London, UK, 9 February 2022

Carr's Group (CARR): Optimising value for shareholders

Over several decades Carr's Group has diversified both within and outside the UK agricultural market. This has reduced the group's exposure to the vagaries of the British climate, farming policy and volatile commodity prices and taken it into activities that generate substantially higher margins and present opportunities for stronger growth than the traditional agriculture sector in individual countries. However, while the board sees potential for growth in each of the three divisions, there are limited opportunities to exploit inter-divisional synergies, so it has announced a strategic review.

Our DCF analysis gives an indicative value of 170p/share (unchanged). Given the ongoing strategic review, a sum-of-the-parts (SOTP) analysis is more appropriate as this recognises that stocks engaged purely in engineering activities or providing speciality agricultural inputs command substantially higher multiples than those involved in supplying commoditised agricultural inputs. Our SOTP calculation gives a value of 292.7p/share, suggesting that any potential strategic activity that released the value of individual divisions by splitting up the group would be beneficial for shareholders. 

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