Carr's disappoints interim expectations

Carr’s (CARR) is continuing its way through a strategic review, with external advisers, of its eclectic range of divisions. In the meantime, there are positives to take from these half-year results, which came in slightly below management’s expectations. Hopes for a better second half mean full-year targets are unchanged.

Chief financial officer Neil Austin told Investors’ Chronicle that the outcome of the strategic review would likely be announced in the second half of the year. The succession process to find a new chief executive will probably conclude in line with the review timeframe, management said.

The revenue performance was driven by the company’s agricultural supplies division. Helped by high livestock and milk prices, sales spiked by 15 per cent to £159mn. Speciality agriculture revenue was up by 6 per cent to £43mn, although the margin collapsed by a fifth due to delays in passing through raw material price increases. 

Engineering revenue struggled, falling by 10 per cent to £21mn. But the division's adjusted operating profit margin climbed by more than half and the order book was up by 14 per cent from the year-end.

Net debt jumped by 183 per cent to £30mn, driven by inventories and receivables movements. Austin said there are “no concerns” around the increase, and the drivers are likely to reverse in the second half of the year.

Shore Capital analysts said that “the valuation at present remains fair” but that “the outcome of the strategic review would result in a revisit of the investment case”. The broker has the shares trading on 11 times forward earnings, which looks undemanding. We await the outcome of the strategic review before becoming more bullish. Hold.

Last IC view: Hold, 150p, 7 Dec 2021