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Carr’s Group — Both divisions slightly ahead of expectations

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 — Both divisions slightly ahead of expectations

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.

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Written by

Industrials

Carr's Group

Both divisions slightly ahead of expectations

Trading update

Basic materials

18 July 2018

Price

165.0p

Market cap

£151m

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

11.1

13.4

22.5

Rel (local)

11.4

7.6

18.1

52-week high/low

165p

120p

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 event

FY18 results

12 November 2018

Analyst

Anne Margaret Crow

+44 (0)20 3077 5700

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

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.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

08/16

314.9

14.2

10.8

3.8**

15.3

2.3

08/17

346.2

11.9

9.4

4.0

17.6

2.4

08/18e

377.4

16.6

13.1

4.3

12.6

2.6

08/19e

384.3

16.9

13.4

4.5

12.3

2.7

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

Positive trends in agriculture continue

As noted at the AGM and the interims, UK farming sentiment remains positive, resulting in feed volumes, retail sales, machinery sales and fuel sales all ahead of the prior year. The acquisition of Pearson Farm Supplies in October 2017 also benefited both retail sales and feed volumes. US feed block volumes continued to recover as cattle prices for producers improved. A favourable environment for dairy producers in Germany supported a further increase in feed block volumes from the German joint venture.

Strong recovery in UK Manufacturing continues

Work continues on the significant fabrication contract that was delayed until almost the end of FY17. The precision engineering business is benefiting from a recovery and stabilisation of the oil price, which happily coincides with a strengthened management team, resulting in more effective business development and improved operating efficiencies. The remote handling businesses are also performing well and the programme to create additional capacity in Germany is nearing completion. NuVision’s order book is looking good, having secured a major contract to mitigate stress corrosion cracking in welded pipes in certain nuclear plants. NuVision was acquired in August 2017 and has integrated well.

Valuation: Trading at a discount to peers

Following the estimates upgrade, our updated DCF analysis gives an indicative value of 178p/share (previously 169p). At the current share price, Carr’s is trading below its peers with regards to mean P/E (12.6x vs. 14.5x) for the year ending August 2018. Continued recovery in the US feed block market and further confirmation of the Engineering upturn should help close the valuation gap.

Changes to estimates

Exhibit 1: Estimate revisions

FY18e

FY19e

FY20e

£m

Old

New

change

Old

New

change

Old

New

change

Agriculture revenues

329.9

331.7

0.5%

336.4

338.1

0.5%

341.4

343.2

0.5%

Agriculture EBITA

12.4

12.7

2.4%

12.6

12.6

0.0%

12.9

12.9

0.0%

Engineering revenues

45.2

45.7

1.1%

46.2

46.2

0.0%

47.3

47.3

0.0%

Engineering EBITA

4.3

4.4

2.3%

4.8

4.8

0.0%

5.2

5.2

0.0%

Group revenues

375.1

377.4

0.6%

382.5

384.3

0.5%

388.7

390.5

0.5%

Adjusted PBT

16.2

16.6

2.5%

16.9

16.9

0.0%

17.6

17.6

0.0%

EPS (p)

12.8

13.1

2.6%

12.9

13.4

3.6%

13.5

14.0

3.6%

DPS(p)

4.3

4.3

0.0%

4.5

4.5

0.0%

4.7

4.7

0.0%

Net (cash)/debt

14.7

14.4

-2.1%

10.7

10.0

-6.8%

5.8

4.7

-20.1%

Source: Edison Investment Research

Following the trading update, we revise our estimates slightly to reflect the following:

■

higher commodity prices;

■

strong demand for agricultural inputs in the UK; and

■

outperformance in the Engineering division.

We also reduce the tax rate for FY19 and FY20 from 27% to 24% so it is in line with the rate applied for FY18.


Exhibit 2: Financial summary

£m

2016

2017

2018e

2019e

2020e

Year-end Aug

PROFIT & LOSS

Revenue

 

 

314.9

346.2

377.4

384.3

390.5

EBITDA

 

 

16.5

13.9

19.4

19.8

20.6

Operating Profit (before amort. and except.)

 

 

12.9

9.8

14.8

15.1

15.8

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

14.1

14.8

Net Interest

(0.8)

(0.7)

(1.0)

(1.0)

(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

16.9

17.6

Profit Before Tax (FRS 3)

 

 

14.1

10.0

15.6

15.9

16.6

Tax

(2.9)

(1.7)

(3.3)

(3.4)

(3.6)

Profit After Tax (norm)

11.2

9.9

13.3

13.5

14.1

Profit After Tax (FRS 3)

11.2

8.3

12.3

12.5

13.1

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

12.2

12.8

Net income (FRS 3)

12.5

7.0

11.0

11.2

11.8

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

13.4

14.0

EPS – normalised and fully diluted (p)

 

 

10.4

9.4

13.0

13.3

13.9

EPS - FRS 3 (p)

 

 

13.8

7.7

12.0

12.3

12.9

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

3.9

4.0

BALANCE SHEET

Fixed Assets

 

 

63.1

87.9

86.6

85.2

83.6

Intangible Assets

11.7

26.5

26.4

26.2

26.1

Tangible Assets, Deferred tax assets and Pension surplus

51.4

61.4

60.2

58.9

57.5

Current Assets

 

 

139.1

121.1

122.7

125.5

128.9

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

22.0

24.4

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

112.1

116.4

Minority interest

(13.4)

(14.4)

(15.4)

(16.4)

(17.4)

Shareholders equity

 

 

96.7

91.5

92.7

95.6

99.0

CASH FLOW

Operating Cash Flow

 

 

11.7

15.1

15.6

18.8

20.1

Net Interest

(0.5)

(0.7)

(1.0)

(1.0)

(1.0)

Tax

(1.1)

(1.2)

(3.3)

(3.4)

(3.6)

Investment activities

(2.9)

(1.1)

(3.8)

(3.8)

(3.8)

Acquisitions/disposals

22.7

(13.2)

(4.1)

(2.3)

(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)

4.4

5.3

Opening net debt/(cash)

 

 

24.4

(8.1)

14.1

14.4

10.0

HP finance leases initiated

0.0

0.0

0.0

0.0

0.0

Other

(5.1)

1.9

0.0

0.0

0.0

Closing net debt/(cash)

 

 

(8.1)

14.1

14.4

10.0

4.7

Source: Edison Investment Research, Carr’s Group accounts. Note: *excluding 17.54p special dividend.

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 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

DISCLAIMER
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. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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 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

DISCLAIMER
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. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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

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