Carr’s Group plc (LON:CARR) expects its full year performance will be “significantly below” current estimates, in part due to a delayed contract in the UK manufacturing business.
Shares plunged 19.60% to 121.0p in early trading.
The engineering and agricultural company said the contract delay was expected to hurt production throughout the financial year.
Carr’s has tried to offset the financial impact through cost-cutting, accelerating the order book and securing new work to replace the delayed control.
However, the level of new work secured was not enough to mitigate the impact of the delay.
“While progress has been made with cost-cutting, winning sufficient new work in the short term and accelerating the existing order book has been challenging, especially in the oil and gas market,” the company said.
The group said it has still had some significant contract wins over the past 18 months in the recovering nuclear market. It has also identified further “potentially material” opportunities to secure contracts in defence, new nuclear and aerospace markets after winning some
In the agriculture division, the US animal feed block business suffered as volumes and margins were hit by falling cattle prices for producers.
While cattle prices have started to rise, the recovery is expected to be slower than previously anticipated.
“Consequently, this will result in significantly reduced profitability in our USA feed block business as the market recovers in the short to medium term.”
The UK agriculture business, on the other hand, continued to perform well and is expected to exceed the board’s expectations for the current fiscal year. Customer confidence started to improve, driven by a pick-up in returns for dairy farmers as milk prices rise.
VSA Capital Research expects consensus forecasts for full year pre-tax profit will fall 20% to £11.3mln with a £3mln hit in each division, offset by over-performance in remote handling and UK agriculture.
“On the more positive side, confidence continues to increase in the UK agriculture sector with UK milk prices +20% year-on-year and UK ruminant feed production, +c10% year-on-year.”
“Undoubtedly Carr will be weak today but we believe the company remains well positioned to benefit from a variety of improving markets (nuclear, UK agriculture, US cattle) over the medium term.”