Wynnstay Regulatory News (WYN)

26 Jan 2006 07:00

Wynnstay Group PLC26 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 ofthe Common Agricultural Policy is changing farmers' traditional buying patternsand the substantial rises in fuel and power prices have adversely affectedcosts. Against this background, I am pleased to report that profits for the yearreached a record high. It is also encouraging to see increased contributionsfrom our joint ventures and associate company. While there is no doubt that market conditions are difficult, we are confidentthat our broadly based spread of businesses and strong balance sheet give ussignificant advantages within our sector. Further rationalisation in the supplyindustry is necessary and we believe that we are well placed to take advantageof such opportunities. We therefore view prospects for the business over themedium 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 2174Limited CHAIRMAN'S STATEMENT Introduction The year has been a challenging one for our industry as a whole. The reform ofthe Common Agricultural Policy (CAP) is changing farmers' traditional buyingpatterns and the substantial rises in fuel and power prices have adverselyaffected costs. Fertiliser production, which relies heavily on natural gasduring the manufacturing process, has been severely affected by higher gas costsand the price of fertiliser has risen to a 10 year high. Against this background, I am pleased to report that profits for the yearreached a record high. It is also encouraging to see increased contributionsfrom our Joint Ventures and Associate Company. We have made progress this yearboth operationally, with the implementation of a new Group I.T. system, and withacquisitions. Towards the end of September 2005, we were pleased to be involvedin purchasing part of the Pye-Bibby business after it went into administration.In December 2005, after the financial year end, we purchased the business ofQuins Farm Supplies, based in Newtown, Powys, which supplies animal healthproducts and country sporting goods, including shotguns, as well as generalhardware items. At the same time, our Joint Venture business, Youngs AnimalFeeds, 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 theGroup's agricultural base, whilst at the same time looking for opportunities toparticipate 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 of9% was helped by an improved performance from our Joint Ventures and AssociateCompany, but this result also includes non-recurring expenditure of £250,000,relating to the acquisition of part of the Pye-Bibby business. Turnoverdecreased by 2.5% to £100.81m (2004: £103.43m), with the reduction attributed toprice deflation principally in feeds and our decision to shed feed businesswhich did not offer us appropriate returns. In virtually every major productsector we gained market share and continue to expand our customer base. Whilst headline earnings per share were maintained at 22.8p, the basic earningsper 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 EifionyddLoan Stock who exercised their conversion rights. There remains a loan stockbalance of £417,000, convertible into a maximum of 1.668 million shares. The FRS7 reassessment of the fair value of the consideration for the Eifionyddacquisition has resulted in a reduction in the carrying value of goodwillrelating to this transaction of £397,000, due to a reduction in the Group'sshare price. I am pleased to welcome new shareholders as a result of the stockconversion. Early indications are that these new shareholders are retainingtheir 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 thetime of writing and I should wish to emphasise that our balance sheet assets areall shown at historical value and that our Group does not have any pensiondeficit. Dividend We are pleased to continue our progressive dividend policy, with the Boardrecommending an 11% increase in the final dividend to 5.0p per share, giving atotal dividend for the year of 5.0p. I am also pleased to announce that it is the Board's intention, subject totrading results, to commence payment of an interim dividend during the nextfinancial year. Our intention is to introduce a policy of paying out the totaldividend in two stages; one third as an interim dividend and two thirds as thefinal dividend. Review of Trading Trading conditions have been volatile during the year. Feed ingredient pricesfell whilst in contrast, rising natural gas costs caused fertiliser prices toescalate and has restricted production. The increase in fuel price has had aparticular impact on our road delivery costs since we are major distributor ofheavy goods and it is still proving difficult to pass on all this cost impact tocustomers. Under the circumstances, the three core divisions have performed welland gained market share in almost every sector in which they operate. The Stores Division continues to make good progress. We are increasing theproduct range across our outlets and are part way through our store upgradeprogramme. We completed the construction of a major new store at Newtown, whichopened in early December. The store marks a new level in both design andpresentation and early trading has been extremely encouraging. The Arable Division dealt well with sharply increased fertiliser prices andlower returns to grain farmers. Further substantial progress was made in grassseed sales, and market share has improved in cereal seed. The Feeds Division business has only benefited from the Bibby acquisition forone month of the financial year. However, it represents an important strategicmove for the Group, bringing substantial benefits for both Llansantffraid andCarmarthen mills and improving our share of the compound feed market. We arepleased to have played an active role in the further rationalisation of the feedindustry in the region. Our Joint Venture activities performed well, with an exceptional result fromproperty development company, Wyro Developments, which enjoyed an excellent yearwith above budget sales and substantial additions to its land bank. Ourassociate company, Wynnstay Fuels, benefited from higher fuel prices and alsofrom its new depot in North West Wales, where it has constructed new storagefacilities. Prospects We plan further significant investment in our infrastructure during 2006. Havingreceived grant aid approval from the E.U. Objective One Programme, we intend tobegin work on constructing a new feed blending plant in North Wales. We willalso commence work on a new retail store and a new Head Office for the Group atLlansantffraid. 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 CommonAgricultural Policy is introducing significant uncertainty into our marketplaceand we expect the impact on farmers' traditional buying patterns will showthrough more strongly in 2006 since farmers have received their last subsidiesunder the old system. Energy price rises, particularly electricity for ourmanufacturing plants and fuel for our distribution fleets, have increased ourcosts and we still have to pass onto customers much of the cost increase. Inaddition, it is hard to predict recovery in the demand for fertiliser, which hasreduced significantly as a result of much higher prices. The spring market is ofvital importance to the Group and we have to be conscious that if sales continueto be depressed it will materially impact on our financial performance at thehalf year. Our participation in the Bibby acquisition brings benefits to our FeedsDivision, adding volume to our feed mills and giving us access to a widercustomer base as well as enabling us to reduce costs. The Stores business hasconsiderable scope for growth and we are exploring the possibility ofestablishing a new format of dedicated pet and equine stores. Our ArableDivision is seeing improved demand from new markets for cereals involved in foodand energy processing, and grain prices for the 2006 season appear to be alittle firmer. Our Joint Ventures are performing increasing well and operate in growth marketswhich we intend to exploit. We are confident that we can produce an increasingincome stream from these activities. While there is no doubt that market conditions are difficult, we are confidentthat our broadly based spread of businesses and strong balance sheet give ussignificant advantages within our sector. Further rationalisation in the supplyindustry is necessary and we believe that we are well placed to take advantageof such opportunities. We therefore view prospects for the business over themedium term with confidence. May I thank all shareholders for their continued support and welcome those newshare holders particularly from the Eifionydd area who have converted theirLoanstock. John DaviesChairman MANAGING DIRECTOR'S REPORT 2005 proved to be a challenging year, with increased costs adding to demandingtrading conditions. I am therefore delighted that we have achieved a recordtrading profit, even after taking into account a £250,000 provision to cover thecost of reorganising the Bibby feed acquisition. The three core divisions performed robustly. The investment in previous yearshas proved to be of great benefit and as a result, we have a cost effectiveinfrastructure while providing an excellent service. It is also pleasing to see our investment both in time and resources bearingfruit in our Joint Venture Companies, which add strength and depth to ourbusiness base. REVIEW OF TRADING Feeds Division The Feeds Division manufactures and markets a wide range of animal nutritionproducts for farm livestock. The division also operates a raw materialswholesale business which supplies feed ingredients to farmers and other feedmanufacturers in England and Wales. The Feeds Division, which accounts for 35% of the Group turnover, performed welloverall in a year of fluctuating demand. Against the background of a fall ofsome 10% in feed sales nationally, we made excellent progress in gaining marketshare in several product areas. However, owing to our decision to shed some lessprofitable business, our overall feed volumes decreased slightly by 2.6%. Our flagship Llansantffraid mill produced excellent volumes, with dairy feeds upby 11% and sheep feed up by 19%. Overall our sheep feeds volumes, including feedproduced by our joint venture partner, Welsh Feed Producers, and by third partymanufactures on our behalf, were very strong, with total sheep feed salesincreasing by 14% to reach record levels. There was particularly strong demandfor lamb finishing rations where our superior nutritional technology is muchappreciated by producers. Over the year, we made further investment in our Llansantffraid mill, adding afifth pelleting press and new raw material silo accommodation. Together with ourjoint venture partners, we made a further investment in the Carmarthen feed millto enhance feed output and quality. Demand for feed blends was strong and we continue to use a number of contractmanufacturers to cater for this growing sector of the market. We are building our presence in the poultry feed market. Our partnership with amajor egg marketing company, utilising our specialist feeds for the productionof niche egg products sold at the premium end of the market, continues to growand we have recruited a number of new egg producers during the period. After last year's 30% increase in sales, beef feed sales fell substantiallyduring the year due to a change in the EU regime. However, our joint venturebusiness, which markets Celtic Pride Prime Quality Beef, continues to win marketshare in both the food service sector and to retail butchers. The beef isproduced from animals reared to high welfare standards and fed on products basedon unique nutritional technology. Our raw material trading department had another successful year and made asubstantial contribution to the profits of the Feeds Division. This arm alsoprovided procurement services for our manufacturing plants. During 2006, having received EU grant aid, we intend to build a new feedblending plant in Rhosfawr, North Wales. This will give us a state of the artfacility from which we will be able to supply not just the local market but allGroup sales in Wales. It will also lead to considerable transport benefits as wecan backload vehicles delivering compound feeds into the area fromLlansantffraid mill. The administration of the Pye-Bibby feed business represented one of the biggestfinancial failures in British agriculture and had a major impact on theagricultural supply industry. Following Carrs-Billington (Operations Ltd)purchase of some of the assets of Pye-Bibby, we were pleased to work closelywith them to re-structure those assets. A new company, Bibby Agriculture Ltd,was formed, with Carrs Billington retaining 50% of ownership, ourselves 25% andour joint venture partner, Welsh Feed Producers, also taking a 25% stake. Thenew 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 newcompany is to maximise the sales opportunities in Wales and the borders, whilereducing production and logistics costs by utilising the facilities of the feedmills closest to the respective customer base. We believe the Bibby brand has agood reputation and we wish to build on its long standing relationships withfarmers throughout our trading area. There will be long term benefits for bothLlansantffraid and Carmarthen mills in producing the volumes of feed requiredfor the new Bibby business. Arable Division The Arable Division supplies a wide range of services and products includingseeds, fertilisers and agricultural chemicals to cereal and grass land farmers.It has its own grain trading arm, Shropshire Grain, which provides a marketingservice in the West Midlands and adjoining counties. Sales in the division account for 36% of Group turnover. There was an increasedcontribution from fertiliser and herbage seeds sales, whilst sales of chemicalsfell. Fertiliser sales value increased by 12%, because of rapid price inflation andalso strong sales at the latter end of the financial year as farmers broughtforward purchasing in anticipation of further price rises. The nationalfertiliser market experienced falling sales of between 10-15%, depending on thegeographical area. Maize seed sales were maintained in a smaller market and herbage seed salesvalues increased by 19%. We continue to build market share in the latter and areone of the premium processors in the United Kingdom. Increasingly, we are usingprimary producers to provide us with our raw materials. We see further scope forimprovement in herbage seed sales utilising our extensive retail and storenetwork. Spray chemical sales fell by 8%, although this was considerably less than thegeneral market decrease as farmers reduced their expenditure on spray treatmentsdue to reduced prices for grain. I am pleased to report that Shropshire Grain Ltd, our wholly owned grain tradingdivision, achieved another good performance. Grain trading is a notoriously lowmargin business but we continue to outperform the sector. Our philosophy ofencouraging reciprocal trading with farmers and growers pays dividends and wewill roll out this concept further across the UK, both through organic expansionand 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 ofproducts both to professional farmers and growers as well as to the generalpublic. The Stores Division, which accounts for 28% of Group turnover, enjoyed anothersuccessful year and made substantial progress in many of its major productareas. Sales in our core retail products were above budget, with pet products improvingby 9% and equine products by 17%. There was a fall in sales of some of thetraditional farm inputs, such as fencing products, but household goods includingdetergents and cleaning products, improved by 47% from a small base. Garden products, a relatively small but growing area of product sales, also sawfurther encouraging growth, increasing by over 30%. Animal healthcare productsfell in sales value, although volumes grew in real terms, since the fall invalue was due to greater sales of non-branded generic products at lower salesvalues. The eight Eifionydd stores acquired some two years ago are improving theirperformance in terms of margin and product range and we are continuing to focuson 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 petproducts 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 newstore in Newtown, and we will be moving the Welshpool shop to our Welshpoolpremises in late January. We are continuing with our stores development programme. A new store, includinga new post office, will be constructed in 2006 at our Llansantffraid site,greatly improving facilities at that site. Major store improvements are underwayat our stores in Gaerwen, North Wales, and Oswestry in Shropshire. These shouldbe completed in the first half of 2006. There is also an ongoing re-fittingprogramme across the Group's stores, designed to improve stock, presentation andgeneral facilities. At the year end, we launched our e-commerce site for the retail business. Itoffers an extensive range of retail goods at competitive prices and supported bya 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 andshrubs, operating from three sites based in Somerset. Our target market is largemultiple retailers, garden centres and general retailers. Foxmoor has had a successful year following its re-structuring and made asubstantial contribution to the Group's profits. Our glasshouses are fullyoccupied and committed for 2006 and we have embarked on a major marketingcampaign with Matt James, Channel 4's "City Gardener", to market a range ofarchitectural ferns and plants to major market garden centre outlets. Thebusiness has gained considerable extra trade for 2006 and continues to expandthrough 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 marketswhich are separate to our core business but which bring additional synergisticbenefits to the group. Youngs Animal FeedsYoungs Animal Feeds had a successful year in terms of sales of pet foods andequine products but suffered from the delay in the commissioning of its newplant, which is being built to produce the Super Molichop range of Hi- FibreEquine feeds. There is increasing demand for the range and we have gained newbusiness from other retailers and manufactures. However, due to the delaysmentioned previously, our sales targets have not been met. At the time ofwriting, many of the problems have been resolved and we look forward to thefactory enjoying full production in 2006. Wyro DevelopmentsThe property development company has had a highly successful year, with aconsiderable increase in activity on our two sites at Abermule, near Newtown inPowys. Successful marketing has led to the first site being almost wholly soldout at prices in excess of budget. Work is progressing on the second site whichwill offer more expensive homes and early indications are that sales will be ontarget. In addition, we have completed work on a redundant brownfield Group sitein North Wales which is currently being marketed. Wyro has added considerably toits land bank and, at the time of writing, is in the process of completing thepurchase of three further sites which will have a mix of housing types. Thecompany has established itself as a premium property developer in Mid Wales andwe are confident that we will continue to be successful in marketing highquality, value-for-money homes in the future. Welsh Feed Producers Ltd.Welsh Feed Producers has enjoyed a successful year despite being adverselyaffected by the Pye-Bibby collapse. As a result of the launch of the newcompany, Bibby Agriculture Ltd, the venture has secured a considerable amount offeed volume so that production capacity is now largely filled. We look forwardto working closely with our new colleagues in reducing costs and streamliningour operation. It is hoped that during 2006, the plant will produce recordoutputs of cattle and sheep feeds. Associate Company Wynnstay Fuels LtdWynnstay Fuels, the distributor of agricultural, commercial and domestic fuels,has had a successful year, helped considerably by rising fuel prices. It hasrecently established a new fuel sales centre, with storage and loadingfacilities in North Wales on an existing company site . The centre has beenhighly successful and has built a substantial business from scratch, benefitingfrom the existing customer base in the area. We believe further gains willaccrue to Wynnstay Fuels during 2006, as we continue to develop sales throughout our trading area. OUTLOOK Market conditions remain challenging. The new CAP reforms are now being felt andfarmers are increasingly adopting the "just in time" buying policy noted in ourinterim report. Dairy farming profits remain under pressure and this is having aknock-on effect on the supply industry. The escalating cost of energy is aconcern, as is the sharp rise in the cost of fertiliser. The important springordering market has yet to be experienced and any adverse reaction and buyingresistance will affect Group profits. The successful integration of the Bibbybusiness is an important factor in our feed business and, at the time ofwriting, 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 developingrelated joint ventures as part of our diversification is becoming increasinglybeneficial and we continue to look for further opportunities. May I thank all the shareholders for their ongoing support and express aparticular welcome to those new shareholders from the Eifionydd area. B. B. HarrisManaging Director CONSOLIDATED PROFIT AND LOSS ACCOUNTFor year ended 31st October 2005 2005 2004 Note £000 £000 ---------- -----------TURNOVER 1Continuing operations 100,806 103,430 Cost of sales (82,482) (85,465) ---------- -----------GROSS PROFIT 18,324 17,965Selling and distribution costs (15,150) (14,660)Administrative expenses (918) (889) ---------- -----------OPERATING PROFIT 3 2,256 2,416Share of operating profit in joint ventures 490 140Share 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 2,754Income from other fixed asset investments 31 27Interest receivable 108 88Interest payable 2 (231) (229) ---------- -----------PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 2,869 2,640TAX ON PROFIT ON ORDINARY ACTIVITIES (874) (780) ---------- -----------PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 1,995 1,860DIVIDENDS - 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 thoseincluded in the profit and loss account above.There is no difference between the profit calculated on an historical cost basisand those reported in the profit and loss account above. BALANCE SHEETAs at 31st October 2005 2005 2004 Note £000 £000 ------------ -----------FIXED ASSETSIntangible fixed assets 5 2,501 3,134Tangible fixed assets 8,769 8,694Investments 2,763 1,651 ------------ ----------- 14,033 13,479 ------------ ----------- CURRENT ASSETSStocks 8,284 8,018Debtors 19,158 17,210Cash at bank and in hand 1,646 1,275 ------------ ----------- 29,088 26,503CREDITORS: 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 aftermore than one year (345) (437) PROVISIONS FOR LIABILITIES ANDCHARGESDeferred taxation (189) (189)Other provisions 6 (250) - ------------ -----------NET ASSETS 23,114 21,500 ============ =========== CAPITAL AND RESERVES Called up share capital 2,438 2,170Share premium account 4,253 2,464Loanstock redemption reserve 5 3,153 5,084General reserves 1,582 1,582Profit 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 andsigned on its behalf. CASHFLOW STATEMENTFor the year ended 31st October 2005 2005 2004 Note £000 £000 --------- ----------Net cash flow from operating activities 7 3,483 128Returns 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/DEBTFor 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 STATEMENTSFor the year ended 31st October 2005 1. ACCOUNTING POLICIES1.1 Basis of preparation of financial statementsThe financial information is prepared under the historical cost convention andin accordance with applicable United Kingdom law and accounting standards. Theparticular accounting policies adopted are described below. 1.2 Basis of consolidation and goodwillCorporate and unincorporated joint ventures in which the Group has an investmentrepresenting not less than 20% of the voting rights, and over which it exertssignificant influence, are treated as associated undertakings. The Groupaccounts include the appropriate share of these undertakings' profits based onthe latest available audited accounts, and provide for an appropriate share oftheir losses, based on the latest available management accounts. The results ofsubsidiary 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 andwritten off over its estimated useful economic life. The Company has taken advantage of the exemptions conferred by S.230 of theCompanies 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 companyaccounts. 1.3 TurnoverTurnover represents the invoiced value of sales which fall within WynnstayGroup's ordinary activities and excludes Value Added Tax. 1.4 Tangible fixed assets and depreciationTangible fixed assets are stated at cost, net of depreciation and any provisionfor impairment. Depreciation is provided at rates calculated to write off the cost of fixedassets on a straight line basis over their expected useful lives as follows:Freehold property - 2.5% - 5% per annumPlant and machinery/office equipment - 10% - 33% per annumMotor vehicles - 20% - 30% per annum 1.5 StocksStocks are valued at the lower of cost and net realisable value. 1.6 Deferred taxationProvision is made in full for all taxation deferred in respect of timingdifferences 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 notthat they will be recovered. 1.7 Leasing and hire purchaseAssets held under finance leases or being obtained under hire purchase contractsare capitalised in the balance sheet and depreciated over their useful economiclives, interest being charged to the profit and loss account over the period ofthe agreement. Operating lease rentals are charged to the profit and lossaccount as incurred. 1.8 PensionsThe Company operates a defined contribution pension scheme. Contributions tothis scheme are charged to the profit and loss account, as they are incurred inaccordance with the rules of the scheme. 1.9 Employee share ownership trustThe Company operates an employee share ownership trust. Contributions to thistrust are charged to the profit and loss account on an accruals basis. 1.10 Investments(i) Subsidiary undertakingsShares in subsidiaries are valued at cost less provision for permanentimpairment.(ii) Associated undertakingsInvestments in associates are stated at the amount of the Company's share of netassets. The consolidated profit and loss account includes the Company's share ofthe associated companies' profits after taxation using the equity accountingbasis.(iii) Joint venture undertakingsInvestments 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 includedin the consolidated profit and loss account using the equity accounting basis.This accounting treatment is not in line with the requirements of FinancialReporting Standard 9, "Associates and Joint Ventures", which requires theadoption of the gross equity accounting basis. There is no material effect tothe reported figures as a result of this departure.(iv) Other investmentsInvestments held as fixed assets are shown at cost less provisions for theirpermanent impairment. 2. INTEREST PAYABLE 2005 2004 £000 £000 -------- --------Bank loans and overdrafts wholly repayable within five years 123 20Interest on loan capital 18 27Finance lease charges 65 52Interest on loan stock 25 30 -------- -------- 231 229 ======== ======== 3. OPERATING PROFITThe Operating profit is stated after charging: 2005 2004 £000 £000 -------- --------Amortisation - intangible fixed assets 236 249Depreciation of tangible fixed assets:- owned by the company 762 825- held under finance leases 285 203Auditors' remuneration 36 35Auditors' remuneration - non-audit 33 20Operating lease rentals:- other operating leases 162 48Directors emoluments 587 508Exceptional 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 of5.0p pence net per 25p ordinary share (2004: 4.5 pence net per 25p ordinaryshare). 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 arepresented below in addition to the basic and diluted figures required to bereported under Financial Reporting Standard 14, Earnings per share. In theopinion of the directors, such figures are relevant to the understanding of thefinancial position of the Group in the light of the exceptional item shown atnote 18. Fully diluted earnings per ordinary share are also disclosed at 16.02pand 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 ASSETSIntangible fixed assets represent purchased Goodwill which is being amortisedover the estimated life of each transaction. In accordance with FinancialReporting Standard 7, Fair values in acquisition accounting, a revised fairvalue assessment has been made as at 31st October 2005 of the purchaseconsideration for the Eifionydd Farmers transaction. This reassessment isrequired 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 untilthe loanstock is actually converted into ordinary shares in the Company. Theconversion period is 1st September 2005 to 31st August 2006. The revised fairvalue 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 (Note20). The revised amortisation in respect of the goodwill arising on theEifionydd Farmers transaction is £112,360 as a consequence of the reduced fairvalue. 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 productionand distribution functions following the investment in Bibby AgricultureLimited. 7. NET CASH FLOW FROM OPERATING ACTIVITIES 2005 2004 £000 £000 --------- ---------Operating profit 2,777 2,583Associated undertaking results (521) (167)Amortisation of intangible fixed assets 236 249Depreciation of tangible fixed assets 1,047 1,028Increase in stocks (266) (790)Increase in debtors (1,948) (2,981)Increase in creditors 1,908 206Increase 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 FINANCEInterest received 108 88Interest paid (166) (177)Hire purchase interest (65) (52)Dividends received 31 27 --------- ---------NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICINGOF FINANCE (92) (114) ========= ========= 2005 2004 £000 £000 --------- ---------CAPITAL EXPENDITURE AND FINANCIAL INVESTMENTPurchase of intangible fixed assets - (63)Purchase of tangible fixed assets (853) (902)Proceeds from sale of tangible fixed assets 290 40Purchase of investments (731) (50)Proceeds from sale of investments - 294 --------- ---------NET CASH OUTFLOW FROM CAPITAL EXPENDITURE (1,294) (681) ========= ========= 2005 2004 £000 £000 --------- ---------FINANCINGIssue of ordinary shares 523 1,258Repayment 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 bankand in hand: 1,275 371 - 1,646Bank overdraft (609) 400 - (209) --------- -------- -------- -------- 666 771 - 1,437DEBT :Finance leases (621) 335 (359) (645)Debts duewithin one year (1,584) 316 (12) (1,280)Debts fallingdue after morethan 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 inFebruary 2006. Further copies will be available to the public, free of charge,at the Company's Registered office at Eagle House, Llansantffraid, Powys, SY226AQ. 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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