The latest interim results announcement from the Carr’s Group reveals that the board is considering the divestment of its Engineering division that services the nuclear industry.
A recent internal review has concluded that continuing with two divisions – Agriculture and Engineering – is “an inefficient operating model, particularly given the lack of synergistic benefits and resultant central overheads, both of which are dilutive to our management and investment focus”.
Therefore, the Group is exploring options for the Engineering Division. In September 2016, Carr’s divested its flour milling division to Whitworth Bros, and in September 2022 sold its 50% share in the Carr’s Billington Agriculture business to partner the Billington Group.
The latest half year results show the Group made an operating profit of £3.54 million on revenues of £81.37m in the six months to 29 February 2024, compared to £5.21m and £79.75m in the same period of 2023. Adjusted operating profit was little changed at £5.76m (5.84m).
The Agriculture division, which makes feed blocks, feed supplements and ruminant health products in the UK and internationally, returned an adjusted operating profit of £4.9m on sales of £52.8m, compared to a restated £6m and £57.1m in H1 2023.
While UK feed block volumes increased by 11% year-on-year, those in the US fell by 18%. The Group has closed an under-performing manufacturing facility in Nevada, with production transferred to its two remaining US sites.
The US dairy feed supplement business increased volumes by 19% but remains loss making due to unfavourable contracts that end this year. The Group says there is new management in place to return the enterprise to profitability.
The Group reports cautious improvement in the UK market as input prices stabilise but says the US market continues to be challenging due to cyclical herd size reductions and drought conditions in some regions. Looking ahead, the board expects trading conditions in agriculture to remain challenging, particularly in the US, for the rest of the current year but is confident prospects will improve in the medium to long term.
“Having reviewed the position of the Group and its market valuation the board has concluded that the value of each of our divisions individually, when added together, significantly outweighs our market capitalisation,” states Carr’s Group chief executive David White. “The growing profitability and future prospects of our Engineering Division make this the optimal time to explore options to realise value for that division.
“The significant opportunities to improve our market position in our Agriculture Division point to short term focus on optimising trading through challenging conditions and preparing that business for future growth built on the foundation of our leading brands. We now have the team in place to deliver the transformation necessary at divisional and central level.”
Group Chairman Tim Jones adds: ‘‘We are excited by the opportunities in the Agriculture Division. Global demand for meat and dairy continues to grow strongly at the same time as the imperative to reduce the climate impact of livestock. The task for Carr’s Agriculture is to reduce the carbon footprint of livestock and enhance animal welfare whilst delivering better margins and productivity for farmers. Carr’s product innovations promote shorter calving intervals, enhance weight gain and help to lower methane emissions.
“Carr’s now has the people, the products and the market opportunities to rapidly grow our global impact in this space.’’