HALF-YEAR profits have dipped slightly at Carr's Group, the Carlisle-based agriculture, food and engineering group.

And the company is warning of “significant challenges” ahead, particularly in UK agriculture, which could hit profits in the next financial year.

Carr's made £10.5m before tax in the six months to February, down from £10.6m in the same period last year.

Turnover was 9.4 per cent lower, at £189.1m, largely, the company says, due to lower commodity prices. Despite the fall in profits, Carr's is raising the interim dividend from .925p to .95p.

Chief executive Tim Davies said: “The group is operating in challenging markets.

“However, our international presence and diversity has provided a robust first-half performance.

“Trading in the second half is as anticipated and we remain on track to meet the full year expectations of the board.”

He added: “The UK agricultural market has suffered from the depressed farm gate milk and livestock prices and we expect this to continue through 2016 and 2017, which will directly adversely impact our UK farm customers.”

Carr's has more than 50 UK sites, a robotics business in Germany and animal-feed plants in the US.

The Cumbrian operations include Silloth flour mill, the Carrs Billington agricultural machinery dealerships and country retail stores, and Bendalls Engineering in Carlisle.

Carr's broker Investec had predicted first-half profits would be lower but expects full-year profits to come in at around the record figure of £17.5m achieved in 2014-15.

Carr's said the flooding caused by Storm Desmond in December affected a number of sites, including a feed mill in Lancaster, and one of its key customers, McVitie's in Carlisle, but added there would be no adverse financial impact because it was comprehensively insured.

In its agriculture division, “challenging” conditions in the UK were in part offset by strong performance in the US.

And while operating profit in engineering  slumped by 58 per cent, Carr's says said it had been awarded “several new contracts” from Sellafield, which will boost profits in the second half of the financial year.