Potential sale of engineering arm after firm review
THE owner of North Shields-based Chirton Engineering could be mulling over a potential sale of the business as part of a slimming down exercise.
Carr’s Group plc, the Carlisle-based manufacturing group which acquired Chirton 10 years ago, told investors that it is in the early stages of valuing its engineering division, which includes the Tyneside business and five other brands, including businesses in Germany and the US.
Carr’s said the running of both its agricultural and engineering divisions is inefficient with a lack of synergies across the various businesses and management stretched across both.
It has identified the £50m revenue engineering arm in a review intended to “maximise shareholder value”.
The announcement came as bosses pointed to the division’s strong first-half 2024 performance in which revenues increased 26.1% to £28.5m, amid a £57.8m order book.
The potential move follows a change of leadership at Carr’s, which bought Chirton for £2.75m in 2014.
The group’s former chief financial officer, David White, stepped up to become chief executive officer in November last year which was followed by news of cost reduction action across the business, including restructuring costs of £600,000 in 2023.
Full year results for Carr’s in 2023 showed 15.3% revenue growth to £143.2m while statutory operating profit fell 76% to £2m.
Bosses described last year as challenging, with that assessment repeated in the fresh half-year results to the end of February in which revenue increased 2% to £81.4m and statutory operating profit fell 32.1% to £3.5m.
Carr’s board said it had looked at the growth potential of the agricultural and engineering divisions, suggesting the potential to create value in its agricultural business is a longer-term project, via transformation plans to be carried out by Mr White alongside Gavin Manson as chief financial officer and Martin Rowland as executive director of transformation.
Meanwhile, there was said to be a more immediate opportunity in the engineering arm. David White said: “Having reviewed the position of the group and its market valuation the board has concluded that the value of each of our divisions individually, when added together, significantly outweighs our market capitalisation.
“The growing profitability and future prospects of our engineering division make this the optimal time to explore options to realise value for that division.
“The significant opportunities to improve our market position in our agriculture division point to short-term focus on optimising trading through challenging conditions and preparing that business for future growth built on the foundation of our leading brands.
“We now have the team in place to deliver the transformation necessary at divisional and central level.”
Tim Jones, Carr’s Group chair, said: “Our strategy of focus, improve, deliver has highlighted the value opportunity that is available from each of our divisions in time.
“We have concluded that our engineering division represents a significant opportunity to deliver incremental value to shareholders now, and that it is the right thing to do, to explore that opportunity.
“And we are excited by the opportunities in the agriculture division. Global demand for meat and dairy continues to grow strongly at the same time as the imperative to reduce the climate impact of livestock.
“The task for Carr’s Agriculture is to reduce the carbon footprint of livestock and enhance animal welfare whilst delivering better margins and productivity for farmers.
“Carr’s product innovations promote shorter calving intervals, enhance weight gain and help to lower methane emissions. I am delighted that Carr’s now has the people, the products and the market opportunities to rapidly grow our global impact in this space.’’