Farmer owned Mole Valley Farmers has reported “solid” trading from its latest financial year, the last under outgoing chief executive Andrew Jackson, despite the effect of weather and economic uncertainty on farmer customers.
The feed manufacturing to farm retail co-operative made a pre-tax profit of £444,000 on a turnover of £495.37 million in the year to September 30th 2019, compared to an adjusted pre-tax loss of £2.42m from revenues of £490.52m in the previous twelve months. Net assets at the year-end stood at £43.0m from the prior £42.6m.
Last year’s reported pre-tax profit of £1.4m was adjusted down by £3.8m retrospectively, after accounting errors were identified in 2019. The adjustment includes £1.1m relating to 2017 trading. The company introduced new accounting systems in October 2019.
The group’s combined agricultural business, including feeds, fertilisers, forage products and supplements contributed £246m to turnover in the latest year’s trading (£271.9m in 2018). The overall feed volume sold was comparable to the previous year at just under 1m tonnes, with growth in dairy feeds offsetting reduced beef and sheep products. The company says this mirrors the national feed sales picture in the period, while its feed volumes were 4.2% ahead of those budgeted. Farmer membership now exceeds 9,000 accounts.
It is focusing on ruminant feeds and supplements, investing in production and environmental R&D with academic and research bodies including the Centre for Innovation Excellence in Livestock (CIEL). Such investment will help meet innovations necessary to meet product environment footprints, including phosphorus and nitrogen in feed material sourcing, plus methane and nitrogen output monitoring as standard in some of MVF’s future rationing programmes.
The latest year saw the launch of a new calf feed, Ambition, incorporating Omnigen and the latest science in calf nutrition; the Lifetime Dairy Yield parameter for its dairy herd management service; and the Forage Potential Index to link forage production, utilisation and feed use on farm. MVF also introduced a new, improved standard mineral range as well as several specialist compound feeds to help enhance milk fat and protein yield.
“There have been some very positive volume retentions within our ruminant feeds business, because of sustained investment, improvements in logistics and providing a wider range of on-farm services,” says Mr Jackson.
The Group’s combined fertiliser and forage business performed below budget, largely due to a telescoped spring season – a combination of deferred forward buying and farmers not wanting product on farm until needed meant the company was faced with delivering six weeks’ worth of production over a 10 day period. This tested both the MVF blending facility at Newport and its third-party suppliers, with the extended plant shutdown by the company’s preferred NPK supplier limiting customer deliveries further. Fertiliser volumes during the period were 140,934 tonnes.
The “unprecedented” drop in AN pricing in March 2019 affected revenues for the whole season, while favourable grass and forage growing conditions dampened demand for fertiliser and seeds. However, silage additive sales exceeded the previous years’ treated tonnes.
As part of a programme of operational improvement, MVF is preparing to leave one of its five compound feed plants at Calne in Wiltshire this year, a plant it took over from Dukes & Botley in 2009. Plans to consolidate the existing volume into alternative locations are well advanced. Other divisional investment included upgrading the business IT platform to Microsoft AX; technical developments in feed and the Precision Nutrition rationing programme.
The Group’s rural stores business saw combined revenues grow by £4m to £222m (£218.1m in 2018) against a background of weather-related reduced demand for cyclical farming products and non-essential items, although some categories – particularly timber and fencing products – saw exceptional sales. The Mole Valley Farmers chain saw revenues increased to £105m (£96.8m in 2018) after the acquisition of three stores – Penzance, Cirencester and Tavistock – from Countrywide Farmers, although like-for-like sales were down 2%.
The Mole Country Stores brand, with a wider geographical spread and smaller stores, returned sales of £91m, down on the previous year’s £93.3m. Bridgmans FarmDirect, a more traditional direct to farm merchanting model with four branches had a difficult trading year with sales of £24m (£27m).
The division concedes that last year’s centralisation of product distribution to stores from three locations to a single 80,000 sq ft warehouse at Andover identified some problems with “poor replenishment performance, not necessarily related to our central distribution facility”.
A thorough review of working practices and product flows through the business and to the customer, supported by suppliers the logistics partner, has resulted in distribution model changes with a reduction in inventory values and more just in time working. This has yielded stock savings of £3m and better on-shelf availability. Work continues to reduce unnecessary delivery miles.
“With livestock producers benefitting from some exceptionally good growing conditions, our direct-to-farm volumes and revenues have been influenced by the weather,” notes Mr Jackson. “Also, given the economic uncertainty surrounding Brexit that prevailed over the wider economy and the agricultural industry, our farming customers have been more cautious throughout the year and seem to have spent less on non-essential items.
“The 2019 performance is a reasonable result, despite challenging conditions. At the same time, the business has remained resolute in achieving a number of progressive operational objectives.”
• Mr Jackson was succeeded by Jack Cordery as chief executive on May 1st 2020.