18 April 2024
CARR’S GROUP PLC
STRATEGIC UPDATE AND INTERIM RESULTS
For the 6 months ended 29 February 2024
Carr’s Group plc (CARR.L), (”Carr’s”, the ”Company”, or the ”Group”) the Agriculture and Engineering Group, announces a strategic update and its un-audited interim results for the six months ended 29 February 2024.
Strategic Update
Following the review of the performance, composition and organisation of the Group’s operations highlighted at the time of the Full Year Results announcement (”FY23”) on 21 December 2023 the Board 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 management’s and investment focus.
The Board believes that both the Engineering Division and the Agriculture Division hold material value creation opportunities; however, the Agriculture Division will be optimised in the medium term through transformation plans developed and implemented by recently appointed management, whilst the Engineering Division represents a near-term opportunity.
The Board is therefore running a process to explore options to maximise shareholder value with regard to the Engineering Division.
Further updates will be provided when appropriate.
Interim Results for the 6 months ended 29 February 2024
Financial Highlights
| Adjusted (Continuing Operations) | H1 2024 | H1 2023 (restated) | +/-% |
| Revenue (£’m) | 81.4 | 79.8 | +2.0 |
| Adjusted operating profit (£’m) | 5.8 | 5.8 | -1.4 |
| Adjusted profit before tax (£’m) | 5.6 | 5.6 | +0.6 |
| Adjusted earnings per share (p) | 4.8 | 5.0 | -4.0 |
| Statutory (Continuing Operations) | H1 2024 | H1 2023 (restated) | +/-% |
| Revenue (£’m) | 81.4 | 79.8 | +2.0 |
| Operating profit (£’m) | 3.5 | 5.2 | -32.1 |
| Profit before tax (£’m) | 3.4 | 5.0 | -31.3 |
| Basic earnings per share (p) | 3.0 | 4.5 | -33.3 |
| Interim dividend per share (p) | 2.35 | 1.175 | +100.0 |
| Net cash (£’m) | 8.0 | 8.6 | |
Highlights
· Engineering Division
− Continued strong performance with revenues for the six month period increased by 26.1% to £28.5m (H1 2023: £22.6m).
− Adjusted operating profit for the six month period increased by 119.2% to £2.4m (H1 2023: £1.1m).
− Adjusted operating profit on a LTM basis of £6.6m from revenues of £56.5m.
− Forward order book of £57.8m remains strong and increased from £41.3m at H1 FY23.
· Agriculture Division
− Revenues for the six month period reduced by 7.5% on prior year to £52.8m (H1 2023: £57.1m).
− Adjusted operating profit for the six month period reduced by 17.4% to £4.9m (H1 2023 restated: £6.0m).
− UK feed block tonnage increased by 11% year on year whilst the US feed block business volumes were down 18% year on year. The under-performing facility in Nevada has now closed with production requirements transferred to the two remaining sites.
− US dairy feed supplement business increased volume by 19%, however remains loss making due to unfavourable contracts ending in FY24. New management in situ to return to profitability.
− UK market cautiously improving as input prices stabilise, whilst US market conditions continue to be challenging due to cyclical herd size reductions and ongoing regional drought condition.
· Central costs
− Central costs, on an adjusted basis, of £1.6m (H1 2023 restated: £1.3m).
− Ongoing cost reduction measures underway in FY24, continuing into H1 FY25, step-changes aligned to strategic direction.
· Adjusting items
− £2.3m of adjusting items (pre-tax) comprising:
§ £1.9m of restructuring and other non-recurring cash costs
§ £0.4m in relation to amortisation of intangibles
· Net cash / debt
− Half year-end net cash of £8.0m (H1 2023: Net cash £8.6m) – following payment of final dividend for FY23.
· Dividends
– Interim dividend of 2.35p per share (H1 2023: 1.175p).
– Reflecting previously announced policy of a single interim dividend and final, rather than two interims and final.
Strategic Highlights
· Board and management appointments in anticipation of the transformation of the Group: David White (Chief Executive Officer), Gavin Manson (Chief Financial Officer), Martin Rowland (Executive Director of Transformation), Gillian Watson (Non-Executive Director and Senior Independent Director) and Fiona Rodford (Non-Executive Director).
· Transformation of Agriculture Division underway with new leadership across global businesses, with Josh Hoopes joining as CEO Agriculture in March supported by new leadership teams in the UK and US.
· Ongoing cost reduction measures underway in FY24, continuing into H1 FY25, with step changes aligned to strategic direction.
· Group bank facilities of £25m extended to December 2026.
· Final £4.0m deferred consideration from the sale of the Agricultural Supplies Division received in October 2023.
Outlook
Trading conditions in agriculture remain challenging, particularly in the US. The Board expects this to continue through the current financial year, while retaining confidence in prospects improving in the medium to long term. Our short-term focus is on ensuring that performance is optimised during persistently challenging conditions whilst making the changes necessary to deliver longer term value creation. The Engineering Division delivered a strong first half performance, building on FY23. The Board remains confident that order book levels will enable year-on-year growth during FY24, while also providing confidence beyond the current financial year. Board expectations for FY24 remain unchanged.
Quote: David White (Chief Executive Officer)
“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. 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.”
Quote: Tim Jones (Chair)
”Our strategy of Focus, Improve, Deliver has highlighted the value opportunity that is available from each of our divisions in time. We have concluded that our Engineering Division represents a significant opportunity to deliver incremental value to shareholders now, and that it is the right thing to do to explore that opportunity. And 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. I am delighted that Carr’s now has the people, the products and the market opportunities to rapidly grow our global impact in this space.”
| Carr’s Group plc | +44 (0) 1228 554 600 |
| David White, Chief Executive Officer | |
| Gavin Manson, Chief Financial Officer | |
| FTI Consulting | +44 (0) 203 727 1340 |
| Richard Mountain/Ariadna Peretz |