TIDMWYN

RNS Number : 3633Q

Wynnstay Group PLC

28 June 2022

28 June 2022

AIM: WYN

Wynnstay Group Plc

("Wynnstay" or the "Group" or the "Company")

Interim Results for the Six Months ended 30 April 2022

Record interim results driven by strong sector backdrop and significant one-off gains

KEY POINTS

Financial

 
      --  Record interim results, ahead of original management expectations, 
           driven by: 
                  -  firm market backdrop, with strong farmgate prices boosting 
                      farmer sentiment 
                  -  significant one-off gains from fertiliser blending activities 
                      at Glasson, caused by sharply rising natural gas prices 
      --  Revenue up 34% to GBP335.66m (2021: GBP249.71m), with significant 
           inflation - accounted for c.GBP80m of the rise 
                -    GBP6.4m first contribution from Humphrey acquisition, completed 
                      in March 2022 
      --  Underlying pre-tax profit*up 85% to GBP10.21m (20 21 : GBP5.53m)/ 
           Reported PBT up 78% to GBP9.56m (20 21 : GBP5.36m) 
      --  Basic earnings per share, including non-recurring items, up 
           71% to 36.99p (20 21 : 21.62p) 
      --  Net debt at 30 April 2022 on a pre-IFRS 16 basis increased 
           to GBP7.62m (30 April 2021: GBP0.75m net cash), reflecting 
           acquisition funding and higher working capital requirements 
           due to inflation 
      --  Net assets up 10.5% to GBP111.68m/GBP5.50 per share at period 
           end (30 April 20 21 : GBP101.05m/GBP5.05 per share) 
      --  Interim dividend up 8.0% to 5.40p (20 21 : 5.00p) 
 

Operational

 
      --  Acquisition of the Humphrey businesses completed in March 2022 
           for initial payment of GBP9.5m 
                -     in line with strategy to expand poultry feed manufacturing 
                       capacity for the growing free-range egg sector and immediately 
                       earnings enhancing 
                -     extends Group's geographic trading area into the South, 
                       the Midlands and South Wales 
                -     opportunity to redevelop mothballed Calne mill into modern, 
                       multi-species feed mill to support further expansion 
      --  Agriculture Division - revenue up 45% to GBP263.03m (20 21 
           : GBP180.72m), operating profit before non-recurring items 
           up 176% to GBP6.06m (20 21 : GBP2.20m) 
                  -   Glasson contribution significantly ahead due to one-off 
                       stock price gains from fertiliser blending activities 
                  -   feed volumes up 3.25%, ahead of sector average, with good 
                       growth in target markets 
                  -   grain trading volumes up 50%, reflected return to more 
                       normalised harvest and good autumn planting season. Lower 
                       spring cereal and grass seed sales, in line with sector 
      --  Specialist Agricultural Merchanting Division - revenue up 5% 
           to GBP72.63m (20 21 : GBP68.88m), operating profit before non-recurring 
           items up 26% to GBP4.28m (20 21 : GBP3.40m) 
                  -   favourable sales mix on lower total volumes; strong sales 
                       of bagged feed, animal health care and hardware products 
                  -   efficiency improvements helped drive higher profitability 
 

Outlook

 
      --  Trading conditions remain positive - underpinned by firm farmgate 
           prices 
      --  Board believes Group is well-placed to achieve growth prospects 
           for the full year; exceptional gains of H1 not expected to 
           be repeated in H2 
 
                 *    Group remains focused on acquisitions in key target 
                      areas 
 

* Underlying pre-tax profit is a non-GAAP (generally accepted accounting principles) measure and is not intended as a substitute for GAAP measures and may not be calculated in the same way as those used by other companies. Refer to Note 6 for an explanation on how this measure has been calculated and the reasons for its use.

Gareth Davies, Chief Executive of Wynnstay Group plc, commented:

"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.

"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."

Enquiries:

 
 Wynnstay Group Plc     Gareth Davies, Chief     T: 020 3178 6378 (today) 
                         Executive                T: 01691 827 142 
                         Paul Roberts, Finance 
                         Director 
 KTZ Communications     Katie Tzouliadis / Dan   T: 020 3178 6378 
                         Mahoney 
 Shore Capital (Nomad   Stephane Auton / John    T: 020 7408 4090 
  and Broker)            More 
 

CHAIRMAN'S STATEMENT

INTRODUCTION

We are pleased to report record interim results, with underlying pre-tax profit up by 85% to GBP10.21m* (2021: GBP5.53m) and revenue up 34% to GBP335.66m (2021: GBP249.71m). Reported pre-tax profit increased by 78% to GBP9.56m (2021: GBP5.36m).

These excellent results are ahead of our original expectations, and reflect a strong trading backdrop, supported by buoyant farmgate prices across most categories, which boosted farmer sentiment and farm investment. There were also unexpected one-off gains at our fertiliser blending activity at Glasson. This was created by sharply rising fertiliser prices as a result of the significant increases in the world price of natural gas, which is used in the production of ammonium nitrate fertiliser. Fertiliser prices have fallen slightly from their high point in March, and we do not anticipate these one-off gains to be repeated.

There was widespread inflationary pressure in the period, which was exacerbated by the Russian invasion of Ukraine in late February and the ensuing sanctions imposed on Russia. Certain energy and soft commodity prices reached levels not seen globally for several decades. In the UK, wheat and fertiliser prices reached record levels in March. While this dampened some demand, the effect of inflation on Group revenues has been significant.

Operational conditions in the period continued to be affected by the Coronavirus pandemic, in particular the high infection rates associated with the Omicron variant and the inconsistency of supply of certain products. Thanks to the efforts of our teams and wide sourcing network, this did not affect customer service levels or product provision. The working environment has now largely normalised following the lifting of Government restrictions, and we remain ready to react to any new guidance.

A major highlight in the first half was the acquisition in March 2022 of Humphrey Feeds Ltd, a manufacturer and supplier of poultry feed, and Humphrey Pullets Ltd, which supplies point-of-lay pullets ("Humphrey"). Both businesses are based in Hampshire and mainly supply farmers in the South of England, as well the Midlands and South Wales. The provisional assessed consideration for the acquisition was GBP13.2 million, with an initial GBP9.5 million paid in cash at completion. This highly complementary acquisition is in line with the Board's strategic plans to expand the Group's poultry feed manufacturing capacity for the free-range egg sector, a growing market, and extend the Group's geographic trading area. As previously reported, we expect the Humphrey acquisition to enhance earnings this financial year. In order to fund the acquisition, the Company entered into a new GBP12.5m revolving credit facility. Further details about the business and our plans to develop the opportunities it brings are provided further on in the report. We are delighted to welcome our new colleagues and customers to the Group, and are pleased to report that the business is bedding in well, as expected.

These trading results continue to demonstrate the benefits of our balanced business model, supplying products to both livestock and arable farming enterprises. Our investment programmes across the Group are progressing, with substantial projects under way in our feed and seed operations. The trading outlook for the second half remains very positive and we expect to make further good progress in the second half.

FINANCIAL RESULTS

First half results for the six months ended 30 April 2022 have been significantly affected by rising commodity prices, which have increased revenues and created one-off raw material gains in fertiliser blending.

Revenue increased by 34% on the same period last year to GBP335.66m (2021: GBP249.71m), with commodity price inflation accounting for an estimated GBP80.00m of the overall increase. The Humphrey acquisition, completed in mid-March 2022, contributed GBP6.4m to Group revenues. Revenue generated by the Agriculture Division increased by 45% to GBP263.03m (2021: GBP180.72m) while the Specialist Agricultural Merchanting Division generated a 5% increase at GBP72.63m (2021: GBP68.88m).

Adjusted operating profit, which is before non-recurring costs, share-based payments and intangible amortisation, rose by 84% to GBP10.43m (2021: GBP5.68m). The Agricultural Division contributed operating profit of GBP6.06m (2021: GBP2.20m), up by 176% by comparison with the same period last year. This result included the one-off stock profits from fertiliser blending. The Specialist Agricultural Merchanting division contributed operating profit of GBP4.28m (2021: GBP3.40m). This 26% increase mainly reflected improved margins, driven partly by efficiencies. Other activities incurred a slight operating loss of GBP0.07m (2021: loss of GBP0.12m). As in prior years, the contribution from our Joint Ventures will be consolidated in the second half of our full year results.

Non-recurring costs charged in the period amounted to GBP0.52m and related to the transaction and funding costs of the Humphrey acquisition (2021: Nil). Net finance costs, including IFRS 16 charges, totalled GBP0.19m (2021: GBP0.11m), and reflected the new loans drawn to fund the acquisition. Share-based payment expenses for the period decreased to GBP0.13m (2021: GBP0.16m).

Underlying pre-tax profit, which excludes share-based payments and non-recurring items, increased by 85% to GBP10.21m* (2021: GBP5.53m). Reported profit before tax increased by 78% to GBP9.56m (2021: GBP5.36m). The effective tax rate for the period was higher than the same period last year at 21.4% (2021: 19.1%). This was because deferred tax rates were adjusted to recognise the future increase in the Corporation Tax rate to 25% from April 2023, and has resulted in a charge of GBP2.05m (2021: GBP1.03m). Profit after tax increased by 73% to GBP7.51m (2021: GBP4.34m), and basic earnings per share increased by 71% to 36.99p (2021: 21.62p).

Net assets at 30 April 2022 stood 10.5% higher year-on-year at GBP111.68m (30 April 2021: GBP101.05m) and equates to GBP5.50 per share (30 April 2021: GBP5.04 per share), based on the weighted average number of shares in issue during the period at 20.31m (2021: 20.06m).

Net debt on a pre IFRS 16 basis (excluding property leases) increased to GBP7.62m at 30 April 2022 from a 2021 equivalent position of GBP0.75m net cash. The rise reflected both acquisition funding and significantly higher working capital requirements resulting from the substantial commodity price inflation. Working capital in any given year typically peaks around the April interim period end, reducing over the second half. Total Right of Use property lease liabilities amounted to GBP5.13m (2021: GBP5.60m) resulting in reported accounting net debt of GBP12.75m (2021: GBP4.85m).

DIVID

The Board is pleased to declare an increased interim dividend of 5.40p per share (2021: 5.00p), up by 8.0% on the equivalent payment last year. The increased payment reflects both the strong results and the Directors continuing confidence in growth prospects.

The interim dividend will be paid on 31 October 2022 to shareholders on the register at the close of business on 30 September 2022. As in previous years, the Scrip Dividend alternative will continue to be available, with the last day for election for this scheme being 14 October 2022.

REVIEW OF OPERATIONS

AGRICULTURE DIVISION

Strong farmgate prices for most agricultural produce has continued to underpin sector sentiment despite farm costs also rising, particularly for fuel and energy. Prices for beef, lamb, and especially grain in the first half were significantly ahead of the same period last year, with milk prices also firm. Egg prices were generally flat, although they have been increasing since April.

Feed Products

Feed volumes rose on a like-for-like basis by 3.25% over the same period last year and were above the average growth rate in the sector. We increased volumes in key target areas, including dairy, poultry and sheep feed, supported by our strategy of increasing the number of our on-farm sales specialists.

Rising raw material and operating costs, including labour, energy and packaging, continued to put pressure on margins. Nonetheless, the feed division performed well, although its operating margin was slightly lower than the same period last year.

The acquisition of the Humphrey business opens up significant future growth opportunities for the Group. While it immediately adds additional poultry feed manufacturing capacity from a leased facility in Twyford in Hampshire, there is scope to redevelop its currently moth-balled freehold site at Calne in Wiltshire to create a modern, multi-species mill, manufacturing both poultry and ruminant feed. This would give us a strategically well-located feed manufacturing facility and enable us to extend our trading footprint in the South of England, including in the South West. In addition, once operational, the Calne mill would also enable us to efficiently develop local growth opportunities at Llansantffraid and Carmarthen by transferring some production capacity at these feed mills to the Calne facility. We also plan to extend sales of other Wynnstay products and services to the new farmer customer base that we have gained with the acquisition. The Humphrey business made a first-time contribution to poultry feed sales in line with our expectations.

Arable Products

The Arable operations have been the most affected by the geopolitical factors that have driven raw material prices higher and increased operating costs. Nonetheless, these have been managed well.

The volume of grain traded by GrainLink, our grain marketing business, was substantially ahead of the same period in the last financial year, increasing by 50%. This increase largely reflected a return to more normal harvest tonnages and yields in 2021 compared with the exceptionally poor harvest in 2020, and volume gains made in our Eastern operations, following new business wins generated by the expansion of dedicated resource in this area. One impact of rising crop prices has been the need to meet very significant margin calls on forward grain hedging contracts. We use these contracts to provide an effective hedge between our grain purchases from farmers and subsequent sales to food manufacturers. Forward positions will unwind over the course of the next six months as the physical grain is delivered and these contracts unwind.

The Autumn seed planting season was strong, and good growing conditions since then bode well for the forthcoming 2022 harvest and grain trading volumes. With a good Autumn planting season, the spring-sown cereal crops acreage was reduced, and grass seed sales were also lower than the comparative period last year partly due to the very dry weather in March and April 2022. However, both our spring cereal and grass seed sales are in line with sector averages.

The volume of fertiliser traded within Wynnstay Agriculture Supplies decreased by some 26% compared with the equivalent period last year, a reflection of elevated fertiliser prices. This compares with industry contraction of about a third, and improved margins have more than balanced the reduced tonnage.

Glasson Grain Limited ("Glasson")

Glasson operates in three main areas; feed raw materials, fertiliser production and the manufacture of specialist animal feed products.

As discussed earlier, the contribution to Group results from Glasson significantly exceeded our original expectations. This was driven by our fertiliser blending activity, which experienced one-off stock price gains as the price of fertiliser rose, reflecting the highly-disrupted natural gas (a key ingredient) market. We have developed the fertiliser manufacturing business and assets of HELM Great Britain Limited, purchased in March 2021, building up its book of customers and establishing a good working relationship with our existing fertiliser facility in nearby Goole. The feed raw materials activity performed in line with expectations. Volumes in Glasson's smallest activity, specialist feed manufacturing, decreased reflecting more difficult end-markets.

SPECIALIST AGRICULTURAL MERCHANTING DIVISION

Specialist Agricultural Merchanting and Youngs Animal Feeds

The Group's chain of 54 depots caters for the needs of farmers and other rural dwellers and operates very closely with the Agricultural Division, providing a strong channel to market for our products.

The operating profit contribution from this activity was well ahead of last year, helped by positive farmer confidence, a favourable mix of sales, and the cumulative benefits of the efficiency improvements that have been implemented across the business. The depots saw good sales of higher margin bagged feed, animal health care products and the more discretionary items in the hardware categories, although total sales, excluding inflation, were slightly down on the same period in the prior financial year.

We continued to develop our digital offering and some 1,800 accounts are now signed up to our customer portal, which enables customers to access their Wynnstay account and place orders online.

Youngs, our specialist equine feeds operation, delivered a profitable contribution to this division, although like the rest of the equine sector, it experienced volume and margin pressures.

JOINT VENTURES AND ASSOCIATES

Results from the Group's joint ventures and associate companies are not included in this half year report, and in accordance with established policies will be consolidated into Wynnstay's full year results.

ESG

In February 2021, we created a new management position, which carried specific responsibility for leading the ongoing development and implementation of the Group's ESG strategy. Our policies and objectives are being effectively embedded across all of the Group's operations. We are also working with our peers in the industry to promote increased sustainability throughout UK agriculture, including as a member of the sustainability committee of the agrisupply industry's leading trade association, the Agricultural Industries Confederation (AIC). We are now seeking to establish an ESG Advisory Board with external members in order to support future policy and planning.

A key pillar in the Group's growth strategy is supporting customers with the advice, products, and services that are necessary to adapt to the new environmental and efficiency priorities set in the UK Agriculture Act. Our own focus on sustainability will strengthen our ability to support customers' environmental aims.

OUTLOOK

World politics and the UK economy have become much more volatile and less predictable in recent months, and we are very aware of increasing cost pressures and international supply chain challenges. We will continue to navigate these challenges as effectively as possible, and our balanced business model remains a major strength. Recent world events have also sharpened the focus on the importance of national food security, and this should help to strengthen the position of UK agriculture. We believe we have a significant role to play in helping to ensure that UK farmers are able to feed the population sustainably and efficiently.

Our programme of investment at our Astley seed plant and at the Carmarthen feed mill continues, and planning is under way for a new multi-species feed mill at Calne, which will service farmers in the South and West of the country.

As we look ahead and consider prospects for the second half of the financial year, we remain very confident. The trading environment for farmers remains well-supported by strong farmgate prices, which will help to underpin ongoing farmer confidence and investment. However, we do not expect the significant one-off gains experienced in the first half of the financial year to be repeated.

We remain focused on growth opportunities, including acquisitions, and look to the future with confidence.

Steve Ellwood

Chairman

* Note 6. Explanation of Non GAAP measure.

WYNNSTAY GROUP PLC

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 April 2022

 
                                                                     Unaudited     Unaudited        Audited 
                                                                    six months    six months           year 
                                                                         ended         ended          ended 
                                                                      30 April      30 April    31 Oct 2021 
                                                                          2022          2021 
                                                            Note        GBP000        GBP000         GBP000 
---------------------------------------------------------  -----  ------------  ------------  ------------- 
 CONTINUING OPERATIONS 
 Revenue                                                               335,661       249,709        500,386 
 Cost of sales                                                       (294,399)     (216,413)      (432,493) 
---------------------------------------------------------  -----  ------------  ------------  ------------- 
 Gross profit                                                           41,262        33,296         67,893 
 Manufacturing, distribution and 
  selling costs                                                       (27,059)      (24,202)       (50,072) 
 Administrative expenses                                               (3,962)       (3,604)        (7,096) 
 Other operating income                                      5             193           185            361 
---------------------------------------------------------  -----  ------------  ------------  ------------- 
 Adjusted operating profit*                                  6          10,434         5,675         11,086 
 Amortisation of acquired intangible 
  assets and share -based payment 
  expense                                                    7           (165)         (197)          (477) 
 Non-recurring items                                         7           (523)             -              - 
---------------------------------------------------------  -----  ------------  ------------  ------------- 
 Group operating profit                                                  9,746         5,478         10,609 
 Interest income                                                            25            51            193 
 Interest expense                                                        (211)         (165)          (383) 
 Share of profits in joint 
  ventures and associate accounted 
  for using the equity method                                2               -             -            677 
 Share of tax incurred in by 
  joint venture and associate                                                -             -          (105) 
---------------------------------------------------------  -----  ------------  ------------  ------------- 
 Profit before taxation                                                  9,560         5,364         10,991 
 Taxation                                                    8         (2,047)       (1,027)        (2,057) 
---------------------------------------------------------  -----  ------------  ------------  ------------- 
 
   Profit for the period                                                 7,513         4,337          8,934 
 
 Other comprehensive income 
  Items that will reclassified 
  subsequently to profit or 
  loss: 
   *    net change in the fair value of cash flow hedges 
        taken to equity, net of tax                                         42             -            263 
---------------------------------------------------------  -----  ------------  ------------  ------------- 
 Other comprehensive income 
  for the period                                                            42             -            263 
---------------------------------------------------------  -----  ------------  ------------  ------------- 
 Total comprehensive income for 
  the period                                                             7,555         4,337          9,197 
----------------------------------------------------------------  ------------  ------------  ------------- 
 
 Basic earnings per ordinary 
  share (pence)                                                          36.99         21.62          44.40 
 Diluted earnings per ordinary 
  share (pence)                                                          36.07         21.30          43.53 
 

* Adjusted operating profit is after adding back amortisation of acquired intangible assets, share-based payment expense and non-recurring items.

CONDENSED CONSOLIDATED BALANCE SHEET

As at 30 April 2022

 
                                                        Unaudited            Unaudited    Audited 
                                                       six months           six months       year 
                                                            ended                ended      ended 
                                                           30 Apr          30 Apr 2021     31 Oct 
                                                             2022                            2021 
                                       Note                GBP000               GBP000     GBP000 
------------------------------------  -----  --------------------  -------------------  --------- 
 ASSETS 
 NON-CURRENT ASSETS 
 Goodwill                                                  17,465               14,417     14,322 
 Investment property                                        2,372                2,372      2,372 
 Property, plant and equipment                             18,340               17,654     16,746 
 Right-of-use assets                    10                  9,861               10,153     11,043 
 Investments accounted for using the 
  equity method                                             3,430                3,613      3,433 
 Intangibles                                                4,940                  327        236 
 Derivative financial instruments                               -                    -          5 
------------------------------------  -----  --------------------  -------------------  --------- 
                                                           56,408               48,536     48,157 
------------------------------------  -----  --------------------  -------------------  --------- 
 CURRENT ASSETS 
 Derivative financial instruments                             359                  227        320 
 Inventories                                               63,721               44,221     50,550 
 Trade and other receivables                              103,254               75,180     72,511 
 Financial assets - loans to joint 
  ventures                                                  2,090                3,865      3,319 
 Cash and cash equivalents              11                  6,112                4,991     19,641 
                                                          175,536              128,484    146,341 
------------------------------------  -----  --------------------  -------------------  --------- 
 TOTAL ASSETS                                             231,944              177,020    194,498 
 
 LIABILITIES 
 CURRENT LIABILITIES 
 Financial liabilities - borrowings                       (2,569)                (979)      (672) 
 Lease liabilities                                        (3,685)              (3,173)    (3,995) 
 Derivative financial instruments                           (825)                (214)       (53) 
 Trade and other payables                                (96,761)             (64,551)   (76,212) 
 Current tax liabilities                                  (1,793)              (1,019)    (1,218) 
 Provisions                                                 (351)                    -      (243) 
                                                        (105,984)             (69,722)   (82,393) 
------------------------------------  -----  --------------------  -------------------  --------- 
 NET CURRENT ASSETS                                        69,552               58,762     63,948 
------------------------------------  -----  --------------------  -------------------  --------- 
 
 NON-CURRENT LIABILITIES 
 Financial liabilities - borrowings                       (7,588)              - (313)          - 
 Lease liabilities                                        (5,025)              (5,687)    (5,731) 
 Trade and other payables                                    (37)                 (87)       (38) 
 Deferred tax liabilities                                 (1,629)                (474)      (474) 
 Derivative financial instruments                               -                    -      (140) 
                                                         (14,279)              (6,248)    (6,383) 
------------------------------------  -----  --------------------  -------------------  --------- 
 TOTAL LIABILITIES                                      (120,263)             (75,970)   (88,776) 
------------------------------------  -----  --------------------  -------------------  --------- 
 NET ASSETS                                               111,681              101,050    105,722 
------------------------------------  -----  --------------------  -------------------  --------- 
 
 
 
 EQUITY 
 Share capital        14     5,094     5,034     5,075 
 Share premium              31,989    30,998    31,600 
 Other reserves              4,303     3,686     4,131 
 Retained earnings          70,295    61,332    61,916 
 TOTAL EQUITY              111,681   101,050   105,722 
-------------------  ---  --------  --------  -------- 
 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

For the six months ended 30 April 2022

 
                                                                         Cash 
                                                                         Flow 
                                      Share      Share       Other      Hedge      Retained     Total 
                                    Capital    Premium    Reserves    Reserve      Earnings    Equity 
 
                                     GBP000     GBP000      GBP000     GBP000        GBP000    GBP000 
 
 
 Balance at 1 November 
  2020                                5,013     30,637       3,525          -        59,003      98,178 
 Profit for the period                    -          -           -          -         4,337       4,337 
--------------------------------  ---------  ---------  ----------  ---------  ------------  ---------- 
 Total comprehensive income 
  for the period                          -          -           -          -         4,337       4,337 
--------------------------------  ---------  ---------  ----------  ---------  ------------  ---------- 
 Transactions with owners 
  of the Company, recognised 
  directly in equity 
 Shares issued during the 
  period                                 21        361           -          -             -         382 
 Dividends                                -          -           -          -       (2,008)     (2,008) 
 Equity settled share-based 
  payment transactions                    -          -         161          -             -         161 
--------------------------------  ---------  ---------  ----------  ---------  ------------  ---------- 
 Total contributions by 
  and distributions to owners 
  of the Group                           21        361         161          -       (2,008)     (1,465) 
--------------------------------  ---------  ---------  ----------  ---------  ------------  ---------- 
 At 30 April 2021                     5,034     30,998       3,686          -        61,332     101,050 
--------------------------------  ---------  ---------  ----------  ---------  ------------  ---------- 
 Profit for the period                    -          -           -          -         4,597       4,597 
--------------------------------  ---------  ---------  ----------  ---------  ------------  ---------- 
 Total comprehensive income 
  for the period                          -          -           -        263        4,597        4,860 
--------------------------------  ---------  ---------  ----------  ---------  ------------  ---------- 
 Transactions with owners 
  of the Company, recognised 
  directly in equity 
 Shares issued during the 
  period                                 41        602           -          -             -         643 
 Dividends                                -          -           -          -       (1,013)     (1,013) 
 Equity settled share-based 
  payment transactions                    -          -         182          -             -         182 
--------------------------------  ---------  ---------  ----------  ---------  ------------  ---------- 
 Total contributions by 
  and distributions to owners 
  of the Group                           41        602         182          -       (1,013)       (188) 
--------------------------------  ---------  ---------  ----------  ---------  ------------  ---------- 
 At 31 October 2021                   5,075     31,600       3,868        263        64,916     105,722 
--------------------------------  ---------  ---------  ----------  ---------  ------------  ---------- 
 Profit for the period                    -          -           -          -         7,513       7,513 
--------------------------------  ---------  ---------  ----------  ---------  ------------  ---------- 
 Total comprehensive income 
  for the period                          -          -           -          -         7,513       7,513 
--------------------------------  ---------  ---------  ----------  ---------  ------------  ---------- 
 Transactions with owners 
  of the Company, recognised 
  directly in equity 
 Shares issued during the 
  period                                 19        389           -          -             -         408 
 Dividends                                -          -           -          -       (2,134)     (2,134) 
--------------------------------  ---------  ---------  ----------  ---------  ------------  ---------- 
 Change in the fair value 
  of cash flow hedges taken 
  to equity, net of tax during 
  period                                  -          -           -        287             -         287 
 Recycle cash flow hedge 
  to Income Statement                     -          -           -      (245)             -       (245) 
 Equity settled share-based 
  payment transactions                    -          -         130          -             -         130 
--------------------------------  ---------  ---------  ----------  ---------  ------------  ---------- 
 Total contributions by 
  and distributions to owners 
  of the Group                           19        389         130         42       (2,134)     (1,554) 
--------------------------------  ---------  ---------  ----------  ---------  ------------  ---------- 
 At 30 April 2022                     5,094     31,989       3,998        305        70,295     111,681 
--------------------------------  ---------  ---------  ----------  ---------  ------------  ---------- 
 
 

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 30 April 2022

 
                                                     Unaudited              Unaudited       Audited 
                                                    six months             six months          year 
                                                         ended                  ended         ended 
                                                      30 April               30 April    31 October 
                                                          2022                   2021          2021 
                                            Note        GBP000                 GBP000        GBP000 
-----------------------------------------  -----  ------------  ---------------------  ------------ 
 Cash flow from operating activities 
 Cash (used in)/generated from 
  operations                                 9         (9,316)                (7,351)        10,554 
 Interest received                                          25                     51           193 
 Interest paid                                            (84)                  (165)         (102) 
 Settlement of provision                                     -                      -          (96) 
 Tax paid                                              (1,311)                  (594)       (1,462) 
 Net cash (used in)/generated 
  from operating activities                           (10,686)                (8,059)         9,087 
-----------------------------------------  -----  ------------  ---------------------  ------------ 
 
  Cash flows from investing activities 
 Acquisition of subsidiaries 
  and other businesses and their 
  assets (net of cash acquired)              17        (8,572)                (1,844)       (2,238) 
 Proceeds of sale of property, 
  plant and equipment & ROU assets                         492                     95           340 
 Purchase of property, plant 
  and equipment                                        (1,418)                (1,009)       (1,563) 
 Decrease in short term loans 
  to joint ventures                                      1,229                     24           570 
 Receipt of Dividend from Unlisted                                                  - 
  Investment                                                 2                                    - 
 Dividends received from joint 
  ventures                                                   -                      -           753 
 Net cash used by investing 
  activities                                           (8,267)                (2,734)       (2,138) 
-----------------------------------------  -----  ------------  ---------------------  ------------ 
 Cash flows from financing activities 
 Net proceeds from the issue 
  of ordinary share capital                                408                    382         1,025 
 Lease payments                                        (2,335)                (1,977)       (4,392) 
 New borrowings                                          9,485                      -             - 
 Repayments of loans                                         -                  (593)         (900) 
 Dividends paid to shareholders                        (2,134)                (2,008)       (3,021) 
-----------------------------------------  -----  ------------  ---------------------  ------------ 
 Net cash from/(used in) financing 
  activities                                             5,424                (4,196)       (7,288) 
-----------------------------------------  -----  ------------  ---------------------  ------------ 
 
   Net decrease in cash and cash 
   equivalents                                        (13,529)               (14,989)         (339) 
-----------------------------------------  -----  ------------  ---------------------  ------------ 
 Cash and cash equivalents at 
  beginning of period                                   19,641                 19,980        19,980 
 
 Cash and cash equivalents at 
  end of period                              11          6,112                  4,991        19,641 
-----------------------------------------  -----  ------------  ---------------------  ------------ 
 
 

WYNNSTAY GROUP PLC

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

GENERAL INFORMATION

Wynnstay Group Plc has a number of operations. These are described in the segment analysis in note 4.

Wynnstay Group Plc is a company incorporated and domiciled in the United Kingdom. The address of its registered office is shown in note 3.

   1.    BASIS OF PREPARATION 

The Interim Report was approved by the Board of Directors on 27 June 2022.

The condensed financial statements for the six months to the 30 April 2022 have been prepared in accordance with International Accounting Standard (IAS) 34 and the Disclosure Guidance and Transparency Rules sourcebook of the UK's Financial Conduct Authority, except as disclosed in note 3.

The financial information for the Group for the year ended 31 October 2021 set out above is an extract from the published financial statements for that year which have been delivered to the Registrar of Companies. The auditor's 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 2022 and for the six months ended 30 April 2021 are unaudited. The consolidated financial statements are presented in sterling, which is also the Group's functional currency. Amounts are rounded to the nearest thousand, unless otherwise stated.

The condensed consolidated interim financial statements should be read in conjunction with the annual consolidated financial statements for the year ended 31 October 2021, which have been prepared in accordance with UK adopted International Accounting Standards.

   2.   GOING CONCERN 

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.

The Group has a sound financial base and forecasts that show profitable trading and sufficient cash flow and resources to meet the requirements of the business, including compliance with banking covenants and on-going liquidity. In assessing their view of the likely future financial performance of the Group, the Directors consider industry outlooks from a variety of sources, and various trading scenarios. This analysis showed that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook, and the ongoing issues created by the continuing Coronavirus concerns and the war in Ukraine which has caused significant commodity price volatility.

In conclusion, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

   3.    SIGNIFICANT ACCOUNTING POLICIES 

The condensed financial statements have been prepared under the historical cost convention other than shared-based payments, which are included at fair value and certain financial instruments which are explained in the annual consolidated financial statements for the year ended 31 October 2021.

The Group has a policy of using annual results for the consolidation of its share of the results of joint ventures, and as such no consolidation has occurred in these condensed financial statements which is consistent with previous years.

The condensed consolidated interim financial statements for the six months to 30 April 2022 have been prepared on the basis of the accounting policies expected to be adopted for the year ending 31 October 2022. These are anticipated to be consistent with those set out in the Group's latest annual financial statements for the year ended 31 October 2021. A copy of these financial statements is available from the Company's Registered Office at Eagle House, Llansantffraid, Powys, SY22 6AQ.

New standards and interpretations

New and amended standards adopted in the annual financial statements for the year ended 31 October 2021 did not have any significant impact on those results and changes implemented from the 1 January 2021 are similarly not having any material impact on the Group as they are either not relevant to the Group's activities or require accounting which is consistent with the Group's current accounting policies.

Critical accounting estimates and judgements

The Group makes certain estimates and assumptions regarding the future. These estimates and judgements are continually evaluated based on historic experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. At 30 April 2022 management have not identified any indicators of impairment within the Group. In the future, actual experience may di er from these estimates and assumptions, however it is believed these are not significant nor likely to cause a material adjustment to the carrying amount of assets and liabilities within the next financial year.

   4.    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 assess their performance.

The chief operating decision-maker 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 Agriculture, Specialist Agricultural Merchanting, 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 segment, namely the United Kingdom.

Agriculture - manufacturing and supply of animal feeds, fertiliser, seeds and associated agricultural products.

Specialist Agricultural Merchanting - supplies a wide range of specialist products to farmers, smallholders, and pet owners.

Other - miscellaneous operations not classi ed as Agriculture or Specialist Agricultural Merchanting.

The Board assesses the performance of the operating segments based on a measure of operating pro t. Non-recurring costs and nance income and costs are not included in the segment result that is assessed by the Board. Other information provided to the Board is measured in a manner consistent with that in the nancial statements. No segment is individually reliant on any one customer.

The segment results for the period ended 30 April 2022 and comparative periods are as follows:

 
 Unaudited for the six months                             Specialist 
  ended                                  Agriculture    Agricultural     Other     Total 
  30 April 2022:                                         Merchanting 
                                              GBP000          GBP000    GBP000    GBP000 
------------------------------------  --------------  --------------  --------  -------- 
 
   Revenue from external customers           263,034          72,627         -   335,661 
------------------------------------  --------------  --------------  --------  -------- 
 Segment results : 
 Group operating profit before 
  non-recurring items                          6,062           4,276      (69)    10,269 
 Share of result of Joint 
  Ventures                                         -               -         -         - 
                                               6,062           4,276      (69)    10,269 
 Non-recurring items (note 
  7)                                                                               (523) 
 Interest income                                                                      25 
 Interest expense                                                                  (211) 
                                                                                -------- 
 Profit before taxation                                                            9,560 
 Taxation                                                                        (2,047) 
                                                                                -------- 
 Profit for the period attributable 
  to shareholders                                                                  7,513 
                                                                                -------- 
 
 
 
 Unaudited for the six months                             Specialist 
  ended                                  Agriculture    Agricultural     Other        Total 
  30 April 2021:                                         Merchanting 
                                              GBP000          GBP000    GBP000       GBP000 
------------------------------------  --------------  --------------  --------  ----------- 
 
   Revenue from external customers           180,716          68,884       109      249,709 
------------------------------------  --------------  --------------  --------  ----------- 
 Segment results : 
 Group operating profit before 
  non-recurring items                          2.197           3,398     (117)        5,478 
 Share of result of Joint 
  Ventures                                         -               -         -            - 
------------------------------------  --------------  --------------  --------  ----------- 
                                               2,197           3,398     (117)        5,478 
 
 Interest income                                                                         51 
 Interest expense                                                                     (165) 
                                                                                ----------- 
 Profit before taxation                                                               5,364 
 Taxation                                                                           (1,027) 
                                                                                ----------- 
 Profit for the period attributable 
  to shareholders                                                                     4,337 
                                                                                ----------- 
 
 
 
                                      Agriculture      Specialist    Other     Total 
 Audited for the year ended                          Agricultural 
  31 October 2021:                                    Merchanting 
                                           GBP000          GBP000   GBP000    GBP000 
-----------------------------------  ------------  --------------  -------  -------- 
 
   Revenue from external customers        358,961         141.425        -   500,386 
-----------------------------------  ------------  --------------  -------  -------- 
 Segment results : 
 Group operating profit before 
  non-recurring items                       3,697           7,120    (208)    10,609 
 Share of result of Joint 
  Ventures                                    524              33      120       677 
-----------------------------------  ------------  --------------  -------  -------- 
                                            4,221           7,153     (88)    11,286 
 
 Interest income                                                                 193 
 Interest expense                                                              (383) 
                                                                            -------- 
 Profit before taxation                                                       11,096 
 Taxation (including on Joint 
  ventures)                                                                  (2,162) 
                                                                            -------- 
 Profit for the year attributable 
  to shareholders                                                              8,934 
                                                                            -------- 
 
   5.    OTHER OPERATING INCOME 
 
                       Unaudited     Unaudited       Audited 
                      six months    six months          year 
                           ended         ended         ended 
                   30 April 2022      30 April    31 October 
                                          2021          2021 
                          GBP000       GBP'000        GBP000 
---------------  ---------------  ------------  ------------ 
 Rental Income               193           185           361 
---------------  ---------------  ------------  ------------ 
 

6. ALTERNATIVE PERFORMANCE MEASURES

On the Board's preferred alternative performance measures referred to as Adjusted operating profit and Underlying pre-tax profits which are respectively, Group operating profit adding back amortisation of acquired intangible assets, share-based payment expense and non-recurring items, and the Group profit before tax adding back share-based payment expense, non-recurring items and including the value of the share of tax incurred by joint ventures and associates. On these measures the Group achieved adjusted operating profit of GBP10.43m (2021: GBP5.68m) and underlying pre-tax profits of GBP10.21m (2021: GBP5.53m).

Reconciliation with the reported income statement for this measure, Operating profit before non-recurring items and Underlying pre-tax profit and the Profit before tax shown on the Condensed Statement of Comprehensive Income, together with reasons for their use is given below.

 
                                            Unaudited     Unaudited       Audited 
                                           six months    six months          year 
                                                ended         ended         ended 
                                             30 April      30 April    31 October 
                                                 2022          2021          2021 
                                               GBP000        GBP000        GBP000 
---------------------------------------  ------------  ------------  ------------ 
 Profit before tax                              9,560         5,364        10,991 
 Share of tax incurred by joint 
  ventures and associate                            -             -           105 
 Non-recurring items (note 7)                     523             -             - 
 Net finance costs                                186           114           190 
 Share of results from joint ventures 
  before tax                                        -             -         (677) 
---------------------------------------  ------------  ------------  ------------ 
 Operating profit before non-recurring 
  items (note 8)                               10,269         5,478        10,609 
 Share of results from joint ventures 
  and associate before tax                          -             -           677 
---------------------------------------  ------------  ------------  ------------ 
 Segment results plus share of results 
  from joint ventures and associate 
  before tax (note 4)                          10,269         5,478        11,286 
 Share-based payments                             130           161           343 
 Net finance charges                            (186)         (114)         (190) 
---------------------------------------  ------------  ------------  ------------ 
 Underlying pre-tax profit                     10,213         5,525        11,439 
---------------------------------------  ------------  ------------  ------------ 
 
 
                                        Unaudited     Unaudited       Audited 
                                       six months    six months          year 
                                            ended         ended         ended 
                                    30 April 2022      30 April    31 October 
                                                           2021          2021 
                                           GBP000        GBP000        GBP000 
--------------------------------  ---------------  ------------  ------------ 
 
 Profit before tax                          9,560         5,364        10,991 
 Share of results from joint 
  ventures                                      -             -         (677) 
 Share of tax incurred by joint 
  ventures                                      -             -           105 
 Net finance charges                          186           114           190 
 Share-based payments                         130           161           343 
 Amortisation of intangibles                   35            36           134 
 Non-recurring items (note 
  7)                                          523             -             - 
--------------------------------  ---------------  ------------  ------------ 
 Adjusted operating profit                 10,434         5,675        11,086 
--------------------------------  ---------------  ------------  ------------ 
 

The Board uses alternative performance measures as it believes the underlying commercial performance of the current trading activities is better reflected, and provides investors and other users of the accounts with an improved view of likely future performance by making adjustments to the IFRS results for the following reasons:

-- Share of results from joint ventures and associate

Provides a fuller understanding of activities directly under management control and those incorporated from joint ventures.

-- The add back of tax incurred by joint ventures and associate

The Board believes the incorporation of the gross result of these entities provides a fuller understanding of their combined contribution to the Group performance.

-- Net finance charges

Provides an understanding of results before interest received and paid.

-- Share-based payments

This charge is calculated using a standard valuation model, with the assessed non-cash cost each year varying depending on new scheme invitations and the number of leavers from live schemes. These variables can create a volatile non-cash charge to the income statement, which is not directly connected to the trading performance of the business.

-- Amortisation of acquired intangible assets

This charge relates to intangible assets created from prior business combinations, hence provides a fuller understanding of current operating performance.

-- Non-recurring items

The Group's accounting policies include the separate identification of non-recurring material items on the face of the income statement, which the Board believes could cause a misinterpretation of trading performance if not disclosed.

   7.    AMORTISATION OF ACQUIRED INTANGIBLE ASSETS AND SHARE-BASED PAYMENTS AND NON-RECURRING ITEMS 
 
                                     Unaudited     Unaudited       Audited 
                                    six months    six months          Year 
                                         ended         ended         ended 
                                 30 April 2022      30 April    31 October 
                                                        2021          2021 
                                        GBP000        GBP000        GBP000 
-----------------------------  ---------------  ------------  ------------ 
 Amortisation of acquired 
  intangible assets and 
  share-based payments 
 Amortisation of intangibles                35            36            39 
 Goodwill impairment                         -             -            95 
 Cost of share-based 
  reward                                   130           161           343 
-----------------------------  ---------------  ------------  ------------ 
                                           165           197           477 
-----------------------------  ---------------  ------------  ------------ 
 
 Non-recurring items 
 Acquisition transaction                   523             -             - 
  costs 
                                           523             -             - 
-----------------------------  ---------------  ------------  ------------ 
 

Acquisition transaction costs relate to the Business Combination (see note 17) of Humphrey Poultry Holdings Limited in March 2022.

   8.    TAXATION 

The tax charge for the six months ended 30 April 2022 and 30 April 2021 is based on an apportionment of the estimated tax charge for the full year.

The effective tax rate is 21.4% (6 months ended 30 April 2021: 19.1%) which is higher than the standard rate of 19.0% primarily due to adjustments to deferred tax provisions following the Government's decision to raise the standard rate of Corporation Tax to 25% with effect from April 2023 (2021: 19.0%).

   9.    CASH (USED IN)/GENERATED FROM OPERATIONS 
 
                                              Unaudited     Unaudited                  Audited 
                                             six months    six months                     year 
                                                  ended         ended                    ended 
                                               30 April      30 April               31 October 
                                                   2022          2021                     2021 
                                                 GBP000        GBP000                   GBP000 
-----------------------------------------  ------------  ------------  ----------------------- 
 Profit for the period                            7,513         4,337                    8,934 
 Adjustments for: 
 Taxation                                         2,047         1,027                    2,057 
 Investment and goodwill impairment                   -             -                       95 
 Depreciation of tangible fixed 
  assets                                          1,109         1,042                    2,165 
 Amortisation of other intangible 
  fixed assets                                       35            36                       39 
 Depreciation of right-use-assets                 2,019         1,932                    3,974 
 Profit on disposal of property, 
  plant and equipment                             (104)          (77)                     (86) 
 Profit on disposal of right-of-use 
  asset                                               -             -                     (14) 
 Loss on relinquishment of property 
  lease                                               -             -                       26 
 Movement in provisions                               -             -                      193 
 Net interest income / (expense)                     59          (24)                     (91) 
 Interest on right of use liabilities               127           138                      281 
 Investment revaluation                               -           (2)                        2 
 Derivative held as Fair Value 
  P&L FVPL                                          632             -                       23 
 Government grant                                   (1)             -                      (2) 
 Share of results of joint ventures 
  and associate                                       -             -                    (572) 
 Share-based payment expense                        130           161                      343 
 Changes in working capital (excluding 
  effects of acquisitions and disposals 
  of subsidiaries) 
 Increase in inventories                       (11,028)       (8,254)                 (14,583) 
 Increase in trade and other receivables       (25,106)      (19,557)                 (16,753) 
 Increase in trade and other payables            13,252        11,890                   24,523 
 Cash (used in)/generated from 
  operations                                    (9,316)       (7,351)                   10,554 
-----------------------------------------  ------------  ------------  ----------------------- 
 
 

During the six months to 30 April 2022, the Group purchased property, plant and equipment of GBP2,381,000 (2021: GBP1,832,000) of which GBP965,000 relates to right-of-use assets (2021: GBP845,000).

10. LEASES

The following tables shows the movement in right-of-use assets and lease liabilities, along with the aging of the lease liabilities.

 
 Right-of-use assets                       Land and    Plant, machinery     Total 
                                          buildings    & motor vehicles 
                                             GBP000              GBP000    GBP000 
--------------------------------------  -----------  ------------------  -------- 
 At 1 November 2020                           6,266               4,974    11,240 
 Additions                                      400                 445       845 
 Amortisation                               (1,120)               (812)   (1,932) 
 At 30 April 2021                             5,546               4,607    10,153 
 Additions                                    2,261               1,185     3,446 
 Amortisation                               (1,257)               (785)   (2,042) 
 Disposals                                    (437)                (77)     (514) 
--------------------------------------  -----------  ------------------  -------- 
 At 31 October 2021                           6,113               4,930    11,043 
 Additions                                        -                 965       965 
 Arising on acquisition of subsidiary 
  undertakings                                    -                 210       210 
 Reclassification                                55                (55)         - 
 Depreciation                               (1,102)               (917)   (2,019) 
 Disposals                                        -               (338)     (338) 
 At 30 April 2022                             5,065               4,795     9,861 
--------------------------------------  -----------  ------------------  -------- 
 
 
 Lease liabilities                         Land and    Plant, machinery     Total 
                                          buildings    & motor vehicles 
                                             GBP000              GBP000    GBP000 
--------------------------------------  -----------  ------------------  -------- 
 At 1 November 2020                           6,291               3,701     9,992 
 Additions                                      424                 238       662 
 Interest expense                                71                  67       138 
 Lease payments                             (1,184)               (748)   (1,932) 
 At 30 April 2021                             5,602               3,258     8,860 
 Additions                                    2,237               1,392     3,629 
 Interest expense                                62                  81       143 
 Lease payments                             (1,235)             (1,225)   (2,460) 
 Disposal                                     (446)                   -     (446) 
--------------------------------------  -----------  ------------------  -------- 
 At 31 October 2021                           6,220               3,506     9,726 
 Additions                                        -                 965       965 
 Reclassification                                 -                  17        17 
 Arising on acquisition of subsidiary 
  undertakings                                    -                 210       210 
 Interest expense                                60                  67       127 
 Lease payments                             (1,144)             (1,191)   (2,335) 
 At 30 April 2022                             5,136               3,574     8,710 
--------------------------------------  -----------  ------------------  -------- 
 
 
                        Within 1 year   1-2 years   2-5 years   Over 5    Total 
                                                                 years 
                               GBP000      GBP000      GBP000   GBP000   GBP000 
---------------------  --------------  ----------  ----------  -------  ------- 
 
   Lease liabilities            3,685       3,026       1,428      571    8,710 
---------------------  --------------  ----------  ----------  -------  ------- 
 

11. NET CASH

 
                                        Unaudited     Unaudited       Audited 
                                       six months    six months          year 
                                            ended         ended         ended 
                                         30 April      30 April    31 October 
                                             2022          2021          2021 
                                           GBP000        GBP000        GBP000 
-----------------------------------  ------------  ------------  ------------ 
 Cash and cash equivalents per 
  balance sheet                             6,112         4,991        19,641 
 Cash and cash equivalents per 
  cash flow statement                       6,112         4,991        19,641 
 Bank loans due within one year 
  or on demand                            (1,897)         (306)             - 
 Loan capital                               (672)         (673)         (672) 
 Net cash due within one year               3,543         4,012        18,969 
 Bank loans due after one year            (7,588)             -             - 
 Total net (debt) / cash excluding 
  leases                                  (4,045)         4,012        18,969 
-----------------------------------  ------------  ------------  ------------ 
 
 

12. FINANCIAL INSTRUMENTS

The Board has overall responsibility for the determination of the Group's risk management objectives and policies and whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's finance function. The Board receives monthly reports from the Group Financial Director through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility.

The Group's principle financial instruments (other than derivatives) compromise loans, cash and short -term deposits; the main purpose of these instruments is to raise finance for the Group's operations; and additionally include trade and other receivables, trade and other payables and lease liabilities.

The Group also enters derivative transactions, principally foreign exchange contracts and wheat futures to manage commodity price and currency risks arising from the Group's operations.

The Group's policy does not permit use of derivatives for speculative purposes. However, some derivatives do not qualify for hedge accounting, or are specifically not designated as a hedge where gains and losses on the hedging instrument and the hedged item naturally offset in the Group's income statement. Treasury operates on a centralised basis, where Derivatives are only used for economic hedging purposes and not as speculative investments and are classified as 'held for trading', other than designated and effective hedging instruments and are presented as current assets or liabilities if they are expected to be settled within 12 months after the end of the reporting period, otherwise they are classified as non current.

The principal financial instruments used by the Group, from which risk arises, are as follows:

   --     Cash and cash equivalents 
   --     Trade receivables 
   --     Trade and other payables 
   --     Borrowings 
   --     Forward currency contracts 
   --     Wheat futures contracts 

The following financial instruments have been recognised in the Group's respective financial statements:

 
                                                                                   GROUP 
            Financial Assets                                   Apr 22              Apr 21              Oct 21 
                                                               GBP000              GBP000              GBP000 
------------------------------------------------  -------------------  ------------------  ------------------ 
            Cash and cash equivalents                           6,112               4,991              19,641 
            Trade receivables, net of loss 
             allowance                                         98,139              73,080              70,320 
            Loan to joint venture                               2,090               3,865               3,319 
            Derivative of financial instruments                   359                 227                 325 
------------------------------------------------  -------------------  ------------------  ------------------ 
                                                              106,700              82,163              93,605 
------------------------------------------------  -------------------  ------------------  ------------------ 
 
 
                                                                                     GROUP 
            Financial Liabilities                                Apr 22              Apr 21              Oct 21 
                                                                 GBP000              GBP000              GBP000 
--------------------------------------------------  -------------------  ------------------  ------------------ 
            Bank loans and other borrowings                      10,157                 979                 672 
            Lease liabilities                                     8,710               8,860               9,726 
            Trade payables and other payables                    81,823              63,029              69,868 
            Deferred and contingent consideration                 3,785                 229                 197 
            Derivative financial instruments                        825                 214                 193 
--------------------------------------------------  -------------------  ------------------  ------------------ 
                                                                105,300              73,311              80,656 
--------------------------------------------------  -------------------  ------------------  ------------------ 
 

Financial instruments not measured at fair value includes cash and cash equivalents, trade and other receivables, trade and other payables, loans and borrowings, and lease liabilities. Due to their short-term nature, the carrying value of cash and cash equivalents, trade and other receivables, and trade and other payables approximates their fair value.

IFRS 13 requires nancial instruments that are measured at fair value to be classi ed according to the valuation technique used:

   --     Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities 

-- Level 2 - inputs, other than level 1 inputs, that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived form prices)

   --     Level 3 - unobservable inputs 

All derivative nancial assets and liabilities are classi ed as Level 1 instruments as they are quoted market prices. Contingent consideration is measured at fair value using Level 3 inputs such as entity projections of future probability.

 
                                            Fair value               Amortised cost 
 Financial Assets                       Apr   Apr 21      Oct       Apr      Apr      Oct 
                                         22                21        22       21       21 
                                     GBP000   GBP000   GBP000    GBP000   GBP000   GBP000 
----------------------------------  -------  -------  -------  --------  -------  ------- 
 Trade Receivables, net of 
  loss allowance                          -        -        -    98,139   73,080   70.320 
 Trade and other receivables              -        -        -     2,090    3.865    3,319 
 Derivative financial instruments 
  (Level 1)                             359      227      325         -        -        - 
----------------------------------  -------  -------  -------  --------  -------  ------- 
                                        359      227      325   100,229   76,945   73,639 
----------------------------------  -------  -------  -------  --------  -------  ------- 
 
 
                                                 Fair value               Amortised cost 
 Financial Liabilities                       Apr   Apr 21      Oct       Apr      Apr      Oct 
                                              22                21        22       21       21 
                                          GBP000   GBP000   GBP000    GBP000   GBP000   GBP000 
---------------------------------------  -------  -------  -------  --------  -------  ------- 
 Bank loans and other borrowings               -        -        -    10,157      979      672 
 Lease liabilities                             -        -        -     8,710    8,860    9,726 
 Trade and other payables                      -        -        -    81,823   63,029   69,868 
 Deferred and contingent consideration     3,785      229      197         -        -        - 
 Derivative financial instruments 
  (Level 1)                                  825      214      193         -        -        - 
---------------------------------------  -------  -------  -------  --------  -------  ------- 
                                           4,610      443      390   100,690   72,868   80,266 
---------------------------------------  -------  -------  -------  --------  -------  ------- 
 

The Group is exposed through its operation to the following financial risks:

   --     Credit risk 
   --     Foreign exchange risk 
   --     Commodity market price risk 
   --     Interest rate risk 
   --     Liquidity risk 
   --     Capital management risk 

The policies and processes for managing each of these risks are summarised in the Group's annual report published in February 2022 and available on the Company's website.

13. EARNINGS PER SHARE

Basic earnings per 25p ordinary share has been calculated by dividing profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period. For diluted earnings per share the weighted average number of ordinary shares is adjusted to assume conversion of all dilutive potential ordinary shares (share options and warrants) taking into account their exercise price in comparison with the actual average share price during the year.

 
                                                            Unaudited 
                                              Unaudited    six months 
                                             six months         ended 
                                                  ended      30 April 
                                          30 April 2022          2021 
--------------------------------------  ---------------  ------------ 
 
   Weighted average number of shares 
   in issue: basic                           20,311,023    20,055,501 
 Earnings per share: basic in pence               36.99         21.62 
 Weighted average number of shares 
  in issue: diluted                          20,831,327    20,365,205 
 Earnings per share: diluted in pence             36.07         21.30 
 

14. SHARE CAPITAL

 
                                      Number of shares   Total Nominal 
                                                                 Value 
                                                  000s          GBP000 
-----------------------------------  -----------------  -------------- 
 Allotted and fully paid: ordinary 
  shares 25p each 
 Balance at 31 October 2020                     20,051           5,013 
 Issue of shares                                    86              21 
-----------------------------------  -----------------  -------------- 
 Balances at 30 April 2021                      20,137           5,034 
 Issue of shares                                   162              41 
-----------------------------------  -----------------  -------------- 
 Balances at 31 October 2021                    20,299           5,075 
 Issue of shares                                    77              19 
-----------------------------------  -----------------  -------------- 
 Balances at 30 April 2022                      20,376           5,094 
-----------------------------------  -----------------  -------------- 
 

The shares issued in the period related to 26,000 company share options (2021: 24,000) and 51,000 (2021: 62,000) shares allotted to shareholders exercising their rights to receive dividends under the Company's scrip dividend scheme. No other shares were allocated during the current or prior period.

As at 30 April 2022 a total of 20,376,000 shares are in issue (2021: 20,137,000).

15. DIVIDS

During the period ended 30 April 2022 an amount of GBP2,134,000 (2021: GBP2,008,000) was charged to reserves in respect of equity dividends paid. An interim dividend of 5.40p per share (2021: 5.00p) will be paid on 31 October 2022 to shareholders on the register on the 30 September 2022. New elections to receive Scrip Dividends should be made in writing to the Company's Registrars before 14 October 2022.

16. OTHER RESERVES

Included in Other reserves are share-based payments; as 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 2022 the ESOP Trust, which is consolidated within the Group financial statements, held 16,834 (2021: 16,834) Ordinary Shares in the Group.

17. BUSINESS COMBINATION NOTE

Humphrey Poultry (Holdings) Limited

On 18 March 2022, Wynnstay Group plc entered a business combination and acquired 100% of the share capital of Humphrey Poultry (Holdings) Limited, which is the holding company for two commercial and operational entities, Humphrey Feeds Limited and Humphrey Pullets Limited.

The provisional assessed consideration is GBP13.171m inclusive of GBP1.011m of cash. This provisional consideration is subject to verification of a minimum underlying net asset target value of the acquiree, including the cash, of GBP6.171m, which due to the timing of the preparation of completion accounts for the acquiree, is expected to be finalised during the second half of the Group's financial year. The provisional consideration will be adjusted should the confirmed net assets of the acquiree be higher or lower than the target value. The Board believes at the time of half-year announcement that the net assets are not likely to significantly change.

The sum of GBP9.485m was paid on completion and the provisional consideration includes a deferred contingent element subject to the achievement of certain commercial targets to be assessed after the first anniversary of completion. The fair value of a deferred contingent consideration element has been based on management's expectation of the future performance of the business and that could range from GBPnil to GBP2.000m. The remainder of the provisional consideration is to be paid upon final verification of the acquiree's net assets as explained above, but which are currently estimated to be analysed as follows:

 
                                       Current   Non- Current     Total 
                                        GBP000         GBP000    GBP000 
------------------------------------  --------  -------------  -------- 
 Trade receivables net of loss 
  allowance                              5,003              -     5,003 
 Other receivables                         595              -       595 
 Inventories                             2,144              -     2,144 
 Cash and cash equivalents               1,011              -     1,011 
 Trade payables                        (3,469)              -   (3,469) 
 Other payables                          (347)              -     (347) 
 Lease liabilities                       (146)           (64)     (210) 
 Deferred tax                                -          (101)     (101) 
------------------------------------  --------  -------------  -------- 
 Net Current Assets and Non-Current 
  Liabilities                            4,791          (165)     4,626 
 
 Tangible fixed assets                       -          1,545     1,545 
 
 Underlying Net Assets of Acquiree       4,791          1,380     6,171 
------------------------------------  --------  -------------  -------- 
 

A full analysis of the provisional consideration is provided in the table below which includes the break-down of the tangible fixed assets which incorporates freehold land and buildings in the amount of GBP599k, which reflects the current view of fair value assessment of this element of the purchase price. An independent valuation of this property has been commissioned at the time of this announcement, but this will not impact the provisional consideration, but may adjust the analysis. The goodwill balance represents the assembled workforce and future sales opportunities and is not expected to be deductible for tax purposes.

 
                                                     Fair Value of Net 
                                                                Assets 
                                                                 Total 
                                                                GBP000 
--------------------------------------------------  ------------------ 
 Fair value of net assets required 
 Goodwill                                                        3,143 
 Intangible - Brand                                              3,775 
 Intangible - Customer list                                        963 
 Property, plant and equipment                                   1,335 
 ROU assets                                                        210 
 Cash and cash equivalents                                       1,011 
 Trade receivables                                               5,003 
 Other receivables                                                 595 
 Inventories                                                     2,144 
 Trade payables                                                (3,469) 
 Other payables                                                  (347) 
 Lease liabilities                                               (210) 
 Deferred tax                                                    (982) 
--------------------------------------------------  ------------------ 
 Net Assets                                                     13,171 
 Acquisition date - fair value of the total 
  net assets acquired                                           13,171 
--------------------------------------------------  ------------------ 
 Represented by: 
 Cash settled to vendor during the period                        9,485 
 Contingent on net asset verification outstanding 
  at 30 April 2022                                               1,686 
 Contingent and deferred outstanding at 
  30 April 2022                                                  2,000 
--------------------------------------------------  ------------------ 
 Provisional Consideration                                      13,171 
--------------------------------------------------  ------------------ 
 
 Cash Flow Statement: 
 Cash Settled to vendor during the period                        9,485 
 Less, cash and cash equivalents acquired                      (1,011) 
 Cash paid to other vendors during the period 
  for prior acquisitions                                            98 
--------------------------------------------------  ------------------ 
                                                                 8,572 
--------------------------------------------------  ------------------ 
 

Directly attributable acquisition costs of GBP523k were incurred with the transaction, and these have been recognised as non-recurring expenses in the income statement for the period. During the last available audited accounts of the acquired entities, for the period to February 2021, the annual aggregate revenues on a non-consolidated basis amounted to GBP41.446m and profit before tax was GBP1.634m. Business combination accounting is expected to be finalised within 12 months from the completion date of the acquisition.

Amounts included in the Consolidated Statement of Comprehensive Income period to 30 April 2022 in relation to the acquired business are revenues of GBP6.407m and profit before tax of GBP0.183m.

Contingent and deferred consideration of GBP0.098m was paid during the period to 30 April 2022 relating to other prior period acquisitions, resulting in a total gross cash outflow of GBP9.583m in the six-month period to 30 April 2022 or GBP8.572m net of cash acquired with the Humphrey transaction.

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END

IR SEFFMWEESEDM

(END) Dow Jones Newswires

June 28, 2022 02:00 ET (06:00 GMT)

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