Last close As at 05/08/2026
GBP1.32
▲ 1.00 (0.76%)
Market capitalisation
GBP69m
Research: Industrials
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.
Written by
Carr's Group |
Engineering pipeline to offset weather challenges |
AGM update |
Basic materials |
14 January 2020 |
Share price performance
Business description
Next event
Analyst
Carr's Group is a research client of Edison Investment Research Limited |
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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.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
08/18 |
403.2 |
17.7 |
15.2 |
4.50 |
10.5 |
2.8 |
08/19 |
403.9 |
18.9 |
15.6 |
4.75 |
10.3 |
3.0 |
08/20e |
434.6 |
19.4 |
16.2 |
4.90 |
9.9 |
3.1 |
08/21e |
439.6 |
20.0 |
16.7 |
5.10 |
9.6 |
3.2 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Mild UK weather affects demand
Compared to FY19, demand for animal feed in the UK was depressed by the unseasonably mild weather which resulted in plentiful supplies of forage. The corresponding period in FY19 followed a prolonged period of drought, so while farmers typically started FY19 with very low stores of forage, levels were more normal at the start of FY20. Moreover, a combination of lower cattle prices, rising input prices and continuing Brexit uncertainty resulted in lower sales of supplements as farmers were not pushing to maximise outputs and lower sales of products related to infrastructure investment. Management does not expect this situation to improve during FY20. In the US, there was lower demand for feed blocks because of reduced cattle prices and a delayed start to winter feeding. However, higher cattle prices and better availability of forage could potentially benefit divisional performance during the remainder of FY20.
Contracts underpin further Engineering progress
Contract phasing meant that Engineering had a slow start to the year. However, management anticipates that the strong pipeline, which includes a US$8.5m robotics contract from the US primarily for delivery in FY20, will result in full year divisional performance ahead of management’s previous expectations. Both the Global Robotics and the UK Service and Manufacturing businesses are expected to show y-o-y growth. The two significant Mechanical Stress Improvement Process contracts won by the US operation during FY19 will primarily benefit FY21.
Valuation: Indicative valuation of 190p/share
Our DCF analysis derives an indicative value of 190p/share (unchanged). At the current share price, Carr’s is trading below its agricultural supply peers with regards to the mean EV/EBITDA multiple (7.8x vs 8.2x) and P/E multiple (9.9 vs 12.6x) for FY20e. Confirmation that the improvement in US cattle prices is sustainable plus news of further Engineering orders should, in our view, help close the valuation gap compared with the mean.
Exhibit 1: Financial summary
£m |
2018 |
2019 |
2020e |
2021e |
2022e |
||
Year-end Aug |
|||||||
PROFIT & LOSS |
|||||||
Revenue |
|
|
403.2 |
403.9 |
434.6 |
439.6 |
444.6 |
EBITDA |
|
|
19.9 |
22.1 |
22.8 |
23.2 |
23.5 |
Operating Profit (before amort. and except.) |
|
|
18.6 |
19.8 |
20.6 |
21.2 |
21.6 |
Amortisation of acquired intangibles |
(0.3) |
(0.8) |
(0.8) |
(0.8) |
(0.8) |
||
Exceptionals |
(0.8) |
(0.9) |
0.0 |
0.0 |
0.0 |
||
Share-based payments |
(1.1) |
(0.9) |
(0.9) |
(0.9) |
(0.9) |
||
Operating Profit |
16.4 |
17.2 |
18.9 |
19.5 |
19.9 |
||
Net Interest |
(0.9) |
(0.9) |
(1.2) |
(1.2) |
(1.2) |
||
Profit Before Tax (norm) |
|
|
17.7 |
18.9 |
19.4 |
20.0 |
20.4 |
Profit Before Tax (FRS 3) |
|
|
15.5 |
16.3 |
17.7 |
18.3 |
18.7 |
Tax |
(1.9) |
(2.7) |
(2.9) |
(3.0) |
(3.0) |
||
Profit After Tax (norm) |
15.6 |
15.9 |
16.5 |
17.0 |
17.4 |
||
Profit After Tax (FRS 3) |
13.6 |
13.6 |
14.8 |
15.3 |
15.7 |
||
Minority interest |
(1.8) |
(1.6) |
(1.6) |
(1.6) |
(1.6) |
||
Net income (norm) |
13.9 |
14.3 |
14.9 |
15.5 |
15.8 |
||
Net income (FRS 3) |
11.9 |
12.0 |
13.2 |
13.8 |
14.1 |
||
Average Number of Shares Outstanding (m) |
91.4 |
91.8 |
92.39 |
92.4 |
92.4 |
||
EPS - normalised (p) |
|
|
15.2 |
15.6 |
16.2 |
16.7 |
17.1 |
EPS (p) |
|
|
14.8 |
15.2 |
15.7 |
16.3 |
16.6 |
EPS - FRS 3 (p) |
|
|
13.0 |
13.1 |
14.3 |
14.9 |
15.3 |
Dividend per share (p) |
4.50 |
4.75 |
4.90 |
5.10 |
5.30 |
||
EBITDA Margin (%) |
4.9 |
5.5 |
5.2 |
5.3 |
5.3 |
||
Operating Margin (before GW and except.) (%) |
4.6 |
4.9 |
4.7 |
4.8 |
4.9 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
96.5 |
115.6 |
115.7 |
115.8 |
115.9 |
Intangible Assets |
26.5 |
42.2 |
42.6 |
42.9 |
43.3 |
||
Tangible Assets, Deferred tax assets and Pension surplus |
70.0 |
73.4 |
73.1 |
72.9 |
72.6 |
||
Current Assets |
|
|
134.7 |
140.7 |
147.8 |
150.8 |
153.8 |
Stocks |
42.4 |
46.3 |
52.4 |
53.0 |
53.6 |
||
Debtors |
67.7 |
65.8 |
75.0 |
75.9 |
76.7 |
||
Cash |
24.6 |
28.6 |
20.4 |
21.9 |
23.4 |
||
Current Liabilities |
|
|
(99.5) |
(88.8) |
(90.9) |
(88.7) |
(86.5) |
Creditors including tax, social security and provisions |
(64.5) |
(64.9) |
(70.1) |
(70.9) |
(71.7) |
||
Short term borrowings |
(35.0) |
(23.9) |
(20.9) |
(17.9) |
(14.9) |
||
Long Term Liabilities |
|
|
(10.8) |
(36.6) |
(36.6) |
(36.6) |
(36.6) |
Long term borrowings |
(5.0) |
(28.6) |
(28.6) |
(28.6) |
(28.6) |
||
Other long term liabilities |
(5.8) |
(8.0) |
(8.0) |
(8.0) |
(8.0) |
||
Net Assets |
|
|
121.0 |
131.0 |
136.0 |
141.3 |
146.6 |
Minority interest |
(15.7) |
(16.7) |
(17.7) |
(18.7) |
(19.7) |
||
Shareholders’ equity |
|
|
105.3 |
114.3 |
118.3 |
122.5 |
126.8 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
15.0 |
16.0 |
12.6 |
22.5 |
22.8 |
Net Interest |
(1.0) |
(1.1) |
(1.2) |
(1.2) |
(1.2) |
||
Tax |
(2.5) |
(2.3) |
(2.9) |
(3.0) |
(3.0) |
||
Investment activities |
(2.8) |
(4.2) |
(5.8) |
(5.8) |
(5.8) |
||
Acquisitions/disposals |
(4.2) |
(10.2) |
(3.5) |
(3.5) |
(3.5) |
||
Equity financing and other financing activities |
(0.1) |
0.6 |
0.0 |
0.0 |
0.0 |
||
Dividends |
(3.8) |
(4.2) |
(4.4) |
(4.5) |
(4.7) |
||
Net Cash Flow |
0.5 |
(5.4) |
(5.2) |
4.5 |
4.5 |
||
Opening net debt/(cash) |
|
|
14.1 |
15.4 |
23.8 |
29.0 |
24.5 |
HP finance leases initiated |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
1.7 |
3.0 |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
15.4 |
23.8 |
29.0 |
24.5 |
20.0 |
Source: Company reports, Edison Investment Research
|
|
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