Final Results
Wynnstay Group PLC
26 January 2006
WYNNSTAY GROUP PLC
Final Results for the year ended 31st October 2005
Based in Wales, Wynnstay manufactures and supplies agricultural products and
services to farmers and country dwellers.
KEY POINTS
• Record profits before taxation of £2.87m up 9% including exceptional
item of £0.25m (2004: £2.64m)
• Turnover of £100.81m (2004: £103.43m)
• Dividend increased by 11% to 5.0p (2004: 4.5p)
• Basic earnings per share before exceptional item up 12.5% to 25.6p
(2004: 22.8p)
• Net assets increased by 7% to £23.11m (2004: £21.50m)
• Total net debt stands at £0.5m, representing gearing of only 3%
• Diversified business base provided robustness in challenging market
conditions
• Group remains well placed to take advantage of consolidation
opportunities
Chairman, John Davies, commented,
'The year has been a challenging one for our industry as a whole. The reform of
the Common Agricultural Policy is changing farmers' traditional buying patterns
and the substantial rises in fuel and power prices have adversely affected
costs. Against this background, I am pleased to report that profits for the year
reached a record high. It is also encouraging to see increased contributions
from our joint ventures and associate company.
While there is no doubt that market conditions are difficult, we are confident
that our broadly based spread of businesses and strong balance sheet give us
significant advantages within our sector. Further rationalisation in the supply
industry is necessary and we believe that we are well placed to take advantage
of such opportunities. We therefore view prospects for the business over the
medium term with confidence.'
Press enquiries:
Wynnstay Group plc Bernard Harris, Managing T: 020 7448 1000 today
Director
Paul Roberts, Finance Director Thereafter: 01691 828512
Biddicks Katie Tzouliadis T: 020 7448 1000
W.H. Ireland David Youngman T: 0161 832 2174
Limited
CHAIRMAN'S STATEMENT
Introduction
The year has been a challenging one for our industry as a whole. The reform of
the Common Agricultural Policy (CAP) is changing farmers' traditional buying
patterns and the substantial rises in fuel and power prices have adversely
affected costs. Fertiliser production, which relies heavily on natural gas
during the manufacturing process, has been severely affected by higher gas costs
and the price of fertiliser has risen to a 10 year high.
Against this background, I am pleased to report that profits for the year
reached a record high. It is also encouraging to see increased contributions
from our Joint Ventures and Associate Company. We have made progress this year
both operationally, with the implementation of a new Group I.T. system, and with
acquisitions. Towards the end of September 2005, we were pleased to be involved
in purchasing part of the Pye-Bibby business after it went into administration.
In December 2005, after the financial year end, we purchased the business of
Quins Farm Supplies, based in Newtown, Powys, which supplies animal health
products and country sporting goods, including shotguns, as well as general
hardware items. At the same time, our Joint Venture business, Youngs Animal
Feeds, acquired Dollin & Morris Ltd, the manufacturer and retailer of pet,
equine and wild bird foods, based at Standon in Staffordshire.
We continue to pursue our two strand strategy of developing business outside the
Group's agricultural base, whilst at the same time looking for opportunities to
participate in consolidation of the UK agricultural supply industry.
Financial Results
Pre-tax profits for the Group improved to £2.87m (2004: £2.64m). The increase of
9% was helped by an improved performance from our Joint Ventures and Associate
Company, but this result also includes non-recurring expenditure of £250,000,
relating to the acquisition of part of the Pye-Bibby business. Turnover
decreased by 2.5% to £100.81m (2004: £103.43m), with the reduction attributed to
price deflation principally in feeds and our decision to shed feed business
which did not offer us appropriate returns. In virtually every major product
sector we gained market share and continue to expand our customer base.
Whilst headline earnings per share were maintained at 22.8p, the basic earnings
per share before the Bibby provision increased by 12.5% to 25.6p (2004: 22.8p).
Our balance sheet remains very strong, with net assets increasing to £23.11m
(2004: £21.50m) a rise of 7.5% and at the year end, net cash stood at £1.4m.
Total net debt stands at £0.5m, representing gearing of only 3%.
At the year end, some 812,000 shares were issued to holders of the Eifionydd
Loan Stock who exercised their conversion rights. There remains a loan stock
balance of £417,000, convertible into a maximum of 1.668 million shares. The FRS
7 reassessment of the fair value of the consideration for the Eifionydd
acquisition has resulted in a reduction in the carrying value of goodwill
relating to this transaction of £397,000, due to a reduction in the Group's
share price. I am pleased to welcome new shareholders as a result of the stock
conversion. Early indications are that these new shareholders are retaining
their holdings for the long term, with few deciding to sell.
Net assets per share stand at £2.37 compared with a share price of £2.28 at the
time of writing and I should wish to emphasise that our balance sheet assets are
all shown at historical value and that our Group does not have any pension
deficit.
Dividend
We are pleased to continue our progressive dividend policy, with the Board
recommending an 11% increase in the final dividend to 5.0p per share, giving a
total dividend for the year of 5.0p.
I am also pleased to announce that it is the Board's intention, subject to
trading results, to commence payment of an interim dividend during the next
financial year. Our intention is to introduce a policy of paying out the total
dividend in two stages; one third as an interim dividend and two thirds as the
final dividend.
Review of Trading
Trading conditions have been volatile during the year. Feed ingredient prices
fell whilst in contrast, rising natural gas costs caused fertiliser prices to
escalate and has restricted production. The increase in fuel price has had a
particular impact on our road delivery costs since we are major distributor of
heavy goods and it is still proving difficult to pass on all this cost impact to
customers. Under the circumstances, the three core divisions have performed well
and gained market share in almost every sector in which they operate.
The Stores Division continues to make good progress. We are increasing the
product range across our outlets and are part way through our store upgrade
programme. We completed the construction of a major new store at Newtown, which
opened in early December. The store marks a new level in both design and
presentation and early trading has been extremely encouraging.
The Arable Division dealt well with sharply increased fertiliser prices and
lower returns to grain farmers. Further substantial progress was made in grass
seed sales, and market share has improved in cereal seed.
The Feeds Division business has only benefited from the Bibby acquisition for
one month of the financial year. However, it represents an important strategic
move for the Group, bringing substantial benefits for both Llansantffraid and
Carmarthen mills and improving our share of the compound feed market. We are
pleased to have played an active role in the further rationalisation of the feed
industry in the region.
Our Joint Venture activities performed well, with an exceptional result from
property development company, Wyro Developments, which enjoyed an excellent year
with above budget sales and substantial additions to its land bank. Our
associate company, Wynnstay Fuels, benefited from higher fuel prices and also
from its new depot in North West Wales, where it has constructed new storage
facilities.
Prospects
We plan further significant investment in our infrastructure during 2006. Having
received grant aid approval from the E.U. Objective One Programme, we intend to
begin work on constructing a new feed blending plant in North Wales. We will
also commence work on a new retail store and a new Head Office for the Group at
Llansantffraid. We see further benefits to be come through from our new I.T.
system, particularly in terms of management information.
We expect trading this year to remain challenging. The reform of the Common
Agricultural Policy is introducing significant uncertainty into our marketplace
and we expect the impact on farmers' traditional buying patterns will show
through more strongly in 2006 since farmers have received their last subsidies
under the old system. Energy price rises, particularly electricity for our
manufacturing plants and fuel for our distribution fleets, have increased our
costs and we still have to pass onto customers much of the cost increase. In
addition, it is hard to predict recovery in the demand for fertiliser, which has
reduced significantly as a result of much higher prices. The spring market is of
vital importance to the Group and we have to be conscious that if sales continue
to be depressed it will materially impact on our financial performance at the
half year.
Our participation in the Bibby acquisition brings benefits to our Feeds
Division, adding volume to our feed mills and giving us access to a wider
customer base as well as enabling us to reduce costs. The Stores business has
considerable scope for growth and we are exploring the possibility of
establishing a new format of dedicated pet and equine stores. Our Arable
Division is seeing improved demand from new markets for cereals involved in food
and energy processing, and grain prices for the 2006 season appear to be a
little firmer.
Our Joint Ventures are performing increasing well and operate in growth markets
which we intend to exploit. We are confident that we can produce an increasing
income stream from these activities.
While there is no doubt that market conditions are difficult, we are confident
that our broadly based spread of businesses and strong balance sheet give us
significant advantages within our sector. Further rationalisation in the supply
industry is necessary and we believe that we are well placed to take advantage
of such opportunities. We therefore view prospects for the business over the
medium term with confidence.
May I thank all shareholders for their continued support and welcome those new
share holders particularly from the Eifionydd area who have converted their
Loanstock.
John Davies
Chairman
MANAGING DIRECTOR'S REPORT
2005 proved to be a challenging year, with increased costs adding to demanding
trading conditions. I am therefore delighted that we have achieved a record
trading profit, even after taking into account a £250,000 provision to cover the
cost of reorganising the Bibby feed acquisition.
The three core divisions performed robustly. The investment in previous years
has proved to be of great benefit and as a result, we have a cost effective
infrastructure while providing an excellent service.
It is also pleasing to see our investment both in time and resources bearing
fruit in our Joint Venture Companies, which add strength and depth to our
business base.
REVIEW OF TRADING
Feeds Division
The Feeds Division manufactures and markets a wide range of animal nutrition
products for farm livestock. The division also operates a raw materials
wholesale business which supplies feed ingredients to farmers and other feed
manufacturers in England and Wales.
The Feeds Division, which accounts for 35% of the Group turnover, performed well
overall in a year of fluctuating demand. Against the background of a fall of
some 10% in feed sales nationally, we made excellent progress in gaining market
share in several product areas. However, owing to our decision to shed some less
profitable business, our overall feed volumes decreased slightly by 2.6%.
Our flagship Llansantffraid mill produced excellent volumes, with dairy feeds up
by 11% and sheep feed up by 19%. Overall our sheep feeds volumes, including feed
produced by our joint venture partner, Welsh Feed Producers, and by third party
manufactures on our behalf, were very strong, with total sheep feed sales
increasing by 14% to reach record levels. There was particularly strong demand
for lamb finishing rations where our superior nutritional technology is much
appreciated by producers.
Over the year, we made further investment in our Llansantffraid mill, adding a
fifth pelleting press and new raw material silo accommodation. Together with our
joint venture partners, we made a further investment in the Carmarthen feed mill
to enhance feed output and quality.
Demand for feed blends was strong and we continue to use a number of contract
manufacturers to cater for this growing sector of the market.
We are building our presence in the poultry feed market. Our partnership with a
major egg marketing company, utilising our specialist feeds for the production
of niche egg products sold at the premium end of the market, continues to grow
and we have recruited a number of new egg producers during the period.
After last year's 30% increase in sales, beef feed sales fell substantially
during the year due to a change in the EU regime. However, our joint venture
business, which markets Celtic Pride Prime Quality Beef, continues to win market
share in both the food service sector and to retail butchers. The beef is
produced from animals reared to high welfare standards and fed on products based
on unique nutritional technology.
Our raw material trading department had another successful year and made a
substantial contribution to the profits of the Feeds Division. This arm also
provided procurement services for our manufacturing plants.
During 2006, having received EU grant aid, we intend to build a new feed
blending plant in Rhosfawr, North Wales. This will give us a state of the art
facility from which we will be able to supply not just the local market but all
Group sales in Wales. It will also lead to considerable transport benefits as we
can backload vehicles delivering compound feeds into the area from
Llansantffraid mill.
The administration of the Pye-Bibby feed business represented one of the biggest
financial failures in British agriculture and had a major impact on the
agricultural supply industry. Following Carrs-Billington (Operations Ltd)
purchase of some of the assets of Pye-Bibby, we were pleased to work closely
with them to re-structure those assets. A new company, Bibby Agriculture Ltd,
was formed, with Carrs Billington retaining 50% of ownership, ourselves 25% and
our joint venture partner, Welsh Feed Producers, also taking a 25% stake. The
new company will utilise the production facilities of its shareholders i.e.
Carrs Billington's feed mill at Stone, Staffordshire, the Welsh Feed Producers'
mill in Carmarthen and our Llansantffraid plant. The objective of the new
company is to maximise the sales opportunities in Wales and the borders, while
reducing production and logistics costs by utilising the facilities of the feed
mills closest to the respective customer base. We believe the Bibby brand has a
good reputation and we wish to build on its long standing relationships with
farmers throughout our trading area. There will be long term benefits for both
Llansantffraid and Carmarthen mills in producing the volumes of feed required
for the new Bibby business.
Arable Division
The Arable Division supplies a wide range of services and products including
seeds, fertilisers and agricultural chemicals to cereal and grass land farmers.
It has its own grain trading arm, Shropshire Grain, which provides a marketing
service in the West Midlands and adjoining counties.
Sales in the division account for 36% of Group turnover. There was an increased
contribution from fertiliser and herbage seeds sales, whilst sales of chemicals
fell.
Fertiliser sales value increased by 12%, because of rapid price inflation and
also strong sales at the latter end of the financial year as farmers brought
forward purchasing in anticipation of further price rises. The national
fertiliser market experienced falling sales of between 10-15%, depending on the
geographical area.
Maize seed sales were maintained in a smaller market and herbage seed sales
values increased by 19%. We continue to build market share in the latter and are
one of the premium processors in the United Kingdom. Increasingly, we are using
primary producers to provide us with our raw materials. We see further scope for
improvement in herbage seed sales utilising our extensive retail and store
network.
Spray chemical sales fell by 8%, although this was considerably less than the
general market decrease as farmers reduced their expenditure on spray treatments
due to reduced prices for grain.
I am pleased to report that Shropshire Grain Ltd, our wholly owned grain trading
division, achieved another good performance. Grain trading is a notoriously low
margin business but we continue to outperform the sector. Our philosophy of
encouraging reciprocal trading with farmers and growers pays dividends and we
will roll out this concept further across the UK, both through organic expansion
and through any opportunities which may arise to acquire similar businesses.
Stores Division
The Stores Division operates 24 retail outlets in Mid and North Wales,
Shropshire, Staffordshire and Warwickshire and sells an extensive range of
products both to professional farmers and growers as well as to the general
public.
The Stores Division, which accounts for 28% of Group turnover, enjoyed another
successful year and made substantial progress in many of its major product
areas.
Sales in our core retail products were above budget, with pet products improving
by 9% and equine products by 17%. There was a fall in sales of some of the
traditional farm inputs, such as fencing products, but household goods including
detergents and cleaning products, improved by 47% from a small base.
Garden products, a relatively small but growing area of product sales, also saw
further encouraging growth, increasing by over 30%. Animal healthcare products
fell in sales value, although volumes grew in real terms, since the fall in
value was due to greater sales of non-branded generic products at lower sales
values.
The eight Eifionydd stores acquired some two years ago are improving their
performance in terms of margin and product range and we are continuing to focus
on enhancing our offering, both in terms of products and facilities.
We completed the construction and fit-out of our Newtown store during the year.
The store now offers a superb product range, with greater emphasis on pet
products and hardware, and very high levels of presentation and service.
In November, after the financial year end, we acquired Quins Farm Supplies,
based at Newtown, Powys. The business retails animal health care products,
together with an extensive range of country clothing and sporting goods,
including guns. Quins' Newtown store business has now been relocated to our new
store in Newtown, and we will be moving the Welshpool shop to our Welshpool
premises in late January.
We are continuing with our stores development programme. A new store, including
a new post office, will be constructed in 2006 at our Llansantffraid site,
greatly improving facilities at that site. Major store improvements are underway
at our stores in Gaerwen, North Wales, and Oswestry in Shropshire. These should
be completed in the first half of 2006. There is also an ongoing re-fitting
programme across the Group's stores, designed to improve stock, presentation and
general facilities.
At the year end, we launched our e-commerce site for the retail business. It
offers an extensive range of retail goods at competitive prices and supported by
a first class delivery service. The website address is www.wynnstayonline.co.uk.
OTHER ACTIVITIES
Foxmoor
Foxmoor (formerly Frank Rowe Ltd) is a large scale producer of pot plants and
shrubs, operating from three sites based in Somerset. Our target market is large
multiple retailers, garden centres and general retailers.
Foxmoor has had a successful year following its re-structuring and made a
substantial contribution to the Group's profits. Our glasshouses are fully
occupied and committed for 2006 and we have embarked on a major marketing
campaign with Matt James, Channel 4's 'City Gardener', to market a range of
architectural ferns and plants to major market garden centre outlets. The
business has gained considerable extra trade for 2006 and continues to expand
through innovative marketing. Exploiting the trend for 'instant gardening',
particular emphasis is being placed on ornamental grasses and ferns.
Joint Ventures & Associates
The Group has interests in three joint ventures and an associate company,
working closely with like-minded people to develop business in growth markets
which are separate to our core business but which bring additional synergistic
benefits to the group.
Youngs Animal Feeds
Youngs Animal Feeds had a successful year in terms of sales of pet foods and
equine products but suffered from the delay in the commissioning of its new
plant, which is being built to produce the Super Molichop range of Hi- Fibre
Equine feeds. There is increasing demand for the range and we have gained new
business from other retailers and manufactures. However, due to the delays
mentioned previously, our sales targets have not been met. At the time of
writing, many of the problems have been resolved and we look forward to the
factory enjoying full production in 2006.
Wyro Developments
The property development company has had a highly successful year, with a
considerable increase in activity on our two sites at Abermule, near Newtown in
Powys. Successful marketing has led to the first site being almost wholly sold
out at prices in excess of budget. Work is progressing on the second site which
will offer more expensive homes and early indications are that sales will be on
target. In addition, we have completed work on a redundant brownfield Group site
in North Wales which is currently being marketed. Wyro has added considerably to
its land bank and, at the time of writing, is in the process of completing the
purchase of three further sites which will have a mix of housing types. The
company has established itself as a premium property developer in Mid Wales and
we are confident that we will continue to be successful in marketing high
quality, value-for-money homes in the future.
Welsh Feed Producers Ltd.
Welsh Feed Producers has enjoyed a successful year despite being adversely
affected by the Pye-Bibby collapse. As a result of the launch of the new
company, Bibby Agriculture Ltd, the venture has secured a considerable amount of
feed volume so that production capacity is now largely filled. We look forward
to working closely with our new colleagues in reducing costs and streamlining
our operation. It is hoped that during 2006, the plant will produce record
outputs of cattle and sheep feeds.
Associate Company
Wynnstay Fuels Ltd
Wynnstay Fuels, the distributor of agricultural, commercial and domestic fuels,
has had a successful year, helped considerably by rising fuel prices. It has
recently established a new fuel sales centre, with storage and loading
facilities in North Wales on an existing company site . The centre has been
highly successful and has built a substantial business from scratch, benefiting
from the existing customer base in the area. We believe further gains will
accrue to Wynnstay Fuels during 2006, as we continue to develop sales through
out our trading area.
OUTLOOK
Market conditions remain challenging. The new CAP reforms are now being felt and
farmers are increasingly adopting the 'just in time' buying policy noted in our
interim report. Dairy farming profits remain under pressure and this is having a
knock-on effect on the supply industry. The escalating cost of energy is a
concern, as is the sharp rise in the cost of fertiliser. The important spring
ordering market has yet to be experienced and any adverse reaction and buying
resistance will affect Group profits. The successful integration of the Bibby
business is an important factor in our feed business and, at the time of
writing, demand is strong.
Despite the difficulties, the Group is in a strong position to move forward,
with minimum debt and a diverse business base. The strategy of developing
related joint ventures as part of our diversification is becoming increasingly
beneficial and we continue to look for further opportunities.
May I thank all the shareholders for their ongoing support and express a
particular welcome to those new shareholders from the Eifionydd area.
B. B. Harris
Managing Director
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For year ended 31st October 2005
2005 2004
Note £000 £000
---------- -----------
TURNOVER 1
Continuing operations 100,806 103,430
Cost of sales (82,482) (85,465)
---------- -----------
GROSS PROFIT 18,324 17,965
Selling and distribution costs (15,150) (14,660)
Administrative expenses (918) (889)
---------- -----------
OPERATING PROFIT 3 2,256 2,416
Share of operating profit in joint ventures 490 140
Share of operating profit in associates 31 27
---------- -----------
TOTAL OPERATING PROFIT 2,777 2,583
Net profit on sale of fixed assets 184 171
---------- -----------
PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST 2,961 2,754
Income from other fixed asset investments 31 27
Interest receivable 108 88
Interest payable 2 (231) (229)
---------- -----------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 2,869 2,640
TAX ON PROFIT ON ORDINARY ACTIVITIES (874) (780)
---------- -----------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 1,995 1,860
DIVIDENDS - On equity shares (507) (391)
---------- -----------
RETAINED PROFIT FOR THE FINANCIAL YEAR 1,488 1,469
---------- -----------
Earnings per 25p share 4 22.78p 22.78p
========== ===========
Diluted earnings per 25p share 4 16.64p 16.69p
========== ===========
There were no recognised gains and losses for 2005 or 2004 other than those
included in the profit and loss account above.
There is no difference between the profit calculated on an historical cost basis
and those reported in the profit and loss account above.
BALANCE SHEET
As at 31st October 2005
2005 2004
Note £000 £000
------------ -----------
FIXED ASSETS
Intangible fixed assets 5 2,501 3,134
Tangible fixed assets 8,769 8,694
Investments 2,763 1,651
------------ -----------
14,033 13,479
------------ -----------
CURRENT ASSETS
Stocks 8,284 8,018
Debtors 19,158 17,210
Cash at bank and in hand 1,646 1,275
------------ -----------
29,088 26,503
CREDITORS: amounts falling due within
one year (19,223) (17,856)
------------ -----------
NET CURRENT ASSETS 9,865 8,647
------------ -----------
TOTAL ASSETS LESS CURRENT LIABILITIES 23,898 22,126
CREDITORS: amounts falling due after
more than one year (345) (437)
PROVISIONS FOR LIABILITIES AND
CHARGES
Deferred taxation (189) (189)
Other provisions 6 (250) -
------------ -----------
NET ASSETS 23,114 21,500
============ ===========
CAPITAL AND RESERVES
Called up share capital 2,438 2,170
Share premium account 4,253 2,464
Loanstock redemption reserve 5 3,153 5,084
General reserves 1,582 1,582
Profit and loss account 11,688 10,200
------------ -----------
SHAREHOLDERS' FUNDS - ALL EQUITY 23,114 21,500
============ ===========
The financial statements were approved by the board on 25th January 2006 and
signed on its behalf.
CASHFLOW STATEMENT
For the year ended 31st October 2005
2005 2004
Note £000 £000
--------- ----------
Net cash flow from operating activities 7 3,483 128
Returns on investments and servicing of finance 8 (92) (114)
Taxation (719) (548)
Capital expenditure and financial investment 8 (1,294) (681)
Equity dividends paid (391) (331)
--------- ----------
CASH INFLOW /(OUTFLOW) BEFORE FINANCING 987 (1,546)
Financing 8 (216) 805
--------- ----------
INCREASE/(DECREASE) IN CASH IN THE YEAR 771 (741)
========= ==========
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS/DEBT
For the year ended 31st October 2005
2005 2004
£000 £000
--------- ----------
Increase/(Decrease) in cash in the year 771 (741)
Cash inflow from increase in debt and lease financing 739 453
--------- ----------
CHANGE IN NET DEBT RESULTING FROM CASH FLOWS 1,510
(288)
New finance leases and debt (371) (451)
--------- ----------
MOVEMENT IN NET DEBT IN THE YEAR 1,139 (739)
Net debt at 1st November 2004 (1,627) (888)
--------- ----------
NET DEBT AT 31st OCTOBER 2005 9 (488) (1,627)
========= ==========
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31st October 2005
1. ACCOUNTING POLICIES
1.1 Basis of preparation of financial statements
The financial information is prepared under the historical cost convention and
in accordance with applicable United Kingdom law and accounting standards. The
particular accounting policies adopted are described below.
1.2 Basis of consolidation and goodwill
Corporate and unincorporated joint ventures in which the Group has an investment
representing not less than 20% of the voting rights, and over which it exerts
significant influence, are treated as associated undertakings. The Group
accounts include the appropriate share of these undertakings' profits based on
the latest available audited accounts, and provide for an appropriate share of
their losses, based on the latest available management accounts. The results of
subsidiary undertakings are consolidated on an acquisition accounting basis,
with purchased goodwill arising prior to FRS 10 written off against reserves.
Following the implementation of FRS 10, purchased goodwill is capitalised and
written off over its estimated useful economic life.
The Company has taken advantage of the exemptions conferred by S.230 of the
Companies Act 1985 not to prepare a profit and loss account. A profit of
£1,525,000 (2004: £1,603,000) has been dealt with in the parent company
accounts.
1.3 Turnover
Turnover represents the invoiced value of sales which fall within Wynnstay
Group's ordinary activities and excludes Value Added Tax.
1.4 Tangible fixed assets and depreciation
Tangible fixed assets are stated at cost, net of depreciation and any provision
for impairment.
Depreciation is provided at rates calculated to write off the cost of fixed
assets on a straight line basis over their expected useful lives as follows:
Freehold property - 2.5% - 5% per annum
Plant and machinery/office equipment - 10% - 33% per annum
Motor vehicles - 20% - 30% per annum
1.5 Stocks
Stocks are valued at the lower of cost and net realisable value.
1.6 Deferred taxation
Provision is made in full for all taxation deferred in respect of timing
differences that have originated but not reversed by the balance sheet date.
Deferred tax assets are recognised to the extent that it is more likely than not
that they will be recovered.
1.7 Leasing and hire purchase
Assets held under finance leases or being obtained under hire purchase contracts
are capitalised in the balance sheet and depreciated over their useful economic
lives, interest being charged to the profit and loss account over the period of
the agreement. Operating lease rentals are charged to the profit and loss
account as incurred.
1.8 Pensions
The Company operates a defined contribution pension scheme. Contributions to
this scheme are charged to the profit and loss account, as they are incurred in
accordance with the rules of the scheme.
1.9 Employee share ownership trust
The Company operates an employee share ownership trust. Contributions to this
trust are charged to the profit and loss account on an accruals basis.
1.10 Investments
(i) Subsidiary undertakings
Shares in subsidiaries are valued at cost less provision for permanent
impairment.
(ii) Associated undertakings
Investments in associates are stated at the amount of the Company's share of net
assets. The consolidated profit and loss account includes the Company's share of
the associated companies' profits after taxation using the equity accounting
basis.
(iii) Joint venture undertakings
Investments in joint ventures are stated at the Company's share of net assets.
The Company's share of the profits or losses of the joint ventures is included
in the consolidated profit and loss account using the equity accounting basis.
This accounting treatment is not in line with the requirements of Financial
Reporting Standard 9, 'Associates and Joint Ventures', which requires the
adoption of the gross equity accounting basis. There is no material effect to
the reported figures as a result of this departure.
(iv) Other investments
Investments held as fixed assets are shown at cost less provisions for their
permanent impairment.
2. INTEREST PAYABLE
2005 2004
£000 £000
-------- --------
Bank loans and overdrafts wholly repayable within five years 123 20
Interest on loan capital 18 27
Finance lease charges 65 52
Interest on loan stock 25 30
-------- --------
231 229
======== ========
3. OPERATING PROFIT
The Operating profit is stated after charging:
2005 2004
£000 £000
-------- --------
Amortisation - intangible fixed assets 236 249
Depreciation of tangible fixed assets:
- owned by the company 762 825
- held under finance leases 285 203
Auditors' remuneration 36 35
Auditors' remuneration - non-audit 33 20
Operating lease rentals:
- other operating leases 162 48
Directors emoluments 587 508
Exceptional selling and distribution costs (note 6) 250 -
======== ========
Auditors' fees for the Company were £29,000 (2004: £28,000)
4. DIVIDENDS AND EARNINGS PER SHARE
2005 2004
£000 £000
-------- --------
Total dividends proposed 507 391
======== ========
The proposed dividend is as recommended in the Directors' Report at a rate of
5.0p pence net per 25p ordinary share (2004: 4.5 pence net per 25p ordinary
share).
Earnings per share
Basic earnings per share Diluted earnings per share
2005 2004 2005 2004
£000 £000 £000 £000
------- ------- ------- -------
Earnings attributable
to shareholders 1,995 1,860 2,013 1,882
------- ------- ------- -------
Weighted average
number of shares in
issue during the year 8,759 8,166 12,095 11,274
------- ------- ------- -------
Earnings per ordinary
25p share (pence) 22.78 22.78 16.64 16.69
======= ======= ======= =======
Basic and diluted earnings per share excluding the exceptional item are
presented below in addition to the basic and diluted figures required to be
reported under Financial Reporting Standard 14, Earnings per share. In the
opinion of the directors, such figures are relevant to the understanding of the
financial position of the Group in the light of the exceptional item shown at
note 18. Fully diluted earnings per ordinary share are also disclosed at 16.02p
and 18.01p excluding the exceptional item (2004:15.58p).
Earnings per share excluding exceptional item (note 6)
Basic earnings per share Diluted earnings per share
2005 2004 2005 2004
£000 £000 £000 £000
------- ------- ------- -------
Earnings attributable
to shareholders 2,245 1,860 2,263 1,882
------- ------- ------- -------
Weighted average
number of shares in
issue during the year 8,759 8,166 12,095 11,274
------- ------- ------- -------
Earnings per ordinary
25p share 25.63 22.78 18.71 16.69
======= ======= ======= =======
5. INTANGIBLE FIXED ASSETS
Intangible fixed assets represent purchased Goodwill which is being amortised
over the estimated life of each transaction. In accordance with Financial
Reporting Standard 7, Fair values in acquisition accounting, a revised fair
value assessment has been made as at 31st October 2005 of the purchase
consideration for the Eifionydd Farmers transaction. This reassessment is
required due to the consideration being in the form of convertible loanstock,
the fair value of which fluctuates with the price of the Company's shares until
the loanstock is actually converted into ordinary shares in the Company. The
conversion period is 1st September 2005 to 31st August 2006. The revised fair
value as at 31st October 2005 has created a reduction in goodwill of £397,000.
An equivalent adjustment has been made to the Loanstock Redemption Reserve (Note
20). The revised amortisation in respect of the goodwill arising on the
Eifionydd Farmers transaction is £112,360 as a consequence of the reduced fair
value.
6. OTHER PROVISONS
2005 2004
£000 £000
---------- ---------
At 1st November 2004 - -
Charge for the year 250 -
---------- ---------
At 31st October 2005 250 -
========== =========
The provision in the year relates to reorganisation costs required in production
and distribution functions following the investment in Bibby Agriculture
Limited.
7. NET CASH FLOW FROM OPERATING ACTIVITIES
2005 2004
£000 £000
--------- ---------
Operating profit 2,777 2,583
Associated undertaking results (521) (167)
Amortisation of intangible fixed assets 236 249
Depreciation of tangible fixed assets 1,047 1,028
Increase in stocks (266) (790)
Increase in debtors (1,948) (2,981)
Increase in creditors 1,908 206
Increase in other provisions 250 -
--------- ---------
NET CASH INFLOW FROM OPERATIONS 3,483 128
========= =========
8. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT
2005 2004
£000 £000
--------- ---------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received 108 88
Interest paid (166) (177)
Hire purchase interest (65) (52)
Dividends received 31 27
--------- ---------
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING
OF FINANCE (92) (114)
========= =========
2005 2004
£000 £000
--------- ---------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of intangible fixed assets - (63)
Purchase of tangible fixed assets (853) (902)
Proceeds from sale of tangible fixed assets 290 40
Purchase of investments (731) (50)
Proceeds from sale of investments - 294
--------- ---------
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE (1,294) (681)
========= =========
2005 2004
£000 £000
--------- ---------
FINANCING
Issue of ordinary shares 523 1,258
Repayment of loans (404) (190)
Capital element of finance lease repayments (335) (263)
--------- ---------
NET CASH INFLOW/(OUTFLOW) FROM FINANCING (216) 805
========= =========
9. ANALYSIS OF CHANGES IN NET DEBT
1st November Cash flow Other 31st October
non-cash
changes
2004 2005
£000 £000 £000 £000
--------- -------- -------- --------
Cash at bank
and in hand: 1,275 371 - 1,646
Bank overdraft (609) 400 - (209)
--------- -------- -------- --------
666 771 - 1,437
DEBT :
Finance leases (621) 335 (359) (645)
Debts due
within one year (1,584) 316 (12) (1,280)
Debts falling
due after more
than one year (88) 88 - -
--------- -------- -------- --------
NET DEBT (1,627) 1,510 (371) (488)
========= ======== ======== ========
10. ANNUAL REPORT
The Annual Report and Financial Statements will be posted to shareholders in
February 2006. Further copies will be available to the public, free of charge,
at the Company's Registered office at Eagle House, Llansantffraid, Powys, SY22
6AQ.
11. ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held at The Royal Oak Hotel,
Welshpool on the 23rd March 2006 at 11.45am.
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