Wynnstay buoyed up by demand for livestock feed
The group has issued its preliminary results for the year ended 30 October 2017.
It said turnover from continuing operations increased year-on-year by 10.5% to £390.7m (US$554m). The agricultural division saw its operating profit jump 11% to £3.34m, with a recovery in trading conditions for both livestock and arable farmers.
Ken Greetham, Wynnstay CEO, commented:
"Our core agricultural business delivered a significantly improved performance year-on-year, reflecting better trading conditions for our farmer customers, with milk and other farm output prices recovering from the depressed levels of the last two years. The recovery in prices over 2017 drove a greater sense of optimism across the agricultural sector.
"The group's results as a whole were impacted by Just for Pets Limited (JFP), which was very regrettably placed into administration in early October. However, this decisive action helped to minimize the potential adverse effect on both creditors and employees, preserving most jobs.
"The agricultural trading backdrop is stronger than this time last year and the new financial year has started in line with management expectations. We continue to invest in the group's infrastructure, focusing on manufacturing and logistics, and believe that the business remains well-placed to develop and grow."
The analyst view…
Shore Capital analysts, in a note on the results, said they had anticipated a decline in contribution year on year at the company. “So this result is encouraging.”
“We are optimistic about the group’s prospects with the business well-placed with a broad spread of activities, solid momentum in more stable market conditions and a strong balance sheet.”
Performance was driven by a strong upturn in feed volumes which have grown broadly in line with the market overall, said the UK equity researchers.
Wynnstay’s feed division targets the ruminant and layer sectors. It operates two compound feed mills and one blending plant, producing yearly in excess of 300,000 tons of feeds.
“We note the feed volume performance has benefited from the investment the group made in a bagged feed line in 2016, which mainly supplies the retail stores where they have seen increased demand for the bagged product. We note there are plans for further investment in both compound feed mills in 2018,” said the analysts.
The natural hedge within the Wynnstay group has come to the fore to some extent in FY2017, they added. “The smaller harvest in 2016 resulted in lower grain volumes within GrainLink, the grain marketing business in the arable division. Therefore, the stronger feed performance has more than mitigated its reduced contribution.”
The Shore Capital analysts said they believe management at the UK agribusiness took the right course of action in regard to JFP.
"The focus now will be entirely on developing and growing Wynnstay’s core agricultural operations."
Brexit
Wynnstay said the agreement of terms for the UK's exit from the EU remains unresolved and this creates a degree of uncertainty in the agricultural market.
"However, the UK is a relatively efficient producer of most agricultural products and this, combined with pledged support from the UK Government, gives a degree of comfort to the industry. Whatever the outcome of the final Brexit negotiations, there is no doubt that improving productivity will remain a significant focus for most farming enterprises, and Wynnstay is well positioned, with its broad range of products and services, to aid efficiency within the sector."
