Carr’s Group — Engineering recovery sustained

Carr’s Group (LSE: CARR)

Currency in GBP

Last close As at 26/01/2023

GBP1.22

5.50 (4.74%)

Market capitalisation

GBP109m

Research: Industrials

Carr’s Group — Engineering recovery sustained

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.

Anne Crow

Written by

Anne Margaret Crow

Director, TMT & Industrials

Industrials

Carr's Group

Engineering recovery sustained

Interim results and outlook

General industrials

20 April 2022

Price

152p

Market cap

£143m

Net debt (£m) at end February 2022 (excluding finance leases)

29.9

Shares in issue

94.0m

Free float

56.0%

Code

CARR

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(2.6)

(2.9)

7.6

Rel (local)

(4.6)

(1.7)

1.9

52-week high/low

168p

135p

Business description

Carr’s Group’s Speciality Agriculture and Agricultural Supplies divisions serve farmers in the North of England, South Wales, the Welsh Borders and Scotland, the United States, Germany, Canada and New Zealand. The Engineering division offers remote handling equipment and fabrications to the global nuclear and oil and gas industries.

Next event

FY22 results

November 2022

Analyst

Anne Margaret Crow

+44 (0)20 3077 5700

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

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.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

08/20**

395.6

15.0

12.0

4.75

12.7

3.1

08/21

417.3

16.6

13.2

5.00

11.5

3.3

08/22e

477.6

17.3

12.7

5.20

12.0

3.4

08/23e

478.6

17.9

12.9

5.40

11.8

3.6

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Restated.

H122 performance

Group H122 revenues grew by 10.6% y-o-y to £222.7m. Higher commodity prices were offset by a reduction in feed volumes and lower revenues from the engineering solutions business. Adjusted operating profit decreased slightly, by £0.2m to £10.8m. A strong performance from the Agricultural Supplies division and continued recovery in the Engineering division, as well as lower central costs, were offset by a reduction in profits from the Speciality Agriculture division where margins were adversely affected by delays in passing on higher input costs. The initial interim dividend (Carr’s typically pays two interim dividends) was maintained at 1.175p/share. Net debt (excluding finance leases of £15.3m) jumped by £19.9m during H122 to £29.9m, mainly due to working capital movements, which management expects to substantially reverse during H222.

Estimates broadly unchanged

Management notes that the FY22 outlook is in line with expectations, so we leave our FY22 and FY23 estimates broadly unchanged, with no revisions to group adjusted EBITA or group adjusted PBT. However, we have modified the profit mix so that a higher proportion of the profits in both years are attributable to the Engineering division, where the order book is strong, and a lower proportion to the Speciality Agriculture division. Although feed block margins have recovered, the ongoing drought in northern US states is reducing demand there.

Valuation: Releasing the value of divisions beneficial

Our discounted cash flow (DCF) analysis indicates a value of 170p/share (unchanged). Given the ongoing strategic review, we believe a sum-of-the-parts (SOTP) analysis is more appropriate as it shows that stocks engaged purely in engineering activities or providing speciality agricultural inputs command substantially higher multiples than those involved in supplying commoditised agricultural inputs. Our SOTP calculation gives a value of 268.8p/share, which suggests that any potential strategic activity that released the value of individual divisions by splitting up the group would be beneficial for shareholders.

Divisional performance

Exhibit 1: Divisional analysis

Year end 31 August (£m)

FY20

FY21

FY22e

FY23e

Speciality Agriculture revenues

61.9

68.5

77.1

76.7

Agricultural Supplies revenues

280.7

297.5

345.5

339.9

Engineering revenues

53.0

51.3

55.0

62.0

Group revenues

395.6

417.3

477.6

478.6

Speciality Agriculture EBITA (including JVs and associate)

7.6

9.5

7.6

8.3

Agricultural Supplies EBITA (including JVs and associate)

5.8

6.7

7.3

7.5

Share of post-tax results of associate and joint ventures

0.0

0.0

0.0

0.0

Engineering EBITA

3.8

3.9

5.6

5.9

Central costs

(0.9)

(2.6)

(2.2)

(2.7)

Group EBITA before exceptional items

16.3

17.6

18.3

18.9

Amortisation of acquired intangibles

(1.4)

(1.2)

(1.2)

(1.2)

One-off items

(2.6)

(3.4)

0.0

0.0

Group reported EBIT

12.3

13.0

17.1

17.8

Source: Company accounts, Edison Investment Research

Speciality Agriculture

Divisional revenues increased by 6.2% y-o-y to £42.7m while adjusted operating profit (including JVs) declined by 21.1% to £6.5m. The revenue increase was attributable to commodity price inflation. Overall, the volume of feed blocks increased very slightly (0.8%) because modest growth in the UK (2.5%) supported by high livestock prices was offset by a 5.9% reduction in the United States (excluding JVs) relating to the drought affecting the northern part of the country and the resultant reduction in cattle numbers. The drop in profit reflects lower utilisation of the feed block plant serving the northern US and a reduction in margin because of a lag in passing through increases in raw material prices. This situation has stabilised with both prices and input costs now higher.

Our revised estimates (Exhibits 1 and 2) model a sharp reduction in divisional profits during FY22 on the basis that the drought in the United States will have an adverse impact on sales of feed blocks in the region. Moreover, although livestock and farm gate milk prices in the UK remain strong, a situation that typically encourages farmers to invest in feed blocks and supplements to enhance farm outputs, the high price of inputs such as fertiliser may cause farmers to limit discretionary purchases such as feed blocks. Since feed blocks help cattle utilise forage more efficiently, farmers may choose to graze their herds more intensively rather than supplement feed with feed blocks. We then model a partial recovery in divisional profits during FY23 to reflect the positive impact of strengthening the group’s sales presence in the United States, particularly Texas, and in Canada and Germany, and of completing the automation project at Animax, as demand for its bolus-based supplements currently exceeds supply. We assume that the northern US states will still be afflicted by drought during FY23.

Agricultural Supplies

H122 divisional revenues grew by 15.3% y-o-y to £158.7m and adjusted operating profit (including associates) by 19.1% to £3.9m. Although feed volumes were 2.5% lower, reflecting the mild winter, selling prices were 26.3% higher as the group passed on rising input costs in a timely manner. The mild winter also resulted in an 8.5% fall in volumes of fuel sold, though fuel price volatility supported good margins. Retail sales were up 4.1% in both absolute and like-for-like terms and machinery revenues remained strong. Operating margins improved very slightly, from 2.4% to 2.5%.

The outlook for this division is favourable because livestock prices remain high and Carr’s Billington and other UK feed manufacturers are expected to reset their prices in April/May, as they do each year, which should restore margin per tonne. While the war in Ukraine is likely to result in shortages of some commodities, management expects that the division will be able to reformulate feeds using alternative ingredients as it has done in the past. Our estimates model improvements in divisional profits growth during FY22 and FY23. This is based on management’s comments that it has created a new central buying team, recruited new sales managers and introduced a programme to ensure that the management teams spend more of their time with customers. We also expect the division to benefit from the opening of a new machinery branch in Stranraer, Scotland during H122 and in Thirsk, England later in H222.

Engineering

Engineering revenues fell by 9.6% to £21.3m while adjusted operating profit jumped by 58.2% to £1.5m. The divisional order book continued to strengthen during H122, finishing at £44.2m, which was 13.8% higher than end FY21 and 8.6% higher than end H121. In December, management noted that during H221 there had been a big jump in orders for fabrication work from the nuclear industry as well as good order intake in the precision engineering business, which was driven by a recovery in the oil and gas market. As anticipated, this resulted in a strong performance in both businesses during H122. The Remote Handling and Robotics performance was also better than the prior year period, which was expected because of the strong order book. The group achieved a significant milestone by securing its first contract to supply a power manipulator in the United States to an internationally renowned research institution. It also completed development of the A150, a new, small-scale telescopic manipulator for the growing nuclear medicine market. As anticipated, although both the UK and US Engineering Solutions businesses won major contracts during FY21, contract phasing meant that levels of activity for both businesses were lower than during the prior year period. In addition, there were delays and higher costs associated with a major defence project, and delays on a service contract for the nuclear industry following a technical fault, so the overall divisional performance was below management’s expectations.

The strengthening order book, especially for the precision engineering business, supports our assumption of a substantial improvement in divisional profitability during FY22 followed by more modest improvement in FY23. We assume that there will not be a repeat of the delays to the Engineering Solutions businesses during H222 and that the global oil price will be at average levels or above during the remainder of the forecast period, supporting precision engineering activity. The division is able to pass on higher steel prices to customers. The Robotics business is experiencing some impact from the sanctions on Russia, which is one of its export markets, but this is already factored into our estimates.

Group performance

P&L: Order book supports recovery of the Engineering division

Group H122 revenues grew by 10.6% y-o-y to £222.7m, with higher commodity prices offsetting a reduction in feed volumes and lower revenues from the engineering solutions business. Adjusted operating profit decreased slightly, by £0.2m to £10.8m. A strong performance from the Agricultural Supplies division and recovery in the Engineering division, combined with lower central costs, were offset by a reduction in profits from the Speciality Agriculture division. Non-recurring items totalling £0.8m included a £1.3m credit related to a net decrease in fair value of deferred consideration payable for the UK engineering solutions business, £1.2m in costs attributable to the implementation of the group and associate’s cloud-based enterprise resource planning (ERP) system, which had previously been capitalised, and £0.4m in costs associated with the ongoing strategic review. The initial interim dividend (Carr’s typically pays two interim dividends) was maintained at 1.175p/share.

Balance sheet: Commodity price inflation drives working capital increase

Net debt (excluding finance leases of £15.3m) jumped by £19.9m during H122 to £29.9m at the half-year end. The movement is primarily attributable to an £8.9m increase in inventories and a £19.7m rise in receivables. Most of the increase is attributable to the Agricultural Supplies division where receivables are higher because of commodity price inflation and some slower collections related to the roll-out of the new ERP system. Inventories are higher because of higher commodity prices and a decision to hold more machinery inventory, which was partly to mitigate supply chain issues and partly to stock the two new outlets. Management expects both receivables and inventories to reduce by the end of the current financial year. We note that the group had £20.4m in undrawn facilities at end H122 and the relatively high level of net debt does not cause an issue with any covenants. The retirement benefit surplus increased by £0.6m to £10.0m at end H122. The group no longer makes deficit reduction contributions because the pension scheme was fully funded at the last full actuarial valuation.

Estimates broadly unchanged

Exhibit 2: Revisions to estimates

£m unless stated

FY21

FY22e

FY23e

Actual

Old

New

Change

Old

New

Change

Speciality Agriculture revenues

68.5

67.0

77.1

15.0%

68.5

76.7

12.0%

Agricultural Supplies revenues

297.5

300.5

345.5

15.0%

303.5

339.9

12.0%

Engineering revenues

51.3

55.0

55.0

0.0%

62.0

62.0

0.0%

Group revenues

417.3

422.5

477.6

13.0%

434.0

478.6

10.3%

Speciality Agriculture EBITA including JVs

9.5

9.6

7.6

-20.8%

9.8

8.3

-16.2%

Agricultural Supplies EBITA including JVs

6.7

6.4

7.3

13.6%

6.5

7.5

14.6%

Engineering EBITA

3.9

4.9

5.6

14.3%

5.3

5.9

12.4%

Central costs

(2.6)

(2.6)

(2.2)

43.2%

(2.7)

(2.7)

0.0%

Group EBITA after deducting share-based payments

17.6

18.3

18.3

0.0%

18.9

18.9

0.0%

Normalised PBT after deducting share-based payments

16.6

17.3

17.3

0.0%

17.9

17.9

0.0%

Normalised undiluted EPS after deducting share-based payments (p)

13.2

13.7

12.7

-7.4%

14.0

12.9

-7.8%

Dividend per share (p)

5.0

5.2

5.2

0.0%

5.4

5.4

0.0%

Net debt/(cash)

25.4

33.6

33.6

0.0%

27.3

27.3

0.0%

Source: Company accounts, Edison Investment Research

Management notes that the FY22 outlook is in line with expectations, so we leave our FY22 and FY23 estimates broadly unchanged, with no revisions to group adjusted EBITA or group adjusted PBT. However, we have modified the composition of the profits so that a higher proportion of the profits in both years are attributable to the Engineering division and a lower proportion to the Speciality Agriculture division. The individual changes are as follows:

We increase our revenue forecasts for both Speciality Agriculture and Agricultural Supplies by 15% in FY22 and 12% in FY23 to reflect commodity price inflation.

We reduce our FY22 and FY23 Speciality Agriculture EBITA estimates to reflect weaker demand for feed blocks in the northern United States, caused by the drought, and potentially weaker demand in the UK during H222 because of high feed prices.

We raise our FY22 and FY23 Agricultural Supply EBITA estimates to reflect strong machinery sales and continued growth in retail sales from a similar cost base.

We raise our FY22 and FY23 Engineering EBITA estimates to reflect continued strong performance from the precision engineering business, which assumes that the global oil price will remain at average levels or above for the remainder of the forecast period.

We reduce FY22 central costs because performance-based remuneration will be less while the group is without a CEO.

We assume a higher level of profit attributable to non-controlling interests, in line with the H122 split.

Our estimates assume that receivables reduce by £8.7m during H222 as late payments are collected from farmers, although we expect inventory will be at a similar level to end H122. This results in an operating cash inflow of £17.3m during H222 versus a £15.2m outflow during H122.

We remove the third and final payment of deferred consideration for the UK engineering solutions business.

Strategic review and management changes

While the board continues to see potential for growth in each of the three divisions, there are limited opportunities to exploit inter-divisional synergies. Consequently, in December 2021 the board announced that it was carrying out a strategic review. The board expects to provide an update on this process during H222.

In line with the succession plan announced in August 2020, Hugh Pelham became CEO when the previous CEO, Tim Davies, stood down at the group's AGM in January 2021. Hugh left the group in October 2021. Chairman Peter Page has moved from a non-executive to an executive role while a new CEO is found. The board expects to complete this process by the end of FY22.

Valuation

DCF methodology

Exhibit 3: DCF valuation (p/share) – sensitivities to WACC and terminal growth assumptions

Discount rate (post-tax, nominal)

170

9.0%

9.5%

10.0%

10.5%

11.0%

Terminal growth

0.0%

176

166

156

148

140

1.0%

194

181

170

160

151

1.5%

204

190

178

167

157

2.0%

216

200

187

174

164

3.0%

246

226

208

193

180

Source: Edison Investment Research

Our valuation methodology is based on a DCF analysis, supplemented with a comparison of peer group multiples. We continue to use a conservative 10.0% WACC and 1.0% terminal growth rate for our DCF calculation. This gives a fair value of 170p/share, which is unchanged since our December 2021 note. We believe that the valuation gap should begin to close as the improved order book in Engineering converts to an improved divisional performance.

SOTP analysis

In Exhibit 4 we compare Carr’s prospective EV/EBITDA and P/E multiples with those for its listed peers offering speciality products to livestock farmers (Speciality Agriculture), companies engaged in the supply of more commoditised inputs to livestock farmers (Agricultural Supply) and a sample of UK engineering companies. At the current share price (152p), Carr’s is trading at a relatively modest discount to our sample of companies engaged in agricultural supply and our sample of engineering companies on all metrics. The level of discount is much more pronounced when comparing Carr’s with the mean for the sample of companies offering speciality agricultural products. This suggests that Carr’s current share price does not attribute any uplift in value compared with agricultural suppliers such as ForFarmers for the Speciality Agriculture division.

Exhibit 4: Peer-based multiples

Name

Market cap
(£m) 

EV/EBIT 1FY
(x)

EV/EBIT 2FY
(x)

P/E 1FY
(x)

P/E 2FY
(x)

Speciality Agriculture

Animalcare Group

195.3

20.2

17.9

26.0

23.6

Anpario

127.5

18.2

16.3

23.3

22.1

Benchmark Holdings

342.0

113.9

28.2

(97.0)

34.8

Mean

19.2

20.8

24.7

26.8

Agricultural Supply

ForFarmers

274.4

13.7

9.1

21.0

10.4

NWF Group

105.6

10.2

11.6

7.8

11.9

Ridley Corporation

312.1

11.0

9.8

15.9

14.1

Wynnstay Group

127.7

10.6

9.8

14.9

14.1

Mean

11.4

10.1

14.9

13.6

Engineering

Avingtrans

144.6

14.9

13.2

20.6

18.2

IMI

3,322.9

11.7

10.8

12.7

11.8

James Fisher and Sons

189.7

10.9

8.8

9.3

7.3

Weir Group

3,972.4

14.0

12.6

17.1

15.3

Mean

12.9

11.4

14.9

13.2

Carr's Group @ 152p/share

142.8

10.0

9.6

12.0

11.8

Source: Refinitiv, Edison Investment Research. Note: Prices as at 14 April 2022. Grey shading indicates exclusion from mean.

We base our SOTP analysis (Exhibit 5) on the EBIT attributable to each division, including the contribution from the associate and JVs where appropriate, applying multiples derived from the peer comparison in Exhibit 4. Obviously, this is a relatively small peer group and the calculation is sensitive to the multiples used. Despite these limitations, the exercise illustrates the value in the individual divisions. Our calculation produces an indicative group value of 268.8p/share, suggesting that any strategic activity that released the value of individual divisions would be beneficial for shareholders. This is lower than the 292.7p/share calculated in our February note because the proportion of profit attributable to the Speciality Agriculture division, where margins are substantially higher than in traditional agricultural supply business, is less.

Exhibit 5: SOTP analysis

FY22 EBIT (£m)

Multiple (x)

Value (£m)

Speciality Agriculture

7.6

19.2

145.8

Agricultural Supply

7.3

11.4

82.6

Engineering

5.6

12.9

72.1

Central costs

(2.2)

8.0

(17.6)

EV

300.5

Net debt at end February 2022*

(29.9)

Minorities at end February 2022

(18.0)

Equity

252.6

Number of shares (m)

94.0

Indicative value per share (p)

268.8

Source: Edison Investment Research, Refinitiv. Note: *Excluding finance leases. Prices as at 14 April 2022.

Exhibit 6: Financial summary

£m

2020

2021

2022e

2023e

31-August

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

restated

Revenue

 

 

395.6

417.3

477.6

478.6

Share of post-tax profit from JVs and associate

0.0

0.0

0.0

0.0

EBITDA

 

 

23.4

23.9

24.8

25.4

Operating profit (before amort. and excepts.)

 

16.3

17.6

18.3

18.9

Amortisation of acquired intangibles

(1.4)

(1.2)

(1.2)

(1.2)

Exceptionals

(2.6)

(3.4)

0.0

0.0

Reported operating profit

12.3

13.0

17.1

17.8

Net Interest

(1.3)

(1.0)

(1.0)

(1.0)

Profit Before Tax (norm)

 

 

15.0

16.6

17.3

17.9

Profit Before Tax (reported)

 

 

10.9

12.1

16.1

16.8

Reported tax

(1.3)

(2.4)

(3.5)

(3.9)

Profit After Tax (norm)

12.7

14.7

13.8

14.1

Profit After Tax (reported)

9.6

9.7

12.6

12.9

Minority interests

(1.2)

(1.9)

(1.9)

(1.9)

Net income (normalised)

11.1

12.3

11.9

12.1

Net income (reported)

8.4

7.7

10.7

11.0

Average Number of Shares Outstanding (m)

92.3

93.1

93.9

94.0

EPS - normalised (p)

 

 

12.0

13.2

12.7

12.9

EPS - fully diluted (p)

 

 

11.8

13.0

12.5

12.8

EPS - basic reported (p)

 

 

9.1

8.3

11.4

11.7

Dividend (p)

4.75

5.00

5.20

5.40

EBITDA Margin (%)

5.9

5.7

5.2

5.3

Normalised Operating Margin

4.1

4.2

3.8

4.0

BALANCE SHEET

Fixed Assets

 

 

124.4

123.4

120.3

117.2

Intangible Assets

38.4

36.7

35.5

34.3

Tangible Assets

53.1

53.0

51.1

49.3

Investments & other

32.9

33.7

33.7

33.7

Current Assets

 

 

120.4

139.1

148.4

155.4

Stocks

41.0

43.2

52.3

55.3

Debtors

59.8

68.9

80.3

80.9

Cash & cash equivalents

17.6

24.3

13.1

16.4

Other

2.1

2.7

2.7

2.7

Current Liabilities

 

 

(70.8)

(86.1)

(84.4)

(80.2)

Creditors

(56.6)

(72.0)

(73.3)

(72.1)

Tax and social security

(0.0)

(0.0)

(0.0)

(0.0)

Short term borrowings including finance leases

(14.2)

(14.1)

(11.1)

(8.1)

Other

0.0

0.0

0.0

0.0

Long Term Liabilities

 

 

(42.4)

(41.2)

(41.2)

(41.2)

Long term borrowings including finance leases

(36.2)

(35.6)

(35.6)

(35.6)

Other long-term liabilities

(6.2)

(5.6)

(5.6)

(5.6)

Net Assets

 

 

131.6

135.2

143.2

151.2

Minority interests

(16.8)

(17.2)

(19.1)

(21.0)

Shareholders' equity

 

 

114.8

118.1

124.1

130.1

CASH FLOW

Op Cash Flow before WC and tax

23.4

23.9

24.8

25.4

Working capital

5.2

3.2

(19.2)

(4.8)

Exceptional & other

(7.4)

(4.9)

0.0

0.0

Tax

(3.1)

(2.1)

(3.5)

(3.9)

Operating Cash Flow

 

 

18.2

20.0

2.1

16.8

Investment activities

(6.2)

(3.6)

(4.6)

(4.6)

Acquisitions/disposals

(2.7)

(1.1)

0.0

0.0

Net interest

(1.5)

(1.1)

(1.0)

(1.0)

Equity financing

0.0

0.9

0.0

0.0

Dividends

(3.3)

(5.5)

(4.7)

(4.9)

Other

0.8

0.3

0.0

0.0

Net Cash Flow

5.2

9.9

(8.2)

6.3

Opening net debt/(cash) including finance leases

 

23.8

32.8

25.4

33.6

FX

0.0

0.0

0.0

0.0

Other non-cash movements

(14.3)

(2.5)

0.0

0.0

Closing net debt/(cash)

 

 

32.8

25.4

33.6

27.3

Finance leases

13.9

15.4

15.4

15.4

Closing net debt/(cash) excluding finance leases

18.9

10.0

18.1

11.8

Source: Company accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Carr’s Group and prepared and issued by Edison, in consideration of a fee payable by Carr’s Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Carr’s Group and prepared and issued by Edison, in consideration of a fee payable by Carr’s Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

More on Carr’s Group

View All

Latest from the Industrials sector

View All Industrials content

Research: Industrials

Mytilineos — Well placed to benefit from renewables

Mytilineos is well placed to benefit from a push in the EU to accelerate renewable plans. It has a renewable portfolio of c 7GW and is well funded to support its investment in the energy transition, with financial flexibility of c €1.5bn augmented by strong operating cash flow across all areas of the business. We forecast EPS growth of 28% pa over the period FY21–24, which supports a dividend yield of 6% in FY24e. It trades at a P/E of just 8x (FY22e) and 6x (FY23e). Based on our FY22 net income forecast of €271m, we expect Q1 earnings to be substantially ahead of the €37m reported a year earlier at Q121, and possibly ahead of the strong Q421 (€65m).

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free