Preliminary Results
Wynnstay Group PLC
24 January 2007
WYN.L
WYNNSTAY GROUP PLC
('Wynnstay' or 'the Group')
Preliminary Results for the year ended 31 October 2006
Based in Wales, Wynnstay manufactures and supplies agricultural products and
services for farmers and operates a network of 24 stores providing a wide range
of products both for farmers and country dwellers.
Key Points
•Creditable results against challenging trading conditions
- H2 improvement, as expected
- strength of diversified business base reflected in results
•Total turnover of £110.9m
•Pre-tax profit of £2.534m
•Basic earnings per share of 18.08p
•Net assets increased by 10% to £25.26m
•Proposed final dividend of 3.5p per share, making total dividend for the
year of 5.25p, up 5% over last year
•Acquisition in August of Glasson Group (Lancaster) Limited for total of
£2.4m
- benefits Group's three major divisions, Feeds, Arable and Stores
- expected to be earnings enhancing in current financial year
•Launch of 'Just for Pets' stores - exciting new development
- first store to open in Telford with 2 further stores over new financial year
•Board optimistic for outlook for Group
- important Spring market still to come
Bernard Harris, Managing Director, commented,
'This year was especially challenging with the commencement of the EU Single
Farm Subsidy Payment and rising fuel and power prices. However, as anticipated,
we saw an improvement in trading conditions in the second half. Against this
backdrop, our results are creditable and reflect the strength of our diversified
business base.
Looking forward, the launch of our new 'Just for Pets' stores is an exciting
development and we anticipate opening our first dedicated pet products store in
March 2006 and two further stores by the end of the current financial year.
Also, we expect to see the benefits of our acquisition of Glasson to come
through over the year.
While the important Spring market is yet to come, the Board is optimistic for
the outlook for the Group.'
Press enquiries:
Wynnstay Group plc Bernard Harris, Managing Director T: 020 7448 1000 today
Paul Roberts, Finance Director Thereafter: 01691 828512
Biddicks Katie Tzouliadis T: 020 7448 1000
WH Ireland Limited David Youngman T: 0161 832 2174
CHAIRMAN'S STATEMENT
Introduction
In my interim report, I reported that general trading conditions had become more
difficult with the commencement of the EU Single Farm Subsidy Payment and the
impact of higher fuel and power prices, especially on fertiliser production,
where prices reached a 10 year high. In the second half of the year, we saw some
improvement in conditions, however, the factors above continued to impact the
performance of the Group and for the first time in five years, our record of
profits growth (before exceptional items) faltered.
Nevertheless, we have continued to develop the Group, investing in our Stores
Division and in our manufacturing capability. Quins Farm Supplies, which we
acquired in December 2005, has been fully integrated within our Stores business
and we are about to launch our first stand-alone pet store, 'Just for Pets'. Our
new feed blending facility at Rhosfawr, North Wales, became operational in
September and at the time of writing is performing above expectations.
In August, we completed the purchase of our largest acquisition to date, Glasson
Group (Lancaster) Limited ('Glasson') for a total consideration of £2.4m.
Glasson should bring benefits to the Group's three major divisions, Feeds,
Arable and Stores. Given the timing of this acquisition, it has not made an
impact on Group profits this year but I believe it will be earnings enhancing in
the current financial year.
Our joint ventures all performed well and continue to strengthen our diversified
business base.
Financial Results
Excluding the three month contribution of £8.83m from Glasson, turnover was
£102.05m (2005: £100.81m). Pre-tax profit was £2.534m (2005: £2.869m). The
decrease of 11.7% largely reflected the significant drop in fertiliser sales, an
important Group activity, and the impact of increased energy costs. Basic
earnings per share were 18.08p (2005: 22.78p).
Our balance sheet remains strong with net assets of £25.26m (2005: £23.62m), an
increase of 7%. Using the average number of shares in issue during the year, net
assets per share are £2.44 compared with a share price of £2.41 at the time of
writing. Gearing remains conservative at 20%.
Dividend
The Board initiated the payment of an interim dividend this financial year,
which was paid in October 2006 at the rate of 1.75p per share. The Board is now
pleased to recommend a final dividend of 3.5p per share. This makes a total
dividend for the year of 5.25p, an increase of 5% over last year (2005: 5.0p).
The final dividend will be paid on 30th April 2007 to shareholders on the
register at the close of business on 30th March 2007.
Review of Trading
As stated, trading conditions for two of our three major divisions, Feeds and
Arable, were difficult. Passing on energy cost increases will take time. The
dairy sector is affected by very weak milk prices, which is resulting in many
producers leaving the industry, whilst those remaining are reluctant to accept
feed price rises. However, the price of wheat has moved up substantially since
the 2006 harvest and this has encouraged record levels of new planting in the
sector, which will benefit our Arable Division. The increase in wheat prices has
simultaneously raised the cost of producing animal feed considerably and these
price increases have not fully found their way into the feed market.
The Arable Division enjoyed good sales of cereal seeds during the important
autumn planting season, due to excellent weather conditions and the higher price
of wheat. However, as I stated previously, fertiliser sales were poor, which
impacted considerably the Division's performance.
In the Feed Division, the drought conditions in Mid Wales and in the Welsh
Border counties led to strong demand for feed during the late summer and early
autumn, although excellent grass growing conditions after rainfall during
October and November subsequently reduced demand. Both our Llansantffraid mill
and our joint venture operation in Carmarthen enjoyed improved feed sales, with
the latter producing a record tonnage.
Our Stores Division performed well during the year and improved sales in many of
its major product groups. Our major new store at Newtown, Powys, opened in
December 2005, has now enjoyed a full year's trading and performed to budget,
and over the course of the year, we completed the refitting and upgrading of our
stores at Oswestry, in Shropshire, and at Gaerwen and Rhosfawr in North Wales.
We are about to launch our first stand-alone pet store under the 'Just for Pets'
format in Telford and we have plans for at least two more pilot stores during
the financial year, subject to satisfactory lease negotiations.
The overall performance of our other activities, the three joint ventures and
associate company, was good. In particular, Wyro Developments, our property
development joint venture, had an excellent year and continues to add to its
land bank.
Board Change
Having reached the agreed retirement age for Board members, Robert
Jones-Perrott, a Non-executive Director, will be leaving the Board at this
year's A.G.M.
Robert joined the Board of Wynnstay & Montgomeryshire Farmers in 1984, his
family being founder members of the original Wynnstay Farmers Association in
1917.
We are grateful for Robert's tremendous support of the business and wish him a
long, active and happy retirement. We intend to appoint a new Non-executive
Director in due course.
Prospects
We continue to look for improved shareholder value in many areas of the
business. Market conditions are far from ideal but in the Arable Division, we
believe we have seen the bottom of the cycle, with better market conditions
going forward for arable crops, particularly for the bio-fuels sector. The
improved world price for wheat has encouraged higher levels of cereal planting
and this will help fertiliser and seed sales. We are therefore anticipating a
considerable improvement in the performance of the Arable Division over the
coming year.
Whilst conditions in the Feed business are challenging, we are a low cost
producer and will invest further in our infrastructure and distribution
operations, making us well placed to take advantage of the changing conditions.
We will have a full year's contribution from the new feed blending plant at
Rhosfawr. Demand for feed remains strong, however, margins and rising costs are
giving concern and we believe that it will take some time for these to be fully
recovered from the marketplace.
We are budgeting for further growth in the Retail business as the benefits of
store upgrades carried out during 2006 lead to greater sales. The ongoing
refurbishment programme will continue this trend and the opening of our first
'Just for Pets' store is an exciting new initiative. We will continue to look
for further opportunities to expand the number of retail outlets in both
formats.
In the current financial year, the Group will benefit from a full year's trading
from Glasson, with budgeted sales for the year expected at £38m. The business
complements the activities of our three core divisions as well as some of our
joint ventures. The full benefits of this acquisition will be more fully
reflected in results for the financial year 2008, once the business has been
integrated into the Group.
Our Joint Venture businesses will continue to grow, with anticipated higher
sales in Wyro Developments, our property development business, and anticipated
greater growth in our pet and speciality equine business, Youngs Animal Feeds.
I look forward to updating shareholders on the Group's trading at the Annual
General Meeting in March, when I will be in a position to comment on the
important spring market.
John Davies
Chairman
MANAGING DIRECTOR'S REVIEW
INTRODUCTION
Rising power and fuel prices, higher ingredient costs for our feed business and
increased fertiliser prices, coupled with a change in the EU's support payment
system for farmers, affected the Group's results this year. Nevertheless, the
Group produced a creditable result which reflects the success of our diversified
business model.
We continue to make progress in our strategy of acting as a consolidator within
the agricultural sector and in the final quarter of the year, in August, we
purchased the assets of the Glasson Group (Lancaster) Limited ('Glasson').
Glasson is involved in the importation, shipping and trading of animal feed
materials together with fertiliser blending and the manufacture of pet and
speciality products and therefore fits very well with our major businesses.
Outside our three core divisions, our Joint Ventures and Associate Companies
made very good progress. In particular, Bibby Agriculture Limited, established
last year, traded profitably and our property joint venture (Wyro Developments)
and our animal feeds joint venture (Youngs Animal Feeds) achieved particular
success.
REVIEW OF TRADING
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.
This division accounted for 32% of Group turnover and gained market share over
the year, with volumes growing by 5.2%, helped by the prolonged winter weather.
Sheep feed volumes again achieved a record, improving by 22%, and lamb finisher
rations volumes, where we supply a number of major producers, were also
successful. We are looking at ways of differentiating our products for
intensively fed lambs, carrying out extensive research at the Institute of
Grassland and Environmental Research in Aberystwyth, with particular emphasis on
Omega 3, essential fatty acid retention in lamb meat. Compound dairy feeds also
achieved a good performance, with volumes up 7%.
Feed blends are a growing part of the ruminant feed market and our sales grew
rapidly, with Llansantffraid enjoying 140% growth over the previous year.
Further investment was made in automatic production control, product cooling and
in the general enhancement of quality at Llansantffraid mill. Our new feed
blending plant in Rhosfawr, North Wales, came on stream in September and is
currently performing ahead of budget. The plant is expanding its customer base
and offers considerable savings in distribution costs in the area. In order to
service our expanding sales area, we are also using three other suppliers of
blended feeds.
Our specialist partnership in niche egg production continues to grow and we took
on further producers over the year. We will continue to expand this activity as
the market for free range eggs increases.
Our beef feed sales were slightly down. However, we continue to recruit new
producers for our Celtic Pride beef scheme, which produces high quality beef
products, following an exacting protocol, and sells to the top-end of the food
service market.
Our Raw Material trading department had another successful year and continues to
increase its volumes substantially both to farmers and the feed manufacturing
industry.
ARABLE DIVISION
The Arable Division supplies a wide range of services and products, including
seeds, fertilisers and agricultural chemicals to arable and grass-land farmers.
It has its own grain trading arm, Shropshire Grain Limited, which provides a
marketing service throughout the Group's trading area.
Sales in this division accounted for 30% of Group turnover. The division was
affected by a substantial fall in volume sales of fertiliser, which decreased by
12%, as sharply increasing fertiliser prices deterred sales. Farmers and growers
continue to operate on a 'just-in-time' buying policy, reluctant to forward
purchase fertiliser at higher prices. Our recorded fertiliser sales during the
year were also affected by the previous purchasing of large volumes ahead of the
season in Autumn 2005. Lower fertiliser prices are forecast from June 2007
onwards as the price of natural gas, a key component in the manufacturing
process, eases. With lower prices, we should see a pick-up in demand,
particularly from the arable farming sector.
Cereal seed sales were excellent and improved by 9% due to favourable weather
conditions for planting and anticipated higher wheat prices going forward. New
markets for wheat are opening up in the both bio-ethanol sector and also as a
raw material for starch production. Herbage seed sales were maintained in a
market substantially reduced by the drought conditions in much of our trading
area in the late summer.
Following the 2005 harvest which produced consistently good quality grain,
trading markets have been rather flat. Nevertheless, Shropshire Grain - our
in-house grain trading arm - has made the best of a difficult season and
produced a robust performance, maintaining throughput and margins. This has been
assisted by the early months of trading the 2006 harvest which, in contrast to
2005, has produced variable quality grain and therefore greater price
volatility. Grain prices have improved by about 50% since the summer, largely
due to a poor Australian harvest. This is helping to create a more positive
outlook amongst arable farmers and offers us the opportunity for us to improve
margins.
STORES DIVISION
The Stores Division operates 24 retail outlets, in Mid and North Wales,
Shropshire, Staffordshire and Lancashire, and sells an extensive range of
products both to professional farmers and growers as well as to the general
public.
The division accounted for 27% of Group turnover. Total sales improved by 5.2%
and there was very good growth in some key product areas.
Pet food sales improved by 10% and the important equine market grew by 8%.
Household goods, including cleaning products, improved by 20%. It is also
encouraging to see country clothing sales growing by 13% as a result of better
ranging and product offers. Animal healthcare product sales grew by 18%, helped
by the Quins Farm Supplies in December 2005. Quins, which supplies animal health
care and nutrition products as well as general hardware items and a range of
country sporting goods including shotguns, is now fully integrated.
Further margin improvements took place in the eight Eifionydd stores, acquired
some two and a half years ago, due to store improvements and better product
sourcing.
Our new Newtown store enjoyed its first full year of trading, achieving its
target, and sales continue to grow. The store is also piloting a 'One Stop'
fishing tackle shop to complement the Quins offering of shooting and sporting
goods.
Over the year, we completed three major store refits, at Gaerwen (in Anglesey),
and Oswestry (Shropshire) and Rhosfawr (North Wales). In 2007, we will be
refitting our store at St Asaph in North Wales.
In 2007, we are taking an exciting step forward with the launch of our 'Just for
Pets' stand-alone stores, with the first lease signed on a site in Telford. We
hope to open a further two stores over the year. The pet supplies market is a
growth sector and we believe we have the expertise to exploit demand in areas of
high population density.
OTHER ACTIVITIES
Glasson Group
We acquired Glasson Group (Lancaster) Limited in August 2006 in line with our
strategy to act as a consolidator in the agricultural supply industry. Glasson's
activity complements all of our three major divisions, acting as a shipper and
trader of raw materials and operating the port of Glasson, near Lancaster.
Owning shipping facilities give us a degree of independence in the procurement
of raw materials both for our feed business and fertiliser production. Turnover
at the time of acquisition was £37m and we believe Glasson will bring
considerable benefits to the Group.
Glasson is a major trader of raw materials and, together with our own feed
manufacturing, blending and trading activities, we will handle in excess of
600,000 tonnes of raw materials every year, which will add to our purchasing
power and strengthen our position in the marketplace. Glasson also operates a
fertiliser blending plant, which will increase the Group's fertiliser activities
and enable us to offer both compound and blending fertilisers to the market.
Additionally, Glasson manufactures ingredients for the pet food industry, which
not only complements our Youngs' joint venture but also widens the range of
products available through our retail division.
Going forward, we anticipate that there will be considerable synergies to be
exploited as the businesses become more closely integrated.
Foxmoor
Foxmoor is a large scale producer of potted plants and shrubs operating from
four sites based in the South West. Its target market is multiple retailers,
garden centres and other general horticultural outlets.
Foxmoor's sales value grew by 40% during the year but it was adversely affected
by much higher costs, particularly gas and labour. In addition, non-recurring
costs were incurred in developing a new site in Devon. We expect further sales
growth in 2007, with our production capacity provisionally sold for that period.
We have also established a new venture in conjunction with the Ideal Shopping
Channel to sell plants and associated garden accessories, which will add to our
horticultural activities.
JOINT VENTURES AND ASSOCIATES
The Group has interests in three joint ventures and two associate companies to
develop business in growth markets.
• Wyro Developments
Wyro, our property development business, enjoyed an excellent year, with sales
on budget. There were an encouraging number of reservations at our second site
at Abermule near Newtown, where sales values are higher than we have previously
achieved in the area. Negotiations are nearing completion for two further large
sites in Powys which will include units of mixed value housing. Work is nearing
completion on two small executive developments near Welshpool, which have
created considerable interest.
We continue to look for opportunities to acquire further land particularly where
we can develop low cost housing for which there is strong local demand.
• Youngs Animal Feeds
Youngs Animal Feeds acquired Dollin and Morris Ltd, a specialist manufacturer of
equine, pet and wild bird seed, in December 2005. During the year, we integrated
the two businesses and installed a new IT system to run the combined operation.
Further work was carried out at our Molichop Equine Feed Plant in Staffordshire
and we have won considerable amounts of new business for the products from the
plant.
• Welsh Feed Producers
Our joint venture mill in Carmarthen benefited from the volumes acquired from
Bibby and the plant enjoyed record sales during the year. An ongoing upgrade
programme in grinding and pelleting facilities is continuing to improve output
and product quality for which the plant has an enviable reputation.
• Bibby Agriculture Ltd (associate company)
Bibby Agriculture brought considerable volume benefits to the business at
Carmarthen mill and is trading profitably. Considerable scope exists for cost
reduction and distribution savings going forward, working closely with our
partners, Carrs Billington Agriculture Ltd.
• Wynnstay Fuels Ltd (associate company)
Wynnstay Fuels, which distributes agricultural and domestic fuels, enjoyed a
successful year, helped by substantial increases in prices. Fuel volumes rose by
30% due to the expanded sales area following the recent construction of storage
and distribution facilities in North Wales.
OUTLOOK
In 2007, we will enjoy a full year's contribution from Glasson as well as our
new feed blending plant. Integration benefits will accrue from the Glasson
acquisition and the combined purchasing volumes of raw materials should help the
Group going forward.
The Retail divison offers very encouraging prospects for growth, with continuing
investment, improved purchasing and marketing helping us capture our share of
growing markets in pet and equine products particularly. We also intend to
expand our sales of animal healthcare products and are looking for opportunities
to acquire further retail distributors in a market that is rapidly
consolidating. Our 'Just for Pets' stores, the first of which is due to be
launched in March 2007, offers an exciting opportunity to build on our
experience in the high growth pet products sector with the new stand-alone pet
store format.
Market conditions in the agricultural industry remain mixed. Our industry is
still subject to higher power costs and the ever increasing burden of compliance
and regulation. These costs must be recovered in the market and inevitably this
takes time. The sheep and beef markets have improved considerably with the
lifting of the export ban and look better in the short term. In contrast, the
dairy sector is suffering from low milk prices and rising costs which are
limiting producers' spending power. The feed industry as a whole in the UK
continues to suffer from over-capacity.
After several years of low grain prices and rising input costs, the arable
sector would appear to have a much brighter future. Low world grain stocks and
increasing demand, coupled with crop failures around the world due to extreme
weather conditions, will help this trend. The rising world price for wheat has
encouraged higher levels of planting by cereal farmers and the decision to close
a sugar beet processing factory in Shropshire should result in growers switching
from sugar beet production to combinable crops. This should help our Arable
Division, encouraging increased fertiliser usage, and therefore, we expect to
generate substantially higher volumes during 2007. Whilst high wheat costs will
impact on feed margins, the balanced nature of our business between livestock
and arable sectors should help to lessen the impact.
Prospects in our joint ventures remain good, particularly in our property
business and the Young's equine and pet supply company.
Bernard Harris
Managing Director
WYNNSTAY GROUP PLC
CONSOLIDATED PROFIT & LOSS ACCOUNT
For the year ended 31 October 2006
As restated
2006 2005
Note £000 £000 £000 £000
TURNOVER 1,2
Continuing operations 102,050 100,806
Acquisitions 8,833 -
---------------------------------
110,883 100,806
Cost of sales (91,394) (82,482)
---------------------------------
GROSS PROFIT 19,489 18,324
Selling and distribution costs (16,262) (15,150)
Administrative expenses (1,162) (918)
---------------------------------
OPERATING PROFIT 4 2,065 2,256
Share of operating profit in joint ventures 610 490
Share of operating profit in associates 62 31
---------------------------------
Continuing operations 2,707 2,777
Acquisitions 30 -
---------------------------------
GROUP OPERATING PROFIT 2,737 2,777
Net profit on sale of fixed assets 27 184
---------------------------------
PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST 2,764 2,961
Income from other fixed asset investments 8 31
Interest receivable 188 108
Interest payable 3 (426) (231)
---------------------------------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 2,534 2,869
TAX ON PROFIT ON ORDINARY ACTIVITIES (664) (874)
---------------------------------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 1,870 1,995
=================================
Earnings per 25p share 18.08p 22.78p
=================================
Diluted earnings per 25p share 5 15.58p 16.64p
=================================
There were no recognised gains and losses for 2006 or 2005 other than those
included in the profit and loss account above.
There is no difference between the profit calculated on an historical cost basis
and those reported in the profit and loss account above.
WYNNSTAY GROUP PLC
BALANCE SHEET
As at 31 October 2006
Group Company
As restated As restated
2006 2005 2006 2005
Note £000 £000 £000 £000
FIXED ASSETS
Intangible fixed assets 2,882 2,501 2,174 2,137
Tangible fixed assets 10,946 8,769 9,394 8,733
Investments in subsidiary - - 3,742 1,322
undertakings
Investments 3,390 2,763 2,017 1,876
-------------------------------------------
17,218 14,033 17,327 14,068
-------------------------------------------
CURRENT ASSETS
Stocks 9,557 8,284 7,782 8,246
Debtors 22,258 19,158 19,346 18,827
Cash at bank and in hand 1,181 1,646 1,147 1,646
-------------------------------------------
32,996 29,088 28,275 28,719
CREDITORS: amounts falling due
within one year (22,363) (18,716) (19,248) (19,115)
-------------------------------------------
NET CURRENT ASSETS 10,633 10,372 9,027 9,604
-------------------------------------------
TOTAL ASSETS LESS CURRENT LIABILITIES 27,851 24,405 26,354 23,672
-------------------------------------------
CREDITORS: amounts falling due
after more than one year (2,061) (345) (1,954) (345)
PROVISIONS FOR LIABILITIES AND CHARGES
Deferred taxation (528) (189) (379) (189)
Other provisions - (250) - (250)
-------------------------------------------
NET ASSETS 25,262 23,621 24,021 22,888
===========================================
CAPITAL AND RESERVES
Called up share capital 2,867 2,438 2,867 2,438
Share premium account 7,673 4,253 7,673 4,253
Loan stock redemption reserve - 3,153 - 3,153
General reserves 1,582 1,582 1,582 1,582
Profit and loss account 13,140 12,195 11,899 11,462
-------------------------------------------
SHAREHOLDERS' FUNDS - ALL EQUITY 25,262 23,621 24,021 22,888
===========================================
WYNNSTAY GROUP PLC
CASH FLOW STATEMENT
For the year ended 31 October 2006
2006 2005
Note £000 £000
Net cash flow from operating activities 8 2,611 3,483
Returns on investments and servicing of finance 9 (230) (92)
Taxation (482) (719)
Capital expenditure and financial investment 9 (2,331) (1,294)
Acquisitions 9 (3,782) -
Equity dividends paid (708) (391)
----------------------
CASH (OUTFLOW)/INFLOW BEFORE FINANCING (4,922) 987
Financing 9 2,789 (216)
----------------------
(DECREASE)/INCREASE IN CASH IN THE YEAR (2,133) 771
======================
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
2006 2005
£000 £000
(Decrease)/Increase in cash in the year (2,133) 771
Cash (outflow)/inflow from increase in debt and
lease financing (2,132) 739
------------------------
CHANGE IN NET DEBT RESULTING FROM CASH FLOWS (4,265) 1,510
New finance leases and debt (208) (371)
Finance leases acquired with subsidiaries (235) -
------------------------
MOVEMENT IN NET DEBT IN THE YEAR (4,708) 1,139
Net debt at 1 November 2005 (488) (1,627)
------------------------
NET DEBT AT 31 OCTOBER 2006 10 (5,196) (488)
========================
WYNNSTAY GROUP PLC
NOTES
1. Accounting policies
1.1 Basis of preparation of financial statements
The financial information is prepared under the historical cost convention and
in accordance with applicable United Kingdom law and accounting standards. The
particular accounting policies adopted are described below, together with an
explanation of where changes have been made to previous policies on the adoption
of new accounting standards in the year.
1.2 Changes in accounting policy
The Group has adopted Financial Reporting Standard 21, events after the balance
sheet date, in these financial statements. The adoption of this standard
represents a change in accounting policy and the comparative figures have been
restated accordingly.
1.3 Basis of consolidation and goodwill
Corporate and unincorporated joint ventures in which the Group has an investment
representing not less than 20% of the voting rights, and over which it exerts
significant influence, are treated as associated undertakings. The Group
accounts include the appropriate share of these undertakings' profits based on
the latest available audited accounts, and provide for an appropriate share of
their losses, based on the latest available management accounts. The results of
subsidiary undertakings are consolidated on an acquisition accounting basis,
with purchased goodwill arising prior to FRS 10 written off against reserves.
Following the implementation of FRS 10, purchased goodwill is capitalised and
written off over its estimated useful economic life.
1.4 Profits of holding company
The Company has taken advantage of the exemptions conferred by S.230 of the
Companies Act 1985 not to prepare a profit and loss account. A profit of
£1,362,000 (2005: £1,525,000) has been dealt with in the parent Company
accounts.
1.5 Turnover
Turnover represents the invoiced value of sales which fall within Wynnstay
Group's ordinary activities and excludes Value Added Tax.
1.6 Tangible fixed assets and depreciation
Tangible fixed assets are stated at cost, net of depreciation and any provision
for impairment. Depreciation is provided at rates calculated to write off the
cost of fixed assets over their expected useful lives as follows:
Freehold property - 2.5%-5% per annum straight-line
Leasehold land and buildings - 3% per annum reducing balance
Plant and machinery/office equipment - 10%-33% per annum straight-line
Motor vehicles - 20%-30% per annum straight-line
1.7 Stocks
Stocks are valued at the lower of cost and net realisable value.
1.8 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.
Deferred tax assets are recognised to the extent that it is more likely than not
that they will be recovered.
1.9 Foreign currencies
Monetary assets and liabilities denominated in foreign currencies are translated
into sterling at the rate of exchange ruling at the balance sheet date.
Transactions in foreign currencies are translated into sterling at the rate
ruling on the date of the transaction.
Exchange gains and losses are recognised in the profit and loss account.
1.10 Leasing and hire purchase
Assets held under finance leases or being obtained under hire purchase contracts
are capitalised in the balance sheet and depreciated over their useful economic
lives, interest being charged to the profit and loss account over the period of
the agreement. Operating lease rentals are charged to the profit and loss
account as incurred.
1.11 Pensions
The Company operates a defined contribution pension scheme. Contributions to
this scheme are charged to the profit and loss account, as they are incurred in
accordance with the rules of the scheme.
1.12 Employee share ownership trust
The Company operates an employee share ownership trust. Contributions to this
trust are charged to the profit and loss account on an accruals basis.
1.13 Investments
(i) Subsidiary Undertakings
Shares in subsidiaries are valued at cost less provision for permanent
impairment.
(ii) Associated undertakings
Investments in associates are stated at the amount of the Company's share of net
assets. The consolidated profit and loss account includes the Company's share of
the associated companies' profits after taxation using the equity accounting
basis.
(iii) Joint venture undertakings
Investments in joint ventures are stated at the Company's share of net assets.
The Company's share of the profits or losses of the joint ventures is included
in the consolidated profit and loss account using the equity accounting basis.
This accounting treatment is not in line with the requirements of Financial
Reporting Standard 9, 'Associates and Joint Ventures', which requires the
adoption of the gross equity accounting basis. There is no material effect to
the reported figures as a result of this departure.
(iv) Other investments
Investments held as fixed assets are shown at cost less provisions for their
permanent impairment.
2. Turnover
Turnover represents the amounts derived from the provision of goods which fall
within the Group's ordinary activities, stated net of value added tax.
In the opinion of the directors, the Group operates in a single area of
activity, and segmental analysis is therefore not appropriate.
The acquired turnover during the year is attributable to Glasson Group
(Lancaster) Limited; details of the acquisition are provided in note 7.
3. Interest payable
2006 2005
£000 £000
Bank loans and overdrafts wholly repayable
within five years 335 123
Interest on loan capital - 18
Finance lease charges 83 65
Interest on loan stock 8 25
--------------------
426 231
--------------------
4. Operating profit
The operating profit is stated after charging:
2006 2005
£000 £000
Amortisation - intangible fixed assets 262 236
Depreciation of tangible fixed assets:
- owned by the Company 824 762
- held under finance leases 311 285
Operating lease rentals:
- other operating leases 313 162
Directors' emoluments 607 587
-------------------
Exceptional selling and distribution costs - 250
-------------------
5. Dividends and earnings per share
As restated
2006 2005
£000 £000
Final paid for prior year: 5.0p (2005: 4.5p) per
25p share 507 391
Interim paid for current year: 1.75p (2005:
0.0p) per 25p share 201 -
--------------------
Total dividends paid 708 391
--------------------
Subsequent to the year end it has been recommended in the Directors' Report that
a final dividend, at a rate of 3.5 pence net per 25p ordinary share (2005: 5.0
pence net per 25p ordinary share) be paid, making a total in respect of the year
of 5.25 pence (2005: 5.0 pence).
Earnings per share
Basic earnings per Diluted earnings per
share share
2006 2005 2006 2005
Earnings attributable to
shareholders (£'000) 1,870 1,995 1,878 2,013
--------------------------------------------
Weighted average number of
shares in issue during the
year (No.) 10,344 8,759 12,052 12,095
--------------------------------------------
Earnings per ordinary 25p
share (pence) 18.08 22.78 15.58 16.64
--------------------------------------------
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 shares (share options and convertible loanstock).
An adjustment to earnings is also made to recognise notional interest saved on
convertible loanstock.
7. Acquisitions
Acquisition of Glasson Group (Lancaster) Limited
The Group purchased the Glasson Group, which comprises four companies, on 4th
August 2006 for a net total consideration of £2.4m, which has been treated as an
acquisition in the year.
The total adjustments required to the book values of the assets and liabilities
of the Group in order to present the net assets of the Group at fair value in
accordance with the Group accounting principles were £2,417,985, details of
which are set out as follows, together with the resultant amount of goodwill
arising.
From the date of acquisition to 31st October 2006, the acquisition contributed
£8,832,809 to turnover, £60,658 to profit before interest and £30,425 to net
profit after interest. Glasson Group (Lancaster) Limited contributed £135,542 to
the Group's net operating cash flows, paid £30,233 in respect of interest and
utilised £6,135 for capital expenditure.
In its last financial year to 31st May 2006, Glasson Group (Lancaster) Limited
made a profit after tax of £179,175. For the period 31st May 2006 to the date of
acquisition, the trading performance of the business during what is its quiet
time of year shows an operating loss of £103,890.
Acquisition of Glasson Group (Lancaster) Limited
'Sale back' Provisional
Book value Revaluations Subtotal of property fair value
£000 £000 £000 £000 £000
Tangible
fixed assets 2,203 729 2,932 (1,350) 1,582
Stock 1,997 - 1,997 - 1,997
Debtors 3,301 - 3,301 - 3,301
Cash at bank
and in hand 131 - 131 - 131
Creditors (4,849) - (4,849) - (4,849)
Loans & finance
leases (148) - (148) - (148)
-----------------------------------------------------------
Net assets
acquired 2,635 729 3,364 (1,350) 2,014
Goodwill 404
-----------------------------------------------------------
Consideration 2,418
-----------------------------------------------------------
Consideration
satisfied by:
Convertible
secured
loanstock 500
Cash 1,918
-----------------------------------------------------------
2,418
-----------------------------------------------------------
The book value of the assets and liabilities have been taken from the management
accounts of Glasson Group (Lancaster) Limited as at 31st July 2006, the closest
available reporting date to the acquisition date of 4 August 2006. The movement
between these dates is not considered to be material.
The revaluation adjustments in respect of tangible fixed assets comprise the
valuations of certain freehold and leasehold properties.
8. Net cash flow from operating activities
2006 2005
Reconciliation of operating profit to net cash
inflow from operating activities:
£'000 £'000
Operating profit 2,737 2,777
Associated undertaking results (672) (521)
(Increase)/decrease of loans made to joint
ventures (1,500) 400
Amortisation of intangible fixed assets 262 236
Depreciation of tangible fixed assets 1,135 1,047
Impairment of investments 1 -
Decrease/(increase) in stocks 725 (266)
Decrease/(increase) in debtors 1,701 (2,348)
(Decrease)/increase in creditors (1,528) 1,908
(Decrease)/increase in other provisions (250) 250
-------------------
Net cash inflow from operations 2,611 3,483
-------------------
9. Analysis of cash flows for headings netted in the cash flow statement
2006 2005
£'000 £'000
Returns on investments and servicing of finance
Interest received 188 108
Interest paid (343) (166)
Hire purchase interest (83) (65)
Dividends received 8 31
----------------
Net cash outflow from returns on investments and
servicing of finance 230 (92)
----------------
2006 2005
£'000 £'000
Capital expenditure and financial investment
Purchase of intangible fixed assets (604) -
Purchase of tangible fixed assets (1,629) (853)
Proceeds from sale of tangible fixed assets 44 290
Purchase of investments (182) (731)
Proceeds from sale of investments 40 -
-------------------
Net cash outflow from capital expenditure (2,331) (1,294)
2006 2005
£'000 £'000
Acquisitions
Purchase of subsidiary undertakings (1,918) -
Net overdrafts acquired with subsidiary
undertakings (1,864) -
----------------------
Net cash outflow from acquisitions (3,782) -
----------------------
2006 2005
£'000 £'000
Financing
Issue of ordinary shares 657 523
Repayment of loans (530) (404)
Capital element of finance lease repayments (338) (335)
New loan 3,000 -
---------------------
Net cash outflow from financing 2,789 (216)
---------------------
10. Analysis of changes in net debt
1 Nov Cash flow Acquisition Other 31 Oct
2005 (excluding non-cash 2006
changes
cash and
overdrafts)
£'000 £'000 £'000 £'000 £'000
Cash at bank and in
hand: 1,646 (465) - - 1,181
Bank overdraft (209) (1,668) - - (1,877)
----------------------------------------------------
1,437 (2,133) - - (696)
Debt:
Finance leases (645) 338 (235) (106) (648)
Debt due within one
year (1,280) (969) - 148 (2,101)
Debts falling due
after more than one
year - (1,501) - (250) (1,751)
Net debt (488) (4,265) (235) (208) (5,196)
11. Annual report
The Annual Report and Financial Statements will be posted to shareholders
7 February 2007. Further copies will be available to the public, free
of charge, at the Company's Registered office at Eagle House, Llansantffraid,
Powys, SY22 6AQ.
12. Annual general meeting
The Annual General Meeting of the Company will be held at The Royal Oak Hotel,
Welshpool on the 20 March 2007 at 11.45a.m..
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