US Edition Carr’s Milling Industries
£16.00-65p
Questor says BUY
CARR’S Milling Industries is an overlooked company that has delivered reliable growth in pre-tax profits during the past four years and rewarded investors with a steadily increasing dividend.
The company is one of the few remaining listed conglomerates in Britain today, with operations as diverse as agriculture, flour milling and robotic engineering.
Tim Davies, chief executive, said he was pleased with trading, which was in line with expectations during the first four months. Analysts expect revenue of £434m, and pre-tax profits of £16.6m, giving earnings per share of 130p for the full year ended August 2014.
Carr’s core is focused on the provision of animal feed to farmers and this agriculture division contributed 73pc of group revenue and 65pc of pre-tax profits in the most recent full-year results. Cold weather in the US is driving strong demand for dairy cattle feed, and this is offsetting weaker demand in the UK as mild winter weather allows farmers to graze dairy cows for longer.
The flour milling operations contribute a fifth of group revenue and 4pc of pre-tax profits. Carr’s has recently made a major investment in a new flour mill at its Kirkcaldy plant in Fife. The company expects further financial benefits from this investment in the year ahead.
One of the more interesting parts of Carr’s operations is its engineering company based in Germany called Walischmiller. This division makes mobile robotic handling equipment that is used in the nuclear industry. Demand has been strong for the products and an investment to increase production capacity at the Walischmiller factory has now been completed. While the engineering division contributes only 7pc of group revenue, it makes up almost a third of group pre-tax profits.
Carr’s shares have soared by more than 50pc during the past 12 months and are just off record highs. However, the company is being sensible with its investments and with the shares rated on a fairly conservative 12.8 times earnings, falling to 11.9 times next year, they represent a long-term buy.