Wynnstay Regulatory News (WYN)

AIM: WYN

WYNNSTAY GROUP PLC

("Wynnstay" or "the Group" or "the Company")

Final Results

For the year ended 31 October 2011

Key Points

·; Record figures - strongest ever annual results

·; Revenues up 42% to £346.18m (2010: £243.74m)

·; Group pre-tax profit* increased by 17% to £6.94m (2010: £5.95m)

·; Earnings per share rose by 10% to 30.23p (2010: 27.48p)

·; Net assets up 9% at £51.70m (2010: £47.37m)

·; Final dividend of 5.20p proposed, taking total dividend to 7.80p, up 10% (2010: 7.10p)

·; Acquisition of Wrekin Grain Ltd in May 2011 - helps to establish national presence in grain marketing

·; Agricultural division - revenues up 54% to £274.57m, reflecting

- benefit of acquisitions (Woodheads Seeds & Wrekin Grain)

- especially good performances from raw materials trading and arable supplies

·; Specialist retailing division - revenues up 9% to £71.32m

- Wynnstay Stores: good like-for-like sales, supported by high levels of non-discretionary spend

- Just for Pets: three further stores added, taking total to 19

·; Board remains positive about the Group's growth prospects, underpinned by:

- strong balance sheet and the breadth of the Group's activities

- excellent long term outlook for UK agricultural industry

* Group pre-tax profit includes the Group's share of pre-tax profits from joint ventures & associate investments

Ken Greetham, Chief Executive, said,

"I am pleased to report that Wynnstay has delivered its strongest ever annual figures. While there was an impact from inflation in commodity prices, the Group's results show the benefit of our acquisitions over the last two years, Wrekin Grain and Woodheads, as well as especially good performances from our raw materials trading, arable supplies and specialist retailing activities.

We acquired Wrekin Grain Ltd in May 2011 and having combined the business with our existing grain marketing operation, we launched the merged businesses as GrainLink, to create a national presence in grain marketing.

Looking ahead, the Board is positive about Wynnstay's growth prospects, which are supported by our robust balance sheet and the broad range of our activities. This year, we expect to see deflation in agricultural prices, given the good grain harvests across the globe, and pricing pressure for farmers is likely to remain unchanged as supermarkets position consumer staples such as milk and bread as competitively as possible. Nonetheless, long term global macro-economic trends play in favour of UK agriculture. Overall, we believe that the Group is well positioned to continue expanding both organically and through additional complementary acquisitions."

Enquiries:

CHAIRMAN'S STATEMENT

Overview

I am very pleased to report that Wynnstay continues to perform strongly and results for the year to 31 October 2011 set a new high for the Group against the backdrop of a volatile market. Revenues for the 12 months increased by 42% to £346.18m and Group pre-tax profit rose by 17% to £6.94m. The increase reflects the benefit of recent acquisitions, inflation, especially on feed and fertiliser prices, which has been a key feature over the year, as well as organic growth.

The broad business base of the Group continues to be an important factor in delivering overall growth and looking across Wynnstay's range of activities, our raw materials trading, arable supplies and specialist retailing activities all delivered especially good results.

The acquisition in May 2011 of Wrekin Grain Ltd, a leading independent grain marketing and agricultural inputs supplier based in Shropshire, has further strengthened our presence in the arable sector. It significantly increases Wynnstay's grain marketing volumes and extends the Group's geographic trading area and farming customer base. We have now completed its integration with our existing grain trading activity and have rebranded and launched the combined businesses as "GrainLink Ltd", giving us a national presence in grain marketing.

As well as expanding our agricultural supplies activities, we continued with the steady expansion of our specialist retailing division. This division saw very good like-for-like growth from Wynnstay Stores, helped by our refurbishment programme. Mainly targeting the farming community, although we also attract custom from country dwellers in general, these stores typically supply non-discretionary products and therefore sales have remained buoyant. We continued with the roll-out of our Just for Pets pet products chain, expanding by another three stores in the year. Results from all our newer stores are encouraging and the total number of Just for Pets stores now stands at 19. We plan to open three further new stores in 2012.

Financial results

The year to 31 October 2011 saw total revenues increase by 42% to £346.18m (2010: £243.74m). The Group's agricultural supplies activities contributed revenues of £274.57m (2010: £178.02m) and specialist retailing contributed £71.32m (2010: £65.47m) to this result. The Group's pre-tax profit was £6.94m (2010: £5.95m), an increase of 17% on last year. The operating profit contribution from agricultural supplies activities including joint venture results was £3.82m (2010: £3.00m) and specialist retailing activities contributed £3.70m (2010: £3.46m). Other activities showed a small loss of £0.19m (2010: loss of £0.13m) and net finance charges amounted to £0.39m (2010: £0.38m). After a Group taxation charge of £1.94m (2010: £1.71m), net earnings were 18% higher than last year at £5.00m (2010: £4.23m). This equates to 30.23p per share (2010: 27.48p) representing an increase of 10% over the preceding year.

The Group's balance sheet remains strong, with net assets at 31 October 2011 amounting to £51.70m (2010: £47.37m) or approximately £3.12 per share (2010: £3.08). Gearing remains low, despite funding the Wrekin acquisition through additional debt, and stands at 13% (2010: 7%) at the year end, based on a net debt position of £6.67m (2010: £3.47m). Return on net assets increased to 14.2% (2010: 13.5%).

Dividend

The Board is pleased to propose the payment of a final dividend of 5.20p per share, which together with the interim dividend of 2.60p per share, paid on 31 October 2011, takes the total dividend for the year to 7.80p, an increase of 10% on last year (2010: 7.10p). The final dividend will be paid on 30 April 2012 to shareholders on the register on 30 March 2012. A scrip dividend alternative will continue to be available as in previous years. The last date for election for the scrip dividend will be 16 April 2012.

The Board

At the Group's AGM, in March 2011, Non-executive Director Edwin Hughes stepped down from the Board, having reached the Company's agreed retirement age. Edwin has had a long and successful tenure with the Group, having joined the Board in 1989 when our business merged with the Vale of Clwyd Farmers. He has always been very supportive of our growth strategy and has made a very significant contribution to the Group over the years, latterly as Non-executive Vice Chairman. I would like to thank him for all his support and, on behalf of the Board and staff, I wish Edwin, together with his wife Jo, a long and happy retirement.

Subsequently, Jim McCarthy was appointed to the Board in July 2011. Jim has assumed the role of Senior independent Non-executive Director and we welcome him as a valuable new contributor to the Group. Jim brings a wealth of corporate and management experience to Wynnstay, having served in a number of very senior and high profile roles, particularly in retailing. He is Chief Executive Officer of Poundland Ltd, the high street retailer, which he has led since joining in 2006. Previously, he was at J Sainsbury plc, where he was Managing Director of Convenience, and between 1989 and 2003, Jim was Chief Executive Officer at T & S Stores plc, the convenience store chain which he built up to over 1,100 outlets and subsequently sold to Tesco plc in 2003.

Outlook

The significant inflation in agricultural commodity prices, which the Group has experienced during the last twelve months, is beginning to reverse. Good grain harvests across the globe have increased world grain stocks and, as a result, we have seen a weakening in cereal prices. Feed prices are reflecting these trends and we expect Group revenues to show the effect of deflation in the coming year. Nonetheless, global macro-economic trends, including population growth, rising food consumption and the shift to a westernised diet, remain unchanged. These powerful trends will continue to maintain the underlying strength of world demand for agricultural products and create opportunities for the agricultural industry as a whole.

Against this backdrop, Wynnstay continues to be very well positioned. The Group is well financed with a strong balance sheet and the spread of our activities is a major strength. We will continue to pursue our twin-track strategy of growth via acquisition, particularly within our core agricultural business, together with organic growth. We believe that the prospects for the Group across both our agricultural and specialist retailing activities remain very positive.

John Davies

Chairman

CHIEF EXECUTIVE'S REVIEW

Introduction

The Group has delivered its best annual results ever in the twelve months to 31 October 2011. This was achieved in a year dominated by inflation across all agricultural commodities, which brought both challenges and opportunities for the agricultural industry.

As I have noted in the past, Wynnstay's ability to deliver growth in a sustained manner is supported by the broad range of activities in which we are involved. Overall there was an increase in the total volume of products traded which, helped by contributions from acquisitions and the significant inflation in commodity prices, lifted revenues to a record £346.18 million, a 42% increase over 2010. Group pre-tax profits rose by 17% to £6.94 million. A notable strength of the Group has been its capacity to deal with inflation, through prudent management of working capital and a strong balance sheet.

Our acquisition strategy has continued to support the Group's expansion. During the year, in May 2011, we acquired Wrekin Grain Ltd, a leading grain marketing business and subsequently merged it with Shropshire Grain Ltd, our existing grain trading business, to form "GrainLink Ltd". This established a national presence for Wynnstay in grain marketing. The business complements our acquisition of Woodheads Seeds Ltd in 2010, the seed processer and supplier based in Yorkshire, and further strengthens our arable activities.

Our refurbishment of Wynnstay Stores continued and the operation produced good like-for-like sales growth. We opened three further Just for Pets outlets during the year and also relocated our distribution centre to a larger facility, which will accommodate the continued expansion of the chain.

Our Chairman paid tribute to Edwin Hughes in his Statement and I would also like to add my personal thanks to Edwin for his commitment to the Group and the support he gave me during my first years as Chief Executive. I wish Edwin a long and happy retirement. At the same time, I would also like to welcome Jim McCarthy to the Board as our new Senior independent Non-executive Director. Jim's substantial corporate and management experience will benefit the Company as we continue to develop the business.

Review of Activities

Agriculture

Revenues from our agricultural activities increased by 54% over 2010 to £274.57 million and the profit contribution rose by 27% to £3.82 million. Volume growth benefited from a full year's input from Woodheads Seeds, which we acquired in May 2010, as well as a six month contribution from Wrekin Grain, which we acquired in May 2011. This, combined with increased trading volume at Glasson and considerable inflation, substantially increased the turnover of the Agricultural Division. Feed volumes showed a year on year improvement however, as expected, there was a slippage in demand for ruminant feed at the end of the year.

Feed Products

Our feed activities continue to benefit from having a presence in both the ruminant and monogastric markets. We maintained growth in sales of poultry feed, despite poorer egg prices and reduced returns for our customers, and our strong relationship with Stonegate, the national egg marketing business, continues successfully. Recent increases in egg prices are an encouraging sign that the sector will generate more acceptable levels of return for producers.

With the ongoing volatility in world markets, raw material procurement is an important element of the Feed Division. Higher raw material costs, along with increased fuel prices, were generally reflected within feed prices during the second half. However margins were squeezed as demand for ruminant feed reduced due to extended grazing conditions in the autumn. More recently, deflation in grain prices has triggered a reduction in feed prices; nevertheless demand for dairy feeds has been slow to recover. Bibby Agriculture, our joint venture business, performed well during the year and maintains an excellent reputation for feed supply in the trading area.

Glasson Group

Glasson Group, our raw material and fertiliser trading operation, outperformed our expectations this year. Strong demand, coupled with significant fluctuations in raw material prices, contributed to an excellent performance from the team. Glasson supplies a wide range of raw materials to the feed compound industry as well as added value lines, including wild bird feeds and a range of smallholder feeds, to animal feed outlets. Its fertiliser blending operations have been very successful and, after the year end, we extended Glasson's fertiliser activity by establishing a joint venture, which trades as "FertLink Ltd". This new business, based in Birkenhead, near Liverpool, will supply fertiliser product both within the Group and to other wholesale accounts.

Arable Products

The Arable Division continued to gain momentum during the year. It has enjoyed the benefit of a full year's trading from Woodheads Seeds, acquired in the prior financial year, in May 2010. The total volume of seed traded, including our pre-existing seed business, has been very encouraging and the enlarged activity now forms a very important strand of the Arable Division. With the addition of Woodheads Seeds, Wynnstay is recognised as a major supplier of cereal seeds and herbage seeds to the UK market.

In May 2011, the Group acquired Wrekin Grain, a grain marketing company, operating from Telford in Shropshire. Wrekin Grain has now been integrated with our long established grain marketing business, Shropshire Grain, to form GrainLink, a business with sufficient scale to create a national presence for Wynnstay in grain marketing. I am pleased to report that GrainLink made a good contribution in its first few months of trading and it provides a platform for further expansion in the arable sector.

Group fertiliser volumes increased over last year and mirrored wider industry trends in the UK, with variable demand during the season. This was closely aligned to weather conditions, particularly within the grassland areas. Demand for arable products was strong during the summer months, as farmers bought stocks ahead of likely price increases. Livestock farms generally have less storage capacity therefore the recent price increases tempered sales during the autumn, however this should be balanced by stronger demand in the spring. We continue to enjoy a strong relationship with GrowHow, the only UK manufacturer of ammonium nitrate.

Specialist Retail

Our specialist retailing activities, comprising Wynnstay Stores and Just for Pets, performed well during the year. Revenues increased by 9% over 2010 to £71.32 million and the profit contribution increased by 7% to £3.70 million. Growth was driven by the ongoing store refurbishment programme at our country stores chain, Wynnstay Stores, and additional openings of our Just for Pets pet stores.

Wynnstay Stores

Wynnstay Stores delivered another strong performance. Like-for-like sales, adjusted for inflation, increased by 4% year on year, supported by high levels of non-discretionary spending by our farming customer base. Our wide range of products also attracts a broad cross-section of rural dwellers and these sales have been robust. Our store refurbishment programme continued during the year. At Dolgellau in Gwynedd, we repositioned our store within its existing site in January 2011 and the store now provides an enhanced range of products in a much improved retail environment. At Welshpool in Powys, we have taken a site adjacent to the current store to expand the range of hardware products the store offers and at Oswestry we have relocated to a new flagship store. The site is much larger than the previous location and offers a full range of products including a larger gun room with an excellent range of products for country sports enthusiasts.

Our stores are recognised as an important source of products within their rural communities. Product knowledge is also a key aspect of our offering and all our stores have suitably qualified personnel (SQP) to provide guidance on animal pharmaceuticals. In addition, we continue to look for new products to offer our farming customer base, including the supply of alternative energy products.

We continue to see our Wynnstay store chain, which total 28 stores, as providing a one stop shop for agricultural supplies for farmers as well as a useful resource for rural dwellers. Our ongoing store refurbishment programme is aimed at strengthening our offering and we will seek opportunities to expand the geography of the network further.

Youngs Animal Feeds Ltd, acquired in November 2009, has contributed well and is recognised as a leading supplier of equine products to a number of specialist outlets across the Midlands.

Just for Pets

Sales at our Just for Pets stores continued to grow, up 12% year on year reflecting our store opening programme. The pet product sector continues to show resilience against the wider retail sales trend and although like-for-like sales are down by 3%, we are particularly encouraged by the performance of the new stores. The first "easipetcare" veterinary concession was opened, in November 2010, at our Burton upon Trent store. A number of small pet clinics were established at selected stores during the year and we opened a second easipetcare concession at the Kidderminster store in December 2011.

We were pleased to receive another award from the Pet Care Trade Association during the year, when our Acocks Green store was voted "Favourite pet care retailer". This follows our Malvern branch being voted "Retailer of the year" in 2010. These awards demonstrate the commitment of the business and staff to customer service, an approach which is apparent throughout all the stores and highly attractive to customers. We relocated our distribution centre to a new facility at Hartlebury, Worcestershire, in September. The move facilitates further expansion over the coming years as the chain continues to grow. There are plans for three new stores in 2012, the first of which will open at Yardley in the West Midlands in February.

Joint ventures and associate

Our joint venture and associate businesses continue to contribute to the Group and have performed in line with management expectations.

Staff

I would like to record my appreciation of the dedication and commitment of all personnel within the Group who are for us our most valuable "assets". The Board is very grateful to all staff for their contribution to such strong results.

Outlook

The agricultural industry is a strong and important part of the UK economy and the farming community is the Group's largest customer base. In the short term, there could be some pricing pressures for farmers mainly as a result of supermarkets' commitment to provide essential items such as milk and bread at "value" levels. However, the long term outlook for the UK agricultural industry is very positive, especially for efficient producers in the sector.

The breadth of our activities has been an important part of the Group's ability to deliver sustainable growth over many years. It also acts as a buttress against volatility in our markets caused by the effect of variable climatic conditions on world agricultural production. In addition, Wynnstay has a strong balance sheet, which will help to support our growth ambitions and as well as targeting organic expansion, we will continue to look for suitable complementary acquisitions. We remain confident that the Group is well positioned for continued growth over the new financial year.

I look forward to updating all stakeholders further at our AGM in March.

Ken Greetham

Chief Executive

WYNNSTAY GROUP PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 October 2011

All of the above are derived from continuing operations.

There were no recognised income and expenses for 2011 or 2010 other than those included in the consolidated statement of comprehensive income shown above.

WYNNSTAY GROUP PLC

CONSOLIDATED BALANCE SHEET

As at 31 October 2011

WYNNSTAY GROUP PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

As at 31 October 2011

WYNNSTAY GROUP PLC

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 October 2011

WYNNSTAY GROUP PLC

NOTES TO THE ACCOUNTS

1. The Company has taken advantage of the exemption, under section s408 of the Companies Act 2006, from presenting its own income statement. The profit after tax for the period dealt with in the financial statements under IFRS of the company was £3,896,000 (2010: £2,820,000).

2. SEGMENTAL REPORTING

IFRS 8 requires operating segments to be identified on the basis of internal financial information about the components of the Group that are regularly reviewed by the chief operating decision maker (CODM) to allocate resources to the segments and to assess their performance.

The chief operating decision maker has been identified as the Board of Directors ("the Board"). The Board reviews the Group's internal reporting in order to assess performance and allocate resources. The Board has determined that the operating segments, based on these reports are Agricultural Supply, Retail and Other.

The Board considers the business from a product/service perspective. In the Board's opinion, all of the Group's operations are carried out inthe United Kingdom.

Continuing operations

Agriculture Supply - Manufacturing and supply of animal feeds, fertiliser, seeds and associated agricultural products.

Retail - Supplies of a wide range of specialist products to farmers, smallholders and pet owners.

Other - Miscellaneous operations not classified as agriculture or retail.

The Board assesses the performance of the operating segments based on a measure of operating profit. Finance income and costs are not included in the segment result that is assessed by the Board. Other information provided to the Board is measured in a manner consistent with that in the financial statements.

Inter-segmental transactions are entered into under the normal commercial terms and conditions that would be available to unrelated third parties.

2. SEGMENTAL REPORTING - (cont.)

Primary reporting format - business segments

The segment results for the year ended 31 October 2011 are as follows:

2. SEGMENTAL REPORTING (cont.)

3. FINANCE COSTS - NET

4. GROUP OPERATING PROFIT

The following items have been included in arriving at operating profit:

Services provided by the Group's auditors

During the year the Group obtained the following services from the Group's auditor

Included in the Group audit fee are fees of £46,750 (2010: £43,085) paid to the Group's auditor in respect of the parent company.

5. SHARE OF POST-TAX PROFIT OF ASSOCIATE AND JOINT VENTURES

6. DIVIDENDS

Subsequent to the year end it has been recommended in the Directors' Report that a final dividend of 5.20p net per ordinary share (2010: 4.70p) be paid on 30 April 2012. Together with the interim dividend already paid on 31 October 2011, of 2.60p net per ordinary share (2010: 2.40p), this would result in a total dividend for the financial year of 7.80p net per ordinary share (2010: 7.10p).

7. EARNINGS PER SHARE

Basic earnings per 25p ordinary share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year excluding those held in the Employee Share Ownership Trust which are treated as cancelled.

For diluted earnings per share, the weighted average number of ordinary shares is adjusted to assume conversion of all dilutive potential ordinary shares (share options and warrants) taking into account their exercise price in comparison with the actual average share price during the year.

8. CASH AND CASH EQUIVALENTS AND BANK OVERDRAFTS

9. BUSINESS COMBINATIONS

During the year the Group completed one acquisition structured as a share purchase.

On 4 May 2011 the Group completed the acquisition of the entire share capital of Wrekin Grain Limited, a leading independent grain marketing and agricultural inputs supplier based in Telford, Shropshire. After utilising cash acquired with the business of £1 million (as set out in the table below,) the net maximum consideration, contingent on a certain level of financial performance being achieved over the next four years is £4.015 million. Details of the trade, asset values acquired and the consideration are given below, together with details, subject to the comments below, of the revenues and operating profit generated in the period:

100% of the trade receivables at the acquisition have been collected.

The acquisition of Wrekin Grain Ltd, which has since changed its name to GrainLink Ltd, will provide the Group with an expanded customer base, providing cross selling opportunities and the scope to develop new trading relationships. The expanded activities are intended as a platform to establish a national presence in grain marketing for the Group. In July 2011 the trade and assets of Shropshire Grain Limited were hived into GrainLink Ltd and the respective figures shown above for consolidated revenue and operating profit therefore contain transactions for that period which would previously have been reported in that Company but are now indistinguishable from the acquired activities.

10. FINANCIAL LIABILITIES - BORROWINGS

Current

Non-current

  10. FINANCIAL LIABILITIES - BORROWINGS (cont.)

Bank loans and overdrafts include overdrafts totalling £1,357,574 (2010: £1,067,569) relating to subsidiary companies, which are secured by debentures over the assets of those companies.

Finance lease obligations are secured on the assets to which they relate.

11. SHARE CAPITAL

During the year 106,263 shares (2010: 97,295) were issued with an aggregate nominal value of £26,566 (2010: £24,324) and were fully paid up for equivalent cash of £368,057 (2010: £268,317) to shareholders exercising their right to receive dividends under the Company's scrip dividend scheme.

A total of nil (2010: £167,504) shares with an aggregate nominal value of £nil (2010: £41,876) were issued for a cash value of £nil (2010: £373,884) to relevant holders exercising options in the Company.

12. CASH GENERATED FROM/(USED IN) OPERATIONS

13. ANNUAL REPORT

The Annual Report and full Financial Statements will be posted to shareholders during the week commencing 6 February 2012. Further copies will be available to the public, free of charge, from the Company's Registered Office at Eagle House, Llansantffraid, Powys, SY22 6AQ or on the Company's website at www.wynnstay.co.uk. 

14. ANNUAL GENERAL MEETING

The Annual General Meeting of the Company will be held at The Sovereign Suite at Shrewsbury Town Football Club, Oteley Road, Shrewsbury on 20 March 2012 at 11.45am.