Carr's Group Plc (“Carr's” or the “Group”)
Trading update
Carr's (CARR.L), the Agriculture and Engineering Group, is issuing a trading update to coincide with its Annual General Meeting being held in Carlisle today at 11.30 am. This update relates to the 18-week period ended 4 January 2020.
The Board continues to expect the performance of the Group to be in line with its existing expectations for the full year.
Trading in Agriculture during the last three months was behind the Board's expectations driven primarily by mild weather. In Engineering, as previously reported, contract phasing has also led to a slow start but, with the benefit of a strong pipeline, we expect an improved performance for the remainder of the financial year. As a result of this and lower central costs we continue to expect the full year performance to be in line with expectations, albeit with a greater weighting than normal to the second half.
Agriculture
Agriculture markets have remained challenging. In the UK, lower cattle prices, downward pressure on milk prices and rising input costs have contributed to pressure on farm incomes which, combined with continuing Brexit uncertainty, has resulted in reduced levels of farmer confidence. In addition, following the unseasonably mild and dry weather seen over the prior year supporting large forage stocks on farms, the division has seen reduced spending on feed and animal supplements. This has resulted in reduced sales volumes in both UK Agriculture and UK Supplements to the end of the period despite an initial good start to the financial year.
In the USA, reduced cattle prices and a delayed start to winter feeding has led to a lower level of demand for our products. However, we have now started to see an improvement in market conditions with cattle prices beginning to rise from a level that was below last year and the 10-year average. Following a period of sustained drought most USA states now have sufficient moisture to sustain grass growth, which is positive in the medium term for our USA feed block business.
Full year performance in Agriculture is expected to be moderately behind the Board's previous expectations.
Engineering
As previously reported, Engineering started slowly due to contract phasing, however, the strength of the pipeline, particularly in Global Robotics and UK Service and Manufacturing, positions the division well.
Our most recent acquisition, NW Total, continues to perform well and is now integrated into the broader Engineering division. This business provides new opportunities for the division, particularly in the nuclear defence market.
Full year performance in Engineering is now expected to be slightly ahead of the Board's previous expectations.
Financial position
The Group's financial position remains strong. Net debt as at 30 November 2019, excluding the impact of the adoption of IFRS 16, was £29.7m compared to net debt of £23.8m at 31 August 2019. This was predominantly driven by seasonal working capital movements.
We continue to review suitable acquisition opportunities whilst investing in the Group's existing businesses both in the UK and overseas.
Board changes
As previously announced, at the conclusion of today's AGM Peter Page will be appointed Non-Executive Chairman, subject to his election at that meeting, upon Chris Holmes standing down from the Board as originally announced in December 2018. The Board would like to place on record its huge gratitude and thanks to Chris for his contribution over 29 years of service, both as CEO and subsequently as Chairman.
Dividend
Subject to shareholder approval at today's AGM, the proposed final dividend of 2.5 pence per share for the year ended 31 August 2019 will be paid on 10 January 2020 to shareholders on the register at close of business on 29 November 2019. The ex-dividend date was 28 November 2019.
Tim Davies, Chief Executive, commented:
“Despite a challenging start to the year in our Agriculture division, due to a number of weather and market factors, we are confident in the medium-term prospects for Agriculture. These near-term challenges in Agriculture are expected to be offset by a stronger than expected performance in our Engineering business, where the order books remain strong, in addition to lower central costs. Our investments in people, acquisitions and research, alongside our expanding international footprint, leave us well positioned for sustained growth.“
The Company expects to issue its interim results for the 26-week period ending 29 February 2020 on Wednesday 15 April 2020.