Agricultural supply business Wynnstay Group PLC (LON:WYN) said in its half-year results statement that farmer confidence is returning.
Revenue from continuing operations in the six months to the end of April 2018 was up 10.3% to £218.53mln from £198.14mln in the corresponding period 12 months earlier, feeding through to register a 15.7% increase in profit before tax to £4.91mln from £4.25mln.
The agricultural division's revenue rose 9.9% year-on-year to £160.1mln, while operating profit rose 33% to £2.05mln.
The group said the strongest recovery was in animal feed, driven by farmers returning to more typical feeding patterns and the protracted winter.
The specialist retail division saw operating profit rise 6.2% to £3.1mln on the back of an 11.4% increase to £58.3mln.
Long-awaited upturn in agricultural sector
Wynnstay Stores benefited from the improved trading backdrop, with like-for-like sales up 8% year-on-year, excluding inflation.
"Wynnstay's interim results are encouraging, with the group's stronger performance reflecting the long-awaited upturn for the agricultural sector, which started to come through in 2017. The continuing improvement in farm-gate prices has boosted farmer confidence, and demand across most product categories was higher year-on-year,” said Ken Greetham, the chief executive officer of Wynnstay.
"We continue to invest in and develop the group in line with our strategic plans, and, at the end of April, acquired eight stores from the administrators of Countrywide Farmers PLC. This strategic acquisition together with two separate store purchases strengthen our presence in a number of counties, especially in the South West of England, where Wynnstay is currently under-represented,” he added.
House broker Shore Capital said the results benefited from the improved trading backdrop with the ongoing recovery in the agricultural sector.
"Farming output prices continue to be at healthier levels that are in turn seeing a noticeable improvement in farmer sentiment. Whilst the backdrop has been more favourable, the group’s resilient model has still been tested in the period with the natural hedge of the group’s activities coming to the fore. The long winter has benefited feed demand but delayed spend on arable products albeit there has been some catch-up post period end," the broker noted.
"Looking forward, the improved market outlook and this performance helps underpin our view that the group is now on much firmer footing to drive profit growth. This gives us the confidence to upgrade our full-year forecasts and beyond and suggests rating expansion could follow too," Shore added.
Well on track to meet or exceed current consensus
VSA Capital Research said the results were not surprising given the March trading update, the bullish trading update from NWF Group last week and the 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,” VSA said.
“WYN looks well on track to meet or even exceed current consensus (revenue of £407.6mln, +4.3% YoY, and an adjusted PBT of £8.2mln, +2.5% YoY),” the broker added.
Shares in Wynnstay were up 1.6% at 465p in early deals.