Join our community of smart investors

Carr's battles through prices lull

Pricing pressures in commodities fed through to sale prices but the group still managed to stump up record pre-tax profit
November 9, 2015

Being exposed to flour, oil and raw materials for feed might seem a precarious place to be given the commodities slump and vicious food price war. But Carr's (CARR) managed to increase pre-tax profit in its food division by 6.3 per cent to £2.4m, thanks to its high-tech Kirkcaldy mill, which produced higher-quality flour in a mixed harvest. Meanwhile, strong demand for feed due to the rebuilding of the US beef herd helped propel agriculture division profits by 8.8 per cent to £10.4m. Feed block volumes, excluding joint ventures, were up a fifth on the previous period.

IC TIP: Buy at 151p

The lower oil price caught up with its engineering business, conspiring with operational factors to send pre-tax profit here down 17 per cent to £3.1m. In response, Carr's is speeding up a move into the nuclear sector at Chirton Engineering.

Chief executive Tim Davies acknowledged margins in the food division would "start to come under pressure" as food price deflation persists, not to mention the impact on its agriculture division of a persistently low milk price. However, management said it could tackle these issues through self-help measures and its global footprint.

House broker Investec Securities expect pre-tax profit to be flat in the 2016 financial year at £17.5m but see EPS rising to 13.7p, from 13.2p in FY2015.

 

CARR'S (CARR)
ORD PRICE:151pMARKET VALUE:£135m
TOUCH:145-152p12-MONTH HIGH:178pLOW: 123p
DIVIDEND YIELD:2.5%PE RATIO:11
NET ASSET VALUE:96.9pNET DEBT:25%

Year to 29 AugTurnover (£m)Pre-tax profit (£m)Earnings per share (p)*Dividend per share (p)*
201137310.07.72.6
201240413.19.82.9
201346815.412.03.2
201442916.612.83.4
201541217.513.43.7
% change-4+6+5+9

Ex-div: 17 Dec

Payment: 15 Jan

*Adjusted to account for 10-for-one share split in January 2015