Brighter outlook for farmers lifts Carr’s

The elements are important to a group as closely linked to the land as Carr’s (CARR), and it has benefited from tailwinds over the past 12 months that led to it delivering an adjusted pre-tax profit of £16.6m, an 11 per cent year-on-year increase. 

The 190-year-old company operates three main divisions, two of which are focused on agriculture – a speciality agriculture arm that sells feed blocks (which animals lick for minerals and other nutrients) and an agricultural supplies business offering everything from clothing to tractors through a rural shop network.

The speciality agriculture division reported a 25 per cent increase in operating profit to £9.5m, as its operating margin grew by 1.6 percentage points to 13.9 per cent. It was underpinned by strong farmgate prices for milk and livestock, executive chairman Peter Page said. 

Average farm gate prices for milk rose 9 per cent year on year to 32.55p per litre in October, according to the Department for the Environment, Food and Rural Affairs. Carr's agricultural supplies arm, which generates about 70 per cent of group revenue, saw its adjusted operating profit climb 15.7 per cent year on year to £6.7m.

Profit edged up only marginally at its engineering arm to £3.9m, but its order book grew 16 per cent to £38.8m and strengthened further to £44.6m by the end of October as higher oil prices support investment in that market. 

The company is currently working on recruiting a chief executive after Hugh Pelham, who joined the business in January, departed in October.

“These things take time so it will be months, rather than weeks” before a replacement is found, Page said. 

Based on Shore Capital’s forecast earnings of 13.4p per share for 2022, Carr’s shares are currently priced at their five-year average of 11.1 times, which seems like fair value. Hold.