Interim Results
Wynnstay Group PLC
29 June 2005
WYNNSTAY GROUP PLC
INTERIM RESULTS
for the six months ended 30 April 2005
Based in Wales, Wynnstay manufactures and supplies agricultural products and
services to farmers and country dwellers.
• Profit before tax up 9% to £1.99 million (2004: £1.83 million)
• Turnover of £55.01 million (2004: £58.52 million)
• Basic earnings per share increased to 16.84p (2004: 16.70p)
• Net assets rose 20% to £23.13 million (2004: £19.25 million)
• Good performances from three core divisions - Feeds, Arable and Stores
- improved margins at Feeds Division despite small fall in volumes
- Arable Division benefiting from new seed warehousing facility
- Stores refurbishment programme underway and construction of
new store at Newtown, Powys started
• New division, Foxmoor, saw successful first half with all sites running
at full capacity
• Outlook remains positive with good growth opportunities
John Davies, Chairman of Wynnstay Group Plc, commented,
'I am pleased to report favourable results for the six months to 30 April 2005.
Despite challenging trading conditions, including mild weather and changes in
farmers' buying patterns as a result of Common Agricultural Policy Reform, we
achieved our budget and gained market share in most business sectors.
Since the start of the second half, we have seen signs of improving demand
across some sectors and we continue to work for productivity gains and a
reduction in the cost base of the business. Although our core businesses
continue to face challenges, particularly by the well-documented changes to the
C.A.P., we firmly believe the effects of the changes provide us with growth
opportunities. In particular, we are well placed to gain further market share
from rationalisation.'
We expect to make steady progress over the second half of the year and I look
forward to updating shareholders in due course.'
Press enquiries:
Wynnstay Group plc Bernard Harris, Managing Director T: 020 7448 1000 today
Paul Roberts, Finance Director Thereafter: 01691 828512
Biddicks Katie Tzouliadis T: 020 7448 1000
WYNNSTAY GROUP PLC
CHAIRMANS STATEMENT FOR THE HALF YEAR REPORT
INTRODUCTION
I am pleased to report favourable results for the first six months of the
financial year. This was despite challenging conditions, principally the mild
weather and changes in farmers' buying patterns, brought about by Common
Agricultural Policy ('C.A.P') reform, which led to a reduction in demand in some
sectors. We also experienced higher fuel and power costs which are taking time
to pass on to customers. Nevertheless, we achieved our budget and gained market
share in most business sectors.
Turnover for the six months to the 30 April 2005 was £55.01 million (2004:
£58.52 million). The 6% reduction on last year's result reflected deflationary
factors, particularly in the feeds business and our decision to relinquish
business which did not offer us appropriate returns. Despite the lower turnover,
profit before tax improved by 9% to £1.99 million (2004: £1.83 million). Basic
earnings per share were 16.84p compared to 16.70p for the same period last year.
As at 30 April 2005, the Group's net assets stood at £23.13 million (2004:
£19.25 million), an increase of 20%.
During the first half, we focused on further integrating the Eifionydd business,
acquired some 18 months ago, and improving its contribution to the Group. We
also completed the installation of our new Group I.T. system, which now is fully
functional.
Rationalisation of the agricultural supply industry is gathering pace in
virtually every sector and this will bring further opportunities to the Group.
In addition, we view the reductions in the national feed capacity, announced
recently as a result of takeovers and mergers, as most welcome.
DIVIDEND
In line with our existing dividend policy, the Board does not intend to pay an
interim dividend but will continue with its policy of improving the terms for
shareholders when the year end results are known.
OPERATIONS
Feed Division (Animal nutrition products and raw materials)
Despite a small fall in volumes, improved margins and more stable pricing due to
better harvest conditions contributed to a good overall performance for the
division. In addition, the cooler weather conditions, which led to a late
Spring, have helped to improve sales at the beginning of the third quarter, in
May and early June.
The reduction in volume was mainly accounted for by reduced demand from the beef
feed sector, which in turn reflected changes in support payments for beef
farmers from the E.U. By contrast, dairy feed volumes improved by 11% due to our
more aggressive marketing stance and sheep feeds sales were marginally ahead
despite mild weather conditions and an abundance of home-produced forage. We
continue to make progress in the poultry sector, helped by the expansion of our
joint initiative with a group of egg producers who produce unique niche eggs for
major multiple retailers.
The raw material trading business enjoyed another good period, with the
volatility in raw material markets being well managed. This business now manages
the material purchasing function for the Carmarthen Mill based in South Wales as
well as purchasing at our flagship feeds plant at Llansantffraid and at our
other various feed blending operations.
We continue to use third party manufacturers to good effect, particularly in the
South Midlands. The relationships we have developed allow us to increase market
share in areas outside our established base.
The capital expenditure programme at Llansantffraid Mill to improve efficiency
and product quality continues.
Arable Division (Seeds, fertilizer, agro-chemicals and grain trading)
Cereal seeds sales improved over the same period last year in what proved to be
a long planting season as a result of the inclement spring weather, while we
maintained maize seed sales against a fall in the market as a whole. Our new
seed warehousing facility helped us to improve efficiency and reduce the costs
of handling during the period.
The buying patterns for fertiliser proved to be challenging with farmers'
shifting purchasing patterns to 'just in time'. In addition, the national market
contracted during the first half by 10%. Both these changes reflect the impact
of the EU's Common Agricultural Policy reforms. While our reduced sales of
fertiliser mirrored the contracted market as a whole nevertheless, we gained
market share. Demand after the half year end has improved as farmers have come
back into the market to replenish their depleted stocks and we have experienced
better sales in May and early June.
Agro-chemicals met with a reduced early demand due to the later Spring and
cooler weather and we are working hard to make up for lost ground.
Our grain trading arm, Shropshire Grain, improved volume by about 10%, albeit
with significantly lower selling prices. This was due to a larger and more
variable quality crop being available. Shropshire Grain continues to sell into
quality human food based markets, particularly milling wheat, and is expanding
its purchasing base.
Stores Division (Retail stores in Wales and Border Counties)
The Stores Division performed well during the period. The benefits of the
integration of the eight Eifionydd Farmers stores are coming through and we have
continued to concentrate on improving purchasing and management of the supply
chain. Overall margins improved during the half year and we are pleased to see
our focus on margin enhancement at the Eifionydd stores is bearing fruit.
However, there is still some way to go to bring Eifionydd margins up to the
level of the existing core business.
There was continuing strong growth in equine and pet products. In addition to
improving pet food sales, we are placing more emphasis on driving sales of pet
accessories. Clothing sales continue to grow, helped by the launch of a new,
upmarket range of country clothing. In the agricultural range, sales of
hardware, including fencing and electrical goods also grew strongly. This was
helped by better ranging, display and purchasing.
Work has commenced on a new store at Newtown, Powys, which will be completed in
September 2005, and will result in a totally new shopping experience for
customers in the area. In the first half, we also began our stores upgrade
programme and extensive renovation and re-fitting is ongoing at the shops
acquired from Eifionydd Farmers, with resulting improvement in sales. During the
first half, we were pleased to receive planning permission for a new store at
our Headquarters site at Llansantffraid and we intend to commence building work
in the Autumn.
Foxmoor
We acquired ownership of Foxmoor, which produces pot plants and shrubs, in
November 2004, after its re-structuring. The business has enjoyed a successful
first half, with strong demand from multiple retailers and garden centres. I am
pleased to report that it continues to gain new accounts from most sectors of
the horticultural retail industry. Reflecting the strong order book, all sites
are running at full capacity and we are carefully exploring further
opportunities to expand production.
Joint Ventures and Associate Companies
Joint Ventures
Wyro Developments Ltd
Our property development joint venture has sold Phase 1 of the Abermule
development near Newtown, Powys at full asking prices. Work on the remaining
phases continues. In addition, construction work on a small company-owned site
in North Wales to build small number of dwellings has commenced. This should be
completed during the late Autumn. We have also received planning permission for
a small development of executive homes near to Welshpool, Powys. We continue to
look for opportunities to add to our land bank and we believe our policy of
quality construction, together with competitive pricing, will continue to enable
us to sell properties on budget.
Youngs Animal Feeds Ltd
Our joint venture equine and pet feed distribution business has enjoyed another
successful year, improving sales of both pet and equine products. Results were
somewhat affected by the costs associated with the commissioning of the new
Molichop plant, which is now coming on stream. The factory is the most
technically advanced of its type in the United Kingdom and specialises in the
production of high fibre feeds, a fast growing sector of the market and to date
we have gained substantial new business for the plant.
We are looking for further opportunities to grow Youngs, both by acquisition and
organic growth. Youngs operates in an expanding market and the business
continues to provide significant supply chain benefits to the Group's stores.
Welsh Feed Producers
The business, which manufactures ruminant animal feeds, enjoyed a successful
winter feeding season, with exceptional product quality and manufacturing
productivity. The mill is well placed to supply the South Wales Milk Field which
is set to expand as a result of changes associated with the reform of the Common
Agricultural Policy. Further productivity gains have been targeted, both in
manufacturing and sales, and we continue to invest in the plant, when we can
demonstrate economic benefit.
Associate Company
Wynnstay Fuels
Our associate fuels business enjoyed a successful period, with continuing strong
sales growth from its recently opened sales operation in North Wales. Plans are
advanced to construct new storage facilities on a group site in North West Wales
to help meet the current strong demand.
OUTLOOK
Since the start of the second half, we have seen signs of improving demand
across some sectors and we continue to work for productivity gains and a
reduction in the cost base of the business. Although our core businesses
continue to face challenges, particularly by the well-documented changes to the
C.A.P., we firmly believe the effects of the changes provide us with growth
opportunities. In particular, we are well placed to gain further market share
from rationalisation.
Our policy of diversification, with our joint ventures, provides us with further
benefits and we are pleased with the success at Wyro Developments while the new
Molichop animal feeds factory at Youngs will contribute substantially during the
next financial year. The integration of the Foxmoor pot plants and shrubs
business has gone well and the second half should see this new division further
develop as it responds to the strong demand from its growing customer base.
May I thank all shareholders for their ongoing support of the business, and also
customers who I hope are beginning to see the benefits of our substantial
investment in I.T. systems. I would also like to thank all staff for their
continuing commitment to the Group.
We expect to make steady progress over the second half of the year and I look
forward to updating shareholders in due course.
J E Davies
Chairman
GROUP PROFIT AND LOSS ACCOUNT
For the six months ended 30 April 2005
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30th April 2005 30th April 2004 31st October 2004
Notes £'000 £'000 £'000
Turnover 55,017 58,515 103,430
Cost of sales (44,464) (48,628) (85,465)
-------- -------- --------
Gross profit 10,553 9,887 17,965
Selling and
distribution costs (7,868) (7,483) (14,660)
Administrative
expenses (597) (494) (889)
-------- -------- --------
Operating profit 2,088 1,910 2,416
- share of profits in
joint ventures and
associates 3 0 0 167
- profit from sale of
fixed assets &
investment income 0 0 198
-------- -------- --------
Profit on ordinary
activities before
interest 2,088 1,910 2,781
- net interest payable (96) (79) (141)
-------- -------- --------
Profit on ordinary
activities before
taxation 1,992 1,831 2,640
Tax on profit on
ordinary activities 4 (530) (530) (780)
-------- --------- ---------
Profit on ordinary
activities after
taxation 1,462 1,301 1,860
Dividends 0 0 (391)
-------- --------- ---------
Profit on ordinary
activities after tax 1,462 1,301 1,469
======== ========= =========
Earnings per share
- headline 5 16.84p 16.70p 22.78p
- fully iluted 11.33p 11.07p 15.58p
GROUP BALANCE SHEET
As at 30 April 2005
Unaudited Unaudited Audited
As at As at As at
30th April 2005 30th April 2004 31st October 2004
Note £'000 £'000 £'000
Fixed assets
Intangible 6 3,020 2,296 3,134
Tangible 8,575 8,335 8,694
Investments 1,655 1,665 1,651
-------- -------- --------
13,250 12,296 13,479
-------- -------- --------
Current assets
Stocks 8,082 7,890 8,018
Debtors 21,883 20,275 17,210
Cash at bank and
in hand 6 4 1,275
-------- -------- --------
29,971 28,169 26,503
-------- -------- --------
Creditors: amounts
falling due within
one year (19,655) (20,525) (17,856)
-------- -------- --------
Net current assets 10,316 7,644 8,647
-------- -------- --------
Total assets
less current liabilities 23,566 19,940 22,126
Creditors: amounts
falling due after
more than one year (249) (520) (437)
Provisions for
liabilities and
charges (189) (167) (189)
-------- -------- --------
Net assets 23,128 19,253 21,500
======== ======== ========
Capital and reserves
Called up share
capital 7 2,185 1,973 2,170
Share premium
account 2,615 1,574 2,464
Reserves 13,244 11,614 11,782
Loan Stock
conversion reserve 6 5,084 4,092 5,084
-------- -------- --------
Shareholders' funds 23,128 19,253 21,500
======== ======== ========
GROUP CASH FLOW STATEMENT
For the six months ended 30 April 2005
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30th April 2005 30th April 2004 31st October 2004
Note £'000 £'000 £'000
Cash flow from
operating
activities 8 (3,323) (4,894) 128
Returns on
investments and
servicing of finance (96) (79) (114)
Taxation (292) (149) (548)
Net capital
expenditure and
financial investment (375) (405) (546)
Acquisition and
disposal 0 (135) (135)
Equity dividends paid (391) (331) (331)
-------- -------- --------
-------- -------- --------
Cash inflow before use
of liquid resources
and financing (4,477) (5,993) (1,546)
Financing - issue of shares 166 172 1,258
(Decrease) / Increase in debt (273) (157) (453)
-------- -------- --------
(Decrease) /
Increase in cash
in the period (4,584) (5,978) (741)
======== ======== ========
Reconciliation of net cash flow to movement in net debt
£'000 £'000 £'000
(Decrease) /
Increase in cash
in the period (4,584) (5,978) (741)
Repayment of
lease financing 158 157 453
------- -------- --------
------- -------- --------
Change in net debt
resulting from cash flows (4,426) (5,821) (288)
New finance lease and debt (90) (104) (451)
Movement in net
debt in the period (4,516) (5,925) (739)
Opening net debt (1,627) (888) (888)
-------- -------- --------
Closing net debt (6,143) (6,813) (1,627)
======== ======== ========
NOTES TO THE INTERIM FINANCIAL INFORMATION
1. Basis of preparation.
The Interim Report was approved by the Board of Directors on 28th June 2005.
The financial information contained in this Interim Report has been prepared on
the basis of the accounting policies set out in the Groups' audited accounts for
the year ended 31st October 2004. The financial information for the six months
ended 30th April 2005 and for the six months ended 30th April 2004 is unaudited.
The financial information for the Group set out above does not constitute
'statutory accounts' within the meaning of Section 240 of the Companies Act
1985. The information for the year ended 31st October 2004 has been extracted
from the statutory accounts of Wynnstay Group plc for that year which received
an unqualified audit report and have been delivered to the Registrar of
Companies.
2. International Financial Reporting Standards. (IFRS)
The London Stock Exchange has announced the requirement for AIM listed companies
to report financial results using IFRS from 2007. The Company is currently
reviewing the implications of this change in reporting standards and will seek
to implement the new rules at the earliest practicle opportunity.
3. Consolidation of share of results of profits in joint ventures & associates.
As the Group has a policy of using audited accounts for the consolidation of its
share of the profits of joint venture & associate activities, no such
consolidation has occured during the six months to April 2005. Relevant results
will be accounted for during the second half of the financial year.
4. Taxation
The tax charge for the six months to 30th April 2005 is based on an
apportionment of the estimated tax charge for the full year.
5. Earnings per Share
Earnings per share have been calculated based on the profit on ordinary
activities after taxation of £1,461,811 (£1,300,630) and the weighted average
number of shares in issue adjusted for the share sub-division, of 8,679,913
(7,790,532). Fully diluted earnings per share are based on the total of shares
in issue, staff options and shares anticipated to be issued following conversion
of the convertible loanstock of 12,903,179 (11,751,920).
6. Intangible assets
Intangible assets represent purchased Goodwill which is being amortised over the
estimated life of each transaction. In accordance with FRS 7, a revised fair
value assessment has been made as at the 30th April 2005 of the purchase
consideration for the Eifionydd Farmers transaction. This re-assessment 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 has created an additional goodwill asset of £2,644,000, which has been
amortised in this period by £66,100. An equivalent adjustment has been made to
the loanstock redemption reserve.
7. Share capital
At the Company's annual general meeting on 25th March 2004, it was resolved to
sub-divide the 10,000,000 issued and unissued ordinary shares of £1 each in the
capital of the Company into 40,000,000 ordinary shares of £0.25 each ranking
pari passu in all respects with each other.
8. Reconciliation of operating profit to operating cashflows
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
30th April 2005 30th April 2004 31st October 2004
£'000s £'000s £'000s
Operating profit 2,088 1,910 2,583
Depreciation of
tangible fixed assets 510 485 1,028
Amortisation of
intangible fixed assets 114 102 249
Group share of associates
and joint ventures
operating profit 0 0 (167)
Loans made to
joint venture 100 (1,957) (1,650)
Movement in stock (64) (662) (790)
Movement in debtors (4,773) (4,088) (1,331)
Movement in creditors (1,298) (684) 206
--------- -------- ---------
--------- -------- ---------
Net cash inflow
from operating activities (3,323) (4,894) 128
========= ======== =========
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