The Group has delivered a very resilient trading performance in an unprecedented year of challenges. Underlying pre-tax profit* increased by 4% to £8.37m (2019: £8.01m) on revenues of £431.40m (2019: £490.60m). This pleasing result, which is ahead of original market expectations, was helped by a strong close to the year, particularly for feed sales, which benefited both the Agricultural Division and Specialist Agricultural Merchanting Division. It also reflects well on the Group’s strategy, which is focused on further developing existing products and services, strengthening channels to market, and improving efficiency and productivity. Our balanced business model, which spans both arable and livestock sectors, also provided a strong natural hedge to the sector variations experienced in the year.
The challenges over the financial year were significant even without the coronavirus crisis. We started the financial year with subdued farmer confidence, arising from lower farmgate prices and continuing Brexit uncertainty. The abnormally wet 2019 autumn severely disrupted planting, resulting in one of the worst seasons on record and consequently low demand for arable inputs and a historically poor autumn harvest and reduced grain trading. The onset of the coronavirus pandemic created further difficulties. However, our teams responded magnificently and, as an essential service provider, we worked hard to rapidly adopt new safety practices so that we could continue to operate all our sites while ensuring the welfare of our colleagues, customers, suppliers and communities. Other than for a short period when a handful of depots were closed, we have kept all our depots, manufacturing and processing facilities open and operating in line with government restrictions.
Despite the additional demands of responding to the pandemic, we made good progress with strategic growth initiatives. We continued with our outlet optimisation programme, closing two sites, and have further strengthened our specialist advisory teams, particularly in youngstock, animal health, dairy and free range egg production, all of which are growth areas for the Group. We have also introduced a sales trading desk to support our on-farm specialists, and will be continuing to focus on developing our channels to market, including digital. With the expiry of our lease on our Selby seed plant in Yorkshire, we closed this site in December and are exploring options for a new site. We are also planning to invest in our seed processing plant at Astley in Shrewsbury to increase capacity and efficiency.
Towards the end of the financial year, we put into effect a reorganisation of the Group’s management structure. These changes encompassed the creation of new management roles with new designated areas of responsibility and reporting lines. The new management structure will better support our growth plans for the business and strengthen our operational effectiveness. We expect to conclude this significant major initiative over the coming months.
Group revenue decreased by 12% to £431.40m (2019: £490.60m), which mainly reflected commodity price deflation and significantly reduced volumes in certain categories, notably grain trading. The impact was felt most by the Agriculture Division, where revenue was down by 16% to £302.58m (2019: £358.69m). Revenue in the Specialist Agricultural Merchanting Division was 2% lower at £128.81m (2019: £131.84m). This mainly refl ected the impact of restricted trading protocols, introduced at the start of the coronavirus crisis. Like-for-like sales for this Division reduced by 1%.
Underlying pre-tax* profit, the Board’s preferred alternative performance measure, which includes the gross share of results from joint ventures and excludes share-based payments and non-recurring items, increased by 4% to £8.37m (2019: £8.01m). The Agriculture Division contributed £2.88m (2019: £2.95m) to this result, which included contributions from joint ventures, and the Specialist Agricultural Merchanting Division contributed £5.78m (2019: £5.24m). Other activities generated a small loss of £0.12m (2019: loss of £0.05m). On an IFRS basis, reported profit before taxation was £6.98m (2019: £7.55m).
The Group incurred a number of additional charges in the year, mainly relating to its strategic reorganisation, but also including site closure charges and goodwill impairments charges. Together these amounted to £1.19m (2019: £0.3m).
The Group adopted the new accounting standard, IFRS 16, relating to leases, which replaces rental expense with right-of-use asset amortisation and interest. As a result, reported net finance costs increased by £0.09m to £0.27m (2019: £0.18m excluding IFRS 16).
Profit after taxation was £5.53m (2019: £6.13m), and basic earnings per share was 27.73p (2019: 30.95p).
Cash flows and balance sheet
Continued strong cash generation, together with tight control of working capital, left the business with net cash, before lease obligations, at the financial year-end of £18.41m (31 October 2019: £7.57m). After deducting total lease obligations of £9.99m (2019: £3.72m excluding IFRS 16), total net cash at 31 October 2020 amounted to £8.42m (2019: £3.84m).
The Group’s balance sheet remains strong with net assets 3% higher at £98.18m (2019: £94.95m) at the financial year-end. This equates to £4.92 (2019: £4.79) per share, and the return on net assets was 8.6% (2019: 8.5%)
The Board is pleased to propose the payment of a final dividend of 10.00p per share. Together with the interim dividend of 4.60p per share, paid on 31 October 2020, this takes the total dividend for the year to 14.60p, an increase of 4.3% on last year (2019: 14.00p).
The final dividend will be paid on 30 April 2021 to shareholders on the register on 6 April 2021, subject to shareholder approval at the AGM. A scrip dividend alternative will continue to be available as in previous years. The last date for election for the scrip dividend will be 16 April 2021.
THE BOARD AND COLLEAGUES
On behalf of the Board, I would like to thank all our colleagues for their professionalism and dedication in a very difficult year. The drive to ensure that the business was able to adapt swiftly to the new conditions created by the coronavirus pandemic and to maintain operations, while ensuring the safety of colleagues, customers and suppliers, was outstanding.
Following our reorganisation of operations, Andrew Evans stood down from the Board on 1 December 2020. Nonetheless, he remains a key member of the Senior Executive Team in his new role of Group Operations and Feeds Director. On behalf of my fellow Directors, I would like both to formally acknowledge Andrew’s contribution as a member of the Board since 2008, and to welcome his ongoing significant contribution as member of the Senior Executive Team.
Now that a non-tariff trade agreement has been concluded with the EU, the picture for UK agriculture is significantly clearer as we start 2021, and a major uncertainty has been removed. We expect to see investment recommence and the sector move forward, with UK food producers also having the ability to seek new markets for agricultural products. The UK Agriculture Bill will change the way that farmers are supported by the Government, and we anticipate that a more resilient agricultural sector will result. We also expect opportunities for Wynnstay to provide support as farmers focus on environmental investment and efficiencies. We therefore view medium and long-term prospects for our industry positively.
Agricultural commodity prices have generally improved over the past 12 months and the short-term outlook remains strong. Winter cereal plantings are significantly greater than a year ago, in line with a more normal sowing season. This will drive demand for arable inputs and yield a larger crop to trade post-harvest.
While the coronavirus and associated restrictions remain a concern, the onset of the national vaccination programme should help to underpin social and economic recovery. We have clear targets for the business over the next few years. These include continuing investment to improve productivity and support growth, and a focus on ensuring that we are best placed to support UK farmers as they pivot to new priorities, including environmental initiatives and the adoption of new farming practices. We see a significant role for Wynnstay in supporting farmers with products and services to help drive sustainability and greater efficiency as well as to reduce carbon emissions, including the management of farm waste.
Our ongoing investment in widening the Group’s knowledge base and advisory teams, and the importance we place on innovative products and services by working with our valued suppliers, is integral to positioning Wynnstay as a leading UK agricultural supplier. The reorganisation that we have substantially completed is also part of this strategy, and should support greater innovation and flexibility as we look to develop and grow our channels to market.
The new financial year has started well, and the Board remains confident that the Group is well-placed to progress with its strategic objectives. We will also continue to assess acquisition opportunities that align with our growth strategy, and look to the future with confidence.
26 January 2021