US Edition Carr’s Milling Industries
£16.86+6p
Questor says BUY
MODERN business wisdom tells us that the corporate model of the conglomerate is broken. Carr’s Milling Industries is proving it is anything but, as this business which provides a mixture of agricultural feed, flour milling and robotic engineering outperforms rivals and the wider market.
In fact, one could be forgiven for thinking its chief executive, Tim Davies, was taking a swipe at his critics when he said: “The period has clearly demonstrated the strength of the group with its geographic diversity and operational balance.”
The company reported a 2pc increase in pre-tax profits to £10.1m during the first six months and management’s confidence was underlined by a 9.7pc increase in the interim dividend to 8.5p. The shares go ex-dividend on April 23 and the payout date is May 16.
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. In the UK mild winter weather has allowed farmers to graze dairy cows for longer, reducing sales of feed blocks.
However the bad news brought by the good weather was offset by strong performances in the other parts of the group.
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 continues to generate savings from better efficiency.
One of the more interesting parts of Carr’s operations is Walischmiller, its Germany-based engineering unit, which makes mobile robotic handling equipment that is used in the nuclear industry. New contract awards have been very low during the first half, but the company should benefit as progress is made on the new fleet of UK nuclear power plants.
Carr’s shares are rated on a fairly conservative 12.9 times earnings, falling to 12.1 times next year, and as racier stock market alternatives sink like a stone, the tried and tested model at Carr’s is reassuring. Buy.