The Group’s full year results reflect an especially difficult year for the agricultural sector as a whole. Lower farmgate prices and ongoing political uncertainty around Brexit adversely affected farmer confidence, leading to reduced spending. Wynnstay’s trading performance was also held back by the abnormally warm winter weather in the first half of the financial year, which reduced feed sales and other weather-related products during key trading months.
Underlying Group pre-tax profit* (the Board’s preferred alternative performance measure) from continuing operations is down by £1.59m year-on-year to £8.01m (2018: £9.60m), and reported profit before tax was £7.55m (2018: £9.53m). Revenue of £490.60m (2018: £462.66m) was higher year-on-year reflecting commodity price inflation.
Within our Agriculture Division, feed volumes contracted significantly but the reduction was in line with market trends, while Glasson Grain delivered an exceptionally strong performance, driven by increased fertiliser volumes, reflecting market share gains in Scotland, and higher sales of specialist added-value animal feed products. The good harvest in 2019 helped to generate an above-average sector performance from GrainLink, our grain trading operation, and the seeds operation performed well in challenging conditions.
The performance of our Agricultural Merchanting Division was similarly affected. Lower demand for bagged feed and feed-related products were the principal factors behind its reduced contribution to Group profits. We rationalised our depot network from 59 sites in 2018 to 55 by the end of the financial year. This followed the acquisition in April 2019 of Stanton Farm Supplies, the van-based specialist dairy products supplier that operates in Somerset, and the 2018 acquisition of a number of former Countrywide stores in the South West of England. We continue to focus on developing our specialist advisory services, so that we can assist customers with advice on the latest farming products and methods.
Our Arable event, which highlights innovation in arable farming, attracted over 1,000 farmers in June 2019 and helps to emphasise Wynnstay’s position as a trusted supplier partner and value-added specialist adviser.
We continued to focus on improving efficiencies within our manufacturing, distribution and processes across the Group, and this will be an ongoing priority for our operations.
Revenue increased by £27.94m to £490.60m (2018: £462.66m), with much of this growth accounted for by higher unit commodity prices. The Agriculture Division generated £358.69m of revenue (2018: £334.34m), reflecting higher average commodity values particularly in feed and fertiliser products. The Specialist Agricultural Merchanting Division generated £131.84m in revenue (2018: £128.26m), with a full year contribution from the former Countrywide depots acquired in April 2018. Like-for-like sales, however, showed a small reduction of 3.5% as the mild winter reduced demand for bagged feed products.
Reported profit before taxation on an IFRS basis was £7.55m (2018: £9.53m). Underlying Group pre-tax profit*, which includes the gross share of results from joint ventures and associates, but excludes share-based payments and non-recurring items and is the Board’s preferred alternative performance measure, was £8.01m (2018: £9.60m). Including contributions from joint ventures, the Agriculture Division contributed £2.95m (2018: £4.29m) to this result, and the Specialist Agricultural Merchanting Division £5.24m (2018: £5.53m). Other activities showed a small loss of £0.05m (2018: loss of £0.09m). Non-recurring business combination and reorganisation costs of £0.30m were incurred during the year, and net finance costs were similar to last year at £0.18m (2018: £0.19m). Profit after taxation was £6.13m (2018: £7.71m), and basic earnings per share was 30.95p (2018: 39.11p).
Continued strong cash generation together with tight control of working capital resulted in a net cash position at the year-end of £3.84m (2018: net debt of £0.98m).
Balance sheet net assets stood at £94.95m (2018m: £91.07m) at the year-end equating to £4.79 (2018: £4.62) per share, and the return on net assets was 8.5% (2018: 10.6%).
*Underlying pre-tax profit is a non-GAAP (generally accepted accounting principles) measure and is not intended as a substitute for GAAP measures and may not be calculated in the same way as those used by other companies. Refer to Note 17 for an explanation on how this measure has been calculated and the reasons for its use.
The Board is pleased to propose the payment of a final dividend of 9.40p per share, which together with the interim dividend of 4.60p per share, paid on 31 October 2019, takes the total dividend for the year to 14.00p, an increase of 4.8% on last year (2018: 13.36p). The final dividend will be paid on 30 April 2020 to shareholders on the register on 27 March 2020. A scrip dividend alternative will continue to be available as in previous years. The last date for election for the scrip dividend will be 16 April 2020.
Our colleagues across the Group continue to show great dedication, commitment and motivation. On behalf of the Board I would like to thank them for their significant input and hard work over the year.
The trading environment for the agricultural supplies sector remains challenging. Farmgate prices are generally lower than a year ago, and the detail of what Brexit means for the agricultural industry remains uncertain - although the Government has made clear its support for UK farmers and outlined proposals that emphasise environmental management and efficiency. We therefore anticipate that farmers will remain circumspect in their spending and investment plans over 2020.
Against this background, the high level of forage stocks on farms has reduced feed demand, and the wet weather conditions over recent months have decreased the acreage of winter cereals that farmers have been able to plant.
Nonetheless, Wynnstay’s wide spread of activities provides a robust platform and we continue with plans to reduce costs, optimise margins, invest in our manufacturing facilities, systems and skill base, supported by Wynnstay’s strong balance sheet. In addition, we will continue to review acquisition opportunities to strengthen our existing activities.
We see opportunities to further develop our relationship with farmer customers and supplier partners, in particular as UK farmers seek to implement initiatives to enhance efficiencies and drive environmental standards. Our focus is advising on and supplying products, ideas and practices that will facilitate both goals.
Whilst there has been understandable weakness in the agricultural sector in the short term, the Board is confident that Wynnstay’s medium and long-term prospects within the industry remain strong.
22 January 2020