Carr’s Group PLC (LON:CARRC) operates in fairly defensive markets and has further reduced risk through diversification in each market served, supported by a sequence of acquisitions. The sale of the Food division and the acquisition of the small engineering business, STABER, focuses the group on those activities where there is global reach, less competition, defensible IP and substantially greater opportunities for growth. Our sum-of-the-parts valuation of 161p/share remains unchanged.
M&A strategy focusses on growth sectors
At the end of FY16, the group sold its Food division to Whitworths for £24.9m net. £16.0m of the proceeds has been distributed to shareholders via a special dividend of 17.54p. €7.85m has been used to finance the STABER acquisition announced in October. This transaction brings key IP used in the Engineering division in house. It highlights how management is shifting the group’s focus from low-margin, asset-intensive activities such as flour milling to higher-margin, IP-rich activities. This strategy decouples Carr’s prospects from those of the fairly static UK feed market and further reduces exposure to the vagaries of the British climate and government policy, making it stand out from the other listed companies in the agricultural supply sector.
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