The Wynnstay Group has reported flat profitability and lower full year revenues, in line with the cost of its continued expansion and ongoing commodity price deflation.
The Group made a pre-tax profit of £8.34 million on sales of £377.38m in the year ended October 31st 2015, compared to £8.49m and £413.56m in the previous twelve months. At the year end, the Group had cash reserves of £9.75m, up from £8.39m in 2014.
...agricultural division operating profit up 9% to £4.13m on sales of £270.05m...
Wynnstay’s Agricultural Division posted an operating profit of £4.13m on revenues of £270.05m, from the £3.8m and £308.71 in the previous year. Feed volumes increased by 1.5% over the twelve months, although a strong first half was followed by weaker demand due to the mild autumn weather and weakening milk and livestock prices at farm level. Slightly lower demand for dairy compounds was offset by increases in blends and poultry, beef and sheep rations. The company has invested in its dairy sales team to ensure customer access to the Group’s full product range through direct sales and the Wynnstay Stores chain.
The wholly owned equine supplies business Youngs Animal Feeds performed strongly during the year. Glasson, which wholesales feed ingredients and fertilisers through Glasson Dock near Lancaster, saw a reduction in volumes handled.
The arable marketing business, which includes Grain Link and Woodhead Seeds, enjoyed increases in seed and crop volumes, despite margin pressure. A return to good grain yields in harvest 2014 and 2015 has led lower prices, with the result that farmers are holding onto their grain. Seed volumes were in line with the previous year.
First half fertiliser demand was subdued, as buyers waited for price reductions in a falling market. Poor crop prices in autumn 2015 kept farmers from the market, so the company expects more fertiliser sales to shift to this spring.
The Group’s Retail Division made an operating profit of £5.08m on revenues of £107.19m, up from £4.88m and £104.62m last year. The business invested £3.48m in store acquisitions, with Ross Feeds of Ross-on-Wye and S Jones of Ceredigion during the year, plus the eight-outlet Agricentre chain based in the West Country for £2.74m right at the end of the period.
Looking ahead, the Group warns that output prices at farm level remain low through a combination of high global food stocks, tempered demand in developing countries and fluctuating international currencies which are “delaying a return to acceptable pricing. This means that our farmer customers will face ongoing challenges which will require further efficiencies throughout the agricultural industry”. At the same time, the prolonged mild autumn resulted in a slow start to the feed season.
In the longer term, it remains confident in the prospects for UK farming, “which are well supported by macroeconomic factors, including world population growth and increasing demand for food and energy”.
“Wynnstay has delivered a pleasing performance in a trading environment that has been impacted by continuing low output prices for farmers,” comments Wynnstay Group chief executive Ken Greetham. “These robust results were supported by recent acquisitions as well as increased volumes and efficiency gains in some sectors. We continued to expand our business during the year, including the acquisition of Agricentre at the year end, which brings eight new outlets and extends the Group’s presence into a major new geographic region.
“Farmgate prices remain a challenge for the industry, with prices still below the realistic cost of production for many farmers. With the consequent impact on farm sentiment, it is prudent to take a more cautious view on trading for the year ahead.
“However the longer term macroeconomic growth drivers for the sector remain compelling and we intend to continue to build on the Group’s solid foundations, developing Wynnstay’s presence both organically and through further acquisitions.”