Carr’s Group – going nuclear?

An interesting acquisition means that Carr’s Group merits closer inspection, writes Mark Watson-Mitchell.

I wonder what Jonathan Dodgson Carr would think today of the company that he founded way back in 1831? It was then that he set up as a baker and dealer in meal and flour, and in 1834 he actually opened the first flour mill to supply the baking business.

Over the years his company diversified into the animal feed business. It eventually went public way back in 1972, when I knew it as Carr’s Milling Industries. Then in 1996 the larger group acquired its first engineering business. It changed its name to Carr’s Group (LON:CARR) four years ago and sold off its flour mills just over a year later.

So, what would the baker and meal dealer think of his company getting deeper into the engineering sector?

In a £9.6m deal it has recently acquired NW Pump & Valve, an engineering business that supplies some of the world’s largest companies in the nuclear defence, nuclear decommissioning, nuclear power generation and other special markets. It is in fact a very neat fit with the group’s other technical engineering interests which design and manufacture bespoke equipment for the petrochemical, oil and gas, pharmaceutical, process, renewable energy and the nuclear industries.

With operations in the UK, the USA and Germany, the Engineering division manufactures steel fabrications, pressure vessels, manipulators, robotics and remote handling equipment and distributes to clients across the globe.

But that side only produces about 24% of Carr’s Group profits. The majority is made by its Agriculture division, which comprises some 43 country retail stores and heating oil and machinery fuel depots – offering a one-stop shop for both farmers and the local communities. They are situated in the North of England and in the South of Scotland.

In the USA, the UK and Germany it also manufactures animal supplements and molasses-based feed blocks for farm animals. In the UK it has three plants that handle over 500,000 tonnes of animal feed production. It also has a Suffolk based maker of livestock trace element supplements.

In the year to end August 2018 the Group reported £403.2m of sales and £17.7m of pre-tax profits, with earnings of 15.2p and a dividend of 4.5p per share. The year ending soon could see revenue of £418.8m, profits of £18m, earnings of 15.2p and dividends of 4.70p. For the coming year, estimates suggest £435m of turnover, with £19.4m pre-tax, earnings of 16.4p and dividend of 4.9p per share. With 91.9m shares in issue the company is valued at just £140m.


One of the main flour suppliers in the UK, Heygate & Sons, is the biggest shareholder in the group, with 13.8% of the equity, whilst other interesting holders include Thomas William George Charlton with 2.72% and Edelweiss Holdings with 2.18% (both are worth checking out on Google).

Institutional holders include Fidelity (4.65%), Wesleyan Assurance (3.81%), Rathbone (3.12%), Polar Capital (2.91%), Artemis (2.86%), Hargreaves Lansdown (2.22%), and Smith & Williamson (2.06%).

I do believe that all these investors are sensible holders of what I rate as a cheap stock. The recent ‘nuclear’ acquisition, which will be earnings enhancing in the coming year, is a smart move and in a short time frame will help to balance out the two divisions’ profits.

Shares of the Carr’s Group appear undervalued in relation to its peers, and at 153p are at least 47p below where I consider that they should be trading, give it a year and they could well be above that level.