REG - Wynnstay Group PLC - Interim Results
25/06/2024 07:00
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RNS Number : 6734T Wynnstay Group PLC 25 June 2024
AIM: WYN
Wynnstay Group Plc
("Wynnstay" or the "Group" or the "Company")
Interim Results for the six months ended 30 April 2024
Performance affected by challenging trading conditions as anticipated
Expectations for the full year remain unchanged
KEY POINTS
Financial
· Resilient performance in challenging trading conditions created by:
o exceptionally wet weather conditions, which disrupted the seed planting
season;
o weaker farmer sentiment; and
o falling commodity prices, which impacted manufacturing operations.
· Revenue of £328.5m (2023: £409.1m) with the year-on-year
reduction driven by commodity price deflation, which accounted for c. £69.0m
(86%) of the decrease.
· Gross profit down slightly at £40.2m (2023: £41.7m) - reflecting
lower activity, however unit margins across categories were broadly
maintained.
· Adjusted operating profit(1) of £4.7m (2023: £5.8m).
· Adjusted pre-tax profit(2) of £4.8m (2023: £6.0m). Reported
pre-tax profit of £4.4m (2023: £5.5m).
· Basic earnings per share of 14.3p (2023: 19.3p).
· Net cash(3) at 30 April 2024 was £18.5m (2023: net debt of £7.3m)
and benefited from soft commodity price deflation. The Group's annual working
capital requirement is typically highest at this point.
· Net assets increased to £136.3m/£5.91 per share (2023:
£132.4m/£5.87 per share).
* Interim dividend of 5.6p (2023: 5.5p)
( )
(1)Adjusted operating profit excludes amortisation of acquired intangibles,
share based payment expenses and non-recurring items.
(2)Adjusted profit before taxation excludes amortisation of acquired
intangibles, share based payment expenses, non-recurring items and the share
of tax incurred by joint ventures.
(3)Net cash / (debt) excluding IFRS 16 leases.
Operational
· Agriculture Division - revenue of £257.0m (2023: £333.6m),
adjusted operating profit(1) of £1.3m (2023: £2.3m):
o seed and fertiliser sales significantly impacted by wet weather;
o manufactured feed volumes 2.3% lower. Margins maintained.
· Specialist Agricultural Merchanting Division - revenue of £71.5m
(2023: £75.6m), adjusted operating profit(1) of £3.3m (2023: £3.4m).
o sales only c. 0.8% lower adjusting for deflation.
· Higher labour, distribution and packaging costs, partially offset
through ongoing efficiency initiatives.
· Investment programmes on track - increasing feed manufacturing
capacity and installing next phase of solar panel arrays.
Current Trading and Outlook
· Trading in April and May was ahead of the prior year and further
weather-deferred sales are expected to come through in H2. The Group also has
favourable forward positions in grain and a strong order book in fertiliser.
Some margin pressures remain.
· Outlook for farmgate prices, especially for milk, is more
favourable.
· Group remains positioned to deliver a full year performance in line
with current market expectations, with a more significant second half
weighting than last year.
Steve Ellwood, Executive Chairman of Wynnstay Group plc, said:
"Trading conditions in the first half of the financial year were significantly
tougher than in the comparable period last year. The seed planting season was
disrupted by persistent rain and wider farmer sentiment was weakened by
suppressed farmgate prices and continuing uncertainty over governmental
support polices. This was reflected in farm spending and investment
patterns.
"We managed trading pressures as effectively as possible and broadly
maintained margins across our product categories. We also continued to make
progress with our major investment programmes.
"Spring trading over April and May has been ahead of last year and we
anticipate more favourable farmgate prices, especially for milk, in the second
half of the year. The Group continues to benefit from a strong balance sheet
and good cash flow, which will support our investment and growth plans. Our
expectations for the full year remain unchanged."
Enquiries
Wynnstay Group plc Steve Ellwood, Executive Chairman 0203 178 6378 (Today)
Rob Thomas, Group Finance Director 01691 827 142
KTZ Communications Katie Tzouliadis, Robert Morton 020 3178 6378
Shore Capital (Nomad and Broker) Stephane Auton/Tom Knibbs/Rachel Goldstein (Corporate Advisory) 020 7408 4090
Henry Willcocks (Corporate Broking)
Wynnstay Group Plc will be hosting an online presentation of the Company's
results on Friday, 28 June at 1.00 p.m. Shareholders and potential investors
can register to join the online presentation at:
https://bit.ly/WYN_H124_results_webinar
(https://lsems.gravityzone.bitdefender.com/scan/aHR0cHM6Ly9iaXQubHkvV1lOX0gxMjRfcmVzdWx0c193ZWJpbmFy/015667A6F4752BCC74A751750350BC80FD00EC51CAABD384574BABEE6BEC66B6?c=1&i=1&docs=1)
. Further information can be obtained from KTZ Communications.
EXECUTIVE CHAIRMANS STATEMENT
Overview
The difficult trading conditions that were experienced as the Group commenced
the new financial year persisted over the first five months of the period and,
as expected, Group profits are lower than last year's outcome.
The more challenging trading environment was driven by a combination of
factors. The winter months were some of the wettest on record for the UK and
the prolonged rains significantly disrupted the sowing season, affecting sales
of winter and spring seed as well as fertiliser and other inputs. Farmer
spending patterns were also reined in as a result of weaker farmgate prices
for certain products, especially milk, and general uncertainty over new
governmental support schemes. The impact was felt mostly by the Agriculture
division. The Group's labour, distribution and packaging costs were also
higher. However, management initiatives helped to mitigate much of their
effects.
While first half revenue decreased significantly, this was principally the
result of reduced soft commodity prices, including for fertiliser, after the
previous sharp increases. This deflation accounted for an estimated 86% of the
year-on-year revenue decrease.
The Group's balance sheet remains strong, and its net cash position is
significantly higher than a year ago. This was helped by commodity input price
deflation, which meant that working capital requirements were lower at a time
when the annual cycle peaks.
Trading in April and May was ahead of the prior year and the outlook for
farmgate prices, especially milk, looks more favourable.
Financial Results
Revenue decreased by 19.7% to £328.5m (2023: £409.1m). An estimated £69.0m
(c. 86%) of this reduction resulted from the normalisation of soft commodity
prices, including for fertiliser, from their previously elevated levels. The
remainder reflected lower activity levels, in line with market trends.
Gross profit, which is a better indicator of the Group's activity levels,
given the effect of soft commodity prices on revenues, was down by 3.7%. Unit
margins remained consistent on an aggregate basis across the Group's range of
products.
Adjusted operating profit(1) reduced by 19.3% to £4.7m (2023: £5.8m).
Labour, distribution and packaging costs rose, although efficiency initiatives
offset much of the impact. Adjusted profit before tax(2) was lower at £4.8m
(2023: £6.0m) and earnings per share were 14.3 pence per share (2023: 19.3
pence per share). Net assets increased by 2.9% year-on-year to £136.3m (2023:
£132.4m), which equates to £5.91 per share (2023: £5.87 per share).
Net cash(3) at 30 April 2024 (typically the peak point in the Group's annual
working capital cycle) increased to £18.5m (30 April 2023: net debt(3) of
£7.3m). The £24.0m year-on-year decrease in working capital requirements
was in line with reduced soft commodity prices. Lease liabilities totalled
£13.2m (2023: £9.0m), with the increase on last year reflecting the renewal
of certain property leases. Net cash including lease liabilities was £5.3m
(2023: net debt of £16.3m). Net cash is expected to build over the second
half, following the normal working capital cycle.
Dividend
In line with its progressive dividend policy, the Board is pleased to declare
an increased interim dividend of 5.6p per share (2023: 5.5p), up by 1.8%
year-on-year. Dividend cover remains prudent at two times earnings.
The interim dividend will be paid in cash on 31 October 2024 to shareholders
on the register at the close of business on 27 September 2024.
Operational Review
Agriculture Division
Revenue was £257.0m (2023: £333.6m) and adjusted operating profit(1) was
£1.3m (2023: £2.3m).
Feed
Manufactured feed volumes were 2.3% lower compared to the first half of 2023,
reflecting overall softer market demand. In particular, demand from dairy
farmers was affected by weaker milk prices compared to the corresponding
period last year. We are now seeing some improvement in farmgate prices, which
we expect to boost feed demand in the second half of the year. Margins
continued to be pressured by rising labour, distribution and packaging costs.
However, we successfully mitigated these factors through efficiency
initiatives. Our specialist teams of feed experts continue to assist our
customers with advice on nutrition, particularly for dairy herds, calves,
poultry and lamb.
We were pleased to complete the first phase of redevelopment at our
multi-species feed mill at Carmarthen. This has added manufacturing capacity
and improved efficiencies through faster vehicle loading. We are currently
evaluating a second phase of development, which would add further capacity
and reduce the need to outsource some manufacturing volumes. We continue to
investigate options for poultry feed manufacturing in southern England.
The redevelopment of the mothballed poultry feed mill at Calne in Wiltshire,
acquired with the acquisition of the Humphrey Feeds business, is considered
unlikely, given the significant rise in costs for such a project. In the
interim, we continue to manufacture poultry feed at the Twyford mill in
Hampshire.
Arable
Seed and fertiliser sales were significantly impacted by weather conditions.
Prolonged wet weather disrupted the autumn and spring planting seasons,
preventing sowing, damaging sown crops, and delaying sales of spring-sown
cereal seed, fertiliser and other inputs. We estimate that the arable season
has been delayed by approximately four weeks and, as a consequence, some sales
are coming through in the second half of the year. Looking ahead, we
anticipate an overall smaller UK harvest, reflecting the delayed spring
planting and damage to winter planting.
As expected, last year's excellent performance at GrainLink, our grain
marketing business, was not repeated. Traded volume was 4% lower and margins
returned to longer-term average levels.
Our recent Arable Event, held on 19 June 2024, celebrated its tenth
anniversary and was well attended, with over 1,000 visitors, including farmers
and exhibitors. This annual event provides an opportunity for farmers to view
extensive trial plantings grown by Wynnstay, access arable specialists and
gain valuation information for the upcoming harvest and drilling season. It is
part of our aim to ensure our customers are well-served, and that we continue
to consolidate our position as a trusted and expert supplier.
Glasson Grain Limited ("Glasson")
Glasson's principal activity is blended fertiliser production, with feed raw
materials trading and specialist animal feed production somewhat smaller
operations.
Further deflation in fertiliser prices put pressure on margins in the first
quarter. This is a reflection of Glasson's position as a manufacturer,
carrying stocks of forward-bought raw materials. Margins recovered in the
second quarter, but spring season sales were significantly delayed by the wet
weather. These delayed sales are coming through, and we have a strong forward
order book. Fertiliser blending was at full capacity in April and May, and we
expect the operation to perform in line with management expectations for the
remainder of the year.
Feed raw material trading performed in line with budgets, whilst the smaller
specialist animal feed production facility showed an improvement on last year,
although its performance remains a focus of management attention.
Specialist Agricultural Merchanting Division
The Division operates a chain of 53 depots (2023: 53), which cater for the
needs of farmers and other rural dwellers. It operates very closely with the
Agricultural Division, providing a strong channel to market for
Wynnstay-manufactured products.
The Division delivered resilient results in a difficult trading environment.
While total revenue across the depot network was 5.4% lower at £71.5m (2023:
£75.6m), most of this reduction was due to price deflation. Adjusting for
this, sales were broadly flat, down by just 0.8% year-on-year, although the
sales mix showed lower spending on higher-margin product categories, such as
bagged feed and hardware. The division also experienced inflation-driven
increases in overheads, however these were managed effectively and adjusted
operating profit(1) was in line with the prior year at £3.3m (2023:
£3.4m).
We continued to develop our click-and-collect service and online portal
activities as part of our plans to ensure that we evolve to meet the future
needs of our farming customers.
Youngs, our small specialist equine feeds operation, delivered a profitable
contribution.
Joint Ventures
The gross share of results of joint ventures was £0.5m (2023: £0.6m). Bibby
Agriculture has continued to perform well although the comparison is against a
record contribution in 2023. Wyro Developments and Total Angling have
performed in line with expectations.
ESG
Our ESG approach encompasses both internal and customer-related initiatives.
We are very well-placed to assist our farmer customers with solutions to their
environmental goals, and our stated mission is to help farmers to feed the UK
in a more sustainable way.
We continue to focus on expanding our environmental product offering and keep
abreast of innovation and new approaches that may be relevant for our
customers. This aspect of what we do is becoming increasingly important as
farmers adjust to new governmental support schemes. These are replacing direct
payments, as instituted under the EU's Common Agricultural Policy. The process
of transition to the new support schemes - the Environmental Land Management
Scheme in England and the Sustainable Farming Scheme in Wales - is under way.
However, current uncertainties around these new schemes have dampened farmer
confidence and inhibited investment decisions. Our work with farmers will help
to drive farm efficiencies and the new environmental priorities. For example,
our team of specialist advisors can offer customers environmentally-friendly
seed mixtures that include pollinators, deep-rooted herbs and wildflowers.
Demand for these products has grown strongly as farmers adjust cropping
rotations in order to participate in the new support schemes. We are also
involved with industry initiatives to influence Government policy and champion
UK farming.
A key objective for the Group is to be carbon neutral by 2040. We have a
number of programmes under way to reduce carbon emissions and energy
consumption. These programmes encompass the Group's vehicle fleet, biofuel use
and energy requirements. The first phase of our multi-million-pound solar
panel arrays project was completed last year, and I am pleased to report that
we are now beginning to capture the benefits, which are in line with our
expectations and contributing to the reduction in manufacturing overheads. We
also started the second phase of the project in the period.
Our 'Colleagues Forum' continues to be developed as well as initiatives to
support the local communities in which we operate. As ever, our staff remain
highly committed to charitable causes and we are also very pleased to provide
support. Fundraising proceeds are distributed to nominated charities,
principally Children with Cancer and The Royal Agricultural Benevolent
Institution (RABI), the leading UK farmer charity, which provides local
support to the farming community in England and Wales.
Outlook
The first half of the year has been challenging against weaker farmer
sentiment and record-breaking wet weather months. However, we have seen good
performances in April and May, which were ahead of the prior year. Fertiliser
sales held back by the wet weather conditions started to come through in late
spring, and there was strong demand for spring seed, after the failure of the
winter sowing season, although stock availability was limited. Further
weather-deferred sales are materialising and should continue to do so in the
second half of the year.
We expect farmgate prices to be more favourable, particularly for milk, which
will help to support demand for feed products in the second half of the
financial year. We also have favourable forward positions in grain and a
strong fertiliser order book, both of which will benefit the second half
performance.
Wynnstay's strong balance sheet, balanced business model, and good cash
generation continue to provide significant advantages in the current market,
and we remain focused on delivering our strategic growth ambitions. In light
of recent improvements and a more positive short-term outlook, the Board
believes that the Group remains positioned to deliver a full year performance
in line with current market expectations, with a more second-half weighting
than in FY23.
Steve Ellwood
Executive Chairman
(1)Adjusted operating profit excludes amortisation of acquired intangibles,
share based payment expenses and non-recurring items.
(2)Adjusted profit before taxation excludes amortisation of acquired
intangibles, share based payment expenses, non-recurring items and the share
of tax incurred by joint ventures.
(3)Net cash / (debt) excluding IFRS 16 leases.
WYNNSTAY GROUP PLC
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 April 2024
Unaudited six months ended 30 April 2024 Unaudited six months ended 30 April 2023 Audited year ended 31 October 2023
(As restated Note 16)
Note £'000 £'000 £'000
CONTINUING OPERATIONS:
Revenue 4 328,490 409,139 735,877
Cost of sales (288,310) (367,411) (656,829)
Gross profit 40,180 41,728 79,048
Manufacturing, distribution and selling costs (30,008) (30,982) (60,060)
Administrative expenses (5,593) (5,198) (10,020)
Other operating income 5 83 227 371
Adjusted operating profit(1) 4,662 5,775 9,339
Amortisation of intangible assets and share based payment expense 3, 6 (249) (269) (468)
Non-recurring items 3, 6 - (28) (82)
Operating profit 4,413 5,478 8,789
Interest income 215 200 528
Interest expense (615) (604) (1,286)
Share of profits in joint ventures, accounted for using the equity method 8 518 599 865
Adjusted profit before taxation(2) 4,780 5,970 9,446
Amortisation of acquired intangibles and share based payment expense 3, 6 (249) (269) (468)
Non-recurring items - (28) (82)
Share of tax incurred by joint ventures and associates 8 (129) (133) (192)
Profit before taxation 4,402 5,540 8,704
Taxation 7 (1,113) (1,223) (1,776)
Profit for the period 8 3,289 4,317 6,928
OTHER COMPREHENSIVE INCOME
Items that will be reclassified subsequently to profit or loss, net of
deferred tax:
- Net change in the fair value of cashflow hedges taken to equity (97) 70 49
- Recycle cashflow hedge taken to income statement 44 (286) (83)
Other comprehensive income for the period (53) (216) (34)
Total comprehensive income for the period 3,236 4,101 6,894
Basic earnings per 25p share 12 14.31p 19.28p 30.75p
Diluted earnings per 25p share 12 13.91p 18.88p 30.31p
(1)Adjusted operating profit excludes amortisation of acquired intangibles,
share based payment expenses and non-recurring items.
(2)Adjusted profit before taxation excludes amortisation of acquired
intangibles, share based payment expenses, non-recurring items and the share
of tax incurred by joint ventures.
WYNNSTAY GROUP PLC
Condensed Consolidated Balance Sheet
As at 30 April 2024
Registered Number 2704051
Unaudited 30 April 2024 Unaudited 30 April 2023 Audited 31 October 2023
(As restated
Note 16)
Note £'000 £'000 £'000
ASSETS:
Non-current assets:
Goodwill 15,530 15,530 15,530
Intangible assets 4,836 5,046 4,960
Investments accounted for using equity method 4,796 4,566 4,407
Investment property 1,850 1,850 1,850
Property, plant and equipment 24,024 22,728 24,598
Right of use assets 9 14,559 10,015 14,129
Derivative financial instruments 101 - 54
65,696 59,735 65,528
Current assets:
Inventories 53,554 59,050 55,456
Trade and other receivables 92,178 108,710 81,276
Loans to joint venture 639 1,059 639
Cash and cash equivalents 10 24,897 1,381 31,055
Derivative financial instruments 750 - 209
172,018 170,200 168,635
TOTAL ASSETS 237,714 229,935 234,163
LIABILITIES
Current liabilities:
Borrowings 10 (2,595) (2,975) (2,595)
Lease liabilities 9 (3,864) (3,312) (3,762)
Trade and other payables (78,523) (76,510) (75,694)
Current tax liabilities (732) (918) (257)
Derivative financial instruments (265) (137) (432)
Provisions - (108) -
(85,979) (83,960) (82,740)
NET CURRENT ASSETS 86,039 86,240 85,895
Non-current liabilities:
Borrowings 10 (3,794) (5,691) (4,743)
Lease liabilities 9 (9,325) (5,706) (9,213)
Trade and other payables (9) (35) (9)
Derivative financial instruments (5) - (8)
Deferred tax liabilities (2,290) (2,109) (2,219)
(15,423) (13,541) (16,192)
TOTAL LIABILITIES (101,402) (97,501) (98,932)
NET ASSETS 136,312 132,434 135,231
EQUITY:
Share capital 13 5,769 5,639 5,739
Share premium 43,873 42,431 43,482
Other reserves 15 4,152 3,785 4,080
Retained earnings 82,518 80,579 81,930
TOTAL EQUITY 136,312 132,434 135,231
WYNNSTAY GROUP PLC
Condensed Consolidated Statement of Changes in Equity
As at April 2024
Share capital Share premium Other reserves Cashflow hedge reserve Retained Earnings Total
£'000s £'000s £'000s £'000s £'000s £'000s
As at 31 October 2022 5,585 42,130 4,130 137 78,719 130,701
Profit for the period (as restated Note 16) - - - - 4,317 4,317
Net change in the fair value of cashflow hedges taken to equity, net of tax - - - 70 - 70
Recycle cashflow hedge taken to income statement - - - (286) - (286)
Total comprehensive income for the period (as restated Note 16) - - - (216) 4,317 4,101
Shares issued during the period 54 301 - - - 355
Dividends - - - - (2,608) (2,608)
Own shares acquired by ESOP trust - - (225) - - (225)
Equity settled share based payment transactions - - 145 - - 145
Recycling of equity remuneration reserves - - (186) - 151 (35)
Total contributions by and distributions to the owners of the Company 54 301 (266) - (2,457) (2,368)
As at 30 April 2023 (as restated Note 16) 5,639 42,431 3,864 (79) 80,579 132,434
Profit for the period - - - - 2,611 2,611
Net change in the fair value of cashflow hedges taken to equity, net of tax - - - (21) - (21)
Recycle cashflow hedge taken to income statement - - - 203 - 203
Total comprehensive income for the period - - - 182 2,611 2,793
Shares issued during the period 100 1,051 - - - 1,151
Dividends - - - - (1,260) (1,260)
Equity settled share based payment transactions - - 113 - - 113
Total contributions by and distributions to the owners of the Company 100 1,051 113 - (1,260) 4
As at 31 October 2023 5,739 43,482 3,977 103 81,930 135,231
Profit for the period - - - - 3,289 3,289
Net change in the fair value of cashflow hedges taken to equity, net of tax - - - (97) - (97)
Recycle cashflow hedge taken to income statement - - - 44 - 44
Total comprehensive income for the period - - - (53) 3,289 3,236
Shares issued during the period 30 391 - - - 421
Dividends - - - - (2,701) (2,701)
Equity settled share based payment transactions - - 125 - - 125
Total contributions by and distributions to the owners of the Company 30 391 125 - (2,701) (2,155)
As at 30 April 2024 5,769 43,873 4,102 50 82,518 136,312
WYNNSTAY GROUP PLC
Condensed Consolidated Cash Flow Statement
For the six months ended 30 April 2024
Unaudited six months ended 30 April 2024 Unaudited six months ended 30 April 2023 Audited year ended 31 October 2023
Note £'000 £'000 £'000
Cash flows from operating activities
Cash generated from / (used in) operations 8 658 (16,763) 20,272
Interest received 215 200 528
Interest paid (248) (433) (822)
Tax paid (550) (1,599) (2,763)
Net cash generated from / (used in) operating activities 75 (18,595) 17,215
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 204 122 256
Purchase of property, plant and equipment (567) (2,836) (5,761)
Acquisition of subsidiary undertakings net of cash acquired (37) (2,709) (2,709)
Decrease in short term loans to joint ventures - 8 428
(Increase) in loans to the ESOP trust - (195) (195)
Dividends received from joint ventures and associates - - 367
Net cash generated used in investing activities (400) (5,610) (7,614)
Cash flows from financing activities
Proceeds from the issue of ordinary share capital 421 320 1,471
Proceeds from new loans - - 26
Lease payments 9 (2,654) (2,263) (5,042)
Repayment of borrowings 10 (949) (1,423) (2,371)
Dividends paid to shareholders 14 (2,701) (2,608) (3,868)
Net cash used in financing activities (5,883) (5,974) (9,784)
Net (decrease) / increase in cash and cash equivalents (6,208) (30,179) (183)
Effects of exchange rate changes 50 (23) 61
Cash and cash equivalents at the beginning of the period 31,055 31,177 31,177
Cash and cash equivalents at the end of the period 10 24,897 975 31,055
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 note 4
segment analysis.
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 24 June 2024.
The condensed financial statements for the six months to the 30 April 2024
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 disclosure in note 3.
The financial information for the Group for the year ended 31 October 2023 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 2024 and for the
six months ended 30 April 2023 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 2023, 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.
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 2023.
The condensed consolidated interim financial statements for the six months to
30 April 2024 have been prepared on the basis of the accounting policies
expected to be adopted for the year ending 31 October 2024. These are
anticipated to be consistent with those set out in the Group's latest annual
financial statements for the year ended 31 October 2023. 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 2023 did not have any significant impact on those
results and changes implemented from the 1 January 2024 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 2024 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.
Alternative performance measures
The Board believe that adjusted operating profit and adjusted profit before
taxation better reflect the underlying commercial trends and performance of
the Group and provides investors and other users of the accounts with useful
information on these trends.
Adjusted operating profit is statutory operating profit after adding back
non-recurring items, amortisation of acquired intangible assets and share
based payment expenses. Adjusted profit before taxation is statutory profit
before taxation after adding back non-recurring items, amortisation of
acquired intangible assets, share based payment expenses and the share of tax
incurred by joint ventures.
Non-recurring items
Non-recurring items are items that the Board believes are material and one-off
or non-operating in nature and are better disclosed separately in the income
statement. Events which may give rise to non-recurring items include, but
are not limited to, gains or losses on the disposal of
subsidiaries/businesses, gains or losses on the disposal or revaluation of
properties, gains or losses on the disposal of investments, the restructuring
of the business, the integration of new businesses, acquisition related costs,
changes to estimates in relation to deferred and contingent consideration for
prior period business combinations and asset impairments including impairment
of goodwill.
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 2024 and comparative periods
are as follows:
Agriculture Specialist Agricultural Merchanting Other Total
Unaudited for the six months ended 30 April 2024 £'000 £'000 £'000 £'000
Revenue from external customers 257,001 71,489 - 328,490
Segment results:
Adjusted operating profit 1,340 3,307 15 4,662
Amortisation of intangible assets (124)
Share based payments (125)
Non-recurring items -
Operating profit 4,413
Interest income 215
Interest expense (615)
Share of result of joint ventures 518
Profit before taxation 4,531
Taxation (1,242)
Profit for the period 3,289
There were no revenues from transactions in the year with individual customers
which amount to 10% more of Group revenues. All results are from continuing
operations.
Agriculture Specialist Agricultural Merchanting Other Total
Unaudited for the six months ended 30 April 2023 £'000 £'000 £'000 £'000
Revenue from external customers 333,569 75,570 - 409,139
Segment results:
Adjusted operating profit 2,347 3,444 (16) 5,775
Amortisation of intangible assets (124)
Share based payments (145)
Non-recurring items (28)
Operating profit 5,478
Interest income 200
Interest expense (604)
Share of result of joint ventures (as restated Note 16) 599
Profit before taxation 5,673
Taxation (1,356)
Profit for the period 4,317
There were no revenues from transactions in the year with individual customers
which amount to 10% more of Group revenues. All results are from continuing
operations.
Agriculture Specialist Agricultural Merchanting Other Total
Audited for the year ended 31 October 2023 £'000 £'000 £'000 £'000
Revenue from external customers 584,313 151,475 89 735,877
Segment results:
Adjusted operating profit 3,052 6,176 111 9,339
Amortisation of intangible assets (210)
Share based payments (258)
Non-recurring items (82)
Operating profit 8,789
Interest income 528
Interest expense (1,286)
Share of result of joint ventures 865
Profit before taxation 8,896
Taxation (1,968)
Profit for the period 6,928
5. OTHER OPERATING INCOME
Unaudited six months ended 30 April 2024 Unaudited six months ended 30 April 2023 Audited year ended 31 October 2023
£'000 £'000 £'000
Rental income 82 226 369
Government grant income 1 1 2
Total other operating income 83 227 371
6. AMORTISATION OF ACQUIRED INTANGIBLE ASSETS, SHARE BASED PAYMENTS AND
NON-RECURRING ITEMS
Unaudited six months ended 30 April 2024 Unaudited six months ended 30 April 2023 Audited year ended 31 October 2023
£'000 £'000 £'000
Amortisation of acquired intangibles 124 124 210
Share based payments expense 125 145 258
Total 249 269 468
Non-recurring items:
Business combination expenses - 28 28
Business reorganisation expenses - - 54
Total - 28 82
7. TAXATION
The tax charge for the six months periods ended 30 April 2024 and 30 April
2023 are based on the apportionment of the estimated tax charge for the
respective full years.
The effective tax rate is 25.3% (6 months ended 30 April 2023: 22.1%), which
is higher than the prior year following the Government's decision to raise the
standard rate of Corporation Tax to 25.0% with effect from April 2023
(financial year rate 2023: 22.5%).
8. CASH GENERATED FROM / (USED IN) OPERATIONS
Unaudited six months ended 30 April 2024 Unaudited six months ended 30 April 2023 (as restated Note 16) Audited year ended 31 October 2023
Note £'000 £'000 £'000
Profit for the period 3,289 4,317 6,928
Adjustments for:
Taxation 1,113 1,223 1,776
Depreciation of tangible fixed assets 1,111 1,163 2,312
Depreciation of right of use assets 2,029 2,024 4,189
Amortisation of intangible assets 6 124 124 210
(Profit) on disposal of tangible fixed assets (134) (31) (121)
Loss on disposal of right of use assets - - 2
Derivative hedge at fair value through profit and loss (854) 434 809
Hedge ineffectiveness 25 (118) (50)
Government grants 5 (1) (1) (2)
Movement in provisions - (237) (345)
Interest on right of use assets 367 171 464
Net interest expense 33 233 294
Share of result of post-tax results of joint ventures (389) (466) (673)
Share based payments 6 125 145 258
ESOP trust revaluation - (31) (31)
Changes in assets and liabilities:
Decrease in inventories 1,902 12,998 16,592
(Increase) / decrease in trade and other receivables (10,902) (11,074) 16,360
Increase / (decrease) in trade and other payables 2,820 (27,637) (28,700)
Cash generated from / (used in) operations 658 (16,763) 20,272
During the six months to 30 April 2024, the Group entered new land and
building leases creating right-of-use assets of £519,000 (2023: £2,417,000),
and purchased property, plant and equipment of £2,561,000 (2023: £3,776,000)
of which £1,995,000 relates to right-of-use assets (2023: £940,000).
9. LEASES
The following tables shows the movement in right-of-use assets and lease
liabilities, along with the aging of the lease liabilities.
Land & Buildings Plant, machinery & Motor Vehicles Total
Right of use assets £'000 £'000 £'000
As at 31 October 2022 3,919 4,283 8,202
Additions 2,417 940 3,357
Additions - Business combination 307 217 524
Disposals - (12) (12)
Reclassification 54 (86) (32)
Depreciation (1,175) (849) (2,024)
As at 30 April 2023 5,522 4,493 10,015
Additions 3,745 2,674 6,419
Disposals - (6) (6)
Reclassification - (134) (134)
Depreciation (1,202) (963) (2,165)
As at 31 October 2023 8,065 6,064 14,129
Additions 519 1,995 2,514
Disposals - (13) (13)
Reclassification - (42) (42)
Depreciation (999) (1,030) (2,029)
As at 30 April 2024 7,585 6,974 14,559
Land & Buildings Plant, machinery & Motor Vehicles Total
Lease liabilities £'000 £'000 £'000
As at 31 October 2022 4,052 3,291 7,343
Additions 2,417 940 3,357
Additions - Business combination 307 147 454
Disposals - (44) (44)
Interest expense 92 79 171
Lease payment (1,245) (1,018) (2,263)
As at 30 April 2023 5,623 3,395 9,018
Additions 3,745 2,674 6,419
Disposals - 23 23
Interest expense 156 137 293
Lease payment (1,256) (1,522) (2,778)
As at 31 October 2023 8,268 4,707 12,975
Additions 519 1,995 2,514
Disposals - (13) (13)
Interest expense 161 206 367
Lease payment (1,100) (1,554) (2,654)
As at 30 April 2024 7,848 5,341 13,189
Within 1 year 1 - 2 years 2 - 5 years Over 5 years Total
Lease liability ageing £'000 £'000 £'000 £'000 £'000
As at 30 April 2024
Lease liability 3,864 3,166 3,993 2,166 13,189
As at 30 April 2023
Lease liability 3,312 2,997 1,652 1,057 9,018
10. NET CASH
Unaudited six months ended 30 April 2024 Unaudited six months ended 30 April 2023 Audited year ended 31 October 2023
£'000 £'000 £'000
Cash and cash equivalents per balance sheet 24,897 1,381 31,055
Bank overdrafts repayable on demand - (406) -
Cash and cash equivalents per cash flow 24,897 975 31,055
Bank loans due within one year or on demand (1,897) (1,897) (1,897)
Loan stock (unsecured) (698) (672) (698)
Net cash / (debt) due within one year 22,302 (1,594) 28,460
Bank loans due after one year (3,794) (5,691) (4,743)
Total net cash / (debt) excluding leases 18,508 (7,285) 23,717
11. 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:
Unaudited six months ended 30 April 2024 Unaudited six months ended 30 April 2023 Audited year ended 31 October 2023
£'000 £'000 £'000
Cash and cash equivalents per balance sheet 24,897 1,381 31,055
(note 10)
Trade receivables, net of loss allowance 87,643 106,854 78,241
Loan to joint venture 639 1,059 639
Derivative financial instruments 851 - 263
Financial assets 114,030 109,294 110,198
Bank loans and other borrowings (note 10) 6,389 8,666 7,338
Lease liabilities (note 9) 13,189 9,018 12,975
Trade and other payables 77,681 76,205 74,389
Deferred and contingent consideration 67 199 199
Derivative financial instruments 270 137 440
Financial liabilities 97,596 94,225 95,341
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.
30 April 2024 30 April 2023 31 October 2023 30 April 2024 30 April 2023 31 October 2023
£'000 £'000 £'000 £'000 £'000 £'000
Trade receivables, net of loss allowance - - - 87,643 106,854 78,241
Loan to joint venture - - - 639 1,059 639
Derivative financial instruments (level 1) 851 - 263 - - -
Financial Assets 851 - 263 88,282 107,913 78,880
Bank loans and other borrowings - - - 6,389 8,666 7,338
Lease liabilities - - - 13,189 9,018 12,975
Trade and other payables - - - 77,681 76,205 74,389
Deferred and contingent consideration 67 199 199 - - -
Derivative financial instruments (level 1) 270 137 440 - - -
Financial Liabilities 337 336 639 97,259 93,889 94,702
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; and
· Capital management risk.
The policies and processes for managing each of these risks are summarised in
the Group's annual report for the year ended 31 October 2023 and are available
on the Company's website.
12. EARNINGS PER SHARE
Basic earnings per 25p ordinary share have 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.
Unaudited six months ended 30 April 2024 Unaudited six months ended 30 April 2023 (as restated Note 16)
£'000 £'000
Basic:
Weighted average number of shares in issue 22,979,700 22,388,625
Earnings per share 14.31p 19.28p
Diluted:
Weighted average number of shares in issue 23,646,262 22,869,576
Earnings per share 13.91p 18.88p
13. SHARE CAPITAL
Number of shares Total
'000 £'000
As at 31 October 2022 22,340 5,585
Issue of shares 215 54
As at 30 April 2023 22,555 5,639
Issue of shares 400 100
As at 31 October 2023 22,955 5,739
Issue of shares 122 30
As at 30 April 2024 23,077 5,769
The shares issued in the period related to 31,417 in relation to Performance
Share Plan options (2023: 141,766) and 90,837 (2023: 72,372) 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 2024 a total of 23,077,417 shares are in issue (2023:
22,554,586).
14. DIVIDENDS
During the period ended 30 April 2024 an amount of £2,701,000 (2023:
£2,608,000) was charged to reserves in respect of equity dividends paid. An
interim dividend of 5.6p per share (2023: 5.5p) will be paid on 31 October
2024 to shareholders on the register on the 27 September 2024. New elections
to receive Scrip Dividends should be made in writing to the Company's
Registrars before 17 October 2024.
15. 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 cashflow hedge
reserve, which represents the IFRS9 fair values realised through other
comprehensive income.
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 2024 the ESOP Trust, which is consolidated within the Group
financial statements, held 82,000 (2023: 127,000) Ordinary Shares in the
Group.
16. RESTATEMENT OF PRIOR PERIODS
There is no impact on the audited full year financial statements for the years
ending 31 October 2023.
To ensure consistency with year-end accounting policies and stated results,
the Directors have made certain limited restatements to previously reported
interim results for the period to 30 April 2023. These are summarised as
follows:
· Item 1: The Group's gross share of the results of its joint
ventures and associates for the six month period to 30 April 2023 of £599,000
have been included in the consolidated income statement, as have the Group's
proportion of joint venture related tax of £133,000. Inclusion is in line
with the Group's accounting policy and better reflects the net profit earned
in the interim period;
· Item 2: Certain haulage costs of £1,783,000 incurred in the six
month period to 30 April 2023 are now allocated to distribution costs.
Previously, these were reported as cost of sales. This restatement makes
their classification consistent with the audited results of the year ended 31
October 2023.
The impact on the condensed consolidated statement of comprehensive income for
the period ended 30 April 2023 is summarised as follows:
Unaudited six months ended 30 April 2023 (as reported) Item 1 Item 2 Unaudited six months ended 30 April 2023 (as restated)
£'000 £'000 £'000 £'000
Revenue 409,139 - - 409,139
Cost of sales (369,194) - 1,783 (367,411)
Gross profit 39,945 - 1,783 41,728
Manufacturing distribution and selling costs (29,199) - (1,783) (30,982)
Operating profit 5,478 - - 5,478
Share of profits in joint ventures - 599 - 599
Share of tax incurred by joint ventures - (133) - (133)
Profit before taxation 5,074 466 - 5,540
Profit for the period 3,851 466 - 4,317
Total comprehensive income for the period 3,635 466 - 4,101
Basic Earnings per 25p share 17.20p 2.08p - 19.28p
Diluted Earnings per 25p share 16.84p 2.04p - 18.88p
Effective tax rate 24.1% (2.0%) - 22.1%
The impact on the condensed consolidated balance sheet at 30 April 2023 is as
follows:
Unaudited 30 April 2023 (as reported) Item 1 Item 2 Unaudited 30 April 2023 (as restated)
£'000 £'000 £'000 £'000
Investments accounted for using the equity method 4,100 466 - 4,566
Non-current assets 59,269 466 - 59,735
Total assets 229,469 466 - 229,935
Net assets 131,968 466 - 132,434
Retained earnings 80,113 466 - 80,579
Total equity 131,968 466 - 132,434
There is no impact on the condensed consolidated cash flow statement for the
period ended 30 April 2023.
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