Interim figures from the Carr’s Group, the first under new chief executive Hugh Pelham, show a 3% fall in reported profitability on slightly higher revenues with Covid-19 affecting its Engineering division. But agricultural trading is up year-on-year.
The Group has reported a pre-tax profit of £10.2 million on sales of £201.4m in the six months to February 27th 2021, compared to £10.5m and £200m in the first half of the previous year. After adjustments, pre-tax profit stands at £10.4m, up 8.1% from the previous £9.6m. Net debt reduced by almost 60% to £10.6m from the prior £25.4m.
Mr Pelham, who joined the company in early January, has completed an initial review of the business. He has split the former Agriculture division into two units: Agricultural Supplies comprises the UK’s Carr’s Billington Agriculture (CBA) ruminant feed manufacturing and rural retail and farm equipment activities; fuel distribution and the Bibby Agriculture feed joint venture. The other, Speciality Agriculture, covers the manufacture of feed blocks, minerals and trace element boluses in the UK, Europe, North America and New Zealand.
Both these divisions performed strongly in the first half, despite the COVID-19 and Brexit uncertainty that affected the period, with all agricultural stores and manufacturing facilities remaining operational. But the third division, Engineering which services the nuclear industry, was affected by pandemic-related low oil prices and travel restrictions.
Agricultural Supplies made an adjusted operating profit of £3.3m on revenues of £137.7m, compared to £2.5m and £138.4m in the first six months of the prior year.
Total feed sales volumes increased by 0.4% to 318,000 tonnes, with farm machinery revenues up 29.1% year-on-year and total retail sales 4.3% higher (like-for-like sales were up 8.1%). But fuel volumes were down 2.5%, particularly in the first quarter. Mr Pelham notes that significant raw material price rises affected feed business profitability in the half, but stronger margins in retail, fuel and machinery helped offset this.
Mr Pelham says the division’s strategy is to provide all its farmer customers need, while differentiating the CBA offer through the product range, customer and technical service levels, local presence and the quality of its compound feeds. A number of operational initiatives have seen some standardisation of product ranges and pricing, improved supply chain arrangements and better management of raw material buying and pricing. The chief executive sees further opportunities to grow through new store openings and industry consolidation.
The agreement of a trade deal with the EU in December 2020 has significantly improved UK farmer confidence, observes Mr Pelham, which has been further buoyed by current strong farmgate prices. He believes the new UK Agriculture Bill and policy will also provide opportunities as farmers are incentivised by efficiency and environmental schemes.
The Speciality Agriculture division reported an adjusted operating profit of £8.2m from revenues of £40.2m in the latest first half, up from £6.5m and £36.6m in H1 2020. Worldwide feed block and speciality minerals sales rose by 8.4% to 101,000 tonnes in the traditionally busier first half for sales. Mr Pelham says a strong performance in all geographic areas was driven by strong livestock prices and more seasonal weather patterns than in prior years. Revenues recovered at the animal health bolus business Animax, and the Group is investing to automate production processes there.
The divisional strategy remains a focus on molasses-based feed blocks and specialist animal health products. The Group has identified growth opportunities from expansion in the US – particularly the state of Texas – Canada and Germany. It is also working on more environmentally sustainable packaging for key products lines.
“Despite a challenging operational environment with significant headwinds experienced in Engineering we have delivered an improved performance compared to the same period last year,” says Mr Pelham. “Our Speciality Agriculture and Agricultural Supplies divisions have performed particularly strongly. The outlook for Engineering is for an improved performance in the second half of the financial year.
“Considerable opportunity exists to optimise the current portfolio through a process of standardisation, simplification and seeking synergies between similar businesses. Growth can be achieved through a mixture of geographic expansion, selling all our service lines to our customer base, and acquisition and potential industry consolidation,” he concludes.