British agriculture faces its biggest overhaul in more than 40 years as the UK prepares to leave the EU in March. There are worries over import and export tariffs for food and animals and a reduction in subsidies. The listed companies serving farmers have been bulking up and moving into new product lines as they prepare.
Carr’s origins lie in the eponymous water biscuits enjoyed by generations of royalty, but today it is farm animals that consume its edible products in fields from Scotland to New Zealand and South America.
Founded in 1831 and still headquartered in Carlisle, Carr’s has blended continuity with change.
It sold its flour mills business for £36m in 2016 and is focused on growing two expanding unrelated divisions — in agriculture and engineering. Both have production bases and sales spread internationally.
Carr’s has customers in more than 50 countries; half of overall group profits come from overseas. In a trading update in July, it reported a strong start to the second half and predicted full-year trading slightly ahead of expectations. Results are due on Monday.
Carr’s runs 43 country retail stores in the north of England and Scotland. Its nutritional supplements for beef, sheep and dairy herds are made and sold there too. The business expanded with the acquisition in September of Suffolk-based manufacturer, Animax, for up to £8.5m.
The engineering division, started in 1996 when Carr’s bought a Carlisle business working at the Sellafield nuclear site, has grown through acquisitions in the UK, Germany and the US. Sectors served include nuclear and oil and gas.
July’s update helped trigger a share increase to a year-high of 165p and broker upgrades. At 152p the shares are trading on a forward price/earnings ratio of 12.8.
NFW, another of the UK’s 14 feedmakers, made record profits last year. The Cheshire-based company mainly serves dairy herds in the rainy west side of Britain. It bought the Jim Peet business near Carlisle in 2016 to extend its reach and spent £3m to double capacity.
The company now has 40 nutritionists to advise farmers on the right blend for their herd. The weak pound means feed prices have risen 10 per cent since the Brexit vote but Richard Whiting, chief executive, said dairy farmers can afford the increase. The milk price is stable at 29p a litre, enough for them to make a profit.
NWF has 12 per cent of the UK feed market, Carr’s 8 per cent and market leader ForFarmers 21 per cent, so there is scope for further consolidation, according to analysts at Peel Hunt, NWF house broker.
NWF also delivers oil and other fuels, another fragmented sector ripe for acquisitions. Its third area of operation is food logistics, storing and moving non-chilled products for companies such as Typhoo tea and Bart, the spicemaker. Mr Whiting says its warehouse is full and it is leasing extra space as the company stocks up ahead of Brexit.
In the year to May 31, NWF posted a 45 per cent rise in pre-tax profit year on year, from £6.7m to £9.7m. Turnover grew from £556m to £611m on higher fuel sales in the cold winter and increased animal feed production.
Peel Hunt upgraded the shares to a buy rating on November 7. With shares at 174.6p on Friday, the forward p/e ratio is 10.5.
National Milk Records
National Milk Records was part of the Milk Marketing Board, the national dairy production and marketing institution split up and privatised in 1993. The bulk of its business remains testing the quality and safety of milk and cows. It also provides traceability services, including ear tags, and has moved into genomics, advising farmers on which are the best cows to breed from.
It is planning to move to Aim by the end of the year from the Nex alternative market. About 7,000 farmers retain a 9 per cent stake but other shareholders include Genus, the genetic livestock company.
Andy Warne, managing director, said it tests half the 10,000 cows in the UK once a month to check their production and health. It also collects a sample of milk from each dairy farm every day for processors in case anyone becomes ill after drinking it.
Mr Warne said the Chichester-based company had become a better investment proposition in 2017 after it raised £13m to buy itself out of the legacy commitments from the MMB final salary pension scheme. Since then the shares have risen from 76.5p to 125p.
It made adjusted operating profit of £1.9m in the year to June 30 on £21.4m revenue.