The Wynnstay Group has reported increased profitability on lower revenues from its latest first half trading, despite what it terms “exceptionally challenging market conditions caused by the coronavirus crisis; subdued farmgate prices; and ongoing Brexit uncertainty,” plus commodity price deflation reducing revenues.
The Group made a pre-tax profit of £4.30 million on revenues of £229.29m in the six months to April 30th 2020, compared to £4.12m and £260.57m in the prior first half – a respective increase of 4% and fall of 12%. Net assets stood at £96.84m at the end of the period from £92.97m twelve months earlier.
Commodity price deflation accounted for some 60% of the decrease in revenues, with the remainder attributed to lower volumes of certain product categories due to the wet autumn, and retail store sales affected by Covid-19 trading restrictions.
Wynnstay’s Agriculture Division made an operating profit of £1.81m on revenues of £166.41m (£1.79m and £195.05m in H1 2019).
The Group’s feed manufacturing performance improved with higher margins more than offsetting volumes that were down in line with the national market trend after the previous year’s record output. While the last winter was mild, it was also wet, preventing early turnout. There was a small decline in cattle volumes as many farmers reacted to lower prices by switching to straights from manufactured compounds, but sheep feed volumes recovered. The group maintained its share of the local free-range layer feed sector and increased its ruminant youngstock milk replacer market share.
The extreme wet autumn weather and reduced winter crop plantings reduced the demand for arable inputs. A significant tonnage of winter cereal seed remained unplanted and will overhang the market until the coming autumn. But this increased demand for spring cereal seed. In turn, more spring crops cut the demand for fertilisers and plant protection products.
The grassland fertiliser market was also delayed by the wet weather, as were grass seed sales, although seed volumes were higher year-on-year once sales started.
Wynnstay’s grain trading business benefitted from the larger 2019 cereals harvest with more volume to trade. However, when it became clear that harvest 2020 was going to be reduced, some farmers decided to delay marketing their grain in anticipation of higher prices. This increased the competition for supplies, and reduced trade margins. The company expects this to continue for the rest of the current season, and into 2020/21 with a small harvest in area and yield.
Glasson Grain, Wynnstay’s feed materials and fertiliser wholesaling and specialist animal feed manufacturing business had a good period. Feed activities were satisfactory, although the delayed demand for fertiliser meant that orders picked up in April, with volumes eventually matching the 2019 level. The sharp drop in oil prices after the coronavirus restrictions reduced fertiliser prices and margins.
Wynnstay’s Specialist Agricultural Merchanting Division – its chain of 55 rural stores – returned an operating profit of £3.02m on revenues of £62.83m (£2.67m and £65.48m in 2019). It maintained trading throughout the Covid-19 lockdown through an order and collect system, although some ancillary product sales were affected. Nearly all depots have now resumed more normal trading protocols while ensuring social distancing.
The division’s total sales decreased slightly during the period, largely due to the wet weather and the coronavirus restrictions toward the end of the period. But it made an improved financial contribution to the group, following a cost efficiency programme started last year.
The Group’s specialist equine feeds business, Young’s Animal Feeds, saw revenues increase as customers stockpiled due to coronavirus. But the company expects a short-term hit from the cancellation of many summer equine events and shows. Young’s is to relaunch its manufactured fibre feed range under the Sweet Meadow brand.
“These resilient results in the face of the headwinds created by the coronavirus pandemic, continuing Brexit uncertainty and subdued farmgate prices, demonstrate the robustness of the business,” states Wynnstay chief executive Gareth Davies. “Wynnstay’s broad spread of agricultural activities is a significant strength, acting as a natural hedge against sector variations.
“We are proud of the way staff responded to the challenges of trading under the Government’s emergency ‘lockdown’ measures, which meant that we were able to maintain the supply of products and services to customers, albeit with necessary adaptations.
“The Group is well-placed financially and operationally to navigate the ongoing coronavirus crisis. While we expect the remainder of the year to remain challenging, our confidence in the long-term prospects for Wynnstay remain undiminished.”
Despite the uncertainty, Mr Davies says Wynnstay will continue with its investment programme, and has maintained its interim dividend.