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Cyclical weakness in Carr’s Group’s Speciality Agriculture business has affected the company’s fortunes of late. However, the new management team, a strong net cash balance sheet and a record order book in the Engineering division offer optimism. Operational progress, particularly a reversal of fortunes in Speciality Agriculture, should rebuild confidence and a reduction in the current discount to our view of the underlying value.
Carr's Group PLC
Carr’s Group (CARR) has released its FY23 results to 2 September. Operating profit of £8.0m was slightly below our forecast of £8.3m due to modest shortfalls in both Engineering and Specialty Agriculture (central costs were in line). The interest charge was slightly higher than our forecast, and PBT was therefore £7.5m versus our forecast of £8.0m. The outlook statement is in line with previous commentary. The immediate and long-term prospects for the Engineering division are bright, with the £60m order book being 47% higher than this time last year. This includes prestige projects in both fabrication and precision engineering (an £8.4m contract for one of Sellafield’s new-build major infrastructure projects) and robotics (a £10m contract for the UK’s National Nuclear Laboratory, which is the largest single contract ever signed by Walischmiller). The medium- to long-term prospects for a cyclical recovery in Speciality Agriculture are unchanged, but so are the challenging current environment and the uncertainty regarding the timing of the expected improvement. We consequently make no changes to our growth assumptions but factor in the slightly lower FY23 base. We therefore reduce both our FY24E and FY25E PBT forecasts by £0.3m (or 3%). Our EPS cuts are slightly greater as we now assume a 25% tax rate (up from 24%). Finally, the statement that the “Board and new Executive team are reviewing the performance, composition and organisation of the Group’s operations” is a reminder of the determination to maximise value for shareholders, backed up by a series of recent management changes.
Carr’s Group has announced a fully refreshed executive team, none having been in-situ at the start of 2023. This will enable the executives to have an uninhibited view of the operations, enabling the development and implementation of a strategy reflecting the different opportunities and challenges facing the Engineering and Speciality Agriculture divisions.
Carr's Group^ (CARR, Hold at 115p) - CEO & CFO appointed
FY23 trading has continued according to the early August update, demonstrating the benefit of two unrelated activities at Carr’s Group: the Engineering division’s strength countering the weakness seen in the Speciality Agriculture business. Both have underlying longer-term growth attractions to drive earnings, along with the recovery potential in the agriculture end-markets.
Carr's Group^ (CARR, Hold at 130p) - FY23F in line with revised expectations
Carr’s Group (CARR) has released a trading statement covering FY23 (to 02 September). It last updated the market on 04 August, when it guided PBT expectations down to c.£8m (from c.£10m previously). There is no change to that guidance in today’s statement. However, the divisional contribution has shifted further away from Specialty Agriculture, where trading conditions remain challenging, towards Engineering, where the order book has grown further. Any net shortfall here should be offset by central costs being slightly lower than previously anticipated. The Speciality Agriculture division is being adversely affected by lower feed block volumes in both the US (due to drought conditions in parts of the country) and the UK (due to high input costs reducing customer profitability and therefore demand for CARR’s products). CARR is cautious about the immediate outlook but continues to expect a return to growth in the medium and long-term. By contrast, the Engineering division is performing strongly, with the order book continuing to grow. It stood at £63m at the end of FY23, up from £57m at H1 and £40.6m at the end of FY22. This not only increases the visibility on FY24 performance but extends it into FY25. CARR is hopeful that the order book can now be maintained at around this healthy level. CARR ended FY23 with net cash of £4.2m, with the c.£4m shortfall versus our expectations being purely a timing issue, with “significant customer receipts” since the period end and a further £4m of proceeds from the previous sale of the Agricultural Supplies division expected later this month.
External factors, US drought and excessive input prices, in the Speciality Agriculture business continue to weigh on volumes. As these reverse, strong market positions should help to drive activity back towards historical levels. With the Engineering division performing well the medium-term outlook is far more encouraging than the short-term market issues may suggest.
Carr's Group^ (CARR, Hold at 125p) - CEO to step down
Carr's Group^ (CARR, Hold at 144p) - FY23F to be 20% below expectations
Carr’s Group (CARR) has released a trading statement updating on FY23 (to 02 September). It now expects FY23 PBT to be around £8m and we reduce our forecast accordingly (to £8.0m) from our previous forecast of £10.0m. The main reason is weakness in Specialty Agriculture, due to a combination of persistently high UK farm input costs and US drought conditions reducing demand. We cut our divisional profit forecast from £7.3m to £6.2m. The Engineering business remains set for a strong H223, although we reduce our FY23E profit forecast slightly to £5.5m (previously £5.7m). Central costs are expected to be higher than previously anticipated, and we increase our assumption from £2.7m to £3.4m. Our group operating profit forecast therefore falls from £10.3m to £8.3m. Our interest cost assumption remains unchanged at £0.3m, giving FY23E PBT of £8.0m. Regarding FY24, we think it right to remain cautious on Specialty Agriculture. With August set to be weak, it seems likely that FY24 will start slowly, and September and October are (like August) important trading months. We therefore reduce our divisional profit forecast from £7.5m to £6.0m. We leave our Engineering forecast unchanged at £6.5m. We assume that Central costs fall to £2.9m, but this is still slightly higher than our previous forecast of £2.7m. Our FY24E group operating profit forecast therefore falls from £11.3m to £9.6m, and our PBT forecast from £11.2m to £9.5m. Looking further forward to FY25, CARR continues to anticipate a recovery in its Speciality Agriculture business, driven particularly by a growing US herd once drought conditions recede. We therefore forecast an improvement in divisional operating profit to £7.0m (and a further fall in Central costs to £2.7m). Our FY25E PBT downgrade (from £12.2m to £11.2m) is therefore more modest.
As flagged in its February update, the Speciality Agriculture division of Carr’s Group experienced a weaker trading environment from November onwards, while trading in the Engineering division was initially slower than anticipated. This resulted in a 23% drop in adjusted operating profit year-on-year in H123 to £5.8m. Management expects trading conditions for the Speciality Agriculture division to improve later this calendar year, while a strong Engineering order book supports good divisional performance in H223 and FY24. We downgrade our FY23 and FY24 adjusted PBT estimates by 5% for both years.
Carrs Group^ (CARR, Hold at 127p) - HY23A; FY23F to be c.5% below consensus.
Carr’s Group (CARR) has reported its H123 results, covering the 6 months to 4 March. Compared with H122 figures that have been re-stated to reflect the disposal of the Agricultural Supplies business, group revenue from continuing operations grew by 24% to £79.8m, but adjusted operating profit fell by 23% to £5.8m. The adjusted operating margin therefore fell by 450bps from 11.7% to 7.2%, led by a 430bps decline in the gross margin (from 26.6% to 22.3%). The strong revenue growth was driven by the Specialty Agriculture division (+34%) with Engineering +4%. Both divisions, and central costs, contributed to the operating margin decline, with Speciality Agriculture down 490bps, Engineering down 430bps, and central costs up from £1.0m to £1.3m. We reduce our FY23E PBT forecast by 5% from £10.5m to £10m, into line with CARR’s guidance. Our FY24E downgrade is modest at 2% (from £11.4m to £11.2m) and we increase our FY25E forecast by 3% (from £11.8m to £12.2m). For H223 and FY24, it is the good progress being made in the Engineering business that is driving expected growth and making up for a challenging environment for Specialty Agriculture. We expect a significant improvement in Engineering operating profit in H223 to £4.6m, up from only £1.1m in H123. Significant contract wins have boosted the order book to £57m at the end of April, from £40.6m at the year end. This will start to benefit CARR in H223 and should carry over into FY24 and beyond. By contrast, Agriculture faces a challenging current environment. The spending power of its customers has been squeezed by severe input cost pressure, and the size of the US beef herd has contracted due to a combination of normal cyclical factors and severe drought conditions. We look at this, and the encouraging prospects for recovery, in the rest of this note.
Carr’s Group has released its audited results for FY22, having previously issued a detailed trading update in February giving preliminary financial metrics on FY22 performance. The shares were suspended from trading in January because of delays in publishing these results. The company has applied for them to be restored to trading.
Issuer Sponsored PORTMEIRION GROUP+ (PMP, House Stock at 353p) – Significantly undervalued FTSE 250 C&C GROUP^ (CCR, Buy at 147p) – Pre-close update; EBIT to be at the low end but dividends to be resumed - LONDONMETRIC PROPERTY^ (LMP, Buy at 168p) – Further disposals hint at investment market regaining momentum RATHBONES GROUP^ (RAT, BUY at 1884p) – Dull until it isn’t FTSE SmallCap XPS PENSIONS^ (XPS, Buy at 157p) – Unscheduled update prompts upgrades AIM EBIQUITY^ (EBQ, BUY, 52p) – Full year results preview Cross Sector CARR’S GROUP^ (CARR, Suspended, 121.5p) – Strong FY22A; FY23F unchanged.
CARR EBQ XPS RAT LMP PMP CCR
Carr’s Group (CARR) has released its FY22 results (to 3 September 2022). The results had been delayed by the requirement for a second audit of part of the Agricultural Supplies business, which was sold in October 22. CARR produced a detailed trading update on 21 February, including the key P&L numbers and net debt. We therefore already knew that CARR faced challenges in FY22 including supply chain delays and rising raw material and energy costs. There is no update on the FY23 outlook, although we can see from the Anpario results yesterday that the environment remains tough. In Speciality Agriculture, CARR’s FY22 performance was ahead of initial expectations as it increased prices to offset “extraordinary” raw material cost increases. In the US, feed block volumes were down due to drought in several regions, which reduced grass feeding. CARR expects this to continue into 2023. Nonetheless, CARR has expanded its US sales capability and achieved additional distribution. European feed block volumes were flat, helped by modest growth in the UK despite price increases. Bolus volumes were stable. Energy and raw material costs remain high, but “are plateauing”. The Engineering division grew operating profit by 38% in FY22, as it recovered from the impact of Covid in the previous year. It ended FY22 with a strong order book of £40.6m, vs. £39.7m in the previous year. Following the disposal of Agricultural Supplies, the focus for future growth will be on Speciality Agriculture, through organic growth and “carefully targeted acquisitions”. CARR sees demand for nutritional supplements growing due to the increasing use of pasture-based grazing, and the importance of sustainability and animal welfare. In Engineering, the focus will be on realising the full potential of the current business in the growing nuclear industry.
Carr’s Group has issued a detailed trading update giving some preliminary financial metrics on FY22 performance. These show both continuing divisions (Speciality Agriculture and Engineering) beating our EBIT estimates, following a strong finish to the year. The shares remain suspended until management finishes the final stages of the audit process, which it believes are ‘essentially complete’. Our note is based on the initial information in the trading update. We will publish a follow-on update once the full results are announced.
The recent trading update from Carr’s Group notes that FY22 performance (year ended 3 September 2022) was in line with management expectations and ahead of FY21, while trading so far in FY23 has been in line with management expectations and ahead of FY22. There will be a delay to the publication of the group’s audited FY22 results because a separate audit of the associate that was sold as part of the disposal of the group’s Agricultural Supplies division is now required for independence reasons.
Audit delay Carr’s has reported that there will be a delay in completing the audit of the FY22 results and thus also in reporting its results. The delay is connected to the associate Carr’s Billington Agriculture (Operations) (CBAO) which was part of the Agricultural Supplies business sold post the Sept year end to Billington (deal completed Oct 26th). CBAO represented c8% of the group’s FY22 adjusted PBT. CBAO’s auditor is Mitchell Charlesworth, and although its audit of CBAO is nearing completion, for independence reasons, it is now deemed Grant Thornton, the group auditor, cannot rely on this audit. Hence, a second audit is required and this will delay the results until mid-January 2023. Temporary suspension will be requested This will be beyond the date required by the FCA for publication of results (which is 3rd Jan 2023) and hence Carr’s will ask for the shares to be temporarily suspended from Jan 4th until the reporting date, likely a few weeks later. Trading in line The Group has issued a trading update reporting that, since its last update on August 5th, FY22 trading had been in line with expectations. For the two remaining divisions, Speciality Agriculture and Engineering, it remarked that Engineering had performed below its expectations, but Speciality Agriculture was ahead of expectations. Trading for the continuing businesses in the new FY23 has started well, in line with expectations and ahead of FY22. The Board’s audit committee will meet in early December to review all other aspects of the audit and issue a further update thereafter.
Following its strategic review, Carr’s Group has announced the group will move to two divisions, exiting Agricultural Supplies via a disposal to its 20-year JV partner, Edward Billington & Sons. This will allow management to focus on the higher margin/ROCE divisions of Speciality Agriculture and Engineering to drive future shareholder value. It believes the growth prospects are stronger in Speciality Agriculture and Engineering vs Agricultural Supplies which is a capital intensive, regional operation and where the freedom to manage the business and strategy have been limited by the co-ownership structure. The EV of £44.5m represents an exit multiple of c6.4x EBITDA (adj FY2021) which is a premium to the pre-emption rights laid out in the original JV articles (of 3.5x EBITDA). We see this as a fair multiple, in line with peer businesses such as NWF and Wynnstay. After paying down associated debt, it will receive c£30m in total cash consideration (post fees), with around £5.5m of this deferred (only £1.5m is contingent on future profit). Hence, the immediate consideration will leave the group with net cash of c£7-8m pro-forma for FY22E (assuming pre-deal closing group net debt of c£30m for FY22) and c.£13m once the non-contingent deferred consideration is received. The group has highlighted reinvestment plans for the business (capex/working capital/possible pension buyout), but it will also have scope to look for acquisition opportunities. Whilst any disposal in a low interest rate environment will tend to dilute, we believe this disposal should result in a re-rating of Carr’s shares reflecting the better mix of higher margin businesses. There is no change in our target price of 200p and we reiterate our BUY recommendation.
Carr's Group PLC Wynnstay Group plc
Carr’s Group has announced the disposal of its Agricultural Supplies division for up to £44.5m cash following the strategic review announced in January 2022. While we expect the disposal to lead to an earnings reduction in the short term, the proceeds will be reinvested in the Speciality Agriculture and Engineering divisions. Management believes this strategy will generate faster growth in the longer term than retaining the Agricultural Supplies activity.
Strategic review completed; Carr’s Billington Agriculture disposal for £44.5m.
Carr’s Group’s trading update for the 22 weeks ending 30 July 2022 notes that the overall trading performance for FY22 is in line with board expectations so we leave our estimates unchanged. The board states that the strategic review announced in December 2021 is nearing completion and it expects to make a separate announcement soon.
The group has announced that after an extensive search process it is appointing Peter Page to the role of CEO. Peter is Chairman of Carr’s Group, taking up this role in 2020, having joined the Board a year earlier. He has a strong credentials given his background in agriculture and animal health. He has held senior roles at Devro (CEO) and Aviagen (Head of Europe). In his roles at these businesses, he has also overseen a number of large engineering contracts. In addition, CFO Neil Austin has informed the Board that he will leave the group at the next AGM (Jan 2023) to take up a new role as CFO of the Westmorland Family. A search for a new non-executive Chairman and CFO will commence accordingly. The group has recently strengthened the Board with two new NED appointments. A trading update has also been released indicating that trading overall remains in line with group expectations for FY22. There is a broadly good performance from Agricultural activities, with Speciality Agriculture succeeding in passing through higher prices and improving margins. US volumes are still being impacted by the drought. Volumes in Agricultural Supplies have been solid, underpinned by farmer confidence and strong farmgate prices. For Engineering, the order book remains strong, but the profits are behind expectations. After some contract delays/higher costs in 1H, the group has also faced supply chain issues for certain key electrical components. The strategic review announced earlier in the year is nearing completion and there will be a separate announcement in due course. We make no changes to our forecasts or 200p TP. Buy reiterated.
Carr’s Group’s H122 results show it is coping well with commodity price volatility. The high oil prices are boosting demand for precision engineering services, supporting a recovery in the Engineering division. Management is confident that the FY22 performance will be in line with market expectations, so we leave our estimates broadly unchanged.
Carr’s has delivered a solid 1H22. Its PBT was £10.3m, which was a modest decline on 1H21 (£10.5m). EPS were 7.6p and the interim dividend was held at 1.175p. Profit growth was reported in Agricultural Supplies and Engineering, while Speciality Agriculture reported a lower 1H result. The markets have been highly volatile in 1H22, with rapidly changing raw materials and commodity prices. However, price increases have been implemented and demand in the Agricultural Supplies division has been underpinned by continued strong farmgate prices (livestock and milk). EBIT (inc JV/Assoc) increased by 19%. For Speciality Agriculture profits dipped by 21%, reflecting a lag in passing on higher costs (now achieved) and some reduction in livestock numbers in the USA due to drought. Engineering reported a much stronger half (+58%), although this was lapping an especially quiet period last year. The main improvement came from fabrication/precision engineering, particularly in the oil/gas sector. Robotics performed as expected, while engineering solutions suffered some delays and cost over-run on one project. The order book remains strong at £44.2m so a good 2H is anticipated. The group reports higher debt at the half year largely reflecting a working capital outflow. Rising commodity prices have increased inventories and there was also a delay in collecting debtors (due to a new ERP system). Much of this will reverse in 2H so we expect only a slightly higher closing debt vs FY21. In January, the group announced a review of its strategic options recognising the limited synergies available between its three divisions. This review is nearing completion with an update expected in 2H.
Over several decades Carr’s Group has diversified both within and outside the UK agricultural market. This has reduced the group’s exposure to the vagaries of the British climate, farming policy and volatile commodity prices and taken it into activities that generate substantially higher margins and present opportunities for stronger growth than the traditional agriculture sector in individual countries. However, while the board sees potential for growth in each of the three divisions, there are limited opportunities to exploit inter-divisional synergies, so it has announced a strategic review.
FY21 was not a straightforward year for Carr’s Group, with ongoing disruption due to COVID and management changes, so it was reassuring to see good overall profit progress in FY21 from the group. At the adjusted PBT level, it delivered an 11% advance, with adjusted EPS up by a similar 10%. The result was largely led by the agricultural activities, with both Agriculture divisions (incl. the associate companies/joint ventures) reporting double-digit increases in operating profits. Engineering showed only modest progress, but this division encountered COVID-related headwinds. As it starts the new year, these have dissipated and the order book remains strong. In terms of management changes, Tim Davies was replaced by Hugh Pelham in January 2021, but Hugh subsequently left the business in October. It is clear from the reported numbers/current trading that this was not due to any profit issues. The search for a new CEO is underway but, in the interim, the Board has announced it is undertaking a Strategic Review. Although the group slightly beat our FY21E forecast in December, we opted not to increase our FY22E estimates. The winter months are typically the most important for Agriculture and although the general backdrop looks positive, trading can be impacted by weather. Our sum-of-the-parts model, reflecting the higher value added nature of the Speciality Agriculture and Engineering operations, shows the unrecognised value sitting in Carr’s Group. However, the diverse nature of the activities is likely one factor that has prevented this from being fully appreciated. The Board will report on the progress of the Strategic Review in April and we hope to see actions announced then that will help crystalize this hidden value.
CARR NCC OSB PAG RWI SBRE SMS STAN TBCG TET
Carr’s trading update for the first 20 weeks of FY22 notes that the group has made a positive start to the year with overall performance during the period broadly in line with Board expectations. Importantly, the announcement notes that while the Board sees potential for growth in each of the three divisions, there are limited opportunities to exploit inter-divisional synergies, so it has decided to conduct a strategic review. We leave our estimates unchanged and reiterate our indicative valuation of 170p/share.
Carr’s Group has updated the market after the first 20 weeks of trading and overall reports that its expectations for FY performance remain unchanged. As such, we make no changes to our forecasts today. The group reports a positive start to trading YTD with results broadly in line with the Board’s expectations. The few areas where the business is currently modestly behind budget are viewed to be phasing only. Livestock and farmgate prices generally remain buoyant in both the UK and USA, so this is providing a favourable backdrop for the Agricultural operations. Speciality Agriculture continues to show volume growth and, although margins are slightly down on the PY (due to higher raw material costs), this will correct as price increases take effect. Agricultural Supplies also remains on track, with strong machinery sales continuing to be a feature. Only fuel volumes are lower, due to the milder weather. Engineering is enjoying a strong start to the year with fewer COVID headwinds and returns so far are comfortably ahead of last year, especially in Fabrication and Remote Handling & Robotics. The absolute number is slightly behind budget, but this is again due to contract phasing and is expected to even out as the year progresses. The Engineering order book remains strong. At end December, the group flags higher than normal net debt at £27.9m (vs £10m at FY21 y/end and £19m one year ago). Q1 typically sees a working capital outflow, but, with higher commodity prices, this has been exaggerated, plus the group has seen some additional movements from a decision to hold more machinery stock (to avoid any possible supply issues and to continue to service strong demand) and a movement specific to one Engineering contract. We comment overleaf on the announced Strategic Review.
Carr’s Group (‘Carr’s’), the Agriculture and Engineering Group, has today announced its full-year results for the year ended 28 August 2021. Overall, the Group has performed very well showcasing the benefits of its diversified business model with performance 3% ahead of market expectations.
Carr’s Group’s FY21 results were ahead of management’s improved expectations, with increased profits across both the Speciality Agriculture and Agricultural Supplies divisions offsetting weaker performance from the Engineering division caused by low oil prices during Q121. Noting continued strength in livestock prices in the United States and the UK, stable farmgate milk prices in the UK and a strong Engineering order book, we raise our FY22 and FY23 PBT estimates by 4.7% and 2.2% respectively.
Carr’s Group has delivered results ahead of expectations. Its adj. PBT is £16.6m vs our forecast of £16.1m. This represents an 11.1% improvement on the prior year. EPS were 13.2p (+10%) and the full year dividends totalled 5.00p (+5.3%). The profit uplift was driven by all three reported segments. The strongest growth came from Speciality Agriculture which added c£2m to operating profits. Agricultural Supplies were £0.5m higher and Engineering £0.1m. This was partly offset by higher central costs reflecting payments for the outgoing CEO (Tim Davies) in January 2021 and increased performance-led remuneration. The backdrop for Agricultural activities has been favourable in all regions. Livestock prices have been higher, helping drive US and UK demand for feed blocks. New launches have also helped add to the 12% increase in feed block sales. Dairy prices have also remained firm, helping support blended feed sales/profits. Machinery had an exceptionally strong year and retail sales increased by 6.3% despite disruption from COVID. The outlook for Agriculture remains solid with no sign of any weakness in farmgate prices. Engineering had been expected to have a better year, but here COVID did have some impact. Oil prices were low at the outset of the year affecting the precision engineering workflow from the oil/gas sector. However, Robotics performed better despite some early travel restrictions causing delays. Order books look positive and, with oil prices higher and the associated workflow improving, we expect profit growth in FY22E. At this early stage, and with some wider inflationary/supply chain uncertainties, we leave our forecasts unchanged for now.
CEO to step down It has been announced that Hugh Pelham CEO will step down with immediate effect. He has been with the Group since the start of the year but the decision to leave is mutual and amicable. On an interim basis, current Chairman, Peter Page (who was previously CEO of Devro plc), will become Executive Chairman until a suitable candidate is appointed. Trading in line Group trading remains in line with the previously reported guidance. In July, in its Q3 update, the Group reported that it had seen a good rebound in trading across its Engineering and Agricultural activities. In Agriculture, farm gate prices had remained firm, helping farmer confidence, and in Engineering there had been higher levels of activity in all areas. At the time (see here), we increased FY21E forecasts by 3% (£0.5m) to PBT of £16.1m, EPS 11.6p. The Group will report FY21 numbers on November 22.
Carr’s Group has released its Q3 update, reporting on trade since the half year to July 17th. Overall, the group now states that it expects to be moderately ahead of market expectations. The group has also declared a second interim dividend of 1.175p. As we have seen reported by peers, the UK agricultural market has benefited from improved farmer confidence helped by resilient farmgate prices. This has helped both the Agricultural Supplies division as well as Speciality Agriculture. In Agricultural Supplies, the general retail performance has been good, as have machinery sales. Speciality Agriculture has recovered well from a weak FY20 result, with volume improvements in the UK and overseas operations. Engineering has seen a higher level of activity in all areas, with higher oil prices helping demand in this sector too. The order book has been extended again, particularly in nuclear and defence. Overall, we increase our FY21E adj PBT from £15.55m to £16.05m, which is a 3% increase. However, at the EPS level we also now include for FY21E a higher expected tax charge (the deferred tax impact of the corporation tax increase to 25% in 2023) and this is expected to reduce EPS this year by c1.1p. Our EPS forecast is now 11.6p, but would be c 12.7p on a normal (20%) tax charge. We make no change to forecasts for next year at this stage, but anticipate further progress to adj PBT of £17m. The increase in forecasts feeds through to our valuation which is derived using EV/EBITDA peer multiples. We update peer multiples too and this increases our TP to 198p from 180p. We continue to see Carr’s as undervalued versus both engineering and other speciality agricultural operators.
CARR EYE STEM VMUK
Carr’s Group has provided an update for the 20-week period ended 17 July 2021, which notes that FY21 performance is expected to be moderately ahead of management expectations. Strong performances from both the Speciality Agriculture and Agricultural Supplies divisions have continued into H221. The H221 Engineering divisional recovery that management expected has been realised, supported by contracts from the nuclear and defence markets, and rising oil and gas prices. We raise our FY21 adjusted PBT estimate by 4.5%, leaving FY22 and FY23 estimates unchanged.
Carr’s Group has reported a 5% rise in adjusted operating profit during H121. Strong performances from both the Speciality Agriculture and Agricultural Supplies divisions more than compensated for weaker demand from the oil and gas market, which adversely affected the Engineering division. However, the Engineering order book is strengthening with contracts from the nuclear and defence markets, so management expects a second half divisional recovery and its expectations for FY21 performance are unchanged.
Carr’s Group has delivered a strong improvement in 1H profits, underpinning our expectation of a return to growth at the FY. 1H21 PBT was £10.4m vs the prior year’s £9.6m and in line with our expectations. EPS was 8.0p (FD) and the interim dividend was declared at 1.175p. The growth was driven by Agriculture, with the total operating profit (incl. JV/associates) from these activities increasing by 27% (or £2.4m). This year the group has split its Speciality Agriculture from Agriculture Supplies, showing the quality of the income stream in this area. The higher-margin Speciality Agriculture accounts for just over 70% of the division’s profit, which was probably not appreciated by the market. Engineering reported a reduced operating profit (down 24%, or £0.3m), with operations impacted by lower activity in the oil & gas sector as well as some contract delays as access to customer sites was limited due to COVID. As travel restrictions ease and oil prices are recovering, the outlook for 2H is much improved. The order book also shows a healthy increase from the 2020 year-end level. Half year net debt (excluding leases) was £10.6m, down from £18.9m at FY20, thanks in part to a £4m+ working capital inflow. We expect full year debt to remain in the low double-digit £ms. New CEO Hugh Pelham has outlined some initial thoughts and will look to optimise the current portfolio through standardisation, simplification and seeking synergies. It will continue to look to differentiate its offer, seek consolidation opportunities and grow through new products and/or new geographies.
Diversification means Carr’s Group provides essential infrastructure to the global nuclear industry and occupies a critical position in food supply chains in the UK, the US and Europe. As a result, almost all of its businesses have remained operational during the coronavirus pandemic. While group profitability was adversely affected by the low oil price caused by the pandemic, we see potential for recovery driven by greater penetration of international markets for animal feed supplements during FY21 and a return to more normal oil prices from FY22 onwards.
Carr’s trading update for the first 19 weeks of FY21 notes that trading in Agriculture was ahead of management expectations because of strong sales of supplements. This was offset by a weaker than expected performance in the Engineering division caused by continued low crude oil prices. We note that net debt (excluding leases) was 24% lower year-on-year at the end of November, reflecting close inventory control and lower commodity prices. We leave our estimates broadly unchanged and reiterate our indicative valuation of 170p/share.
Carr’s Group has released its AGM update and, reassuringly, it reports that during the first four months of FY21 it has seen a positive start to the year, despite ongoing COVID restrictions, and it is trading in line with expectations. We make no changes to FY forecasts which show profit growth of 5%. Net debt was also better than expected as the group kept a tight focus on cash. In Agriculture, it is trading a little ahead of expectations. In the US, cattle prices firmed in the latter months of FY20 and this has continued to drive feed block demand. The group has also seen strong demand for supplements from the UK and exports to Ireland (not all believed to be Brexit-related). The rest of UK agriculture has been in line with expectations, despite some tough Q1 comparisons. Engineering is running a little behind expectations on the oil and gas-led operations. Activity in this sector has been impacted by continued low oil prices as COVID restrictions have continued for longer than we might have hoped. By and large, the nuclear-led operations are performing to plan. On December 24th the Government announced it has secured a free trade agreement for goods with the EU (subject to them meeting rules of origin). One key risk for UK agriculture was on lamb exports which could have impacted on Carr’s customers, but, with this deal, that threat has been removed. It also removes a major uncertainty for the wider sector which will have undoubtedly restricted investment. Hence, the sector can now move forward with improved visibility to adapt to the phased changes in support payments. At the AGM, the previously announced change in CEO will become effective After 8 years, Tim Davies steps down as CEO and will be replaced by Hugh Pelham. Tim will remain in the business to ensure an orderly handover.
Both of Carr’s Group’s divisions have continued to operate throughout the coronavirus lockdowns as they serve key markets. While adjusted PBT was 17% lower year-on-year during FY20 because of an unseasonably mild winter in the UK and delays in engineering contracts, a pick-up in US cattle prices at the year-end helped deliver a full-year result ahead of our estimates, which were revised down in March.
Carr’s Group’s trading update for the 19 weeks ended 11 July 2020 notes that the company continues to trade in line with management expectations for FY20. The board is combining the two interim dividend payments this year into a single interim payment of 2.25p/share, equivalent to the two interim payments made in FY19. We leave our FY20 estimates unchanged but reduce our FY21 EPS estimate by 12% to reflect lower cattle prices in the US and weaker demand from the oil and gas industry, both related to the coronavirus pandemic.
Carr’s Q3 update confirms the group is trading in line with FY expectations. To date Covid-19 has had no material financial impact. Divisionally, there is some variation to performance, with Agriculture performing ahead of expectations and helping to offset some underperformance in Engineering. In UK Agriculture, the farming sector has continued to operate normally, with some benefit from more “normal” weather in Q3 and stable commodity prices. Hence, demand for feed, fuel, machinery and supplements was good. In the US, beef prices have been weaker, as foodservice demand has evaporated and this has in turn impacted on feed block demand. Engineering has a more complex supply chain and was perhaps more likely to encounter Covid-19 delays. The group has seen some slowdown in work streams at customers due to revised working practices, but this is now resolving. Weaker oil prices have also impacted on activity levels in the oil and gas sector. As trading overall has continued to run in line with management expectations, the Board has been decided to reinstate the previously deferred interim dividend. Hence, along with a second interim dividend, the group will pay 2.25p in October which equals the total of the two interim dividends paid last year. We make no adjustments to FY20E numbers today. However, for FY21E, the two negative factors mentioned above could continue (weakness in oil & gas investment and lower US feed block demand). Prudently, therefore we adjust our PBT forecast by £2m, from £17.6m to £15.6m, giving EPS of 12.3p (prev 14.0p). We trim FY22E PBT by £1m, from £18m to £17m, for EPS of 13.4p (prev 14.2p). Our TP reduces to 155p.
It has been a challenging period for agriculture over the past few years, with farmers in the UK living with the uncertainty of Brexit, but in the past 6 months the weather has also played a compounding role. Mild winter weather and ample silage from last summer has given farmers the opportunity to reduce purchases of certain consumables and this hit Carr’s in 1H20. US farmers’ confidence has similarly been impacted by stubbornly low cattle prices. Engineering did not act as the counter balance in 1H, as its phasing was already geared into 2H20, even prior to the recent report that two sizeable contracts had been delayed, most likely now into FY21. As a result, 1H adjusted PBT fell by 16%, after some mitigation by swift action from management to cut costs. Covid-19 adds a level of uncertainty to the immediate outlook, although, to date, the business has seen no adverse impact. As part of the vital food supply chain, farmers are still active (you cannot furlough livestock), so demand has proved robust. The group’s sites are all largely operational (Engineering and Agriculture), including the Carr’s retail outlets which saw a very busy March. However, the situation is being closely monitored. The group is financially robust, with net debt/EBITDA at 1.2x and comfortable headroom/debt maturity dates. However, it is keeping a close check on cash and, with this in mind, has opted to defer the declaration of an interim dividend. It will reassess the situation in July (the next expected trading update). Carr’s recent share price underperformance is more down to the profit adjustment than Coivd-19, in our view, but the stock looks lowly rated regardless. We would not put Carr’s in the high risk (Covid-19) group and hence are happy to retain our Buy recommendation.
Carr’s Group (‘Carr’s’) yesterday (15 April 2020) announced its interim results for the 26 weeks ended 29 February 2020. Overall, H1 FY2020F results were resilient despite challenging trading conditions across agriculture (i.e. mild weather) and engineering (i.e. contract delays across Asia). Carr’s group’s feed/compound mills, stores and engineering manufacturing sites remain fully operational given its products/services are deemed essential to its end users. The Board notes the ongoing uncertainty but based on recent activity it “still anticipates a full-year outcome broadly in line with those (March 2020) revised expectations.” Thus, we leave our recently (March 2020) revised forecasts unchanged. We expect FY2020F adj. PBT of £14.2m and adj. diluted EPS of 10.6p. Carr’s on our forecasts trades on a FY2020F PER of 10.5x, EV/EBITDA of 8x and a dividend yield of 4.2% (we note the interim dividend has been deferred and will be reviewed in June 2020). We retain our Hold recommendation at this juncture.
As flagged in January, Carr’s Group’s UK agricultural activities have been adversely affected by the mild winter. In addition, the Engineering division had a slow start to the year because of contract phasing. Both the group’s divisions appear relatively unaffected by the COVID-19 pandemic, so we leave our estimates unchanged for now following the downwards revision we made last month reflecting a delay in major engineering orders and unrelated to the coronavirus outbreak.
Carr’s has reported 1H results of £9.6m PBT and EPS of 7.9p (FD). The interim dividend was deferred until the full effects of COVID-19 become clearer. The profits show a 16% decline on the prior year, which was anticipated following the 12th March update where the group reported that trading had been weaker than expected in Agriculture in 1H (both in the UK and US). It also reported that there had been a delay in (two) anticipated engineering contracts in Asia, but this is more a factor for 2H20. The engineering pipeline is still strong so the medium-term outlook for this division remains robust. In Agriculture, farmer confidence (UK and USA) has remained weak. In the UK, we still face Brexit uncertainty (future trade deals) as well as some weakening in farmgate prices. In the US, cattle prices have risen from their lows, but not by any sizeable margin. In both countries, mild winter weather has allowed farmers to reduce purchases, of feed in particular, to keep costs in check. With lower demand, feed margins have also come under pressure. The group has reacted to these challenges by reducing central costs, which has helped to mitigate some of the profit shortfall vs original expectations. COVID-19 has not had any dramatic impact on the business at the present time (see overleaf), but prudently the group is keeping a tight focus on cash. Net debt closed the half at £25.4m (excl. leases), which is a comfortable 1.2x EBITDA. The undrawn facilities were £22m. We anticipate FY20E net debt of just under £30m, after the payment of some deferred consideration. We make no changes to forecasts today having adjusted them just one month ago for issues unrelated to COVID-19. The underlying trading outlook has not changed materially since, although COVID-19 adds a layer of uncertainty and the group will continue to monitor its effects closely.
In this short note, we provide data and analysis on Carr’s Group^ (Hold), NWF Group^ (Hold), Origin Enterprises (No Recommendation, Coverage Pending) and Wynnstay+ (House Stock) within the food producers’ sector. Given the current and rapidly evolving situation around COVID-19, near term trading can seem somewhat uncertain. So, we look to focus on the balance sheet with regards to leverage, liquidity and solvency positions for each company.
CARR NWF OGN WYN
As flagged in an interim management statement in January, Carr’s Group’s UK agricultural activities have been adversely affected by the mild winter that has depressed demand for feed and feed supplements. Based on the order pipeline, management had expected this would be balanced by overperformance in the Engineering division, but delays in receiving orders will lead to underperformance here as well. We cut our FY20 and FY21 EPS estimates by 26% and 10% respectively and reduce our indicative valuation from 190p/share to 172p/share.
Carr’s has issued a trading update warning that the group’s performance for FY20 will be significantly below its expectations. We reduce our FY20E PBT forecast by 23% to £14.3m, with EPS of 11.2p (previously £18.6m, 14.7p). The environment in Agriculture has been challenging, as the group flagged in its AGM. In the UK, there has been a combination of continued uncertainty around Brexit/overseas trade within the farming community, and a particularly mild winter. As the weather has been favourable (with ample forage), this has allowed farmers to reduce feed and supplement purchases. With reduced volumes, markets have become increasingly competitive, with some resulting impact on margins as well. In the US, the cattle price recovery has been muted so farmer confidence remains fragile and, here too, mild winter weather has allowed farmers to reduce purchases. The group has taken the view that there will be no late bounce in the remaining late winter/early spring months. In Engineering, the group reported a slow start to the year, but it had expected a better 2H as it was anticipating some remote handling orders in its build schedule. However, two sizeable orders have been delayed, in China (due to an export licence issue) and Japan, thus affecting the division’s result in FY20. These orders are still likely to be delivered, but falling into FY21. The group has reacted, implementing group-wide cost reduction measures which will help to mitigate some of the profit shortfall in both divisions. For FY21, the UK farming environment could still prove difficult. Whilst we cannot predict the weather, the issue of overseas trade might still be unsettled as the new financial year commences. Hence, we expect a reasonable bounce-back in Engineering, but remain prudent on Agriculture. We downgrade FY21E PBT by 8% to £17.6m, 14.0p EPS (from £19.2m, 15.2p).
Carr’s Group today issued an unscheduled trading statement ahead of its interim results for the 26-week period ended 29 February 2020. Management expect FY2020F to be significantly below expectations as a result of the continuation of challenging agricultural conditions (both in the UK and US) and engineering contracts delays in China and Japan, given the recent COVID-19 outbreak. As a result, we downgrade our FY2020F adj. PBT by c25% to £14.2m and adj. diluted EPS by c27% to 10.6p. Similarly, we rebase our FY2021F expectations assuming the delayed contracts are delivered in the next financial year. Management responded by implementing further cost reduction measures to better position each division for the future, but we note the partial offset in the first half. Based on our revised forecasts, Carr’s trades on a FY2020F PER of c9x, an EV/EBITDA of c7x and a dividend yield of 5.2% (prudently assuming flat growth year-on-year which equates to a 4% cut). We retain our Hold recommendation.
Carr’s trading update for the first 18 weeks of FY20 notes that while trading in Agriculture was lower than expected, primarily because of the mild UK weather, the strong Engineering pipeline should enable the group to meet management expectations for the year. Management also notes that a greater weighting than normal to the second half is likely. We leave our estimates unchanged and reiterate our indicative valuation of 190p/share.
Carr’s Group has released a trading update ahead of its AGM today. Overall, it highlights that it continues to expect the Group performance to be in line with existing expectations. We make no changes to our forecasts today. In Agriculture, it has been a slower start to the year. The group had already flagged a cautious outlook for this current year in light of weaker farmgate prices and continuing Brexit uncertainty. However, this has been compounded in Q1 by the mild winter weather we have seen to date, which has allowed UK farmers to utilise their healthy stocks of forage and not resort to buying more expensive, manufactured feed supplements. Similarly, in the US there has been slower start to the winter feed season, with weaker cattle prices. However, prices are now recovering which should help farmer confidence build through the year. As a result, the group is trading moderately behind its FY expectations for this division. Conversely, the activity levels in Engineering are now expected to be slightly ahead of expectations in the FY, with favourable, additional tender activity giving rise to some shorter dated work within the order book. In particular, the new NW Total business is expected to perform ahead of plan. Net debt at the end of Q1 was £29.7m, up on the FY19 year end (£23.8m), but only due to usual working capital movements. The group remains well-placed to fund further acquisition opportunities. H1 is the busier half for the group, so with the slower start (but depending on trading in Q2) we might see a greater profit weighting than normal to 2H. However, the outlook for the full year overall remains unchanged. Buy reiterated.
FY19 brought a number of weather-related challenges for the group’s agricultural businesses, as well as growing Brexit uncertainty, but Carr’s still delivered a new peak in profits. Overtaking the previous highest group pre-tax profit struck in FY15 of £17.5m (which then included Food activities), it reported FY19 adjusted PBT of £18.0m, an 8% increase on the prior year. Despite the headwinds, the profit performance from Agriculture was resilient, assisted by good cost control, favourable procurement and improved efficiencies. However, the 31% increase in Engineering was the main factor in delivering a stronger group result. Strategically, the group made progress, further increasing the proportion of profits derived from businesses which are technology/innovation led. There were two such acquisitions in the year – Animax, which operates in animal nutrition, complementing existing feed supplements, and NW Total, which operates in the nuclear defence sector. The group closed the year with 1.1x net debt to EBITDA so it has comfortable headroom to continue to acquire businesses which conform to this strategy. At this early stage in the financial year, it is difficult to form a clear view on Agriculture as it is sensitive to weather as well as changes in commodity prices. With Brexit still unresolved, this adds another layer of uncertainty so we have adopted a prudent view on forecasts here. Engineering is more predictable given the order books and we anticipate further progress in 2020. We use a sum-of-the-parts model to arrive at our target price. Using the latest peer multiples for Agriculture and Engineering, our target price is 215p which suggests total forecast return in excess of 45%. We continue to rate the shares at BUY.
Carr’s Group has built market-leading positions in high-value, growing sectors in global agricultural and engineering markets by differentiating itself through innovative technologies. These include low-moisture feed blocks and highly specialised robotic arms for use in hazardous environments such as the nuclear industry. This strategy delivered a 7.0% rise in adjusted PBT during FY19, despite unfavourable weather conditions in both its main agriculture markets. The diversification also reduces the group’s exposure to UK government farming policy and any adverse effects of Brexit.
Carr’s Group (‘Carr’s’), the Agriculture and Engineering group, reported full-year results for its year ended 31 August 2019 on 11 November. Overall, the Group performed well and slightly ahead of our expectations with a robust performance in Agriculture despite unseasonable weather in the UK/USA and strong performance in Engineering. Carr’s looks to be in a good position, in our view, given the investment made in prior years and the ongoing commitment. In this note, we provide our updated financial expectations which adjust for IFRS16, this has minimal net impact on underlying financials. Despite shares trading on an undemanding FY2020F PER of c9.9x and an EV/EBITDA ratio of 7.5x with a dividend yield 3.4%, at present, we see limited share price appreciation in the shortterm given the current earnings profile until a Brexit outcome has been reached in January 2019. We retain our Hold recommendation.
Carr’s Group delivered a 7.0% increase in adjusted profit before tax during FY19 despite adverse weather conditions in both the US and the UK, which affected demand for feed blocks, animal feed and fuel. The profit growth was attributable to a strong performance from the Engineering division. We leave our FY20 and FY21 estimates broadly unchanged, nudge our indicative valuation up 6p to 190p/share and present FY22 estimates for the first time.
Carr’s Group has delivered a stronger than expected FY19 result with adjusted PBT up 9% to £18m, comfortably ahead of our forecast of £17.4m. EPS were 14.2p (FD) and the full year dividend 4.75p (+5.5%). This result was achieved against some challenging comparatives from the prior year. Agriculture in both the UK and USA faced very different weather patterns vs 2018. In the UK, we had a mild winter reducing demand in several agri-related categories, whilst in the US, wetter weather boosted forage and block demand was lower. However, the end to the US drought should bode well for cattle production in future periods. Despite revenue headwinds, profits from Agriculture were protected by cost reductions, good procurement and improved efficiencies. EBIT was ahead by 1.6%, although this included the contribution from Animax. Engineering reported 31% EBIT growth, led by a strong result from UK Service and Manufacturing and Global Technical Services. Global Robotics saw reduced activity, but only on the phasing of contracts. It anticipates an improvement in 2020. A new organisational structure is designed to realise synergies, improve efficiencies and better align products and services with markets/customers. Acquired businesses Animax and NW Total performed in line with expectations and the group continues to look for IP-led acquisition opportunities. Net debt closed the year at £23.8m (1.1x EBITDA). Brexit uncertainty is building in the UK, delaying some investment decisions, and hence we remain cautious on the outlook for UK Agri, although we expect some recovery in US blocks. Engineering will benefit from the first full year contribution from NW Total. Overall, we make no changes to forecasts.
Carr’s Group has issued its Q3 update, stating it is trading in line with the Board’s expectations. We make no changes to forecasts today. In UK Agriculture, the milder weather relative to last year has impacted on demand for feed and fuel, but this has been partly mitigated by good procurement/positions on raw materials and cost management, as was the case through 1H. The integration of Animax has also gone well, as the group invests in product development and expanding international sales. Carr’s continues to add to its range with the recent purchase of Paul Chuter (all-terrain vehicles). Brexit uncertainty remains and the group is closely monitoring developments. In the USA, the new Shelbyville site has helped extend the group’s geographic reach and trading through the main FY19 winter season was good. We recently flagged that flooding in the Mid-West could have some impact in FY20 and reflected this in some minor forecast adjustments. Engineering continues to build its order book (especially UK Manufacturing), giving greater confidence over the medium term, Remote Handling activity has been lower this year, as previously flagged, but the level of global opportunities remains high. The entry into the US via NuVision brings further opportunities. The group’s nuclear expertise has been further strengthened by the purchase of NW Total.
Diversification both inside and outside the agriculture sector means that Carr’s Group continues to trade in line with management expectations for FY19 despite the unusually mild UK winter and spring. We leave our estimates and indicative valuation of 184p per share unchanged.
Carr’s Group has announced the acquisition of Cumbria-based NW Total Engineered Solutions for a total cash consideration of up to £9.6m. The acquisition fulfils management’s ambition of taking the Engineering division into the nuclear defence segment. We expect it will be earnings enhancing from FY20 onwards and raise our indicative valuation from 182p/share to 184p/share.
Carr’s Group has announced the acquisition of NW Total, which is a service and manufacturing company providing value-added solutions to the nuclear defence, nuclear decommissioning, nuclear power generation industries and other highly regulated markets such as utilities, pharmaceuticals and energy. It is based in Barrow in Furness, with a largely domestic but long-standing customer base. The management who have been responsible for driving good growth in the business will be remaining. The consideration is a maximum of £9.6m, with £6m paid on completion and up to £3.6m deferred, payable over the next three years dependent on performance. It is likely the deferred element, if paid, will be self-funding. The business generated £9.1m of revenue and £1.6m of EBITDA (PBT £1.5m) in the year to March 2019, although there will be some investment in operating expenses under Carr’s ownership. The business will make only a small EBITDA contribution (2 months) in the current year and there will be some integration costs, so we make no change to our FY19E forecast (with trading also on track), but in FY20E the deal is expected to be enhancing. We upgrade FY20E PBT by a net £0.4m to £18.6m. This includes the contribution from the acquisition but also a small trim (£0.4m) to assumptions for agriculture to reflect the recently reported climatic challenges in the US mid-west (severe flooding) and ongoing Brexit uncertainty in the UK. For FY21E, our upgrade is greater at £0.6m to £19.2m, assuming some US recovery. Our TP moves up to 214p from 206p and we reiterate our BUY recommendation.
Once again, Carr’s diversified model has enabled it to deliver profit growth despite well-publicised issues in the UK agriculture sector. Pre-exceptional PBT grew by 4.5% to £11.4m as a flat result from the Agriculture division was enhanced by a year-on-year performance improvement in Engineering. Group H119 revenues rose by 3.0% year-on-year to £206.2m, reflecting commodity price inflation and sales from Animax, which was acquired in September 2018. Noting this resilience, we leave our estimates and valuation unchanged.
Carr’s trading update for the first 18 weeks of FY19 indicates that both divisions are performing well. As the group is trading in line with management’s expectations for the full year, we leave our estimates and indicative valuation of 182p/share unchanged.
Carr’s Group is building market-leading positions in high-value, growing sectors in global agricultural and engineering markets, increasing its international footprint and differentiating itself through innovative technologies such as low-moisture feed blocks and highly specialised robotic arms for use in hazardous environments such as the nuclear industry. This strategy delivered a 49% rise in adjusted PBT during FY18. It also reduces the group’s exposure to variations in UK weather and government farming policy.
The FY18 results for Carr’s Group show that it has delivered the promised recovery in both divisions. This is the result of (1) market conditions which have boosted demand for feed blocks in the US and a wide range of agricultural inputs in the UK; and (2) prior year investment, for example in feed block production capacity and in acquisitions. Noting that the FY18 performance was ahead of our estimates, we revise our FY19 and FY20 forecasts upwards and raise our indicative valuation by 4p/share to 182p/share.
Carr’s Group (CARR LN) # , the agricultural and engineering group, has released results for the year ended 2 September 2018 (FY 2018).
On 21 September, Carr’s Group announced that it had completed the acquisition of Animax, a producer of animal health products, for a total cash consideration of up to £8.5m. The transaction will broaden the group’s existing range of animal health products and supplements. We raise our estimates and reiterate our indicative valuation of 178p/share.
The recovery in both US feed block sales and the UK manufacturing businesses noted at Carr’s Group’s AGM in January has continued through to the end of June. As both divisions are trading slightly ahead of management’s expectations at the interim stage, we raise our estimates again and revise our indicative valuation from 169p/share to 178p/share.
Carr’s Group (CARR LN)# , the agriculture and engineering group, has provided a trading update for the 17 week period ended 30 June 2018.
The recovery in both US feed block sales and the UK manufacturing businesses noted at Carr’s Group’s AGM in January has continued throughout H118. This has resulted in a 22% improvement in adjusted PBT year-on-year and a slight over-performance compared with management’s expectations. H218 has started well, so we raise our estimates and adjust our indicative valuation from 167p/share to 169p/share.
Performance during the first 18 weeks of FY18 indicates that the recovery in both divisions that was predicted by Carr’s management is well underway. As the group is trading in line with management’s expectations for the full year, we leave our estimates and valuation unchanged except for an upward revision to revenues to reflect higher commodity prices.
Carr’s Group’s AGM trading update confirms that both Agriculture and Engineering divisions continue to recover and trade in line with expectations. The shares have been surprisingly weak since the full year results last November and trade on a very undemanding valuation. The increased confidence in the recovery from last year’s setbacks should help the shares to recover.
Carr’s Group (CARR LN) # , the agricultural and engineering group, has released a trading update for the 18-week period ended 6 January 2018, ahead of its AGM later today. Positive start to the year, including in retail; UK feed block sales continue to be strong, US feed block sales continue to recover as US cattle prices improve; new CARR feed block plant in Shelbyville commissioned in December as scheduled. UK manufacturing business well ahead of last year; remote handling business performing well.
Carr’s Group operates in relatively defensive markets. Demand for agricultural outputs worldwide is being driven by a rising global population, a switch to Westernised diets in the developing world and the adoption of bio-fuels. Demand for products and services from the Engineering division is primarily related to investment in the global nuclear industry and benefits from employers’ increased concern about removing personnel from hazardous environments. While enjoying the beneficial impact of these macro-trends, management’s focus on internationalisation and innovation reduces the exposure to crop and livestock disease, local variations in weather patterns and to government farming policies, from which agricultural stocks typically suffer, and Brexit.
While our international agriculture focus remains on Carr’s Group (CARR LN, BUY, T/P 185p), we maintain an interest in other listed companies with exposure to the space. In particular, we look for sustained trends of increased protein consumption as a longer-term determinant of demand for items such as feed blocks, animal feed, pesticides, crop protection and fertilizers. Zambeef (ZAM LN, N/R) issued results today. Year-to-date its stock fell by 35%.
Carr's Group PLC Zambeef Products PLC
Carr's Group (CARR LN, BUY, T/P 185p) reported a 9.9% revenue increase to £346.2m in the year to 2nd September 2017, which was ahead of Bloomberg expectations of a £333m outcome and our own £335m estimate. However, profitability was severely hampered by both US agriculture and a well flagged engineering contract delay. That said, the current year has started well and full year dividends are proposed to increase by 5.0% to 4.0p.
As flagged at the interim stage, group profits dipped during FY17 as a result of weak demand for feed blocks in the US and a major contract delay affecting the UK manufacturing activity. Demand for feed blocks in the US began to pick up in the second half and the major contract was finally signed in July, underpinning a recovery in FY18. Despite these short-term setbacks, management continued to invest for the medium-term, opening up the US nuclear market through the acquisition of NuVision and constructing a new feed-block plant to serve the eastern and southern US. We raise our estimates slightly to reflect a continuation of the favourable environment in UK agriculture and upgrade our indicative DCF valuation from 163p/share to 167p/share.
Carr’s Group (CARR LN) # , the agricultural and engineering group, has released results for the year ended 2 September 2017 (FY 2017).
Carr’s Group has acquired US-based NuVision Engineering for a total cash consideration of up to US$20m (£15.4m). The transaction is immediately earnings enhancing. Importantly, it gives German-based Wälischmiller, which is part of the Carr’s Group Engineering division, greatly enhanced access to the US nuclear market. We raise our FY18 and FY19 estimates and revise our indicative valuation from 158p/share to 163p/share.
Carr’s Group (CARR LN)#, the agricultural, food and engineering group, has announced the acquisition of ESI Holding Company, the holding company of US-based nuclear engineering firm NuVision Engineering.
Carr’s Group’s (CARR LN, BUY, 185p) latest trading update – which referred to the 19 week period ended 19th July 2017 – confirmed the Board’s expectations for the current year, which ends 2nd September 2017. Moreover, the statement included a number of fresh positives – notably for American feed blocks and UK engineering. UK agriculture continues to recover well.
Carr’s Group notes that the continued recovery in UK agriculture, supported by improving farmer confidence, is offsetting weak demand in the US for feed blocks caused by a surplus of cattle following a period of restocking. Importantly, management is seeing the first signs of recovery in the US market. This, together with a strong order book for the remote handling activity and improved prospects for the UK Manufacturing activity, underpin our expectations of profit recovery next year. We leave our estimates and valuation unchanged.
Carr’s Group# : FY 2017 Trading Update
Carr’s Group (CARR LN, BUY, T/P 185p) should release a trading statement on Tuesday 18th July 2017. We expect the engineering business to be more “as usual” than earlier in the year when contract delays prompted a downgrade to forecast. Agriculture should be more positive. In our view a number of longer term growth attractions remain in place, notably for international feedblocks. Our 185p price target is equivalent to a 19.8x calendar 2017 P/E. BUY.
Carr's Group PLC Nichols plc
African forestry and agriculture business Obtala Limited (OBT LN)# has conditionally acquired (subject to due diligence) the forestry business WoodBois International ApS (WBI) for US$14.8m.
CARR WYN WBI PETS
Carr’s Group (CARR LN, BUY, T/P 185p), which warned on full year FY2017 profits in a 30th March 2017 trading statement, released interim FY2017 figures this morning. While the numbers appeared to be fine overall, their relevance was diminished by its earlier release. But in our view a number of longer term growth attractions remain in place, notably for feedblocks where UK volume rose by +6.0% and, ex-US, momentum remained positive. The full year earnings outlook remains in line with the board’s revised expectations.
Once again, Carr’s Group results demonstrate how diversification gives resilience to cyclicity in any one market. This time outperformance in UK Agriculture, supported by improving farmer confidence, offset weak demand in the US for feed blocks caused by a surplus of cattle following a period of restocking. This drove a 5% increase in pre-exceptional PBT to £8.9m. Our estimates already include downward revisions for prolonged weakness in US feed block demand and contract delays in UK manufacturing activity, so we leave both our estimates and indicative valuation of 158p/share unchanged.
Carr’s Group (CARR LN, BUY, T/P 185p) issued a trading update today, which stated that the company’s performance for the current financial year is anticipated to be significantly below the board’s existing expectations. The company is due to release its FY2017 interim profits (26-weeks to 4th March 2017) on 12th April 2017. UK engineering and US feedblocks explain the warning. Elsewhere in the business, performance is on track with both remote handling and UK agriculture performing well.
Carr’s Group# Trading Update VSA Comment
Once again, the in-built diversity provided by having two divisions operating in different sectors and internationalisation within those two divisions shows its worth. During the first 18 weeks of FY17 a better than expected performance from the Agricultural division was balanced against a significant contract delay in the Engineering division, with the group as a whole trading in line with management’s expectations for the full year. We leave our estimates and valuation unchanged.
Carr’s Group’s (CARR LN, HOLD, T/P 175p) issued a statement today which confirmed that the company continues to trade in line with the Board’s expectations for the current financial year. The announcement refers to 18- week period which ended on 7th January and is the first pre-AGM statement since the disposal of the flour milling business for £36m.
Ahead of its AGM later today, Carr’s Group (CARR LN)# , the agricultural, food and engineering group, has provided a trading update for the eighteen weeks to 7 January.
Carr’s Group operates in fairly defensive markets and has further reduced risk through diversification in each market served, supported by a sequence of acquisitions. The sale of the Food division and the acquisition of the small engineering business, STABER, focuses the group on those activities where there is global reach, less competition, defensible IP and substantially greater opportunities for growth. Our sum-of-the-parts valuation of 161p/share remains unchanged.
Carr’s Group has acquired STABER GmbH for a net consideration of €6.75m (£6.0m). This brings key IP used in the Engineering division’s remote handling products in house. We make minor adjustments to our FY18 PBT and EPS estimates and reiterate our indicative valuation of 161p.
Carr’s Group (CARR LN, HOLD, T/P 175p) yesterday announced the €6.75m (£6.00m) acquisition of STABER Gmbh, which will complement its Walischmiller operations in Germany. Importantly, this deal secures the intellectual property of STABER for Carr’s German operation Walischmiller. The STABER inputs are a salient component of Telbot and Demo 2000 Telbot.
Back in June we highlighted some early signs of stabilisation inthe global dairy market that we believed might start to feed through into UK dairy prices over the following months.
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Carr’s Group is to sell its Food division to Whitworths for £24.9m net cash. The move enables management to focus investment on the Agriculture and Engineering divisions. These are engaged in geographically diverse activities where there is less competition, defensible IP and substantially greater opportunities for growth. While we believe the disposal is advantageous for the group, in the short term it will reduce earnings. We have revised our FY17 and FY18 estimates and cut our indicative valuation from 197p/share to 161p.
Carr’s “in line” Q3 statement confirms progress | Dairy Crest Q1 – “in line” complements 4% yield
Carr's Group PLC Dairy Crest Group
CARR has seen weaker than expected performance in engineering offset by stronger than expected performance in agriculture, with its US feedblock sales in particular benefiting from both an expanding market and increased market share. This again demonstrates the resilience and diversification of the CARR business model.
Carr's interims show that its strategy of innovation, investment and internationalisation is able to counter the impact of the headwinds prevailing in many of its markets. The announcement notes that Carr’s is trading in line with expectations but comments on a challenging agricultural market globally. We leave our FY16 estimates unchanged, while reducing FY17 and FY18 profit estimates slightly, and revise our indicative valuation to 197p/share (previously 205p).
Carr’s Group (CARR LN, HOLD, T/P 175p) reported £189.1m of sales revenue in the six months to end-February 2016 compared with £208.6m in the same period a year earlier. Pre-tax profit of £10.5 from £10.6m and adjusted EPS was 9.0p compared with 8.7p.
CARR has once again demonstrated the benefits of its diversification, with its food operations delivering another solid performance and strong performance in its US feedblock operations (volumes +11.7% YoY, exc. JVs) offsetting continued lacklustre market conditions in the UK and Europe. As a result, group operating margins increased to 5.1% (H1 2015: 4.6%)
Ahead of its AGM later today, Carr’s Group (CARR LN)# , the agricultural, food and engineering group, has provided a trading update for the eighteen weeks to 2 January.
Carr’s Group operates in fairly defensive markets and has further reduced risk through diversification in each market served, supported by a sequence of acquisitions. Management achieved another year of record profits in FY15 through sustained investment in product innovation and infrastructure. We expect this strategy to maintain FY16 profits at these record levels despite challenging conditions in some of the markets served. Our sum-of-the-parts analysis indicates that the stock is undervalued at current levels.
Carr’s strategy of innovation, investment and internationalisation has delivered another record year of profits despite challenging markets for all three divisions. We expect this strategy to mitigate the impact of continued weakness in the markets served, enabling the group to maintain profit at these record levels. We revise our estimates to reflect market conditions and see fair value at 199p/share (previously 203p/share).
Carr’s Group (CARR LN)# , the agricultural, food and engineering group, has released results for the year ended 31 August 2015 (FY 2015).
Carr’s Group: H2 Trading Update
After posting a record first half profit before tax, Carr’s interim management statement notes that the group continues to trade in line with expectations. Management’s strategy of innovation, investment and internationalisation continues to deliver growth, despite pressure on dairy farm incomes in the UK. We leave our estimates broadly unchanged and reiterate our sum-of-the parts valuation of 203p/share.
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