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 FY19 indicates that both divisions are performing well. As the group is trading in line with management’s expectations for the full year, we leave our estimates and indicative valuation of 182p/share unchanged.
Written by
Carr's Group |
Good start to FY19 |
AGM update |
General industrials |
8 January 2019 |
Share price performance
Business description
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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 FY19 indicates that both divisions are performing well. As the group is trading in line with management’s expectations for the full year, we leave our estimates and indicative valuation of 182p/share unchanged.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
08/17 |
346.2 |
11.9 |
9.4 |
4.0 |
17.0 |
2.5 |
08/18 |
403.2 |
17.7 |
15.2 |
4.5 |
10.5 |
2.8 |
08/19e |
418.8 |
18.1 |
15.3 |
4.7 |
10.5 |
2.9 |
08/20e |
425.5 |
18.9 |
16.0 |
4.9 |
10.0 |
3.1 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Continued improvement in US feed block volumes
US feed block volumes continued to rise as the cattle price recovery has been maintained and penetration of the eastern states of the US has increased following the commissioning of the low moisture feed block plant in Tennessee in January 2018. UK farming sentiment remains positive. Although demand for fuel and animal health products for cattle being kept indoors was lower because of the mild autumn, trading overall was in line with management expectations. The integration of Animax, acquired in September 2018, with its complementary animal health product portfolio is progressing well.
Strong Engineering order book
The UK Manufacturing order book, which includes long-term contracts from the nuclear industry, is strong. The recent $8.5m US contract for remote handling equipment from the German business demonstrates the benefits of working with NuVision (acquired August 2017) and helps top up Wälischmiller’s order book following completion of the substantial Chinese orders in FY18. NuVision’s own order book benefitted from two significant Mechanical Stress Improvement Process contracts, won during the summer, which extend to FY21. Funding from the US Department of Energy to develop a small-scale working prototype of NuVision’s passive cooling technology, which is intended to prevent a repeat of the Fukushima tragedy, potentially opens a new product area longer-term.
Valuation: Unchanged at 182p/share
Our DCF analysis gives an indicative value of 182p/share (unchanged). At the current share price, Carr’s is trading below its peers with regards to mean EV/EBITDA (6.8x vs 8.0x) and mean P/E (10.5x vs 12.1x) for the year ending August 2019. Clarity on trading arrangements post-Brexit and news of Engineering orders should help close the valuation gap, in our view.
Exhibit 1: Financial summary
£m |
2017 |
2018 |
2019e |
2020e |
2021e |
||
Year-end Aug |
Restated |
||||||
PROFIT & LOSS |
|||||||
Revenue |
|
|
346.2 |
403.2 |
418.8 |
425.5 |
430.5 |
EBITDA |
|
|
13.9 |
19.9 |
21.0 |
21.5 |
22.0 |
Operating Profit (before amort. and except.) |
|
|
9.8 |
15.4 |
16.4 |
16.8 |
17.3 |
Amortisation of acquired intangibles |
(0.1) |
(0.3) |
(0.2) |
(0.2) |
(0.2) |
||
Share-based payments |
(0.5) |
(1.1) |
(1.1) |
(1.1) |
(1.1) |
||
Exceptionals |
(1.3) |
(0.8) |
(0.2) |
0.0 |
0.0 |
||
Operating Profit |
7.9 |
13.2 |
14.9 |
15.5 |
16.0 |
||
Net Interest |
(0.7) |
(0.9) |
(1.3) |
(1.0) |
(1.0) |
||
Share of post-tax profits in JVs and associates |
2.8 |
3.2 |
3.0 |
3.0 |
3.0 |
||
Profit Before Tax (norm) |
|
|
11.9 |
17.7 |
18.1 |
18.9 |
19.3 |
Profit Before Tax (FRS 3) |
|
|
10.0 |
15.5 |
16.6 |
17.6 |
18.0 |
Tax |
(1.7) |
(1.9) |
(2.6) |
(2.8) |
(2.9) |
||
Profit After Tax (norm) |
9.9 |
15.6 |
15.5 |
16.1 |
16.5 |
||
Profit After Tax (FRS 3) |
8.3 |
13.6 |
14.0 |
14.8 |
15.2 |
||
Minority interest |
(1.3) |
(1.8) |
(1.5) |
(1.5) |
(1.5) |
||
Net income (norm) |
8.6 |
13.9 |
14.0 |
14.6 |
15.0 |
||
Net income (FRS 3) |
7.0 |
11.9 |
12.5 |
13.3 |
13.7 |
||
Average Number of Shares Outstanding (m) |
91.4 |
91.4 |
91.4 |
91.4 |
91.4 |
||
EPS - normalised (p) |
|
|
9.4 |
15.2 |
15.3 |
16.0 |
16.4 |
EPS |
|
|
9.4 |
14.8 |
15.0 |
15.6 |
16.0 |
EPS - FRS 3 (p) |
|
|
7.7 |
13.0 |
13.6 |
14.5 |
15.0 |
Dividend per share (p) |
4.0 |
4.5 |
4.7 |
4.9 |
5.1 |
||
EBITDA Margin (%) |
4.0 |
4.9 |
5.0 |
5.0 |
5.1 |
||
Operating Margin (before GW and except.) (%) |
2.8 |
3.8 |
3.9 |
4.0 |
4.0 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
87.6 |
96.5 |
101.9 |
101.8 |
101.7 |
Intangible Assets |
26.6 |
26.5 |
27.0 |
27.1 |
27.3 |
||
Tangible Assets, Deferred tax assets and Pension surplus |
61.1 |
70.0 |
74.9 |
74.7 |
74.4 |
||
Current Assets |
|
|
120.9 |
134.7 |
133.9 |
138.2 |
142.6 |
Stocks |
37.0 |
42.4 |
47.0 |
51.3 |
51.9 |
||
Debtors |
60.0 |
67.7 |
71.3 |
73.6 |
74.5 |
||
Cash |
23.9 |
24.6 |
15.5 |
13.3 |
16.2 |
||
Current Liabilities |
|
|
(73.9) |
(99.5) |
(83.7) |
(81.8) |
(79.6) |
Creditors including tax, social security and provisions |
(56.9) |
(64.5) |
(66.7) |
(67.8) |
(68.6) |
||
Short term borrowings |
(17.1) |
(35.0) |
(17.0) |
(14.0) |
(11.0) |
||
Long Term Liabilities |
|
|
(28.7) |
(10.8) |
(25.8) |
(25.8) |
(25.8) |
Long term borrowings |
(21.0) |
(5.0) |
(20.0) |
(20.0) |
(20.0) |
||
Retirement benefit obligation |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other long term liabilities |
(7.8) |
(5.8) |
(5.8) |
(5.8) |
(5.8) |
||
Net Assets |
|
|
105.9 |
121.0 |
126.3 |
132.5 |
138.9 |
Minority interest |
(14.4) |
(15.7) |
(16.7) |
(17.7) |
(18.7) |
||
Shareholders equity |
|
|
91.5 |
105.3 |
109.6 |
114.8 |
120.2 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
15.1 |
15.0 |
14.9 |
16.0 |
21.4 |
Net Interest |
(0.7) |
(1.0) |
(1.3) |
(1.0) |
(1.0) |
||
Tax |
(1.2) |
(2.5) |
(2.6) |
(2.8) |
(2.9) |
||
Investment activities |
(1.1) |
(2.8) |
(5.3) |
(4.8) |
(4.8) |
||
Acquisitions/disposals |
(13.2) |
(4.2) |
(8.8) |
(2.3) |
(2.3) |
||
Equity financing and other financing activities |
0.1 |
(0.1) |
0.0 |
0.0 |
0.0 |
||
Dividends to shareholders |
(19.5) |
(3.8) |
(4.1) |
(4.3) |
(4.5) |
||
Net Cash Flow |
(20.4) |
0.5 |
(7.3) |
0.8 |
5.9 |
||
Opening net debt/(cash) |
|
|
(8.1) |
14.1 |
15.4 |
21.5 |
20.7 |
HP finance leases initiated |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
1.9 |
1.7 |
(1.2) |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
14.1 |
15.4 |
21.5 |
20.7 |
14.8 |
Source: Company data, Edison Investment Research
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Research: Energy & Resources
Egdon has announced the spud of the Biscathorpe-2 well in Lincolnshire, a material well that makes up 28% of risked conventional valuation targeting Pmean gross unrisked resource of 14mmbo. Egdon describes Biscathorpe as one of the largest undrilled prospects onshore UK. Our last published conventional asset value for Egdon was 12.7p/share. Valuation of Egdon’s net shale resource (188,000 net acres) remains uncertain but, in our view, has potential to be worth risked c 100p/share based on the current expectation of well cost, type curves and forward gas prices, assuming a supportive political and planning backdrop.