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Wynnstay Group PLC  -  WYN   

Half Year Results

Released 07:00 21-Jun-2017

RNS Number : 6448I
Wynnstay Group PLC
21 June 2017
 

AIM: WYN

21 June 2017

 

 

WYNNSTAY GROUP PLC

("Wynnstay" or "the Group")

 

Half Year Results

For the six months to 30 April 2017

 

Key Points

 

·     Results benefited from greater demand for agricultural inputs over the winter period but were affected by continued subdued trading at pet products business, Just for Pets

 

·     Revenue of £205.32m (2016: £193.24m) -  increase partly driven by higher commodity prices

 

·     Adjusted* profit before tax, before goodwill & investment impairment charges, is £4.07m (2016: £4.08m) - excluding the pet products operation, the Group's performance for the first six months improved year-on-year, with profitability ahead

 

·     Reported profit before tax, including goodwill & investment impairment charges, is £0.13m (2016: £4.08m)

 

·     Adjusted * earnings per share, before goodwill & investment impairment charges, of 16.84p (2016: 17.22p)

 

·     Reported loss per share of 3.38p (2016: earnings per share of 17.22p)

 

·     Net debt at period end (a seasonal peak) was £8.28m (2016: £3.90m).  The rise reflected commodity price inflation and consequent higher average working capital utilisation. Ample headroom in debt facilities

 

·     Net assets at 30 April 2017 stood at £85.03m (2016: £85.06m)

 

·     Interim dividend of 4.20p (2016: 4.00p) - an increase of 5.0%

 

·     Agricultural Division - revenue of £145.78m, operating profit of £1.54m

-      greater demand for many agricultural inputs over the winter period but feed and arable margins remained under pressure across the sector

-      broad portfolio of products helped to smooth marketplace variations

 

·     Specialist Retail Division - revenue of £59.48m, operating profit of £2.41m

-      improved results at Wynnstay Stores

-      Just for Pets generated a trading loss and a restructuring is underway, with options under consideration 

 

·     The trading backdrop has improved but challenges for the agricultural supply industry remain.  Nonetheless, Wynnstay remains well-placed to continue its development

 

 

Ken Greetham, Chief Executive of Wynnstay, commented:

"The recovery in farmgate prices drove an improvement in demand for many agricultural inputs over the winter period. Wynnstay's agriculture-related activities, including Wynnstay Stores, have benefited as a result over the first half and show year-on-year progress. 

"However, the trading loss at our Just for Pets chain has impacted the Group's overall results and, given this unit's performance, we have recognised a non-cash goodwill and investment impairment charge and are restructuring the operations and reviewing our options for the business. 

"Looking forward, we are encouraged by the improvement in farmgate prices for our farmer customers but believe that the rate of recovery for the agricultural supply sector will remain tempered. Nonetheless, Wynnstay is well-positioned to continue its organic and acquisitive growth strategy. The breadth of the Group's activities and strong balance sheet provide a solid foundation for further development over the coming years."

 

Enquiries:

 

Wynnstay Group plc

Ken Greetham, Chief Executive

Paul Roberts, Finance Director

T: 01691 827 142

T: 020 3178 6378 (today)

 

 

 

KTZ Communications

Katie Tzouliadis / Emma Pearson

 

T: 020 3178 6378

Shore Capital (Nomad and Broker)

Stephane Auton / Patrick Castle

T: 020 7408 4090

 

 

CHAIRMAN'S STATEMENT

 

INTRODUCTION

 

The Group's interim results reflect some easing in trading headwinds for farmers, with an improvement in farmgate prices resulting in a greater demand for many agricultural inputs over the winter period.  However feed and arable margins remained under pressure across the sector. Wynnstay's breadth of agricultural activities, including Wynnstay Stores, once again provided a degree of resilience, helping to mitigate the variations across our marketplaces.  The most significant impact on the Group's results was weaker trading at our pet products chain, Just for Pets.  As we previously reported, this business continued to experience subdued demand, reflecting overall difficult trading conditions, and incurred a trading loss during the period. We have therefore recognised a non-cash goodwill impairment charge of £3.88m and are reviewing options for the unit, with restructuring now also underway. 

 

Excluding the pet products operation, the Group's performance for the first six months was better year-on-year, with profitability ahead. However, including the trading loss at Just for Pets, the Group's adjusted* profit before tax, before goodwill & investment impairment charges, is marginally below last year at £4.07m (2016: £4.08m).  The Group's reported profit before tax for the first half, including the impairment charges, is £0.13m (2016: £4.08m). 

 

An improvement in overall feed sales, which reflected the national picture, was driven by higher demand for dairy feed. However, total volumes in April reduced slightly as the mild weather gave rise to early spring grass, benefiting livestock farmers. We experienced strong demand for spring seed and fertiliser although, as expected, grain trading volumes were behind the previous year after a smaller 2016 harvest.

 

Within the Retail Division, Wynnstay Stores traded well, with a small increase in like-for like-sales as famers begin to reinvest in their enterprises. The diverse range of products offered by Wynnstay Stores is a key attraction and drives footfall. By contrast, Just for Pets experienced a reduction in like-for-like sales and margins, reflecting high-street pressures and changes in consumer shopping behaviour.

 

Looking ahead, there is a degree of short term stability as farmgate prices begin to improve. Demand for inputs is expected to remain robust although margin pressure is likely to remain a feature of the industry. However, Wynnstay remains well-placed within the sector with its broad portfolio of products, customer focus and strong balance sheet. 

 

 

FINANCIAL RESULTS

 

In order to provide a more representative view of the Group's business performance (non-GAAP alternative performance measures), the Directors provide adjusted figures for profit before tax, operating profit and earnings per share, which take account of non-cash charges for intangible amortisation, share-based payments, and goodwill & investment impairment. A reconciliation table is provided below*. The Directors believe that the non-recurring nature of the goodwill impairment charge supports the presentation of adjusted results and these adjusted results provide a better understanding of the underlying performance of the business. 

 

Revenue for the six months to 30 April 2017 totalled £205.32m (2016: £193.24m), an increase of 6.25% on the same period last year. The rise is partly attributable to higher commodity prices after a three year period of sustained deflation. The Agriculture Division contributed £145.78m (2016: £135.18m) to Group revenues, with the Specialist Retail Division contributing £59.48m (2016: £57.97m). Other activity revenues were £0.06m (2016: £0.09m). 

 

Operating profit before non-cash charges relating to intangible amortisation, share-based payments, and the goodwill & investment impairments, was flat at £4.24m (2016: £4.24m). Non-cash charges amounted to £4.02m (2016: £0.07m), and mainly reflected the goodwill & investment impairment charge of £3.94m (2016: nil).  This impairment charge is mostly against the carrying value of goodwill attributed to the Just for Pets business. Intangible amortisation and share-based payments amounted to £0.08m (2016: £0.07m). Reported Group operating profit reduced to £0.21m (2016: £4.18m).

 

Operating profit in the Agricultural Division was £1.54m (2016: £1.82m), with low volumes of traded grain, and margin pressures in other agricultural products, affecting the result. Operating profit in our Specialist Retail operations increased to £2.68m (2016: £2.40m), reflecting improved results at Wynnstay Stores. The Agricentre business, acquired in October 2015, produced an improved performance during the period. Other activities, which include the charges relating to annual intangible amortisation and share based payments of £0.08m (2016: £0.07m), incurred an operating loss of £0.06m (2016: loss of £0.05m).

 

Net finance costs reduced slightly to £0.09m (2016: £0.10m) helped by marginally lower average interest rates across the period. With the return to commodity price inflation, we expect average working capital and therefore debt and future finance costs to trend up. The Group retains substantial headroom within its existing debt facilities to accommodate this anticipated increase. April is historically the Group's peak cash requirement period and net debt at 30 April 2017 was £8.28m (2016: £3.90m), reflecting higher levels of working capital utilisation in the first half.

 

Adjusted profit before tax, before goodwill amortisation and share-based payments of £3.94m, is marginally below last year at £4.07m (2016: £4.08m), reflecting the trading loss at Just for Pets.  Earnings per share before the goodwill & investment impairment charge was 16.84p (2016: 17.22p) - see table below *. As the impairment charge is likely to be disallowable for tax purposes, a tax charge for the period has been provided on this basis. This has resulted in a loss per share of 3.38p (2016: earnings per share of 17.22p) based on the reported loss after taxation of £0.66m for the period (2016: profit of £3.34m).  

 

Net assets at 30 April 2017 were £85.03m (2016: £85.06m).  This represents approximately £4.36 per share (2016: £4.38 per share), with the weighted average number of shares in issue during the period at 19.49m (2016: 19.39m).

 

 

*Alternative performance measures

 

Adjusted profit before tax

 

Six months ended 30 April 2017

Six months ended 30 April 2016

 

£millions

£millions

 

Profit before tax

0.13

4.08

Goodwill and investment impairment 

3.94

-

 

Adjusted profit before tax

 

4.07

 

4.08

 

 

Operating profit before non-cash charges

 

Six months ended 30 April 2017

Six months ended 30 April 2016

 

£millions

£millions

 

Operating profit per published accounts

 

0.22

 

4.17

Intangible amortisation and share-based payments

0.08

0.07

Goodwill and investment impairment

3.94

-

 

 

 

 

Operating profit before non-cash charges

 

4.24

 

4.24

 

 

Earnings per share before goodwill and investment impairment charges

 

Six months ended 30 April 2017

Six months ended 30 April 2016

 

 

 

(Loss)/earnings attributable to shareholders (£millions)

(0.66)

3.34

Weighted average number of shares in issue (number millions)

19.49

19.39

(Loss)/ earnings per share

 

(3.38p)

 

17.22p

 

(Loss)/earnings attributable to shareholders (£millions)

Add back Goodwill and investment impairment (£millions)

 

(0.66)

3.94

 

3.34

-

Earnings attributable to shareholder after impairment

3.28

3.34

Weighted average number of shares in issue (number millions)

19.49

19.39

Earnings per share after impairment charges

16.84p

17.22p

 

 

DIVIDEND 

 

The Board is pleased to declare an increased interim dividend of 4.20p per share (2016: 4.00p), a rise of 5% year-on-year.  The interim dividend is in line with our progressive policy and will be paid on 31 October 2017 to shareholders on the register at the close of business on 29 September 2017. As in previous years, a Scrip Dividend alternative will also be available, with the last day for election for this scheme being 17 October 2017. 

 

 

REVIEW OF OPERATIONS

 

AGRICULTURE

 

The last two years have been particularly challenging for livestock and arable farmers. Pleasingly there has been some improvement in grain and milk prices since the autumn of 2016, although they have not recovered to levels previously attained. The improvement in output prices has lifted farmer confidence, and helped to generate greater demand for most inputs, and Wynnstay has benefited from the increased volume of feed and arable products although pressure on margins continued.

 

Feed Products

 

Strong demand for feed products over the winter months led to an overall increase in feed volume in the first half year-on-year, reflecting the national trend. The early 2017 spring tempered feed demand and, in April, total volumes reduced mainly reflecting the decrease in sheep feed. This contrasted with April volumes last year, which benefited from the inclement weather conditions. The improved milk price supports ongoing demand for dairy feed as producers return to more traditional feeding patterns.

 

The range of our feed products, which cater for both ruminant and monogastric livestock, along with our blended feed and traded straight feeds, are key features of this business, and the breadth and depth of our operations help to mitigate the effects of volatility within the sector.

 

As expected the state-of-the-art bagging facility, which we commissioned ahead of the winter period, helped to improve supply chain efficiencies of bagged product direct to farm and through the network of retail stores.

 

Glasson Grain

 

Glasson performed well in the first half. Fertiliser volumes increased significantly although margins remained under pressure. Sales of traded materials and specialist products were slightly lower than the previous year but the business remains well placed in the market.

 

Arable Products

 

The smaller grain harvest from the 2016 season limited the volume of cereals marketed through the GrainLink and Woodheads businesses and, as a result, the contribution from these activities was below last year's level. Arable crops have benefitted from recent rainfalls which should support prospects for a good 2017 harvest although it is still too early in the season to make firm predictions.

 

Demand for fertiliser was strong over the winter period as farmers ordered ahead of anticipated price increases. Helped by an early spring, overall Group volumes exceeded the previous year.

 

Sales of cereal seed were also buoyant although slightly lower in volume than the record performance achieved in 2016. There is ongoing demand for herbage seed and agrochemicals as we enter the busy spring growing season. 

 

 

SPECIALIST RETAIL

 

Wynnstay Stores

 

Wynnstay Stores provide a valuable route to market for our agricultural products and the stores also help to cement our customer relationships. Like-for-like sales, adjusted for inflation, improved by over 2% in the period. There was a strong performance from key agricultural products, reflecting improved farmer sentiment as they invested in their businesses.  This was particularly evident in increased demand for milk powders, animal health and hardware products.

 

We continue to invest in the infrastructure of the operations. We completed the refurbishment of our store at Craven Arms, Shropshire, in the period, and we will be relocating our store in Ruthin, Denbighshire, during the summer.

 

Just for Pets

 

As previously reported, certain stores at Just for Pets did not deliver the expected performance and, overall, trading remained subdued.  This resulted in a loss from the chain during the first half. Operating 25 stores, Just for Pets remains a relatively small part of the Group compared to our core agricultural activities and, accordingly, the Board is reviewing the options for the business unit and is implementing restructuring measures in the second half. A goodwill impairment of £3.89m for the goodwill value of the asset has been accounted for in the period.

 

 

JOINT VENTURES AND ASSOCIATES

 

Results from the Group's joint ventures and associate companies are not included in this half yearly report.  They will, as usual, be consolidated into Wynnstay's full year results. 

 

 

OUTLOOK

 

It is encouraging to see an improvement in output prices for our farmer customers. However the current oversupply of many commodities in the Global market and the negotiations for the UK's exit from the European Union will bring further challenges for many farming enterprises. Nonetheless the strategic and environmental importance of UK agriculture should provide a foundation for an increasingly efficient industry in which a focus on productivity will remain a major consideration for many customers.

 

All this provides for a challenging backdrop for the agricultural supply industry and will affect the rate of recovery of the supply sector. However Wynnstay is well-placed to continue its organic and acquisitive growth strategy.  In addition, it is actively addressing the issues at Just for Pets. The breadth of our activities, our talented team and strong balance sheet provide firm foundations for the Group's further development over the coming years.

 

Jim McCarthy

Chairman

 

WYNNSTAY GROUP PLC

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 April 2017

 

 

Unaudited six months ended

30 April 2017

Unaudited six months ended

30 April 2016

Audited year ended

31 October 2016

 

Note

£'000

£'000

£'000

 

 

 

 

 

Revenue 

 

205,315

193,237

368,143

Cost of sales

 

(176,270)

(164,781)

(310,750)

Gross profit

 

29,045

28,456

57,393

 

 

 

 

 

Manufacturing, distribution and selling costs

 

(21,655)

(21,131)

 

(45,522)

 

Administrative expenses 

 

(3,337)

(3,268)

(4,889)

 

Other operating income 

183

187

454

Group operating profit before intangible amortisation share-based payment costs  

 

4,236

4,244

7,436

 

 

 

 

 

Intangible amortisation and share-based payment costs 

 

(82)

(69)

(78)

Group operating profit after intangible amortisation and share-based payment costs

 

4,154

4,175

7,358

Goodwill and investment impairment

10

(3,942)

-

-

Group operating profit

 

212

4,175

7,358

 

 

 

 

 

Interest income

 

8

18

69

Interest expense

 

(95)

(118)

(209)

 

 

 

 

 

Share of profits in associates and joint ventures

2

-

-

93

Share of tax incurred in associates and joint ventures

 

-

-

(26)

 

 

 

 

 

Profit before taxation

 

125

4,075

7,285

 

 

 

 

 

Taxation

4

(784)

(735)

(1,456)

 

 

 

 

 

Profit for the period

 

(659)

3,340

5,829

 

 

 

 

 

 

 

 

 

 

Earnings per 25p share before  impairment charges

5

16.84p

17.22p

30.01p

Diluted earnings per 25p share before  impairment charges

5

16.53p

17.14p

29.81p

(Loss)/earnings  per 25p share

5

(3.38p)

17.22p

30.01p

Diluted (Loss)/earnings per 25p share

5

(3.38p)

17.14p

29.81p

 

WYNNSTAY GROUP PLC

CONDENSED CONSOLIDATED BALANCE SHEET

As at 30 April 2017

 

 

Unaudited as at 30 April 2017

Unaudited as at 30 April 2016

Audited as at

31 October 2016

 

Note

£'000

£'000

£'000

Assets

 

 

 

 

Non-current assets

 

 

 

 

Goodwill

11

14,266

18,142

18,147

Investment property

 

2,372

2,372

2,372

Property, plant and equipment

 

20,279

19,312

20,535

Investments

 

3,397

3,580

3,457

Intangibles

 

102

117

109

 

 

40,416

43,523

44,620

Current assets 

 

 

 

 

Inventories

 

36,265

34,016

31,344

Trade and other receivables

 

63,212

57,457

50,316

Financial assets - loans to joint ventures

 

2,786

2,802

2,786

Cash and cash equivalents

12

22

2,762

10,111

 

 

 

 

 

 

 

102,285

97,037

94,557

Total assets

 

142,701

140,560

139,177

 

 

 

 

 

Liabilities

 

 

 

 

Current liabilities

 

 

 

 

Financial liabilities - borrowings

 

(6,014)

(2,948)

(2,626)

Trade and other payables

 

(47,953)

(47,519)

(44,750)

Current tax liabilities

 

(1,128)

(1,107)

(905)

 

 

 

 

 

 

 

(55,095)

(51,574)

(48,281)

Net current assets

 

47,190

45,463

46,276

 

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

Financial liabilities - borrowings

 

(2,286)

(3,711)

(3,202)

Trade and other payables

 

-

-

(388)

Deferred tax liabilities

 

(289)

(220)

(358)

 

 

 

 

 

 

 

(2,575)

(3,931)

(3,948)

Total liabilities

 

(57,670)

(55,505)

(52,229)

Net assets

 

85,031

85,055

86,948

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

Share capital  

6

4,883

4,862

4,874

Share premium

 

29,065

28,679

28,848

Other reserves

 

3,008

2,932

2,933

Retained earnings

 

48,075

48,582

50,293

 

 

 

 

 

Total equity

 

85,031

85,055

86,948

 

 

 

WYNNSTAY GROUP PLC

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

For the six months ended 30 April 2017

 

 

 

 

 

 

Share capital

Share premium

Other reserves

Retained earnings

Total equity

 

Note

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

Balance at 1 November 2015

 

4,848

28,439

2,890

46,678

82,855

Profit for the period

 

-

-

-

3,340

3,340

Total comprehensive income for the period

 

-

-

-

3,340

3,340

Transactions with owners of the company, recognised directly in equity

 

 

 

 

 

 

Shares issued during the period

 

14

240

-

-

254

Own shares acquired by ESOP trust

 

-

-

(20)

-

(20)

Dividends

 

-

-

 

(1,436)

(1,436)

Equity settled share-based payments transactions

 

-

-

62

-

62

Total contributions by and distributions to owners of the Group

 

14

240

42

(1,436)

(1,140)

At 30 April 2016

 

4,862

28,679

2,932

48,582

85,055

 

Profit for the period

 

-

-

-

2,489

2,489

Total comprehensive income for the period

 

-

-

-

2,489

2,489

Transactions with owners of the company, recognised directly in equity

 

 

 

 

 

 

Shares issued during the period

 

12

169

-

-

181

Dividends

 

-

-

-

(778)

(778)

Equity settled share-based payments transactions

 

-

-

1

-

1

 Total contributions by and distributions to owners of the Group

 

12 

169 

(778) 

(596) 

At 31 October 2016

 

4,874

28,848

2,933

50,293

86,948

Profit for the period

 

-

-

-

(659)

(659)

Total comprehensive income for the period

 

-

-

-

(659)

(659)

Transactions with owners of the company, recognised directly in equity

 

 

 

 

 

 

Shares issued during the period

6

9

217

-

-

226

Dividends

7

-

-

-

(1,559)

(1,559)

Equity settled share-based payments

14

-

-

75

-

75

 Total contributions by and distributions to owners of the Group

 

9

217

75

(1,559)

(1,258)

At 30 April 2017

 

4,883

29,065

3,008

48,075

85,031

 

 

 

WYNNSTAY GROUP PLC

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 30 April 2017

 

 

 

Unaudited six months ended

30 April 2017

Unaudited six months ended 30 April 2016

Audited year ended

31 October 2016

 

Note

£'000

£'000

£'000

 

 

 

 

 

Cash flow from operating activities

 

 

 

 

Cash (used in) / generated from operations

13

(9,372)

(3,033)

8,897

Interest received

 

8

18

69

Interest paid

 

(95)

(118)

(209)

Tax paid

 

(630)

(561)

(1,346)

 

 

 

 

 

Net cash flows from operating activities

 

(10,089)

(3,694)

                  7,411

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Proceeds on sale of property, plant and equipment

 

63

121

224

Purchase of property, plant and equipment

13

(1,075)

(603)

(2,748)

Proceeds on sale of investments

 

-

100

290

Purchase of intangibles

 

-

-

(3)

Own shares acquired by ESOP Trust

 

-

(20)

(20)

 

 

 

 

 

 

Net cash used by investing activities

 

(1,012)

(402)

(2,257)

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Net proceeds from the issue of ordinary share capital

 

226

254

435

Finance lease principal repayments

 

(574)

(320)

(849)

Repayments of borrowings

 

(416)

(1,400)

(2,162)

Dividends paid to shareholders

 

(1,559)

(1,436)

(2,214)

 

 

 

 

 

Net cash generated from financing activities

 

(2,323)

(2,902)

(4,790)

 

 

 

 

 

Net (decrease)/increase in cash and cash

equivalents

(13,424)

                   (6,998)

364

Cash and cash equivalents at beginning of period

 

10,111

9,747

9,747

 

 

 

 

 

Cash and cash equivalents at end of period

12 

(3,313)

2,749

10,111

 

 

WYNNSTAY GROUP PLC

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

1.     Basis of preparation

 

The Interim Report was approved by the Board of Directors on 20 July 2017.

 

The condensed financial statements for the six months to the 30 April 2017 have been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting except as disclosed in note 2.

 

The financial information for the Group for the year ended 31 October 2016 set out above is an extract from the published financial statements for that year which have been delivered to the Registrar of Companies. The auditors' report on those financial statements was not qualified and did not contain statements under section 498(2) or 498(3) of the Companies Act 2006. The information contained in this document does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.

 

The financial information for the six months ended 30 April 2017 and for the six months ended 30 April 2016 is unaudited.

 

The condensed consolidated interim financial statements should be read in conjunction with the annual consolidated financial statements for year ended 31 October 2016, which have been prepared in accordance with IFRS as adopted by the EU.

 

The Directors have prepared the condensed consolidated interim financial statements on a going concern basis, having satisfied themselves from a review of internal budgets and forecasts and current banking facilities that the Group has adequate resources to continue in operational existence for the foreseeable future.

 

2.   Consolidation of share of results in joint ventures and associates

 

As the Group has a policy of using audited accounts for the consolidation of its share of the results of joint venture and associate activities, no such consolidation has occurred during the six months to 30 April 2017. Although this is not in accordance with IFRS the impact on the financial statements is not material. Relevant results will be accounted for during the second half of the financial year.

 

3.  Significant accounting policies

 

The condensed financial statements have been prepared on an historical cost basis or fair value basis as appropriate.

 

The same accounting policies, presentation and methods of computation are followed in these condensed financial statements as were applied in the preparation of the Group's financial statements for the year ended 31 October 2016. A copy of these financial statements is available from the Company's Registered Office at Eagle House, Llansantffraid, Powys SY22 6AQ.

 

New Standards issued but not yet effective

 

At the date of authorisation of these interim statements, the following relevant major standard were in issue but not yet effective. The Directors anticipate that the Group will adopt these standards on their effective dates:

 

.

 

 

Effective for accounting periods commencing on or after

 

 

 

IFRS 15 Revenue from Contracts with Customers

 

1 January 2018

 

 

 

IFRS 9 Financial Instruments

 

1 January 2018

 

 

 

IFRS 16 Leases

 

1 January 2019

 

 

It is considered that the above standards and amendments, with the exception of IFRS 16 'Leases', will not have a significant effect on the results of the Group or Company.

 

IFRS16 is effective for accounting periods beginning on or after 1 January 2019. The Directors are currently reviewing the level of the Group's leasing arrangements that would be brought within scope of IFRS16. At the date of signing the interim statement the Directors are not yet in a sufficiently advanced stage of their reviews to be able to quantify any financial impact from this standard.

 

The accounting policies applied by the Group in these condensed consolidated interim statements are substantially the same as those applied by the Group in its consolidated financial statements for the 12 months ending 31 October 2016. There have been a number of minor changes to standards which became applicable for the year ended 31 October 2017, none of which have been assessed as having a significant impact on the Group.

 

4.     Taxation

 

The tax charge for the six months ended 30 April 2017 and 30 April 2016 is based on an apportionment of the estimated tax charge for the full year.

 

The effective tax rate is 627% (2016: 18.03%) which is higher than the standard rate of 19.50% (2015: 20%).

During this period the Group has goodwill and investment impairment charges of £3,942,194 and these are likely to be disallowable for tax purposes. The effective tax rate excluding the Goodwill and Investment impairment is 19.30% because it excludes certain items of income and expense that are taxable or deductible in other years. Reductions in the UK corporation tax rate to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were substantively enacted on 26 October 2015. An additional reduction to 17% (effective 1 April 2020) was substantively enacted on 6 September 2016. This will reduce the Group's future current tax charge accordingly. The deferred tax liability at the balance sheet date has been calculated at 17%.

 

5.     Earnings per share

 

Earnings per share before impairment have been calculated based on the profit attributable to ordinary shareholders of £3,282,799 (six months ended 30 April 2016: profit of £3,339,926) and after impairment charges a loss of £659,395  and the weighted average number of shares in issue of 19,495,387 (2016: 19,392,684). Diluted earnings per share are based on the aggregate weighted average number of shares and all potential shares adjusted for their proposed issue price, of 19,860,730 (2016: 19,489,260). In accordance with IAS 33, diluted loss per share is not adjusted for shares to be potentially issued, and is accordingly reported as being the same as headline loss per share.

 

6.     Share capital

 

During the current period a total of 35,104 (2016: 57,920) shares were issued with an aggregate nominal value of £8,776 (2016: £14,480) fully paid up for equivalent cash of £226,226 (2016: £254,738). Included in these issues were 35,104 (2016: 52,120) shares allotted to shareholders exercising their rights to receive dividends under the Company's scrip dividend scheme and Nil shares (2016: 5,800) allotted to relevant holders exercising options in the Company. No other shares (2016: nil) were allocated during the period. As at 30 April 2017 a total of 19,530,296 shares are in issue (2016: 19,448,884).

 

7.     Dividends

 

During the period ended 30 April 2017 an amount of £1,558,804 (2016: £1,435,831) was charged to reserves in respect of equity dividends paid. An interim dividend of 4.20p per share (2016: 4.00p) will be paid on 31 October 2017 to shareholders on the register on 29 September 2017. New elections to receive scrip dividends should be made in writing to the Company's Registrars before 17 October 2017.

 

8.     Segmental reporting

 

IFRS 8 requires operating segments to be identified on the basis of internal financial information about the components of the Group that are regularly reviewed by the chief operating decision maker ("CODM") to allocate resources to the segments and to access their performance.

 

The CODM has been identified as the Board of Directors ("the Board"). The Board reviews the Group's internal reporting in order to assess performance and allocate resources. The Board has determined that the operating segments, based on these reports are Agriculturel, Specialist Retail and Other.

 

The Board considers the business from a product/service perspective. In the Board's opinion, all of the Group's operations are carried out in the same geographical segments, namely the United Kingdom.

 

Agriculture - Manufactures and supplies of animal feeds, fertiliser, seeds and associated agricultural products.

               

Specialist Retail - Supplies  of a wide range of specialist products to farmers, smallholders and pet owners.

 

Other - Miscellaneous operations not classified as agriculture or specialist retail.

 

The Board assesses the performance of the operating segments based on a measure of operating profit. Finance income and costs are not included in the segmental result that is assessed by the Board.

 

Other information provided to the Board is measured in a manner consistent with that in the financial statements. Inter-segmental transactions are entered into under the normal commercial terms and conditions that would be available to unrelated third parties.

 

The Board has assessed the movement in net assets within each operating segment and notes that there are no material differences compared to the previous year.

 

 

The segment results for the period ended 30 April 2017 are as follows:

 

 

 

Agriculture

 

Specialist Retail

Other

Total

 

 

£'000s

£'000s

£'000s

£'000s

Unaudited for the six months ended 30 April 2017:

 

 

 

 

 

                     Revenue

 

145,776

59,484

55

205,315

 

 

 

 

 

 

                     Segment results

 

1,537

2,675

(58)

4,154

                     Share of result of associates & joint ventures

 

-

-

-

-

 

 

1,537

2,675

(58)

4,154

                     Impairment charges

 

 

 

 

(3,942)

                     Interest income

 

 

 

 

8

                     Interest expense

 

 

 

 

(95)

                     Profit before tax

 

 

 

 

125

                     Taxation

 

 

 

 

(784)

                     Profit for the period attributable to shareholders

 

 

 

 

(659)

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited for the six months ended 30 April 2016:

 

 

 

 

 

                     Revenue

 

135,179

57,972

86

193,237

 

 

 

 

 

 

                     Segment results

 

1,817

2,405

(47)

4,175

                     Share of result of associates & joint ventures

 

-

-

-

-

 

 

1,817

2,405

(47)

4,175

                     Interest income

 

 

 

 

18

                     Interest expense

 

 

 

 

(118)

                     Profit before tax

 

 

 

 

4,075

                     Taxation

 

 

 

 

(735)

                     Profit for the period attributable to shareholders

 

 

 

 

3,340

 

 

 

 

 

 

 

 

 

 

 

 

Audited for the year ended 31 October 2016:

 

 

 

 

 

                     Revenue

 

249,736

118,281

126

368,143

 

 

 

 

 

 

                     Segment results

 

2,934

4,493

(69)

7,358

                     Share of result of associates & joint ventures

 

72

51

(30)

93

 

 

3,006

4,544

(99)

7,451

                     Interest income

 

 

 

 

69

                     Interest expense

 

 

 

 

(209)

                     Profit before tax

 

 

 

 

7,311

                     Income taxes (includes tax of associates & joint ventures)

 

 

 

 

(1,482)

                     Profit for the year attributable to shareholders

 

 

 

 

5,829

 

 

9.     Other operating income

 

 

Unaudited as at 30 April 2017

Unaudited as at 30 April 2016

Audited

as at 31 October 2016

 

£'000s

£'000s

£'000s

 

 

 

 

 

Rental income

183

 

187

 

388

 

Other operating income

-

 

-

 

66

 

Other operating income

183

 

187

 

454

 

 

10.  Goodwill and investment impairment

 

 

 

Unaudited as at 30 April 2017

Unaudited as at 30 April 2016

Audited

as at 31 October 2016

 

£'000s

£'000s

£'000s

 

 

 

 

 

Goodwill impairment 

3,881

 

-

 

-

 

Investment impairment

61

 

-

 

-

 

Goodwill and investment impairment

3,942

 

-

 

-

 

The Goodwill impairment charge relates to the Just for Pets business, see note 11, the investment impairment relates to the impairment of the investment in Welsh Feed Producers which went into administration during the period.

 

  

11.  Goodwill

 

After initial recognition, goodwill is subject to annual impairment test or more frequently if events or changes in circumstances indicate that it might be impaired, in accordance with IAS 36.

 

 

 

 

 

 

Cost

£'000s

 

 

 

 

 

 

 

At November 2016 and 30 April 2017 

19,784

 

 

 

Aggregate impairment

 

 

 

 

At 1 November 2016

1,637

 

 

 

Impairment charge

3,881

 

 

 

At 30 April 2017

5,518

 

 

 

Net book value

 

 

 

 

At 30 April 2017

14,266

 

 

 

At 31 October 2016

 

18,147

 

 

 

Goodwill impairment

 

Goodwill arising on business combinations is not amortised but is reviewed for impairment on an annual basis, or more frequently if there are indications that goodwill may be impaired.

Goodwill acquired in a business combination is allocated to groups of cash generating units according to the level at which management monitor that goodwill.

Recoverable amounts for cash generating units are based on the higher of value in use and fair value less cost to sell. Value in use is calculated from cash flow projections for the next five years using data from the Group's latest internal forecasts, the results of which are reviewed by the Board.

The key assumptions for the value in use calculations are those regarding discount rates and growth rates. Management estimate discount rates using pre-tax rates that reflect the current market assessment of the time value of money and the risks specific to the cash generating units. Growth rates are based on past experience and expectations of future changes in the market. Given the current economic climate, a sensitivity analysis has been performed in assessing the recoverable amounts of goodwill.

In April 2017 and October 2016 impairment reviews were performed by comparing the carrying value of goodwill with the recoverable amount of the cash generating units to which goodwill has been allocated.

The impairment charge of £3,880,535 relates to the impairment on the CGU of the Group's subsidiary Just for Pets Limited.

 

Goodwill is allocated to specific cash generating units ("CGU") as it arises

The Group has a number of CGUs in both Agriculture and the Specialist Retail sectors. The carrying value of goodwill allocated to the Agriculture CGU is £7,776,514 (2016: £7,776,514), and to Specialist Retail is £6,489,560 (2016: £10,370,095).

The pre-tax discount rates used to calculate value in use ranges from between 9% to 12% for both the Agriculture and Specialist retail segments. These discounts rates are derived from the Group's weighted average cost of capital and adjusted for the specific risks relating to each CGU.

 

The forecasts are extrapolated based on estimated long term growth rates of 1% to 3% for both Agriculture and Specialist Retail segments

 

The Directors have considered the sensitivity to key assumptions and are satisfied that there are no reasonably probable changes in key assumptions which would cause the carrying amount of the CGU to exceed its recoverable amount

 

 

12.  Cash and cash equivalents  and bank overdrafts

 

 

Unaudited

as  at 30 April 2017

Unaudited as at 30 April 2016

Audited

as at 31 October 2016

 

£'000s

£'000s

£'000s

 

 

 

 

 

Cash and cash equivalents per balance sheet 

22

2,762

 

10,111

 

Bank overdrafts

(3,335)

(13)

 

-

 

Cash and cash equivalents per cash flow statement

(3,313)

2,749

 

10,111

 

13.  Cash (used in)/generated from operations

 

 

 

Unaudited

six months

 ended 30 April 2017

Unaudited

 six months ended 30 April 2016

Audited

 year

ended 31 October

2016

 

 

£'000s

£'000s

£'000s

 

 

 

 

 

(Loss)/Profit for the period

 

(659)

3,340

5,829

Adjustments for:

 

 

 

 

Taxation

 

784

735

1,456

Impairment of goodwill

 

3,881

-

-

Depreciation of tangible fixed assets

 

1,422

1,431

2,768

Amortisation of  intangibles

 

7

7

15

Impairment of investments

 

61

-

-

(Profit) on disposal of property, plant and equipment

 

(26)

(83)

(128)

Interest income  

 

(8)

(18)

(69)

Interest expense

 

95

118

209

Share of results of joint ventures and associates

 

-

-

(67)

Share based payment expenses

 

75

62

63

Changes in working capital (excluding effects of acquisitions and disposals of subsidiaries)

 

 

 

 

Decrease in short term loan to joint venture

 

-

-

16

(Increase)/ decrease in inventories

 

(4,921)

(2,322)

350

(Increase)in trade and other receivables

 

(12,896)

(8,850)

(1,709)

Increase in payables

 

2,813

2,547

164

 

 

 

 

 

Cash (used in)/ generated from operations

 

(9,372)

(3,033)

8,897

 

 

During the six months to 30 April 2017, the Group purchased property, plant and equipment of £1,202,000 (2016: £1,357,000) of which £127,000 (2016: £754,000) relates to assets acquired under finance leases.

  

14. Other reserves

 

Included in Other reserves are share-based payments: the Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value at the date of the grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest.

 

The Group operates a number of share option and Save As You Earn schemes and fair value is measured by use of a recognised valuation model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

 

At the 30 April 2017, the ESOP Trust, which is consolidated within the Group's financial statements held 53,377 Ordinary Shares in the Group.

 

15. Group financial commitments

 

As at 30 April 2017, the Group's contingent liabilities in respect of bank guarantees for one of its associates amount to £125,000 (2011: £125,000).

 

16. Capital commitments

 

As at 30 April 2017 the Group had capital commitments as follows:

 

Unaudited

as at 30 April 2017

Unaudited as at 30 April 2016

Audited

as at 31 October 2016

 

£'000s

£'000s

£'000s

 

 

 

 

Contracts placed for future capital expenditure not provided in the financial statements

 

282

 

 

2,005

 

361

 

17. Related parties

 

Transactions between the Company and its subsidiaries, which are related parties have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and its joint ventures and associates are described below:

 

 

Transaction value

Balance outstanding

 

Unaudited six months ended

30 April 2017

 

Unaudited six months

ended

30 April 2016

Audited year ended 31 October 2016

 

Unaudited as at

  30 April 2017

Unaudited

as at

 30 April 2016

Audited

as at

31 October 2016

 

£'000s

£'000s

£'000s

£'000s

£'000s

£'000s

 

 

 

 

 

 

 

Sales of goods to joint ventures and associates

12,220

6,480

10,594

6,077

3,670

2,684

Purchases of goods from joint ventures and associates

8,327

3,677

5,346

1,356

2,758

65

Interest receivable from joint ventures and associates 

-

-

58

-

-

-

Loans with joint ventures

-

-

-

2,786

2,802

2,786

Sales of goods to related parties were made at the Group's usual list prices, less average discounts. Purchases were made at market price discounted to reflect the quantity of goods purchased and the relationship between parties.


This information is provided by RNS
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