Mole Valley Farmers set to acquire Countrywide's stores

Farmer-owned agricultural supplier and rural retailer Mole Valley Farmers is in exclusive discussions to buy the Countrywide Farmers retail operation that was placed on the market earlier this year. Countrywide, which was considering an Alternative Investment Market listing in 2014, has suspended trading in its shares. It is also divesting its Amenity & Turf business.

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A Countrywide statement reports “encouraging progress towards a sale” with the negotiation of detailed terms expected to take a number of weeks to conclude.  The company, which hopes to complete the process by the end of the year, says the divestment “represents an excellent opportunity to secure the future of the retail business with an established sector-leading company for our customers and employees”.

Countrywide announced the potential sale of its retail chain after a second consecutive divisional loss, which the company attributed to problems with the implementation of a new IT platform across the business to replace a number of legacy systems it had built up through acquisitions over the years. The platform took three years and cost £6 million to install, “inhibiting capacity and to develop the business and drive growth in the short term, with a particularly deleterious effect on retail sales in the last half of 2016.   

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The Countrywide retail division made an operating loss of £7.83 million on revenues of £116m in the year ended November 30th 2016, following a loss of £5.34m on sales of £141.17 in the previous 18 month period. Sales had fallen by 1.9% over the latest full year, but dropped by 3.9% in the second half. The business had 68 outlets at the 2016 year end, but has since closed 14 less profitable outlets, leaving it with a chain of 53 stores.

The Mole Valley network of 52 outlets, compromising ten Mole Valley Farmers branches, 38 Mole Valley Country Stores and four trading under legacy brands, contributed £193.5m to the MVF Group revenues of £422.5m in 2016. Assuming a deal is agreed, the combined operation would have a chain of 105 stores generating £309m at 2016 performance levels. Approval from the competition authorities may be needed.    The Countrywide stores would be a good fit geographically, giving MVF a greater presence in the Home Counties and West Midlands, as well as into Cornwall through the former Cornwall Farmers stores.

Countrywide had divested its traditional agriculture businesses, supplying feed, arable inputs and grain trading services, in early 2015. The company had intended to focus on its Rural Energy and Turf & Amenity businesses (Direct Sales) that reported an operating profit of £2.49m on sales of £17.96m in 2106. But the board now says it is “in the process of winding down and transferring the Turf & Amenity business to an alternative provider, enabling the Turf and Amenity team to continue to serve customers under new ownership”. But it adds that trading at the Energy business continues in line with expectations.

● In a separate move to reduce bank facilities, Countrywide has sold its 80% shareholding in Leicestershire’s MSF Welland Valley Feeds to the existing management for £1m.

MSF Welland Valley Feeds has a single retail store based in Market Harborough which operates as an entirely standalone business.