Wynnstay Regulatory News (WYN)

29 Jun 2005 07:00

Wynnstay Group PLC29 June 2005 WYNNSTAY GROUP PLC INTERIM RESULTS for the six months ended 30 April 2005 Based in Wales, Wynnstay manufactures and supplies agricultural products and services to farmers and country dwellers. • Profit before tax up 9% to £1.99 million (2004: £1.83 million) • Turnover of £55.01 million (2004: £58.52 million) • Basic earnings per share increased to 16.84p (2004: 16.70p) • Net assets rose 20% to £23.13 million (2004: £19.25 million) • Good performances from three core divisions - Feeds, Arable and Stores - improved margins at Feeds Division despite small fall in volumes - Arable Division benefiting from new seed warehousing facility - Stores refurbishment programme underway and construction of new store at Newtown, Powys started • New division, Foxmoor, saw successful first half with all sites runningat full capacity • Outlook remains positive with good growth opportunities John Davies, Chairman of Wynnstay Group Plc, commented, "I am pleased to report favourable results for the six months to 30 April 2005.Despite challenging trading conditions, including mild weather and changes infarmers' buying patterns as a result of Common Agricultural Policy Reform, weachieved our budget and gained market share in most business sectors. Since the start of the second half, we have seen signs of improving demandacross some sectors and we continue to work for productivity gains and areduction in the cost base of the business. Although our core businessescontinue to face challenges, particularly by the well-documented changes to theC.A.P., we firmly believe the effects of the changes provide us with growthopportunities. In particular, we are well placed to gain further market sharefrom rationalisation." We expect to make steady progress over the second half of the year and I lookforward to updating shareholders in due course." Press enquiries: Wynnstay Group plc Bernard Harris, Managing Director T: 020 7448 1000 today Paul Roberts, Finance Director Thereafter: 01691 828512 Biddicks Katie Tzouliadis T: 020 7448 1000 WYNNSTAY GROUP PLC CHAIRMANS STATEMENT FOR THE HALF YEAR REPORT INTRODUCTION I am pleased to report favourable results for the first six months of thefinancial year. This was despite challenging conditions, principally the mildweather and changes in farmers' buying patterns, brought about by CommonAgricultural Policy ("C.A.P") reform, which led to a reduction in demand in somesectors. We also experienced higher fuel and power costs which are taking timeto pass on to customers. Nevertheless, we achieved our budget and gained marketshare in most business sectors. Turnover for the six months to the 30 April 2005 was £55.01 million (2004:£58.52 million). The 6% reduction on last year's result reflected deflationaryfactors, particularly in the feeds business and our decision to relinquishbusiness which did not offer us appropriate returns. Despite the lower turnover,profit before tax improved by 9% to £1.99 million (2004: £1.83 million). Basicearnings per share were 16.84p compared to 16.70p for the same period last year.As at 30 April 2005, the Group's net assets stood at £23.13 million (2004:£19.25 million), an increase of 20%. During the first half, we focused on further integrating the Eifionydd business,acquired some 18 months ago, and improving its contribution to the Group. Wealso completed the installation of our new Group I.T. system, which now is fullyfunctional. Rationalisation of the agricultural supply industry is gathering pace invirtually every sector and this will bring further opportunities to the Group.In addition, we view the reductions in the national feed capacity, announcedrecently as a result of takeovers and mergers, as most welcome. DIVIDEND In line with our existing dividend policy, the Board does not intend to pay aninterim dividend but will continue with its policy of improving the terms forshareholders when the year end results are known. OPERATIONS Feed Division (Animal nutrition products and raw materials) Despite a small fall in volumes, improved margins and more stable pricing due tobetter harvest conditions contributed to a good overall performance for thedivision. In addition, the cooler weather conditions, which led to a lateSpring, have helped to improve sales at the beginning of the third quarter, inMay and early June. The reduction in volume was mainly accounted for by reduced demand from the beeffeed sector, which in turn reflected changes in support payments for beeffarmers from the E.U. By contrast, dairy feed volumes improved by 11% due to ourmore aggressive marketing stance and sheep feeds sales were marginally aheaddespite mild weather conditions and an abundance of home-produced forage. Wecontinue to make progress in the poultry sector, helped by the expansion of ourjoint initiative with a group of egg producers who produce unique niche eggs formajor multiple retailers. The raw material trading business enjoyed another good period, with thevolatility in raw material markets being well managed. This business now managesthe material purchasing function for the Carmarthen Mill based in South Wales aswell as purchasing at our flagship feeds plant at Llansantffraid and at ourother various feed blending operations. We continue to use third party manufacturers to good effect, particularly in theSouth Midlands. The relationships we have developed allow us to increase marketshare in areas outside our established base. The capital expenditure programme at Llansantffraid Mill to improve efficiencyand product quality continues. Arable Division (Seeds, fertilizer, agro-chemicals and grain trading) Cereal seeds sales improved over the same period last year in what proved to bea long planting season as a result of the inclement spring weather, while wemaintained maize seed sales against a fall in the market as a whole. Our newseed warehousing facility helped us to improve efficiency and reduce the costsof handling during the period. The buying patterns for fertiliser proved to be challenging with farmers'shifting purchasing patterns to 'just in time'. In addition, the national marketcontracted during the first half by 10%. Both these changes reflect the impactof the EU's Common Agricultural Policy reforms. While our reduced sales offertiliser mirrored the contracted market as a whole nevertheless, we gainedmarket share. Demand after the half year end has improved as farmers have comeback into the market to replenish their depleted stocks and we have experiencedbetter sales in May and early June. Agro-chemicals met with a reduced early demand due to the later Spring andcooler weather and we are working hard to make up for lost ground. Our grain trading arm, Shropshire Grain, improved volume by about 10%, albeitwith significantly lower selling prices. This was due to a larger and morevariable quality crop being available. Shropshire Grain continues to sell intoquality human food based markets, particularly milling wheat, and is expandingits purchasing base. Stores Division (Retail stores in Wales and Border Counties) The Stores Division performed well during the period. The benefits of theintegration of the eight Eifionydd Farmers stores are coming through and we havecontinued to concentrate on improving purchasing and management of the supplychain. Overall margins improved during the half year and we are pleased to seeour focus on margin enhancement at the Eifionydd stores is bearing fruit.However, there is still some way to go to bring Eifionydd margins up to thelevel of the existing core business. There was continuing strong growth in equine and pet products. In addition toimproving pet food sales, we are placing more emphasis on driving sales of petaccessories. Clothing sales continue to grow, helped by the launch of a new,upmarket range of country clothing. In the agricultural range, sales ofhardware, including fencing and electrical goods also grew strongly. This washelped by better ranging, display and purchasing. Work has commenced on a new store at Newtown, Powys, which will be completed inSeptember 2005, and will result in a totally new shopping experience forcustomers in the area. In the first half, we also began our stores upgradeprogramme and extensive renovation and re-fitting is ongoing at the shopsacquired from Eifionydd Farmers, with resulting improvement in sales. During thefirst half, we were pleased to receive planning permission for a new store atour Headquarters site at Llansantffraid and we intend to commence building workin the Autumn. Foxmoor We acquired ownership of Foxmoor, which produces pot plants and shrubs, inNovember 2004, after its re-structuring. The business has enjoyed a successfulfirst half, with strong demand from multiple retailers and garden centres. I ampleased to report that it continues to gain new accounts from most sectors ofthe horticultural retail industry. Reflecting the strong order book, all sitesare running at full capacity and we are carefully exploring furtheropportunities to expand production. Joint Ventures and Associate Companies Joint Ventures Wyro Developments Ltd Our property development joint venture has sold Phase 1 of the Abermuledevelopment near Newtown, Powys at full asking prices. Work on the remainingphases continues. In addition, construction work on a small company-owned sitein North Wales to build small number of dwellings has commenced. This should becompleted during the late Autumn. We have also received planning permission fora small development of executive homes near to Welshpool, Powys. We continue tolook for opportunities to add to our land bank and we believe our policy ofquality construction, together with competitive pricing, will continue to enableus to sell properties on budget. Youngs Animal Feeds Ltd Our joint venture equine and pet feed distribution business has enjoyed anothersuccessful year, improving sales of both pet and equine products. Results weresomewhat affected by the costs associated with the commissioning of the newMolichop plant, which is now coming on stream. The factory is the mosttechnically advanced of its type in the United Kingdom and specialises in theproduction of high fibre feeds, a fast growing sector of the market and to datewe have gained substantial new business for the plant. We are looking for further opportunities to grow Youngs, both by acquisition andorganic growth. Youngs operates in an expanding market and the businesscontinues to provide significant supply chain benefits to the Group's stores. Welsh Feed Producers The business, which manufactures ruminant animal feeds, enjoyed a successfulwinter feeding season, with exceptional product quality and manufacturingproductivity. The mill is well placed to supply the South Wales Milk Field whichis set to expand as a result of changes associated with the reform of the CommonAgricultural Policy. Further productivity gains have been targeted, both inmanufacturing and sales, and we continue to invest in the plant, when we candemonstrate economic benefit. Associate Company Wynnstay Fuels Our associate fuels business enjoyed a successful period, with continuing strongsales growth from its recently opened sales operation in North Wales. Plans areadvanced to construct new storage facilities on a group site in North West Walesto help meet the current strong demand. OUTLOOK Since the start of the second half, we have seen signs of improving demandacross some sectors and we continue to work for productivity gains and areduction in the cost base of the business. Although our core businessescontinue to face challenges, particularly by the well-documented changes to theC.A.P., we firmly believe the effects of the changes provide us with growthopportunities. In particular, we are well placed to gain further market sharefrom rationalisation. Our policy of diversification, with our joint ventures, provides us with furtherbenefits and we are pleased with the success at Wyro Developments while the newMolichop animal feeds factory at Youngs will contribute substantially during thenext financial year. The integration of the Foxmoor pot plants and shrubsbusiness has gone well and the second half should see this new division furtherdevelop as it responds to the strong demand from its growing customer base. May I thank all shareholders for their ongoing support of the business, and alsocustomers who I hope are beginning to see the benefits of our substantialinvestment in I.T. systems. I would also like to thank all staff for theircontinuing commitment to the Group. We expect to make steady progress over the second half of the year and I lookforward to updating shareholders in due course. J E DaviesChairman GROUP PROFIT AND LOSS ACCOUNTFor the six months ended 30 April 2005 Unaudited Unaudited Audited Six months ended Six months ended Year ended 30th April 2005 30th April 2004 31st October 2004 Notes £'000 £'000 £'000 Turnover 55,017 58,515 103,430 Cost of sales (44,464) (48,628) (85,465) -------- -------- --------Gross profit 10,553 9,887 17,965 Selling and distribution costs (7,868) (7,483) (14,660)Administrative expenses (597) (494) (889) -------- -------- --------Operating profit 2,088 1,910 2,416- share of profits in joint ventures and associates 3 0 0 167- profit from sale offixed assets & investment income 0 0 198 -------- -------- --------Profit on ordinary activities beforeinterest 2,088 1,910 2,781- net interest payable (96) (79) (141) -------- -------- --------Profit on ordinary activities beforetaxation 1,992 1,831 2,640 Tax on profit on ordinary activities 4 (530) (530) (780) -------- --------- ---------Profit on ordinary activities after taxation 1,462 1,301 1,860 Dividends 0 0 (391) -------- --------- ---------Profit on ordinary activities after tax 1,462 1,301 1,469 ======== ========= =========Earnings per share - headline 5 16.84p 16.70p 22.78p- fully iluted 11.33p 11.07p 15.58p GROUP BALANCE SHEETAs at 30 April 2005 Unaudited Unaudited Audited As at As at As at 30th April 2005 30th April 2004 31st October 2004 Note £'000 £'000 £'000 Fixed assetsIntangible 6 3,020 2,296 3,134Tangible 8,575 8,335 8,694Investments 1,655 1,665 1,651 -------- -------- -------- 13,250 12,296 13,479 -------- -------- --------Current assetsStocks 8,082 7,890 8,018Debtors 21,883 20,275 17,210Cash at bank andin hand 6 4 1,275 -------- -------- -------- 29,971 28,169 26,503 -------- -------- -------- Creditors: amountsfalling due withinone year (19,655) (20,525) (17,856) -------- -------- --------Net current assets 10,316 7,644 8,647 -------- -------- --------Total assetsless current liabilities 23,566 19,940 22,126 Creditors: amountsfalling due aftermore than one year (249) (520) (437) Provisions forliabilities andcharges (189) (167) (189) -------- -------- --------Net assets 23,128 19,253 21,500 ======== ======== ======== Capital and reservesCalled up sharecapital 7 2,185 1,973 2,170Share premiumaccount 2,615 1,574 2,464Reserves 13,244 11,614 11,782Loan Stockconversion reserve 6 5,084 4,092 5,084 -------- -------- --------Shareholders' funds 23,128 19,253 21,500 ======== ======== ======== GROUP CASH FLOW STATEMENTFor the six months ended 30 April 2005 Unaudited Unaudited Audited Six months ended Six months ended Year ended 30th April 2005 30th April 2004 31st October 2004 Note £'000 £'000 £'000 Cash flow fromoperating activities 8 (3,323) (4,894) 128 Returns on investments and servicing of finance (96) (79) (114) Taxation (292) (149) (548) Net capitalexpenditure and financial investment (375) (405) (546) Acquisition and disposal 0 (135) (135) Equity dividends paid (391) (331) (331) -------- -------- -------- -------- -------- --------Cash inflow before useof liquid resources and financing (4,477) (5,993) (1,546) Financing - issue of shares 166 172 1,258(Decrease) / Increase in debt (273) (157) (453) -------- -------- --------(Decrease) /Increase in cash in the period (4,584) (5,978) (741) ======== ======== ======== Reconciliation of net cash flow to movement in net debt £'000 £'000 £'000 (Decrease) /Increase in cashin the period (4,584) (5,978) (741) Repayment of lease financing 158 157 453 ------- -------- -------- ------- -------- --------Change in net debtresulting from cash flows (4,426) (5,821) (288) New finance lease and debt (90) (104) (451) Movement in netdebt in the period (4,516) (5,925) (739) Opening net debt (1,627) (888) (888) -------- -------- --------Closing net debt (6,143) (6,813) (1,627) ======== ======== ======== NOTES TO THE INTERIM FINANCIAL INFORMATION 1. Basis of preparation.The Interim Report was approved by the Board of Directors on 28th June 2005. The financial information contained in this Interim Report has been prepared onthe basis of the accounting policies set out in the Groups' audited accounts forthe year ended 31st October 2004. The financial information for the six monthsended 30th April 2005 and for the six months ended 30th April 2004 is unaudited. The financial information for the Group set out above does not constitute"statutory accounts" within the meaning of Section 240 of the Companies Act1985. The information for the year ended 31st October 2004 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. International Financial Reporting Standards. (IFRS) The London Stock Exchange has announced the requirement for AIM listed companiesto report financial results using IFRS from 2007. The Company is currentlyreviewing the implications of this change in reporting standards and will seekto implement the new rules at the earliest practicle opportunity.3. Consolidation of share of results of profits in joint ventures & associates.As the Group has a policy of using audited accounts for the consolidation of itsshare of the profits of joint venture & associate activities, no suchconsolidation has occured during the six months to April 2005. 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 2005 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 £1,461,811 (£1,300,630) and the weighted averagenumber of shares in issue adjusted for the share sub-division, of 8,679,913(7,790,532). Fully diluted earnings per share are based on the total of sharesin issue, staff options and shares anticipated to be issued following conversionof the convertible loanstock of 12,903,179 (11,751,920). 6. Intangible assets Intangible assets represent purchased Goodwill which is being amortised over theestimated life of each transaction. In accordance with FRS 7, a revised fairvalue assessment has been made as at the 30th April 2005 of the purchaseconsideration for the Eifionydd Farmers transaction. This re-assessment 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 has created an additional goodwill asset of £2,644,000, which has beenamortised in this period by £66,100. An equivalent adjustment has been made tothe loanstock redemption reserve. 7. Share capital At the Company's annual general meeting on 25th March 2004, it was resolved tosub-divide the 10,000,000 issued and unissued ordinary shares of £1 each in thecapital of the Company into 40,000,000 ordinary shares of £0.25 each rankingpari passu in all respects with each other. 8. Reconciliation of operating profit to operating cashflows Unaudited Unaudited Audited Six months ended Six months ended Year ended 30th April 2005 30th April 2004 31st October 2004 £'000s £'000s £'000s Operating profit 2,088 1,910 2,583Depreciation oftangible fixed assets 510 485 1,028 Amortisation ofintangible fixed assets 114 102 249 Group share of associatesand joint ventures operating profit 0 0 (167) Loans made tojoint venture 100 (1,957) (1,650) Movement in stock (64) (662) (790) Movement in debtors (4,773) (4,088) (1,331) Movement in creditors (1,298) (684) 206 --------- -------- --------- --------- -------- ---------Net cash inflowfrom operating activities (3,323) (4,894) 128 ========= ======== ========= This information is provided by RNS The company news service from the London Stock Exchange