Wynnstay Regulatory News (WYN)

28 June 2022

AIM: WYN

Wynnstay Group Plc

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

Interim Results for the Six Months ended 30 April 2022

Record interim results driven by strong sector backdrop and significant one-off gains

KEY POINTS

Financial

Operational

Outlook

*Underlying pre-tax profit is a non-GAAP (generally accepted accounting principles) measure and is not intended as a substitute for GAAP measures and may not be calculated in the same way as those used by other companies. Refer to Note 6 for an explanation on how this measure has been calculated and the reasons for its use.

Gareth Davies, Chief Executive of Wynnstay Group plc, commented:

"These record interim results have been underpinned by a favourable sector backdrop, with strong farmgate prices across most sectors and positive farmer sentiment, as well as significant one-off gains in our fertiliser blending activity.

"The acquisition of Humphrey Feeds and Pullets is exciting. It significantly extends our geographic reach and opens up new growth opportunities.

"While there are still challenges with cost inflation and supply chain pressures, sector sentiment remains strong, and we are confident about achieving our growth goals for the full year."

Enquiries:

CHAIRMAN'S STATEMENT

INTRODUCTION

We are pleased to report record interim results, with underlying pre-tax profit up by 85% to £10.21m* (2021: £5.53m) and revenue up 34% to £335.66m (2021: £249.71m). Reported pre-tax profit increased by 78% to £9.56m (2021: £5.36m).

These excellent results are ahead of our original expectations, and reflect a strong trading backdrop, supported by buoyant farmgate prices across most categories, which boosted farmer sentiment and farm investment. There were also unexpected one-off gains at our fertiliser blending activity at Glasson. This was created by sharply rising fertiliser prices as a result of the significant increases in the world price of natural gas, which is used in the production of ammonium nitrate fertiliser. Fertiliser prices have fallen slightly from their high point in March, and we do not anticipate these one-off gains to be repeated.

There was widespread inflationary pressure in the period, which was exacerbated by the Russian invasion of Ukraine in late February and the ensuing sanctions imposed on Russia. Certain energy and soft commodity prices reached levels not seen globally for several decades. In the UK, wheat and fertiliser prices reached record levels in March. While this dampened some demand, the effect of inflation on Group revenues has been significant.

Operational conditions in the period continued to be affected by the Coronavirus pandemic, in particular the high infection rates associated with the Omicron variant and the inconsistency of supply of certain products. Thanks to the efforts of our teams and wide sourcing network, this did not affect customer service levels or product provision. The working environment has now largely normalised following the lifting of Government restrictions, and we remain ready to react to any new guidance.

A major highlight in the first half was the acquisition in March 2022 of Humphrey Feeds Ltd, a manufacturer and supplier of poultry feed, and Humphrey Pullets Ltd, which supplies point-of-lay pullets ("Humphrey"). Both businesses are based in Hampshire and mainly supply farmers in the South of England, as well the Midlands and South Wales. The provisional assessed consideration for the acquisition was £13.2 million, with an initial £9.5 million paid in cash at completion. This highly complementary acquisition is in line with the Board's strategic plans to expand the Group's poultry feed manufacturing capacity for the free-range egg sector, a growing market, and extend the Group's geographic trading area. As previously reported, we expect the Humphrey acquisition to enhance earnings this financial year. In order to fund the acquisition, the Company entered into a new £12.5m revolving credit facility. Further details about the business and our plans to develop the opportunities it brings are provided further on in the report. We are delighted to welcome our new colleagues and customers to the Group, and are pleased to report that the business is bedding in well, as expected. 

These trading results continue to demonstrate the benefits of our balanced business model, supplying products to both livestock and arable farming enterprises. Our investment programmes across the Group are progressing, with substantial projects under way in our feed and seed operations. The trading outlook for the second half remains very positive and we expect to make further good progress in the second half.

FINANCIAL RESULTS

First half results for the six months ended 30 April 2022 have been significantly affected by rising commodity prices, which have increased revenues and created one-off raw material gains in fertiliser blending. 

Revenue increased by 34% on the same period last year to £335.66m (2021: £249.71m), with commodity price inflation accounting for an estimated £80.00m of the overall increase. The Humphrey acquisition, completed in mid-March 2022, contributed £6.4m to Group revenues. Revenue generated by the Agriculture Division increased by 45% to £263.03m (2021: £180.72m) while the Specialist Agricultural Merchanting Division generated a 5% increase at £72.63m (2021: £68.88m).

Adjusted operating profit, which is before non-recurring costs, share-based payments and intangible amortisation, rose by 84% to £10.43m (2021: £5.68m). The Agricultural Division contributed operating profit of £6.06m (2021: £2.20m), up by 176% by comparison with the same period last year. This result included the one-off stock profits from fertiliser blending. The Specialist Agricultural Merchanting division contributed operating profit of £4.28m (2021: £3.40m). This 26% increase mainly reflected improved margins, driven partly by efficiencies. Other activities incurred a slight operating loss of £0.07m (2021: loss of £0.12m). As in prior years, the contribution from our Joint Ventures will be consolidated in the second half of our full year results.

Non-recurring costs charged in the period amounted to £0.52m and related to the transaction and funding costs of the Humphrey acquisition (2021: Nil). Net finance costs, including IFRS 16 charges, totalled £0.19m (2021: £0.11m), and reflected the new loans drawn to fund the acquisition. Share-based payment expenses for the period decreased to £0.13m (2021: £0.16m). 

Underlying pre-tax profit, which excludes share-based payments and non-recurring items, increased by 85% to £10.21m* (2021: £5.53m). Reported profit before tax increased by 78% to £9.56m (2021: £5.36m). The effective tax rate for the period was higher than the same period last year at 21.4% (2021: 19.1%). This was because deferred tax rates were adjusted to recognise the future increase in the Corporation Tax rate to 25% from April 2023, and has resulted in a charge of £2.05m (2021: £1.03m). Profit after tax increased by 73% to £7.51m (2021: £4.34m), and basic earnings per share increased by 71% to 36.99p (2021: 21.62p). 

Net assets at 30 April 2022 stood 10.5% higher year-on-year at £111.68m (30 April 2021: £101.05m) and equates to £5.50 per share (30 April 2021: £5.04 per share), based on the weighted average number of shares in issue during the period at 20.31m (2021: 20.06m).

Net debt on a pre IFRS 16 basis (excluding property leases) increased to £7.62m at 30 April 2022 from a 2021 equivalent position of £0.75m net cash. The rise reflected both acquisition funding and significantly higher working capital requirements resulting from the substantial commodity price inflation. Working capital in any given year typically peaks around the April interim period end, reducing over the second half. Total Right of Use property lease liabilities amounted to £5.13m (2021: £5.60m) resulting in reported accounting net debt of £12.75m (2021: £4.85m).

DIVIDEND

The Board is pleased to declare an increased interim dividend of 5.40p per share (2021: 5.00p), up by 8.0% on the equivalent payment last year. The increased payment reflects both the strong results and the Directors continuing confidence in growth prospects. 

The interim dividend will be paid on 31 October 2022 to shareholders on the register at the close of business on 30 September 2022. As in previous years, the Scrip Dividend alternative will continue to be available, with the last day for election for this scheme being 14 October 2022. 

REVIEW OF OPERATIONS

AGRICULTURE DIVISION

Strong farmgate prices for most agricultural produce has continued to underpin sector sentiment despite farm costs also rising, particularly for fuel and energy. Prices for beef, lamb, and especially grain in the first half were significantly ahead of the same period last year, with milk prices also firm. Egg prices were generally flat, although they have been increasing since April.

Feed Products

Feed volumes rose on a like-for-like basis by 3.25% over the same period last year and were above the average growth rate in the sector. We increased volumes in key target areas, including dairy, poultry and sheep feed, supported by our strategy of increasing the number of our on-farm sales specialists.

Rising raw material and operating costs, including labour, energy and packaging, continued to put pressure on margins. Nonetheless, the feed division performed well, although its operating margin was slightly lower than the same period last year.

The acquisition of the Humphrey business opens up significant future growth opportunities for the Group. While it immediately adds additional poultry feed manufacturing capacity from a leased facility in Twyford in Hampshire, there is scope to redevelop its currently moth-balled freehold site at Calne in Wiltshire to create a modern, multi-species mill, manufacturing both poultry and ruminant feed. This would give us a strategically well-located feed manufacturing facility and enable us to extend our trading footprint in the South of England, including in the South West. In addition, once operational, the Calne mill would also enable us to efficiently develop local growth opportunities at Llansantffraid and Carmarthen by transferring some production capacity at these feed mills to the Calne facility. We also plan to extend sales of other Wynnstay products and services to the new farmer customer base that we have gained with the acquisition. The Humphrey business made a first-time contribution to poultry feed sales in line with our expectations.

Arable Products

The Arable operations have been the most affected by the geopolitical factors that have driven raw material prices higher and increased operating costs. Nonetheless, these have been managed well.

The volume of grain traded by GrainLink, our grain marketing business, was substantially ahead of the same period in the last financial year, increasing by 50%. This increase largely reflected a return to more normal harvest tonnages and yields in 2021 compared with the exceptionally poor harvest in 2020, and volume gains made in our Eastern operations, following new business wins generated by the expansion of dedicated resource in this area. One impact of rising crop prices has been the need to meet very significant margin calls on forward grain hedging contracts. We use these contracts to provide an effective hedge between our grain purchases from farmers and subsequent sales to food manufacturers. Forward positions will unwind over the course of the next six months as the physical grain is delivered and these contracts unwind.

The Autumn seed planting season was strong, and good growing conditions since then bode well for the forthcoming 2022 harvest and grain trading volumes. With a good Autumn planting season, the spring-sown cereal crops acreage was reduced, and grass seed sales were also lower than the comparative period last year partly due to the very dry weather in March and April 2022. However, both our spring cereal and grass seed sales are in line with sector averages.

The volume of fertiliser traded within Wynnstay Agriculture Supplies decreased by some 26% compared with the equivalent period last year, a reflection of elevated fertiliser prices. This compares with industry contraction of about a third, and improved margins have more than balanced the reduced tonnage.

Glasson Grain Limited ("Glasson")

Glasson operates in three main areas; feed raw materials, fertiliser production and the manufacture of specialist animal feed products.

As discussed earlier, the contribution to Group results from Glasson significantly exceeded our original expectations. This was driven by our fertiliser blending activity, which experienced one-off stock price gains as the price of fertiliser rose, reflecting the highly-disrupted natural gas (a key ingredient) market. We have developed the fertiliser manufacturing business and assets of HELM Great Britain Limited, purchased in March 2021, building up its book of customers and establishing a good working relationship with our existing fertiliser facility in nearby Goole. The feed raw materials activity performed in line with expectations. Volumes in Glasson's smallest activity, specialist feed manufacturing, decreased reflecting more difficult end-markets.

SPECIALIST AGRICULTURAL MERCHANTING DIVISION

Specialist Agricultural Merchanting and Youngs Animal Feeds

The Group's chain of 54 depots caters for the needs of farmers and other rural dwellers and operates very closely with the Agricultural Division, providing a strong channel to market for our products.

The operating profit contribution from this activity was well ahead of last year, helped by positive farmer confidence, a favourable mix of sales, and the cumulative benefits of the efficiency improvements that have been implemented across the business. The depots saw good sales of higher margin bagged feed, animal health care products and the more discretionary items in the hardware categories, although total sales, excluding inflation, were slightly down on the same period in the prior financial year.

We continued to develop our digital offering and some 1,800 accounts are now signed up to our customer portal, which enables customers to access their Wynnstay account and place orders online.

Youngs, our specialist equine feeds operation, delivered a profitable contribution to this division, although like the rest of the equine sector, it experienced volume and margin pressures. 

JOINT VENTURES AND ASSOCIATES

Results from the Group's joint ventures and associate companies are not included in this half year report, and in accordance with established policies will be consolidated into Wynnstay's full year results.

ESG

In February 2021, we created a new management position, which carried specific responsibility for leading the ongoing development and implementation of the Group's ESG strategy. Our policies and objectives are being effectively embedded across all of the Group's operations. We are also working with our peers in the industry to promote increased sustainability throughout UK agriculture, including as a member of the sustainability committee of the agrisupply industry's leading trade association, the Agricultural Industries Confederation (AIC). We are now seeking to establish an ESG Advisory Board with external members in order to support future policy and planning.

A key pillar in the Group's growth strategy is supporting customers with the advice, products, and services that are necessary to adapt to the new environmental and efficiency priorities set in the UK Agriculture Act. Our own focus on sustainability will strengthen our ability to support customers' environmental aims.

OUTLOOK

World politics and the UK economy have become much more volatile and less predictable in recent months, and we are very aware of increasing cost pressures and international supply chain challenges. We will continue to navigate these challenges as effectively as possible, and our balanced business model remains a major strength. Recent world events have also sharpened the focus on the importance of national food security, and this should help to strengthen the position of UK agriculture. We believe we have a significant role to play in helping to ensure that UK farmers are able to feed the population sustainably and efficiently.

Our programme of investment at our Astley seed plant and at the Carmarthen feed mill continues, and planning is under way for a new multi-species feed mill at Calne, which will service farmers in the South and West of the country.

As we look ahead and consider prospects for the second half of the financial year, we remain very confident. The trading environment for farmers remains well-supported by strong farmgate prices, which will help to underpin ongoing farmer confidence and investment. However, we do not expect the significant one-off gains experienced in the first half of the financial year to be repeated.

We remain focused on growth opportunities, including acquisitions, and look to the future with confidence.

Steve Ellwood

Chairman

* Note 6. Explanation of Non GAAP measure.

WYNNSTAY GROUP PLC

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 April 2022

* Adjusted operating profit is after adding back amortisation of acquired intangible assets, share-based payment expense and non-recurring items.

CONDENSED CONSOLIDATED BALANCE SHEET

As at 30 April 2022

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

For the six months ended 30 April 2022

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 30 April 2022

WYNNSTAY GROUP PLC

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

GENERAL INFORMATION

Wynnstay Group Plc has a number of operations. These are described in the segment analysis in note 4.

Wynnstay Group Plc is a company incorporated and domiciled in the United Kingdom. The address of its registered office is shown in note 3.

1. BASIS OF PREPARATION

The Interim Report was approved by the Board of Directors on 27 June 2022.

The condensed financial statements for the six months to the 30 April 2022 have been prepared in accordance with International Accounting Standard (IAS) 34 and the Disclosure Guidance and Transparency Rules sourcebook of the UK's Financial Conduct Authority, except as disclosed in note 3.

The financial information for the Group for the year ended 31 October 2021 set out above is an extract from the published financial statements for that year which have been delivered to the Registrar of Companies. The auditor's report on those financial statements was not qualified and did not contain statements under section 498(2) or 498(3) of the Companies Act 2006. The information contained in this document does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.

The financial information for the six months ended 30 April 2022 and for the six months ended 30 April 2021 are unaudited. The consolidated financial statements are presented in sterling, which is also the Group's functional currency. Amounts are rounded to the nearest thousand, unless otherwise stated.

The condensed consolidated interim financial statements should be read in conjunction with the annual consolidated financial statements for the year ended 31 October 2021, which have been prepared in accordance with UK adopted International Accounting Standards. 

2. GOING CONCERN

The Directors have prepared the condensed consolidated interim financial statements on a going concern basis, having satisfied themselves from a review of internal budgets and forecasts and current banking facilities that the Group has adequate resources to continue in operational existence for the foreseeable future.

The Group has a sound financial base and forecasts that show profitable trading and sufficient cash flow and resources to meet the requirements of the business, including compliance with banking covenants and on-going liquidity. In assessing their view of the likely future financial performance of the Group, the Directors consider industry outlooks from a variety of sources, and various trading scenarios. This analysis showed that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook, and the ongoing issues created by the continuing Coronavirus concerns and the war in Ukraine which has caused significant commodity price volatility.

In conclusion, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

3. SIGNIFICANT ACCOUNTING POLICIES

The condensed financial statements have been prepared under the historical cost convention other than shared-based payments, which are included at fair value and certain financial instruments which are explained in the annual consolidated financial statements for the year ended 31 October 2021.

The Group has a policy of using annual results for the consolidation of its share of the results of joint ventures, and as such no consolidation has occurred in these condensed financial statements which is consistent with previous years.

The condensed consolidated interim financial statements for the six months to 30 April 2022 have been prepared on the basis of the accounting policies expected to be adopted for the year ending 31 October 2022. These are anticipated to be consistent with those set out in the Group's latest annual financial statements for the year ended 31 October 2021. A copy of these financial statements is available from the Company's Registered Office at Eagle House, Llansantffraid, Powys, SY22 6AQ.

New standards and interpretations

New and amended standards adopted in the annual financial statements for the year ended 31 October 2021 did not have any significant impact on those results and changes implemented from the 1 January 2021 are similarly not having any material impact on the Group as they are either not relevant to the Group's activities or require accounting which is consistent with the Group's current accounting policies.

Critical accounting estimates and judgements

The Group makes certain estimates and assumptions regarding the future. These estimates and judgements are continually evaluated based on historic experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. At 30 April 2022 management have not identified any indicators of impairment within the Group. In the future, actual experience may differ from these estimates and assumptions, however it is believed these are not significant nor likely to cause a material adjustment to the carrying amount of assets and liabilities within the next financial year. 

4. 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 Agriculture, Specialist Agricultural Merchanting, 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.

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

Specialist Agricultural Merchanting - supplies a wide range of specialist products to farmers, smallholders, and pet owners.

Other - miscellaneous operations not classified as Agriculture or Specialist Agricultural Merchanting.

The Board assesses the performance of the operating segments based on a measure of operating profit. Non-recurring costs and 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. No segment is individually reliant on any one customer.

The segment results for the period ended 30 April 2022 and comparative periods are as follows:

5. OTHER OPERATING INCOME

6. ALTERNATIVE PERFORMANCE MEASURES

On the Board's preferred alternative performance measures referred to as Adjusted operating profit and Underlying pre-tax profits which are respectively, Group operating profit adding back amortisation of acquired intangible assets, share-based payment expense and non-recurring items, and the Group profit before tax adding back share-based payment expense, non-recurring items and including the value of the share of tax incurred by joint ventures and associates. On these measures the Group achieved adjusted operating profit of £10.43m (2021: £5.68m) and underlying pre-tax profits of £10.21m (2021: £5.53m).

Reconciliation with the reported income statement for this measure, Operating profit before non-recurring items and Underlying pre-tax profit and the Profit before tax shown on the Condensed Statement of Comprehensive Income, together with reasons for their use is given below.

The Board uses alternative performance measures as it believes the underlying commercial performance of the current trading activities is better reflected, and provides investors and other users of the accounts with an improved view of likely future performance by making adjustments to the IFRS results for the following reasons:

• Share of results from joint ventures and associateProvides a fuller understanding of activities directly under management control and those incorporated from joint ventures.

• The add back of tax incurred by joint ventures and associateThe Board believes the incorporation of the gross result of these entities provides a fuller understanding of their combined contribution to the Group performance.

• Net finance chargesProvides an understanding of results before interest received and paid.

• Share-based paymentsThis charge is calculated using a standard valuation model, with the assessed non-cash cost each year varying depending on new scheme invitations and the number of leavers from live schemes. These variables can create a volatile non-cash charge to the income statement, which is not directly connected to the trading performance of the business.

• Amortisation of acquired intangible assets

This charge relates to intangible assets created from prior business combinations, hence provides a fuller understanding of current operating performance.

• Non-recurring itemsThe Group's accounting policies include the separate identification of non-recurring material items on the face of the income statement, which the Board believes could cause a misinterpretation of trading performance if not disclosed.

7. AMORTISATION OF ACQUIRED INTANGIBLE ASSETS AND SHARE-BASED PAYMENTS AND NON-RECURRING ITEMS

Acquisition transaction costs relate to the Business Combination (see note 17) of Humphrey Poultry Holdings Limited in March 2022.

8. TAXATION

The tax charge for the six months ended 30 April 2022 and 30 April 2021 is based on an apportionment of the estimated tax charge for the full year.

The effective tax rate is 21.4% (6 months ended 30 April 2021: 19.1%) which is higher than the standard rate of 19.0% primarily due to adjustments to deferred tax provisions following the Government's decision to raise the standard rate of Corporation Tax to 25% with effect from April 2023 (2021: 19.0%).

9. CASH (USED IN)/GENERATED FROM OPERATIONS

During the six months to 30 April 2022, the Group purchased property, plant and equipment of £2,381,000 (2021: £1,832,000) of which £965,000 relates to right-of-use assets (2021: £845,000).

10. LEASES

The following tables shows the movement in right-of-use assets and lease liabilities, along with the aging of the lease liabilities.

11. NET CASH

12. FINANCIAL INSTRUMENTS

The Board has overall responsibility for the determination of the Group's risk management objectives and policies and whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's finance function. The Board receives monthly reports from the Group Financial Director through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility.

The Group's principle financial instruments (other than derivatives) compromise loans, cash and short -term deposits; the main purpose of these instruments is to raise finance for the Group's operations; and additionally include trade and other receivables, trade and other payables and lease liabilities.

The Group also enters derivative transactions, principally foreign exchange contracts and wheat futures to manage commodity price and currency risks arising from the Group's operations.

The Group's policy does not permit use of derivatives for speculative purposes. However, some derivatives do not qualify for hedge accounting, or are specifically not designated as a hedge where gains and losses on the hedging instrument and the hedged item naturally offset in the Group's income statement. Treasury operates on a centralised basis, where Derivatives are only used for economic hedging purposes and not as speculative investments and are classified as 'held for trading', other than designated and effective hedging instruments and are presented as current assets or liabilities if they are expected to be settled within 12 months after the end of the reporting period, otherwise they are classified as non current.

The principal financial instruments used by the Group, from which risk arises, are as follows:

· Cash and cash equivalents

· Trade receivables

· Trade and other payables

· Borrowings

· Forward currency contracts

· Wheat futures contracts

The following financial instruments have been recognised in the Group's respective financial statements:

Financial instruments not measured at fair value includes cash and cash equivalents, trade and other receivables, trade and other payables, loans and borrowings, and lease liabilities. Due to their short-term nature, the carrying value of cash and cash equivalents, trade and other receivables, and trade and other payables approximates their fair value.

IFRS 13 requires financial instruments that are measured at fair value to be classified according to the valuation technique used:

· Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities

· Level 2 - inputs, other than level 1 inputs, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived form prices)

· Level 3 - unobservable inputs

All derivative financial assets and liabilities are classified as Level 1 instruments as they are quoted market prices. Contingent consideration is measured at fair value using Level 3 inputs such as entity projections of future probability.

The Group is exposed through its operation to the following financial risks:

· Credit risk

· Foreign exchange risk

· Commodity market price risk

· Interest rate risk

· Liquidity risk

· Capital management risk

The policies and processes for managing each of these risks are summarised in the Group's annual report published in February 2022 and available on the Company's website.

13. EARNINGS PER SHARE

Basic earnings per 25p ordinary share has been calculated by dividing profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period. 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.

14. SHARE CAPITAL

The shares issued in the period related to 26,000 company share options (2021: 24,000) and 51,000 (2021: 62,000) shares allotted to shareholders exercising their rights to receive dividends under the Company's scrip dividend scheme. No other shares were allocated during the current or prior period.

As at 30 April 2022 a total of 20,376,000 shares are in issue (2021: 20,137,000).

15. DIVIDENDS

During the period ended 30 April 2022 an amount of £2,134,000 (2021: £2,008,000) was charged to reserves in respect of equity dividends paid. An interim dividend of 5.40p per share (2021: 5.00p) will be paid on 31 October 2022 to shareholders on the register on the 30 September 2022. New elections to receive Scrip Dividends should be made in writing to the Company's Registrars before 14 October 2022.

16. OTHER RESERVES

Included in Other reserves are share-based payments; as the Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value at the date of the grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest.

The Group operates a number of share option and 'Save As You Earn' schemes and fair value is measured by use of a recognised valuation model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

At the 30 April 2022 the ESOP Trust, which is consolidated within the Group financial statements, held 16,834 (2021: 16,834) Ordinary Shares in the Group.

17. BUSINESS COMBINATION NOTE

Humphrey Poultry (Holdings) Limited

On 18 March 2022, Wynnstay Group plc entered a business combination and acquired 100% of the share capital of Humphrey Poultry (Holdings) Limited, which is the holding company for two commercial and operational entities, Humphrey Feeds Limited and Humphrey Pullets Limited.

The provisional assessed consideration is £13.171m inclusive of £1.011m of cash. This provisional consideration is subject to verification of a minimum underlying net asset target value of the acquiree, including the cash, of £6.171m, which due to the timing of the preparation of completion accounts for the acquiree, is expected to be finalised during the second half of the Group's financial year. The provisional consideration will be adjusted should the confirmed net assets of the acquiree be higher or lower than the target value. The Board believes at the time of half-year announcement that the net assets are not likely to significantly change.

The sum of £9.485m was paid on completion and the provisional consideration includes a deferred contingent element subject to the achievement of certain commercial targets to be assessed after the first anniversary of completion. The fair value of a deferred contingent consideration element has been based on management's expectation of the future performance of the business and that could range from £nil to £2.000m. The remainder of the provisional consideration is to be paid upon final verification of the acquiree's net assets as explained above, but which are currently estimated to be analysed as follows:

A full analysis of the provisional consideration is provided in the table below which includes the break-down of the tangible fixed assets which incorporates freehold land and buildings in the amount of £599k, which reflects the current view of fair value assessment of this element of the purchase price. An independent valuation of this property has been commissioned at the time of this announcement, but this will not impact the provisional consideration, but may adjust the analysis. The goodwill balance represents the assembled workforce and future sales opportunities and is not expected to be deductible for tax purposes.