TIDMWYN
RNS Number : 2727E
Wynnstay Group PLC
10 March 2022
AIM: WYN
WYNNSTAY GROUP PLC
("Wynnstay" or "the Group" or "the Company")
Acquisition of
Humphrey Feeds Ltd and associated business, Humphrey Pullets
Ltd
Wynnstay, the agricultural supplies group, is pleased to
announce that it has agreed terms to acquire the share capital of
Humphrey Feeds Ltd, a manufacturer and supplier of poultry feed to
farmers mainly in the South of England. In addition, the Company is
acquiring the share capital of an associated business, Humphrey
Pullets Ltd, which supplies point-of-lay pullets. The initial
consideration for these acquisitions (together "Humphrey" or the
"Acquisition") is GBP9.5 million in cash at completion.
Highlights
-- Based in Hampshire, with an 85-year history, Humphrey is a
well-established manufacturer and supplier of poultry feed, and
point-of-lay pullets, to farmers, mainly in the South of
England
- c.109,000 tonnes of poultry feed sold in FY 2021
- c.200 farmer customers
- share of the poultry feed market for free-range laying hens is estimated at c.5%*
o share of the organic poultry feed market is c.30%*
- pullet-rearing activity supports the main feed business
-- Humphrey's poultry feed manufacturing is based at facilities
in Twyford in Hampshire, with a facility at Calne in Wiltshire
currently unused
- Wynnstay intends to redevelop the Calne site into a modern
c.185,000 metric tonne capacity mill, manufacturing both poultry
and ruminant feed. Planning permission is already in place
-- In the year ended 28 February 2021, Humphrey generated
combined revenues of GBP39.51m, and an adjusted profit before tax**
of GBP1.16m. Reported combined profit before tax was GBP1.63m.
- net assets that transfer at completion are valued at GBP4.5m***
-- Initial consideration for the Acquisition of GBP9.5m in cash
at completion. Deferred consideration of up to GBP2.0m may become
payable dependent on the attainment of certain performance
targets
-- In order to fund the Acquisition, the Company is entering
into a new GBP12.5m revolving credit facility
-- The Board believes this is a highly complementary acquisition:
- is expected to be immediately earnings enhancing
- extends geographic reach
- adds new farmer and supply chain relationships
- increases the Group's poultry feed manufacturing capacity and purchasing power
o significantly expands the Group's share of poultry feed market
for free-range laying hens, a growth sector
o adds organic poultry feed sales (typically premium-margin)
- facilitates expansion of multi-species feed sales in the South of England
-- The Acquisition is in line with the Company's current growth strategy:
- maintain a balanced agricultural offering between arable and feed, and
- reviewing opportunities in the Group's markets, and ongoing
discussions with a number of potential targets
* Humphrey/ Wynnstay estimates
**Adjusted profit before tax excludes non-continuing activities
and costs, one-off items and profits from the disposal of fixed
assets
***Subject to consideration adjustment by reference to
completion accounts
Gareth Davies, Chief Executive Officer of Wynnstay Group plc,
commented:
"This is an excellent acquisition for Wynnstay. Humphrey is a
long-established, family-owned business, with an 85-year history,
which prides itself on 'advancing poultry performance'. It makes a
highly complementary addition to the Group, which will be readily
integrated, and is expected to be immediately earnings
enhancing.
"Humphrey fulfils multiple acquisition criteria for us. It will
significantly extend our trading footprint in the South of England,
enlarge our market share of poultry feed, a key target sector for
us, increase our feed manufacturing capacity, and bring additional
farmer customers.
"Looking further out, with the redevelopment of the Calne
manufacturing facility into a ruminant as well as poultry mill,
there is scope to drive additional significant long-term trading
benefits."
Enquiries:
Wynnstay Group plc Gareth Davies, Chief T: 01691 827
Executive 142
Paul Roberts, Finance
Director
KTZ Communications Katie Tzouliadis / Dan T: 020 3178
Mahoney 6378
Shore Capital (Nomad Stephane Auton / Patrick T: 020 7408
and Broker) Castle / 4090
John More
The Acquisition
Based in Hampshire, the principal activity of Humphrey Feeds Ltd
and Humphrey Pullets Ltd (together "Humphrey" or "the Acquisition")
respectively is the manufacture and supply of poultry feed to
farmers, predominantly in the South of England, and the supply of
point-of-lay pullets. Humphrey is well-established and it is part
of a family-owned enterprise. Its current activities commenced in
1966, but it has an 85-year history.
Humphrey manufactures poultry feed from its leasehold mill in
Twyford, in Hampshire, and in the last financial year, feed sales
totaled 109,000 metric tonnes. In feed manufacturing, Humphrey
follows and is audited against the Universal Feed Assurance Scheme
("UFAS"), an internationally recognised standard. Humphrey owns a
second, freehold manufacturing facility in Calne, in Wiltshire,
which is not currently utilised. Wynnstay plans to redevelop this
facility and to transfer production from Twyford to Calne in the
future. In addition to manufacturing conventional poultry feed,
Humphrey manufactures organic poultry feed. For its organic poultry
feed manufacture, it is certified by Organic Farmers and Growers
("OF&G"), and Humphrey also works with Organic UK (The Organic
Trade Board), an independent non-profit membership
organization.
Humphrey supplies a customer base of approximately 200 farmers,
mainly in the South of England, including the South-west, but also
in the Midlands and Wales. Humphrey's estimated share of the
poultry feed market for free-range laying hens is c.5%*, and its
share of the organic poultry feed market is c.30%*.
Humphrey's feed business is supported by its pullet-rearing
activity. In the current financial year, the unit is budgeted to
rear c.1.1m pullets. These are typically sold when the pullets
reach 16 weeks old, i.e. around the egg-laying stage. The pullet
rearing activity currently accounts for c.7% of Humphrey's poultry
feed sales.
The management team of Humphrey is expected to join Wynnstay at
completion.
*Humphrey/Wynnstay estimates
Financial Information
In the year ended 28 February 2021, Humphrey generated combined
revenues of GBP39.51 million (2020: GBP40.61 million) and an
adjusted profit before tax** of GBP1.16 million (2020: GBP0.97
million). The reported combined profit before tax for the financial
year was GBP1.63 million (2020: GBP1.01 million). Net assets that
transfer at completion are valued at GBP4.5 million***. Feed
volumes sold in 2021 totalled 109,430 metric tonnes (2020: 116, 704
metric tonnes).
**Adjusted profit before tax excludes non-continuing activities
and costs, one-off items and profits from the disposal of fixed
assets
***Subject to consideration adjustment by reference to
completion accounts
Rationale for the Acquisition
Wynnstay has a twin-track strategy of combining organic growth
with carefully selected acquisitions, and an established record of
identifying, negotiating and integrating acquisitions. The Board
believes that the acquisition of Humphrey is highly attractive,
offering significant benefits, and wholly aligns with its growth
strategy. It is expected to be readily integrated and immediately
earnings enhancing. The sale of Humphrey reflects succession
planning on the part of the vendors and their focus on other areas
of activities, particularly property.
A brief summary of the rationale for the Acquisition is as
follows:
-- expected to be immediately earnings enhancing
-- extends the Group's geographic reach
-- adds new farmer and supply chain relationships
-- increases the Group's poultry feed manufacturing capacity and purchasing power
o significantly expands Group's share of the free-range feed
market for laying hens, a growth sector
o adds organic poultry feed sales (typically premium-margin)
-- facilitates expansion of multi-species feed sales in the South of England
The acquisition of Humphrey will mark a significant step in
building Wynnstay's presence in the South of England, including in
the South West. At completion, a base of c.200 existing Humphrey
farmer customers will be added, and following the integration of
the Humphrey operations into the Group, the Board believes that
there will be significant opportunities to increase this customer
base further and to cross-sell other Wynnstay products and
services. Wynnstay will also benefit from the expertise of Humphrey
management and staff, who will join the Group at completion,
Humphrey's supply chain relationships, and from an anticipated
increase in purchasing power.
Poultry feed, in particular for free-range laying hens, is a
specifically targeted growth area for the Group. Poultry feed
demand is typically consistent throughout the year, and UK
free-range egg production is growing. Major supermarkets have
committed to end the sale of colony eggs by 2025, replacing colony
eggs with free-range and barn eggs. The Company estimates that the
addition of Humphrey will take its share of the poultry feed market
for free-range laying hens to c.11% from c.6%. The Group's target
market share is c.15+%. The addition of organic poultry feed,
considered to be a premium-margin market, will also expand
Wynnstay's existing feed offering. Organic poultry feed constituted
c.30% of Humphrey's feed volumes in its last financial year.
Currently Humphrey's manufacturing mill at Calne in Wiltshire is
mothballed, and Wynnstay proposes to redevelop it into a modern
facility, capable of manufacturing c.185,000 metric tonnes of feed,
and to secure organic certification. Wynnstay intends to diversify
production so that the mill manufactures ruminant feed as well as
poultry feed. The Company also plans to transfer feed production at
Twyford to Calne in the future.
The Board expects the redevelopment of the Calne facility to
open up significant opportunities to develop multi-species feed
sales in the region. It will also enable Wynnstay to transfer some
production from the Group's manufacturing plants at Llansantffraid
and Carmarthen to Calne, thereby freeing up capacity and
facilitating the potential for further sales expansion in the
immediate geographies served by these mills.
The Board estimates that the capital expenditure required for
the Calne redevelopment project is c. GBP13.0m, and that project
will take approximately three years to complete. Planning
permission for the redevelopment has already been obtained, and the
project is expected to be funded through debt financing.
Humphrey also operates a pullet-rearing operation, which
Wynnstay will take over as part of the Acquisition. The
pullet-rearing operation currently accounts for c.7% of Humphrey's
poultry feed sales, and is expected to provide a valuable
opportunity for Wynnstay to cross-sell other products and
services.
Acquisition Terms and Funding
Under the terms agreed for the Acquisition, a total initial
consideration of GBP9.5m in cash is due at completion, which is
expected by 18 March 2022. Deferred consideration of up to GBP2.0m
may become payable, dependent on the attainment of certain
performance targets, 12 months after completion of the
Acquisition.
The transaction includes, a four-year lease on the feed
production facility in Twyford on a peppercorn rent, the freehold
of the currently mothballed mill in Calne, and net assets of c.
GBP4.5m***.
In order to fund the Acquisition, the Company is entering into a
new GBP12.5m revolving credit facility.
***Subject to consideration adjustment by reference to
completion accounts
Current Trading
In its final results announcement, issued on 2 February 2022,
Wynnstay reported that trading in the new financial year had begun
well, in line with management expectations, and that the Board
considered that Wynnstay was well-positioned to achieve its growth
objectives for the year.
NOTES
Reconciliation of Adjusted Profit before Tax
Year ended 28 February 2021 2020
GBP'000
-------------------------------- ------ ------
Revenues 41,446 42,535
Less inter-company -1,933 -1,923
------ ------
Combined revenue 39,513 40,612
--------------------------------- ------ ------
Combined reported
profit before
tax 1,634 1,011
Add backs(1)
: 766 646
Less non-recurring(1)
: -1,238 -688
--------------------------------- ------ ------
Combined adjusted profit before
tax 1,162 969
Add back depreciation 627 723
--------------------------------- ------ ------
EBITDA 1,789 1,692
--------------------------------- ------ ------
(1) adjustments for one off costs/benefits relate to Calne cost
write-offs, central support costs, partnership storage, joint
farming agreement, management charges, profit on fixed assets,
interest received, dilapidations provisions and rental income
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END
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March 10, 2022 02:00 ET (07:00 GMT)
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