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Carr's shares soar after 'pragmatic' decision to exit UK flour market

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Shares in Carr's Group soared over 10% as the British agriculture and engineering group announced the sale of its flour business, to food group Whitworths Holdings.

Brokers noted the limited room for growth in the UK milling market, despite the profitability of the segment.

Carr's which recently changed its name from Carr's Milling, has been in the flour business for the best part of two centuries, but sold off the segment after an unsolicited approach from Whitworth.

The sale, for a net consideration of £24.9m, comprises three UK flour mills. The business delivered some £80m of revenue and just over £5m of earnings before interest, taxation, depreciation and amortisation.

Dividend to be paid

Of the revenues raised, Carr's will return £16.0m to shareholders, in a dividend of 17.4 pence a share.

The remaining £8.9m will fuel further growth, including acquisitions, Carr's said.

"At a time of increasing competition and volatility in the flour market, consolidation is essential and inevitable," said Tim Davies, chief executive of Carr's.

Growth potential outside milling

Martin George, chairman of Whitworth said the deal would give the Northhamptsonshire-based business nationwide reach.

Brokers Whitman Howard gave Carr's a hold rating following the deal.

"It is an important step towards structural simplification of the business in addition to one which should allow Carr's to focus more on segments which are both international and have greater inherent growth," Whitman Howard said.

Pragmatic decision

Investec described the deal as a "a pragmatic decision," as it issued a buy rating on the stock.

"Although the business was sound, it was in a category that was declining and where Carr's already had strong regional market shares, so securing additional volume was going to be difficult," Investec said.

"Additionally, profits can be volatile given the commodity nature of the flour and wheat market."

Shares in Carr's Group were up 10.4% in mid-day deals in London, at 160.10 pence.


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