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Questor share tip: Carr's Milling delivers record full year profits
The small-cap conglomerate enjoyed a strong finish to its financial year, says Questor
Carr’s Milling Industries
£16-51p
Questor says HOLD
CARR’S Milling Industries [LON:CRM] (click for company analysis) reported a steady performance across every division in its annual results yesterday, and Questor continues to believe the shares are a decent place to park cash.
The company is an odd mix of flour milling facilities, a nuclear robotics engineer and an animal feed business.
Tim Davies, chief executive, said that diversity had helped it deliver an improved performance during the year. Pre-tax profits increased 7.8pc to £16.6m, giving 127.8p in earnings per share, on revenues of £429m for the year ended August 31. The dividend was increased 3pc to 34p for the period, with the final ex-dividend December 18 and payable January 16.
Carr’s core business is the provision of animal feed to farmers, with the agriculture division contributing about three-quarters of group revenue and two-thirds of pre-tax profits.
The company said a mild and wet winter in the UK had allowed farmers to graze cattle for longer, which in turn hit sales of feed blocks. This was offset by a harsher winter in the US, which boosted overseas sales. Agriculture delivered pre-tax profits up 9.5pc to £9.6m, on sales down 7.5pc to £314.9m.
The flour milling operations contribute a fifth of group revenue and a much lower portion of pre-tax profits. Carr’s new flour mill at its Kirkcaldy plant in Fife has greatly reduced costs.
Pre-tax profits jumped to £2.3m for the year, up from just £600,000 last year. Mr Davies said there should be more to come this year as the mill is operating at full capacity.
One of the more interesting parts of Carr’s operations is Walischmiller, its Germany-based engineering unit, which makes mobile robotic handling equipment used in the nuclear industry.
The engineering business was hit by Russian sanctions and reduced orders from Japan. Profits were down 11.7pc to £3.7m on revenue down 19.6pc to £26.9m.
Carr’s management said that each of its divisions faces a challenging year ahead. The shares are rated on a fairly conservative 12 times earnings and we continue to like the odd mix, but given a slightly more cautious outlook we downgrade to a Hold.