098221)
Shareholders’ equity
Share capital
Share premium
Other reserves
Retained earnings:
Notes
29
2021
£’000
2,343
10,155
2,578
Group
2020
(restated)1
£’000
2019
(restated)1
£’000
2,312
9,176
4,436
2,299
9,165
7,922
Company
2020
(restated)1
£’000
2019
(restated)1
£’000
2,312
9,176
780
2,299
9,165
1,693
2021
£’000
2,343
10,155
536
At the beginning of the year
Profit attributable to the equity shareholders
Other changes in retained earnings
98,907
7,712
(3,613)
92,749
8,422
(2,264)
86,659
12,049
(5,959)
47,909
6,261
(4,293)
43,884
6,773
(2,748)
42,357
6,729
(5,202)
Total shareholders’ equity
Non-controlling interests
Total equity
103,006
98,907
92,749
49,877
47,909
43,884
118,082
17,152
114,831
16,800
112,135
16,184
62,911
—
60,177
—
57,041
—
135,234
131,631
128,319
62,911
60,177
57,041
1
See note 36 for an explanation of the prior year restatement recognised in relation to the adoption of the IFRIC agenda decision on cloud configuration and
customisation costs.
The financial statements set out on pages 97 to 156 were approved by the Board on 7 December 2021 and signed on its behalf by:
Peter Page
Neil Austin
100
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Consolidated Statement of Changes in Equity
For the year ended 28 August 2021
As previously reported at
31 August 2019
Prior year adjustment1
At 1 September 2019
(restated)1
Profit for the year (restated)1
Other comprehensive
(expense)/income
Total comprehensive
(expense)/income
(restated)1
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
Transfer
At 29 August 2020
(restated)1
As previously reported at
29 August 2020
Prior year adjustment1
At 30 August 2020
(restated)1
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
Purchase of own shares
held in trust
Transfer
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
2,299
—
9,165
—
2,299
9,165
—
—
—
—
—
—
13
—
—
—
—
—
—
—
—
11
—
—
—
—
—
—
—
—
—
—
—
—
(58)
13
1,577
—
6,146
—
199
—
93,933
(1,184)
113,319
(1,184)
16,229 129,548
(1,229)
(45)
1,577
6,146
199
92,749
112,135
16,184
128,319
—
—
—
—
—
(2,596)
(2,596)
—
(843)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(2)
8,422
8,422
1,191
9,613
427
(2,169)
—
(2,169)
8,849
(3,344)
6,253
(3,344)
1,191
(588)
7,444
(3,932)
691
(27)
—
—
(11)
(152)
(27)
24
(58)
—
15
(2)
—
—
—
(137)
(29)
24
(58)
—
2,312
9,176
(45)
734
3,550
197
98,907
114,831
16,800
131,631
2,312
—
9,176
—
(45)
—
734
—
3,550
—
197
—
101,202
(2,295)
117,126
(2,295)
17,043
(243)
134,169
(2,538)
2,312
9,176
(45)
734
3,550
197
98,907
114,831
16,800
131,631
—
—
—
—
—
—
31
—
—
—
—
—
—
—
—
979
—
—
—
—
—
—
—
—
—
(110)
155
—
—
—
—
—
—
(1,647)
(1,647)
—
(254)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(2)
7,712
7,712
1,940
9,652
1,338
(309)
—
(309)
9,050
(5,490)
7,403
(5,490)
1,940
(1,647)
9,343
(7,137)
660
406
58
464
32
—
—
(153)
32
1,010
(110)
—
1
—
—
—
33
1,010
(110)
—
480
1,903
195
103,006
118,082
17,152 135,234
At 28 August 2021
2,343
10,155
1
See note 36 for an explanation of the prior year restatement recognised in relation to the adoption of the IFRIC agenda decision on cloud configuration and
customisation costs.
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 £660,000 (2020: £691,000) 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.
Carr’s Group plc Annual Report and Accounts 2021
101
Company Statement of Changes in Equity
For the year ended 28 August 2021
As previously reported at 31 August 2019
Prior year adjustment1
At 1 September 2019 (restated)1
Profit for the year (restated)1
Other comprehensive income
Total comprehensive income (restated)1
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
Transfer
At 29 August 2020 (restated)1
As previously reported at 29 August 2020
Prior year adjustment1
At 30 August 2020 (restated)1
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
Purchase of own shares held in trust
Transfer
Share
Capital
£’000
2,299
—
2,299
Share
Premium
£’000
9,165
—
9,165
—
—
—
—
—
—
13
—
—
2,312
2,312
—
2,312
—
—
—
—
—
—
31
—
—
—
—
—
—
—
—
11
—
—
9,176
9,176
—
9,176
—
—
—
—
—
—
979
—
—
At 28 August 2021
2,343
10,155
Treasury
Share
Reserve
£’000
Equity
Compensation
Reserve
£’000
Retained
Earnings
£’000
44,189
(305)
Total
Equity
£’000
57,346
(305)
43,884
57,041
6,773
115
6,888
(3,344)
519
(25)
—
—
(13)
6,773
115
6,888
(3,344)
(349)
(25)
24
(58)
—
47,909
60,177
48,180
(271)
60,448
(271)
47,909
60,177
6,261
904
7,165
(5,490)
422
26
—
—
(155)
6,261
904
7,165
(5,490)
133
26
1,010
(110)
—
1,693
—
1,693
—
—
—
—
(868)
—
—
—
—
825
825
—
825
—
—
—
—
(289)
—
—
—
—
536
49,877
62,911
—
—
—
—
—
—
—
—
—
—
(58)
13
(45)
(45)
—
(45)
—
—
—
—
—
—
—
(110)
155
—
1
See note 36 for an explanation of the prior year restatement recognised in relation to the adoption of the IFRIC agenda decision on cloud configuration and
customisation costs.
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 £422,000 (2020: £519,000) was transferred from the equity compensation reserve to retained earnings and £331,000 (2020:
£212,000) was transferred from the equity compensation reserve to investment in subsidiaries in respect of options exercised in
the year.
102
Carr’s Group plc Annual Report and Accounts 2021
Consolidated and Company Statements
of Cash Flows
For the year ended 28 August 2021
Cash flows from operating activities
Cash generated from/(used in) continuing operations
Interest received
Interest paid
Tax paid
Notes
31
Group
Company
2021
£’000
2020
(restated)1
£’000
22,163
109
(1,244)
(2,131)
21,227
176
(1,696)
(3,059)
2021
£’000
(1,909)
1,443
(484)
—
2020
(restated)1
£’000
(2,520)
1,774
(729)
(571)
Net cash generated from/(used in) operating activities
18,897
16,648
(950)
(2,046)
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
Cash flows from investing activities
Contingent/deferred consideration paid
Dividends received from subsidiaries
Receipt of loans to subsidiaries
Dividend received from associate and joint ventures
Other loans
Purchase of intangible assets
Proceeds from sale of property, plant and equipment
Purchase of property, plant and equipment and right-of-use assets
Purchase of own shares held in trust
(1,077)
—
—
1,898
—
(107)
396
(3,850)
—
(2,659)
—
—
701
718
(47)
421
(6,569)
(58)
Net cash (used in)/generated from investing activities
(2,740)
(7,493)
—
8,248
477
1,039
—
—
—
—
—
9,764
1,010
(110)
10,000
(8,500)
(98)
(2,400)
(110)
—
(5,490)
—
—
8,856
1,130
588
—
—
—
—
(58)
10,516
24
—
2,500
(4,000)
(114)
(2,400)
110
—
(3,344)
—
i
i
F
n
a
n
c
a
l
S
t
a
t
e
m
e
n
t
s
S
h
a
r
e
h
o
d
e
r
l
I
n
f
o
r
m
a
t
i
o
n
29
9
1,010
(110)
11,526
(8,500)
(3,252)
(2,400)
—
2,394
(5,490)
(1,647)
24
—
5,889
(4,000)
(3,171)
(2,459)
—
(14,508)
(3,344)
(588)
Cash flows from financing activities
Proceeds from issue of ordinary share capital
Purchase of own shares held in trust
New financing and draw downs on RCF
Repayment of RCF draw downs
Lease principal repayments
Repayment of borrowings
(Repayment)/receipt of loans from subsidiaries
Increase/(decrease) in other borrowings
Dividends paid to shareholders
Dividends paid to related party
Net cash used in financing activities
Effects of exchange rate changes
(6,469)
(22,157)
(5,698)
(7,224)
(296)
(989)
(37)
(40)
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
9,392
10,304
(13,991)
24,295
Cash and cash equivalents at end of the year
24
19,696
10,304
3,079
7,984
11,063
1,206
6,778
7,984
1
See note 36 for an explanation of the prior year restatement recognised in relation to the adoption of the IFRIC agenda decision on cloud configuration and
customisation costs.
Carr’s Group plc Annual Report and Accounts 2021
103
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”) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and in accordance
with international accounting standards in conformity with the requirements of the Companies Act 2006.
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 with the exception of the change in accounting policy, following the IFRIC agenda
decision published in April 2021, for costs incurred in relation to the configuration and customisation of the Group's, and associate's,
recently implemented cloud hosted ERP system. Further details of the IFRIC agenda decision and the prior year restatement can be
found in note 36.
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 financial statements have been prepared on a going concern basis which the Directors consider to be appropriate for the following
reasons.
The Directors have reviewed the Group’s operational forecasts and projections for the three years to 31 August 2024 as used for the
viability assessment, 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 for a period of at least 12 months from approval of these financial statements (“the going concern
period”). The Group has operated within all its banking covenants throughout the year. In addition, the Group’s main banking facility is in
place until November 2023 and an invoice discounting facility is in place until August 2023.
For the purpose of assessing the appropriateness of the preparation of the Group’s accounts on a going concern basis, the Directors
have prepared financial forecasts for the Group, comprising profit before and after taxation, balance sheets and cash flows through to
the year ended 2024. The forecasts consider the current cash position, the availability of banking facilities and an assessment of the
principal areas of risk and uncertainty. These forecasts have been sensitised on a combined basis for severe but plausible downside
scenarios. The scenarios tested included significant reductions in profitability and associated cashflows linked to the four principal
risks highlighted in the viability statement on page 37. The results of this stress testing showed that, due to the stability of the core
business, the Group would be able to withstand the impact of these severe but plausible downside scenarios occurring over the period
of the financial forecasts.
In addition, several other mitigating measures remain available and within the control of the Directors that were not included in the
scenarios. These include withholding discretionary capital expenditure and reducing or cancelling future dividend payments.
In all the scenarios, the Group complied with its financial bank covenants, operated within its existing bank facilities, and met its
liabilities as they fall due.
Consequently, the Directors are confident that the Group and the Company will have sufficient funds to continue to meet their liabilities
as they fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the financial
statements on a going concern basis.
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.
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Basis of consolidation continued
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
associate's and joint ventures’ post-tax results, together with impairment losses, are recognised in the income statement, and its share
of movement in reserves is recognised in reserves. The cumulative movements are adjusted against the carrying amount of the
investment. The Group’s investment in associate and joint ventures includes any goodwill arising on acquisition. If the Group’s share of
losses in an associate or joint venture equals or exceeds its investment in the associate or joint venture, the Group does not recognise
further losses, unless it has incurred obligations or made payments on behalf of the associate or joint venture.
All subsidiaries are accounted for by applying the purchase method. The cost of a business combination is measured as the aggregate
of the fair values, at the acquisition date, of the assets given, liabilities incurred or assumed, and equity instruments issued by the
Group. The identifiable assets, liabilities and contingent liabilities of the acquiree are measured initially at fair value at the acquisition
date, irrespective of the extent of any non-controlling interest. The excess of the cost of the business combination over the Group’s
interest in the net fair value of the identifiable assets, liabilities and contingent liabilities is recognised as goodwill. 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.
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 Speciality Agriculture and
Agricultural Supplies divisions are recognised at a point in time. Revenues generated by the Group’s Engineering division are
recognised over time where either 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 or where the Group's performance creates or enhances an asset
that the customer controls as the asset is created or enhanced. 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 or valued contract works.
Carr’s Group plc Annual Report and Accounts 2021
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Principal Accounting Policies
continued
Revenue recognition continued
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.
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.
Retirement benefit asset/obligation
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 that there is a right
to recognise, and that there is no restriction on the recognition of, the IAS 19 pension surplus. At 28 August 2021 and 29 August 2020,
the consolidated and Company balance sheet recognises the full surplus on the Carr’s Group defined benefit pension scheme.
The Company intends to recover the surplus through reduced contributions.
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 28 provides further information on this scheme and how it has been accounted for in the
consolidated accounts.
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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.
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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. Reportable operating segments have been identified as
Speciality Agriculture, Agricultural Supplies and Engineering.
Adjusting items
Adjusting 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 note 5 to the financial statements. The separate disclosure of profit before adjusting items is consistent with how business
performance is measured internally and is presented to aid comparability of performance. Events which may give rise to adjusting
items include, but are not limited to, amortisation of acquired intangible assets, adjustments to contingent consideration arising from
fair value revaluation, restructuring/closure costs including the impairment of assets to recoverable amounts, ERP system
implementation costs, impairment of joint ventures and the effect of changes to deferred tax rates.
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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
1 – 10 years
6 – 25 years
15 years
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Principal Accounting Policies
continued
Other intangible assets continued
Proprietary technology
Development costs
Patents and trademarks
Contract backlog
Software
5 – 13 years
5 – 15 years
contractual life
3 years
3 – 10 years
Following a change in accounting policy during the year (see note 36) software costs incurred as part of a service agreement are only
capitalised when it can be evidenced that the Group has control over the resources defined in the agreement. Software customisation
and configuration costs relating to software not controlled by the Group are expensed as incurred.
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. Intangible
assets are amortised on a straight-line basis.
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 IAS 38 ‘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 improvements
Plant and equipment
up to 50 years
shorter of 50 years or lease term
3 to 20 years
Residual values and useful lives are reviewed, and adjusted if appropriate, at each financial year-end.
Assets not fully constructed at the balance sheet date are classified as assets in the course of construction. When construction is
complete these assets are reclassified to the appropriate heading within property, plant and equipment. Depreciation commences
when the asset is ready for use.
The cost of maintenance, repairs and minor equipment is charged to the consolidated income statement as incurred; the cost of major
renovations and improvements is capitalised.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within the
consolidated income statement.
Investment property
Investment properties are properties held for long-term rental yields. Investment properties are carried in the balance sheet at cost
less accumulated depreciation. Freehold land is not depreciated. For all other investment property, depreciation is calculated on a
straight-line basis to allocate cost less residual values of the assets over their estimated useful lives as follows:
Freehold buildings
up to 50 years
The cost of maintenance, repairs and minor equipment is charged to the consolidated income statement as incurred; the cost of major
renovations and improvements is capitalised.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within the
consolidated income statement.
Impairment of non-financial assets
Non-financial assets are reviewed for impairment where there are any events or changes in circumstances that would indicate potential
impairment. In addition, at each reporting date, the Group assesses whether there is any indication that goodwill may be impaired. Where
an indicator of impairment exists, the Group makes an estimate of recoverable amount. Where the carrying amount of an asset exceeds
its recoverable amount the asset is written down to its recoverable amount. Recoverable amount is the higher of fair value less costs to
sell and value in use and is deemed for an individual asset. If the asset does not generate cash 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.
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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.
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Leases
The Group leases properties, motor vehicles, plant and machinery and other equipment. Lease terms are negotiated on an individual
basis and contain a wide range of terms and conditions.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by
the Group. Each lease payment is allocated between the repayment of the lease liability and finance cost. The finance cost is charged
to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the
liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a
straight-line basis and is also subject to regular impairment reviews.
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Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value
of the following lease payments:
• Fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• Variable lease payments that are based on an index or rate;
• Amounts expected to be payable by the lessee under residual value guarantees;
• The exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
• Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. Where this cannot be determined, the lessee’s
incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset
of similar value in a similar economic environment with similar terms and conditions.
After initial measurement the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term or a
change in the fixed lease payments. Right-of-use assets are adjusted for any remeasurement of lease liabilities.
Right-of-use assets are measured at cost comprising the following:
• The amount of the initial measurement of the lease liability;
• Any lease payments made at or before the commencement date less any lease incentives received;
• Any initial direct costs incurred by the lessee; and
• Restoration costs required by the terms and conditions of the lease.
At the commencement date of property leases the Group normally determines the lease term to be the full term of the lease,
assuming that any option to break or extend the lease is unlikely to be exercised and it is not reasonably certain that the Group will
continue in occupation for any period beyond the lease term. Leases are regularly reviewed and will be revalued if it becomes likely
that a break clause or option to extend the lease is exercised.
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Principal Accounting Policies
continued
Leases continued
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in
the income statement. Short-term leases are leases with a lease term of 12 months or less. Low-value assets generally comprise minor
office and IT equipment.
The Group acts as lessor in certain operating lease arrangements. Rental income is recognised on a straight-line basis in the income
statement. The Group is not a lessor in any finance lease arrangements.
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.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities
and when the deferred tax assets and liabilities relate to income taxes levied by the same tax authority on either the same taxable entity or
different taxable entities where there is an intention to settle the balances on a net basis.
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.
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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.
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.
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 remeasured 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 30 August 2020 the following became effective and were adopted by the Group and Company:
• Amendments to References to the Conceptual Framework in IFRS standards
• Amendments to IFRS 3 'Business combinations’
• Amendments to IAS 1 and IAS 8 to update the definition of material
• Amendments to IFRS 7, IFRS 9 and IAS 39 addressing issues affecting financial reporting in the period leading up to IBOR reform
• Amendment to IFRS 16 ‘Leases’ for COVID-19 related rent concessions
Their adoption did not have a material effect on the Group or Company’s profit for the year or equity.
In April 2021, the IFRS Interpretations Committee (IFRIC) published an agenda decision on the clarification of accounting in relation to
the configuration and customisation costs incurred in implementing Software-as-a-Service (SaaS) as follows:
• Amounts paid to the cloud vendor for configuration and customisation that are not distinct from access to the cloud software are
•
•
expensed over the SaaS contract term.
In limited circumstances, other configuration and customisation costs incurred in implementing SaaS arrangements may give rise to
an identifiable intangible asset, for example, where code is created that is controlled by the entity.
In all other circumstances, configuration and customisation costs will be expensed as the customisation and configuration services
are received.
This agenda decision had a material effect on the Group and Company. Further details of the restatement can be found in note 36.
New standards, amendments and interpretations issued but not yet effective and not early adopted
Amendments to IFRS 9, IAS 39, IFRS 7 and IFRS 16 – Interest Rate Benchmark Reform – Phase 2 (effective date 1 January 2021)
It is considered that the above will not have a significant effect on the results or net assets of the Group or Company.
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:
Intangible assets - cloud based software costs
When the Group incurs configuration and customisation costs as part of a service agreement significant judgement is required in
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Principal Accounting Policies
continued
Significant judgements, key assumptions and estimates (continued)
Intangible assets - cloud based software costs (continued)
assessing whether the Group has control over the resources defined in the agreement. The Group has reviewed its service agreements
in respect of its Cloud hosted ERP system to align its accounting policy with the IFRS Interpretations Committee (IFRIC) agenda
decision in April 2021 on the clarification of accounting in relation to ‘Configuration and customisation Costs in a Cloud Computing
Arrangement’. Given that this agenda decision is relatively recent, with continuing evolution of guidance and interpretation, the Group
consider this to be a key and difficult judgement to determine.
The Group has considered several factors to conclude on the appropriate accounting treatment. These factors include the nature and
key terms of licence arrangements, ownership of intellectual property rights, ability to restrict access to systems, ability to remove
software applications from the cloud environment and run them within the Group’s own IT environment instead, ability to determine
when upgrades are applied and whether associated applications are distinct from the software.
Having considered these factors the Group concluded that it did not have substantive control over all aspects of the ERP system and
has therefore determined that these previously capitalised costs should be expensed. Further details of the prior year restatement to
reflect this change in accounting policy can be found in note 36.
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 28 and actual returns on scheme assets compared to those predicted in the previous scheme valuation. 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. The carrying value of the defined benefit pension scheme surplus at
28 August 2021 is £9.4m (2020: £8.0m). More information on the pension scheme is given in note 28.
The associate’s defined benefit pension scheme is also subject to these estimation uncertainties. 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. The
surplus, calculated in accordance with IAS 19, is £5.4m (2020: £3.5m) of which the Group recognises 49% in its balance sheet within its
‘Investment in associate’.
Impairment of goodwill and 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 the carrying value of goodwill must be assessed for impairment annually, or more frequently if there
are indications that goodwill might be impaired. This requires an estimation of the value in use of the cash generating units to which
goodwill is allocated. Value in use is dependent on estimations of future cash flows from the cash generating unit and the use of an
appropriate discount rate to discount those cash flows to their present value.
No impairment of goodwill was identified in the current or prior year. The carrying value of goodwill at 28 August 2021 is £31.6m (2020:
£32.0m). Further details of cash generating units and stress testing performed on the carrying values can be found in note 11.
During the year an impairment of £2.1m (2020: £nil) has been recognised against the carrying value of interest in joint ventures and a
loan receivable due from joint ventures. Further details of this impairment can be found in note 15.
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 28 August 2021 is £2.0m (2020: £1.9m). Further details of the
provision, including ageing profile, can be found in note 22.
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 uses estimates and judgements when assessing the total
expected costs on a contract. The Group has controls in place to review and monitor 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.
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. Further details in respect of contingent consideration, including movements in fair value between
opening and closing balances, is included in note 27.
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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 £6,261,000 (2020: restated £6,773,000).
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. Following a strategic and operational review reportable operating segments have been identified as Speciality
Agriculture, Agricultural Supplies and Engineering. Prior year disclosures have been restated to aid comparability. Central comprises
the central business activities of the Group's head office, which earns no external revenues. Operating segments have not been
aggregated for the purpose of determining reportable segments. Prior year disclosures have also been restated following the change
in accounting policy for cloud configuration and customisation costs.
Speciality Agriculture derives its revenue from the sale of animal feed blocks and animal health products.
Agricultural Supplies derives its revenue from the manufacture and sale of animal feed together with retail sales of farm equipment,
fuels and farm consumables through its network of rural stores.
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 adjusted operating profit. For internal purposes the CODM assesses operating profit before material
adjusting items (note 5) consistent with the presentation in the financial statements.
Inter-segmental transactions are all undertaken on an arm’s length basis.
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 28 August 2021 is as follows:
Total segment revenue
Inter-segment revenue
Revenue from external customers
Speciality
Agriculture
£’000
Agricultural
Supplies
£’000
Engineering
£’000
Central
£’000
Group
£’000
74,395 297,506
(6)
(5,934)
51,299
(6)
— 423,200
(5,946)
—
68,461 297,500
51,293
— 417,254
Adjusted1 EBITDA2
Depreciation, amortisation and profit/(loss) on disposal of non-current assets
9,858
(1,335)
7,348
(2,602)
6,133
(2,208)
(2,417) 20,922
(6,283)
(138)
Share of post-tax results of associate (adjusted1) and joint ventures
991
1,955
—
—
2,946
Adjusted1 operating profit
Adjusting items (note 5)
Operating profit
Finance income
Finance costs
Adjusted1 profit before taxation
Adjusting items (note 5)
Profit before taxation
9,514
(2,847)
6,701
(1,684)
3,925
97
(2,555)
(127)
17,585
(4,561)
6,667
5,017
4,022
(2,682)
13,024
260
(1,232)
16,613
(4,561)
12,052
1 Adjusted results are consistent with how business performance is measured internally and is presented to aid comparability of performance. Adjusting items are
disclosed in note 5.
2 Earnings before interest, tax, depreciation, amortisation, profit/(loss) on the disposal of non-current assets and before share of post-tax results of associate and
joint ventures.
Carr’s Group plc Annual Report and Accounts 2021
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Shareholder Information
2 Segmental information continued
Assets and liabilities
Segment gross assets
Segment gross liabilities
Speciality
Agriculture
£’000
Agricultural
Supplies
£’000
Engineering
£’000
Central
£'000
Group
£’000
48,558
110,716
79,994
23,236 262,504
(12,251)
(58,056)
(27,783)
(29,180) (127,270)
The segmental information for the year ended 29 August 2020 is as follows. This has been restated to present Speciality Agriculture
and Agricultural Supplies separately. This is to aid comparability with the segmental information presented for the current year. The
disclosure has also been restated following the change in accounting policy for cloud configuration and customisation costs.
Total segment revenue
Inter-segment revenue
Revenue from external customers
Restated:
Adjusted1 EBITDA2
Depreciation, amortisation and profit/(loss) on disposal of non-current assets
Share of post-tax results of associate (adjusted1) and joint ventures
Adjusted1 operating profit
Adjusted items
Operating profit
Finance income
Finance costs
Adjusted1 profit before taxation
Adjusted items
Profit before taxation
Speciality
Agriculture
£’000
Agricultural
Supplies
£’000
Engineering
£’000
Central
£'000
Group
£’000
66,948 280,740
(8)
(5,058)
53,020
(12)
— 400,708
(5,078)
—
61,890 280,732
53,008
— 395,630
7,914
(1,362)
1,061
7,613
(184)
6,884
(2,665)
1,572
5,791
(1,388)
6,754
(2,944)
—
3,810
(2,449)
7,429
4,403
1,361
(781)
(140)
—
(921)
—
(921)
20,771
(7,111)
2,633
16,293
(4,021)
12,272
313
(1,656)
14,950
(4,021)
10,929
1 Adjusted results are consistent with how business performance is measured internally and is presented to aid comparability of performance. Adjusting items are
2
disclosed in note 5.
Earnings before interest, tax, depreciation, amortisation, profit/(loss) on the disposal of non-current assets and before share of post-tax results of associate and
joint ventures.
Assets and liabilities (restated)
Segment gross assets
Segment gross liabilities
Speciality
Agriculture
£’000
Agricultural
Supplies
£’000
Engineering
£’000
Central
£'000
Group
£’000
45,860
97,285
83,852
17,808 244,805
(8,845)
(44,664)
(31,156)
(28,509)
(113,174)
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
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Carr’s Group plc Annual Report and Accounts 2021
2021
£’000
351,766
15,700
48,007
1,779
2
2020
£’000
337,126
10,680
46,186
1,628
10
417,254 395,630
Notes to the Financial Statementscontinued
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£’000
Total
£’000
—
—
32,041
6,365
33 38,259
14,856
158
14,042
10,551
73
—
20
8,037
—
—
—
—
—
—
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Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Right-of-use assets
Investment property
Investment in associate
Interest in joint ventures
Other investments
Contract assets
Non-current receivables
Retirement benefit asset
UK
£’000
17,855
3,788
20,271
16,184
152
14,268
2,489
50
312
—
9,371
Europe
£’000
5,692
520
7,938
58
—
—
3,838
—
—
—
—
2021
USA
£’000
8,013
843
7,950
535
—
—
3,155
22
—
20
—
New
Zealand
£’000
Total
£’000
UK
£’000
— 31,560
5,151
—
39 36,198
16,777
—
—
152
— 14,268
9,482
—
—
72
312
—
—
20
9,371
—
17,855
4,879
21,670
14,283
158
14,042
2,928
50
—
—
8,037
2020 (restated)
Europe
£’000
5,929
519
8,183
—
—
—
3,462
1
—
—
—
USA
£’000
8,257
967
8,373
573
—
—
4,161
22
—
20
—
84,740 18,046 20,538
39 123,363 83,902 18,094 22,373
33 124,402
Major customers
There are no revenues from transactions with individual customers which amount to 10% 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
disaggregated based on the timing of revenue recognition.
Timing of revenue recognition
Over time
At a point in time
Transaction price allocated to the remaining performance obligations
2021
£’000
2020
£’000
36,435
34,790
380,819 360,840
417,254 395,630
2022
£’000
2023
£’000
2024
onwards
£’000
Total
£’000
Total transaction price allocated to the remaining performance obligations
21,477
8,891
3,031
33,399
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 2021
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4 Operating profit
Group operating profit is stated after (crediting)/charging:
Amortisation of grants
(Profit)/loss on disposal of property, plant and equipment
Profit on disposal of right-of-use leases
Depreciation and impairment of property, plant and equipment
Depreciation of right-of-use assets
Depreciation of owned investment property
Amortisation of intangible assets
Adjustments to contingent consideration (note 5)
Restructuring/closure costs (note 5)
Cloud configuration and customisation costs – Group (note 5)
Cloud configuration and customisation costs – share of associate (note 5)
Impairment of investment and loan receivable (note 5)
Foreign exchange losses
Derivative financial instruments losses/(gains)
Research and development expense
Auditors’ remuneration:
Audit services (Company £17,480; 2020: £17,137)
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
2021
£’000
2020
(restated)
£’000
(54)
(144)
—
3,822
2,529
6
1,256
(1,013)
248
1,356
515
2,090
200
3
3,787
89
319
408
(55)
265
(37)
4,567
2,462
6
1,467
(937)
1,964
1,412
202
—
57
(3)
2,066
75
290
365
(42)
28
(14)
(42)
43
1
The auditors' remuneration in respect of the prior year of £365,000 includes a £50,000 additional fee raised during that year in respect
of the audit of the year ended 2019.
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Carr’s Group plc Annual Report and Accounts 2021
Notes to the Financial Statementscontinued
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5 Adjusting items
In reporting financial information, the Group presents alternative performance measures (“APMs”), which are not defined or specified
under the requirements of IFRS. These APMs are consistent with how business performance is measured internally and therefore the
Group believes that these APMs provide stakeholders with additional useful information on the performance of the business. The
following adjusting items have been added back to reported profit measures.
Amortisation of acquired intangible assets (i)
Adjustments to contingent consideration (ii)
Restructuring/closure costs (iii)
Cloud configuration and customisation costs – Group (iv)
Cloud configuration and customisation costs – share of associate (iv)
Impairment of joint venture (v)
Effect of deferred tax rate change – share of associate (vi)
Included in profit before taxation
Effect of deferred tax rate change – Group (vi)
Taxation effect of the above adjusting items
Included in profit for the year
2021
£’000
1,186
(1,013)
248
1,356
515
2,090
179
4,561
990
(528)
5,023
2020
(restated)
£’000
1,380
(937)
1,964
1,412
202
—
—
4,021
—
(907)
3,114
(i) Amortisation of acquired intangible assets which do not relate to the underlying profitability of the Group but rather relate to costs arising on acquisition of businesses.
(ii) Adjustments to contingent consideration arise from the revaluation of contingent consideration in respect of acquisitions to fair value at the year end. Movements in fair
value arise from changes to the expected payments since the previous year end based on actual results and updated forecasts. Any increase or decrease in fair value is
recognised through the income statement.
(iii) Restructuring/closure costs include redundancy costs and impairments of assets to recoverable amounts. The impairment to property, plant and equipment was £nil
(2020: £239,000).
(iv) Costs relating to material spend previously capitalised in relation to the implementation of the Group's, and associate's, ERP system that have now been expensed
following the adoption of the IFRIC agenda decision. See note 36 for further details of the prior year restatement.
(v) During the year the joint venture Afgritech LLC reported a loss and is expected to continue to underperform against budgeted information in the short to medium term.
An impairment review has been undertaken which has resulted in an impairment charge of £1,314,000 (2020: £nil) against the carrying amount of interest in joint venture
and an impairment charge of £776,000 (2020: £nil) against the carrying amount of a loan receivable. Further details can be found in note 15.
(vi) On 24 May 2021, legislation was substantively enacted in the UK to increase the corporate tax rate to 25% with effect from 1 April 2023. As a result of the change, a tax
charge of £179,000 was recognised in the year in the Group's share of associate results and £990,000 was recognised in the Group's tax charge (note 8) in relation to the
remeasurement of deferred tax assets and liabilities. This does not relate to the underlying performance of the associate or Group and has therefore been included as
an adjusting item.
6 Staff costs
The tables below include Directors.
Wages and salaries
Social security costs
Pension costs
Share-based payments
2021
£’000
42,869
4,721
2,742
464
2020
£’000
44,627
5,045
2,683
(137)
50,796
52,218
Included within pension costs is a charge of £18,000 (2020: £13,000) in respect of the defined benefit pension scheme.
The average monthly number of employees during the year was made up as follows:
Sales, office and management
Manufacture and distribution
Key management is considered to be the Directors of the Group.
2021
Number
2020
Number
628
513
1,141
638
572
1,210
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6 Staff costs continued
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
2021
£’000
1,414
3
306
1,723
2020
£’000
1,004
20
474
1,498
1 Salary (after salary sacrifice of pension), fees, bonuses, pay in lieu of pension and benefits in kind. Includes bonuses based on amounts accrued at the year end.
2 Cash contributions paid in the year into the defined contribution pension scheme.
3 Gains realised in the year in respect of the LTIP, deferred bonus plan and share save scheme.
The number of Directors in the defined contribution pension scheme during the year was two (2020: two).
Further details of the Directors’ emoluments, pension benefits and share options are given in the Remuneration Committee Report on
pages 64 to 83.
7 Finance income and finance costs
Finance income
Bank interest
Net interest on the net defined benefit retirement asset (note 28)
Other interest
Total finance income
Finance costs
Interest payable on bank overdrafts
Interest payable on bank loans and other borrowings
Interest payable on 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 19)
Tax on profit
Deferred tax recognised in equity is disclosed in note 19.
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Carr’s Group plc Annual Report and Accounts 2021
2021
£’000
108
147
5
260
(109)
(547)
(476)
(100)
2020
£’000
151
139
23
313
(149)
(934)
(461)
(112)
(1,232)
(1,656)
2021
£’000
2020
(restated)
£’000
837
18
1,130
(84)
1,901
767
(268)
499
2,400
818
(150)
356
(217)
807
450
59
509
1,316
Notes to the Financial Statementscontinued
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(b) Factors affecting tax charge for the year
The tax assessed for the year is higher (2020: lower) than the rate of corporation tax in the UK of 19% (2020: 19%). The differences are
explained below:
Profit before taxation
Tax at 19% (2020: 19%)
Effects of:
Tax effect of share of results of associate and joint ventures
Tax effect of expenses that are not allowable in determining taxable profit
Tax effect of non-taxable income
Effects of different tax rates of foreign subsidiaries
Effects of changes in deferred tax rates
Unrecognised deferred tax on losses
Adjustment in respect of prior years
Total tax charge for the year
2021
£’000
2020
(restated)
£’000
12,052
10,929
2,290
2,077
(428)
488
(778)
77
990
95
(334)
2,400
(462)
184
(633)
83
304
71
(308)
1,316
The tax effect of expenses that are not allowable in determining taxable profit includes adjustments for impairment of joint venture (note
5), share-based payments, depreciation and amortisation of non-qualifying assets, and other expenses disallowable for UK corporation
tax.
The tax effect of non-taxable income includes adjustments to contingent consideration (note 5) and the effect of income within the
patent box regime.
The Group has reviewed its accounting policy following the IFRIC agenda decision in April 2021 in respect of the configuration and
customisation costs previously capitalised in relation to the Group's cloud hosted ERP system. Following this review these previously
capitalised costs have been expensed and amortisation previously charged on those assets has been reversed. The tax charge for year
ended 29 August 2020 shown above has been restated to reflect the tax effect of this change in accounting policy. This has resulted in
a reduction of £259,000 to the UK tax charge as set out in note 36.
(c) Change in corporation tax rate
On 24 May 2021, legislation was substantively enacted in the UK to increase the corporate tax rate to 25% with effect from 1 April 2023.
As a result of the change, a tax charge of £990,000 was recognised for the year for the parent Company and UK tax resident
subsidiaries in relation to the remeasurement of deferred tax assets and liabilities. UK deferred tax balances at 28 August 2021 are
provided at 25% (2020: 19%). This charge of £990,000 does not relate to the underlying profitability of the Group and has been treated
as an adjusting item (note 5).
9 Dividends
Equity
Second interim paid for the year ended 29 August 2020 of 2.25p per 2.5p share (2019: 1.125p)
Final dividend for the year ended 29 August 2020 of 2.5p per 2.5p share (2019: 2.5p)
First interim paid for the year ended 28 August 2021 of 1.175p per 2.5p share (2020: nil)
2021
£’000
2,080
2,311
1,099
5,490
2020
£’000
1,034
2,310
—
3,344
Since the year end an interim dividend of £1,100,423 being 1.175p per share, has been paid. The financial statements do not reflect the
dividend payable.
The proposed final dividend for the year ended 28 August 2021 to be considered by shareholders at the Annual General Meeting is
£2,484,148 being 2.65p per share, making a total for the year of 5.0p (2020: 4.75p). Shares held in treasury do not carry entitlement to a
dividend. The financial statements do not reflect this proposed final dividend as payable.
The second interim dividend paid in respect of the year ended 29 August 2020 of £2,080,000 included the deferred first interim
dividend that, under normal circumstances, would have been paid in May 2020. This was deferred due to the uncertainty associated
with the COVID-19 pandemic.
Carr’s Group plc Annual Report and Accounts 2021
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Shareholder InformationShareholder Information
10 Earnings per ordinary share
Earnings per share are calculated by reference to a weighted average of 93,123,043 shares (2020: 92,346,828) in issue during the year.
Adjusting items disclosed in note 5 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:
2021
2020 (restated)
Earnings per share – basic
Adjusting items:
Amortisation of acquired intangible assets
Adjustments to contingent consideration
Restructuring/closure costs
Cloud configuration and customisation costs – Group
Cloud configuration and customisation costs – share of associate
Impairment of joint venture
Taxation effect of the above
Effect of increase to UK deferred tax rate – Group
Effect of increase to UK deferred tax rate – share of associate
Non-controlling interest in the above
Earnings
£’000
7,712
1,186
(1,013)
248
1,356
515
2,090
(528)
990
179
(433)
Earnings
per share
pence
8.3
1.3
(1.1)
0.3
1.5
0.6
2.2
(0.7)
1.1
0.2
(0.5)
Earnings
£’000
8,422
1,380
(937)
1,964
1,412
202
—
(907)
—
—
(471)
Earnings per share – adjusted
12,302
13.2
11,065
Earnings
per share
pence
9.1
1.5
(1.0)
2.1
1.5
0.2
—
(0.9)
—
—
(0.5)
12.0
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 30.
Earnings per share
Effect of dilutive securities:
Share Save Scheme
Long Term Incentive Plan
Diluted earnings per share
2021
Weighted
average
number of
shares
Earnings
£’000
Earnings
per share
pence
Earnings
£’000
2020 (restated)
Weighted
average
number of
shares
7,712
93,123,043
8.3
8,422 92,346,828
—
—
1,145,027
422,112
7,712
94,690,182
(0.1)
(0.1)
8.1
—
—
978,350
405,866
8,422 93,731,044
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
12,302
94,690,182
13.0
11,065 93,731,044
Earnings
per share
pence
9.1
(0.1)
—
9.0
Earnings
per share
pence
11.8
120
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Carr’s Group plc Annual Report and Accounts 2021
Carr’s Group plc Annual Report and Accounts 2021
Notes to the Financial Statementscontinued
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11 Goodwill and other intangible assets
Cost
At 1 September 2019 (restated)
Exchange differences (restated)
Additions (restated)
Disposals
At 29 August 2020 (restated)
Exchange differences
Additions
Reclassification
At 28 August 2021
Accumulated amortisation and impairment
At 1 September 2019 (restated)
Exchange differences
Charge for the year (restated)
At 29 August 2020 (restated)
Exchange differences
Charge for the year
At 28 August 2021
Net book amount
At 31 August 2019 (restated)
At 29 August 2020 (restated)
At 28 August 2021
Group
Know-how,
technology and
development
costs
£’000
Brands,
patents and
trademarks
£’000
Goodwill
£’000
Customer
relationships
£’000
Contract
backlog
£’000
Software
£’000
Total
£’000
35,418
(836)
—
—
34,582
(481)
—
—
34,101
2,541
—
—
2,541
—
—
2,541
3,392
—
—
—
3,392
—
—
—
3,392
211
—
653
864
—
546
2,714
(12)
37
—
2,739
(23)
—
—
3,105
(133)
6
—
2,978
(53)
3
—
2,716
2,928
538
(9)
474
1,003
(4)
467
692
(46)
243
889
(24)
230
1,410
1,466
1,095
32,877
32,041
31,560
3,181
2,528
1,982
2,176
1,736
1,250
2,413
2,089
1,833
250
(21)
—
—
229
(7)
—
—
222
174
(18)
73
229
(7)
—
222
76
—
—
792
(10)
4
(3)
783
(33)
104
(17)
45,671
(1,012)
47
(3)
44,703
(597)
107
(17)
837
44,196
760
(13)
24
771
(33)
13
751
4,916
(86)
1,467
6,297
(68)
1,256
7,485
32
12
86
40,755
38,406
36,711
The Group has reviewed its accounting policy following the IFRIC agenda decision in April 2021 in respect of the configuration and
customisation costs previously capitalised in relation to the Group's cloud hosted ERP system. Following this review, costs previously
capitalised as additions for the year ended 29 August 2020 of £1,412,000 have now been expensed and amortisation of £46,000
charged on those assets in that year has been reversed. For the year ended 31 August 2019, the Group identified £1,481,000 of
cumulative costs previously capitalised that should be expensed and £41,000 of cumulative amortisation, which is to be reversed. See
note 36 for further details of this prior year restatement. All of the software relating to the cloud hosted ERP system previously
capitalised by the Company has been expensed with any amortisation reversed.
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
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
2021
£’000
5,285
2,068
18
5,692
2,526
7,995
1,742
6,234
2020
£’000
5,285
2,068
19
5,929
2,526
8,238
1,742
6,234
31,560
32,041
Goodwill arising on the acquisition of overseas subsidiaries has been retranslated at the balance sheet date.
Carr’s Group plc Annual Report and Accounts 2021
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Shareholder InformationShareholder Information
11 Goodwill and other intangible assets continued
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 2022, which has been approved by the
Board and forecast information for the four years to August 2026 based on medium-term business plans and an assumption for
long-term growth of between 0-2.2% excluding inflation. The pre-tax discount rates used to discount the forecast cash flows for all
cash generating units are in the range 4.88% – 8.09% (2020: 4.82% – 8.18%).
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, other than potentially for the two cash generating units discussed below.
For the NuVision Engineering, Inc. cash generating unit, the estimated recoverable amount of the cash generating unit exceeded its
carrying value by £4.8m and therefore the Directors concluded that no impairment was required; however the calculations are sensitive
to changes in key assumptions. The key assumptions considered by the Directors, where a reasonably possible change could give rise
to an impairment, were the pre-tax discount rate and long-term growth rate. If the pre-tax discount rate assumption was increased
from 7.05% to 9.32%, the recoverable amount for the cash generating unit would be reduced to a level comparable with its carrying
value. If this higher discount rate assumption was combined with a 1% decrease in the long-term growth rate, which, although not
management’s current expectation is considered to be reasonably possible, this would lead to an impairment charge of £0.9m. To
trigger a material impairment, when combined with the discount rate increase, the long-term growth rate would need to decrease to
-0.1%.
For the Chirton profit centre cash generating unit, the estimated recoverable amount of the cash generating unit exceeded its carrying
value by £2.7m and therefore the Directors concluded that no impairment was required; however the calculations are sensitive to
changes in key assumptions, in particular reasonably possible changes to the pre-tax discount rate. If the pre-tax discount rate
assumption was increased from 7.8% to 11.1%, the recoverable amount for the cash generating unit would be reduced to a level
comparable with its carrying value. To trigger a material impairment the pre-tax discount rate would have to increase to over 15%.
Whilst the initial assessment indicated that the Wälischmiller Engineering GmbH cash generating unit might also be sensitive to
movements in the discount rate and growth rate, after further analysis the Board are satisfied that this is not the case.
Amortisation and impairment charges are recognised within administrative expenses and have been highlighted separately within
adjusting items (note 5) where they relate to acquired intangible assets.
There is no goodwill or other intangible assets in the Company (2020 restated: none).
Significant cash generating units
The table below shows the key assumptions that have been used in the impairment testing for goodwill with a significant carrying
value together with sensitised assumptions required to eliminate the headroom:
Cash generating unit
NuVision Engineering, Inc.
NW Total Engineered Solutions Ltd
Wälischmiller Engineering GmbH
Carrs Billington Agriculture (Sales) Ltd
Carr’s Engineering Ltd – Chirton profit centre
Carrs Agriculture Ltd – UK feed blocks
Animax Ltd
Long-term
average
growth in
EBIT1
%
Pre-tax
discount rate
%
Pre-tax
discount rate
(sensitised)2
%
Long-term
growth rate
%
Long-term
growth rate
(sensitised)2
%
Cash flows
(sensitised)3
%
5.1
2.1
3.0
2.7
1.9
2.0
6.3
7.05
7.17
8.09
4.88
7.80
5.45
5.44
9.32
20.75
12.18
19.49
11.10
27.15
17.45
2.0
2.2
1.5
1.8
—
1.8
1.8
-0.5
-10.5
-3.5
-37.9
-3.8
-30.0
-11.6
-29.5
-68.3
-37.8
-78.5
-24.9
-82.0
-77.3
Headroom
£m
4.8
22.8
14.4
152.6
2.7
105.1
23.8
1
Earnings before interest and tax.
2 Rate required to eliminate headroom.
3 Percentage reduction required to cash flows to eliminate headroom.
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Carr’s Group plc Annual Report and Accounts 2021
Notes to the Financial Statementscontinued
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12 Property, plant and equipment
Cost
At 1 September 2019
Exchange differences
Additions
Transfers from right-of-use assets
Disposals
Reclassifications
At 29 August 2020
Exchange differences
Additions
Transfers from right-of-use assets
Disposals
Reclassifications
At 28 August 2021
Accumulated depreciation and impairment
At 1 September 2019
Exchange differences
Charge for the year
Impairment during the year
Transfers from right-of-use assets
Disposals
At 29 August 2020
Exchange differences
Charge for the year
Transfers from right-of-use assets
Disposals
At 28 August 2021
Net book amount
At 31 August 2019
At 29 August 2020
At 28 August 2021
Group
Company
Land and
buildings
£’000
Plant and
equipment
£’000
Assets in the
course of
construction
£’000
Total
£’000
Plant and
equipment
£’000
32,418
(534)
502
—
(145)
893
33,134
(529)
1,248
—
(21)
898
42,926
(1,100)
1,815
672
(2,488)
(292)
41,533
(493)
1,235
803
(5,108)
1,345
701
(5)
4,045
—
—
(598)
4,143
(65)
1,109
—
(14)
(3,785)
76,045
(1,639)
6,362
672
(2,633)
3
78,810
(1,087)
3,592
803
(5,143)
(1,542)
34,730
39,315
1,388
75,433
8,473
(231)
1,101
—
—
(88)
9,255
(122)
1,046
—
(7)
30,247
(831)
3,227
239
272
(1,858)
31,296
(386)
2,776
261
(4,884)
10,172
29,063
—
—
—
—
—
—
—
—
—
—
—
—
38,720
(1,062)
4,328
239
272
(1,946)
40,551
(508)
3,822
261
(4,891)
39,235
23,945
12,679
701
37,325
23,879
10,237
4,143
38,259
24,558
10,252
1,388
36,198
640
—
—
—
(1)
—
639
—
—
—
(365)
—
274
482
—
40
—
—
(1)
521
—
33
—
(365)
189
158
118
85
During the year the classification of assets were reviewed and it was concluded that £1,542,000 of asset cost was better presented as
right-of-use assets. As the asset value is not considered material comparatives have not been restated.
Balances at 1 September 2019 shown in the table above exclude finance leased assets which were transferred to right-of-use assets
on adoption of IFRS 16 'Leases'.
Transfers from right-of-use assets represent finance leased assets that became owned assets on maturity of the lease term.
Freehold land amounting to £3,435,880 (2020: £3,025,704) has not been depreciated.
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
£1,396,000 (2020: £1,450,000).
Included in the above table in respect of assets held under floating charges are assets with a net book amount of £6,483,000 (2020:
£7,653,000). This excludes specific assets under legal charge which are separately disclosed above.
Carr’s Group plc Annual Report and Accounts 2021
123
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12 Property, plant and equipment continued
Depreciation is recognised within the Consolidated Income Statement as shown below:
Cost of sales
Distribution costs
Administrative expenses
13 Right-of-use assets and lease liabilities
Amounts recognised in the balance sheet
The balance sheet shows the following amounts relating to leases:
Cost
At 1 September 2019
Exchange differences
Additions
Transfers to property, plant and equipment
Disposals
At 29 August 2020
Exchange differences
Additions
Modifications
Transfers to property, plant and equipment
Disposals
Reclassifications
At 28 August 2021
Accumulated depreciation
At 1 September 2019
Exchange differences
Charge for the year
Transfers to property, plant and equipment
Disposals
At 29 August 2020
Exchange differences
Charge for the year
Transfers to property, plant and equipment
Disposals
At 28 August 2021
Net book amount
At 31 August 2019
At 29 August 2020
At 28 August 2021
Group
Company
2021
£’000
2,613
333
876
2020
£’000
3,276
10
1,042
3,822
4,328
2021
£’000
—
—
33
33
2020
£’000
—
—
40
40
Group
Company
Land and
buildings
£’000
Plant,
equipment
and vehicles
£’000
Plant,
equipment
and vehicles
£’000
Total
£’000
10,096
(74)
195
—
(622)
9,595
(24)
23
858
—
—
—
7,128
(1)
2,228
(672)
(273)
8,410
(1)
2,630
(16)
(803)
(135)
1,559
17,224
(75)
2,423
(672)
(895)
18,005
(25)
2,653
842
(803)
(135)
1,559
267
—
429
—
(205)
491
—
—
—
—
(13)
—
10,452
11,644
22,096
478
—
(11)
1,187
—
(85)
1,091
(9)
1,075
—
—
1,138
—
1,275
(272)
(83)
2,058
—
1,454
(261)
(89)
1,138
(11)
2,462
(272)
(168)
3,149
(9)
2,529
(261)
(89)
2,157
3,162
5,319
10,096
5,990
16,086
8,504
6,352
14,856
8,295
8,482
16,777
—
—
96
—
(62)
34
—
105
—
(7)
132
267
457
346
Balances at 1 September 2019 shown in the table above include finance leased assets which were transferred from property, plant and
equipment on adoption of IFRS 16 'Leases'.
Transfers to property, plant and equipment represent finance leased assets that became owned assets on maturity of the lease term.
124
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Carr’s Group plc Annual Report and Accounts 2021
Notes to the Financial Statementscontinued
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13 Right-of-use assets and lease liabilities continued
Current liabilities
Non-current liabilities
Group
Company
2021
£’000
2,967
12,458
2020
£’000
2,778
11,171
15,425
13,949
2021
£’000
98
250
348
The remaining contractual maturities of the lease liabilities, which are gross and undiscounted, are as follows:
Less than one year
One to two years
Two to three years
Three to four years
Four to five years
More than five years
Amounts recognised in the income statement
The income statement shows the following amounts relating to leases:
Depreciation
(Profit)/loss on disposal
Interest expense
Short-term leases and low-value assets
Group
Company
2021
£’000
3,280
2,766
2,164
1,675
1,221
8,134
2020
£’000
3,204
2,359
1,830
1,298
992
8,512
19,240
18,195
2021
£’000
104
97
89
73
—
—
363
Group
Company
2021
£’000
2,529
—
476
110
2020
£’000
2,462
(37)
461
111
3,115
2,997
2021
£’000
105
—
9
—
114
2020
£’000
97
354
451
2020
£’000
105
111
87
87
87
—
477
2020
£’000
96
4
8
—
108
There is no expense recognised in the income statement in respect of variable lease payments that are not included in the
measurement of the lease liabilities.
The total Group cash outflow for leases was £3,728,000 (2020: £3,632,000). The total Company cash outflow for leases was £107,000
(2020: £122,000).
The Group receives income on one right-of-use property sublease. A maturity analysis of lease payments, showing the undiscounted
lease payments to be received on an annual basis, is as follows:
Less than one year
One to two years
Two to three years
Three to four years
Four to five years
More than five years
The Company has no income arising from leases.
Group
2021
£’000
2020
£’000
71
71
71
71
27
—
311
71
71
71
71
71
27
382
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125
Shareholder InformationShareholder Information
14 Investment property
Group
Cost
At 1 September 2019, 29 August 2020 and 28 August 2021
Accumulated depreciation
At 1 September 2019
Charge for the year
At 29 August 2020
Charge for the year
At 28 August 2021
Net book amount
At 31 August 2019
At 29 August 2020
At 28 August 2021
Total
£’000
299
135
6
141
6
147
164
158
152
The fair value of investment properties at 28 August 2021 is £360,000 (2020: £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 (2020: none).
15 Investments
Group
Cost
At 1 September 2019 (restated)
Exchange difference
Share of post-tax result (restated)
Share of gains/(losses) recognised directly in equity
Dividend paid by associate and joint ventures
At 29 August 2020 (restated)
Exchange difference
Share of post-tax result
Share of gains/(losses) recognised directly in equity
Dividend paid by associate and joint ventures
At 28 August 2021
Accumulated provision for impairment
At 1 September 2019 and at 29 August 2020
Impairment in the year
At 28 August 2021
Net book amount
At 31 August 2019 (restated)
At 29 August 2020 (restated)
At 28 August 2021
Associate
£’000
13,329
—
989
312
(588)
14,042
—
831
434
(1,039)
Joint
ventures
£’000
Other
investments
£’000
Total
£’000
9,671
(238)
1,442
(211)
(113)
10,551
(253)
1,421
(64)
(859)
85
(3)
—
—
—
82
(1)
—
—
—
23,085
(241)
2,431
101
(701)
24,675
(254)
2,252
370
(1,898)
14,268
10,796
81
25,145
—
—
—
—
1,314
1,314
13,329
9,671
14,042
10,551
14,268
9,482
9
—
9
76
73
72
9
1,314
1,323
23,076
24,666
23,822
Other investments comprise shares in several private limited companies.
The Group has reviewed its accounting policy following the IFRIC agenda decision in April 2021 in respect of the configuration and
customisation costs previously capitalised in relation to the Group's cloud hosted ERP system. Following this review, costs previously
capitalised within the Group's investment in associate for the year ended 29 August 2020 of £202,000 have now been expensed. For
the year ended 31 August 2019, the Group identified £63,000 of cumulative costs previously capitalised that should be expensed. See
note 36 for further details of this prior year restatement.
126
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Carr’s Group plc Annual Report and Accounts 2021
Carr’s Group plc Annual Report and Accounts 2021
Notes to the Financial Statementscontinued
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15 Investments continued
IAS 36, ‘Impairment of assets’, requires consideration of the carrying value of assets under certain circumstances to ensure that they
are not carried at more than their recoverable amount. With the exception of goodwill, where an annual impairment test is required,
impairment reviews are required to be carried out where there is an indicator of impairment. Indicators of impairment include worse
economic performance than expected.
During the year the joint venture Afgritech LLC reported a loss and is expected to continue to underperform against budgeted
information in the short to medium term. As such, the Board has carried out an impairment review of the business. The review
considered the projected future performance of the business based on a range of inputs with the key assumptions noted in the
table below.
Pre-tax discount rate
Long-term growth rate
4.5%
0.0%
The business assets comprise fixed assets including land and buildings together with working capital and cash balances. Land and
buildings have been appraised by an independent third party to determine recoverable amount. At 28 August 2021, the Group’s interest
in the joint venture within investments was £1.3m together with a loan receivable of £1.6m recognised within current assets.
The results of the impairment review were considered by the Board which concluded that the Group’s share of the interest in the joint
venture and associated loan receivable should be impaired to a value of £0.8m, based on future discounted cash flows, being the
Group’s share of the business’s net recoverable value. There is no related goodwill or intangible assets recognised in respect of this
business. A provision for impairment has been recognised against the investment carrying amount, reducing the investment value to
£nil, and a provision for impairment of £0.8m has been recognised against the loan receivable, reducing the carrying amount to £0.8m.
The total impairment charge of £2.1m has been recognised separately on the face of the Group income statement and has also been
included as an adjusting item (note 5). This is reported within the Speciality Agriculture segment in note 2.
Company
Cost
At 1 September 2019
Recapitalisation
Dissolution of dormant subsidiary undertakings
Share-based payment charge in respect of employees of subsidiary undertakings
At 29 August 2020
Share-based payment charge in respect of employees of subsidiary undertakings
At 28 August 2021
Accumulated provision for impairment
At 1 September 2019
Dissolution of dormant subsidiary undertakings
At 29 August 2020
Impairment in the year
At 28 August 2021
Net book amount
At 31 August 2019
At 29 August 2020
At 28 August 2021
Shares in
subsidiaries
£’000
Associate
£’000
Joint
ventures
£’000
Total
£’000
31,332
11,866
(6,479)
(158)
36,561
(107)
36,454
4,794
(801)
3,993
—
3,993
26,538
32,568
32,461
245
—
—
—
245
—
245
—
—
—
—
—
245
245
245
272
—
—
—
272
—
272
—
—
—
100
100
272
272
31,849
11,866
(6,479)
(158)
37,078
(107)
36,971
4,794
(801)
3,993
100
4,093
27,055
33,085
172
32,878
During the year there was an impairment of £100,000 recognised against the cost of investment in Afgritech Ltd following the
impairment review of its subsidiary Afgritech LLC. This impairment of £100,000 reduces the carrying amount in respect of Afgritech Ltd
to £nil.
The recapitalisation of £11,866,000 in the prior year represented the increased shareholding in a subsidiary following the capitalisation
of inter-company debt.
During the prior year the Company began the process of dissolving several dormant subsidiaries. They were officially dissolved at the
start of the current year.
Carr’s Group plc Annual Report and Accounts 2021
127
Shareholder InformationShareholder Information
16 Investment in associate
The associated undertaking at 28 August 2021 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 33% 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 £2,408,000 (2020: £nil). No contingent liabilities
exist within the associate.
The aggregate amounts relating to the associate, of which the Group recognises 49% in the net investment in associate, are:
Total assets
Total liabilities
Revenues
Profit after tax
17 Interest in joint ventures
The joint ventures at 28 August 2021 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
2021
£’000
43,139
(14,020)
137,957
1,696
2020
(restated)
£’000
40,364
(11,706)
121,371
2,019
Equity interest
held
%
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 Filers Way, Weston Gateway Business Park, Weston-Super-Mare BS24 7JP.
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.
128
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Carr’s Group plc Annual Report and Accounts 2021
Carr’s Group plc Annual Report and Accounts 2021
Notes to the Financial Statementscontinued
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17 Interest in joint ventures continued
Joint ventures are accounted for using the equity method.
At the year end the joint ventures had capital commitments of £nil (2020: £nil). No contingent liabilities exist within the joint ventures.
The aggregate amounts included in the financial statements relating to the Group’s share of joint ventures are:
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Income
Expenses
Net finance cost
2021
£’000
2020
£’000
7,763
10,176
(6,054)
(1,106)
44,293
(42,556)
(49)
8,742
8,384
(4,977)
(1,615)
39,478
(37,666)
(88)
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.
During the year an impairment of £1,314,000 was recognised against the investment in Afgritech Ltd and its subsidiary Afgritech LLC.
This is not reflected in the aggregate amounts shown in the table above.
18 Investment in subsidiary undertakings
Name
Carrs Agriculture Ltd
Company
registration
number9
Ordinary
Shares held
%
Country of
incorporation
Country of
operation
100
England1
UK
Carrs Billington Agriculture (Sales) Ltd
Animal Feed Supplement, Inc.
Carr’s Supplements (NZ) Ltd
Carr’s Engineering Ltd
Wälischmiller Engineering GmbH
Carr’s Engineering (US), Inc.
NuVision Engineering, Inc.
Carrs Properties Ltd9
Carr’s International Finance Ltd9
Animax Ltd9
00088157
10888476
01604213
England1
51
UK
100
USA2
USA
100 New Zealand3 New Zealand
100
UK
100
Germany
100
USA
100
USA
UK
100
UK
100
UK
100
England1
Germany4
USA5
USA5
England1
England1
England6
Animax NZ Ltd
100 New Zealand7 New Zealand
Carr’s Supplements (ROI) Ltd
NW Total Engineered Solutions Ltd9 02953309
100
100
Ireland8
Ireland
England1
UK
Activity
Manufacture of
animal feed/mineral blocks and
ingredients of animal feed
Agricultural retailers
Manufacture of animal feed blocks
Distributor of animal feed blocks
Engineering
Engineering
Holding company
Engineering
Property holding
Finance company
Manufacture of animal
health products
Distributor of animal
health products
Distributor of animal feed blocks and
health products
Engineering
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: 17b Farnham Street, Parnell, Auckland, 1052, 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: Shepherds Grove West, Stanton, Bury St Edmunds, Suffolk IP31 2AR.
7 Registered Office address: RSM New Zealand (Auckland), Level 2, Building 5, 60 Highbrook Drive, East Tamaki, Auckland 2013, New Zealand.
8 Registered Office address: Trinity House, Charleston Road, Ranelagh, Dublin 6, Ireland.
9 UK subsidiaries that have taken advantage of the audit exemption set out within section 479A of the Companies Act 2006 for the year ended 28 August 2021.
The Company will guarantee the debts and liabilities of the above UK subsidiary undertakings at the balance sheet date in accordance with section 479C of the
Companies Act 2006. The Company has assessed the probability of loss under the guarantee as remote.
Carr’s Group plc Annual Report and Accounts 2021
129
Shareholder InformationShareholder Information
18 Investment in subsidiary undertakings continued
Dormant subsidiaries are listed on page 162 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 Total Engineered Solutions Ltd; Carrs Agriculture Ltd holds
100% of the investment in Carr’s Supplements (NZ) Ltd and Animax Ltd; Carr’s Engineering (US), Inc. holds 100% of the investment in
NuVision Engineering, Inc.; and Animax Ltd holds 100% of the investment in Animax NZ Ltd.
Non-controlling interests in subsidiary undertakings
The following tables summarise the information relating to Carrs Billington Agriculture (Sales) Ltd, where there is a material non-
controlling interest. The amounts presented are before inter-company eliminations with other companies within the Group. The
non-controlling interest in the subsidiary was 49% in both the current and prior year.
Balance sheet
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Net assets attributable to non-controlling interest
Income statement and statement of comprehensive income
Revenue
Profit after tax
Profit after tax allocated to non-controlling interest
There is no other comprehensive income in the current or prior year.
Statement of cash flows
Cash flows from operating activities
Cash flows from investment activities
Cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
2021
£’000
21,141
70,091
(6,061)
(53,394)
31,777
15,571
2020
(restated)
£’000
20,972
56,618
(5,087)
(41,016)
31,487
15,429
2021
£’000
297,506
3,034
1,487
2020
(restated)
£’000
280,741
1,952
956
2021
£’000
4,049
155
(2,880)
1,324
2020
(restated)
£’000
9,729
(1,140)
(17,505)
(8,916)
During the year dividends of £1,647,000 (2020: £588,000) were paid to the non-controlling interest.
19 Deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Assets
Liabilities
Net
Group
Accelerated tax depreciation
Employee benefits
Other
Tax assets/(liabilities)
2021
£’000
2020
£’000
2021
£’000
—
—
41
41
—
—
—
—
(3,201)
(2,343)
—
2020
£’000
(2,727)
(1,527)
(529)
2021
£’000
(3,201)
(2,343)
41
2020
£’000
(2,727)
(1,527)
(529)
(5,544)
(4,783)
(5,503)
(4,783)
Deferred tax net liabilities are expected to reverse after more than one year from the balance sheet date.
130
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Carr’s Group plc Annual Report and Accounts 2021
Carr’s Group plc Annual Report and Accounts 2021
Notes to the Financial Statementscontinued 19 Deferred tax assets and liabilities continued
Movement in deferred tax during the year
Accelerated tax depreciation
Employee benefits
Other
At
30 August
2020
£’000
(2,727)
(1,527)
(529)
(4,783)
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At
28 August
2021
£’000
(3,201)
(2,343)
41
Exchange
differences
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
23
—
24
47
(497)
(515)
513
(499)
—
(301)
33
(268)
(5,503)
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s
Other deferred tax assets and liabilities includes deferred tax on short-term timing differences, leases, rolled over capital gains, trading
losses, capital losses, business combinations and overseas deferred tax.
Movement in deferred tax during the prior year
Accelerated tax depreciation
Employee benefits
Other
Company
Accelerated tax depreciation
Employee benefits
Other
Tax assets/(liabilities)
Movement in deferred tax during the year
Accelerated tax depreciation
Employee benefits
Other
Movement in deferred tax during the prior year
Accelerated tax depreciation
Employee benefits
Other
At
1 September
2019
£’000
(2,934)
(1,321)
(56)
(4,311)
Exchange
differences
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
69
—
24
93
138
(179)
(468)
(509)
—
(27)
(29)
(56)
At
29 August
2020
£’000
(2,727)
(1,527)
(529)
(4,783)
Assets
Liabilities
Net
2021
£’000
28
—
114
142
2020
£’000
22
—
140
162
2021
£’000
—
(2,343)
—
2020
£’000
—
(1,527)
—
2021
£’000
28
(2,343)
114
2020
£’000
22
(1,527)
140
(2,343)
(1,527)
(2,201)
(1,365)
At
30 August
2020
£’000
22
(1,527)
140
(1,365)
Recognised
in income
£’000
Recognised
in equity
£’000
6
(515)
(52)
(561)
—
(301)
26
At
28 August
2021
£’000
28
(2,343)
114
(275)
(2,201)
At
1 September
2019
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
20
(1,321)
266
2
(179)
(101)
(1,035)
(278)
—
(27)
(25)
(52)
At
29 August
2020
£’000
22
(1,527)
140
(1,365)
Tax of £17,123 (2020: £41,000) in respect of tax losses has not been recognised as a deferred tax asset in the Group balance sheet.
The Company has no unrecognised tax losses (2020: none).
Balances at 1 September 2019 shown in the tables above include deferred tax recognised on the adoption of IFRS 16 'Leases'.
Carr’s Group plc Annual Report and Accounts 2021
131
Shareholder InformationShareholder Information
20 Inventories
Group
Raw materials and consumables
Work in progress
Finished goods and goods for resale
2021
£’000
13,374
1,110
28,742
2020
£’000
13,268
2,351
25,342
43,226
40,961
Inventories are stated after a provision for impairment of £2,202,000 (2020: £1,546,000). The amount recognised as an expense in the
year in respect of the write down of inventories is £753,000 (2020: £691,000). The amount recognised as a credit in the year in respect
of reversals of write downs of inventories is £29,000 (2020: £45,000).
The cost of inventories recognised as an expense and included in cost of sales is £364,143,000 (2020: £341,791,000).
The Company has no inventories (2020: none).
21 Contract balances
The timing of revenue recognition, billings and cash collection results in trade receivables (billed amounts), contract 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 the beginning of the year
Exchange differences
Transfers from contract assets recognised at the beginning of the year to receivables
Increase related to services provided in the year
At the end of the year
Included within:
Current assets
Non-current assets
Contract liabilities
At the beginning of the year
Exchange differences
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 the end of the year
2021
£’000
8,114
(129)
(6,516)
6,045
2020
£’000
9,466
112
(8,080)
6,616
7,514
8,114
7,202
312
7,514
2021
£’000
1,061
(27)
(994)
2,407
2,447
8,114
—
8,114
2020
£’000
1,269
(58)
(1,048)
898
1,061
The Group has assessed expected credit losses and the loss allowance for contract balances as immaterial. The Company has no
contract assets or contract liabilities (2020: none).
132
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Carr’s Group plc Annual Report and Accounts 2021
Carr’s Group plc Annual Report and Accounts 2021
Notes to the Financial Statementscontinued i
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a
a
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a
a
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a
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22 Trade and other receivables
Current:
Trade receivables
Less: provision for impairment of trade receivables
Trade receivables – net
Amounts owed by Group undertakings (note 35)
Amounts owed by other related parties (note 35)
Other taxes and social security receivable
Other receivables
Prepayments
Non-current:
Amounts owed by Group undertakings (note 35)
Other receivables
Group
Company
2021
£’000
2020
£’000
58,007
(2,003)
49,077
(1,873)
56,004
—
1,646
1,460
1,073
1,552
47,204
—
1,989
317
889
1,287
2021
£’000
—
—
—
458
871
—
476
474
61,735
51,686
2,279
2020
£’000
—
—
—
219
1,776
—
212
410
2,617
—
20
20
—
20
20
33,494
—
34,735
—
33,494
34,735
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 charge of £164,000 (2020: £657,000) has been recognised within administrative expenses in the consolidated income
statement in respect of the movement in provision for impairment of trade receivables.
During the year an impairment of £776,000 (2020: £nil) was recognised in both the Group and Company against a loan receivable due
from a joint venture. This is included in the amounts owed by other related parties in the table above. Further details of the impairment
can be found in note 15.
For all other receivables presented above, the Group has assessed expected credit losses and the loss allowance as immaterial.
There are no interest bearing, non-trading amounts owed by Group undertakings within current trade and other receivables in either
the current or prior period.
Interest bearing, non-trading amounts owed by Group undertakings within non-current receivables carry interest at 4.50%, 6.25% or
Bank of England base rate + 2.50%. Such amounts are unsecured and have remaining terms of 1.5 – 2 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
2021
2020
Gross
£’000
Impairment
£’000
38,878
8,791
3,531
1,684
954
4,169
(116)
(39)
(65)
(43)
(40)
(1,700)
Past due
but not
impaired
£’000
N/A
8,752
3,466
1,641
914
2,469
Gross
£’000
Impairment
£’000
34,347
6,517
2,347
1,219
940
3,707
(109)
(28)
(21)
(15)
(12)
(1,688)
Past due
but not
impaired
£’000
N/A
6,489
2,326
1,204
928
2,019
58,007
(2,003)
17,242
49,077
(1,873)
12,966
Carr’s Group plc Annual Report and Accounts 2021
133
Shareholder InformationShareholder Information
22 Trade and other receivables continued
The Company has no trade receivables (2020: £nil).
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.
Trade receivables are assessed by management for credit risk and are considered past due when a counterparty has failed to make a
payment when that payment was contractually due. Management assesses trade receivables that are past the contracted due date by
the ageing periods as presented in the tables above, consistent with how it views the credit risk of trade receivables.
A default is determined to have occurred if the Group becomes aware of evidence that it will not receive all contractual cash flows that
are due.
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 (2020: none).
The carrying value of trade receivables is denominated in the following currencies:
Sterling
US Dollar
Euro
New Zealand Dollar
Other
23 Current tax assets
Corporation tax recoverable
Group taxation relief
24 Cash and cash equivalents and bank overdrafts
Cash and cash equivalents per the balance sheet
Bank overdrafts (note 26)
Cash and cash equivalents per the statement of cash flows
Group
Company
2021
£’000
2020
£’000
2020
£’000
2020
£’000
48,934
3,086
2,850
1,134
—
41,416
1,960
2,955
870
3
56,004
47,204
—
—
—
—
—
—
—
—
—
—
—
—
Group
Company
2021
£’000
2,669
—
2,669
2020
£’000
2,068
—
2,068
2021
£’000
1,851
735
2,586
2020
£’000
1,474
543
2,017
Group
Company
2021
£’000
2020
£’000
24,309
(4,613)
17,571
(7,267)
2021
£’000
11,063
—
19,696
10,304
11,063
2020
£’000
7,984
—
7,984
134
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Notes to the Financial Statementscontinued i
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25 Trade and other payables
Current:
Trade payables
Amounts owed to Group undertakings (note 35)
Amounts owed to other related parties (note 35)
Other taxes and social security payable
Contingent, deferred and unpaid cash consideration
Other payables
Accruals
Deferred income
Non-current:
Contingent consideration
Deferred income
Group
Company
2021
£’000
2020
£’000
16,269
—
23,144
1,697
1,320
2,823
24,268
5
16,669
—
19,820
2,524
2,169
9,270
5,065
5
2021
£’000
744
11
1
409
—
116
1,114
—
2020
£’000
550
2
—
543
—
171
394
—
69,526
55,522
2,395
1,660
—
55
55
1,276
109
1,385
—
—
—
—
—
—
Amounts owed to Group undertakings and other related parties are interest free, unsecured and repayable on demand.
Trade and other payables includes deferred and contingent consideration on prior year acquisitions. After retranslation at the balance
sheet date of foreign currency denominated amounts, £1,320,000 (2020: £2,169,000) of these outstanding payables are recognised
within current liabilities and £nil (2020: £1,276,000) are recognised within non-current liabilities.
Deferred income comprises government grants as follows:
At the beginning of the year
Amortisation in the year
At the end of the year
Included within:
Current liabilities
Non-current liabilities
Group
Company
2021
£’000
114
(54)
60
5
55
60
2020
£’000
169
(55)
114
5
109
114
2021
£’000
2020
£’000
—
—
—
—
—
—
—
—
—
—
—
—
Carr’s Group plc Annual Report and Accounts 2021
135
Shareholder InformationShareholder Information
26 Borrowings
Current:
Bank overdrafts
Bank loans and other borrowings
Loans from Group undertakings (note 35)
Non-current:
Bank loans
Borrowings are repayable as follows:
On demand or within one year
In the second year
In the third to fifth years inclusive
Group
Company
2021
£’000
2020
£’000
2021
£’000
2020
£’000
4,613
6,500
—
7,267
4,153
—
11,113
11,420
—
2,341
—
2,341
—
2,340
110
2,450
23,159
25,021
21,906
22,947
23,159
25,021
21,906
22,947
11,113
1,570
21,589
11,420
3,106
21,915
2,341
1,153
20,753
2,450
2,340
20,607
34,272
36,441
24,247
25,397
Group and Company borrowings are shown in the balance sheet net of arrangement fees of £121,000 (2020: £181,000) of which £60,000
(2020: £60,000) is deducted from current liabilities and £61,000 (2020: £121,000) is deducted from non-current liabilities.
The net borrowings are:
Borrowings as above
Cash and cash equivalents
Net borrowings
Group
Company
2021
£’000
2020
£’000
2021
£’000
2020
£’000
34,272
(24,309)
36,441
(17,571)
24,247
(11,063)
25,397
(7,984)
9,963
18,870
13,184
17,413
Bank loans and other borrowings includes an amount of £2,456,000 (2020: £62,000) 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.
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 includes a drawn down revolving credit facility of £19.6m (2020: £18.3m) which is repayable in November 2023.
At the year end the Group had £9.0m of undrawn revolving credit facilities (2020: £10.3m).
136
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Carr’s Group plc Annual Report and Accounts 2021
Notes to the Financial Statementscontinued
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27 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
Group
Assets
Other investments
Non-current contract assets
Non-current receivables
Current contract assets
Current trade and other
receivables
Current derivatives
Cash and cash equivalents
US
Dollar
£’000
2021
Euro
£’000
NZ
Dollar
£’000
Total
£’000
Sterling
£’000
US
Dollar
£’000
22
—
20
—
—
—
1,122 2,079
—
—
—
—
72
312
20
50
—
—
7,202 4,407
22
—
20
1,850
2020
Euro
£’000
1
—
—
1,857
Sterling
£’000
50
312
—
4,001
—
—
—
—
51,175 3,503
—
2,911
—
14,506 5,664 4,048
—
1,134 58,723 43,055
—
—
—
91 24,309 10,228
3,182
—
4,625
2,972
3
2,231
870
—
487
NZ
Dollar
£’000
Other
£’000
Total
£’000
—
—
—
—
73
—
20
8,114
3 50,082
3
—
17,571
—
70,044 10,331 9,038
1,225 90,638 57,740
9,699
7,064
1,357
3 75,863
Liabilities
1,703
Current borrowings
16
Current leases
579
Contract liabilities
Current trade and other payables 61,805 3,545 2,339
— 5,822
Non-current borrowings
37
Non-current leases
—
Other non-current liabilities
17,337
12,146
—
9,319
2,691
1,573
91
260
295
275
—
—
—
—
9,430
11,113
2,514
2,967
377
2,447
135 67,824 47,169
— 23,159
18,179
— 12,458 10,869
1,276
—
—
648
264
418
3,565
329
302
—
1,342
—
266
2,098
6,513
—
—
104,871 4,466 10,496
135 119,968 89,814
5,526
10,219
2021
11,420
—
2,778
—
—
1,061
— 52,993
— 25,021
11,171
—
1,276
—
— 105,720
—
—
—
161
—
—
—
161
2020
Company
Assets
Non-current receivables
Current trade and other receivables
Cash and cash equivalents
Liabilities
Current borrowings
Current leases
Current trade and other payables
Non-current borrowings
Non-current leases
Sterling
£’000
US Dollar
£’000
Euro
£’000
Total
£’000
Sterling
£’000
US Dollar
£’000
Euro
£’000
Total
£’000
12,192
1,406
9,612
14,574
399
1,191
6,728
—
260
33,494
1,805
11,063
11,329
999
6,832
15,018
1,208
634
8,388
—
518
34,735
2,207
7,984
23,210
16,164
6,988
46,362
19,160
16,860
8,906
44,926
2,341
98
1,986
17,338
250
22,013
—
—
—
—
—
—
—
—
—
4,568
—
2,341
98
1,986
21,906
250
2,450
97
1,117
18,178
354
4,568
26,581
22,196
—
—
—
—
—
—
—
—
—
4,769
—
2,450
97
1,117
22,947
354
4,769
26,965
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.
Carr’s Group plc Annual Report and Accounts 2021
137
Shareholder Information
27 Derivatives and other financial instruments continued
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% (2020: 10%) weakening or strengthening in Sterling against other currencies represents reasonable
possible changes.
Impact on profit after taxation
Impact on total equity
2021
2020
10%
weakening
£’000
969
5,649
10%
strengthening
£’000
(793)
(4,661)
10%
weakening
£’000
784
5,602
10%
strengthening
£’000
(641)
(4,584)
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.
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 borrowings
Bank overdrafts
Bank loans and other borrowings
Fixed rate
Floating rate
2021
2020
Weighted
average
effective
interest rate
%
1.84
1.74
Weighted
average
effective
interest rate
%
1.87
1.68
£’000
4,613
29,659
34,272
1,671
32,601
34,272
£’000
7,267
29,174
36,441
2,483
33,958
36,441
The Group’s floating rate financial liabilities bear interest determined as follows:
Bank overdrafts
Bank loans and other borrowings
US prime rate + 1.0% margin; US prime rate + 0.5% margin; Bank of England base rate + 1.7% margin
Bank of England base rate + 1.67%; Bank of England base rate + 1.77%; Euribor + 1.7%; Bank of
England base rate + 1.15% margin
Company borrowings
Bank loans
Loans from Group undertakings
Floating rate
2021
2020
Weighted
average
effective
interest rate
%
1.79
—
Weighted
average
effective
interest rate
%
1.69
—
£’000
24,247
—
24,247
£’000
25,287
110
25,397
The Company’s floating rate financial liabilities bear interest determined as follows:
Bank loans
Bank of England base rate + 1.67%; Bank of England base rate + 1.77%; Euribor + 1.7%
138
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Carr’s Group plc Annual Report and Accounts 2021
Carr’s Group plc Annual Report and Accounts 2021
Notes to the Financial Statementscontinued
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27 Derivatives and other financial instruments continued
Sensitivity analysis
The impact of a decrease or increase in interest rates during the year is shown in the table below. The Directors consider that a 1%
(2020: 1%) movement in interest rates represents a reasonable possible change.
Impact on profit after taxation
Impact on total equity
2021
2020
1% decrease
£’000
1% increase
£’000
1% decrease
£’000
1% increase
£’000
396
396
(396)
(396)
542
542
(542)
(542)
This sensitivity analysis is not an indication of actual results, which may materially differ. For the purposes of this sensitivity analysis all
other variables have been held constant.
Liquidity risk
The Group’s policy throughout the year has been to maintain a mix of short and medium-term borrowings. Short-term flexibility is
achieved by overdraft facilities. In addition, it is the Group’s policy to maintain committed undrawn facilities in order to provide flexibility
in the management of the Group’s liquidity.
The tables below analyse the Group and Company’s financial liabilities which will be settled on a net basis into relevant maturity
groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the
tables are the contractual undiscounted cash flows which have been calculated using spot rates at the relevant balance sheet date.
Group
Bank overdrafts
Bank loans and other borrowings
Contract liabilities
Trade and other payables
Other non-current liabilities
Company
Bank loans
Loans from Group undertakings
Trade and other payables
2021
2020
Total
£’000
4,613
30,651
2,447
67,824
—
Within
one year
£’000
4,613
6,975
2,447
67,824
—
One to
two years
£’000
—
1,990
—
—
—
Two to
five years
£’000
—
21,686
—
—
—
Total
£’000
7,267
30,639
1,061
52,993
1,320
Within
one year
£’000
7,267
4,668
1,061
52,993
—
One to
two years
£’000
—
3,563
—
—
1,320
Two to
five years
£’000
—
22,408
—
—
—
105,535
81,859
1,990
21,686
93,280
65,989
4,883
22,408
2021
2020
Total
£’000
25,167
—
1,986
27,153
Within
one year
£’000
2,785
—
1,986
4,771
One to
two years
£’000
1,551
—
—
1,551
Two to
five years
£’000
20,831
—
—
Total
£’000
26,629
110
1,117
20,831
27,856
Within
one year
£’000
2,808
110
1,117
4,035
One to
two years
£’000
2,764
—
—
Two to
five years
£’000
21,057
—
—
2,764
21,057
The above tables exclude leases accounted for under IFRS 16. Details of the contractual undiscounted cash flows for leases under
IFRS 16 can be found in note 13.
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.
Carr’s Group plc Annual Report and Accounts 2021
Carr’s Group plc Annual Report and Accounts 2021
139
139
Shareholder InformationShareholder Information
27 Derivatives and other financial instruments continued
Borrowing facilities
The Group has various undrawn facilities. The undrawn facilities available at 28 August 2021, in respect of which all conditions
precedent had been met, were as follows:
Expiring in one year or less
Expiring within two and five years inclusive
2021
Floating
rate
£’000
6,379
29,617
2020
Floating
rate
£’000
6,883
28,200
35,996
35,083
Undrawn facilities include overdraft facilities of £2.5m (2020: £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.
The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt, excluding leases, 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 28 August 2021, the Group had net
debt of £10.0m (2020: £18.9m). Based on net debt, gearing was 7.4% at the year end (2020: restated 14.3%).
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
Transfers between levels are deemed to have occurred at the end of the reporting period. There were no transfers between levels in
the above hierarchy in the period.
All derivative financial instruments are measured at fair value using level 2 inputs. The Group’s bankers provide the valuations for the
derivative financial instruments at each reporting period end based on mark to market valuation techniques.
Contingent consideration is measured at fair value using level 3 inputs. Fair value is determined considering the expected payment,
which is discounted to present value. The expected payment is determined separately in respect of each individual earn-out
agreement taking into consideration the expected level of profitability of each acquisition.
140
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Carr’s Group plc Annual Report and Accounts 2021
Notes to the Financial Statementscontinued
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27 Derivatives and other financial instruments continued
The significant unobservable inputs are the projections of future profitability, which have been based on the budget for the year to
August 2022, and the discount rate, which has been based on the incremental borrowing rate. At 28 August 2021, all of the remaining
contingent consideration payable is included within current liabilities and has therefore not been discounted. In respect of the prior
year, a reasonable change in the discount rate applied would not have had a material impact on the balances recognised within
non-current liabilities. The range of possible outcomes for the contingent consideration payable would be between £nil and £1,320,000.
The following table presents a reconciliation of the contingent consideration liability measured at fair value on a recurring basis using
significant unobservable inputs (level 3).
Fair value at the beginning of the year
Exchange differences
Payments made to vendors (including legal costs)
Change in fair value
Fair value at the end of the year
2021
£’000
3,422
(12)
(1,077)
(1,013)
2020
£’000
7,954
(184)
(2,513)
(1,835)
1,320
3,422
The change in fair value has been included as an adjusting item (note 5).
Fair values of financial assets and liabilities
The fair values 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 loss of £36,000
(2020: £112,000) was recognised in equity during the year on translation of US Dollar denominated loans with a fair value of $1,608,000
(2020: $1,608,000) to Sterling. A foreign exchange pre-tax gain of £201,000 (2020: £58,000) was recognised in equity during the year on
translation of Euro denominated loans with a fair value of €5,330,000 (2020: €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 the beginning of the year
(Losses)/gains during the year
At the end of the year – included within current assets
The Company has no forward foreign currency contracts (2020: none).
2021
2020
Fair
value
£’000
Contractual
or notional
amount
£’000
3
(3)
—
105
(105)
—
Fair
value
£’000
Contractual
or notional
amount
£’000
—
3
3
—
105
105
Fair value has been determined by reference to the value of equivalent forward foreign currency contracts at the balance sheet date.
Gains and losses on currency-related derivatives are included within administrative expenses.
Carr’s Group plc Annual Report and Accounts 2021
Carr’s Group plc Annual Report and Accounts 2021
141
141
Shareholder InformationShareholder Information
28 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 (2020: £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 2020 and updated on an approximate basis to 28
August 2021 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
2021
%
3.30
2.60
1.70
3.30
3.30
2020
%
2.90
2.00
1.80
2.90
3.50
The assumption for CPI has been derived by making an adjustment for the expected long-term gap between RPI and CPI. This has
generally been viewed as more credible than fixing the assumption based on the Bank of England CPI inflation target. This may change
going forward, especially from 2030, when RPI will be aligned with CPIH.
The assumed RPI/CPI gap as at 28 August 2021 has been adjusted down to 0.7% from 0.9% at 29 August 2020. This broadly reflects
retention of a 0.9% p.a. assumed gap before 2030 and 0% p.a. gap thereafter, suitably weighted to reflect the scheme’s exposure to CPI
liabilities in the period before non-pensioner members’ retirement and, given the maturity of the population, is significantly weighted to
the period before 2030.
The mortality tables used in the valuation as at 28 August 2021 are 100% of 2019 Vita Curves for males and females with allowance for
mortality improvements using CMI_2020 with a 1.25% p.a. underpin. The mortality assumptions adopted imply the following life
expectancies at age 65 as at 28 August 2021:
Males currently age 45
Females currently age 45
Males currently age 65
Females currently age 65
At
28 August
2021
23.1 years
25.6 years
21.8 years
24.1 years
At
29 August
2020
23.1 years
25.3 years
21.8 years
23.7 years
142
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Carr’s Group plc Annual Report and Accounts 2021
Carr’s Group plc Annual Report and Accounts 2021
Notes to the Financial Statementscontinued
28 Retirement benefits continued
No adjustments have been made to mortality assumptions at the year end to reflect the potential effects of COVID-19 as the actual
plan experience is not yet available and it is too soon to make a judgement on the impact of the pandemic on future mortality
improvements. The mortality experience analysis for the scheme will be carried out in the future as part of the 31 December 2023
funding valuation for the Carr’s Group Pension Scheme.
Amounts recognised in the Income Statement in respect of defined benefit schemes:
i
i
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S
t
t
r
r
a
a
t
t
e
e
g
g
c
c
R
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p
p
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r
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t
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G
G
o
o
v
v
e
e
r
r
n
n
a
a
n
n
c
c
e
e
Administrative expenses
Net interest on the net defined benefit asset
Total income
The (income)/expense is recognised within the Income Statement as shown below:
Within operating profit:
Administrative expenses
Within interest:
Finance income
Total income
Remeasurements of the net defined benefit asset to be shown in the Statement of Comprehensive Income:
i
i
i
i
F
F
n
n
a
a
n
n
c
c
a
a
l
l
S
S
t
t
a
a
t
t
e
e
m
m
e
e
n
n
t
t
s
s
2021
£’000
18
(147)
(129)
2021
£’000
18
(147)
(129)
2021
£’000
(3,265)
314
(220)
4,376
1,205
2020
£’000
13
(139)
(126)
2020
£’000
13
(139)
(126)
2020
£’000
422
173
—
(453)
142
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
2021
£’000
2020
£’000
(66,254)
75,625
(65,834)
73,871
9,371
8,037
Carr’s Group plc Annual Report and Accounts 2021
Carr’s Group plc Annual Report and Accounts 2021
143
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Shareholder InformationShareholder Information
28 Retirement benefits continued
Reconciliation of opening and closing balances of the present value of the defined benefit obligation:
Benefit obligation at the beginning of the year
Interest cost
Net measurement losses/(gains) – financial
Net measurement gains – demographic
Net measurement losses – experience
Benefits paid
Benefit obligation at the end of the year
Benefit obligation by participant status:
Vested deferred
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
144
144
Carr’s Group plc Annual Report and Accounts 2021
Carr’s Group plc Annual Report and Accounts 2021
2021
£’000
2020
£’000
65,834
1,150
3,265
(314)
220
(3,901)
68,037
1,199
(422)
(173)
—
(2,807)
66,254
65,834
2021
£’000
19,602
46,652
2020
£’000
22,615
43,219
66,254
65,834
2021
£’000
73,871
1,297
4,376
(3,901)
(18)
2020
£’000
75,806
1,338
(453)
(2,807)
(13)
75,625
73,871
Fair value of assets
2021
£’000
10,247
2,561
57,759
2,625
2,433
2020
£’000
11,563
2,328
52,274
5,360
2,346
75,625
73,871
5,673
885
Notes to the Financial Statementscontinued
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28 Retirement benefits continued
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. Cash includes investments in UK Cash Funds within the Mercer fund portfolios.
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
68,572
64,060
64,540
67,395
69,581
63,027
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 14 years (2020: 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
£’000
—
—
4,021
4,146
4,275
4,407
4,544
24,925
Carr’s Group plc Annual Report and Accounts 2021
Carr’s Group plc Annual Report and Accounts 2021
145
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Shareholder InformationShareholder Information
28 Retirement benefits continued
Characteristics and the risks associated with the Scheme
Information about the characteristics of the Scheme:
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 2020, being the date of the
most recent finalised actuarial valuation, the scheme funding valuation of the Scheme revealed a surplus of £2.3m equating to a
funding level of 103%. On a solvency basis the scheme had a deficit of £10.0m, equating to a funding level of 88%. 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 2022 are expected to be £nil. The next full triennial actuarial valuation will be as at 31 December 2023, 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 lower risk assets, such as bonds. 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
2024–2028. 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 £1,909,000 (2020: £1,815,000).
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 £5.4m (2020: £3.5m). 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.
146
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Carr’s Group plc Annual Report and Accounts 2021
Carr’s Group plc Annual Report and Accounts 2021
Notes to the Financial Statementscontinued i
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28 Retirement benefits continued
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 £13.7m and the Group’s estimated liability on the wind-up of the scheme was £6.6m.
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
(2020: £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 2018, which showed that the scheme had a deficit of £2.6m on a technical provisions basis.
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 ‘Investment in associate’ in its consolidated balance sheet.
Other pension schemes
The pension expense in respect of defined contribution pension arrangements in foreign subsidiaries during the year was £565,000
(2020: £581,000).
Pension contributions into NEST during the year amounted to £92,000 (2020: £95,000).
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 £16,000 (2020: £31,000).
Other pension-related expenses
During the year the Group incurred expenses associated with pension schemes, including death in service insurance policy premiums,
of £142,000 (2020: £148,000).
29 Share capital
Group and Company
Shares
£’000
Shares
£’000
Allotted and fully paid Ordinary Shares of 2.5p each:
At the beginning of the year
Allotment of shares
At the end of the year
92,465,833
1,254,292
2,312
31
91,942,005
523,828
93,720,125
2,343
92,465,833
2,299
13
2,312
2021
2020
The table above includes no (2020: 41,352) shares held in Treasury.
The consideration received on the allotment of shares during the year was £1,010,438 (2020: £23,688).
For details of share-based payment schemes see note 30.
Since the year end 21,295 shares have been allotted with a nominal value of £532 due to the exercise of share options.
Purchases of the Company's own shares are included as cash flows from financing activities within the Consolidated and Company
Statements of Cash Flows. The prior year presentation remains unchanged on the grounds of immateriality.
Carr’s Group plc Annual Report and Accounts 2021
Carr’s Group plc Annual Report and Accounts 2021
147
147
Shareholder InformationShareholder Information
30 Share-based payments
Group
The Group operates three active share-based payment schemes at 28 August 2021.
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 December 2018, November 2019 and
November 2020 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 three-year vesting period plans. The exercise period is six 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
Save Schemes are as follows:
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
Long Term
Incentive Plan
November 2020
Long Term
Incentive Plan
November 2019
Long Term
Incentive Plan
December 2018
Share Save
Scheme
(3-Year Plan
2021)
Share Save
Scheme
(3-Year Plan
2020)
Share Save
Scheme
(3-Year Plan
2019)
23/11/20
11/11/19
19/12/18
21/12/20
16/12/19
17/12/18
£1.25
£0.00
£1.102
7
721,437
3
£1.43
£0.00
£1.277
8
610,464
3
£1.485
£0.00
£1.348
8
579,788
3
£1.44
£1.275
£0.36
153
420,851
3
Market value* Market value* Market value* Black-Scholes Black-Scholes Black-Scholes
34.8%
3.65
3.4
0.81%
£1.275
£1.02
£0.37
216
1,176,886
3
£1.565
£1.223
£0.46
157
508,407
3
41.3%
3.65
3.4
-0.07%
36.4%
3.65
3.4
0.61%
—
10
6.5
—
—
10
6.5
—
—
10
6.5
—
1.81%
45%
2.33%
0%
2.05%
0%
3.73%
95%
3.04%
95%
2.56%
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 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.
148
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Carr’s Group plc Annual Report and Accounts 2021
Carr’s Group plc Annual Report and Accounts 2021
Notes to the Financial Statementscontinued
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30 Share-based payments continued
Number of options (LTIP and Share Save)
Outstanding:
At 1 September 2019
Granted in the year
Forfeited in the year
At 29 August 2020
Granted in the year
Exercised in the year
Forfeited in the year
At 28 August 2021
Exercisable:
At 29 August 2020
At 28 August 2021
Weighted average:
Remaining contractual
life (years)
Remaining expected
life (years)
Long Term
Incentive Plan
November 2020
Number ’000
Long Term
Incentive Plan
November 2019
Number ’000
Long Term
Incentive Plan
December 2018
Number ’000
Long Term
Incentive Plan
December 2017
Number ’000
Share Save
Scheme (3-Year
Plan 2021)
Number ’000
Share Save
Scheme (3-Year
Plan 2020)
Number ’000
Share Save
Scheme (3-Year
Plan 2019)
Number ’000
—
—
—
—
721
—
—
721
—
—
9
—
610
—
610
—
—
(55)
555
—
—
8
580
—
—
580
—
—
(52)
528
—
—
7
612
—
—
612
—
(310)
(302)
—
—
—
6
—
—
—
—
1,177
—
(95)
1,082
—
—
—
508
(57)
451
—
(1)
(95)
355
—
—
378
—
(52)
326
—
(1)
(62)
263
—
—
3.07
2.07
1.07
5.50
4.50
3.50
2.50
2.82
1.82
0.82
The total charge/(credit) recognised for the year arising from share-based payments are as follows:
Deferred Bonus Share Plan 2021
Deferred Bonus Share Plan 2020
Deferred Bonus Share Plan 2019
Deferred Bonus Share Plan 2018
Long Term Incentive Plan November 2020
Long Term Incentive Plan December 2018
Long Term Incentive Plan December 2017
Share Save Scheme (3-Year Plan 2021)
Share Save Scheme (3-Year Plan 2020)
Share Save Scheme (3-Year Plan 2019)
Share Save Scheme (3-Year Plan 2018)
2021
£’000
119
17
—
(11)
105
—
11
84
75
23
41
464
2020
£’000
—
—
(13)
—
—
(175)
(121)
—
55
42
75
(137)
Carr’s Group plc Annual Report and Accounts 2021
Carr’s Group plc Annual Report and Accounts 2021
149
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Shareholder InformationShareholder Information
30 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)
Outstanding:
At 1 September 2019
Granted in the year
Forfeited in the year
At 29 August 2020
Granted in the year
Exercised in the year
Forfeited in the year
At 28 August 2021
Exercisable:
At 29 August 2020
At 28 August 2021
Weighted average:
Remaining contractual
life (years)
Remaining expected
life (years)
Long Term
Incentive Plan
November 2020
Number ’000
Long Term
Incentive Plan
November 2019
Number ’000
Long Term
Incentive Plan
December 2018
Number ’000
Long Term
Incentive Plan
December 2017
Number ’000
Share Save
Scheme (3-Year
Plan 2021)
Number ’000
Share Save
Scheme (3-Year
Plan 2020)
Number ’000
Share Save
Scheme (3-Year
Plan 2019)
Number ’000
—
—
—
—
588
—
—
588
—
—
9
—
443
—
443
—
—
—
443
—
—
8
470
—
—
470
—
—
(52)
418
—
—
7
486
—
—
486
—
(251)
(235)
—
—
—
6
—
—
—
—
157
—
—
157
—
—
—
42
—
42
—
—
(8)
34
—
—
58
—
(23)
35
—
—
(18)
17
—
—
3.07
2.07
1.07
5.50
4.50
3.50
2.50
2.82
1.82
0.82
The total charge/(credit) recognised for the year arising from share-based payments are as follows:
Deferred Bonus Share Plan 2021
Deferred Bonus Share Plan 2020
Deferred Bonus Share Plan 2019
Deferred Bonus Share Plan 2018
Long Term Incentive Plan November 2020
Long Term Incentive Plan December 2018
Long Term Incentive Plan December 2017
Share Save Scheme (3-Year Plan 2021)
Share Save Scheme (3-Year Plan 2020)
Share Save Scheme (3-Year Plan 2019)
Share Save Scheme (3-Year Plan 2018)
2021
£’000
119
17
—
(11)
83
—
(2)
13
10
2
9
240
2020
£’000
—
—
(13)
—
—
(133)
(80)
—
12
7
18
(189)
Share-based payments awarded to employees of subsidiary undertakings and recognised as an investment in subsidiary undertakings
in the Company are as follows:
Long Term Incentive Plan November 2020
Long Term Incentive Plan December 2017
Share Save Scheme (3-Year Plan 2021)
Share Save Scheme (3-Year Plan 2020)
Share Save Scheme (3-Year Plan 2019)
Share Save Scheme (3-Year Plan 2018)
Total carrying amount of investments
150
150
Carr’s Group plc Annual Report and Accounts 2021
Carr’s Group plc Annual Report and Accounts 2021
2021
£’000
2020
£’000
22
—
61
70
66
—
—
53
—
33
49
191
219
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Notes to the Financial Statementscontinued
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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
Depreciation and impairment of property, plant and equipment
Depreciation of right-of-use assets
Depreciation of investment property
Intangible asset amortisation
(Profit)/loss on disposal of property, plant and equipment
(Profit)/loss on disposal of right-of-use assets
Loss on dissolution of dormant subsidiaries
Adjustments to contingent consideration
Net fair value charge/(credit) on share-based payments
Release of loan provision
Other non-cash adjustments
Finance costs:
Interest income
Interest expense and borrowing costs
Share of results of associate and joint ventures
Impairment of joint venture (Company: impairment of loan receivable)
IAS 19 income statement charge (excluding interest):
Administrative expenses (note 28)
Changes in working capital (excluding the effects of acquisitions):
(Increase)/decrease in inventories
(Increase)/decrease in receivables
Increase/(decrease) in payables
Cash generated from/(used in) continuing operations
32 Analysis of net debt and leases
Group
Cash and cash equivalents
Bank overdrafts
Loans and other borrowings:
– Current
– Non-current
Net debt
Leases:
– Current
– Non-current
Leases
Group
Company
2021
£’000
2020
(restated)
£’000
2021
£’000
2020
(restated)
£’000
9,652
9,613
6,261
6,773
2,400
(260)
—
—
3,822
2,529
6
1,256
(144)
—
—
(1,013)
464
—
(600)
(260)
1,292
(2,252)
2,090
1,316
(250)
—
—
4,567
2,462
6
1,467
265
(37)
—
(937)
(137)
(783)
(504)
(313)
1,716
(2,431)
—
(8)
—
(8,248)
(1,039)
33
105
—
—
—
—
—
—
240
—
637
(1,593)
531
—
876
(256)
—
(14,016)
(588)
40
96
—
—
—
4
5,337
—
(189)
—
1,624
(1,911)
750
—
—
18
13
18
13
(2,679)
(10,606)
16,448
4,811
3,862
(3,479)
—
(471)
749
—
637
(834)
22,163
21,227
(1,909)
(2,520)
At
30 August
2020
£’000
17,571
(7,267)
Cash flow
£’000
7,034
2,654
10,304
9,688
Other
non-cash
changes
£’000
Exchange
movements
£’000
At
28 August
2021
£’000
—
—
—
(296) 24,309
(4,613)
—
(296)
19,696
(4,153)
(25,021)
(3,920)
900
1,514
685
59
277
(6,500)
(23,159)
(18,870)
6,668
2,199
40
(9,963)
(2,778)
(11,171)
—
3,252
(189)
(4,556)
(13,949)
3,252
(4,745)
—
17
17
(2,967)
(12,458)
(15,425)
Other non-cash changes in net debt relate to the release of a loan forgiven by the lender, amounts reclassified as leases and the
release of deferred borrowing costs to the consolidated income statement. For leases, these relate to new leases entered into during
the year.
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32 Analysis of net debt and leases continued
Company
Cash and cash equivalents
Loans and other borrowings:
– Current
– Non-current
Net debt
Leases:
– Current
– Non-current
Leases
At
30 August
2020
£’000
Cash flow
£’000
Other
non-cash
changes
£’000
Exchange
movements
£’000
At
28 August
2021
£’000
7,984
3,116
—
(37)
11,063
(2,450)
(22,947)
110
900
(17,413)
4,126
(97)
(354)
(451)
—
98
98
—
(60)
(60)
(1)
6
5
(1)
201
(2,341)
(21,906)
163
(13,184)
—
—
—
(98)
(250)
(348)
Other non-cash changes in net debt relate to the release of deferred borrowing costs to the income statement.
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 (2020: none).
2021
£’000
2020
£’000
1,164
860
34 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 28 August 2021 amounted to £2,674,000
(2020: £5,973,000).
Certain subsidiary undertakings utilise guarantee facilities with financial institutions which include their own bankers. These financial
institutions in the normal course of business enter into certain specific guarantees with some of the subsidiaries’ customers. All these
guarantees allow the financial institutions to have recourse to the subsidiaries if a guarantee is enforced. The total outstanding of such
guarantees at 28 August 2021 was £3,098,000 (2020: £5,635,000).
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 £14,788,000 (2020: £14,314,000) and as at
28 August 2021 £359,000 (2020: £933,000) 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 28 August 2021, the cumulative rent payable over the remaining
term of the lease is £728,000 (2020: £932,000).
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 (2020: £1,500,000).
One of the Group’s subsidiary undertakings is a participating employer in the Carrs Billington Agriculture Pension Scheme. On a
wind-up of the scheme the buy-out deficit would be split between the participating employers with the Group’s level of participation
in the scheme estimated at 48.5%. At the last actuarial valuation, the Group’s estimated liability on the wind-up of the scheme was
£6.6m (2020: £6.6m).
Certain UK subsidiaries have taken advantage of the audit exemption set out within section 479A of the Companies Act 2006 for the
year ended 28 August 2021. The Company will guarantee the debts and liabilities of these subsidiaries at the balance sheet date in
accordance with section 479C of the Companies Act 2006. Details of the subsidiaries taking audit exemption are included in note 18.
The Company has assessed the probability of loss under the guarantee as remote.
The Group and Company do not expect any of the above to be called in.
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35 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 and note 6.
Balances reported in the Balance Sheet
Amounts owed by businesses controlled by key management personnel (in a
trading capacity):
Trade and other receivables
Trade and other payables
Transactions reported in the Income Statement
Revenue
Purchases
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
2021
£’000
2020
£’000
2021
£’000
2020
£’000
379
(1)
405
(5)
104
—
474
—
—
(1)
—
(5)
—
—
—
—
Company
2021
£’000
2020
£’000
33,494
458
34,735
219
33,952
34,954
—
(11)
(11)
(110)
(2)
(112)
3,400
8,248
1,372
(1)
2,857
14,016
1,653
(1)
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35 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
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
2021
£’000
2020
£’000
2021
£’000
2020
£’000
205
246
(23,128)
(19,815)
1,039
20
109
—
(171)
514
20
106
—
(253)
(120,593) (106,072)
70
—
—
—
109
1,039
—
—
169
—
—
—
106
588
—
—
Group
Company
2021
£’000
2020
£’000
2021
£’000
2020
£’000
1,062
1,639
801
1,607
(15)
(5)
—
—
Included within Group and Company trade and other receivables is £793,000 (2020: £1,605,000) in respect of loans owed by joint
ventures. A provision for impairment of £776,000 (note 22) has been recognised in the year by both the Group and Company against the
loan receivable. The amounts included in the table above are net of this provision for impairment.
Transactions reported in the Income Statement
Revenue
Management charges receivable
Purchases
Group
Company
2021
£’000
2020
£’000
2021
£’000
2020
£’000
895
162
(408)
417
166
(200)
—
—
—
—
—
—
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. This lease is accounted for under IFRS 16 and at the
year end the lease liability included in the consolidated balance sheet was £1,047,000 (2020: £1,114,000). Lease payments made in the
year were £98,000 (2020: £98,000).
36 Prior year restatement
In April 2021, the IFRS Interpretations Committee (IFRIC) published an agenda decision on the clarification of accounting in relation to
the configuration and customisation costs incurred in implementing Software-as-a-Service (SaaS) as follows:
• Amounts paid to the cloud vendor for configuration and customisation that are not distinct from access to the cloud software are
•
•
expensed over the SaaS contract term.
In limited circumstances, other configuration and customisation costs incurred in implementing SaaS arrangements may give rise to
an identifiable intangible asset, for example, where code is created that is controlled by the entity.
In all other instances, configuration and customisation costs will be expensed as the customisation and configuration services are
received.
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Notes to the Financial Statementscontinued i
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Following the publication of this agenda decision the Group and Company has reviewed its accounting policy for the capitalisation of
costs incurred in respect of the configuration and customisation of its cloud hosted ERP system which has been implemented recently
across several of the Group’s businesses. In determining whether a change in accounting policy is required the Group has considered
whether the cost of configuration and customisation activities create a resource controlled by the Group that is separate to the
software. Control is demonstrated if the entity has the power to obtain future economic benefits and also has the ability to restrict
access of others to those benefits.
The Board concluded that the Group did not meet the definition of having control over the asset and that the configuration and
customisation costs did not relate to a separately identifiable asset under IAS 38. It has therefore revised its accounting policy to align
with the IFRIC guidance. This revision has been accounted for retrospectively resulting in a prior year restatement.
The Group identified £2,894,000 of capitalised costs incurred by the parent Company and its subsidiaries in the years up to and
including 29 August 2020 that should be expensed with a further £667,000 in its associate’s balance sheet, of which the Group
recognises 49%. During the current year, costs of £1,356,000 incurred by the parent Company and its subsidiaries have been expensed.
The associate incurred costs of £1,297,000 during the current year, of which the Group recognises 49%, which have been expensed and
recognised through the Group's share of post-tax results of associate.
The affected financial statement line items for the Group are as follows.
Income Statement
Administrative expenses
Adjusted share of results of associate
Reported share of results of associate
Adjusted operating profit
Reported operating profit
Adjusted profit before taxation
Reported profit before taxation
Taxation
Adjusted profit for the year
Reported profit for the year
Basic EPS (pence)
Diluted EPS (pence)
Adjusted EPS (pence)
Balance Sheet
Other intangible assets
Investment in associate
Total non-current assets
Current tax assets
Total current assets
Total assets
Net assets
Retained earnings
Total shareholders’ equity
Non-controlling interests
Total equity
Cash Flow Statement
Cash generated from continuing operations
Net cash generated from operating activities
Purchase of intangible assets
Net cash used in investing activities
29 August 2020
(previously
reported)
£’000
Restatement
£’000
29 August 2020
(restated)
£’000
(21,535)
1,191
1,191
16,247
13,840
14,904
12,497
(1,575)
12,690
10,922
10.3
10.2
11.9
9,171
14,307
127,473
1,535
119,870
247,343
134,169
101,202
117,126
17,043
134,169
(1,366)
–
(202)
46
(1,568)
46
(1,568)
259
37
(1,309)
(1.2)
(1.2)
0.1
(2,806)
(265)
(3,071)
533
533
(2,538)
(2,538)
(2,295)
(2,295)
(243)
(2,538)
(22,901)
1,191
989
16,293
12,272
14,950
10,929
(1,316)
12,727
9,613
9.1
9.0
12.0
6,365
14,042
124,402
2,068
120,403
244,805
131,631
98,907
114,831
16,800
131,631
22,639
18,060
(1,459)
(8,905)
(1,412)
(1,412)
1,412
1,412
21,227
16,648
(47)
(7,493)
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36 Prior year restatement continued
The affected financial statement line items for the parent Company are as follows.
Balance Sheet
Other intangible assets
Total non-current assets
Current tax assets
Total current assets
Total assets
Net assets
Retained earnings
Total shareholders’ equity
Total equity
29 August 2020
(previously
reported)
£’000
Restatement
£’000
29 August 2020
(restated)
£’000
334
76,766
1,954
12,555
89,321
60,448
48,180
60,448
60,448
(334)
(334)
63
63
(271)
(271)
(271)
(271)
(271)
–
76,432
2,017
12,618
89,050
60,177
47,909
60,177
60,177
In accordance with IAS 1, a third balance sheet has been presented below to show the impact to the opening balance sheet for the
prior year. The Group identified £1,481,000 of costs previously capitalised as at 1 September 2019 in respect of the cloud hosted ERP
system that should be expensed and £41,000 of amortisation to be reversed. In addition the Group's investment in associate has been
restated to reflect the Group's share of costs of £159,000 capitalised by the associate as at 1 September 2019 that should be expensed.
The opening balance sheet of the prior year has been restated to correct for these. Balances at 1 September 2019 are those disclosed
after the application of IFRS 16 ‘Leases’ which was adjusted prospectively on adoption. The affected financial statement line items are
as follows.
Group
Balance Sheet
Other intangible assets
Investment in associate
Total non-current assets
Total assets
Current tax liabilities
Total current liabilities
Total liabilities
Net assets
Retained earnings
Total shareholders’ equity
Non-controlling interests
Total equity
Company
Balance Sheet
Other intangible assets
Total non-current assets
Current tax assets
Total current assets
Total assets
Net assets
Retained earnings
Total shareholders’ equity
Total equity
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1 September
2019
(previously
reported)
£'000
9,318
13,392
127,110
267,068
(1,010)
(90,177)
(137,520)
129,548
93,933
113,319
16,229
129,548
1 September
2019
(previously
reported)
£'000
376
52,323
840
43,803
96,126
57,346
44,189
57,346
57,346
Restatement
£'000
(1,440)
(63)
(1,503)
(1,503)
274
274
274
(1,229)
(1,184)
(1,184)
(45)
(1,229)
1 September
2019
(restated)
£'000
7,878
13,329
125,607
265,565
(736)
(89,903)
(137,246)
128,319
92,749
112,135
16,184
128,319
Restatement
£'000
1 September
2019
(restated)
£'000
(376)
(376)
71
71
(305)
(305)
(305)
(305)
(305)
–
51,947
911
43,874
95,821
57,041
43,884
57,041
57,041
Notes to the Financial Statementscontinued i
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Five-Year Statement
Continuing operations
Revenue and results
Revenue
Operating profit
Analysed as:
Adjusted operating profit
Adjusting items
Operating profit
Finance income
Finance costs
Profit before taxation
Analysed as:
Adjusted profit before taxation
Adjusting items
Profit before taxation
Taxation
Profit for the year
Analysed as:
Adjusted profit for the year
Adjusting items
Profit for the year
Ratios (continuing operations)
Operating margin (excluding adjusting items)1
Return on net assets (excluding adjusting items)
Earnings per share – basic
– adjusted
Dividends per ordinary share
(Restated)1,2
2017
£’000
(Restated)2
2018
£’000
(Restated)2
2019
£’000
(Restated)2
2020
£’000
2021
£’000
346,224
403,192 403,905 395,630 417,254
10,573
16,194
16,020
12,272
13,024
12,091
(1,518)
17,464
(1,270)
18,971
(2,951)
16,293
(4,021)
17,585
(4,561)
10,573
16,194
16,020
12,272
13,024
176
(864)
358
(1,261)
463
(1,349)
313
(1,656)
260
(1,232)
9,885
15,291
15,134
10,929
12,052
11,403
(1,518)
9,885
(1,685)
16,561
(1,270)
15,291
(1,815)
18,085
(2,951)
15,134
(2,473)
14,950
(4,021)
10,929
(1,316)
16,613
(4,561)
12,052
(2,400)
8,200
13,476
12,661
9,613
9,652
9,608
(1,408)
14,646
(1,170)
15,025
(2,364)
12,727
(3,114)
14,675
(5,023)
8,200
13,476
12,661
9,613
9,652
3.5%
10.8%
7.6p
8.9p
4.0p
4.3%
13.7%
12.8p
13.9p
4.5p
4.7%
14.1%
12.1p
14.6p
4.75p
4.1%
11.4%
9.1p
12.0p
4.75p
4.2%
12.3%
8.3p
13.2p
5.0p
1 Restated for the reclassification to operating profit of the share of post-tax results of the associate and joint ventures.
2 Restated for the change in accounting policy for configuration and customisation costs incurred in implementing Software-as-a-Service (Saas).
Carr’s Group plc Annual Report and Accounts 2021
Carr’s Group plc Annual Report and Accounts 2021
157
157
Shareholder InformationShareholder Information
Five-Year Statement
continued
Net assets employed
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Right-of-use assets
Investment property
Investments
Contract assets
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
– Leases
– Derivative financial instruments
Contract liabilities
Trade and other payables
Current tax liabilities
Non-current liabilities
Financial liabilities
– Borrowings
– Leases
Deferred tax liabilities
Other non-current liabilities
Total liabilities
Net assets
(Restated)1,2
2017
£’000
(Restated)2
2018
£’000
(Restated)2,3
2019
£’000
(Restated)2
2020
£’000
24,293
2,149
37,149
—
176
18,106
—
444
5,209
—
24,272
1,895
38,484
—
170
21,207
—
21
10,146
—
32,877
7,878
37,325
16,086
164
23,076
—
22
7,769
410
32,041
6,365
38,259
14,856
158
24,666
—
20
8,037
—
2021
£’000
31,560
5,151
36,198
16,777
152
23,822
312
20
9,371
—
87,526
96,195
125,607
124,402 123,363
37,023
—
59,723
319
42,371
—
67,516
181
46,270
9,466
55,573
—
40,961
8,114
51,686
2,068
43,226
7,202
61,735
2,669
13
23,887
26
24,632
—
28,649
3
17,571
—
24,309
120,965
134,726
139,958
120,403
139,141
208,491
230,921 265,565 244,805 262,504
(17,060)
—
(18)
—
(56,181)
(673)
(34,994)
—
—
—
(64,290)
(175)
(22,673)
(2,801)
—
(1,269)
(62,424)
(736)
(11,420)
(2,778)
—
(1,061)
(55,522)
(33)
(11,113)
(2,967)
—
(2,447)
(69,526)
(42)
(73,932)
(99,459)
(89,903)
(70,814)
(86,095)
(20,966)
—
(4,010)
(3,755)
(4,997)
—
(3,981)
(1,784)
(26,846)
(12,777)
(4,721)
(2,999)
(25,021)
(11,171)
(4,783)
(1,385)
(23,159)
(12,458)
(5,503)
(55)
(28,731)
(10,762)
(47,343)
(42,360)
(41,175)
(102,663)
(110,221)
(137,246)
(113,174) (127,270)
105,828
120,700
128,319
131,631
135,234
1 Restated for the finalisation of the fair value acquisition accounting for NuVision Engineering, Inc.
2 Restated for the change in accounting policy for configuration and customisation costs incurred in implementing Software-as-a-Service (Saas)..
3 Restated for the adoption of IFRS 16 'Leases'.
158
158
Carr’s Group plc Annual Report and Accounts 2021
Carr’s Group plc Annual Report and Accounts 2021
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Alternative Performance Measures Glossary
The Annual Report and Accounts includes alternative performance measures (“APMs”), which are not defined or specified under the
requirements of IFRS. These APMs are consistent with how business performance is measured internally and are also used in assessing
performance under the Group's incentive plans. Therefore the Directors believe that these APMs provide stakeholders with additional
useful information on the Group's performance.
Alternative performance measure
Definition and comments
EBITDA
Adjusted EBITDA
Adjusted operating profit
Adjusted profit before
taxation
Adjusted profit for the year
Earnings before interest, tax, depreciation, amortisation, profit/(loss) on the disposal of non-current
assets and before share of post-tax results of the associate and joint ventures. EBITDA allows the user
to assess the profitability of the Group's core operations before the impact of capital structure, debt
financing and non-cash items such as depreciation and amortisation.
Earnings before interest, tax, depreciation, amortisation, profit/(loss) on the disposal of non-current
assets, before share of post-tax results of the associate and joint ventures and excluding items
regarded by the Directors as adjusting items. This measure is reconciled to statutory operating profit
and statutory profit before taxation in note 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 adjusting items. This measure is
reconciled to statutory operating profit in the income statement and note 2. Adjusted results are
presented because if included, these adjusting 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 adjusting items. This
measure is reconciled to statutory profit before taxation in the income statement and note 2. Adjusted
results are presented because if included, these adjusting items could distort the understanding of the
Group's performance for the year and the comparability between the years presented.
Profit after taxation after adding back items regarded by the Directors as adjusting items. This measure
is reconciled to statutory profit after taxation in the income statement. Adjusted results are presented
because if included, these adjusting items could distort the understanding of the Group's performance
for the year and the comparability between the years presented.
Adjusted earnings per share Profit attributable to the equity holders of the Company after adding back items regarded by the
Adjusted diluted earnings
per share
Net debt
Underlying sales
growth/decline
Free cash flow
Gross margin
Adjusted Group
operating margin
Return on net assets
Directors as adjusting items 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.
Profit attributable to the equity holders of the Company after adding back items regarded by the
Directors as adjusting items after tax divided by the weighted average number of Ordinary Shares in
issue during the year adjusted for the effects of any potentially dilutive options. Diluted earnings per
share is shown in note 10.
The net position of the Group's and Company’s cash at bank and borrowings as per the balance sheet.
Details of the movement in net debt is shown in note 32.
Year-on-year increase/(decrease) in sales revenue excluding the impact of acquisitions and disposals.
This performance measure allows the user to have a clearer understanding of the organic sales
growth/decline of the Group. A reconciliation of underlying sales growth/decline to reported revenue
is shown below.
Cash generated from operating activities less maintenance capital expenditure. The calculation of free
cash flow is shown below. Free cash flow demonstrates how much cash is available for the Group to
utilise for expansionary capital investment, paying dividends, or financing/repaying borrowings.
Reported gross profit as a percentage of reported revenue. Gross margin is a reflection of how
successfully the Group manages raw material price volatility and its selling prices in competitive
markets. A calculation of gross margin is shown below.
Operating profit after adding back items regarded by the Directors as adjusting items as a percentage
of revenue. Adjusted Group operating margin excluding adjusting items is 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. The calculation of adjusted Group operating margin to the
statutory equivalent is shown below.
Profit before tax after adding back items regarded by the Directors as adjusting items as a percentage
of net assets. This financial performance metric allows users to understand how effectively and
efficiently the Group is using its assets to generate earnings. The calculation of return on net assets is
shown below.
Ratio of net debt to EBITDA
The ratio of net debt to EBITDA is a measurement of leverage and reflects the Group’s ability to service
its debt. The calculation of net debt to EBITDA is shown below.
Carr’s Group plc Annual Report and Accounts 2021
Carr’s Group plc Annual Report and Accounts 2021
159
159
Shareholder InformationShareholder Information
Alternative Performance Measures Glossary
continued
The following tables show reconciliations and calculations that are not presented elsewhere in this Annual Report and Accounts.
Underlying sales growth/decline
Reported and underlying revenue
Free cash flow
Cash generated from operating activities per the consolidated statement of cash flows
Maintenance capital expenditure
Free cash flow
Gross margin
Reported revenue
Reported gross profit
Gross profit as a percentage of revenue
Adjusted Group operating margin
Reported operating profit
Adjusting items (note 5)
Adjusted operating profit
Reported revenue
Adjusted operating profit as a percentage of reported revenue
Return on net assets
Reported profit before taxation
Adjusting items (note 5)
Adjusted profit before taxation
Net assets per the consolidated balance sheet
Adjusted profit before taxation as a percentage of net assets
Ratio of net debt to EBITDA
Adjusted EBITDA (note 2)
Net debt (note 32)
Ratio of net debt to adjusted EBITDA
160
160
Carr’s Group plc Annual Report and Accounts 2021
Carr’s Group plc Annual Report and Accounts 2021
2021
£’000
2020
£’000
Change
417,254 395,630
+5.5%
2021
£’000
2020
(Restated)
£’000
18,897
(1,628)
16,648
(3,960)
Change
+13.5%
17,269
12,688
+36.1%
2021
£’000
2020
£’000
417,254 395,630
52,249
52,080
13.2%
12.5%
Change
+5.5%
2021
£’000
13,024
4,561
2020
(restated)
£’000
12,272
4,021
17,585
16,293
417,254 395,630
4.1%
4.2%
Change
+6.1%
+7.9%
2021
£’000
12,052
4,561
16,613
135,234
12.3%
2020
(restated)
£’000
10,929
4,021
14,950
131,631
11.4%
Change
+10.3%
+11.1%
2021
£’000
20,922
9,963
0.48
2020
£’000
20,771
18,870
0.91
Change
+0.7%
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Directory of Operations
Carr’s Group plc
Old Croft, Stanwix, Carlisle,
Cumbria
CA3 9BA
Tel: 01228 554600
Web: www.carrsgroup.com
AGRICULTURAL
SUPPLIES
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
Carr’s Billington Agriculture
Annan
Annan Business Park, Annan,
Dumfriesshire
DG12 6TZ
Tel: 01461 202772
Carr’s Billington Agriculture
Appleby
Crosscroft Industrial Estate,
Appleby, Cumbria
CA16 6HX
Tel: 01768 352999
Carr’s Billington Agriculture
Ayr
1A Whitfield Drive, Heathfield
Industrial Estate, Ayr,
KA8 9RX
Tel: 01292 263635
Carr’s Billington Agriculture
Ayr Auction
Livestock Auction Mart,
Whiteford Hill, Ayr
KA6 5JW
Tel: 01292 619229
Carr’s Billington Agriculture
Bakewell
Unit 4-6, Kingfisher Building,
Buxton Road, Bakewell,
Derbyshire
DE45 1GS
Tel: 01629 814126
Carr’s Billington Agriculture
Balloch
Ballagan, Stirling Road, Balloch
G83 8LY
Tel: 01389 752800
Carr’s Billington Agriculture
Barnard Castle
Montalbo Road, Barnard Castle,
Durham
DL12 8ED
Tel: 01833 637537
Carr’s Billington Agriculture
Brecon
Warren Road Stores, Warren
Road, Brecon, Powys
LD3 8EF
Tel: 01874 623470
Carr’s Billington Agriculture
Brecon**
Warren Road, Brecon, Powys
LD3 8EF
Tel: 01874 623470
Carr’s Billington Agriculture
Brock
Brockholes Way, Claughton
on Brock, Preston
PR3 0PZ
Tel: 01995 643 200
Carr’s Billington Agriculture
Carlisle
Montgomery Way,
Rosehill Estate, Carlisle
CA1 2UY
Tel: 01228 520212
Carr’s Billington Agriculture
Carlisle**
Parkhill Road, Kingstown
Industrial Estate, Carlisle
CA3 0EX
Tel: 01228 518860
Carr’s Billington Agriculture
Cockermouth
Unit 5, Lakeland Agricultural
Centre, Cockermouth
CA13 0QQ
Tel: 01900 824 105
Carr’s Billington Agriculture
Gisburn
Pendle Mill, Mill Lane, Gisburn,
Clitheroe, Lancashire
BB7 4ES
Tel: 01200 445 491
Carr’s Billington Agriculture
Hawes
Burtersett Road, Hawes,
North Yorkshire
DL8 3NP
Tel: 01969 667334
Carr’s Billington Agriculture
Hexham
Tyne Mills Industrial Estate,
Hexham, Northumberland
NE46 1XL
Tel: 01434 605371
Carr’s Billington Agriculture
Jedburgh
Mounthooly, Crailing, Jedburgh
TD8 6TJ
Tel: 01835 850250
Carr’s Billington Agriculture
Kendal
J36, Rural Auction Centre,
Crooklands, Milnthorpe,
Kendal, Cumbria
LA7 7FP
Tel: 01539 566035
Carr’s Billington Agriculture
Lancaster**
Lansil Way, Lancaster
LA1 3QY
Tel: 01524 597 200
Carr’s Billington Agriculture
Langwathby**
High Mill, Langwathby, Penrith
CA10 1NB
Tel: 01228 518 860
Carr’s Billington Agriculture
Leek
Macclesfield Road,
Leek, Staffordshire
ST13 8NR
Tel: 01538 383277
Carr’s Billington Agriculture
Milnathort
Stirling Road, Milnathort, Kinross
KY13 9UZ
Tel: 01577 862381
Carr’s Billington Agriculture
Morpeth Machinery
Unit 20c, Coopies Lane
Industrial Estate, Morpeth,
Northumberland
NE61 6JN
Tel: 01670 503930
Carr’s Billington Agriculture
Morpeth
Old Station Buildings,
Coopies Lane, Morpeth,
Northumberland
NE61 2SL
Tel: 01670 518474
Carr’s Billington Agriculture
Newtown**
Lion Works, Pool Road,
Newtown, Powys
SY16 3AG
Tel: 01686 626680
Carr’s Billington Agriculture
Oban
Unit 3 Oban Livestock Centre
Soroba, Oban, Argyll
PA34 4SD
Tel: 01631 566279
Carr’s Billington Agriculture
Penicuik
4 Eastfield Park Road,
Penicuik, Midlothian,
EH26 8EZ
Tel: 01968 707040
Carr’s Billington Agriculture
Penrith
Haweswater Road, Penrith
Industrial Estate, Penrith,
Cumbria
CA11 9EU
Tel: 01768 866354
Carr’s Billington Agriculture
Rothbury
The Store, Coquet View,
Rothbury, Morpeth,
Northumberland,
NE65 7RZ
Tel: 01669 620320
Carr’s Billington Agriculture
Skipton
Skipton Auction Mart, Gargrave
Road, Skipton, North Yorkshire
BD23 1UD
Tel: 01756 792166
Carr’s Billington Agriculture
Spennymoor
Southend Works, Byers Green,
Spennymoor, Durham
DL16 7NL
Tel: 01388 662266
Carr’s Billington Agriculture
Stirling
Stirling Agricultural Centre,
Stirling
FK9 4RN
Tel: 01786 474826
Carr’s Billington Agriculture
Stone**
Cold Meece, Stone, Staffordshire
ST15 0QW
Tel: 01785 760 535
Carr’s Billington Agriculture
Stone**
Micklow House Farm, Eccleshall
Road, Stone, Staffordshire
ST15 0BY
Tel: 01782 374387
Carr’s Billington Agriculture
Whitland**
Cilherwydd Store, Llanboidy,
Whitland, Carmarthenshire
SA34 0LL
Tel: 01994 448209
Carr’s Billington Agriculture
Wigton
Hopes Auction Co Ltd,
Skye Road, Wigton, Cumbria,
CA7 9NS
Tel: 016973 45874
Carr’s Billington Agriculture
Wigton**
Pow Hill, Kirkbride,
Wigton, Cumbria
CA7 5LF
Tel: 01697 352229
Carr’s Billington Agriculture
Wooler
Bridge End, South Road, Wooler,
Northumberland,
NE71 6QE
Tel: 01668 281567
Carr’s Billington Fuels
Carlisle
Kingstown Broadway, Kingstown
Industrial Estate, Carlisle
CA3 0HA
Tel: 01228 534 342
Carr’s Billington Fuels
Castle Douglas
Abercromby Industrial Park,
Castle Douglas, Dumfriesshire,
DG7 1LH
Tel: 01387 750747
Carr’s Billington Fuels
Dumfries
Dargavel Stores, Lockerbie Road,
Dumfries, Dumfriesshire
DG1 3PG
Tel: 01387 750747
Carr’s Billington Fuels
Cockermouth
Lakeland Agricultural Centre
Cockermouth, Cumbria
CA13 0QQ
Tel: 01900 828800
Carr’s Billington Fuels
Hexham
Tyne Mills Industrial Estate,
Hexham, Northumberland
NE46 1XL
Tel: 01434 600404
Carr’s Billington Fuels
Lancaster
Lancaster Mill, Lansil Way
Lancaster, Lancashire
LA1 3QY
Tel: 01524 599333
Carr’s Billington Fuels
Langwathby
High Mill, Langwathby,
Penrith, Cumbria
CA10 1NB
Tel: 01768 889899
Carr’s Billington Fuels
Stranraer
Droughduil, Dunragit, Stranraer
DG9 8QA
Tel: 01387 750747
Workware
Kingstown Broadway, Kingstown
Industrial Estate, Carlisle
CA3 0HA
Tel: 01228 591 091
SPECIALITY
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
Caltech
Solway Mills, Silloth,
Wigton, Cumbria
CA7 4AJ
Tel: 016973 32592
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
Gold-Bar Feed Supplements
LLC*
783 Eagle Boulevard, Shelbyville
TN 37160, USA
Tel: 001 877 618 6455
Scotmin
13 Whitfield Drive, Heathfield
Industrial Estate, Ayr
KA8 9RX
Tel: 01292 280 909
Silloth Storage Company*
Station Road, Silloth,
Wigton, Cumbria
CA7 4JQ
ENGINEERING
Bendalls Engineering
Brunthill Road, Kingstown
Industrial Estate, Carlisle
CA3 0EH
Tel: 01228 815 350
Carr’s MSM
Unit 1, Oak Tree Business Centre,
Spitfire Way, Hunts Rise,
South Marston Park,
Swindon, Wiltshire
SN3 4TX
Tel: 01793 824 891
Chirton Engineering
Unit 4A, Tyne Tunnel Trading
Estate, High Flatworth,
North Shields, Tyne and 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
Unit 2 Andrews Way, Barrow
in Furness, Cumbria
LA14 2UE
Tel: 01229 811000
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 2021
Carr’s Group plc Annual Report and Accounts 2021
161
161
Shareholder InformationShareholder Information
Dormant Subsidiaries
Company Name
Carr’s Group Corporate Trustee Ltd
Chirton Engineering Ltd
Clinimax Ltd
Conegar S.A.
Horse and Pet Warehouse Ltd
Paul Chuter Agricultural Services Ltd
Pearson Farm Supplies Ltd
Phoenix Feeds Ltd
Registered and Located
Ownership
England and Wales
England and Wales
England and Wales
Uruguay
Scotland
England and Wales
England and Wales
England and Wales
100%
100%
100%
100%
51%1
51%1
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 with the
exception of Clinimax Ltd which has a registered office of Shepherds Grove West, Stanton, Bury St Edmunds, Suffolk IP31 2AR. Horse
and Pet Warehouse Ltd has a registered office of 1a Whitfield Drive, Heathfield Ind. Est., Ayr KA8 9RX. Conegar S.A. has a registered
office of Juncal 1305, Piso 18, Montevideo, Uruguay.
162
162
Carr’s Group plc Annual Report and Accounts 2021
Carr’s Group plc Annual Report and Accounts 2021
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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
Virgin Money
82 English Street,
Carlisle
CA3 8HP
The Royal Bank of Scotland PLC
Glasgow City Office,
10 Gordon Street,
Glasgow
G1 3PL
Financial Adviser and Broker
Investec Bank plc
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 Group
10th Floor,
Central Square,
29 Wellington Street,
Leeds
LS1 4DL
Carr’s Group plc Annual Report and Accounts 2021
163
Shareholder Information
Notes
164
164
Carr’s Group plc Annual Report and Accounts 2021
Carr’s Group plc Annual Report and Accounts 2021
Carr's Group plc
Old Croft
Stanwix
Carlisle CA3 9BA
United Kingdom