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Carr's continues international expansion

The group is aiming to diversify its business via international expansion
April 16, 2019

Carr’s (CARR) has pushed up inventories by a quarter since its September year-end, a possible reflection of Brexit uncertainties, which meant that operating cash flows fell as a proportion of profits from the 2018 half-year, even though receivables fell as a proportion of revenues. On top of Brexit, another factor that the agri-business cannot control is the weather. The beginning of 2019 was much warmer than the same period in 2018, which meant improved grazing conditions for livestock and a resultant 14.1 per cent decline in UK feed block sales. Along with a 9.9 per cent decrease in Europe, that led to flat operating profits of £9.8m at the agriculture division. All told, the group registered a 2.4 per cent increase in gross profit, albeit on a 10 basis point reduction in the underlying margin. 

IC TIP: Hold at 146p

The group continues to diversify and geographically expand its operations. The integration of livestock supplements manufacturer Animax is “progressing well”, with a focus on improving the group’s production process through increased automation. The aim is to expand its distribution network in the US and Europe. Carr’s has also won an $8.5m (£6.5m) contract in the US under its remote handling business, and was awarded “significant funding” from the US Department of Energy in December last year. During the reported period, investment in a new site in Tennessee helped boost US feed block sales by 5.6 per cent.

Analysts at Investec expect pre-tax profit of £17.4m during the year to August 2019, giving EPS of 13.9p, compared with £16.6m and 13.6p in FY2018.

CARR'S (CARR)   
ORD PRICE:146pMARKET VALUE:£133m
TOUCH:146-150p12-MONTH HIGH:176pLOW: 128p
DIVIDEND YIELD:2.4%PE RATIO:16
NET ASSET VALUE:117p*NET DEBT:19%
Half-year to 2 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201820010.69.01.08
201920610.38.31.13
% change+3-3-8+5
Ex-div:25 Apr   
Payment:31 May   
*Includes intangible assets of £30.9m, or 34p a share