Wynnstay Regulatory News (WYN)

21 Jun 2006 07:01

Wynnstay Group PLC21 June 2006 Wynnstay Group plcWYN.L WYNNSTAY GROUP PLC ("Wynnstay" or "the Group") Interim Results for the six months ended 30 April 2006 Key Points • Turnover of £52.40m (2005: £55.02m) • Profits before tax of £1.31m (2005: £1.99m) • Basic earnings per share of 10p (2005: 16.84p) • Net assets of £24.21m (2005: £23.12m) • Interim dividend of 1.75p per share (2005: Nil) • Strategy of diversified business base provides robustness in challenging market Chairman, John Davies, commented, "In January, when we announced Wynnstay's final results, we reported that weexpected trading this year to be challenging, with the commencement of the EUSingle Farm Subsidy Payment and the impact of energy price rises... The Springmarket was disappointing, showing no real recovery in fertiliser sales, and aspredicted, results for the six months to 30 April 2006 reflect this. We expect some recovery within our core agricultural activity in our secondhalf, however, the impact of higher energy costs, particularly on the fertiliser business, will continue. The Group continues to look for acquisitions, continuing the strategy of actingas a consolidator within the agriculture supply industry, whilst at the same timedeveloping our joint venture activities which should guarantee a profit streamfrom outside the core business." Press enquiries: Wynnstay Group plc Bernard Harris, Managing Director T: 020 7448 1000 today Paul Roberts, Finance Director Thereafter: 01691 828512 Biddicks Katie Tzouliadis T: 020 7448 1000 WH Ireland Limited Robin Gwyn T: 0161 832 2174 CHAIRMAN'S STATEMENT In January, when we announced Wynnstay's final results, we reported that weexpected trading this year to be challenging, with the commencement of the EUSingle Farm Subsidy Payment and the impact of energy price rises. Additionally,we highlighted the importance of a recovery in fertiliser sales for the Group'sfinancial performance at the half year stage. Fertiliser sales had fallensignificantly as a result of higher prices and uncertainty created by the delayin the Single Farm Subsidy Payment. The Spring market was disappointing, showing no real recovery in fertilisersales, and as predicted, results for the six months to 30 April 2006 reflectthis. Turnover was £52.3m (2005: £55.017m) and profit before taxation reduced to£1.310m (2005: £1.992m), basic earnings per share were 10p compared to 16.84pfor the corresponding period last year. As of 30 April 2006, the Group's netassets stood at £24.21m (2005: £23.12m), an increase of 5%. This is the first trading period where we have seen the effect of C.A.P. reformon farmers' buying patterns and the delay in the payment of the Single FarmSubsidy Payment has been a major factor in influencing demand for many of ourproducts. However, we believe that the influence of the changes will become lessprominent, as farmers become accustomed to the new regime. DIVIDEND The Board is pleased to declare the Group's first interim dividend. 1.75p pershare will be paid on 31 October 2006 to shareholders on the register at 29September 2006. OPERATIONS Feed DivisionFeed volumes overall improved by 5% against a contracted market. However,margins were affected by higher energy and distribution costs which we were notable to recover fully from customers. Due to the prolonged winter weather, sheep feed sales were particularly strong,improving by 25% to a new record level. There was also a strong performance fromdairy feed and blended feed sales which again showed strong growth. Considerable work took place during the period on the Bibby Feed business, thejoint venture between the Group and Carrs Milling Industries. Somerationalisation of the business was necessary. The Bibby business is tradingprofitably and has made excellent progress in re-organising its activities.Further benefits are anticipated from this new venture going forward. The raw material trading department enjoyed a substantial increase inprofitability and continues to be an important division within the feeddivision, as it also acts as a procurer for raw materials for our other feedmanufacture and blending activities. Work has commenced on the new feed blending facility based at Rhosfawr, NorthWales, and the plant is anticipated to be in operation by late summer. The newplant will bring considerable cost savings and benefits for manufacturing anddistributing feed in that area. Arable DivisionHigher prices and the well documented changes in the regime of E. U. supportpayments to farmers adversely affected fertiliser sales and results from thisdivision reflect this. There has been some improvement in fertiliser demandduring May and early June, however higher prices continue to impact sales. Cereal and herbage seed sales were largely maintained with the prospect of ahigher level of plantings in the autumn. Wheat prices are looking to be firmerand this is leading to a more optimistic attitude amongst arable farmers. Inaddition, new markets are opening up for both wheat and oil seed rape in theproduction of bio-fuels, which will grow substantially in future years. Shropshire Grain handled a slightly lower volume of product during the periodand continues to look to exploit quality markets for combinable crops. Stores DivisionThe Stores Division, which caters for both farmers and the wider ruralcommunity, performed well during the period, with a considerably improvedperformance from the eight stores which we acquired from Eifionydd Farmers sometwo years ago. Overall margin improvement continues and we are expanding ourrange of products. We continue to promote our retail products through directmail marketing and the launch of our E-Commerce site in January has proved verysuccessful. Sales of pet products increased by 13% and animal healthcare sales rose by 18%,helped partially by the Quins acquisition which took place in December 2005.Sales of household and hardware items also grew strongly due to better ranging,purchasing and presentation. Outdoor clothing sales grew 11%, aided by animproved offering and enhanced marketing. In December 2005, we opened a major new store at Newtown, Powys. This hascontributed to the results for the first time and I am pleased to report it istrading profitably and on budget. Our programme of store improvements is making very good progress. We completed amajor refit at Oswestry, Shropshire, and will be upgrading our stores at Gaerwenand Rhosfawr in North Wales over the second half of the year. We continue tolook for opportunities to expand this division and are currently evaluating anumber of sites. FoxmoorFoxmoor increased its sales substantially over the half year and is targeting asignificant uplift for the full year. The business continues to gain newaccounts throughout the United Kingdom and a new promotion in conjunction withMatt James (Channel 4's City Gardener) has proved to be successful. This hasfocused on a specialist range of architectural, drought-resistant plants, agrowing sector of the market. A new site has been acquired in Devon to increasecapacity by a further 25% and advanced sales for 2007 are already well ahead ofexpectation. Production is running at full capacity and we are looking forsubstantial ongoing growth from this business in the future. JOINT VENTURES AND ASSOCIATE COMPANIES Joint Ventures Wyro Developments LtdWork is well advanced on a second site at Newtown, Powys, and reservationsreceived at the time of writing are on budget. The small former company sitedevelopment in North Wales has been completed and largely sold, whilst work hascommenced on two small developments near Welshpool, Powys, attracting keeninterest. We continue to target further sites to add to our land bank and areclose to agreeing the acquisition of two substantial sites, which willaccommodate a total of 100 units. Youngs Animal FeedsYoungs Animal Feeds acquired our partner's business, Dollin & Morris Ltd, inDecember and has worked hard during the period to integrate the two businesses,including the installation of an improved I.T. system. We have increased theoutput of our new Molichop Equine Feed plant and expect considerable costsavings to accrue when we combine production from our Congleton site in Cheshireonto the one site. We have recently commissioned a new plant to pack wild birdseed, a fast growing sector of the leisure feeds market, for sales both in ourstores and also to our existing customer base of pet stores and garden centres. Welsh Feed ProducersThe Carmarthen feed plant had a record winter in terms of production for ourexpanding customer base. Securing of the Bibby Feed tonnage for the plant wasparticularly beneficial and ensured that the mill was running to full capacity.We have plans for further capital expenditure to improve efficiency. Associate Company Wynnstay FuelsOur associate fuel business enjoyed its most successful period, helped by thecolder weather and continuing strong sales growth in its newest operation inNorth Wales. A new state of the art fuel facility has been opened in Rhosfawr,North Wales, and we have plans to expand the business further, increasingdistribution into Anglesey and Mid Wales. OUTLOOK We believe the current volatile period in agriculture will pass, as farmersadjust to the new Single Farm Subsidy Payment and there are signs that livestockprices are improving, helped by the lifting of the ban on the export of bothlivestock and meat products. This has already improved prices substantiallywhich in turn will feed back to the supply industry. There is increasing concerns with regard to the issue of "food miles" and theeffects of the long supply chain for imported food products that could besourced in the UK. Major retailers are becoming more sensitive to these issuesand this is generally good news for British Agriculture. We expect some recovery within our core agricultural activity in our secondhalf, however, the impact of higher energy costs, particularly on the fertiliser business, will continue. We will meet the challenges in a way that ensures we can continue to operate as a low cost provider. The Group continues to look for acquisitions, continuing the strategy of actingas a consolidator within the agriculture supply industry, whilst at the same timedeveloping our joint venture activities which should guarantee a profit streamfrom outside the core business. John DaviesChairman GROUP PROFIT AND LOSS ACCOUNT FOR THE SIX MONTHS ENDED 30TH APRIL 2006 Unaudited Unaudited Audited six months six months year ended ended ended 30th 30th April 31st April 2005 October 2006 2005 Notes £'000 £'000 £'000 Turnover 52,375 55,017 100,806 Cost of sales (42,140) (44,464) (82,482) Gross Profit 10,235 10,553 18,324 Selling and distribution costs (8,218) (7,868) (15,150)Administrative expenses (594) (597) (918) Operating profit 1,423 2,088 2,256- Share of profits in joint 3 ventures and associates 0 0 521- Profit from sale of fixed assets & Investment Income 0 0 184 Profit on Ordinary activities before Interest 1,423 2,088 2,961- Net Interest Payable (116) (96) (92) Profit on Ordinary activities before taxation 1,307 1,992 2,869 Tax on profit on ordinary 4 activities (313) (530) (874) Profit on ordinary activities after taxation 994 1,462 1,995 GROUP BALANCE SHEET AS AT 30TH APRIL 2006 Unaudited Unaudited Audited as at as at as at 30th April 30th April 31st October 2006 2005 2005 (restated) Note £'000 £'000 £'000 Fixed assets Intangible 6 2,576 3,020 2,501Tangible 8,943 8,575 8,769Investments 2,975 1,655 2,763 14,494 13,250 14,033Current assetsStocks 9,425 8,082 8,284Debtors 24,005 21,883 19,158Cash at bank and in hand 6 6 1,646 33,436 29,971 29,088 Creditors: amounts falling due within one year (21,101) (19,655) (18,716) Net current assets 12,335 10,316 10,372 Total assets less current liabilities 26,829 23,566 24,405 Creditors: amounts falling due after more than one year (2,242) (249) (345) Provisions for liabilities andchargesDeferred taxation (189) (189) (189)Other provisions 0 0 (250) Net assets 24,398 23,128 23,621 Capital and reservesCalled up share capital 6 2,560 2,185 2,438Share premium account 5,195 2,615 4,253Profit and loss reserve 7 12,683 11,662 12,195General reserve 1,582 1,582 1,582Loanstock redemption reserve 6 2,378 5,084 3,153 Shareholders' funds 24,398 23,128 23,621 GROUP CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 30TH APRIL 2006 Unaudited Unaudited Audited six months six months year ended ended ended 30th April 30th April 31st October 2006 2005 2005 Note £'000 £'000 £'000 Cash flow from operating activities 8 (5,381) (3,323) 3,483 Returns on investments and servicing of finance (116) (96) (92) Taxation (240) (292) (719) Net Capital expenditure and financial investment (1,110) (375) (1,294) Equity dividends paid (508) (391) (391) Cash inflow before use of liquid resources and financing (7,355) (4,477) 987Financing - Issue of shares 289 166 523Increase / (Decrease) in debt 2,610 (273) (739) (Decrease) / Increase in cash in (4,456) (4,584) 771the period Reconciliation of net cash flow tomovement in net debt £'000 £'000 £'000 (Decrease) / Increase in cash in the period (4,456) (4,584) 771 Repayment of debt & lease financing 423 158 739 Change in net debt resulting from (4,033) (4,426) 1,510cash flows New finance lease and debt (3,033) (90) (371) Movement in net debt in the period (7,066) (4,516) 1,139 Opening net debt (488) (1,627) (1,627) Closing net debt (7,554) (6,143) (488) NOTES TO THE INTERIM FINANCIAL INFORMATION 1. Basis of preparation. The Interim Report was approved by the Board of Directors on 20th June 2006. The financial information contained in this Interim Report has been prepared onthe basis of the accounting policies set out in the Groups' audited accounts forthe year ended 31st October 2005, as adjusted for the change in accounting fordividends as explained in note 2 below. The financial information for the six months ended 30th April 2006 and for thesix months ended 30th April 2005 is unaudited. The financial information for the Group set out above does not constitute"statutory accounts" within the meaning of Section 240 of the Companies Act1985. The information for the year ended 31st October 2005 has been extractedfrom the statutory accounts of Wynnstay Group plc for that year which receivedan unqualified audit report and have been delivered to the Registrar ofCompanies. 2. Dividend Reporting. FRS 21 requires a change of accounting policy in respect of the accrual ofproposed dividends. Dividends are now included in the profit and loss accountreserve in the year in which the dividend is approved for payment. The full yearaccounts for the year ended 31 October 2005 have been restated via a prior yearadjustment to reflect this change in accounting policy, no adjustment isrequired for the interim period to 30 April 2005. Dividends paid or proposed are no longer to be shown as part of the profit andloss account statement. In accordance with the announcement made in January 2006, the Board has declaredan Interim Dividend of 1.75p per share, which will be paid on the 31st October2006 to shareholders on the register at the close of business on the 29thSeptember. A scrip dividend alternative will be available. 3. Consolidation of share of results of profits in joint ventures & associates. As the Group has a policy of using audited accounts for the consolidation of itsshare of the profits of joint venture & associate activities, no suchconsolidation has occurred during the six months to April 2006. Relevant resultswill be accounted for during the second half of the financial year. 4. Taxation. The tax charge for the six months to 30th April 2006 is based on anapportionment of the estimated tax charge for the full year. 5. Earnings per Share. Earnings per share have been calculated based on the profit on ordinaryactivities after taxation of £993,605 (£1,461,811) and the weighted averagenumber of shares in issue of 9,931,675 (8,679,913). Diluted earnings per shareare based on the aggregate weighted average number of shares and all potentialshares, adjusted for the proposed issue price of 12,016,324 (12,115,333). Fullydiluted earnings per share uses the weighted average number of shares plus allpotential shares without adjusting for the proposed issue price of 12,868,595(12,903,179). 6. Share capital and Convertible Loanstock. During the period a total of 491,950 (59,673) shares were issued with anaggregate nominal value of £122,988 (£14,918) fully paid up for equivalent cashof £1,064,508 (£166,189). Included in these issues were 73,943 (59,673) sharesallotted to shareholders exercising their rights to receive dividends under theCompany's scrip dividend scheme and 410,132 (Nil) allotted to holders ofConvertible Loanstock in the Company. As at the 30th April 2006, there remains atotal of £314,571 of Convertible Loanstock in issue, with each £1 of suchLoanstock being convertible at the option of the holder into four £0.25 fullypaid ordinary shares in the Company prior to the 31st August 2006. After thisdate the Loanstock is redeemable at par at the option of the Company. Interestis payable to the holders of the Loanstock at the rate of 4% per annum.Subsequent to the balance sheet date a further £105,277 of Loanstock has beenconverted resulting in a further 421,108 shares being allotted. At the date ofthis report a total of 10,663,007shares are in issue. 7. Prior year adjustment. As explained in note 2, FRS 21 requires a change in accounting policyin respect of the accrual of proposed dividends. These are now nolonger to be accrued until they have been approved by the shareholdersor paid. As a consequence it is necessary to restate the comparative figuresfor creditors and profit and loss account reserves as at 31 October2005. Audited year ended 31st October 2005 (restated) £'000Creditors - as previously shown 19,223Prior year adjustment (507) ------------As restated 18,716 ============ Profit and loss account reserve - as 11,688previously shownPrior year adjustment 507 ------------As restated 12,195 ============ 8. Reconciliation of operating profit to operating cashflows. Unaudited Unaudited as Audited as as at at at 30th April 30th April 31st 2006 2005 October 2005 £'000s £'000s £'000sOperating profit 1,423 2,088 2,777Depreciation of tangible fixed assets 529 510 1,047Amortisation of intangible fixed assets 125 114 236Group share of associates and joint ventures operating profit 0 0 (521)Loans made to joint venture (1,233) 100 400Movement in stock (1,141) (64) (266)Movement in debtors (3,614) (4,773) (2,348)Movement in creditors (1,470) (1,298) 2,158 ------------------------------------Net cash inflow from operating activities (5,381) (3,323) 3,483 ==================================== 9. International Financial Reporting Standards (IFRS). The London Stock Exchange has announced the requirement for AIM listed companiesto report financial results using IFRS from 2007, which means that Wynnstay willbe obliged to report under this format in its 2007/08 financial year. Thecompany has reviewed the implications of this change and will seek to implementthe new rules at the earliest practical opportunity. To illustrate the likelymajor changes, a reconciliation for the current interim results is shown belowwhich also provides an indication of the presentational format likely to beadopted by the Company. RECONCILIATION BETWEEN UK GAAP REPORTING & IFRS PROFIT AND LOSS ACCOUNT Unaudited results for the six months ended 30th April 2006 UK GAAP Effect of IFRS transition to IFRS £'000 £'000 £'000 Revenue from Cont' Activities 52,375 52,375 Cost of sales (42,140) (42,140) Gross Profit 10,235 10,235 Selling and distribution costs (7,622) (7,622)Administrative expenses (536) (i) (20) (556)Depreciation (529) (529)Amortisation of Intangible Assets (125) (ii) 125 0 Operating profit 1,423 105 1,528 Share of profits in joint ventures 0 0Net Interest Payable (116) (116) Profit before taxation 1,307 105 1,412 Tax on profit (313) (iii) (30) (343) Profit after taxation 994 75 1,069 Earnings per share 10.00p 0.76p 10.76p- Headline- Diluted 8.27p 0.62p 8.89p (i) Being charge of share based remuneration IFRS 2(ii) Add back of amortisation of goodwill IAS 38(iii) Additional deferred tax relating to goodwill writing down allowance IAS 12 BALANCE SHEET Unaudited results for the six months ended 30th April 2006 UK GAAP Effect of IFRS transition to IFRS £'000 £'000 £'000Non Current Assets :Goodwill 2,576 (ii) 125 2,701Property, plant & equipment 8,943 8,943Investments - equity method 2,975 2,975 --------------------------------------------------------- 14,494 125 14,619 ---------------------------------------------------------Current Assets :Inventories 9,425 9,425Trade receivables 21,522 21,522Financial assets 2,483 2,483Cash 6 6 --------------------------------------------------------- 33,436 0 33,436 ---------------------------------------------------------Current Liabilities :Financial liabilities - borrowings (5,310) (5,310)Trade payables (15,197) (i) (iv) (20) (15,217)Current tax liabilities (594) (594) --------------------------------------------------------- (21,101) (20) (21,121) --------------------------------------------------------- Non Current Liabilities :Financial liabilities - borrowings (2,242) (2,242)Deferred tax liabilities (189) (iii) (30) (219) -------------------------------------------------------- (2,431) (30) (2,461) --------------------------------------------------------Net Assets 24,398 75 24,473 ======================================================== Shareholders EquityOrdinary shares 2,560 2,560Share Premium 5,195 5,195Retained earnings 12,683 75 12,758Other reserves 1,582 1,582Loanstock redemption 2,378 2,378 --------------------------------------------------------Total Equity 24,398 75 24,473 ======================================================== This information is provided by RNS The company news service from the London Stock Exchange