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Carr’s Group — Acquisition broadens animal nutrition offer

Fevara (LSE: FVA)

Last close As at 05/08/2026

GBP1.32

▲ 1.00 (0.76%)

Market capitalisation

GBP69m

More on this equity

Research: Industrials

Carr’s Group — Acquisition broadens animal nutrition offer

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.

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Written by

Industrials

Carr's Group

Acquisition broadens animal nutrition offer

Acquisition of Animax

Basic materials

1 October 2018

Price

153.5p

Market cap

£140m

Net debt (£m) at 3 March 2018

16.1

Shares in issue

91.4m

Free float

84.5%

Code

CARR

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

4.6

3.0

6.2

Rel (local)

6.3

4.5

3.5

52-week high/low

165.0p

120.0p

Business description

Carr’s Agriculture division serves farmers in the North of England, South Wales, the Borders and Scotland, the US, Germany and New Zealand. The Engineering division offers remote handling equipment and fabrications to the global nuclear and oil and gas industries.

Next events

Prelims

12 November 2018

Analyst

Anne Margaret Crow

+44 (0)20 3077 5700

Carr's Group is a research client of Edison Investment Research Limited

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.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

8/16

314.9

14.2

10.8

3.8**

14.2

2.5

8/17

346.2

11.9

9.4

4.0

16.3

2.6

8/18e

377.4

16.6

13.1

4.3

11.7

2.8

8/19e

390.3

17.2

13.6

4.5

11.3

2.9

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Excluding 17.54p special dividend.

Boluses complement existing feed block format

Animax has a patented technology for encapsulating the trace elements copper, cobalt, iodine and selenium in boluses that are administered to sheep, cattle and their young. The boluses lodge in the animal’s digestive system, releasing a controlled dosage of the supplement over a six-month period. This is highly complementary to Carr’s feed block format in which trace elements and other supplements are administered via a lick. Post-acquisition, Carr’s will sell Animax’s products through its sales channels across the USA, New Zealand, Europe, the UK and Ireland.

Transaction immediately earnings enhancing

Animax is based in Suffolk. Together with sister company Clinimax, a manufacturer of patented specialist disinfectant products for the medical industry, it generated £0.6m EBITDA for the year ended November 2017. The initial cash consideration payable for the two companies is £6m (excluding £1.2m cash acquired with Animax), with an additional £2.5m cash consideration based on performance payable over the period to November 2020. This is payable from the group’s existing facilities. We revise our estimates (FY19 EPS up 1.9%, FY20 up 3.6%) to reflect management expectations that the transaction will be earnings enhancing in FY19. The initial consideration payable, net of cash acquired, is 8.0x historic EBITDA, slightly less than the historic EV/EBITDA multiple for Carr’s of 9.0x.

Valuation: Trading at a discount to peers

Despite the estimates upgrade, our updated DCF analysis gives an indicative value that remains at 178p because of the cash cost associated with the transaction. At the current share price, Carr’s is trading below its peers with regards to mean P/E (11.7x vs 14.0x) for the year ending August 2018. As discussed in our April note, continued recovery in the US feed block market and further confirmation of the Engineering upturn should help close the valuation gap.

Revisions to estimates

As the acquisition has taken place after the end of FY18, we revise our estimates to reflect the impact of the acquisition from FY19 onwards.

Exhibit 1: Changes to forecast

FY17

FY18e

FY19e

FY20e

Actual

Unchanged

Old

New

% change

Old

New

% change

Agriculture revenues (£m)

315.9

331.7

338.1

344.1

1.8%

343.2

349.3

1.8%

Agriculture EBITA (£m)

11.4

12.7

12.6

13.2

4.8%

12.9

13.5

4.7%

Engineering revenues (£m)

30.4

45.7

46.2

46.2

0.0%

47.3

47.3

0.0%

Engineering EBITA (£m)

0.7

4.4

4.8

4.8

0.0%

5.2

5.2

0.0%

Group revenues (£m)

346.2

377.4

384.3

390.3

1.6%

390.5

396.6

1.6%

Adjusted PBT (£m)

11.9

16.6

16.9

17.2

1.8%

17.6

18.2

3.4%

EPS (p)

9.4

13.1

13.4

13.6

1.9%

14.0

14.5

3.6%

DPS(p)

4.0

4.3

4.5

4.5

0.0%

4.7

4.7

0.0%

Net (cash)/debt (£m)

14.1

14.4

10.0

15.1

50.7%

4.7

9.3

98.9%

Source: Edison Investment Research

Exhibit 2: Financial summary

£m

2016

2017

2018e

2019e

2020e

Year-end Aug

PROFIT & LOSS

Revenue

 

 

314.9

346.2

377.4

390.3

396.6

EBITDA

 

 

16.5

13.9

19.4

20.4

21.2

Operating Profit (before amort. and except.)

 

 

12.9

9.8

14.8

15.7

16.4

Amortisation of acquired intangibles

(0.2)

(0.1)

(0.5)

(0.5)

(0.5)

Share-based payments

0.1

(0.5)

(0.5)

(0.5)

(0.5)

Exceptionals

0.0

(1.3)

0.0

0.0

0.0

Operating Profit

12.8

7.9

13.8

14.7

15.4

Net Interest

(0.8)

(0.7)

(1.0)

(1.3)

(1.0)

Share of post-tax profits in JVs and associates

2.1

2.8

2.8

2.8

2.8

Profit Before Tax (norm)

 

 

14.2

11.9

16.6

17.2

18.2

Profit Before Tax (FRS 3)

 

 

14.1

10.0

15.6

16.2

17.2

Tax

(2.9)

(1.7)

(3.3)

(3.5)

(3.7)

Profit After Tax (norm)

11.2

9.9

13.3

13.7

14.5

Profit After Tax (FRS 3)

11.2

8.3

12.3

12.7

13.5

Post tax profit (loss) relating to discontinued operations

2.8

0.0

0.0

0.0

0.0

Minority interest

(1.5)

(1.3)

(1.3)

(1.3)

(1.3)

Net income (norm)

9.7

8.6

12.0

12.5

13.2

Net income (FRS 3)

12.5

7.0

11.0

11.5

12.2

Average Number of Shares Outstanding (m)

90.1

91.4

91.4

91.4

91.4

EPS - normalised (p)

 

 

10.8

9.4

13.1

13.6

14.5

EPS

 

 

10.4

9.4

13.0

13.5

14.4

EPS - FRS 3 (p)

 

 

13.8

7.7

12.0

12.5

13.4

Dividend per share (p)

3.8*

4.0

4.3

4.5

4.7

EBITDA Margin (%)

5.2

4.0

5.1

5.2

5.3

Operating Margin (before GW and except.) (%)

4.1

2.8

3.9

4.0

4.1

BALANCE SHEET

Fixed Assets

 

 

63.1

87.9

86.6

90.0

88.4

Intangible Assets

11.7

26.5

26.4

26.6

26.5

Tangible Assets, Deferred tax assets and Pension surplus

51.4

61.4

60.2

63.3

61.9

Current Assets

 

 

139.1

121.1

122.7

120.5

124.2

Stocks

33.4

37.0

38.5

39.0

39.5

Debtors

57.2

60.2

63.5

64.5

65.0

Cash

48.4

23.9

20.7

17.0

19.7

Current Liabilities

 

 

(69.0)

(73.7)

(71.7)

(69.2)

(66.7)

Creditors including tax, social security and provisions

(47.3)

(56.7)

(57.7)

(58.2)

(58.7)

Short term borrowings

(21.6)

(17.1)

(14.1)

(11.1)

(8.1)

Long Term Liabilities

 

 

(23.1)

(29.4)

(29.4)

(29.4)

(29.4)

Long term borrowings

(18.6)

(21.0)

(21.0)

(21.0)

(21.0)

Retirement benefit obligation

0.0

0.0

0.0

0.0

0.0

Other long term liabilities

(4.5)

(8.4)

(8.4)

(8.4)

(8.4)

Net Assets

 

 

110.1

105.9

108.1

111.8

116.6

Minority interest

(13.4)

(14.4)

(15.4)

(16.4)

(17.4)

Shareholders equity

 

 

96.7

91.5

92.7

95.4

99.1

CASH FLOW

Operating Cash Flow

 

 

11.7

15.1

15.6

19.4

20.7

Net Interest

(0.5)

(0.7)

(1.0)

(1.3)

(1.0)

Tax

(1.1)

(1.2)

(3.3)

(3.5)

(3.7)

Investment activities

(2.9)

(1.1)

(3.8)

(3.8)

(3.8)

Acquisitions/disposals

22.7

(13.2)

(4.1)

(8.8)

(2.3)

Equity financing and other financing activities

1.0

0.1

0.0

0.0

0.0

Dividends

(3.3)

(19.5)

(3.7)

(3.9)

(4.1)

Net Cash Flow

27.5

(20.4)

(0.2)

(1.9)

5.8

Opening net debt/(cash)

 

 

24.4

(8.1)

14.1

14.4

15.1

HP finance leases initiated

0.0

0.0

0.0

0.0

0.0

Other

(5.1)

1.9

0.0

(1.2)

0.0

Closing net debt/(cash)

 

 

(8.1)

14.1

14.4

15.1

9.3

Source: Company accounts, Edison Investment Research. Note: *Excluding 17.54p special dividend.


Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

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Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Carr's Group and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. 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