Final Results
Wynnstay Group PLC
23 January 2008
WYN
WYNNSTAY GROUP PLC
('Wynnstay' or 'the Group')
Final Results for the year ended 31 October 2007
Based in Wales, Wynnstay supplies agricultural products and services for
farmers. The Group also operates a network of stores providing a wide range of
agricultural and country lifestyle products, and dedicated pet product stores
under the 'Just for Pets' brand.
Key Points
• Record results in a year of volatile trading conditions:
- driven by outperformance of grain & raw material trading
business
• Results reflect success of strategy to act as consolidator in
agricultural industry while developing consumer retailing activities:
- launch of Just for Pets dedicated pet store format in June
- country stores network expanded
- complementary agricultural acquisitions
• Group revenue rose by 42% to £157.0m (2006: £110.9m)
• EBITDA increased by 25% to £5.13m (2006: £4.1m)
• Group pre-tax profit* rose by 23% to £3.25m (2006: £2.64m)
• Earnings per share increased to 19.63p (2006: 19.12p)
• Net assets rose by 12% to £28.4m (2006: £25.3m)
• Return on net assets increased to 12.3% from 10.8%
• Proposed final dividend of 3.625p per share, making total of 5.5p for
the year (2006: 5.25p), up by 5% over last year
• Post year end, acquisition of Wilsons Pet Centres:
- 10 pet superstores, based in West Midlands
- acquisition to be immediately earnings enhancing
• Board confident of Group's prospects
- full benefits of acquisition activity to come
* Group pre-tax profits include the Group's share of pre tax profits from joint
venture and associate investments
Bernard Harris, Managing Director, commented,
'I am pleased to report record results for the year ended 31 October 2007,
despite facing some of the most highly volatile trading conditions in recent
decades. The trading elements of our agricultural business, especially grain and
raw materials trading, benefited hugely from the increase in prices for most
basic feed commodities, and as a result, Glasson, in particular, enjoyed an
outstanding year.
Wynnstay's creditable performance in the face of the challenging trading
environment is a reflection of the strategy we have been pursuing over recent
years, that of acting as a consolidator in the agricultural distribution sector,
and at the same time, extending the Group's consumer retailing activities,
particularly within the area of pet care. Our acquisition last week of a major
pet store chain in the West Midlands moves us forward with our plans to develop
our new pet brand, 'Just for Pets', and represents an exciting development.
I remain confident that the Group will continue to make substantial progress in
2008 as we see the full benefits from our acquisition activity coming through.'
Enquiries:
Wynnstay Group plc Bernard Harris, Managing T: 020 7448 1000 today
Director Thereafter: 01691
Paul Roberts, Finance Director 828512
Biddicks Katie Tzouliadis T: 020 7448 1000
WH Ireland Limited David Youngman T: 0161 832 2174
(NOMAD) Stuart Forshaw
Shore Capital Guy Peters T: 020 7408 4090
CHAIRMAN'S STATEMENT
Introduction
I am pleased to report record results for the year ended 31 October 2007,
despite facing some notable challenges.
The greatest challenges came with some of the most highly volatile trading
conditions Wynnstay has experienced in recent decades, with most basic feed
commodity prices rising substantially. In the second half of the year in
particular, wheat prices continued to climb with the cost of other feed
ingredients following suit. At the same time, we saw continuing rises in power
and fuel costs.
While the impact of this was negative for some of the Group's activities, rising
raw material prices drove excellent performances from Glasson Group ('Glasson')
and Shropshire Grain Ltd, our grain trading operation.
Wynnstay's creditable performance in the face of the challenging trading
environment is a reflection of the strategy we have been pursuing over recent
years, that of acting as a consolidator in the agricultural distribution sector,
and at the same time, extending the Group's consumer retailing activities,
particularly within the area of pet care.
I am pleased to highlight a significant event that occurred following the year
end, in early January 2008, namely the acquisition of Wilsons Pet Centres
('Wilsons'). Comprising 10 pet superstores, the acquisition of Wilsons
represents significant progress in our ambition to build a chain of stand-alone
pet stores under our 'Just for Pets' brand. The acquisition is earnings
enhancing and expands our presence in this market significantly.
Financial results
The financial accounts for the year to 31 October 2007 have been prepared for
the first time under International Accounting Standards and accordingly the
Group's results for 2006 have been restated.
The performance of the business is regularly monitored against Key Performance
Indicators (KPIs) and I am pleased to provide details of these as follows:
* Revenue: the invoiced value of sales from the Group's activities, measured
at a fair value net of all rebates, excluding value added tax.
* EBITDA: Group pre-tax profit, including share of pre-tax profits of joint
ventures and associates, before interest, taxation, depreciation and
goodwill impairment charges.
* Earnings per Share: profit for the year after taxation divided by the
weighted average number of shares in issue during the year excluding any
shares held by the Group' s Employee Share Ownership Trust.
* Return on Net Assets: Group pre-tax profit, including share of pre-tax
profits of joint ventures and associates before any goodwill impairment
charge, divided by the balance sheet net asset value.
* Net Assets per Share: the balance sheet net asset value divided by the
weighted average number of shares in issue during the year, excluding any
shares held by the Group's Employee Share Ownership Trust.
The comparative results for these indicators for the financial year are as
follows:
2007 2006
Revenue £157.0 million £110.9 million
EBITDA £5.128 million £4.096 million
Earnings per share 19.63 pence 19.12 pence
Return on net assets 12.34% 10.78%
Net assets per share £2.41 £2.45
* Revenue increased by 42%, which reflected a full year contribution from
Glasson which was acquired in August 2006 and accounted for £34.4 million
of the increase of £46.1million.
* EBITDA increased by 25%, which again reflected an excellent performance
from acquisitions.
* Return on net assets show a 14% improvement over the previous year but
continues to reflect the significant investment made by the Group for
future developments.
* Net assets per share are still stated using historical values for property
and other fixed assets of the Group.
International financial reporting standards have required a change to the layout
of the Group's Income Statement so that the share of profits of our joint
venture and associate investments are shown after their respective taxation
charge. Before this presentational change the Group's pre-tax profit was
£3.247m, an increase of 22.9% over the equivalent figure of £2.642m last year.
After reflecting the presentational change, reported pre-tax profit increased by
25% to £3.063m from £2.456m last year. After a Group taxation charge of £0.751m
(2006: £0.478m), earnings per share were 19.63p against 19.12p in 2006. Group
net assets at the year end stood at £28.4m (2006: £25.3m) and gearing was a
conservative 25%. After the year end, a small share placement took place raising
£1.21m after costs.
Dividend
An interim dividend of 1.875p per share was paid on 31 October 2007 and the
Board is now recommending a final dividend of 3.625p per share, making a total
for the year of 5.50p per share, an increase of 5% over last year. The final
dividend will be paid on 30 April 2008 to shareholders on the register at the
close of business on 28 March 2008.
Review of Trading
Trading conditions were volatile, with unprecedented rises in the price of
wheat. The trading elements of our agricultural business, particularly grain and
raw materials trading, benefited hugely from the increase in prices for most
basic feed commodities. As a result, Glasson, in particular, enjoyed an
outstanding year. This helped to counterbalance the negative impact on our Feed
Division.
The overall effect of rising feed commodity prices on our Arable Division was
positive and sales of cereal seeds during the autumn planting period reached
record levels. Fertiliser sales were more mixed, with a buoyant spring market,
as the arable farming sector was encouraged by rising commodity prices, but a
subdued summer market as very wet weather conditions rendered the application of
fertiliser impossible. There was some recovery in fertiliser sales in the autumn
as farmers stocked up ahead of impending substantial price increases, however,
the overall annual tonnage increase in the year was relatively modest,
especially after last year's drop in fertiliser sales.
In our Feed Division, the huge price increases impacted feed production costs
and the process of passing on these rises continues. The dairy sector has
experienced a substantial increase in milk prices of up to 40% during the
autumn, which has relieved some of the pressure on that sector. Egg producers
have also received increased returns and this is proving beneficial to producers
in our free range egg scheme, which continues to expand.
The Stores Division had a busy period, working on a number of bolt-on
acquisitions while at the same time improving the existing estate of stores. The
acquisition of T&M Williams and Westhope Livestock Supplies in August and MVZ
Farm Supplies just before the year end added three stores, taking the total
number of traditional rural stores to 27 at the end of the period. The
acquisition of Wrekin Country Stores and J Hatton Agriculture following the year
end added a further three stores and therefore the number of traditional rural
stores now stands at 30. However, trading over the year was mixed. We
experienced a flat performance from general agricultural retailing as the beef
and sheep production sector remains under severe financial pressure, with low
pricing (due to the recent foot and mouth restrictions on export) and rising
costs. However, we are continuing to see good sales growth in pet and equine
products.
In June 2007, we launched our first stand-alone pet store in Telford, which
trades as 'Just for Pets', as part of our strategy to expand our pet products
retailing activities. The acquisition of Wilsons, announced on 14 January, is a
major step forward in developing this side of the business.
Following a successful start to the year, the extremely wet weather during the
summer had a very detrimental effect on our horticultural business, Foxmoor,
with sales brought virtually to a stand-still in June and July.
The performance of our joint venture and associate activities was generally
good. In particular, Wyro Developments Ltd, our property development business,
experienced another excellent year and continues to make good progress.
Staff
On behalf of the Board, I would like to extend our thanks to our staff for all
their hard work over the year. Their efforts have helped the Group to deliver
the creditable results we achieved this year.
Prospects
The increase in world demand for cereals and other food commodities, due to
Asian economic growth, climate change and biofuel production, has resulted in
dramatic price rises, which are likely to be sustainable in the medium term.
This trend will underpin demand for seeds and fertiliser and so bring benefits
to our Arable Division. The sector of UK agriculture currently experiencing the
greatest difficulty is the livestock sector, notably sheep and to a lesser
extent beef. With a steady reduction in the size of the national sheep flock,
prices should improve but a lifting of the export ban after the recent foot and
mouth outbreak is also critical to the viability of UK sheep production.
The Group's strategy is to focus on market segments which offer good growth
potential and will generate improving returns. Acquisitions have been a major
feature of the Group's strategy for a number of years. As the agricultural
supply industry has contracted, the Group has acted as a consolidator, gaining
market share and greater geographical coverage. At the same time, we are focused
on developing our consumer retail activities. Our very recent acquisition of
Wilsons adds critical mass to our pet products retailing activities and provides
a substantial base from which to develop this business. We believe that our
strong balance sheet and considerable cash flow position us well to make further
progress and to continue to acquire businesses that are finding market
conditions more difficult.
I remain confident that the Group will continue to make substantial progress in
2008 as we see the full benefits from our acquisition activity coming through. I
look forward to updating shareholders on the Group's progress at the Annual
General Meeting in March 2008.
John Davies
Chairman
MANAGING DIRECTOR'S STATEMENT
INTRODUCTION
I am pleased to report that Wynnstay achieved record results this year. This is
a creditable performance coming against a background of rapidly rising commodity
prices and the most volatile trading conditions seen in my 40 years in the
industry.
The Group managed this volatility skilfully and our trading businesses, most
significantly Glasson and Shropshire Grain, performed well above budget. In
contrast, rising commodity prices and fuel costs continue to impact on the
profitability of the Feed Division, where we are working hard to pass on some of
the cost increases and improve margins. It is now encouraging to see the rise in
the price of dairy products, which is directly benefiting our dairy farmer
customers, as well as better pricing for egg producers. This should help us to
pass on increased costs. However, sheep meat prices remain depressed, with beef
prices suffering too.
The agricultural market is undergoing considerable consolidation and we continue
to play a role in this process. We completed a number of bolt-on acquisitions
during the year, including T&M Williams Ltd, Westhope Livestock Supplies Ltd and
MVZ Farm Supplies Ltd. Following the financial year end, we acquired Wrekin
Country Stores and J Hatton Agriculture. These businesses represent a
complementary fit with our existing core activities and expand our reach into
new geographic territories.
Very recently, we took a major step forward in developing our retailing
activities with the acquisition of Wilsons Pet Centres announced on 14 January
2008. The acquisition helps us to accelerate the growth of our 'Just for Pets'
brand, adding 10 new pet superstores in the West Midlands and we see the
potential to build a substantial chain of dedicated pet stores under our 'Just
for Pets' brand.
REVIEW OF TRADING
AGRICULTURAL ACTIVITIES
Feed Division
The Feed Division manufactures and markets a wide range of animal nutrition
products for farm livestock. It operates from a number of compound feed mills
and blending plants, either wholly owned or franchised under manufacturer
agreements throughout England and Wales.
Market conditions were difficult for this area of our agricultural business,
with rising ingredient and energy prices keeping margins under pressure.
Compound feed sales improved by 3.5%. We saw good growth in the dairy feed
sector in the second half, boosted by a concerted sales campaign, and this has
continued into the early winter period. Conversely, there was a marked fall in
sheep feed sales as reported at the half year, due to very mild weather
conditions and the decreasing national flock.
Improved prices for egg producers are helping to recruit new members for our
free-range egg production scheme and the benefits of this were particularly
enjoyed during the autumn period. As a result of winning a contract to supply a
large pig producer, sales of pig feed have improved by 64%.
Blended feed sales continued to increase, although the cost advantage for these
products has been eroded over recent months as compound feeds are now proving
more competitive. We expect this buying shift from blends to compound feeds to
increase over the next year.
We continue to work closely with contract feed manufacturers to enable us to
continue to widen our geographical distribution base and also to supply product
in the long term to some of the recent acquisitions.
Our raw material trading activities, as stated previously, have enjoyed an
exceptional year, both in grain trading and in feed ingredients, where markets
have risen markedly. The volatility in the grain market, particularly traded on
the London Futures Market, has been exceptional and we have been able to exploit
opportunities fully.
Glasson Group
Acquired in August 2006, Glasson acts as a shipper and trader of raw materials
and operates the port of Glasson, near Lancaster. Glasson also operates a
fertiliser blending plant and manufactures ingredients for the pet food
industry.
In its first full year contribution to the Group, Glasson's businesses performed
outstandingly, delivering profits considerably higher than budgeted. It was
particularly pleasing to see the fertiliser blending activity increase its
profitability substantially. Some £43m of revenues were generated by the
business during the year. While we are particularly pleased with this first
contribution, we do not anticipate Glasson replicating this performance during
2008.
Arable Division
The Arable Division supplies a wide range of services and products including
cereal and herbage seeds, fertilisers and agro-chemicals for arable grassland
farmers. It has the only major cereal processing plant in the western half of
England. It also has its own grain trading arm, Shropshire Grain Limited, which
provides a marketing service throughout the Group's trading area.
The Arable business saw cereal seed sales hit record levels, aided by both very
good planting conditions and the abolition of the EU Set Aside requirement.
While fertiliser sales started the year strongly, they suffered as a result of
the wet summer weather. There were substantial price increases during the autumn
and fertiliser prices are now 40% higher on a rolling annualised basis and this
is affecting volumes. The UK fertiliser manufacturing industry continued to
rationalise in 2007 and this is expected to bring long term benefits to the
Group. We are now one of the four largest customers of Growhow, the only
producer of compound fertilisers in the UK. Together with the Glasson fertiliser
blending activity in Lancashire, our position in the market offers the
opportunity to extend our geographical reach and also supply additional outlets
recently acquired by the Group.
Shropshire Grain enjoyed a particularly successful year with grain volume and
margins both increasing sharply. The unprecedented degree of volatility,
including dramatic surges in grain prices during the period, presented new
challenges. I am very pleased to report the team responded skilfully to those
challenges and made the best of a demanding trading period, especially in the
second half of the year following the 2007 harvest.
Looking ahead at the soft commodity markets, we see more turbulent times and
view this as an opportunity for Shropshire Grain to continue to gain market
share. In such markets, suppliers and customers value the superior service
package Shropshire Grain offers as a financially strong and dependable regional
merchant. We intend to take full advantage of opportunities which may arise to
expand the business.
RETAIL ACTIVITIES
Stores Division
The Stores Division operates rural retail outlets in Mid and North Wales,
Shropshire, Staffordshire, Worcester and Lancashire and sells an extensive range
of products to professional farmers and growers as well as the general public.
The business has recently entered the pet care market.
Retail sales account for 22% of the Group turnover and for reporting purposes,
includes our small horticulture business, Foxmoor Horticulture, based in the
South West of England. Retail sales on a like-for-like basis improved by 2.5%.
We achieved some very good growth in certain product areas. In particular, pet
product sales increased by 12.5%, helped by the opening of our first dedicated
pet store, 'Just for Pets', in Telford in June. Equine product sales rose by
10.4% and animal healthcare products sales improved by 9.36%, including a small
contribution from acquisitions made in the autumn. In contrast, some traditional
agricultural product sales fell, due to tighter economic conditions for
livestock producers and a decrease in sales of animal feed supplements because
of the very mild weather in the late winter. Other areas of continuing growth
are general hardware products as well as fishing and shooting goods although the
total figure for the latter is modest.
Business at Foxmoor Horticulture, a large scale producer of pot plants and
shrubs, was severely disrupted by wet weather during the critical selling period
in June and July. Therefore, the benefits of strong early spring sales were lost
in the summer and costs in the business were considerably higher than budgeted.
We are taking steps to restore the business to profitability as soon as
possible.
The retail team also supervised the commissioning and building of a major new
flagship store at our Head Office site in Llansantffraid. This superb facility,
featuring an extensive outside sales area, will provide a huge retail gain to
the site. The building incorporates a Spar Convenience Store and although the
new store had only been open for a few weeks, at the time of writing, it is
trading ahead of budget.
We continue to be active with acquisitions. During the year, we completed the
purchase of MVZ Farm Supplies, T&M Williams and Westhope Livestock Supplies.
These new stores expand our presence in both our existing and new geographic
areas. Westhope, based in Hereford, provides us with a springboard into the
southern border counties and has healthy sales of animal nutrition products,
with strong links to dairy farmers in the area, offering the potential to
improve our dairy feed sales. T&M Williams is located in Tregaron, West Wales,
and enhances our distribution of animal health products as well as a broad range
of other agricultural products. MVZ operates from an excellent site in
Droitwich, adjacent to the M5/M42 motorway network, and will provide a
distribution service for animal healthcare and nutritional supplementary
products into the Cotswolds and beyond.
After the year end, we acquired two shops from Wrekin Farmers Ltd, one in
Telford and the other in Stafford. These will provide a useful 'in fill' in our
chain's geographic coverage from the Welsh borders into the Midlands. In
addition, our acquisition in January 2008 of J Hatton Agriculture, in
Lancashire, which trades extensively in animal healthcare products, provides us
with a larger base from which to grow in the important Lancashire livestock
area. Our existing store in Lancashire, acquired with the Glasson business last
year, will be incorporated into this business and will expand its product range.
By the end of 2008, we aim to achieve total Group animal healthcare product
sales in excess of £10m. This in turn will substantially improve our buying
power and market presence against a shrinking manufacturing base.
Following the year end, we have completed the acquisition of Wilsons Pet
Centres, our first acquisition in pet retailing. The acquisition comprises 10
pet superstores in the West Midlands and accelerates our expansion in this
market. As well as adding critical mass, Wilsons brings additional expertise and
will also act as another additional channel for our animal healthcare products.
The business is also a member of a purchasing consortium, sourcing pet
accessories from the Far East and other developing markets. This supply chain
and distribution function should enhance our existing pet product offering
through our traditional Wynnstay rural retail stores.
JOINT VENTURES AND ASSOCIATE COMPANY
The Group has interests in three joint ventures and one associate company.
Wyro Developments
Wyro enjoyed another successful year with increased sales activity on its second
development near Newtown, Powys. This site is expected to be completely sold by
the spring 2008, meaning that the two sites in this area will have yielded sales
of 110 dwellings in total. Work has commenced on a further site near Newtown,
with good initial interest for the mixed housing offered. Despite reports of a
slowing housing market activity, we are confident that our policy of selling
quality houses at competitive prices will result in further success during 2008.
Wyro has acquired a site near Kerry in Mid-Wales for which it is now seeking
detailed planning permission. The business is also negotiating for further
suitable sites to increase its land bank.
Youngs Animal Feeds
Youngs continues to develop the Molichop brand of high fibre equine feed. Output
is steadily increasing from our new plant at Standon in Staffordshire and we
have won a considerable amount of own label business to complement the Molichop
activity.
Welsh Feed Producers
Our joint venture mill in Carmarthen enjoyed excellent sales. Tonnage produced
in the plant reached record levels and considerable capital expenditure has
further enhanced product quality and output.
Wynnstay Fuels (Associate Company)
Wynnstay Fuels, which distributes agricultural and domestic fuels, continued to
make progress during the year. Fuel volumes increased and recent substantial
rises in fuel costs have helped margins. Wynnstay Fuels continues to expand the
business from the Rhosfawr distribution facility in North Wales and we are
looking for further opportunities to expand the business.
OUTLOOK
Food inflation is currently accepted as an inevitability and primary producers
will continue to benefit from this. In addition, local sourcing and food miles
are becoming increasingly important issues for multiple retailers through
consumer pressure. These trends should help our business by improving the market
for all of our core products, although the rising raw material costs may balance
out some of this increase.
Rationalisation in the fertiliser manufacturing industry in the UK will give us
long term benefits, supported by the substantial market share we enjoy on the
western side of Britain. The Glasson fertiliser blending facility will also
provide an additional range of products to complement our distribution of
Growhow fertilisers.
I am confident that our recent acquisitions will deliver in the current
financial year, both in agriculture and retail. I am pleased with the progress
we have made in retailing and the bolt-on agricultural acquisitions will further
strengthen our product offering and geographical coverage. The addition of
Wilsons pet superstores is a major step forward in our growth plan to become
substantial pet retailers. The ability to source directly from the Far East for
the first time will be a major competitive advantage and should benefit our
retailing business across the Group. Including the new Wilsons stores, we now
have a total of 41 retail outlets from which further synergistic and purchasing
benefits should flow through.
As this is my last report before stepping down as Managing Director in May 2008,
I am delighted that we have achieved such an excellent performance in 2007,
despite the many challenges, and that we continue to build firm foundations for
the future. I would like to take this opportunity of passing on my sincerest
thanks to fellow Directors for their ongoing help and the wonderful group of
colleagues, who have worked with me during the last 28 years. Most importantly
of all, may I thank shareholders for their continuing support of our business
which I have appreciated hugely.
Bernard Harris
Managing Director
WYNNSTAY GROUP PLC
CONSOLIDATED INCOME STATEMENT
For the year ending 31 October 2007
2007 2006
Note £000 £000
--------- ---------
Continuing operations
Revenue 2 157,047 110,883
Cost of sales (133,832) (91,397)
--------- ---------
GROSS PROFIT 23,215 19,486
Distribution costs (17,553) (14,865)
Administrative expenses (2,535) (2,276)
Goodwill impairment (257) (89)
--------- ---------
OPERATING PROFIT 4 2,870 2,256
Net finance costs 3 (355) (230)
Share of profits/losses in associates
and joint ventures 732 616
Share of tax incurred in associates
and joint ventures (184) 548 (186) 430
-------- -------- ------- -------
PROFIT BEFORE TAXATION 3,063 2,456
Taxation (751) (478)
--------- ---------
PROFIT FOR THE YEAR 2,312 1,978
Earnings per 25p share 6 19.63p 19.12p
Diluted earnings per 25p share 6 18.89p 16.48p
========= =========
All of the above are derived from continuing operations
There were no recognised income and expenses for 2007 and 2006 other than those
included in the consolidated income statement above.
WYNNSTAY GROUP PLC
CONSOLIDATED BALANCE SHEET
As at 31 October 2007
2007 2006
Note £000 £000
----------- -----------
ASSETS
NON-CURRENT ASSETS
Goodwill 3,614 3,055
Property, plant and equipment 11,534 10,946
Investment in subsidiaries - -
Investments accounted for using equity method 3,972 3,334
----------- -----------
19,120 17,335
----------- -----------
CURRENT ASSETS
Inventories 9,186 8,238
Biological assets 1,675 1,388
Trade and other receivables 24,476 19,508
Financial Assets
- loan to joint venture 4,852 2,750
Cash and cash equivalents 722 1,181
----------- -----------
40,911 33,065
----------- -----------
LIABILITIES
CURRENT LIABILITIES
Financial liabilities - borrowings (4,763) (4,316)
Trade and other payables (23,050) (17,760)
Current tax liabilities (435) (393)
----------- -----------
(28,248) (22,469)
----------- -----------
NET CURRENT ASSETS 12,663 10,596
----------- -----------
NON-CURRENT LIABILITIES
Financial liabilities - borrowings (2,843) (2,061)
Deferred tax liabilities (551) (528)
Other non-current liabilities - -
Provisions - -
----------- -----------
(3,394) (2,589)
----------- -----------
NET ASSETS 28,389 25,342
----------- -----------
EQUITY
Ordinary shares 7 3,125 2,867
Share premium 10 8,597 7,673
Other reserves 10 1,778 1,582
Retained earnings 10 14,889 13,220
----------- -----------
TOTAL EQUITY 10 28,389 25,342
=========== ===========
WYNNSTAY GROUP PLC
CONSOLIDATED CASHFLOW STATEMENT
For the year ending 31 October 2007
2007 2006
Note £000 £000
----------- -----------
Cash flows from operating activities
Cash generated from operations 9 1,447 2,827
Interest received 287 188
Interest paid (653) (426)
Tax paid (686) (482)
----------- -----------
Net cash flows from operating activities 395 2,107
----------- -----------
Cash flows from investing activities
Acquisition of subsidiaries (net of cash
acquired) (769) (3,782)
Investment in subsidiary company - -
Proceeds from sale of property, plant and
equipments 375 44
Purchase of property, plant and equipment (1,532) (1,629)
Purchase of intangible assets (114) (200)
Proceeds on sale of investments - 40
Purchase of investments (91) (182)
Dividends received 11 8
----------- -----------
Net cash used by investing activities (2,120) (5,701)
----------- -----------
Cash flows from financing activities
Net proceeds from the issue of ordinary share
capital 1,182 250
Purchase of shares ESOP - (213)
Net proceeds from drawdown of new loans 2,663 3,000
Finance lease principal repayments (434) (338)
Repayment of borrowings (1,501) (530)
Dividends paid to shareholders (643) (708)
----------- -----------
Net cash generated from financing activities 1,267 1,461
----------- -----------
Net decrease in cash and cash equivalents (458) (2,133)
Cash and cash equivalents at the beginning of
the period (696) 1,437
----------- -----------
Cash and cash equivalents at the end of the
period (1,154) (696)
----------- -----------
WYNNSTAY GROUP PLC
NOTES TO THE ACCOUNTS
For the year ending 31 October 2007
1. ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these financial
statements are set out below. These policies have been consistently applied to
all years presented, unless otherwise stated.
Basis of preparation
These financial statements have been prepared in accordance with International
Financial Reporting Standards and IFRIC interpretations and with those parts of
the Companies Act 1985 applicable to companies reporting under IFRS. The
financial statements have been prepared under the historical cost convention
other than certain assets which are at deemed cost under the transition rules
and share based payments which are included at fair value. A summary of the more
important group accounting policies is set out below, together with an
explanation of where changes have been made to previous policies on the adoption
of new accounting standards in the year.
The preparation of financial statements in conformity with generally accepted
principles requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results ultimately may differ
from those estimates.
Changes in accounting policy
The consolidated financial statements for the year ended 31 October 2007 are the
first financial statements to be prepared in accordance with IFRS. IFRS 1
details the requirements and guidance to be used by the first time adopters of
IFRS in preparing their first IFRS accounts. IFRS 1 requires the Group to select
accounting policies at 1 November 2006 and to apply these retrospectively from 1
November 2005, the 'date of transition'.
IFRS 1 provides optional exemptions to first time adopters. The exemptions
adopted by the Group are as follows:
IFRS 2 - Share Based Payments - The Group has taken advantage of the exemption
not to recalculate equity settled awards granted before 7 November 2002.
IFRS 3 - Business Combinations - Business Combinations which took place prior to
the date of transition have not been restated.
Basis of consolidation
The consolidated financial statements comprise Wynnstay Group Plc and all its
subsidiaries together with the Group's share of the results of its associates
and joint ventures. Group inter-company transactions are eliminated in full.
Results of subsidiary undertakings acquired are included in the financial
statements on an acquisition basis, from the effective date of control. The
separable net assets, both tangible and intangible, of acquired subsidiary
undertakings are incorporated into the financial statements on the basis of
their fair value as at the effective date of control.
Subsidiaries are entities where the Group has the power to govern the financial
and operating policies, generally accompanied by a share of more than 50% of the
voting rights. Subsidiaries are consolidated from the date on which control is
assumed by the Group and are included until the date the Group ceases to control
them. Associates are entities over which the Group has significant influence but
not control, generally accompanied by a share of between 20% and 50% of the
voting rights. Joint ventures are entities over which the Group has joint
control. Investments in associates and joint ventures are accounted for using
the equity method.
Revenue recognition
Revenue represents the invoiced value of sales which fall within Wynnstay
Group's ordinary activities. Revenue is measured at the fair value of the
contract net of rebates excluding value added tax.
Segmental reporting
The Group's primary reporting format is business segments. A business segment is
a component of the Group that is engaged in providing a group of related
products and is subject to the risk and returns that are different from other
business segments. The Group operates in one geographical segment being the UK.
Financial instruments
Financial assets and liabilities are recognised on the Group's consolidated
balance sheet when the Group becomes a party to the contractual provisions of
the instrument.
Leases
Leases are classified as finance leases at inception where substantially all of
the risks and rewards of ownership are transferred to the Group. Assets
classified as finance leases are capitalised on the consolidated balance sheet
and are depreciated over the expected useful life of the asset. The interest
element of the rental obligations is charged to the consolidated income
statement over the period of the lease.
Rentals paid under operating leases are charged to the consolidated income
statement on a straight-line basis over the term of the lease. Leasehold land is
normally classified as an operating lease. Payments made to acquire leasehold
land are included in repayments at cost and are amortised over the life of the
lease. Any incentives to enter into operating leases are recognised as a
reduction of rental expense over the lease term on a straight-line basis.
Property, plant and equipment
Property, plant and equipment is stated at cost, net of accumulated depreciation
and any provision for impairment losses. Depreciation is provided at rates
calculated to write off the cost of fixed assets on a straight line basis over
their expected useful lives as follows:
Freehold property - 2.5% - 5% per annum straight line
Plant and machinery/office equipment - 10% - 33% per annum straight line
Motor vehicles - 20% - 30% per annum straight line
Leasehold land & buildings - 3% per annum reducing balance
Goodwill
Goodwill arising on consolidation represents the excess of the cost of
acquisition over the fair value of the identifiable assets, liabilities and
contingent liabilities of the acquired entity at the date of the acquisition.
At the date of acquisition, goodwill is allocated to cash generating units for
the purpose of impairment testing. Goodwill is recognised as an asset and
assessed for impairment annually. Any impairment is recognised immediately in
the income statement. Once recognised, an impairment of goodwill is not reversed
under any circumstance.
Impairment of assets
At each reporting date, the Group assesses whether there is any indication that
an asset may be impaired. Where an indicator of impairment exists, the Group
makes an estimate of recoverable amount. Where the carrying amount of an asset
exceeds its recoverable amount the asset is written down to its recoverable
amount. Recoverable amount is the higher of fair value less costs to sell and
value in use and is deemed for an individual asset. If the asset does not
generate cash flows that are largely independent of those from other assets or
groups of assets, the recoverable amount of the cash generating unit to which
the asset belongs is determined. Discount rates reflecting the asset specific
risks and the time value of money are used for the value in use calculation.
Inventories and biological assets
Inventories are stated at the lower of cost and net realisable value. Cost
comprises direct materials and, where applicable, direct labour costs and those
overheads that have been incurred in bringing the inventories to their present
location and condition. Where appropriate, cost is calculated on a specific
identification basis. Otherwise inventories are valued using the
first-in-first-out method. Net realisable value represents the estimated selling
price less all estimated costs to completion and costs to be incurred in
marketing selling and distribution.
Biological assets, which are principally comprised of horticultural growing
stocks (separately indefinable plants) are measured at fair value based on
estimated selling price less estimated point of sale costs, in accordance with
IAS 41.
Taxation including deferred taxation
Provision is made in full for all taxation deferred in respect of timing
differences that have originated but not reversed by the balance sheet date. D
eferred tax assets are recognised to the extent that it is more likely than not
that they will be recovered.
Dividends
Final equity dividends to the shareholders of the Company are recognised in the
period that they are approved by the shareholders. Interim equity dividends are
recognised in the period that they are paid.
Share based payments
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. Fair
value is measured by use of a 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.
Employee share ownership trust
The company operates an employee share ownership trust. The assets, liabilities,
income and cost of the ESOP are incorporated into the financial statements of
the Group.
Significant judgments, key assumptions and estimates
Application of certain Group accounting policies requires management to make
judgments, assumptions and estimates concerning the future as detailed below.
Valuation of share-based payments - The fair value of share-based payments is
determined using valuation models and is charged to the income statement over
the vesting period. Estimations of vesting and satisfaction of performance
criteria are required to determine fair value.
Impairment of goodwill - The carrying value of goodwill must be assessed for
impairment annually. This requires an estimation of the value in use of the cash
generating units to which goodwill is allocated. Value in use is dependent on
estimations of future cash flows from the cash generating unit and the use of an
appropriate discount rate to discount those cash flows to their present value.
Provision for impairment of trade receivables - The financial statements include
a provision for impairment of trade receivables that is based on management's
estimation of recoverability. There is a risk that the provision will not match
the trade receivables that ultimately prove to be irrecoverable.
Provision for impairment of inventories - The financial statements include a
provision for impairment of inventories that is based on management's estimation
of recoverability. There is a risk that the provision will not match the
inventories that ultimately prove to be impaired.
2. SEGMENTAL REPORTING
Primary reporting format - business segments
The segment results for the year ended 31 October 2007 are as follows:
Agriculture
Supply Retail Other Total
Year ended 31 October 2007 £000 £000 £000 £000
--------- ------- ------- -------
Revenue 122,133 34,627 287 157,047
--------- ------- ------- -------
Segment result 1,832 1,311 (273) 2,870
Share of results of associates and
joint ventures 194 26 512 732
--------- ------- ------- -------
2,026 1,337 239 3,602
Interest income 298
Interest expense (653)
---------
Profit before tax 3,247
Corporation taxes (935)
---------
Profit for the year attributable to
equity shareholders 2,312
---------
Segment assets 9,820 17,803 6,980 34,603
Unallocated net assets 670
Corporate net borrowings (6,884)
---------
Total Net Assets 28,389
---------
The Group operates in one geographical segment being the UK.
2. SEGMENTAL REPORTING (continued)
Agriculture
Supply Retail Other Total
Year ended 31 October 2007 £000 £000 £000 £000
Revenue 77,968 32,665 250 110,883
--------- ------- ------ ------
Segment result 955 1,514 (213) 2,256
Share of results of associates and
joint ventures 20 52 544 616
--------- ------- ------ -------
975 1,566 331 2,872
Interest income 196
Interest expense (426)
---------
Profit before tax 2,642
Corporation taxes (664)
---------
Profit for the year attributable to
equity shareholders 1,978
-------
Segment assets 9,818 15,048 4,886 29,752
Unallocated net assets 786
Corporate net borrowings (5,196)
-------
Total Net Assets 25,342
-------
3. FINANCE COSTS - NET
2007 2006
£000 £000
------- -------
Interest expense:
Interest payable on borrowings (577) (335)
Interest payable on finance leases (61) (83)
Interest payable on other loans (15) (8)
------- -------
Interest and similar charges payable (653) (426)
------- -------
Interest income 287 188
------- -------
Income from other fixed asset investments 11 8
------- -------
Interest receivable 298 196
------- -------
------- -------
Finance costs net 355 230
------- -------
4. GROUP OPERATING PROFIT
The following items have been included in arriving at operating profit:
2007 2006
£000 £000
------- -------
Staff costs 11,358 9,834
Depreciation of property plant and equipment: - owned assets 1,034 824
- under finance 235 311
leases
Impairment of goodwill 256 89
Loss/ (profit) on disposal of fixed assets (160) (27)
Other operating lease rentals payable - Property 368 313
Repairs and maintenance expenditure on plant, property and
equipment 646 639
Trade receivables impairment 182 -
5. DIVIDENDS
2007 2006
£000 £000
-------- -------
Final dividend paid for prior year 408 507
Interim dividend paid for current year 235 201
-------- -------
643 708
======== =======
The final dividend for the year ending 31 October 2005 paid on the 30 April 2006
of £507,000 was the full amount paid in relation to that Year. Interim dividend
payments were introduced for the 2006 financial year. Subsequent to the year end
it has been recommended in the Directors' Report that a dividend, at a rate of
3.625p net per ordinary share (2006: 3.5p net per ordinary share) be paid.
6. EARNINGS PER SHARE
Basic earnings per Diluted earnings
share per share
2007 2006 2007 2006
£000 £000 £000 £000
------ ------ ------ ------
Earnings attributable to
shareholders (£000) 2,312 1,978 2,312 1,986
------ ------ ------ ------
Weighted average number of
shares in issue during the year
(No.'s) 11,775 10,344 12,238 12,052
------ ------ ------ ------
Earnings per ordinary 25p share
(pence) 19.63 19.12 18.89 16.48
====== ====== ====== ======
Basic earnings per 25p ordinary share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average number of ordinary
shares in issue during the year excluding those held in the Employee Share
Ownership Trust, which are treated as cancelled.
For diluted earnings per share, the weighted average number of ordinary shares
is adjusted to assume conversion of all dilutive potential ordinary shares
(share options and convertible loanstock). An adjustment to earnings is also
made to recognise notional interest saved on convertible loanstock.
7. SHARE CAPITAL
No.of shares 2007 No. of shares 2006
000 £000 000 £000
------- ------- ------- -------
Authorised
Ordinary shares of 25p each 40,000 10,000 40,000 10,000
======= ======= ======= =======
Allotted, called up and fully
paid
Ordinary shares of 25p each 12,501 3,125 11,467 2,867
======= ======= ======= =======
During the year 90,788 shares (2006: 109,394) were issued with an aggregate
nominal value of £22,697 (2006: £27,348) fully paid up for equivalent cash of
£223,821 (2006: £250,361) to shareholders exercising their right to receive
dividends under the Company's scrip dividend scheme.
A total of 925,212 (2006: 17,205) shares with an aggregate nominal value of
£231,303 (2006: £4,301) were also issued for a cash value of £931,119 (2006:
£8,602) to relevant employees exercising options. In addition 17,459 (2006:
1,590,752) shares were issued during the year for cash of £27,480 (2006:
£397,688).
8. POST BALANCE SHEET EVENTS
a) Share Placing. On the 14 November 2007, the Group issued 493,000 new ordinary
25p shares to certain institutional investors at a price of £2.60 each. After
expenses, a total of £1,214,000 was raised which will be used by the Group to
fund its on-going acquisition activities.
b) Acquisitions. Since the year end the Group has completed three acquisitions.
On the 10 December the Group purchased the goodwill and certain assets,
including two agricultural retail outlets from Wrekin Country Stores Ltd, for an
initial consideration of £40,000 plus stock at valuation estimated to be
approximately £260,000 and expenses of £5,000. In the year to the 31 May 2007,
these acquired activities generated revenues of approximately £1.6 million. On
the 4 January 2008, the Group acquired the goodwill and certain assets,
including an agricultural products distribution centre in Lancaster, of J.
Hatton Agriculture for an initial consideration of £237,000, plus stock at
valuation estimated to be approximately £100,000, plus expenses of £10,000. In
the latest available financial statements of this business, the acquired
activities generated revenues of £1.7 million in the year to December 2006.
An assessment of the combined fair value of these acquisitions is given below:
£000
Property, plant and equipment 70
Other current assets 360
-------
Net assets acquired 430
Goodwill arising on acquisition (provisional) 322
-------
Consideration 752
-------
Consideration satisfied by :
Cash paid and expected to be paid 637
Expenses 15
Deferred consideration 100
-------
752
-------
On the 11 January 2008 the Group acquired the entire share capital of Wilsons
Pet Centres Ltd for a gross cash consideration of up to £5.85 million. After
utilising cash acquired with the business of £696,000, as set out in the table
below, the net consideration of up to £5.16 million was satisfied by £4.30
million paid in cash on completion and up to £0.86 million in deferred payments.
Expenses of the transaction amounted to £100,000. For the financial year ending
on the 28 October 2007, Wilsons Pet Centres generated a profit before tax of
£669,000 on revenues of £6.8 million. The business currently operates a chain of
10 pet retail outlets which will be incorporated into the Group's pet retailing
brand 'Just for Pets'. Details of the acquisition costs and net assets of
Wilsons Pet Centres Ltd are given below:
8. POST BALANCE SHEET EVENTS (continued)
Gross Net
£000 £000 £000
Property, plant and equipment 669 - 669
Cash & cash equivalents 885 (696) 189
Other current assets 1,115 - 1,115
Other current liabilities (973) - (973)
------ ------ ------
Net assets acquired 1,696 (696) 1,000
Goodwill arising on acquisition
(provisional) 4,258 - 4,258
------ ------ ------
Consideration 5,954 (696) 5,258
------ ------ ------
Consideration satisfied by :
Cash paid 4,994 (696) 4,298
Expenses 100 - 100
Deferred consideration 860 - 860
------ ------ ------
5,954 (696) 5,258
------ ------ ------
9. CASH FLOWS FROM OPERATING ACTIVITIES
Reconciliation of operating profit to net cash inflow Group
from operating activities: 2007 2006
£000 £000
-------- -------
Net profit 2,312 1,978
Adjustments for:
Tax 935 664
Depreciation of tangible fixed assets 1,269 1,135
Amortisation of other intangible fixed assets 257 89
Profit on disposal of property, plant and equipment (160) (27)
Interest income (298) (196)
Interest expense 653 426
Share of results of joint ventures before taxation (732) (616)
Loans made to joint ventures (2,102) (1,500)
Share based payments 89 6
Changes in working capital (excluding effects of
acquisitions and disposals of subsidiaries):
(Increase)/decrease in inventories (1,018) 728
(Increase)/decrease in trade and other receivables (4,537) 1,702
Increase/(decrease) in payables 4,779 (1,312)
Increase/(decrease) in provisions - (250)
-------- -------
Cash generated from operations 1,447 2,827
======== =======
10. STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
Share Loanstock
Share premium redemption General Retained Total
account reserve reserves earnings
capital
Group £000 £000 £000 £000 £000 £000
------ ------- -------- ------- ------- ------
At 1 November
2005 2,438 4,253 3,153 1,582 12,195 23,621
Inventories
fair value
adjustment -
IAS 41 (due to
first time
adoption of
IFRS) - - - - 72 72
Share based
payment
adjustment
(due to first
time adoption
of IFRS) - - - - (100) (100)
------ ------- -------- ------- ------- ------
At 1 November
2005 2,438 4,253 3,153 1,582 12,167 23,593
Profit
retained for
the year - - - - 1,978 1,978
Shares issued
during the
year 429 3,420 (3,192) - - 657
Fair value
reassessment
of goodwill - - 39 - - 39
Dividends (708) (708)
Adjustment in
respect - - - - (217) (217)
of ESOP
------ ------- -------- ------- ------- ------
At 31 October
2006 2,867 7,673 - 1,582 13,220 25,342
------ ------- -------- ------- ------- ------
Profit
retained for
the year - - - - 2,312 2,312
Shares issued
during the
year 258 924 - - - 1,182
Dividends - - - - (643) (643)
Adjustment in
respect - - - 196 - 196
of share based
payments ------ ------- -------- ------- ------- ------
At 31 October
2007 3,125 8,597 - 1,778 14,889 28,389
------ ------- -------- ------- ------- ------
11. ANNUAL REPORT
The Annual Report and Financial Statements will be posted to shareholders.
Further copies will be available to the public, free of charge, at the Company's
Registered office at Eagle House, Llansantffraid, Powys, SY22 6AQ. A copy will
also be available on the Company's website (www.wynnstay.co.uk) from 31 January
2008.
12. ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held at The Function Suite,
Shrewsbury Town Football Club, Otley Road, Shrewsbury, Shropshire SY2 6ST on 18
March 2008 at 11.30a.m.
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