Shares in Carlisle-headquartered conglomerate Carr’s (CAR) cheapened 3.7% to 98.75p on Wednesday as the agriculture-to-engineering combine reported a 16% first half profit decline.

Yet the share price drop was cushioned by the news both divisions appear relatively unaffected by the coronavirus pandemic, with management also leaving full year guidance unchanged.

Deferral of the first half dividend, which will save Carr’s around £1m, was also well-received with investors preferring to see companies preserve cash in these unprecedented times.

DEMONSTRATING RESILIENCE

In January, Carr’s issued a profit warning with its UK agricultural activities hit by the mild winter and the engineering division off to a slow start to the year because of a delay in contract phasing.

Results for the half ended 29 February show a 16% slump in adjusted pre-tax profit to £9.6m, while the payment of the interim dividend, a £1m cash saving, has been deferred until the full effects of COVID-19 become clear.

Reassuringly, Carr’s has seen ‘no material overall impact to date’ from the COVID-19 pandemic, albeit ‘significant uncertainty remains’.

‘In challenging market conditions, with significant headwinds experienced in both divisions, we have delivered a resilient performance in the period,’ insisted chief executive Tim Davies, adding that ‘we are moving decisively on all fronts to address these challenges, ensuring we conserve cash and maintain a robust financial position.’

FORECASTS UNCHANGED

Despite ongoing challenges in its UK and US agricultural markets, with mild weather and price competition impacting feed and supplement volumes and margins, not to mention delays to engineering contracts in Asia, Davies ‘still anticipates a full year outcome broadly in line with those revised expectations’ outlined in January.

Shore Capital left its year to March 2020 forecasts unchanged, estimates calling for adjusted pre-tax profit of £14.2m and earnings per share of 10.8p. ‘We believe the group has adapted well given the situation and remains in a robust position to navigate through difficult times,’ commented the broker, which is sticking with its ‘hold’ rating on the stock.

OPEN FOR BUSINESS

Most of Carr’s agricultural sites remain operational with measures being taken in line with Government advice. For example, the company is not allowing customers into the stores and has encouraged customers to telephone order prior to arriving at the site.

This has meant that lower feed and fuel volumes have been partly offset by a strong performance in machinery and retail sales.

In the engineering division, orders since January 2020 have been delayed into the 2021 financial year due to the situation in China.

The positive news is that the majority of Carr’s facilities remain operational as the company supplies products and services in connection with projects of national importance, particularly across the nuclear decommissioning and nuclear defence sectors.

READ MORE ABOUT CARR’S HERE

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Issue Date: 15 Apr 2020