Record interim results from Wynnstay

4th July 2022 | Animal Feed, Company News, Grain Trading, Rural Retailing

The Wynnstay Group has reported a record set of interim results, with profitability and revenues supported by strong farmgate prices in the period plus significant one-off gains from its fertiliser blending activities.

The Group has reported a pre-tax profit of £9.56 million on revenues of £335.66m in the six months to April 30th 2022, compared to £5.36m and £249.71m in the previous first half. The company says that “significant” inflation accounted for some £80m of the revenues in the period alongside a £6.4m first contribution from its acquisition of Humphrey Feed & Pullets that completed in March 2022. The underlying pre-tax profit figure rose 85% to £10.21m (£5.53m in H1 2021).

While net assets of £111.68m were 10.5% higher at the period end (£101.05m) net debt also rose to £7.62m (£0.75m on April 30th 2021) in line with the acquisition funding and a higher working capital requirement due to price inflation.

The Group’s Agriculture division made an operating profit of £6.06m on revenues of £236.05m in the half year, up from £2.2m and £180.72m twelve months earlier. Strong farmgate prices for beef, lamb and grain were significantly ahead of the same period of 2021, with milk prices firm and egg prices rising since April, despite rising energy and input costs.

Wynnstay’s feed volumes were up 3.25% in the period, with increases in the key dairy, poultry and sheep feed lines. They were above the feed sector’s average growth rate, reflecting the company’s investment in more on-farm sales specialists.

At the same time, rising raw material and operating costs – including labour, energy and packaging – pressured feed margins, with operating margins down on the prior first half.

The Group’s Arable Products business was more affected by the global geopolitical factors driving market volatility. However, grain volumes traded by its GrainLink marketing business increased by 50% year on year. This reflected the return to average production and yields from harvest 2021 after the very poor UK harvest 2020, plus new business gained in the Eastern region following the Group’s investment in additional resources there.

However, Wynnstay warns that the rapid rise in crop prices means it is exposed to very significant margin calls on the futures-based forward grain contracts it uses to hedge grain purchases from farmers with subsequent sales to end users.

The half year benefitted from a strong autumn 2021 seed planting season, with the generally favourable growing conditions pointing to good spring and reasonable 2022 harvest. But the open autumn reduced the company’s spring cereal and grass seed volumes – not helped by the dry March and April – although both were in line with sector averages.

Wynnstay’s fertiliser volumes fell 26% in the period, in line with exceptionally high product prices, although the Group notes that average industry contraction was around one-third. Improved margins more than balanced the reduced tonnage.

Results from Glasson Grain, the Wynnstay subsidiary wholesaling feed materials and fertilisers and making specialist feed products were significantly ahead of expectations. Fertiliser blending was lifted by one-off stock price gains while the HELM GB business acquired by Wynnstay a year ago increased traded volumes. The feed materials activity performed as expected, but there was fall in demand for specialist feed products due to more difficult end-markets.

Wynnstay’s other division, Specialist Agricultural Merchanting, comprising Wynnstay’s network of 54 rural retail stores, made an operating profit of £4.28m on revenues of £72.63m (£3.4m and £68.88m in H1 2021).

The higher profit was helped by positive farmer confidence, a favourable mix of sales and the effect of recent efficiency improvements across the business. The period saw good sales of higher margin bagged feed, animal health products and more discretionary hardware items, although total sales before inflation were slightly down year-on-year.

Wynnstay continues to develop its digital retail offer with some 1,800 accounts now signed up to its customer portal.

The Youngs specialist equine feeds business was profitable, but volumes and margins fell in line with the national equine sector.

Directors believe trading conditions remain positive, underpinned by the firm farmgate prices. While the Group is well-placed to achieve full year growth, it does not expect the “exceptional” first half gains to be repeated over the next six-month period.

“These record interim results have been underpinned by a favourable sector backdrop, with strong farmgate prices across most sectors and positive farmer sentiment, as well as significant one-off gains in our fertiliser blending activity,” notes Group chief executive Gareth Davies.

“The acquisition of Humphrey Feeds and Pullets is exciting. It significantly extends our geographic reach and opens up new growth opportunities.
“While there are still challenges with cost inflation and supply chain pressures, sector sentiment remains strong, and we are confident about achieving our growth goals for the full year,” he concludes.