Wynnstay Regulatory News (WYN)

AIM: WYN

WYNNSTAY GROUP PLC

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

Final Results

For the year ended 31 October 2012

Key Points

·; Results at record level

·; Revenue up 9% to £375.78m (2011: £346.18m)

·; Group pre-tax profit* up by 13% to £7.82m (2011: £6.94m)

·; Earnings per share up 16% to 34.99p (2011: 30.23p)

·; Net assets at 31 October 2012 up 10% to £56.83m (2011: £51.70m)

·; Proposed final dividend of 5.65p, taking total for the year to 8.50p, a rise of 9% (2011: 7.80p)

·; Agricultural division - revenues up 8% to £295.19m, operating profit up 23% to £4.71m, helped by:

- full year contribution from GrainLink

- strong demand for feed

·; Specialist retail division - revenues up 13% to £80.47m, operating profit up 5% to £3.90m

- Wynnstay Stores, geographic reach extended through new store additions

- Just for Pets, two new outlets opened, taking total to 21 stores

·; Board remains positive about prospects in new financial year

- Group well positioned financially, with low gearing and good cash generation

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

Ken Greetham, Chief Executive, commented,

"Wynnstay continues to perform well and pre-tax profits and revenues for the year stand at record levels. This pleasing achievement is underpinned by the broad spread of our agricultural activities and reflects both the organic and acquisitive development of the business.

Over the year, we acquired a number of small agricultural supplies businesses, further expanded our Just for Pets chain and established FertLink, a joint venture fertiliser business. These moves will help to support ongoing growth and also extend Wynnstay's geographic reach into Oxfordshire and Gloucestershire.

Wynnstay has for some time been an active participant in agricultural consolidation. As part of our growth plan, we will continue to acquire businesses which fit our model whilst also developing Wynnstay organically. The Group has a strong financial base from which to grow, with low gearing and good cash flow. Our broad base continues to be a major factor in providing sustainable returns for all stakeholders in the business and I have confidence that our Group will continue to develop over the coming years."

Enquiries:

CHAIRMAN'S STATEMENT

Overview

In my first statement since my appointment as Chairman of the Group in April 2012, I am pleased to report that the Group has achieved record results in both sales and profitability.

The 13% increase in annual Group pre-tax profits to £7.82m on revenues of £375.78m reflects the benefits of our strategy to grow the business both organically and via acquisition, and also continues to demonstrate the strength of the Group's broad spread of activities within the agricultural sector.

The agricultural division delivered a 23% increase in operating profit to £4.71m, helped both by a full 12 month contribution from GrainLink, our grain trading business which we rebranded after acquiring Wrekin Grain in May 2011, and improved returns, particularly in feed. Volumes across our market sectors varied so whilst demand for animal feed rose, we saw reduced volumes in fertiliser and traded raw materials.

Our specialist retailing activities performed robustly over the period. The division delivered a 5% uplift in operating profit to £3.90m and we continue to develop both our Wynnstay Stores and Just for Pets formats. We acquired three farm supplies businesses during the year and one after the year end, and our chain of Wynnstay Stores now stands at 31. We also opened two new Just for Pets stores over the period, increasing the total number to 21 by the year end.

Over the last few years we have extended Wynnstay's trading presence outside its traditional heartland. The establishment of FertLink, the joint venture fertiliser activity we set up in November 2011, together with the expansion of our Wynnstay Stores network, are further steps in the gradual widening of Wynnstay's farming customer base.

Financial results

Revenues for the year to 31 October 2012 increased by 9% to £375.78m (2011: £346.18m), with agricultural supplies sales contributing £295.19m (2011: £274.57m) and specialist retailing contributing £80.47m (2011: £71.32m). The Group's pre-tax profit (including the Group's share of pre-tax profits from joint ventures and associate investments) rose by 13% year-on-year to £7.82m (2011: £6.94m). The operating profit contribution from agricultural supplies including joint venture results increased by 23% to £4.71m (2011: £3.82m) and specialist retailing activities contributed a 5% increase to £3.90m (2011: £3.70m). Other activities showed a loss of £0.33m (2011: loss of £0.19m). Net finance charges amounted to £0.46m (2011: £0.39m). After a Group taxation charge of £1.99m (2011: £1.94m), net earnings were 17% higher at £5.83m (2011: £5.00m). This equates to 34.99p per share (2011: 30.23p) representing a rise of 16% over the preceding year.

Net assets at the year end were 10% higher at £56.83m (2011: £51.70m). Net debt stood at £13.79m (2011: £6.67m), with the increase reflecting higher working capital utilisation resulting from the expansion of activities and certain weather related changes to some trading patterns. However gearing remains conservative at 24% (2011: 13%) of net assets. Return on net assets remained constant at 14.2% (2011: 14.2%).

Dividend

The Board is pleased to propose the payment of a final dividend of 5.65p per share, which together with the interim dividend of 2.85p per share, paid on 31 October 2012, takes the total dividend for the year to 8.50p, an increase of 9% on last year (2011: 7.80p). The final dividend will be paid on 30 April 2013 to shareholders on the register on 2 April 2013. 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 2013.

Board Changes

With the impending retirement in March 2013 of Non-executive Director, John Davies, my predecessor as Chairman, I would like to acknowledge formally his considerable achievements. Having chaired Wynnstay for the last 23 years, he has made a tremendous contribution to the Group and we are all indebted to John for his work in helping to establish Wynnstay as a significant presence in UK agriculture over this time. The process is now underway to appoint a new Non-executive Director and we expect to make a further announcement on this in the spring. As previously reported, when I moved from the role of Vice Chairman to Chairman in April 2012, Jim McCarthy, Non-executive Director, took up the position of Vice Chairman.

Outlook

The outlook for the UK agricultural industry is very positive, with long term macroeconomic trends, including the increasing requirement for food to feed a growing world population, providing structural support. The Government has recognised the importance of the agricultural industry and instigated a number of initiatives to encourage UK self-sufficiency in food products. A number of retailers are also actively promoting British food products. However pricing pressures remain, driving the need for efficiency throughout the food chain which will ultimately lead to further consolidation within the UK agricultural supply industry.

Wynnstay has for some time been an active participant in agricultural consolidation and is recognised as an acquisitive business. As part of our growth plan, we will continue to acquire businesses which fit our model whilst also developing Wynnstay organically. The Group has a strong financial base from which to grow, with low gearing and good cash flow. Our broad base continues to be a major factor in providing sustainable returns for all stakeholders in the business and I have confidence that our Group will continue to develop over the coming years.

E G Owen

Chairman

CHIEF EXECUTIVE'S REVIEW

Introduction

The Group continues to perform well and pre-tax profits and revenues for the year stand at record levels. This has been achieved against a backdrop of ongoing price inflation in agricultural products and overall difficult economic conditions in the UK. Our robust business model continues to provide us with the opportunity to further develop the Group and the UK agricultural market remains well positioned to benefit from increasing world demand for food and renewable energy.

Group revenue increased by 9% to £375.78 million over the year, supporting a 13% rise in Group pre-tax profit to £7.82 million. Product volumes varied by sector over the period, in line with industry trends, with increased animal feed volumes but decreased fertiliser volumes. Traded raw material volumes also decreased although this was offset by higher grain volumes, which benefited from a full year contribution from GrainLink, our grain trading business established following the acquisition of Wrekin Grain Ltd in May 2011.

Over the twelve months under review, we completed a number of small acquisitions of agricultural supplies businesses, further expanded our Just for Pets chain and established FertLink, a joint venture fertiliser business, operated by our Glasson subsidiary. These moves will help to support ongoing growth across all our activities and also extend Wynnstay's geographic reach into Oxfordshire and Gloucestershire.

REVIEW OF ACTIVITIES

Agriculture

The agricultural division performed extremely well in a market dominated by inflation and adverse weather conditions worldwide. The operating profit from our agricultural activities as a whole increased by 23% year-on-year to £4.71m on revenues of £295.19m, helped by a full 12 month contribution from GrainLink and more realistic margins in feed products. The increased revenues reflect variation in product volumes and continuing inflation. The feed market was buoyant during the summer whereas demand for fertiliser reduced, in line with industry trends, as the inclement weather and poor harvest conditions tempered customers' confidence to purchase ahead of anticipated usage.

Feed Products

Demand for feed was strong in the second half, reversing the trend in the first half, as farmers relied on purchased feeds to balance the poor grazing and harvest conditions, a consequence of the poor weather experienced throughout the summer. This meant that like-for-like volumes for the year as a whole increased by 2% while margins also continued to strengthen.

As ever, the broad portfolio of feed products we supply, catering for both the monogastric and ruminant markets, helped to minimise the effect of any individual sector volatility. Increased costs challenged the profitability of the dairy farming sector, however many of our customers committed to feed contracts during the autumn, mitigating some of the effect of poor milk prices. There has been some positive movement in farm gate prices for dairy farmers, although input costs have also continued to increase.

Bibby Agriculture, our joint venture business, performed well, with sales increasing year-on-year.

Glasson

The Glasson business continues to make an excellent contribution to the Group. The business supplies raw materials to the feed compound industry as well as added-value lines, including wild bird feeds and feeds for smallholder farmers, to animal feed outlets. The volume of raw materials traded was lower than the previous year (which benefited from a high usage of maize gluten), however demand in the second half was strong and forward contracts are very encouraging. Glasson's fertiliser sales increased, primarily as a result of the additional throughput generated by FertLink, the new fertiliser blending activity we established as a joint venture at Birkenhead in November 2011. FertLink has also enabled Glasson to gain market share beyond its traditional trading area.

Arable Products

We have expanded the arable division significantly over recent years as part of our strategy to balance our presence across the livestock and arable markets.

Grain volumes increased by over 35% as we benefited from a full year's trading contribution from GrainLink and further volume increases at Woodheads Seeds. The very poor weather during the summer had a devastating effect on the quality of grain and yields were reduced compared with the harvest of 2011. This had a small effect on traded volumes towards the year end and we expect a further reduction in volume through to the 2013 harvest.

Seed sales remained resilient despite the effect of the adverse weather. However difficult field conditions have restricted cultivation opportunities and many customers will resort to spring varieties if conditions do not improve. Demand for these products is at record levels and we anticipate a good spring season.

Demand for fertiliser was subdued in the second half, in line with industry trends, as poor weather conditions reduced usage on grassland crops. Currently forward orders for spring usage are lower than normal as customers have been reluctant to commit to early purchases. However we anticipate demand recovering as we move towards the spring and the business is well placed to meet this demand, with the extended production facilities available at FertLink.

Specialist Retail

The retail division, which comprises Wynnstay Stores, Just for Pets and Youngs Animal Feeds, continues to grow, supported by a combination of acquisitions, new store openings and refurbishments. Revenues for the year increased by 13% to £80.47m, with operating profit up by 5% to £3.90m.

Wynnstay Stores

Wynnstay Stores comprises a network of rural retail centres providing essential supplies for the farming community together with a strong offering for smallholders and country dwellers. Total revenues increased by 15% year-on-year, reflecting the increased number of stores, changes in product mix and inflation, with non-discretionary spend by farmers remaining high. The importance of our stores within their local rural communities was illustrated in October 2012 when the Group was named as the "Powys Business of the Year" in an annual regional awards event. Our stores network is also recognised by suppliers as an important route to market for their agricultural ranges.

We are continuing to invest in our stores, including personnel, to ensure that we offer both relevant range and a professional and reliable service to our expanding customer base. Over the course of the second half, we acquired two further farm supply outlets, in Tetbury in Gloucestershire and Whitchurch in Shropshire. After the year ended we purchased another outlet in Banbury in Oxfordshire, taking the number of our stores to 31 and further expanding the geographic reach of the Group. The new acquisitions are performing in line with budget and we look forward to a full year's contribution in 2013. The store refurbishment programme continues and in 2013 the outlet at Llanfair Caereinion, in Mid Wales, will be relocated to a new site we have already acquired.

The division benefited from significant demand for solar energy products during the year and although we do not expect this to be repeated, we continue to explore community friendly renewable initiatives to reduce energy costs for our agricultural customers.

Youngs Animal Feeds, which manufactures and distributes equine products to specialist outlets within the UK, made a good contribution to results.

Just for Pets

The pet products division continues to develop and revenues for the year including new store openings increased by 9%. Like-for-like sales rose by 2.9%, assisted by increased promotional activity in the first half. As indicated in the half year report, margins were affected in the first half and the profitability of the division for the year was lower than the prior year although sales improved in the second half. We continue to focus on tight cost control and remain proactive with our marketing initiatives to promote continuing growth in footfall.

In line with our growth plans, we opened new Just for Pets outlets at Yardley, Birmingham in February 2012 and in Coventry in August 2012 and are considering further sites for 2013.

We were delighted to achieve an award from the Pet Care Trade Association for the third consecutive year, when our new store at Yardley was voted "Favourite pet care retailer" by its customers. The award reflects customer care at the store and we believe it typifies the level of service provided throughout the chain.

Joint ventures and Associate

Our joint ventures, comprising Bibby Agriculture, FertLink, Wynnstay Fuels, and Wyro, continued to perform in line with expectations over the year.

Staff

The year has been one of challenges and opportunities, and I would like to take this opportunity to thank all staff for their contribution to the record results we achieved this year. Our personnel continue to be a key factor in the ongoing expansion of the Group and I look forward to the Group's further success.

Outlook

There has been significant pressure on our farming customers during the season, as a result of adverse weather and rising input costs. While some farm gate prices have improved there is scope for further price rises to mitigate increasing costs.

The new financial year has started well, specialist retail sales are encouraging, feed demand has been strong and we expect a recovery in the demand for fertiliser as we move towards the usage period. With the poor grain harvest of 2012 and the poor planting conditions for the 2013 crop, we are not expecting volumes of traded grain to be buoyant. Nonetheless, our balanced business leaves us well placed to accommodate expected sector variation and the new financial year will also benefit from the growth initiatives we have put in place over recent years.

I remain confident about the forthcoming year for the Group and look forward to updating all stakeholders at our AGM in March.

Ken Greetham

Chief Executive

WYNNSTAY GROUP PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 October 2012

All of the above are derived from continuing operations.

WYNNSTAY GROUP PLC

CONSOLIDATED BALANCE SHEET

As at 31 October 2012

WYNNSTAY GROUP PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

As at 31 October 2012

WYNNSTAY GROUP PLC

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 October 2012

WYNNSTAY GROUP PLC

NOTES TO THE ACCOUNTS

1. The Company has taken advantage of the exemption, under 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 as adopted by the EU of the company was £2,577,000 (2010: £3,896,000).

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, Specialist 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 in the same geographical segment, namely the United Kingdom.

Continuing operations

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

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

Other - Miscellaneous operations not classified as agriculture or specialist 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 - (continued)

Primary reporting format - business segments

The segment results for the year ended 31 October 2012 are as follows:

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 £43,050 (2011: £46,750) paid to the Group's auditor in respect of the parent company.

The current year's fees relate entirely to the services provided by KPMG Audit Plc, and the prior year's fees entirely to the Group's previous auditors Whittingham Riddell LLP.

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

6. TAXATION

7. DIVIDENDS

Subsequent to the year end it has been recommended in the Directors' Report that a final dividend of 5.65p net per ordinary share (2011: 5.20p) be paid on 30 April 2013. Together with the interim dividend already paid on 31 October 2012, of 2.85 net per ordinary share (2011: 2.60p), this would result in a total dividend for the financial year of 8.50p net per ordinary share (2011: 7.80p).

8. 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.

9. BUSINESS COMBINATIONS

During the year the Group completed three acquisitions, one of which was structured as an asset purchase and two as share purchases.

The asset transaction was the purchase of goodwill and certain assets from Whitchurch Animal Health Limited on 4 September 2012, for a consideration of £227,613, consisting of goodwill of £120,001 and stock and certain assets of £107,612.

On 16 March 2012, the Group completed the acquisition of the entire share capital of C & M Transport Limited for a total consideration of £186,215. The trading activities and net tangible assets of £136,215 were immediately transferred to the parent company and, as the assets inclusive of net cash of £72,000 are no longer distinguishable, the goodwill arising on the acquisition of £50,000 included in the consideration has been expensed in the period.

On 31 May 2012 the Group completed the acquisition of the entire share capital of PSB (Country Supplies) Ltd, an independent agricultural inputs supplier based in Tetbury, Gloucestershire.

Details of the trade, asset values acquired and the consideration are given below, together with details, subject to the comments below, of revenues and operating profits generated in the period:

The acquisition of the business extends the Group's geographic trading area and farmer customer base, as well as adding an additional outlet to the Group's Country Store chain.

The directors have considered whether any specific intangibles can be identified within the values of Goodwill and do not consider any readily identifiable.

On 1 June 2012 the trade and assets of PSB (Country Supplies) Limited were hived up into Wynnstay Group Plc, and the respective results generated from the acquired business for the period to 31 October 2012 and included in the results of Wynnstay Group plc were, revenue of £1,227,000 and operating profit of £17,500.

Payment of the contingent consideration is dependent on future turnover and profitability.

The maximum additional possible consideration of £150,000 is in line with the fair value.

10. CASH AND CASH EQUIVALENTS AND BANK OVERDRAFTS

11. FINANCIAL LIABILITIES - BORROWINGS

Current

Non-current

11. FINANCIAL LIABILITIES - BORROWINGS (continued)

Bank loans and overdrafts include overdrafts totalling £4,999,271 (2011: £1,357,574) 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.

12. SHARE CAPITAL

During the year 90,786 shares (2011: 106,263) were issued with an aggregate nominal value of £22,697 (2011: £26,566) and were fully paid up for equivalent cash of £342,681 (2011: £368,057) to shareholders exercising their right to receive dividends under the Company's scrip dividend scheme.

A total of 16,678 (2011: Nil) shares with an aggregate nominal value of £4,170 (2011: £Nil) were issued for a cash value of £39,332 (2011: £Nil) to relevant holders exercising options in the Company and a further 20,204 shares (2011: Nil) were issued to other parties for a total cash value of £53,103 (2011: Nil).

13. POST BALANCE SHEET EVENT

On 9 November 2012 the Group completed the acquisition of the entire share capital of Banbury Farm and General Supplies Limited.

Details of the trade, estimated asset values acquired and the provisional price paid are given below, together with the previous trading performance of the Company as reported in the latest available unaudited accounts of the business.

The final consideration to be paid is subject to confirmation of net assets and the financial performance of the acquired business in the period from acquisition to 9 November 2014.

Revenue in the year to 30 September 2011, being the latest complete information available, was £1,397,000 and profit on ordinary activities before tax in that year was £195,000. The acquisition of the business extends the Group's geographic trading area and farmer customer base, as well as adding an additional outlet to the Group's country store chain.

In line with the sale and purchase agreement the maximum contingent consideration will be £200,000.

14. CASH GENERATED FROM/(USED IN) OPERATIONS

15. RESPONSIBILTY STATEMENT

The Directors below confirm to the best of their knowledge:

·; the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

·; the management report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

E G Owen

J J McCarthy

J C Kendrick

J E Davies

Lord Carlile CBE QC

B P Roberts

K R Greetham

D A T Evans

16. CONTENT OF THIS REPORT

The financial information set out above does not constitute the Group's statutory accounts for the years ended 31 October 2012 or 31 October 2011, but is derived from those accounts.

Statutory accounts for 2011 have been delivered to the Registrar of Companies. The auditor, Whittingham Riddell LLP, has reported on the 2011 accounts; the report (i) was unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

The statutory accounts for 2012 will be delivered to the Registrar of Companies following the Annual General Meeting. The auditor, KPMG Audit Plc, has reported on these accounts; their report is unqualified, does not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and; does not include a statement under either section 498(2) or (3) of the Companies Act 2006.

The Annual Report and full Financial Statements will be posted to shareholders during the week commencing 4 February 2013. 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. 

17. 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 19 March 2013 at 11.45am.