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VSA Capital Market Movers - Wynnstay Group: H1 2018 Results

VSA Capital Market Movers - Wynnstay Group: H1 2018 Results

Wynnstay Group: H1 2018 Results

Wynnstay Group (LON:WYN), a UK manufacturer and supplier of agricultural inputs, has announced results for the six-month period ended 30 April 2018 (H1 2018).

  • Revenue: £218.5m, +10.3% YoY (H1 2017: £198.1m)
  • Adjusted Group PBT: £4.9m, +15.5% YoY (H1 2017: £4.3m)
  • Net debt of £6.9m at 30 April 2018 (30 April 2017: £8.3m).
  • Interim dividend: 4.41p, +5.0% YoY (H1 2017: 4.2p).
  • Agriculture Division: Revenues £160.1m, +9.9% YoY; operating profit £2.1m, +33.1% YoY (H1 2017: £145.8m, £1.5m).
  • Specialist Retail Division: Revenue £58.3m, +11.4% YoY; operating profit £3.1m, +6.2% YoY (H1 2017: £52.3m, £2.9m).

VSA Comment

WYN’s trading statement on 20 March confirmed that it had begun the year in an encouraging manner with increased demand for most of its products (feed, fertiliser, grain volumes, seeds, retail products). Although the onset of spring farm activities was delayed by weather, arable product volumes have now recovered to normal levels, with particularly strong demand reported in April and May.

In the fertiliser sector, although margin pressure remains, yesterday’s Q3 trading update from Origin Enterprises (LON:OGN), which reported higher like-for-like volumes in its Q3 (WYN’s Q2) as well as an expectation that volumes would continue to be favourable in Q4 (WYN’s Q3) may finally indicate the start of an improving market in this area.

Grain trading has continued to be a difficult place to make money as grain prices have shown little volatility and margins have therefore been hard to achieve. However since March, we have seen a bit more volatility enter the market with the benchmark UK feed price breaking out of its range and moving above £155/t earlier this month.

In animal feed, DEFRA data has continued to show good UK market demand. WYN has also reported the positive impact of the prolonged winter and subsequent wet weather, which has limited grass growth and led to increased animal feed demand as on-farm fodder stocks have depleted.

In retail, as previously announced on 30 April, WYN bought eight stores from the administration of Countrywide Farmers to expand significantly its retail presence into the South West of the UK. It also acquired two others stores during the period (in mid-Wales and Cornwall) to bring its total retail network to 60 stores.

 

These results are not surprising given the March trading update, the bullish trading update from NWF Group (LON:NWF) last week and well-publicised improvement in the underlying UK agriculture market. Despite these factors, WYN has been the only stock in the sector not to experience a significant share price increase. We think this is unjustified and is perhaps a hangover from the issues experienced with Just for Pets last year.

WYN looks well on track to meet or even exceed current consensus (revenue of £407.6m, +4.3% YoY, and an adjusted PBT of £8.2m, +2.5% YoY).

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