Countrywide has published its first results since it divested its bulk agricultural operations in a transformational change to focus on its rural retail business, now the UK’s largest. It says the figures, for an eighteen month period, are below expectations and in line with reduced farm and retail spending. In addition, the change to the company’s year-end mean the results cover two seasonally quiet half year periods.
The company made a pre-tax profit of £4.1 million on revenues of £320.3m in the eighteen month period ended November 30th 2015, compared to £1.1m and £298.2m for the twelve months to May 31st 2014. But excluding the £8.9m proceeds from business disposals, there was an operating loss of £3.9m (£+1.3m). Net debt increased to £12.5m from £9.7m, while net current assets dropped to £9.5m following the divestments, from £16.9m in May 2014. Shareholder funds stood at £26.9m at the end of the latest period (£21.5m) helped by a property revaluation.
The transformational period for the company is in line with its ambition to achieve an Alternative Investment Market listing. In December 2014 it sold its feed and forage, arable products and crop marketing businesses to ForFarmers, Hutchinsons and Openfield respectively. This decision, “against a challenging outlook for the future profitability of our bulk agriculture business where future consolidation is inevitable,” enables the company to focus on its higher margin retail, rural energy and turf & amenity activities, says chief executive John Hardman. As part of this strategy, it acquired Cornwall Farmers and its 12 stores in September 2015, which are now trading as Cornwall Farmers, part of Countrywide.
Mr Hardman says the business is now well placed to grow into a leading multichannel supplier to the UK rural community, including over 7,000 mainstream agricultural lines “to leverage the strength from our farming heritage”. It is currently investing over £5m in a new IT infrastructure to bring the whole group onto a single platform. The project, which is behind schedule, should complete by the end of the current financial year in November 2016.
With the £6.0m Cornwall Farmers acquisition and the opening of four new stores (in Banbury, Salisbury, Shrewsbury and the Gower), the retail chain now has 69 stores. Countrywide’s online channel saw 28% sales growth over the 18 months. The company has added 20,000 members to its loyalty card scheme in the period, which now has 165,000 consumers.
Retail returned a loss of £5.19m on revenues of £141.17m in the latest 18 months, compared with a loss of £1.3m and £88.59m in the previous year. Mr Hardman describes the retail market as “challenging and competitive” during the period, with spending down in line with depressed farmgate values. Like-for-like performance over the last 12 months was down by 0.5%, with reduced agricultural sales masking growth in equine and pet animal revenues. The company has spent over £1m in keeping its prices competitive.
Direct Sales, including the Agri businesses, made a profit of 5.89m on revenues of £179.12m in the latest period, compared to a loss of £2.64m and £209.58m in the previous year. There was a 3.5% drop in feed volumes to the point of divestment in late 2014 - a fall in compound volumes offset growth in alternative feeds supplied, as farmers under income pressure switched from compounds to blends and straights.
Mr Hardman says the outlook, with continued mild weather and subdued consumer confidence, is one of caution. Current year financial returns are below expectations, but Mr Hardman believes the IT investment and additional Cornwall Farmers stores will drive sales growth and reduce operating costs in the medium term.