Last close As at 05/08/2026
GBP1.38
▲ 5.50 (4.17%)
Market capitalisation
GBP69m
Research: Industrials
Carr’s Group
Written by
Carr's Group |
Diversification combats headwinds and floods |
AGM and IMS |
Food producers |
5 January 2016 |
Share price performance
Business description
Next event
Analysts
Carr's Group is a research client of Edison Investment Research Limited |
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Carr's interim management statement for the first 18 weeks of FY16 shows that its strategy of innovation, investment and internationalisation is able to counter the impact of headwinds in many of its markets, enabling it to achieve another year with profits at the record levels achieved in FY15. The announcement notes that Carr’s is trading in line with expectations, so we leave our estimates and valuation of 205p/share unchanged.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
08/14 |
429.0 |
17.0 |
13.2 |
3.4 |
11.3 |
2.3 |
08/15 |
411.6 |
18.1 |
14.0 |
3.7 |
10.7 |
2.5 |
08/16e |
403.2 |
18.1 |
13.9 |
3.8 |
10.8 |
2.5 |
08/17e |
409.2 |
18.3 |
14.1 |
3.9 |
10.6 |
2.6 |
Note: *PBT and EPS are normalised, excluding intangible amortisation, exceptional items and share-based payments.
Geographical reach de-risks impact of weather
Overall, Agricultural performance was in line with management’s expectations, despite the impact of depressed livestock and farmgate milk prices, which had been anticipated, and very mild UK weather plus flooding in Cumbria, which affected the Lancaster feed-mill, which had not. The retail operation benefited from the acquisition of Green (Agriculture) Co at Morpeth in September 2015 and of Reid & Robertson with outlets in Balloch, Ayr and Oban, acquired in June 2015. The US feed block operations performed well, building on market share gains in FY15. Further growth is expected following the completion of the Nevada redevelopment project in December, which is now outputting branded feed-blocks.
Revival in nuclear balances weakness in oil
The revival in contracts from the nuclear industry has resulted in a strong start to the year at MSM following a significant contract from Sellafield. Wälischmiller has a number of contracts for completion in summer 2016. Bendalls has been awarded several new contracts from Sellafield, requiring both manufacturing and the newly developed design capability, with delivery due through to 2019. This is in addition to four contracts in the nuclear industry tendered jointly with Chirton, which are for delivery through 2016. These joint projects will help offset the expected weakness in demand from the oil & gas industry resulting from low oil prices. One of the Flour division’s customers has been directly affected by the floods in Cumbria, resulting in a short-term reduction in sales; however, like the flooding at the Lancaster feed-mill, this is fully covered by insurance. Both the Engineering and the Flour divisions are trading in line with management's expectations.
Valuation: Potential for share price appreciation
The share price has dipped by over 9% since early December, possibly because of concerns about the recent UK floods. The shares are trading on a year 1 P/E ratio that is low compared with sector averages (14.6x global agricultural suppliers, 14.0x UK food producers, 15.7x German industrials). The diversification strategy limits the overall impact of these events so the discount appears unwarranted.
Exhibit 1: Financial summary
£m |
2014 |
2015 |
2016e |
2017e |
2018e |
||
Year-end 31 Aug |
|||||||
PROFIT & LOSS |
|||||||
Revenue |
|
|
429.0 |
411.6 |
403.2 |
409.2 |
415.0 |
EBITDA |
|
|
20.9 |
22.2 |
22.0 |
22.0 |
22.2 |
Operating Profit (pre amort. of acq intangibles & SBP) |
|
15.8 |
17.0 |
16.6 |
16.5 |
16.8 |
|
Amortisation of acquired intangibles |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Share-based payments |
(0.4) |
(0.6) |
(0.6) |
(0.6) |
(0.6) |
||
Exceptionals |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Operating Profit |
15.4 |
16.4 |
16.0 |
16.0 |
16.2 |
||
Net Interest |
(1.4) |
(1.2) |
(1.0) |
(0.8) |
(0.8) |
||
Share of post-tax profits in JVs and associates |
2.5 |
2.3 |
2.5 |
2.6 |
2.7 |
||
Profit Before Tax (norm) |
|
|
17.0 |
18.1 |
18.1 |
18.3 |
18.7 |
Profit Before Tax (FRS 3) |
|
|
16.6 |
17.5 |
17.5 |
17.8 |
18.1 |
Tax |
(3.7) |
(3.8) |
(3.8) |
(4.0) |
(4.0) |
||
Profit After Tax (norm) |
13.3 |
14.3 |
14.2 |
14.4 |
14.6 |
||
Profit After Tax (FRS 3) |
12.9 |
13.7 |
13.6 |
13.8 |
14.1 |
||
Minority interest |
(1.5) |
(1.7) |
(1.7) |
(1.7) |
(1.7) |
||
Net income (norm) |
11.8 |
12.6 |
12.5 |
12.7 |
12.9 |
||
Net income (FRS 3) |
11.4 |
12.0 |
11.9 |
12.1 |
12.4 |
||
Average Number of Shares Outstanding (m) |
89.0 |
89.6 |
89.8 |
89.8 |
89.8 |
||
EPS - normalised (p) |
|
|
13.2 |
14.0 |
13.9 |
14.1 |
14.4 |
EPS - normalised fully diluted (p) |
|
|
12.8 |
13.6 |
13.5 |
13.6 |
13.9 |
EPS - FRS 3 (p) |
|
|
12.3 |
13.4 |
13.3 |
13.4 |
13.8 |
Dividend per share (p) |
3.4 |
3.7 |
3.8 |
3.9 |
4.0 |
||
EBITDA Margin (%) |
4.9 |
5.4 |
5.4 |
5.4 |
5.4 |
||
Operating Margin (before GW and except.) (%) |
3.7 |
4.1 |
4.1 |
4.0 |
4.0 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
83.4 |
86.5 |
90.3 |
89.2 |
88.2 |
Intangible Assets |
10.3 |
11.3 |
11.1 |
10.9 |
10.9 |
||
Tangible Assets and Deferred tax assets |
73.1 |
75.2 |
79.2 |
78.3 |
77.4 |
||
Current Assets |
|
|
114.3 |
116.9 |
113.1 |
105.1 |
108.2 |
Stocks |
33.3 |
35.0 |
35.4 |
29.1 |
29.6 |
||
Debtors |
63.7 |
65.3 |
66.1 |
56.9 |
57.7 |
||
Cash |
17.3 |
16.5 |
11.7 |
19.0 |
20.9 |
||
Current Liabilities |
|
|
(75.6) |
(70.2) |
(66.8) |
(53.4) |
(51.0) |
Creditors including tax, social security and provisions |
(55.9) |
(55.0) |
(54.7) |
(44.3) |
(44.9) |
||
Short term borrowings |
(19.7) |
(15.2) |
(12.2) |
(9.2) |
(6.2) |
||
Long Term Liabilities |
|
|
(32.3) |
(34.2) |
(30.2) |
(26.2) |
(22.2) |
Long term borrowings |
(22.2) |
(25.7) |
(21.7) |
(17.7) |
(13.7) |
||
Retirement benefit obligation |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other long term liabilities |
(10.1) |
(8.5) |
(8.5) |
(8.5) |
(8.5) |
||
Net Assets |
|
|
89.8 |
99.0 |
106.3 |
114.7 |
123.1 |
Minority interest |
(10.2) |
(11.9) |
(11.9) |
(11.9) |
(11.9) |
||
Shareholders equity |
|
|
79.7 |
87.1 |
94.4 |
102.8 |
111.2 |
CASH FLOW |
|||||||
Operating Cash Flow (net of contribution to pension fund) |
|
|
17.1 |
15.1 |
19.8 |
27.0 |
21.6 |
Net Interest |
(1.4) |
(1.2) |
(1.0) |
(0.8) |
(0.8) |
||
Tax |
(3.2) |
(4.0) |
(3.8) |
(4.0) |
(4.0) |
||
Investment activities |
(7.5) |
(4.0) |
(8.4) |
(4.4) |
(4.4) |
||
Acquisitions/disposals |
(3.6) |
(1.7) |
(1.0) |
0.0 |
0.0 |
||
Equity financing and other financing activities |
(4.1) |
(1.8) |
(7.0) |
(7.0) |
(7.0) |
||
Dividends |
(2.9) |
(3.1) |
(3.3) |
(3.4) |
(3.5) |
||
Net Cash Flow |
(5.7) |
(0.7) |
(4.8) |
7.4 |
1.9 |
||
Opening net debt/(cash) |
|
|
22.1 |
24.6 |
24.4 |
22.2 |
7.9 |
HP finance leases initiated |
(2.3) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
(5.5) |
(0.9) |
(7.0)* |
(7.0)* |
(7.0)* |
||
Closing net debt/(cash) |
|
|
24.6 |
24.4 |
22.2 |
7.9 |
(1.0) |
Source: Edison Investment Research, company accounts. Note: *Repayment of long-term debt. EPS and DPS are stated after 10-for-1 share split.
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