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Brexit worries taking increasing toll on UK farmers, says Carr's


Carr’s Group cautioned of a mounting toll on UK farmer sentiment stemming from the uncertainty surrounding Brexit, although saying it was “confident” in prospects for its agriculture division “in the medium term”.


Chris Holmes, who will in January step down as chairman of the feed blocks-to-engineering group, said that “in the UK, farmer confidence is becoming increasingly impacted by uncertainty around Brexit”.


Sentiment was being clouded “in particular” by doubts over “the future trade arrangements the UK will have with the European Union and the rest of the world”.


Tim Davies, the Carr’s chief executive, said that “the ongoing uncertainty” surrounding the UK’s departure from the European Union was “increasingly impacting farmer confidence and delaying new investment decisions”.


‘Fundamental priority’

The comments follow the UK’s failure to miss its second, October 31 deadline for leaving the European Union, which has now agreed a third date of January 31.


Fears that the UK would leave the bloc without having sealed a trade agreement, a so-called “no deal” scenario, have raised considerable concern among farmers, given the EU is the country’s top trading partner in agriculture.


The AHDB bureau warned last month that a departure on October 31 without a deal would have cost the UK about 1m tonnes in combined barley and wheat exports.


The NFU farmers union said last week that “given the size and proximity of European markets, UK trade in food and drink is dominated by trade with the EU, with 62% of our exports going into the single market.


“Maintaining market access to the EU that is as free and frictionless as possible is a fundamental priority,” it said, in comments aimed at political parties fighting a UK general election scheduled for next month.


The NFU also urged measures to guarantee access to the UK of 70,000 seasonal workers a year needed for work such as fruit and vegetable picking.


‘Challenging market conditions’

Nonetheless, Carr’s Group said that it was “confident in the medium-term prospects” for its UK agriculture business.


This despite too “challenging market conditions” in the year to the end of August, when “unseasonable mild and dry weather during winter and spring impacted sales volumes in the UK and across Europe”.


These conditions were “in stark contrast to the colder weather experienced during the spring of 2018”, which boosted feed block needs.


Indeed, UK feed block sales fell by 16.4% year on year although, helped by the acquisition of feed supplements business Animax, Carr’s agriculture division saw its full-year revenues fall by a more modest 0.6% to £357.4m.


Underlying agriculture division operating profits rose by 1.6% to £13.6m, with the group noting a boost to margins from “lower central costs, together with better procurement and manufacturing efficiencies”.


Market reaction

Including engineering, group adjusted pre-tax profits rose by 9.0% to £18.04, on revenues up 0.2% at £403.9m.


Analysts at Edison Group said that the results offered “confirmation that Carr’s diversified business model can continue to address issues caused by Brexit uncertainty”, signalling that they should offer support for the shares, for which its analysis showed a value of 190p.


The results “should, in our view, help close the valuation gap compared with the mean”, Edison said, viewing Carr’s stock as trading at a multiple of 8.9 times earnings, below a sector average of 12.6, and at 6.9 times ebitda, compared with the 8.2 times attributed by the market to peers.


Shore Capital said that Carr’s had “performed well and slightly ahead of our expectations with a robust performance in Agriculture despite unseasonable weather in the UK-US”.


The broker, which currently has a “hold” rating on the shares, said it was revisiting its forecasts for the group.


Carr’s Group shares stood up 4.8% at 149.91p in midday deals in London.

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