Carr’s (LON:CARRC) interims show that its strategy of innovation, investment and internationalisation is able to counter the impact of the headwinds prevailing in many of its markets. The announcement notes that Carr’s is trading in line with expectations but comments on a challenging agricultural market globally. We leave our FY16 estimates unchanged, while reducing FY17 and FY18 profit estimates slightly, and revise our indicative valuation to 197p/share (previously 205p).
Profits flat despite headwinds
Group revenues reduced by 9% year-on-year to £189.1m, reflecting lower commodity prices. Reported profit before tax was almost flat at £10.5m (£10.6m) as growth in the Agriculture and Food divisions offset a comparatively weak performance from the Engineering division. The US feed block operations performed well, building on market share gains in FY15 following expansion of capacity. This offset weakness in the UK resulting from low farmgate milk prices and mild weather. Country Store sales grew strongly because of two acquisitions, which strengthened the portfolio in south-west Scotland and Northumberland. The Flour division benefited from continued efficiency improvements. A revival in contracts from the UK nuclear industry, supported by investment in design capability and joint tendering activity, resulted in a strong start to the year at MSM and a good order book for the UK manufacturing businesses. This has helped offset reduced activity in the oil and gas sector. However, while the new manufacturing contracts are expected to drive a recovery in Engineering profits during H216, they made little contribution to H116.
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