ANNUAL
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Contents
About Wynnstay
Financial Performance Highlights
Strategic Report
Principal Activities and Business Model
Locations
Group Strategy
Chairman’s Statement
Chief Executive’s Review
Finance Review
Risk Management Statement
Board and Advisors
Corporate Governance
Board of Directors
Directors’ Report
Corporate Governance Statement
Corporate Social Responsibility
Directors’ Remuneration Report
Independent Auditor’s Report
Financial Statements
Consolidated Statement of Comprehensive Income
Consolidated and Company Balance Sheet
Consolidated and Company Statement of Changes in Equity
Consolidated and Company Cash Flow Statement
Principal Accounting Policies
Notes to the Financial Statements
Shareholder Information
Notice of Annual General Meeting
Notes to Notice of Annual General Meeting
Information Relating to the Proposed New Performance Share Plan
Financial Calendar
Shareholder Fraud Warning
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10-11
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
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About Wynnstay
We aim to be the
supplier of choice,
by helping farmers
prosper
Agricultural
processing sites
Depot locations
Wynnstay Group was established in 1918 as a farmers’
cooperative. The business has developed through focused
acquisitions and organic expansion into one of the UK’s
largest suppliers of products and services to farmers and
rural communities. We aim to be the supplier of choice, by
helping farmers prosper through offering a diverse product
range supported by specialist technical advice and where
applicable, industry innovations.
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Financial Performance Highlights
Continuing Operations only1
Depot locations
Group Revenue
£462.66m
2017: £390.72m
+ 18.41%
Earnings per Share
39.11 pence
2017: 32.29 pence
+ 21.12%
Profit before Tax
£9.53m
2017: £7.66m
+ 24.41%
Shareholders’ Funds
£91.07m
2017: £85.39m
+ 6.65%
Underlying Pre-tax Profit*
£9.60m
2017: £7.97m
+ 20.45%
Dividend per Share
13.36 pence
2017: 12.60 pence
+ 6.03%
1 Continuing operations exclude the results of the discontinued Just for Pets Limited
business. For more information, see note 11 on page 68.
* Underlying Pre-tax profits include the Group’s share of pre-tax profit from joint ventures
and associate investments but excludes the non-recurring items and share-based
payments, a reconciliation is included in page 22 of the annual report.
18.41%
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24.41%
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Group Revenue (£m)
Profit before Tax (£m)
Earnings per Share (pence)
Dividend per Share (pence)
£462.66m
£9.53m
39.11p
13.36p
ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
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‘16‘15‘14‘13‘16‘15‘14‘13‘17‘17‘16‘15‘14‘13‘17‘16‘15‘14‘13‘17‘18‘18‘18‘18 Key Strengths
A robust and balanced
business model with two
complementary divisions -
Agriculture and Specialist
Agricultural Merchanting
A strong balance sheet with
capacity to support future
growth
Committed and loyal
employees who offer technical
advice to support the prosperity
of our farmer customer base
through efficiencies and new
innovations
A broad range of
agricultural products
marketed via a multichannel
sales offering
Opportunities for future growth
by increased geographic reach
through organic and focused
acquisitions
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0102030405
Strategic Report
Principal Activities and Business Model
Locations
Group Strategy
Chairman’s Statement
Chief Executive’s Review
Finance Review
Risk Management Statement
Board and Advisors
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
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01
Principal Activities and Business Model
The business model is aligned with the buying needs and habits of our farming
customer base. The business is reported as two complementary divisions,
Agriculture and Specialist Agricultural Merchanting, with a number of operating
units within the appropriate divisions.
Feed
Agriculture
Glasson
Arable
Depots
Specialist
Agricultural
Merchanting
Youngs
Animal
Feeds
Customer
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Agriculture
Specialist
Agricultural
Merchanting
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The Agriculture Division covers
the manufacturing and supply of a
comprehensive range of agricultural inputs to
customers across many parts of the UK.
Our Specialist Agricultural Merchanting Division
supplies specialist agricultural and associated sundry
products to customers throughout Wales, Midlands,
North West and South West of England.
FEED
Feed operates two compound feed mills and one blending plant, offering
a full range of animal nutrition products to the agricultural market. The
location of the mills allows for logistically efficient delivery of products
throughout our trading area. Third party mills are also used to satisfy
additional seasonal and geographic requirements. Both mills are multi
species, allowing the business to provide a broad range of products
to service the requirements of ruminant and monogastric animals.
The business recognises the requirement for nutritional expertise and
employs specialists to provide guidance on feed management for all
farm enterprises.
Continued investment at the two compound mills allows further
expansion of production in both bulk and bagged materials.
DEPOTS
The Group’s Specialist Agricultural Merchanting depots are well
established and provide a comprehensive range of products for farmers
and rural dwellers. The depots, which now number 59 and operate
throughout Wales, Midlands, North West and South West England,
supply a wide range of specialist products to farmers, smallholders
and rural dwellers. Our team is trained to help customers with technical
advice on all aspects of the wide range of products available. The model
is strengthened further by the use of sector specific catalogues, branded
van sales and proactive marketing to promote the extensive range of
products available to the industry. The increased diversity complements
our core agricultural business, acting as an important route to market
for pharmaceutical companies with whom the Group works closely to
provide specialist professional advice to livestock farmers.
YOUNGS ANIMAL FEEDS
Youngs Animal Feeds operates from its production facility at Standon
in Staffordshire. It manufactures and acts as a distributor of a range of
equine and small animal feeds through wholesalers and retailers in the
west of the UK.
GLASSON
Glasson operates from Glasson Dock, near Lancaster. It is a producer
of blended fertiliser, feed raw material supplier and manufacturer of
added value products to specialist animal feed retailers. The business
operates fertiliser manufacturing facilities at Winmarleigh, Goole and
Montrose, also sources from a facility at Birkenhead.
Glasson complements the Group strategy by providing a further
internal hedge against commodity volatility in the agricultural supply
sector.
ARABLE
Arable supplies a wide range of products to arable and grassland
farmers throughout the trading area. The Group is recognised as a
significant supplier of fertiliser, acting as a principal supplier of CF
and Yara products together with our own Top Crop brand of fertiliser.
Seed is processed at Shrewsbury, Shropshire and Selby, Yorkshire.
Agrochemicals are supplied to complete the range of products.
GrainLink, the Group’s in-house grain marketing company, provides
farmers with an independent professional marketing service backed
by the financial security of the Wynnstay Group. The Company has
access to major markets for specialist milling and malting grain as well
as feed into mills throughout our trading area. GrainLink operates from
Shrewsbury, Shropshire and Grantham, Lincolnshire.
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Trading Area and Agricultural Sites
Montrose
TRADING AREA AND
AGRICULTURAL SITES
Feed processing sites
Fertiliser processing sites
Seed processing sites
Trading activity
Glasson
Winmarleigh
Selby
Goole
Rhosfawr
Llansantffraid
Astley
Carmarthen
Feed processing sites in Powys and Carmarthenshire, blending plant in
Gwynedd, arable and seed processing sites in Shropshire and Yorkshire, raw
materials and feed processing site in Lancashire, fertiliser processing sites at
Lancashire, Angus and Yorkshire.
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Specialist Agricultural Merchanting Locations
SPECIALIST AGRICULTURAL
MERCHANTING LOCATIONS
59 Wynnstay Depots and
Wynnstay Agricentres
4 Youngs Animal Feeds
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Wynnstay Depots, Wynnstay Agricentres and Youngs Animal Feeds provide a
comprehensive range of products for farmers and smallholders.
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Group Strategy
The core Wynnstay business supplies goods and services to farmers. The Group is committed to sustained development within the agriculture
sector and will strive for continued growth with a view to optimising the return to all stakeholders in the business.
In order to achieve this ambition, the Group recognises that it must excel in terms of value, quality and the development of its products, services
and people. Wynnstay’s objective is to establish itself as the ‘supplier of choice’ within its trading areas, providing a comprehensive offering that
caters for the needs of arable, livestock and mixed farms.
BACKGROUND
Headquartered in Llansantffraid, in Wales, Wynnstay Group was established in 1918 as a farmers’ cooperative, converting to a Plc in 1992.
Wynnstay trades across Wales, the Midlands, Lancashire, North Yorkshire, Lincolnshire, the West Country and East Scotland. Through a series
of mergers, acquisitive growth and conversion to a Plc, the business has developed into a major supplier of products and services to the
agricultural industry and the rural economy.
The Group’s development
strategy to become
‘Supplier of Choice’:
Investment
Continued investment in
future developments
Product
Range
Offering a broad
spectrum of products
and services
Innovation
Select new products to
enhance the productivity of
agricultural enterprises
Customer
Service
Communicate effectively with
customers and provide
a high level of
customer service
Supplier
of Choice
Operations
Continued investment
in manufacturing,
technology and IT
systems
Growth
Organic and
acquisitive growth
with continued
geographic expansion
Marketing
Provide most effective
route to market for all
products and services
People
Attract, recruit,
develop and retain the
right people
GROWTH STRATEGY
The Group is confident that macro-economic factors, including
world population growth, the need for higher levels of national self-
sufficiency, and the existence of an ideal production environment in
terms of climate, expertise and market, should continue to make the
UK a strong and growing food producer. The Group believes there are
significant opportunities for the continued growth of its successfully
established business model supplying goods primarily to farmers to
support the production of food in the UK.
Over a period of the last thirty years, a twin stranded growth strategy
has been successfully implemented which has seen Group revenues
grow from £12m in 1988 to £462m in 2018. These two strands are
represented by focused acquisitions, and gradual organic expansion
Acquisition
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Act as a consolidator in the UK agricultural supply sector.
Continue to seek “bolt-on” geographic transactions.
Seek larger acquisition opportunities to complement
existing activities and enhance economies of scale.
Explore opportunities with innovative product (producers or
suppliers, and disruptors).
Companies that are innovative in their outlook.
through increasing geographic reach and product extension. This twin
approach has seen the Group conclude over 50 corporate transactions
in the last thirty years, together with expanding its supplied product
range to more than 25,000 SKU’s (Stock Keeping Units or individual
product items) as the Group became a preferred route to market for
many of its main suppliers. The fragmented nature of the supply sector
into farming and the rural economy has supported the success of this
strategy, the Board believes that many opportunities remain, and that
the continuation of this approach, with additional financial resource,
will continue to produce rewarding results for all stakeholders in the
business. The growth focus will therefore remain on developing the
twin strands as follows:
Organic
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Expand use of Customer Relationship Systems and data
usage to increase sales to individual customers.
Develop new sales channels, including on-line, digital
catalogues and van sales.
Continue to develop sales to customers via cutting edge
technical advice.
Seek new store and operating centre opportunities to grow
trading footprint.
Continue to innovate in terms of new products, technology
and suppliers.
To continue to train personnel to enhance the business.
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LONG TERM VIABILITY
The Group’s corporate plan ensures clear direction and focus for
strategic development of the business. Initially instigated in 2015
and substantially reviewed in early 2017, the current plan provides a
framework into 2019, following which further clarity on political related
issues is expected. Regular reviews of planned goals take place to
confirm they remain appropriate in changing circumstances. Annual
budgets are set in line with corporate goals but recognise specific
market conditions at the time.
The Group’s major focus is closely linked to the viability of the UK
agricultural industry. Well publicised information on macro-economic
factors associated with world supply of food and energy point to
a resilient industry. However, the UK’s forthcoming exit from the
EU and the implementation of the UK Agriculture Bill impact the
farming practices of our customer base and this will be given careful
consideration in the ongoing development of the business. The
strategy of operating across multiple agricultural enterprises mitigates
risk, and the Group will constantly review the long-term outlook for
the various sectors of the industry in light of all new information as it
becomes available. The Board remains optimistic for the overall future
of the UK agricultural industry, as the country has the climate, natural
resource and expertise to remain a competitive player in the production
of many food commodities. The focus on improved efficiency at all
points of the food production cycle should offer further opportunities
for the marketing of products and services offered by the Group.
CORPORATE GOALS
The Group categorises its corporate goals under four main headings
which are balanced to satisfy the expectations of all stakeholders.
Shareholders – where the Group focuses on financial performance
which supports a progressive dividend policy and capital growth in
share value.
Customers – where the Group seeks to excel in terms of range, value,
quality and service.
Employees – where the Group aims to attract, develop and reward
high calibre personnel, and ensure a safe, interesting and productive
environment to work in, thus encouraging the highest levels of
customer service.
Suppliers – where the Group wishes to provide the best marketing
route, thereby procuring preferential terms and offering better value
for its customers.
BUSINESS REVIEW AND FUTURE DEVELOPMENTS
A review of the business and future developments of the Group and a
discussion of the principal risks and uncertainties faced by the Group
are presented in the Chairman’s Statement and Chief Executive’s
Review included within the Group’s published accounts.
are
OPERATIONAL STRATEGY
The Company’s growth prospects
underpinned by
macro-economic factors which point to increased demand for
agricultural produce, mainly as a result of an increasing world population
and shifting dietary habits. These factors provide a strong backdrop
for expansion of the Group’s activities, although the inherent cyclical
nature of much of the world’s food production can create certain
short-term stresses to the smooth operation of activities. The Board
has always recognised that the natural processes involved in food
production will, from time to time, create risks to certain enterprises
at different times, either through climatic, disease, economic or other
influences. The Board remains optimistic about the future of the UK
agricultural industry. We believe that demand for seed, feed and other
agricultural inputs will continue to be strong and that Britain will remain
a competitive player in food production.
Political factors must be considered in any strategic planning process,
in particular the political uncertainty that currently exists within the
industry. In terms of UK Government support, the UK Agriculture Bill
has been presented with a proposed framework concentrating future
financial support for economic resilience and public money for public
goods. Economic resilience will focus on improving efficiencies within
farming businesses and increasing market potential. The Public Goods
Scheme will enable land managers to be paid for the production of
outcomes for which there is currently no functioning market e.g. water,
soil and air quality. Financial support is guaranteed to 2022 with a
transition period thereafter. This is a positive outcome for UK farming
business and demonstrates the commitment of the UK Government
to a strong agricultural sector.
Therefore, a Group strategy which is designed to minimise risks by
ensuring a broad and balanced spread of activities across all the
main agricultural input areas will be pursued. This policy of having a
broad-based business limits the impact of any adverse performance
in any single activity and has helped shelter the Group from periodic
commodity volatility extremes in the past.
The agricultural markets that the Group operate within continue to
be supplied by a relatively fragmented industry, which has allowed
the business to develop through a clear strategy of consolidation
and growth. The political uncertainty, the change of Government
support for agriculture, the increased efficiencies through technology
and innovation demanded from our customer base will enhance
rationalisation within the agricultural supply industry. The Group has
a strong track record of both organic and acquisitive growth and the
Board is confident that the Group is well placed to continue to grow
the business. Wynnstay’s robust balance sheet, strong commercial
relationship and highly skilled staff will capitalise upon opportunities to
enhance this successful growth strategy.
Agricultural businesses continue to seek efficiencies throughout
the sector through the embracement of innovation, technology,
automation and technical advice. The Group will continue to focus on
new product development, R&D and an ongoing investment in routes
to market to enhance the performance of our customers’ farming
businesses.
We are also investing in our advisory services to farmers and have
a strong team of specialists (including dairy, poultry, animal health,
calf, hardware and arable) who assist customers in identifying areas
to improve efficiency. As the pressures on UK agriculture to become
more efficient and to enhance productivity increases, we believe that
the advisory element of our services will become more important.
The Group continues to be committed to a programme of
modernisation within the business with particular emphasis being
given to investment into our feed mills and seed processing facilities,
distribution and eCommerce/on-line sales to ensure effective and
efficient supply of the wide range of products that the Group can
offer. This will be supported by effective marketing to drive operational
efficiencies.
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Chairman’s Statement
Record results
in Wynnstay’s
Centenary Year
OVERVIEW
I am pleased to report record financial results in what was Wynnstay’s
Centenary Year. These very strong figures, which are well above our
expectations at the start of the financial year, reflect the continuing
recovery in farmer confidence and spending, driven by improved
farmgate prices. Trading in the second half of the year also benefited
from the unusually dry summer weather that extended well into the
autumn months and boosted sales of feed, fertiliser, and seed in
particular.
Underlying* pre-tax profit
(the Board’s preferred alternative
performance measure) from continuing operations rose by 20.5% to
£9.60m (2017: £7.97m), and Group revenue from continuing activities
increased by 18.4% to £462.66m (2017: £390.72m), with acquisitions
accounting for £28.21m of sales.
All of Wynnstay’s key activities generated increased sales. This
reflected the general improvement in farmgate prices, which benefited
farmers across the arable and livestock sectors. Average UK grain
prices were above the previous season, with milk prices stabilising
to more realistic levels, and sheep and beef meat prices increasing
year-on-year. The weaker pound also benefited UK farm exports.
Against this, farmers faced rising costs, including fuel and fertiliser,
and unexpected feed requirements driven by the dry weather.
Strong feed demand in the second half benefited both our direct-to-
farm activity as well as sales through our other channels-to-market,
including Wynnstay’s agricultural depots. Overall, the Group’s
compound and blended feed volumes were 6.4% higher than last year
and sales of bagged feed, which is predominantly sold through our
depots, reached a record high.
The acquisitions of the Montrose fertiliser blending plant in East
Scotland in November 2017 and the balance of the FertLink
joint venture fertiliser manufacturing business in May 2018 have
established Wynnstay as the second largest fertiliser blending
manufacturer in the UK, enabling us to capitalise on increased fertiliser
demand in the second half. Strategically, the addition of Montrose has
given us our first presence in Scotland, which we will build on. The
Group’s seed operations produced a very strong performance, with
record sales of herbage seeds. Grain trading activities were buoyant,
with volumes up by 15.5% over the previous year. This included a
good initial contribution from our new grain trading operation in
Grantham, opened in the late Spring.
Sales through our agricultural depots were strong, with like-for-like
sales up by 9.8%. We made a number of acquisitions of agricultural
outlets in the year and these have expanded our trading reach and
farming customer base, especially in the South West. The most
significant acquisition was from the administrators of Countrywide
Farmers Plc on 30 April 2018. The integration of our acquisitions
is proceeding to plan and, as previously highlighted, we expect the
former Countrywide depots to make a positive contribution to the
Group’s results in the new financial year to 31 October 2019.
Over the year, we have continued to invest across the Group to
improve operational efficiencies, particularly in production facilities
and logistics. We are also continuing to invest in our advisory services
and have established a strong team of specialists. The application
of science and technology in farming is important and our advisory
services are aimed at assisting farmers in reviewing and adopting
relevant new products and practices as they seek to become more
efficient and more profitable.
FINANCIAL RESULTS
Group revenues from continuing operations for the year to 31 October
2018 increased by 18.4% to £462.66m (2017: £390.72m), with
acquisitions contributing £28.2m and inflation accounting for about
£22.3m of the rise.
Sales in the Agriculture Division rose by 19% to £334.34m (2017:
£280.87m), with the increase reflecting higher average unit values for
most feed, seed and grain products and stronger volumes. Revenue
from the Specialist Agricultural Merchanting Division increased by
17% to £128.26m (2017: £109.73m), with acquisitions contributing
£7.83m to this rise and £10.7m accounted for by strong like-for-like
growth in many important product categories.
On an IFRS basis, profit before taxation increased by 24.4% to
£9.53m (2017: £7.66m). Underlying* Group pre-tax profit, which
excludes share-based payments and non-recurring items but includes
the results from joint ventures and associates, increased by 20.5%
to £9.60m (2017: £7.97m), setting a new record high. This strong
performance was driven by both Divisions.
*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 the Finance Review for an explanation on how this measure has been calculated and reasons for its use.
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Bill, which is currently progressing through Parliament, supports and
promotes investment in sustainable business models, and incentivises
greater efficiency and environmental management. Macro-economic
factors point to increased demand for agricultural produce as a result
of increasing world population and shifting dietary habits, which British
agriculture stands to benefit greatly from. We believe that Wynnstay
can play an important role in supporting the future needs of farmers as
they respond to the new challenges and opportunities ahead.
Wynnstay remains well-placed to grow and develop. The business is
now wholly-focused on its agricultural activities and the acquisitions
that we have completed over the last year have expanded our trading
areas and our customer base, providing growth opportunities for the
future.
We have strong routes into our farming customer base and continue
to invest in our product range and in the different ways in which we
engage with customers, including online. Our depots remain a strong
channel to market, complemented by our growing advisory services,
educational events and specialist catalogues. We intend to continue to
develop our ‘multi-channel’ approach over the coming year.
We also have a programme of investment in place to continue
to improve efficiencies, with a strong focus on enhancing our
manufacturing facilities and upgrading systems.
Trading at the start of the current financial year is in line with
management expectations and looking further ahead, the Board
remains confident of continuing organic and acquisitive growth
opportunities. Wynnstay’s breadth of activities and strong balance
sheet will continue to provide a secure underpinning to the Group’s
position as we develop and expand the business.
Jim McCarthy
Chairman
22 January 2019
The Agriculture Division generated a 28.4% rise in operating profit
contribution to £4.29m (2017: £3.34m), including contributions from
Joint Ventures and Associate business. The Specialist Agricultural
Merchanting Division generated a 16.7% rise in contribution to £5.53m
(2017: £4.74m). Other activities showed a loss of £0.09m (2017: loss
of £0.10m).
Net finance costs increased slightly to £0.19m (2017: £0.15m) as
commodity price inflation created higher average working capital
utilisation.
Profit after tax from continuing operations rose by 22.2% to £7.71m
(2017: £6.31m) and basic earnings per share from continuing
operations increased by 21.1% to 39.11p (2017: 32.29p).
The Group continued to generate good cash flows. However, it closed
the year with net debt of £0.98m (2017: net cash £4.51m), which
mainly reflected higher working capital utilisation as a result of the
growth in revenues. It also reflected increased investment across the
Group particularly in our logistics fleet, depots and manufacturing
facilities. The Group maintains borrowing facilities of approximately
£18.8m, which provide it with ample headroom.
Net assets increased by 6.7% to £91.07m (2017: £85.39m) at the
year-end, which equates to £4.62 per share (2017: £4.37 per share)
and the return on net assets from continuing operations rose to 10.6%
(2017: 9.4%).
DIVIDEND
The Board is pleased to propose the payment of a final dividend of
8.95p per share. Together with the interim dividend of 4.41p per share,
paid on 31 October 2018, this takes the total dividend for the year to
13.36p, an increase of 6.03% on last year (2017: 12.60p).
The final dividend will be paid on 30 April 2019 to shareholders on the
register on 29 March 2019. A script dividend alternative will continue
to be available as in previous years. The last date for election for the
script dividend will be 16 April 2019.
BOARD CHANGES
On 11 July 2018, Gareth Davies assumed the role of Chief Executive
Officer, succeeding Ken Greetham, who retired after 21 years with the
Group, the last 10 of which were as CEO.
On behalf of the Board and all staff, I am delighted to take this
opportunity to welcome Gareth to the Board and to thank Ken for his
substantial contribution to Wynnstay over so many years. Ken leaves
the Group well-positioned for its next stage of growth and we wish him
a very happy retirement.
Gareth joined Wynnstay in 1999, rising to become a key member
of the senior management team. Over the last five years, he has
been Joint Managing Director of Wynnstay (Agricultural Supplies)
Ltd. Gareth is also a Director of Hybu Cig Cymru – Meat Promotion
Wales, the industry-led organisation responsible for the development,
promotion and marketing of Welsh red meat, and a member of both
the Welsh Government Trade and Supply Chain Working Group, as
well as Treasurer of British Grassland Society.
COLLEAGUES
Our colleagues are knowledgeable and highly experienced, and
Wynnstay’s continuing success has been built upon a strong team
culture of commitment, passion and endeavour. On behalf of the
Board, I would like to thank everyone for their part in helping to deliver
a very successful year. We look forward to moving the Group into its
next phase of growth with the support of our dedicated team.
OUTLOOK
We believe that the long-term prospects for UK agriculture are positive,
despite the current uncertainties surrounding political reform and the
changes to the way in which farmers will be supported. The Agriculture
ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
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Datganiad Y Cadeirydd
Canlyniadau
ariannol gorau erioed
yn ystod Blwyddyn
Canmlwyddiant
Wynnstay
TROSOLWG
Mae’n bleser gennyf gyflwyno’r canlyniadau ariannol gorau erioed yn
ystod Blwyddyn Canmlwyddiant Wynnstay. Mae’r ffigurau cadarn iawn
hyn, sy’n uwch o lawer na’n disgwyliadau ar ddechrau’r flwyddyn, yn
adlewyrchu’r gwelliant parhaus o ran hyder ffermwyr a gwariant, wedi’i
lywio gan well prisiau terfynol i ffermydd. Roedd y tywydd anarferol o
sych a gafwyd yn ystod yr haf ac yn ystod misoedd cyntaf yr hydref
o fudd i fasnach yn ystod ail hanner y flwyddyn, gan gynyddu lefelau
gwerthiant ar gyfer porthiant, gwrtaith a hadau yn arbennig.
Cynyddodd elw cyn treth sylfaenol* (mesur perfformiad amgen dewisol
y Bwrdd) o weithrediadau parhaus 20.5% i £9.60m (2017: £7.97m),
a chynyddodd refeniw’r Grŵp o weithgareddau parhaus 18.4% i
£462.66m (2017: £390.72m). Roedd £28.21m o’r gwerthiannau yn
deillio o gaffaeliadau.
Llwyddodd holl weithgareddau allweddol Wynnstay i gynhyrchu lefelau
gwerthiant uwch, gan adlewyrchu’r gwelliant cyffredinol o ran prisiau
terfynol i ffermydd a welwyd gan ffermwyr ym mhob rhan o’r sector âr
a’r sector da byw. Roedd prisiau grawn cyfartalog yn y DU yn uwch
na’r tymor blaenorol, gyda phrisiau llaeth yn sefydlogi i lefelau mwy
realistig, a phrisiau cig defaid a chig eidion yn cynyddu o flwyddyn i
flwyddyn. Bu’r bunt wannach hefyd o fudd i allforion o ffermydd yn y
DU. I’r gwrthwyneb, bu’n rhaid i ffermwyr ymdopi â chostau uwch,
gan gynnwys cost tanwydd a gwrtaith, a gofynion annisgwyl o ran
porthiant o ganlyniad i’r tywydd sych.
Bu’r galw cadarn am borthiant yn ystod yr ail hanner o fudd i’n
gweithgareddau uniongyrchol-i’r-fferm, felly hefyd werthiannau drwy
ein sianeli eraill i’r farchnad, gan gynnwys storfeydd amaethyddol
Wynnstay. Yn gyffredinol, roedd cyfeintiau porthiant cyfansawdd
a chyfun y Grŵp 6.4% yn uwch na’r llynedd a gwerthwyd y lefelau
uchaf erioed o borthiant mewn bagiau, a werthir gan fwyaf drwy ein
storfeydd.
Diolch i’n hymdrechion i gaffael safle cyfuno gwrtaith Montrose
yn Nwyrain yr Alban ym mis Tachwedd 2017 a balans busnes
gweithgynhyrchu gwrtaith cyd-fenter FertLink ym mis Mai 2018,
Wynnstay bellach yw’r gweithgynhyrchydd cyfuno gwrtaith mwyaf
ond un yn y DU, gan ein galluogi i fanteisio ar y galw uwch am wrtaith
yn ystod yr ail hanner. Ar lefel strategol, drwy gaffael Montrose,
mae gennym bellach bresenoldeb yn yr Alban am y tro cyntaf, a’r
nod yw adeiladu ar hynny. Gwelwyd perfformiad cadarn iawn gan
weithrediadau hadau’r Grŵp, gyda’r lefelau gwerthiant uchaf erioed
o ran hadau porfa. Roedd gweithgareddau masnachu grawn yn
llewyrchus, lle cafwyd cynnydd o 15.5% o gymharu â’r flwyddyn
flaenorol. Roedd hyn yn cynnwys cyfraniad cychwynnol da gan ein
gweithrediad masnachu grawn newydd yn Grantham, a agorodd ar
ddiwedd y gwanwyn.
Roedd lefelau gwerthiant drwy ein storfeydd amaethyddol yn gadarn,
a chafwyd cynnydd o 9.8% o ran gwerthiannau cyfatebol. Caffaelwyd
nifer o allfeydd amaethyddol gennym yn ystod y flwyddyn, gan ehangu
ein cyrhaeddiad masnachu a’n sail cwsmeriaid ffermio, yn enwedig
yn y De-orllewin. Y caffaeliad mwyaf arwyddocaol oedd y caffaeliad
a wnaed gan weinyddwyr Countrywide Farmers plc ar 30 Ebrill
2018. Mae’r gwaith i integreiddio ein caffaeliadau yn mynd rhagddo
yn unol â’r bwriad ac, fel y nodwyd yn flaenorol, rydym yn disgwyl y
bydd storfeydd Countrywide gynt yn gwneud cyfraniad cadarnhaol i
ganlyniadau’r Grŵp yn ystod y flwyddyn ariannol newydd hyd at 31
Hydref 2019.
Yn ystod y flwyddyn, rydym wedi parhau i fuddsoddi ym mhob rhan o’r
Grŵp er mwyn gwella effeithlonrwydd gweithredol, yn enwedig mewn
perthynas â chyfleusterau cynhyrchu a logisteg. Rydym hefyd yn parhau
i fuddsoddi yn ein gwasanaethau cynghori ac rydym wedi sefydlu tîm
cadarn o arbenigwyr. Mae’r defnydd o wyddoniaeth a thechnoleg ym
maes ffermio yn bwysig ac mae ein gwasanaethau cynghori yn anelu
at helpu ffermwyr i adolygu a mabwysiadu cynhyrchion ac arferion
newydd perthnasol wrth iddynt geisio dod yn fwy effeithlon ac yn fwy
proffidiol.
CANLYNIADAU ARIANNOL
Cynyddodd refeniw’r Grŵp o weithrediadau parhaus ar gyfer y
flwyddyn hyd at 31 Hydref 2018 18.4% i £462.66m (2017: £390.72m),
gyda chyfrifiadau yn cyfrannu £28.2m a chwyddiant yn cyfrif am tua
£22.3m o’r cynnydd
Cynyddodd lefelau gwerthiant yn yr Is-adran Amaethyddiaeth 19%
i £334.34m (2017: £280.87m), gyda’r cynnydd yn adlewyrchu
*Nid yw mesur elw cyn treth sylfaenol yn egwyddor cyfrifyddu a dderbynnir yn gyffredinol (GAAP) ac ni fwriedir iddo gael ei ddefnyddio yn lle mesurau GAAP ac mae’n bosibl
na chaiff ei gyfrifo yn yr un ffordd â’r mesurau a ddefnyddir gan gwmnïau eraill. Dylid cyfeirio at yr Adolygiad Cyllid er mwyn cael esboniad o sut y cyfrifwyd y mesur hwn a’r
rhesymau dros ei ddefnyddio.
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CYDWEITHWYR
Mae ein cydweithwyr yn hyddysg ac yn brofiadol iawn, ac mae
llwyddiant parhaus Wynnstay yn seiliedig ar ddiwylliant tîm cadarn o
ymrwymiad, brwdfrydedd ac ymdrech. Ar ran y Bwrdd, hoffwn ddiolch i
bawb am chwarae rhan wrth ein helpu i sicrhau blwyddyn lwyddiannus
iawn. Edrychwn ymlaen at symud y Grŵp tuag at ei gyfnod twf nesaf
gyda chymorth ein tîm ymroddedig.
RHAGOLYGON
Credwn fod y rhagolygon hirdymor ar gyfer amaethyddiaeth yn y DU
yn galonogol, er gwaethaf yr ansicrwydd presennol sy’n gysylltiedig
â diwygiadau gwleidyddol a’r newidiadau i’r ffordd y rhoddir cymorth
i ffermwyr. Mae’r Bil Amaethyddiaeth, sydd ar ei hynt drwy’r Senedd
ar hyn o bryd, yn cefnogi ac yn hyrwyddo ymdrechion i fuddsoddi
mewn modelau busnes cynaliadwy, ac yn annog gwell effeithlonrwydd
a rheolaeth amgylcheddol. Mae ffactorau macro-economaidd yn
awgrymu y bydd mwy o alw am gynhyrchion amaethyddol o ganlyniad
i’r cynnydd ym mhoblogaeth y byd a newidiadau mewn arferion
deietegol, a bydd hynny o fudd mawr i’r sector amaethyddiaeth ym
Mhrydain. Credwn y gall Wynnstay chwarae rhan bwysig wrth ddiwallu
anghenion ffermwyr yn y dyfodol wrth iddynt ymateb i’r heriau a’r
cyfleoedd newydd o’u blaenau.
Mae Wynnstay yn parhau mewn sefyllfa dda i dyfu ac i ddatblygu.
Mae’r busnes bellach yn canolbwyntio’n llwyr ar ei weithgareddau
amaethyddol ac mae’r caffaeliadau a gwblhawyd gennym yn ystod
y flwyddyn ddiwethaf wedi ehangu ein meysydd masnachu a’n sail
cwsmeriaid, gan gynnig cyfleoedd twf ar gyfer y dyfodol.
Mae llwybrau cadarn rhyngom ni a’n sail cwsmeriaid ffermio ac rydym
yn parhau i fuddsoddi yn ein hamrywiaeth o gynhyrchion ac yn yr
amrywiaeth o ffyrdd a ddefnyddir gennym i ymgysylltu â chwsmeriaid,
gan gynnwys ar-lein. Mae ein storfeydd yn sianel gadarn ar gyfer
cyrraedd y farchnad o hyd, ac fe’u hategir gan y gwasanaethau
cynghori, y digwyddiadau addysgol a’r catalogau arbenigol a gynigir
gennym. Rydym yn bwriadu parhau i ddatblygu ein dull gweithredu
‘aml-sianel’ yn ystod y flwyddyn nesaf.
Mae gennym raglen fuddsoddi ar waith hefyd er mwyn parhau i wella
ein heffeithlonrwydd, gyda phwyslais cryf ar wella ein cyfleusterau
gweithgynhyrchu ac uwchraddio systemau.
Mae lefelau masnachu ar ddechrau’r flwyddyn ariannol gyfredol yn
unol â disgwyliadau’r rheolwyr a chan edrych ymhellach i’r dyfodol,
erys y Bwrdd yn hyderus y bydd cyfleoedd twf organig ac ym maes
caffael yn parhau. Bydd amrywiaeth gweithgareddau Wynnstay a’i
fantolen gadarn yn parhau i weithredu fel sail gadarn i’r Grŵp wrth i ni
ddatblygu ac ehangu’r busnes.
Jim McCarthy
Cadeirydd
22 Ionawr 2019
gwerthoedd uned uwch ar gyfartaledd ar gyfer y rhan fwyaf o
gynhyrchion porthiant, hadau a grawn a chyfeintiau cadarnach.
Cynyddodd refeniw o’r Is-adran Masnachu Amaethyddol Arbenigol
17% i £128.26m (2017: £109.73m), gyda chaffaeliadau yn cyfrannu
£7.83m at y cynnydd hwn a £10.7m ohono yn deillio o dwf cyfatebol
cadarn mewn sawl categori cynnyrch pwysig.
Ar sail IFRS, cynyddodd elw cyn trethiant 24.4% i £9.53m (2017:
£7.66m). Cynyddodd elw cyn treth sylfaenol* y Grŵp, nad yw’n
cynnwys taliadau ar sail cyfranddaliadau nac eitemau anghylchol ond
sy’n cynnwys canlyniadau cyd-fentrau a chwmnïau cyswllt, 20.5% i
£9.60m (2017: £7.97m), sef y lefel uchaf erioed. Cyfrannodd y ddwy
is-Adran at y perfformiad cadarn hwn.
Cynhyrchodd yr Is-adran Amaethyddiaeth gynnydd o 28.4% o
ran ei chyfraniad elw gweithredu i £4.29m (2017: £3.34m), gan
gynnwys cyfraniadau gan fusnes Cyd-fentrau a Chwmnïau Cyswllt.
Cynhyrchodd yr Is-adran Masnachu Amaethyddol Arbenigol gynnydd
o 16.7% o ran ei chyfraniad i £5.53m (2017: £4.74m). Dangosodd
gweithgareddau eraill golled o £0.09m (2017: colled o £0.10m).
Cynyddodd costau cyllido net ychydig i £0.19m (2017: £0.15m) wrth
i chwyddiant prisiau nwyddau greu defnydd uwch na’r cyffredin o
gyfalaf gweithio.
Cynyddodd elw ar ôl treth o weithrediadau parhaus 22.2% i £7.71m
(2017: £6.31m) a chynyddodd enillion sylfaenol fesul cyfranddaliad o
weithrediadau parhaus 21.1% i 39.11c (2017: 32.29c).
Parhaodd y Grŵp i gynhyrchu llifoedd arian parod da. Fodd bynnag,
ar ddiwedd y flwyddyn, roedd ganddo ddyled net o £0.98m (2017:
arian parod net o £4.51m), gan adlewyrchu’n bennaf y defnydd uwch
o gyfalaf gweithio o ganlyniad i’r twf mewn refeniw, Roedd hefyd
yn adlewyrchu’r cynnydd mewn buddsoddiad ym mhob rhan o’r
Grŵp, yn arbennig yn ein fflyd logisteg, ein storfeydd a’n cyfleusterau
gweithgynhyrchu. Mae gan y Grŵp gyfleusterau benthyca o tua
£18.8m, sy’n rhoi digon o hyblygrwydd iddo.
Cynyddodd asedau net 6.7% i £91.07m (2017: £85.39m) ar ddiwedd
y flwyddyn, sy’n cyfateb i £4.62 fesul cyfranddaliad (2017: £4.37
fesul cyfranddaliad) a chynyddodd yr adenillion ar asedau net o
weithrediadau parhaus 10.6% (2017: 9.4%).
DIFIDEND
Mae’n bleser gan y Bwrdd gynnig y dylid talu difidend terfynol o
8.95c fesul cyfranddaliad. Ynghyd â’r difidend interim o 4.41c fesul
cyfranddaliad, a dalwyd ar 31 Hydref 2018, ceir cyfanswm difidend
o 13.36c ar gyfer y flwyddyn, sef cynnydd o 6.03% o gymharu â’r
llynedd (2017: 12.60c).
Telir y difidend terfynol ar 30 Ebrill 2019 i gyfranddalwyr sydd ar y
gofrestr ar 29 Mawrth 2019. Bydd difidend sgript ar gael fel dewis
amgen o hyd, fel a fu yn ystod blynyddoedd blaenorol. Y dyddiad cau
ar gyfer dewis y difidend sgript fydd 16 Ebrill 2019.
NEWIDIADAU I’R BWRDD
Ar 11 Gorffennaf 2018, ymgymerodd Gareth Davies â rôl y Prif
Swyddog Gweithredol, fel olynydd i Ken Greetham, a ymddeolodd ar
ôl 21 mlynedd gyda’r Grŵp, gyda’r 10 mlynedd olaf o’r cyfnod hwnnw
fel Prif Swyddog Gweithredol.
Ar ran y Bwrdd a phob aelod o’r staff, mae’n bleser gennyf achub
ar y cyfle hwn i groesawu Gareth i’r Bwrdd ac i ddiolch i Ken am ei
gyfraniad sylweddol at Wynnstay dros gynifer o flynyddoedd. Mae’r
Grŵp mewn sefyllfa dda i wynebu ei gyfnod twf nesaf, diolch i Ken, a
dymunwn ymddeoliad hapus iawn iddo.
Ymunodd Gareth â Wynnstay yn 1999, gan ddatblygu i ddod yn aelod
allweddol o’r uwch dîm rheoli. Yn ystod y pum mlynedd diwethaf,
bu’n Rheolwr-gyfarwyddwr ar y Cyd Wynnstay (Agricultural Supplies)
Ltd. Mae Gareth hefyd yn un o Gyfarwyddwyr Hybu Cig Cymru, sef
y sefydliad o dan arweiniad y diwydiant sy’n gyfrifol am ddatblygu,
hybu a marchnata cig coch o Gymru, ac mae’n aelod o Weithgor
Masnachu a Chadwyn Gyflenwi Llywodraeth Cymru, ac yn Drysorydd
Cymdeithas Glaswelltir Prydain.
ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
17
Chief Executive’s Review
We have further
expanded our farming
customer base and
trading reach
INTRODUCTION
I am very pleased to report on Wynnstay’s record pre-tax profit and
revenue, in this my first Chief Executive Officer’s Review since taking
up the role in July 2018.
The Group performed well across all core activities, reflecting the
improved trading backdrop for both the livestock and arable sectors.
This came through in increased revenues from continuing operations,
which were 18.4% higher than the previous year at £462.66m (2017:
£390.72m). Volume growth drove £21.43m of the increase and
acquisitions contributed £28.2m. Commodity price inflation was also
a factor, adding £22.3m. Both the Group’s Divisions increased their
profit contributions, driving a 20.5% rise in underlying* pre-tax profit to
£9.60m (2017: £7.97m).
We continue to report the Group’s performance under two segments,
Agriculture Division and Specialist Agricultural Merchanting Division
(previously referred to as ‘Specialist Retail’), and a detailed review of
activities is provided below.
Feed sales set a new record and the Glasson business turned in
an exceptional performance. Both operations benefited from the
prolonged dry weather conditions in 2018, which drove unseasonal
demand for animal feed in the second half. Sales of herbage seed also
reached a new high, with the same weather factors driving demand
as farms replaced dried, worn-out pasture. The Specialist Agricultural
Merchanting Division performed above our expectations with most
product categories benefiting from improved farmer sentiment. We
have grown this Division’s footprint with the acquisition of further
depots, especially in the West Country. The addition of new farming
customers creates further growth opportunities for the Group’s wider
activities in feeds, fertiliser, and seeds, and helps to continue to build
Wynnstay’s profile and market share.
Our crop marketing business, GrainLink, performed well in a difficult
market and also expanded into a new trading area, opening an office
at Grantham, Lincolnshire.
REVIEW OF ACTIVITIES
AGRICULTURE DIVISION
The Agriculture Division’s main activities comprise the manufacture
and processing of feed, fertiliser and seeds and the marketing of other
agricultural inputs. The Group’s crop marketing services, which are
conducted through GrainLink, also form part of this Division.
Revenues from the Division rose by 19.0% over the year to £334.34m
in 2018 (2017: £280.87m). This rise was driven mainly by increased
demand across most product groups and commodity price inflation.
Operating profit increased by 28.4% to £4.29m (2017 £3.34m). This
was despite margin pressure in some areas, which we anticipate
continuing in 2019.
Both feed and arable activities performed above our expectations,
with record sales of feed, milk replacers, and herbage seeds. Grain
and fertiliser volumes were above last year’s levels, although margins
were squeezed as competitors chased market share.
We continued to introduce innovative new products and to invest in
our specialist sales teams who provide farmers with technical advice.
Improving farm productivity remains a significant area of focus for
farming enterprises and we aim to assist customers with products and
services that will help them to achieve this.
Feed Products
Feed products are manufactured at our main facilities at Llansantffraid
and Carmarthen as well as at a smaller facility at Rhosfawr. We
manufacture a broad range of ruminant and monogastric feeds,
in both loose bulk and a variety of bagged sizes. We also sell raw
materials to farmers and other feed manufacturers. The wide range
of feed that we offer, supplying dairy, beef, sheep, pig and poultry
producers, is a major strength, smoothing out sector variations. It
is complemented by our technical sales staff who are able to advise
customers on all aspects of animal nutrition.
*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 the Finance Review for an explanation on how this measure has been calculated and reasons for its use.
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Total volumes of compound and blended feed products reached a
record level, some 6.4% higher than the previous year. This reflected
strong demand, especially in the second half of the financial year when
the long, dry summer weather limited farmer-grown forage, causing
farmers to buy in additional feed.
The increase in feed demand was felt across all sectors, with an
especially strong demand for poultry feed as many egg producers
increased the size of their business. We also experienced record sales
of our calf feed and milk replacer products. In addition, our joint venture
company, Bibby Agriculture Limited, benefited from these favourable
trading conditions. The dry weather has caused a shortage of fodder
for the Winter months, and we expect this to support ongoing feed
demand.
Working with our Specialist Agricultural Merchanting depots, our feed
advisors have helped to drive sales across a wider geographical area,
and we expect to see further progress with this initiative over the new
financial year.
During 2018, we continued to invest in our Llansantffraid facility to
improve efficiencies and we will be continuing to focus on upgrading
and enhancing systems.
The outlook for feed products remains strong. Our model of supplying
feed across the classes of livestock creates an ‘internal hedge’ which
helps to smooth variations in sector demand and generate greater
consistency in performance.
Glasson Grain
The Glasson business, which is based in Glasson Dock, near
Lancaster, operates in three main areas: the supply of feed raw
materials; production of fertiliser; and manufacture of animal feed
products.
The business delivered an exceptional performance, with all activities
outperforming budget.
The fertiliser operations benefited from the acquisition of a fertiliser
blending facility in Montrose, East Scotland, in November 2017 and
the integration of the FertLink joint venture manufacturing business.
The addition of Montrose has enabled Glasson to trade with an entirely
new customer base in a new geography. Glasson is now the second
largest fertiliser blender in the UK.
Raw material commodity trading benefited from increased feed
demand as a result of the extremely dry weather conditions, and
feed manufacturing achieved record production as a demand for our
specialist, added-value feed products increased.
Arable Products
Our arable activities performed strongly during the year, although with
some variations across sub-sectors.
Overall, seed sales for the year were very good. While, the first half of
the year saw reduced activity within our seed operations due to the
late, wet Spring delaying planting, the extended dry Summer helped
to drive record herbage seed sales, as the weather encouraged farms
to replace worn-out pasture and grow forage crops to substitute
for the lack of fodder. During the year, we refocused the activities of
Woodhead Seeds, based in Selby, Yorkshire, and have brought it under
the management of our main seed operation at Astley, Shropshire.
This has resulted in lower cereal seed tonnage but a higher overall
contribution.
Fertiliser sales for the year were above budget and ahead of the
previous year although there was downward pressure on margins. The
increase was driven by the busy Spring period and the late Summer
surge, as farmers strived to grow grass and forage following months
of prolonged dry conditions. A significant increase in fertiliser prices in
the Autumn reduced forward purchasing, however, we would expect
to see this translate into higher activity in Spring 2019.
We continue to develop our in-house grain marketing business,
GrainLink, based in Shrewsbury, Shropshire, and have expanded its
presence into Lincolnshire, opening a grain trading office in Grantham.
The new office markets grains and oilseeds, and also sells fertiliser and
seed. Our plans to develop the business in this area have been taken
into consideration in our annual goodwill impairment process, details
of which are contained in note 14 of the Financial Statements. Trading
volumes at GrainLink were above the prior year and the business has
performed well in tougher trading conditions, with the late Spring and
dry Summer reducing yields and resulting in strong competition for the
UK tonnage, which put pressure on margins.
GrainLink hosted its annual Arable Event in Shropshire in June 2018.
This specialised event attracted over 1,000 arable farmers to evaluate
field plots of the latest new seed varieties and to study new innovative
and cutting-edge technology within the sector.
The dry Autumn has resulted in excellent drilling conditions across
most of the country. This bodes well for our seed and grain trading
activities in 2019.
Our warehouse expansion project at Astley in Shrewsbury has now
been completed and the new facility which takes this warehouse to
30,000 sq. ft, is expected to become operational in the coming weeks.
It gives us additional capacity for both our seed processing activities
and our depots, and will improve operational efficiencies.
SPECIALIST AGRICULTURAL MERCHANTING DIVISION
Revenue
from our Specialist Agricultural Merchanting Division
increased by 16.9% to £128.26m for the year (2017: £109.73m).
Acquisitions accounted for approximately £7.83m of this rise and
like-for-like sales were £10.7m ahead of the prior year including the
effect of inflation. Operating profit contribution from the Division rose
by 16.7% to £5.53m (2017: £4.74m).
The Division trades predominantly through a network of depots, which
supply a wide range of products specifically geared to the needs of
farmers, although rural dwellers also account for a proportion of sales.
The offering at our depots includes animal health products, bagged
feed and hardware. We also have SQPs (Suitably Qualified Persons)
who provide value-added advice on animal health products, as well as
the other products that we sell, and they help to make this operation
an attractive route to market for our supplier base. The number of
depots that we operate now stands at 59 (October 2017: 50).
As well as our Youngs Animal Feeds business, the Division also includes
sales generated through our other channels-to-market, including
specialist catalogues (for dairy, beef, sheep and poultry farmers), vans
and online. It is an important part of the Group’s wider agricultural
activities, and also assists in establishing the Group’s trading presence
in new geographic areas.
Wynnstay Depots
The acquisitions of the eight former Countrywide depots in April 2018
(one of which we have since closed), MD Lloyd in January 2018
and Mike Hawken Limited in March 2018 have further extended the
Group’s geographic trading presence, particularly in the West Country.
The integration of these acquisitions is now substantially complete and
their overall performance in the period was in line with our budget. We
expect the Countrywide depots to make a positive contribution to the
Division’s profitability in the new financial year to 31 October 2019.
Like-for-like sales across our depots increased by 9.8%, enabling us
to report record sales. In particular feed, hardware, milk replacers and
animal health products sales were very strong, reflecting improved
farmers and weather-related purchases,
trading conditions
particularly of bagged feed in the second half of the year.
for
Our depots continued to benefit from sales driven by the increasing
popularity of our specialist catalogues for dairy, beef and sheep
farmers. These have now been complemented by the recent launch
of a poultry catalogue, which will appeal to the growing number of
egg producers in our trading area. An online option is available for
our customers but currently the vast majority choose other purchasing
routes, reflecting traditional patterns of buying.
ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
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Chief Executive’s Review continued
During the year we relocated our Ruthin depot, which has resulted in
increased trade. We will continue to invest across our depot network
over 2019, and to introduce carefully-chosen new products. We also
remain focused on staff training so that our depot-based advisors
provide farmers with value-added services.
Youngs Animal Feeds
Youngs Animal Feeds manufactures and markets a range of equine
products that are sold through specialist outlets across Wales and
the Midlands. Over the year, we reorganised the business transferring
some feed manufacturing to Glasson. Our Molichop-branded feed
range continues to be manufactured at our purpose-built factory at
Standon and remains a market leading product.
JOINT VENTURES AND ASSOCIATES
In May 2018, the Group transferred the manufacturing operations of
a joint venture company, FertLink Limited, into Glasson Grain, and,
in June, we sold our share of the business in Wynnstay Fuels, an
associate company. As a result, Wynnstay now has three joint venture
businesses, Bibby Agriculture, Wyro and Total Angling, and one
associate business, Celtic Pride.
The total contribution from the joint venture and associate businesses
was higher than the previous year. This was mainly because of an
exceptional performance by Bibby Agriculture.
STAFF
I am very proud of our dedicated, professional and talented
employees, and would like to thank them all for their continued hard
work and commitment. Their skill and experience helps to ensure that
Wynnstay remains one of the leading suppliers of agricultural products
and advice to the agricultural industry.
OUTLOOK
The UK agricultural trading environment has improved significantly.
Looking to the year ahead, trading conditions for the arable sector
appear broadly favourable, helped by strong forward wheat prices
although fertiliser and fuel costs are higher. In the livestock sector,
milk prices are stable although there has been a reduction in forecast
return over the short term, and red meat prices are firm. However, this
sector will be affected by higher winter feeding costs as a result of the
prolonged dry Summer, which has caused a shortage in farm-grown
winter forage.
The UK’s withdrawal from the European Union creates uncertainties
but the Government has confirmed that overall funding for UK farm
support will be protected until 2022. The proposed Agriculture Bill
gives us a clear indication that the Government will seek to support
efficient production as well as measures to enhance the environment.
Although the outcome and impact of Brexit is unknown, Wynnstay
continues to have contingency plans with suppliers and believes that
the requirement for innovation, productivity and efficiency will create
long term opportunities.
Our focus remains on continuing to build market share, both organically
and through acquisitions, and also driving further efficiencies within
the Group. We believe that our broad range of products and technical
advice will help to ensure that we remain a valuable route to market for
our suppliers as we continue to position Wynnstay as the ‘supplier of
choice’ for customers.
Gareth Davies
Chief Executive
22 January 2019
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www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018
Business Development
enhancing the
performance of our
transport fleet
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Investment in production
efficiency
The installation of additional 150 tonne storage bins for poultry
mash at our Llansantffraid Mill was completed in September
2018 as part of our continued investment in our existing
processing facilities. The investment has enabled Wynnstay
to improve the service offered to our poultry customers whilst
enhancing the performance of our transport fleet, leading to
an increased delivered tonnage.
ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
21
Finance Review
The significant
improvement
in KPIs is a mark
of success
GROUP STRUCTURE
Further simplification of the Group’s operational structure has taken
place during the year, with the integration of the Woodheads Seeds
activities into the Wynnstay (Agricultural Supplies) Limited business
from February 2018. In May 2018, Glasson Grain Limited effectively
acquired all the FertLink joint venture activities, and in June 2018, our
associate entity, Wynnstay Fuels Limited sold its trading business to
a third party. Woodheads Seeds Limited will become a non-trading
subsidiary in 2019, and eventually dormant, while FertLink Limited and
Wynnstay Fuels Limited will seek solvent liquidation of their respective
assets.
The effective legal structure of the Group is therefore now, a holding
company, Wynnstay Group Plc, which has investments in four wholly
owned trading subsidiaries, namely;
-
-
-
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Wynnstay (Agricultural Supplies) Limited, an agricultural
merchant.
Glasson Grain Limited, a feed and fertiliser merchant.
GrainLink Limited, a grain merchant.
Youngs Animal Feeds Limited, an equine and pet products
distributor.
Additionally, Wynnstay Group Plc holds investments in the principal
joint ventures and associate companies outlined in note 19 in the
accounts, and certain other property and investment assets.
For reporting purposes the Group’s operations are classified into
two main divisional segments, Agriculture, encompassing the
manufacturing and supply of a comprehensive range of agricultural
inputs delivered to customers, and Specialist Agricultural Merchanting,
covering the supply of products, primarily to farmers, linked through
the provision of expert advice of their use. An additional reporting
segment called “Others” is used for peripheral activities not readily
attributable to either of the main segments.
TRADING RESULTS
The financial performance of the business during the year has reflected
the recovery in the underlying trading environment for the Group’s
predominant farmer customers, where generally farm gate produce
prices more realistically reflected the costs of production. A summary
of the trading conditions experienced by the business over the last
financial year is provided in the Chief Executive’s Review on pages
18-20.
Group revenue in the period increased substantially to £462.66m
(2017: £390.72m from continuing activities), with the growth having
three components. Direct contributions from new acquisitions during
the year added £28.21m to sales, while commodity inflation was
estimated to contribute a further £22.30m to the overall revenue result.
However, the most pleasing element was the £21.43m contribution
identified as being the result of increased comparative additional bulk
product volumes, and growth in merchanting activity through the
Group’s chain of depots.
The segmental revenue analysis showed a 19% growth to £334.34m
(2017: £280.87m) in our Agriculture division, and a near 17% growth to
£128.26m (2017: £109.73m) in our Specialist Agricultural Merchanting
division, with both segments experiencing growth in all the component
elements described above.
On a continuing operations basis, Group adjusted operating profit was
£9.43m (2017: £7.87m), and profit before taxation on an IFRS basis
was £9.53m (2017: £7.66m). On the Board’s preferred alternative
performance measure referred to as Underlying pre-tax profit, which
includes the gross share of results from joint ventures and associates,
but excludes share-based payments and non-recurring items, the
Group achieved £9.60m (2017: £7.97m). A reconciliation with the
reported income statement and this measure, together with the
reasons for its use is given below:
Profit before tax from continuing operations
Share of tax incurred by joint ventures & associates
Share-based payments
Non-recurring items
Underlying Pre-tax profit
2018
£000
9,529
82
55
(69)
9,597
2017
£000
7,664
70
142
95
7,971
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The Board uses this alternative performance measure 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 the
following adjustments to the IFRS results for the following reasons:
-
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The add back of tax incurred by joint ventures and associates. The Board believes the incorporation of the gross result of these
entities provides a fuller understanding of their combined contribution to the Group performance.
The add back of 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.
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. During 2018,
these non-recurring items included the profit made on the disposal of a freehold property. Full details of this net figure are provided in
note 5 of the accounts.
Inclusive of contributions from joint ventures and associate businesses, our Agriculture division generated an operating profit of £4.29m (2017:
£3.34m), an increase of 28%, while our Specialist Merchanting division produced £5.53m (2017: £4.74m), an increase of nearly 17%. Other
activities generated a similar loss to last year at £0.09m (2017: £0.10m).
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TAXATION
The Group’s tax charge on continuing operations, including joint ventures and associates, of £1.90m (2017: £1.43m) represents 19.8% (2017:
18.5%) of the Group pre-tax profit from continuing operations of £9.61m (2017: £7.73m). Deferred tax provisions have been calculated at the
target rate of 17% which will become effective from April 2020. A reconciliation relating to the Group’s tax charge and Group pre-tax profit is
given below:
Group’s tax charge
Taxation
Share of tax incurred by associate and joint venture
Group pre-tax profit from continuing operations
Profit before taxation from continuing operations
Share of tax incurred by associates and joint ventures
A reconciliation to reported profit/(loss) for the year is as follows:
Group pre-tax profit from continuing operations
(Loss)/profit for the year from discontinued operations
Group pre-tax profit from continuing operations
Group’s tax charge
Profit/(loss) for the year
2018
£000
1,821
82
1,903
9,529
82
9,611
2018
£000
9,611
-
9,611
(1,903)
7,708
2017
£000
1,359
70
1,429
7,664
70
7,734
2017
£000
7,734
(6,586)
1,148
(1,429)
(281)
In accordance with Schedule 19 of the Finance Act 2016, the Group
has published a Tax Strategy document on its website, which confirms
that the organisation is committed to full compliance with all statutory
obligations and adopts a policy of full disclosure to HMRC. The Group
refrains from using offshore tax jurisdictions and will not use specifically
constructed tax avoidance schemes or arrangements.
EARNINGS PER SHARE AND DIVIDEND
Basic earnings per share from continuing operations were 39.11p
(2017: 32.29p), based on a weighted average number of shares
in issue during the year of 19.708m (2017: 19.529m). The Board
proposes to recommend the payment of a final dividend of 8.95p
per share to be paid on the 30 April 2019, which when added to the
interim dividend of 4.41p per share paid on the 31 October 2018,
makes a total of 13.36p for the year (2017: 12.60p), an increase of
6.0%. The total dividend is expected to be covered 2.92 times (2017:
2.56 times) by earnings from continuing operations. The total dividend
represents the fifteenth consecutive year of payment growth since
the business was floated on the Alternative Investment Market of the
London Stock Exchange in 2004. This current dividend cover remains
within the range which can support the continuing progressive policy.
Current Company distributable reserves amount to £15.83m, (2017:
£14.19m) and are adequate to cover at least five years of current
dividend payment levels. Adequate anticipated cash resources and
future generation assumptions also support the Board’s view that
the current policy is sustainable. A process of subsidiary dividend
payments to the parent Company is now established to ensure
adequate liquidity and capital are available to support the policy. The
Board will continue to monitor dividend cover ratios when assessing
future payment recommendations.
SHARE CAPITAL
During the year a total of 106,418 (2017: 170,185) new ordinary
shares were issued for a total equivalent cash amount of £0.439m
(2017: £0.723m). A total of 18,816 (2017: 110,896) shares were
issued in relation to the exercise of employee share options for a total
consideration of £0.067m (2017: £0.378m), and the remaining 87,602
(2017: 59,289) shares were issued to existing shareholders exercising
their right to receive dividends in the form of new shares, with an
equivalent cash value of £0.372m (2017: £0.345m).
ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
23
Finance Review continued
BALANCE SHEET
Group net assets at the year end amounted to £91.07m (2017: £85.39m). Based on the weighted average number of shares in issue during the
year of 19.708m, (2017: 19.529m) this represented a net asset value per share of £4.62 (2017: £4.37). During the financial year the share price
traded in a range between a high of £5.17 in August 2018 and a low of £4.01 in March and April 2018. Based on these balance sheet values,
Return on Net Assets from continuing operations for the year was 10.6% (2017: 9.4%).
Capital investment in fixed assets amounted to £5.11m (2017: £2.74m) which was significantly higher than the previous year due to the carry-
over of a number of projects from 2017, as we reported last year. Further expansion expenditure is anticipated during the new financial year, as
the Group continues to invest in increased capacity across the business. Additionally, the Group invested £1.76m on five acquisitions during
the period, which included a total of £1.53m of fixed assets, Some £0.74m of this acquisition expenditure was on a deferred basis, with some
elements contingent on the future trading performance of the acquired businesses.
Net Working Capital, which is defined as, the net of inventory, trade and other receivables and trade and other payables, showed an overall 20%
increase as at the year end, standing at £48.5m (2017: £40.3m), which was primarily caused by the considerable increase in overall revenues,
which were up by 18.4%.
CASHFLOW, NET DEBT AND BANKING FACILITIES
The business’s trading activity remains strongly cash generative, with this being measured by reference to a key performance indicator called
EBITDA (defined below). Essentially, this measures operating profit in broad cash generative terms, and a reconciliation of this measure to
reported IFRS profit before tax is provided below:
IFRS reported pre-tax profit from continuing operations
Tax on joint venture and associate income
Profit on disposal of fixed assets - regular
Profit on disposal of fixed assets - property
Interest
Depreciation
Amortisation and share-based payments
Non-cash non-recurring costs
EBITDA
2018
£000
9,529
82
(51)
(277)
191
3,157
71
138
12,840
2017
£000
7,664
70
(73)
-
153
2,657
156
60
10,687
During the year a substantial element of this generated cash has been utilised in increased working capital requirements to fund the considerable
expansion in activities and generally higher commodity prices. Together with the considerable investment explained above, these activities have
resulted in a net debt position at the year end of £0.98m, compared with net cash in 2017 of £4.51m.
A reconciliation of EDITDA shown above to the net debt position at the year end is provided in the table below, which is shown for additional
information only and is prepared under the indirect method of item allocation, which is not in accordance with IAS 7:
EBITDA before non-recurring items
Loans repaid by/(made to) joint ventures
Adjustment for pre-tax associates and joint ventures
Working capital movements – balance sheet
Working capital movements – re-analysed
Cash generated from operations – as reported
Working capital movements – re-analysed
Discontinued activity
Net interest
Tax paid
Capital expenditure
Capital disposal proceeds
Acquisitions
Other acquired liabilities
Other proceeds
Dividends
Issue of new equity
Net increase /(decrease) in cash
Opening net cash
Closing net (debt)/cash
2018
£000
12,840
32
(376)
(8,221)
(1,444)
2,831
1,444
-
(191)
(1,674)
(5,112)
548
(1,760)
(262)
778
(2,524)
439
(5,483)
4,506
(977)
2017
£000
10,687
(58)
(267)
(4,309)
-
6,053
-
(418)
(153)
(1,496)
(2,736)
177
-
-
457
(2,384)
723
223
4,283
4,506
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The year end does represent a traditionally low point in the Group’s
cash utilisation cycle, and therefore the Board continues to prioritise
the maintenance of adequate debt facilities to accommodate the
usual spring peak of this seasonal fluctuation, together with any
unexpected commodity price volatility. The Group currently has a
combination of committed and short term bank facilities of £18.8m
in place (2017: £17.0m), together with asset finance lines of £6.5m,
which are expected to satisfy forecast peak requirements for 2019.
However, the Board will continue to keep this position under review,
particularly if there is any reversal to the current weaknesses being
shown in commodity prices, which are currently expected to show a
reversal of the inflationary effects experienced during the year under
review.
KEY PERFORMANCE INDICATORS
The performance of the business is regularly monitored against
financial key performance indicators (KPI’s), defined as follows:
Revenue:
EBITDA:
Earnings per share:
Underlying pre-tax
profit:
Return on net
assets:
Net asset per
share:
The invoiced value of sales from the Group’s
activities, measured at a fair value net of all
rebates and excluding value added tax.
£462.66m (2017: £390.72m from continuing
activities).
Earnings before interest, tax, depreciation and
amortisation, and excluding non-recurring
costs, and share-based payment expense.
£12.84m (2017: £10.69m).
Profit for the year after taxation divided by the
weighted average number of shares in issue
during the year excluding any shares held
by the Group’s Employee Share Ownership
Trust. 39.11p (2017: 32.29p).
Underlying pre-tax profit includes the Group’s
share of pre-tax profit from joint ventures and
associate investments but excludes non-
recurring costs and share-based payment
expense. £9.60m (2017: £7.97m).
Underlying pre-tax profit, with
intangible
amortisation added back, divided by the
balance sheet net asset value. 10.6% (2017:
9.4%).
The balance sheet net asset value, divided
by the weighted average number of shares
in issue during the year, excluding any
shares held by the Group’s Employee Share
Ownership Trust. £4.62 (2017: £4.37).
The Board considers the significant improvement in all these KPI’s
for the year under review, as a mark of considerable success for the
business.
Paul Roberts
Finance Director
22 January 2019
ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
25
Business Developments
Business Development
Specialist Arable Event
Established in 2013, the Arable Event is held annually at Weston
under Lizard, Shropshire. It has become the key practical
demonstration for arable farmers in the west of the UK.
In June 2018, the event attracted approximately 1,000 arable
farmers who used the day to receive updates on new technology
and the latest winter cereal varieties. The Event features key note
speakers, a machinery demonstration area and trade stands
from a variety of agricultural businesses.
the key practical
demonstration for
arable farmers in
the west of the UK
this new facility
will improve our
service to our valued
customer base
Increasing efficiencies of
distribution - new warehouse
facilities at Astley
A purpose built 30,000 sq. ft warehouse facility is being
constructed at Astley (Shrewsbury) and is due to be
completed by the end of January 2019. This warehouse will
enable us to improve our service to our valued customer
base. The warehouse will also be used for storing processed
seed which will enable us to grow our seed business.
26
www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018
Business Developments
Business Development
Increasing geographical reach
During the year, Wynnstay expanded the geographical reach
of the company by acquiring a fertiliser blending facility from
Origin UK Operations Limited located at Montrose, Scotland,
opening a grain trading office at Grantham, Lincolnshire and
through the purchase of a number of former Countrywide
depots and Mike Hawken Limited in Cornwall.
As part of our growth strategy, these acquisitions have
enabled Wynnstay to increase our customer base and sales
revenue, strengthening our position as a preferred supplier
and further enhancing the Wynnstay brand.
strengthening our
position as a
preferred supplier
Trading activity
Montrose
Grantham
Cornwall
ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
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Risk Management Statement
For the year ended 31 October 2018
The Group adopts a risk approach appropriate to the business activities
being conducted, and the Board retain responsibility for regularly
reviewing risk management strategies. Risks and uncertainties for
the business are classified into two main categories, Financial and
Operational, and the Board monitor such risks having developed
policies for managing the uncertainties they bring. The monitored risk
categories and the main policies for control are as follows:
FINANCIAL RISK MANAGEMENT:
The Group policies for managing treasury risks are developed and
approved by the Board and are designed to minimise exposure to
market volatility they include:
Interest Rate – While currently most of the Group’s term debt is floating
base rate linked, the Board constantly reviews its option to fix the rates
attached to this debt through the use of interest rate swap derivatives.
Fixed rate term finance is generally used for the acquisition of vehicles.
Foreign Currency – The main currency related risk to the Group
arises from the forward purchasing of imported raw materials for
our Glasson business. This risk is mainly managed by entering into
currency purchase agreements at the time the underlying transaction
is completed. The adjusted fair value of these contracts is not material.
As at the year end the principal amounts relating to forward purchased
currency amounted to £11,849,003 (2017: £8,529,816).
Commodity Price - While the Group does not engage in the taking
of speculative commodity positions, it does have to make significant
forward purchases of certain raw materials, particularly for use in its
animal feed and fertiliser manufacturing activities. Position reporting
systems are in place, together with appropriate position limits, to
ensure the Board is appraised of the exposure level on a regular
basis. Where available, hedging tools such as soft commodity futures
contracts on the London LIFFE market, are used to manage price
decisions.
Credit – A significant proportion of the Group’s trade is conducted
on credit terms and as such a risk of non payment is always present.
Detailed systems of credit approval before initial supply, the operation
of credit limits and an active credit control policy act to minimise this
risk, and historically the incidence of bad debts is low. The grain trading
business has exposed the Group to certain substantial customer
credit balances, and to assist in mitigating this perceived risk, a credit
insurance policy has been purchased to provide partial cover against
default by certain customers.
Finance Availability – Fluctuating commodity prices can adversely
impact working capital levels, and the Group therefore has to maintain
adequate financial resources to accommodate unexpected, but
foreseeable trading patterns and conditions. The Group has historically
operated with banking facilities that provide healthy headroom above
the anticipated maximum requirement as projected in working capital
cycle forecasts. This policy continues, and debt facilities are in place
with HSBC Bank Plc which includes a significant element of committed
facilities through to 2020. Fully amortising term debts extend through
to 2021.
Internal Controls – As the Group operates across a number of different
markets in both its Agriculture and Specialist Agricultural Merchanting
divisions, strong internal controls are required to ensure the business
is not exposed to financial irregularities or losses that are not readily
identifiable. Such controls include policies for the proper authorisation
of the procurement of all products and services, and the sanctioning
of expense expenditure and employment costs. These policies are
principally controlled by the Management Boards of the operating
subsidiaries of the Group, who meet on a regular routine basis. The
Group Chief Executive and Finance Director attend all these meetings
and undertake business and financial reviews of subsidiary activity
with particular attention paid to the monitoring of actual performance
against budget.
OPERATIONAL RISK MANAGEMENT:
Trading concerns are regularly reviewed in routine Management Board
meetings of the operating subsidiaries of the Group, with conclusions
reported to the Board. Existing identified risks include:
Customer Loss and Competition – There is a constant risk of customer
loss from increasing competition in the agricultural sector as the
industry continues to consolidate. The Group continues to counter this
risk by pursuing a sensible growth strategy to increase its market share
primarily through geographic expansion and acquisitions. The Group
specifically seeks to maintain a broad spread of activities across the
main agricultural input areas to minimise threats affecting any particular
farming enterprise. Significant investment continues in the Company’s
sales channels, both in terms of the traditional direct teams and new
trading desk facilities.
Brexit – At the time of approving this report, significant uncertainty
still exists over the nature and consequences of the UK exit from
the EU. The Group identified that risks associated with this decision
fell into two distinct categories; those associated with the form of
any exit agreement and subsequent trade deal, and therefore the
general economic impact on trade and tariffs, and separately, risks
to the Group’s core farmer customer base because of the historic
importance of the Common Agricultural Policy (CAP) to their incomes.
The Group anticipates that a “no deal” scenario with regard to the
exit agreement, has the potential to cause short term disruption to
supply chains for the business, with the greatest concerns relating to
imported raw materials. Expected congestion and customs delays
at ports, under this scenario, would likely impact manufacturing
operations in the short term, particularly as suppliers have been unable
to substantially increase storage capacities. Mitigation plans have
included having contracts available at as many source port locations
as possible and ensuring manufacturing formulation substitutions are
readily available, particularly with domestically produced ingredients.
Internal training arrangements have been established to support any
longer term requirement for increased customs clearance processes,
if products currently sourced from the EU become subject to full
checks. Some relief to the agricultural industry specific uncertainty on
financial support, was provided by the UK and devolved governments
announcing their respective Agriculture Bills. Generally current levels
of funding for farmers after an EU exit has been guaranteed through to
2022, followed by transitional arrangements to 2027. Forward financial
support will then be related to supporting economic resilience through
investment to improve competitiveness, and by a new income stream
to deliver public goods from land, such as environmental protection.
The variation in changes to the incomes of certain categories of
customers as a result of restructured support payments could impact
the performance of some product group income streams for the
business. The Board will continue to monitor developments with a
view to formulating appropriate commercial responses as required.
Sterling Appreciation - Following the Brexit referendum decision in
June 2016, the value of Sterling has remained relatively weak. While
this has an adverse effect on some input costs such as fuel, it has
generally benefited the value of many farm products, particularly grain,
where worldwide prices tend to be set in US dollar terms. Additionally,
a lower exchange rate has also improved the value of EU support
payments to farmers, as these are calculated at fixed Euro rates
across the community. When translated into Sterling, as the payments
are received in the UK, this has resulted in higher level of income than
in previous years. Any marked appreciation against these important
currencies is likely to be detrimental to the overall income of the
Group’s farmer customer base, and therefore could adversely impact
demand for the Company’s products.
World Commodity Prices – During 2015 and 2016, the value of grain
and dairy commodities was depressed on a worldwide basis. This
was a result of cyclical over production which coincided with geo-
political issues such as the Russian ban on the importation of Western
food products and the reduction in Chinese demand, which followed
28
www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018 Reputation – The Group’s trading philosophy is to seek to be the
“Supplier of Choice” to its customers. To achieve this, a reputation
for quality products, service and value for money must be maintained.
Through a comprehensive employee Information and Consultation
policy, all members of staff and local management are tasked with
enhancing the Group’s reputation in the eyes of customers and all
other stakeholders of the business. The Group’s corporate plan is
communicated to management at various levels within the business to
facilitate a strong understanding of the ethos and culture necessary for
continued success. The Board also recognise that an increasing threat
to corporate reputations is developing around the risks associated
with the protection of personal data. Ahead of the introduction of the
new GDPR regulations in 2018, procedural reviews were carried out
and resources strengthened in areas such as IT controls. However,
it is recognised that all organisations could be subject to malicious
activities such as cyber attacks and other forms of data theft, and
while appropriate economic defences have been implemented, there
remains the possibility of data breaches. The Board have therefore
implemented a Data Protection policy which seeks to limit the
collection and use of personal data to an absolute minimum and avoid
the storage of potentially sensitive data at all.
Fraud – Difficult general economic circumstances, evolving trading
channels and new methods of communication with customers and
suppliers may increase the risk of fraud being perpetrated on the
Group. The Board has recognised this increased risk, and continually
reviews internal systems and controls, addressing areas of identified
weaknesses including any matters raised as part of the Group audit
process.
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Finance Director
22 January 2019
a period of economic uncertainty in that critically important import
market. The effect of this global price weakness was immediately felt
in the UK, where farmers responded by reducing costs and slashing
production. The resultant fall in demand for many product categories
had a detrimental impact on the Group’s activities and took some time
to recover as confidence only slowly returned as prices eventually
improved. The Board therefore acknowledges that the Group’s
performance can sometimes be affected by circumstances beyond its
control but acts to minimise such risks through its policy of maintaining
a diverse product offering, of appeal to a wide cross section of farming
enterprises, so that a severe issue in one sector does not impact the
entire Group.
Manufacturing Productivity – Much of the Group’s feed business
is conducted on a customer “made to order” basis. This requires
sophisticated order processing, manufacturing and delivery
systems, as low lead times can provide a competitive advantage.
The breakdown of any of these systems, through mechanical fault,
weather and traffic disruption, or computer malfunctions and errors
can create the risk of order fulfilment failure. The Group protects
against this through the operation of multiple supply points, with third
party manufacturing arrangements in place, and the back up of all
IT systems supported with a disaster recovery plan. The increasing
use of Customer Relationship Management (CRM) systems allow for
higher levels of pre-emptive order processing, thereby encouraging
customer retention. Efficient manufacturing and quality control
compliance regimes, independently audited from time to time, also
contribute to minimising the risks of such productivity failures.
Environmental – In accordance with the Group’s corporate social
responsibility commitments, all activities are planned so as to limit
environmental risks and adverse impacts, but a number of larger
operating sites require a specific Environment Agency regulated permit
to carry out certain activities. The continued efficient conduct of such
activities on those sites is therefore dependent on compliance, to the
regulator’s satisfaction, with the specific terms of the permits which
have been issued. Non-compliance with permit terms could result
in the prohibition of regulated activities at those locations, thereby
adversely affecting the Group’s ability to conduct business connected
to those activities. To effectively manage these situations and minimise
risks of non-compliance the Board oversees the operations of an
Environment & Regulatory Compliance Management Committee,
which consists of a number of senior managers within the Group who
have specific experience and responsibilities for the activities carried
out on the regulated sites.
Licenced Activities – The Business requires a considerable number of
governmental and other regulatory authority approvals and licences
to conduct many important activities within the Group’s operations.
The loss for whatever reason of any such approval or licence could
have a detrimental impact on part or all of the performance of the
Business. Such examples might include commercial vehicle operators
and consumer credit licences issued by national regulators, explosive
and other hazardous goods licences issued by local authorities, and
industry regulated registrations required to legally supply certain
product categories. The Group manages these obligations through
a process of having a named individual with specific responsibility for
each type of approval, who can provide regular updates on issues
connected with that obligation to the appropriate Management Board
Meeting.
Supply Chain Efficiency – The Group’s considerable inventories both
in the Specialist Agricultural Merchanting businesses and as raw
materials for the manufacturing activities are vital to the success of
the organisation, and disruption to this supply would damage revenue
streams. To minimise this risk, the Group operates partnership
relationships with as many suppliers as possible which endeavour to
ensure that optimum stock levels are maintained in Group warehouses,
in wholesaler locations or within committed supplier facilities. A project
team works to optimise stock turn ratios while ensuring adequate
availability through challenging seasonal cycles.
29
ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Board and Advisors
Directors
J J McCarthy
B P Roberts
K R Greetham (Retired 11 July 2018)
G W Davies (Appointed 8 May 2018)
D A T Evans
P M Kirkham
H J Richards
S J Ellwood
Company Secretary
B P Roberts
Company Number
2704051
Registered Office
Eagle House
Llansantffraid Ym Mechain
Powys
SY22 6AQ
Auditor
BDO LLP
3 Hardman Street
Manchester
M3 3AT
Principal Bankers
HSBC Plc
Wales Corporate Banking Centre
15 Lammas Street
Carmarthen
SA31 3AQ
Nominated Advisor and Stockbroker
Shore Capital Limited
Bond Street House
11 Clifford Street
London
W1S 4JU
Registrars
Neville Registrars Limited
Neville House
18 Laurel Lane
Halesowen
West Midlands
B63 3DA
Solicitors
Harrisons Solicitors LLP
11 Berriew Street
Welshpool
Powys
SY21 7SL
DWF LLP
5 St Paul’s Square
Liverpool
L3 9AE
30
www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018
Corporate Governance
Board of Directors
Directors’ Report
Corporate Governance Statement
Corporate Social Responsibility
Directors’ Remuneration Report
Independent Auditor’s Report
32-33
36-37
38-40
41
42-47
48-49
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31
02
Board of Directors
David Andrew Thomas Evans
Retail Director
Age 50
Andrew joined the Board in 2008 and
has executive responsibility for the
activities of Wynnstay (Agricultural
Supplies) Limited. He also owns a
dairy farm in Mid Wales.
Stephen Ellwood
Non-Executive Director
Age 61
Howell John Richards
Non-Executive Director
Age 54
Howell joined the Board in July 2014.
He has significant experience within
the agricultural supply industry and
has established a large dairy enterprise
business in South Wales. As a member of
a number of well recognised committees,
Howell promotes the UK dairy industry
and supports initiatives for young entrants
into UK farming.
Steve joined the Board in January 2016. He has a wealth
of experience within the UK agriculture and agri-food
sectors after spending 10 years as Head of Agriculture
at HSBC, following on as Head of Food and Agriculture
at Smith & Williamson for four years. Steve is now an
active Non-Executive Director for a number of agri-food
businesses across the UK.
Gareth Wynn Davies
Chief Executive
Age 56
Gareth joined the Board in May 2018
when he became Chief Executive.
He joined Wynnstay in 1999 as
Sales Manager for South Wales, and
became Head of Agriculture in 2008.
He is also a Director of Hybu Cig
Cymru – Meat Promotion Wales and
a member of the Welsh Government
Trade and Supply Chain Working
Group.
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www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018
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James John McCarthy
Chairman
Age 63
Jim joined the Board in July 2011 and was appointed
Chairman of the Group in November 2013. He has a
wealth of corporate and management experience from a
background in the retailing industry which spans over 40
years. He is also Non-Executive Chairman at UP Global
Sourcing Holdings Plc.
Bryan Paul Roberts
Finance Director
Age 56
Paul joined the Board in 1997 when he also
became Company Secretary. He originally joined
the Company in 1987 having previously worked
in the animal feed industry. He is a Fellow of the
Chartered Institute of Management Accountants.
Philip Michael Kirkham
Vice-Chairman / Senior Independent
Non-Executive Director
Age 61
Philip joined the Board in April 2013. He runs a
mixed farming business in the West Midlands
and also has significant experience in the UK
livestock sector. He is also Non-Executive
Chairman of Meadow Quality Limited, a multi-
species livestock marketing business.
ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
33
Wynnstay are leading
innovation in the
way we advise our
customers
Business Development
Technical sales advice
The Nuffield Farming Scholarship Trust annually awards 20
research opportunities in farming, food, horticulture or rural
industries. Wynnstay’s Head of Dairy Technical Services (Iwan
Vaughan) was the first Wynnstay employee to be awarded a
Nuffield scholarship.
is called
research paper
‘Sustainable Protein
Iwan’s
Feeding for the UK Dairy Industry’. The key objective was
to document and evaluate how to formulate balanced, low
protein diets which increase cow health and fertility as well
as increasing environmental sustainability by reducing the
incidence of ammonia emissions. Iwan visited 14 countries
attending research institutions, meeting dairy nutritionists and
consultants.
Iwan is quoted:
‘Sustainability and efficiency are key to improved profitability
and the public conception of the food that UK agriculture
produces - Wynnstay are leading innovation in the way that
we advise our customers. Through the Nuffield Scholarship
I have gained new ideas that have enabled Wynnstay to
have a competitive edge, ensuring we have a more efficient
offering to our current and potential customers’
34
www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018
Business Development
Glasson Grain - manufacturing
and marketing of bespoke
blended and straight fertiliser
Glasson specialises in the manufacture and marketing of
bespoke blended and straight fertiliser products, including
imported ammonium nitrate and urea.
Glasson is now the second largest fertiliser blending
company in the UK, with three manufacturing sites based
at Winmarleigh (Lancashire) Goole (Yorkshire) and Montrose
(Scotland). The business services customers from Scotland
to Mid-Wales.
Second largest
fertiliser blending
company in the UK
ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
35
Directors’ Report
For the year ended 31 October 2018
The Directors present their report together with
the audited financial statements of the Parent
Company (“the Company”) and the Group for
the year ended 31 October 2018.
DIRECTORS AND THEIR INTERESTS
The Directors of the Company who held office during the year and their interests in the share capital
of the Company at the year end were as follows:
Wynnstay Group Plc (“the Company”) is a public
limited company incorporated and domiciled in
the United Kingdom under the Companies Act
2006.
The address of the Company’s registered
office is Wynnstay Group Plc, Eagle House,
Llansantffraid-Ym-Mechain, Powys, SY22 6AQ.
The Company has its primary and only listing on
the Alternative Investment Market of the London
Stock Exchange.
The Group financial statements were authorised
for issue by the Board of Directors on 22
January 2019.
Further information on the activities of the
business and the Group strategy are presented
in the Chairman’s Statement, Chief Executives’
Review, Strategic Report and Corporate
Governance Report included within the Group’s
full published Annual Report.
Including Financial risk management objectives
and policies on page 28 within the Risk
future
Management Statement and
developments in the business of the company
on page 15 within the Chairman’s Statement.
likely
SHARE CAPITAL
The movement in the share capital during the
period is detailed in note 28 to the financial
statements.
RESULTS, DIVIDENDS AND
TRANSFERS TO RESERVES
Reported under
the Group profit
IFRS
before taxation from continuing operations
After
is £9,529,000
a
(2017:
£1,359,000), and discontinued activities of £nil
(2017: loss £6,586,000) the Group profit for the
year is £7,708,000 (2017: loss £281,000).
(2017: £7,664,000).
taxation charge of £1,821,000
The Directors recommend a final ordinary
dividend of 8.95p per ordinary 25p share net
(2017: 8.40p per ordinary 25p share net), to be
paid on 30 April 2019 to shareholders on the
register at the close of business on 29 March
2019.
The share price will be marked ex dividend with
effect from the 29 March 2019. In accordance
with the rules of the Company’s Scrip Dividend
Scheme, eligible shareholders will be entitled to
receive their dividend in the form of additional
shares. New mandate forms for this scheme
should be signed and lodged with the Company
Secretary 14 days before the dividend payment
date of 30 April 2019.
LAND AND BUILDINGS
In the opinion of the Directors, the current open
market value of the Group’s interest in land and
buildings exceeds the book value at 31 October
2018 (refer to note 16) by approximately
£4,200,000 (2017: £3,760,000).
36
25p Ordinary Shares
SAYE Options
Discretionary Options
2018
8,992
2017
n/a
2018
7,986
2017
n/a
2018
8,000
G W Davies
(appointed 8
May 2018)
S.J. Ellwood
-
-
-
-
D A T Evans
21,165
20,544
K R Greetham
(retired 11 July
2018)
n/a
45,203
P M Kirkham
1,030
1,000
J J McCarthy
5,000
5,000
H J Richards
-
-
3,243
n/a
3,243
6,425
-
-
-
-
-
-
2017
n/a
-
8,000
-
-
n/a
8,000
-
-
-
-
-
-
B P Roberts
94,498
101,498
4,306
2,806
8,000
8,000
In addition to the above shareholdings, Mr B P Roberts and Mr G W Davies are trustees of the
Company’s Employee Share Ownership Plan trust, which at the year end held 6,834 shares (2017:
8,724 shares). Accordingly, these directors were deemed to hold an additional non-beneficial
holding in such shares.
No director at the year end held any interest in any subsidiary or associate company. Biographical
details of the Directors are set out before the Director’s Report.
DIRECTORS’ APPOINTMENTS AND RETIREMENTS
Under Article 91, Mr P M Kirkham and D A T Evans retire from the Board by rotation at the
forthcoming Annual General Meeting and being eligible, offer themselves for re election.
Under Article 86, Mr G W Davies offers himself for re-appointment.
DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE
During the year the Company purchased and maintained liability insurance for its Directors and
Officers which remained in force at the date of this report.
SUBSTANTIAL SHAREHOLDINGS
At 31 October 2018, the following shareholders held 3% or more of the issued share capital of the
Company:
Registered Shareholder
Beneficial Holder
- Ferlim Nominees Limited
11.1%
- Lion Nominees Limited
- Luna Nominees Limited
- Goldman Sachs Securities Limited
- Chase Nominees Limited
6.7%
4.9%
3.5%
3.3%
Discretionary managed funds of Investec
Wealth & Investment Limited
Discretionary managed funds of Close
Asset Management Limited
Discretionary managed funds of Brown
Shipley Private Bank
Polar Capital Partners
Schroder Investment Management Limited
The directors are not aware that any other person, Company or Group of Companies held 3% or
more of the issued share capital of the Company.
www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018 EMPLOYEES
The Group has procedures for keeping its employees informed about
the progress of the business. The Group continues to encourage
employee motivation by operating a Savings Related Share Option
Scheme open to all employees. The Group provides training and
support for all employees where appropriate and gives a full and
fair consideration to disabled applicants in respect of duties which
may be effectively performed by a disabled person. Where existing
employees become disabled, the Group will seek to continue
employing them, bearing in mind their disability and provided suitable
duties are available. Failing this, all attempts will be made to provide a
continuing income. Health and Safety matters are a high priority issue
for the Board, who consider a monthly report on developments and
any incidents that may have occurred, including accidents and near
misses.
profit or loss for that period. In preparing each of the Group and Parent
Company financial statements, the Directors are required to:
•
•
•
•
select suitable accounting policies and then apply them
consistently;
make judgements and estimates that are reasonable and
prudent;
state whether they have been prepared in accordance with
IFRSs as adopted by the EU; and
prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the Group
and the Parent Company will continue in business.
POLICY FOR PAYMENT OF CREDITORS
The Group agrees terms and conditions with suppliers before business
takes place and, while there is no Group code or standard it is not
Group policy to extend supplier payment terms beyond that agreed.
There are no suppliers subject to special arrangements. The average
credit terms for the Group as a whole based on the year end trade
payables figure and a 365 day year is 56 days (2017: 52 days).
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Parent Company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Parent Company and enable them to
ensure that the financial statements comply with the Companies Act
2006. They have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible
for preparing a Directors’ Report, Corporate Governance Statement
and Directors Remuneration Statement that complies with that law
and those regulations
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in
other jurisdictions.
By order of the Board
B P Roberts
Company Secretary
22 January 2019
AUDITOR REAPPOINTMENT
BDO LLP have indicated their willingness to continue in office and
accordingly a resolution proposing their reappointment will be
submitted to the Annual General Meeting.
DISCLOSURE OF INFORMATION TO AUDITOR
The directors who were members of the Board at the time of approving
the Directors’ Report are listed on page 30. Having made enquires of
fellow Directors each of these Directors, at the date of this report,
confirms that:
•
•
to the best of each Director’s knowledge and belief, there
is no relevant audit information of which the Group’s
auditor is unaware; and
each Director has taken all the steps a director might
reasonably be expected to have taken to be aware of
relevant audit information and to establish that the Group’s
auditor is aware of that information.
This confirmation is given and should be interpreted in accordance
with the provisions of s418 of the Companies Act 2006.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN
RESPECT OF THE ANNUAL REPORT AND ACCOUNTS,
STRATEGIC REPORT AND DIRECTORS’ REPORT AND
THE FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report and
Accounts, Strategic Report and Directors’ Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and Parent
Company financial statements for each financial year. Under that law
they have elected to prepare both the Group and the Parent Company
financial statements in accordance with IFRSs as adopted by the EU
and applicable law. As required by the AIM Rules of the London Stock
Exchange they are required to prepare the Group financial statements
in accordance with IFRSs as adopted by the EU and applicable law
and have elected to prepare the Parent Company financial statements
on the same basis.
Under Company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Group and Parent Company and of their
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Corporate Governance Statement
For the year ended 31 October 2018
CORPORATE GOVERNANCE CODE
In accordance with AIM rule 26, the Board have considered and
adopted the QCA Corporate Governance Code for Small and Mid-size
Quoted Companies published in April 2018 (“the Code”).
THE PRINCIPLES OF GOOD GOVERNANCE AND
COMPLIANCE ARRANGEMENTS
The Board is committed to high standards of corporate governance.
The adoption and maintenance of good governance is the responsibility
of the Board as a whole, who in accordance with AIM rule 26 have
considered and adopted the QCA Corporate Governance Code for
Small and Mid-size Companies (“the Code”). The Code includes a
number of principles of good practice, which have been developed
to support the delivery of growth in long term shareholder value by
maintaining a flexible, efficient and effective management framework
within an entrepreneurial environment. The Board believes that by
adopting these principles, which are appropriate to the size of the
Group, the Company’s numerous and widespread shareholder base
can expect the highest possible level of standards. The Directors are
pleased to provide the following additional information with regard to
compliance with these principles of the Code:
1.
Establish a strategy and business model which promote long
term value for shareholders
Wynnstay is committed to sustained development within the agriculture
sector and will strive for continued growth by acquisition and organic
development of the business. In so doing, the Group will optimise
the return to all stakeholders in the business. In order to achieve this
ambition, the Group recognises that it must excel in terms of value,
quality and the development of its products, services and people. The
Group strives to become the “Supplier of Choice” for its customer
base. Fuller details of the operational strategy of the business can be
found in the latest published Strategic Report.
2.
Seek to understand and meet shareholder needs and
expectations
The Board appreciates that the diverse shareholder base of the Group
may have differing objectives for their investment in the business, and
therefore the importance of ensuring that non-executive directors
(“NED”) in particular, have an up to date understanding of these
perspectives is well recognised. Directors will therefore routinely
engage with both institutional and private investors and will seek
out opinions on unusual or potentially controversial matters before
adopting policy changes or tabling shareholder resolutions. The Board
will always review written feedback reports from investors following
financial results “roadshows” and will also always consider information
received from institutional voter advisory firms. Mr P.M. Kirkham is
the nominated independent NED who makes himself available to
shareholders who may require independent Board contact.
Take into account wider stakeholder and social responsibilities
3.
and their implications for long-term success
The Directors recognise the importance of managing the business in a
responsible, fair and ethical manner, and strive to engender such values
in every aspect of the Group’s operations. Social, environmental and
sustainable considerations are taken into account in the formulation
of polices across the Group, and areas of particular interest to the
Board are reported on, in the separate Corporate Social Responsibility
Report.
Embed effective
4.
opportunities and threats, throughout the organisation
risk management, considering both
The Group adopts a risk approach appropriate to the business
activities being conducted, and the Board retain responsibility
for regularly reviewing risk management strategies. Risks and
uncertainties for the business are classified into two main categories,
Financial and Operational. The Board monitor such risks having
developed policies for managing the uncertainties they bring. The
38
monitored risk categories and the main policies for their control can
be found in our published Risk Management Statement contained in
the Strategic Report.
The Board of Directors has overall responsibility for the system of
internal controls, including financial, operational and compliance,
operated by the Group and for its effectiveness. Such a system can
only provide reasonable and not absolute assurance against material
misstatement or loss, as it is designed to manage rather than eliminate
the failure to achieve business objectives.
The key procedures within the control structure include:
•
•
•
5.
Managers at all levels in the Group have clear lines of reporting
responsibility within a clearly defined organisational structure;
Comprehensive financial reporting procedures exist, with
budgets covering profits, cash flows and capital expenditure
being prepared and adopted by the Board annually. Actual
results are reported monthly to the Board and results compared
with budgets and last year’s actual. Revised forecasts are
prepared as appropriate; and
There is a structured process for appraising and authorising
capital projects with clearly defined authorisation levels.
Maintain the board as a well-functioning, balanced team led by
the chair
The Board currently comprises seven directors, three of whom are
executive and four non-executives. The roles of Chairman and Chief
Executive are separated. The Chairman is non-executive and is elected
by the whole Board on an annual basis, with Mr J J McCarthy originally
appointed to this role in November 2013. A Senior Independent
Director has been appointed, who carries out the important function
of acting as a confidential “sounding board” for other directors, and
who has been nominated as the person available to shareholders who
may require independent Board contact. The Board believes that this
structure, together with the operation of its sub-committees described
below, satisfies the flexible and effective management elements
of the Code guidelines. Certain relevant details of the contracts of
employment for the executive directors, and the letters of appointment
for the non-executive directors are disclosed in the annual Director’s
Remuneration Statement. The circumstances of all non-executive
directors, including the Chairman, have been considered against the
guidelines laid out in section B.1.1 of the UK Corporate Governance
Code, and the general concept of independence of character and
judgement, as of July 2018. The conclusions of these reviews were that
all non-executives were deemed Independent under the Effectivness
principles of the Code. However, the following points were considered
worthy of further disclosure with regard to each non-executive director:
•
•
•
•
James John McCarthy – currently served seven years on the
Board and been Chairman since 2013. He is also the Chairman
of one other listed UK company.
Philip Michael Kirkham – currently served five years on the
Board and been Vice Chairman since 2015 and nominated as
Senior Independent Director. He is a director of M & R Kirkham
& Sons Limited, a mixed farming business in the West Midlands,
which is a customer of the Group, who during the last financial
year purchased goods on an arms length basis from the
Company.
Howell John Richards - currently served four years on the Board.
Prior to his appointment he had served for a number of years
as a paid sales consultant to the business, but has not received
any additional income for such services since being appointed
to the Board. He is a director of Cwrt Malle Limited, a farming
business in South Wales, which is a customer of the Group,
who during the last financial year purchased goods on an arms
length basis from the Company.
Stephen Ellwood - currently served three years on the Board.
He is a director of a number of other businesses operating in
the broader agricultural sector, including NIAB, to whom the
Group pays DEFRA regulated seed crop registration fees.
www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018
6.
Ensure that between them the directors have the necessary
up-to-date experience, skills and capabilities
Brief biographies of the directors can be found in this annual report. The
executive directors all have considerable experience in the agricultural
supply industry and have spent much of their careers with the Group,
providing a significant degree of management continuity. The non-
executives bring a range of business and commercial expertise to the
Board, including direct agriculture and specialist merchanting skills,
and are all deemed independent under the Code as described above.
7.
Evaluating board performance based on clear and relevant
objectives, seeking continuous improvement
The Chairman is responsible for the periodic performance reviews
of the Board, its sub-committees and non-executive directors. In
October 2018, the senior independent non-executive conducted a
Board evaluation exercise, considering the structure, governance,
operating dynamics and the risk management processes currently
in place. The conclusions of this exercise were considered by the
whole Board and deemed satisfactory, with areas for improvement
noted, including specific responsibilities allocated to named individual
directors.
Following the appointment of a new CEO during the year, the Board
arranged executive development training
for specific directors
and certain senior managers of the Group with Cranfield School of
Management. This provides ideal personal development support for a
period of time, away from the day to day pressures of managing the
business.
8.
Promote a corporate culture that is based on ethical values and
behaviours
The Board operates a policy of collective responsibility with regard
to its decision making, with the Chairman being responsible for the
smooth functioning of its activities. The Chairman will ensure that each
member of the Board is given fair and equal opportunity to clearly
express their respective views on all matters, and that the executive
directors are adequately able to communicate reasonable commercial
views on matters under debate. A formal schedule of matters requiring
Board approval is maintained, and includes:
•
•
•
•
•
•
Group strategy control, including approval of principal activities
description and periodic corporate plans.
Board appointments, including structure and composition,
casual and expansionary appointments, retirement policies and
rotation selection, and election of Chairman, Vice Chairman
and other delegated roles.
including relevant code
Corporate governance matters,
adherence, corporate social
responsibility matters and
statements, and approval of any political support or financial
contributions.
Financial control, specifically approval of Group financial and
capital budgets, approval of Group financial results, and
approval of Group financial indebtedness commitments in
excess of a total of £500,000.
Capital expenditure confirmation of projects, which are budget
approved and exceed an expenditure limit of £100,000 or non
budget approved above an expenditure limit of £50,000.
Share capital matters with regard to, the allotment of new
shares, the market purchase of existing shares, the cancellation
of any existing shares, and the dividend policy of the Group,
and approval of Interim & Final dividends.
9.
Maintain governance structures and processes that are fit for
purpose and support good decision-making by the board
The Board operate Code recommended, Audit, Remuneration and
Nomination sub-committees and details are provided below.
Board Committees:
Audit Committee
This Committee currently consists of three non-executive directors:
•
•
Mr P M Kirkham, Mr H J Richards and is chaired by Mr S J Ellwood,
who through his previous banking experience satisfies the guideline
requirement for a financially qualified member of an audit committee.
The Committee normally meets three times a year as required. The
Committee has standard terms of reference which have been formally
approved by the Board, and which include the supervision of the
external audit process and the effectiveness of the internal financial
controls. The terms of reference further task the Committee with
identifying and evaluating significant internal and external risks faced
by the Company, and then making recommendations to the Board on
appropriate strategies for effectively managing these risks. Such risks
include:
•
•
The reliability of internal and external reporting systems;
The safeguarding of assets from inappropriate use, loss and
fraud;
Identifying and properly managing liabilities;
Compliance with relevant taxation legislation and ensuring the
Group acts in accordance with its published tax strategy; and
Ensuring the business operates within all applicable legislation
•
and uses best practice wherever possible.
The Audit Committee met three times during the last financial year
and all committee members attended. The Committee agreed the
nature and scope of the audit with the auditor and monitored their
findings. The Committee organise internal audit assignments to test
the operating effectiveness of internal systems and controls. These
assignments are not completed by specific internal audit employees,
but appropriate members of staff. The Committee has procedures
in place to enable it to meet with the auditor without the presence
of the Company’s management and it formulates and oversees the
Company policy on maintaining auditor objectivity and independence
in relation to non audit services. The policy is to ensure that the nature
of the non audit services performed or the fee income relative to the
audit does not compromise the auditors’ independence, objectivity or
integrity and complies with ethical standards. Details of such services
and fees are provided in note 6 to the accounts.
Remuneration Committee
This Committee of the Board consists of Mr J J McCarthy and Mr H J
Richards and is chaired by Mr P M Kirkham. The Committee meets at
least once a year and has standard terms of reference in place which
have been formally approved by the Board. These terms of reference
include the formulation of remuneration policies for executive directors
and senior managers, and the supervision of employee benefit
structures throughout the Company. The Remuneration Committee
met three times during the last financial year and all committee
members attended.
Nomination Committee
This Committee of the Board currently consists of Mr J J McCarthy, Mr
G W Davies and is chaired by Mr P M Kirkham. The Committee meets
at least once a year and has standard terms of reference in place
which have been formally approved by the Board. The Committee
is tasked with reviewing the leadership needs of the Company and
making recommendations to ensure the continuity of such leadership
through the identification, evaluation and appointment of both
executive and non-executive directors. The Nomination Committee
met once during the last financial year and all committee members
attended. The Committee also conducted an independent review
with search consultants during the year, leading to the appointment of
Gareth Davies as CEO in July 2018.
The Board regularly reviews the structures and processes used to
manage the business, and takes advice from appropriate retained
professionals, including its nominated financial advisor and corporate
lawyers. The Board normally meet once a month with additional
meetings as necessary. During the financial year ending October
2018, there were thirteen Board meetings and all directors attended,
with the exception of, Mr J.J. McCarthy and Mr D.A.T. Evans who
both attended twelve meetings. Minutes are maintained of all Group
and subsidiary Board meetings, and all senior management sessions.
Records are maintained of everyone present at such meetings and
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Corporate Governance Statement continued
announced. The Group retains the services of a professional financial
public relations company, who assist with ensuring the accurate
and timely communication of relevant corporate, financial and other
regulatory news. Mr P M Kirkham is the nominated independent non-
executive Director who makes himself available to shareholders who
may require independent Board contact. The Annual General Meeting
is the principal forum for dialogue with private shareholders who are
given the opportunity to raise questions at the meeting, and to meet
directors and senior managers of the business who make themselves
available after each meeting. The Company aims to send out the
notice of the Annual General meeting at least 21 working days before
the meeting and publish the results of resolutions (which are usually
voted on by a show of hands) in a Regulatory News Statement after
the relevant meeting. Shareholders also have access to the Company’s
website at www.wynnstay.co.uk.
ADDITIONAL INFORMATION
Going concern and long term viability - The Group works within a
corporate plan to ensure clear direction and focus for the strategic
development of the business. This corporate plan is regularly
reviewed and updated appropriately for commercial and economic
circumstances. Annual budgets are set in line with corporate goals
in the plan, but which recognise specific market conditions at the
time. The Directors have prepared the financial statements on a
going concern basis, having satisfied themselves from a review of
internal budgets, forecasts and current bank facilities that the Group
has adequate resources to continue in operational existence for the
foreseeable future.
New Developments – The Board regularly monitors developments
to Corporate Governance regulations and processes appropriate to
entities of its size and will regularly review the continuing applicability of
the QCA Code to the Company.
Auditor Independence - The Board is satisfied that BDO LLP has
adequate policies and safeguards in place to ensure that auditor
objectivity and independence is maintained. The Company meets its
obligations for maintaining the appropriate relationship with the external
auditors through the Audit Committee whose terms of reference
include an obligation to consider and keep under review the degree of
work undertaken by the external auditor, other than the statutory audit,
to ensure such objectivity and independence is safeguarded.
B P Roberts
Company Secretary
22 January 2019
arrangements are in place for updating any relevant personnel who
may have been absent. Directors are able, if necessary, to take
independent professional advice in furtherance of their duties, at the
Company’s expense. All directors and some senior members of staff
have adopted a set of guidelines in regard to their responsibilities for
the management and conduct of the Company.
The formal schedule of matters reserved for Board approval has
been described above and acts as the main guide for any specific
information provided to directors. Additionally, as a matter of routine,
directors receive papers relating to each Board meeting at least seven
days in advance, and which also include:
•
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Group monthly and year to date management accounts with
variances reported against prior year comparisons and
budgets.
Executive director commercial reports on segmental trading
and financial issues.
A report on any health and safety matters or issues.
A report on any environmental matters or issues.
Any relevant industry or competition news.
All directors have access to the Company Secretary to arrange the
inclusion of any matter they wish to table for Board discussion or to
receive additional information on any Company matter that they feel
is relevant. As previously highlighted directors are able, if necessary,
to take independent professional advice in furtherance of their duties,
at the Company’s expense, and are able to commission appropriate
external support for any Board Committee responsibilities.
The Board have adopted policies in regard to various regulatory,
compliance and control issues, and will always seek to ensure that
such policies are operated in a cost effective manner while ensuring
effective achievement of the respective objective. As the Group
operates across a number of different markets in both its Agriculture
and Specialist Agricultural Merchanting segments, strong internal
controls are required to ensure the business is not exposed to financial
irregularities or losses that are not readily identifiable. Such controls
include policies for the proper authorisation of the procurement of all
products and services, and the sanctioning of expense expenditure
and employment costs. These policies are principally controlled by
the Management Boards of the operating subsidiaries of the Group,
who meet on a regular routine basis. The Group Chief Executive and
Finance Director attend all these meetings and undertake business
and financial reviews of subsidiary activity with particular attention paid
to the monitoring of actual performance against budget.
The Board of Directors has overall responsibility for the system of
internal controls, including financial, operational and compliance,
operated by the Group and for its effectiveness. Such a system can
only provide reasonable and not absolute assurance against material
misstatement or loss, as it is designed to manage rather than eliminate
the failure to achieve business objectives.
The key procedures within the control structure include:
•
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Managers at all levels in the Group have clear lines of reporting
responsibility within a clearly defined organisational structure;
Comprehensive financial reporting procedures exist with
budgets covering profits, cash flows and capital expenditure
being prepared and adopted by the Board annually. Actual
results are reported monthly to the Board and results compared
with budgets and last year’s actual. Revised forecasts are
prepared as appropriate; and
There is a structured process for appraising and authorising
capital projects with clearly defined authorisation levels.
10. Communicate how the company is governed and is performing
by maintaining a dialogue with shareholders and other relevant
stakeholders
The Board recognises the importance of communicating with its
shareholders and maintains dialogue with institutional shareholders
and analysts, and presentations are made when financial results are
40
www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018
Corporate Social Responsibility
CORPORATE SOCIAL RESPONSIBILITY
The Directors recognise the importance of managing the business in a
responsible, fair and ethical manner, and strive to engender such values
in every aspect of the Group’s operations. Social, environmental and
sustainable considerations are taken into account in the formulation of
polices in the following areas of activity:
involved
Human resources – the relationship nature of much of the Group’s
trading activities makes it heavily dependent on the quality and
efficiency of the personnel
in the business. People
management and development is therefore critical to the success of
the Company, and considerable effort and investment is put into the
recruitment, training, welfare and support of all staff. The Group is
committed to creating a fair, enjoyable and fulfilling work environment
and has policies in place to create opportunity, prevent discrimination,
encourage engagement and keep staff informed on aspects of
the business. All eligible employees are offered the opportunity to
become shareholders in the business through regular invitations to
join sharesave schemes. The Board believes that these tax effective
and relatively risk free arrangements are an ideal way of aligning staff
interests with those of other stakeholders.
Modern slavery and human trafficking – following the introduction of
the Modern Slavery Act 2015, the Group prepared an initial statement,
published in December 2016, regarding the procedures in place to
limit the risk of slavery or human trafficking events occurring within
its business and supply chain. This statement was updated in May
2018 and sets out Wynnstay’s current approach to understanding
the potential risks of such abuses, and the steps in place and to be
implemented, to prevent modern slavery or human trafficking events
occurring within its own business and associated supply chains. This
statement relates to intentions and actions taken during the financial
year 2017, and the future development of procedures for identifying
risks and preventing abuses. An updated statement is currently under
preparation.
The Wynnstay Board has committed to preventing modern slavery
and human trafficking acts within its corporate activities, and to ensure
that its national and international supply chains are free from such
abuses. Where possible the organisation prefers to build long standing
relationships with our suppliers, where through a strengthening
of trading commitments, we can make clear our expectations of
business behaviour. A review of primary trading partners has been
completed with a view to identifying relationships where a risk may
exist. This categorisation approach is intended to allow the Company
to prioritise its limited resources initially to any areas of perceived
highest threat. Engagement with these suppliers has not identified any
substantial risks to date. Procurement policies have been updated
to include ethical and supplier codes of conduct where appropriate,
in addition to any usual commercial contract terms. This process is
intended to be rolled out to all appropriate supply relationships. Our
procurement policy is intended to comply with the Modern Slavery
Act 2015 and incorporates a risk assessment protocol which identifies
and assesses potential risk within that particular supply chain.
Appropriate investigative and auditing processes commensurate to
the scale of the enterprise and risk, are intended to be executed as
necessary. Our staff will be provided with sufficient training, enabling
them to identify risk and ensure the expectations of the procurement
policy and its associated processes are understood at all levels
across the Group. All suspected cases of modern slavery and human
trafficking are requested to be reported to the Head of Procurement,
and any such report will be investigated on a case by case basis,
with appropriate remedial action taken immediately. The Board also
recognise that concerns about modern slavery are not just limited
to the Company’s supply chains, but may also be a risk within the
Group’s own employment environment, and particularly with regard to
temporary or agency staff use. A review of such hiring practises has
taken place, and a list of approved providers is maintained.
Health and safety – the Group takes the health and safety of its
staff, customers and everyone else involved with its activities very
seriously. All staff receive basic training and where individual roles
require, additional specialist support is provided. Occupational
health specialists are utilised to screen employees who operate in
environments with an added risk of exposure to noise, vibration or
other hazards that may cause harm. The Group and subsidiary Boards
routinely consider health and safety matters and ensure adequate
resources are in place to enable all personnel to fulfil their obligations in
this regard. The Audit Committee considers an annual report on safety,
risk and compliance management and will require appropriate action
be taken where areas of concern are identified. Reportable injuries
(Riddor) during the financial year numbered 6 across the Group, which
was an increase on the previous year when there were 4 incidents.
Sustainability and limiting environmental impact – the Group seeks
to operate all activities in a sustainable manner, and management
are actively encouraged to consider and minimise the environmental
impact of their operations. Energy usage is recorded across the Group
and reported centrally for monitoring, with individual departments
tasked with efficiency improvement targets on a unit productivity
basis. During the year the Group continued to implement improvement
opportunities identified from the audit conducted to comply with
Phase one of the Energy Savings Opportunity Scheme managed by
National Resources Wales. Further LED lighting schemes have been
installed in several locations, and a number of projects completed to
improve the Energy Performance Certificate (EPC) ratings in a number
of buildings. Significant capital expenditure on environmental and
water management projects at Carmarthen mill has been ongoing,
and a new Environment Permit was issued for the site during the
year. At Llansantffraid mill, a new Environment Management System
(EMS) received Green Dragon environment system accreditation in
November 2018, and further site improvement are planned for the
new year. Recycling processes operate across the Group for plastics,
paper, cardboard, metal, wood, electrical equipment and used oils.
Fuel efficiency is paramount in vehicle investment decisions, and
mileage management is a key task for all fleet responsible personnel.
Supporting the community – Making a positive difference to the
communities in which we operate is important to the Group. We play
an active part in communities surrounding our depots and business
offices by supporting local events, fundraising activities and community
groups. Offering support to educational establishments such as
schools, colleges and universities in the form of donations, group visits
and support with research projects is of particular importance as we
recognise the significance of the future generation within the industry.
Alongside this we support the Royal Agricultural Benevolent Institution
(R.A.B.I) and local Young Farmers Clubs in all regions as our nominated
charities, with donations to these and other organisations last year
amounting to £3,072. As 2018 was also the Company’s centenary
year, staff agreed to additionally support Children With Cancer UK,
which is a UK-based charity dedicated to raising money for research
and providing care for children with cancer and their families. The main
fund raising event was a Black Tie Dinner, which took place in January
2019 to mark the official end of the centenary year, with 400 people
closely associated with the business coming together to mark this
significant milestone, and raise a substantial figure for the charity.
Additional Information and New Developments – During the year under
review and in accordance with Schedule 19 of the Finance Act 2016,
the Group has published a Tax Strategy document on its website,
which confirms that the organisation is committed to full compliance
with all statutory obligations and adopts a policy of full disclosure
to HMRC. The Group refrains from using offshore tax jurisdictions,
and will not use specifically constructed tax avoidance schemes or
arrangements. The Board also recognise the importance of protecting
personal data in accordance with the new General Data Protection
Regulations (GDPR) which came into force in May 2018, and has
commenced a program of training and education for all appropriate
staff.
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Directors’ Remuneration Report
Board Remuneration
INTRODUCTORY STATEMENT
As Chair of the Remuneration Committee and on behalf of the Board
of Directors, I am delighted to present our report on remuneration for
the year ended 31 October 2018.
Our approach to remuneration
As set out more fully in our updated Remuneration Policy, the
Committee’s approach to remuneration is based on offering a
competitive but not excessive reward package for executive directors
that aligns their pay with the strategy of the Group.
We seek to encourage, incentivise and motivate those behaviours in
our executive directors which we believe will deliver long-term success
for the Group and strong returns for its shareholders. In addition to
seeking to align the interests of executive directors with those of
shareholders, our Policy seeks to adopt best practice and comply
with all relevant laws and corporate governance regulations, giving the
Group a sound basis for long-term growth and progression.
Context and key Committee decisions on remuneration
The Committee notes the commitment shown by the executive
directors in running the Group in the best interests of all shareholders
and other stakeholders and in prioritising long-term, sustainable,
profitable growth. In the context of this, the Committee has sought
to implement a Remuneration Policy which equips the Group to
retain and, where necessary, recruit the calibre of executive directors
required to support its long-term strategy.
During the financial year ended 31 October 2018 the Committee
conducted a full review of its Remuneration Policy with the assistance
of RSM Tax and Advisory Services LLP, and as a result has made a
number of changes to the remuneration of executive directors with a
focus on ensuring that:
i.
the remuneration packages offered are competitive within
the marketplace that the Company operates, allowing it to
attract and retain the talent necessary to deliver the results
demanded by the Board and the Company’s shareholders;
ii. the performance-based elements of remuneration are
sufficiently aligned with the Group’s strategic objectives,
with stretching performance measures that reward exceptional
performance whilst avoiding rewarding poor performance; and
iii. the remuneration structures provide the mechanisms
necessary to protect shareholders where necessary and adopt
a sufficiently long-term basis for aligning the interests of
executive directors with those of investors.
Having reviewed the base salaries of all executive directors during
the period, the Committee determined that salaries had become
adrift from comparative market rates and as such, recommended
that salaries were increased in the year to ensure that they remained
appropriate in the context of the markets in which we operate.
The Committee also reviewed the previous long-term incentive
structure and determined that it was no longer fit for purpose or in line
with current best market practice. As such, the Committee proposes
to implement a new PSP structure, based on annual awards with a
performance period of three years and a further holding period of two
additional years. In line with good corporate governance practice, the
new PSP also includes malus and clawback provisions.
Whilst the Committee reached a view on its preferred structure
and initial award quanta earlier in the financial year, and although
shareholder approval for the PSP is not a legal requirement, the
Committee wished to obtain shareholder approval for the new PSP
before granting any awards. Should the PSP be approved at the 2019
AGM, the Committee intends that the performance period for the initial
42
awards granted under the plan will be 1 November 2017 to 30 October
2020, with such awards being granted as soon as possible following
the 2019 AGM. This has been deemed appropriate to ensure that the
executive directors were adequately incentivised during the period
awaiting shareholder approval. Further details on the performance
conditions introduced are included below.
On a similar basis, the Committee reviewed the Annual Performance
Bonus scheme during the year, and determined that it was no longer
reflecting best market practice and achieving the alignment with
shareholder interests that the Committee wishes to promote. In
particular, the Committee was concerned that the Annual Performance
Bonus, structured as a fixed percentage of profit (with no threshold)
could lead to executive directors receiving substantial bonus payments
even when the performance of the Group did not merit such payments.
Following the above review, the Committee proposes to implement
new arrangements with stretching and ambitious performance criteria
as follows:
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an annual bonus plan (“ABP”) with targets based on profit
before tax (75%) and stretching, specific and measurable
strategic and/or individual objectives (25%); and
a performance share plan (“PSP”) with performance targets
based upon EPS growth (75%) and return on capital employed
(25%). In line with comparable companies, the Committee
proposes that under the Remuneration Policy:
the maximum bonus opportunity in the ABP will be 100% of
base salary in the case of all executive directors; and
the maximum award opportunity under the PSP will be over
shares with a market value at grant of 100% of base salary.
The performance criteria attached to all awards will ensure that the
maximum opportunity will only be realised in the event of exceptional
performance, and no payments will be made where performance has
been inadequate.
The Remuneration Committee remains fully committed to an open and
honest dialogue with our shareholders, and we welcome your views
on any aspects of remuneration at any time.
BOARD REMUNERATION POLICY
All matters relating to remuneration of the Directors of the Company
are determined by the Remuneration Committee whose decisions
are made with a view to achieving the broad objective of rewarding
individuals for the nature of their work and the contribution they make
towards the Group achieving its business objectives. Proper regard is
given to the need to recruit and retain high quality and motivated staff
at all levels and to ensure the effective management of the business.
The Committee will be cognisant of comparative pay levels after
taking into account geographic location and the operations of the
business, and takes appropriate external professional advice where
considered necessary. During the year the Committee commissioned
RSM Tax and Advisory Services LLP to consider and advise on current
remuneration packages.
The remuneration policy for Directors is set so as to achieve the above
objectives and is broadly split into Executive and Non-Executive
categories, and consists of the following components in each sub
category:
www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018
Executive Directors:
Basic Salary
Purpose: To provide an appropriate amount of basic fixed income to enable the recruitment and retention of effective
management to implement Group strategy.
Operation: The Committee reviews base salaries on an annual basis, consistent with the reviews conducted for other
employees. The review takes into account:
•
•
•
•
•
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absolute and relative Group profitability;
any changes to the scope of each role and responsibilities;
any changes to the size and complexity of the Group;
salaries in comparable organisations;
pay increases elsewhere in the Group; and
the impact of any increases to base salary on the total remuneration package.
Maximum opportunity: The Remuneration Committee has set no overall maximum on salary increases, as it believes that
this creates an anchoring effect for executive directors and other employees.
Performance measures: None, although individual performance, skills and experience are taken into consideration by the
Remuneration Committee when setting salaries.
Annual Bonus
Plan (ABP)
Purpose: To incentivise the executive directors to deliver the Group’s corporate strategy by focusing on annual goals that
are consistent with longer-term strategic objectives.
Operation: Annual bonus targets are reviewed and set on an annual basis. Pay-out levels are determined by the Remuneration
Committee after the year-end, after completion of the audit, based upon a rigorous assessment of performance against the
targets.
Malus provisions apply for the duration of the performance period and any deferral period allowing the Remuneration
Committee to reduce to zero any unvested or deferred awards. Clawback provisions apply to cash amounts paid and shares
or cash released for three years following payment or release, allowing the Remuneration Committee to claim back all or any
amount paid or released.
The circumstances in which malus and/or clawback provisions may be triggered include:
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if the assessment of any performance condition was based upon erroneous or inaccurate or
misleading information;
if a material misstatement is discovered that results in the audited accounts of the Group being
adjusted; or
in the event of any action or conduct of a participant that amounts to fraud or gross misconduct.
•
Maximum opportunity: The maximum annual bonus opportunity that can be earned for any year is capped at 100%
of base salary for all executive directors. Payments at or approaching these levels would require an exceptional level of
performance.
Wynnstay
Profit Related
Pay
Performance
Share Plan
(PSP)
Performance measures: The payment of awards under the ABP is dependent upon performance conditions based upon:
profit before tax (PBT) after accrual for bonus payments (75% weighting); and
stretching, specific and measurable strategic and/or individual objectives. (25% weighting).
•
•
The Remuneration Committee believes the chosen metrics are suitably aligned with the Group’s strategy and are focused on
delivering long-term growth and shareholder return.
Purpose: An all-employee scheme in which the executive directors participate on the same basis as all other employees,
designed to encourage achievement of profit budgets within main trading subsidiaries.
Operation: An employee scheme to reward all staff with a pro-rata profit share, based on a pre-set formula. Paid in February
following the announcement of the financial results for the previous year, after completion of the annual audit.
Performance measures: Based upon the pre-tax profit of the trading subsidiaries, adjusted for commodity inflation and
subject to a cap on the overall all-employee pay-out of 10% of profits of the participating companies.
Purpose: To incentivise executive directors to focus on the long-term strategic objectives of the Group and to deliver
substantial shareholder value, aligning their interests with the interests of shareholders.
Operation: Awards may be granted annually under the PSP and will consist of rights over shares, calculated as a percentage
of base salary. Vesting is subject to the Group’s performance, measured over three years and is followed by a holding
period in respect of 50% of the vested shares, of which one half are released after a one-year holding period and one
half after a two-year holding period. Malus provisions apply for the duration of the performance period and shares held
under deferral arrangements, allowing the Remuneration Committee to reduce to zero any unvested or deferred awards.
Clawback provisions apply until two years after the date upon which any entitlement becomes unconditional, allowing the
Remuneration Committee to claim back all or part of the value of any shares vested.
The circumstances in which malus and/or clawback provisions may be triggered are as stated in relation to the ABP above.
The principal terms of the PSP will be submitted for shareholder approval at the 2019 AGM.
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Directors’ Remuneration Report continued
Performance
Share Plan
(PSP)
Maximum opportunity: The maximum PSP award opportunity per executive director, in respect of any financial year, is
limited to rights over shares with a market value at grant of 100% of base salary.
Performance measures: The vesting of all awards made under the PSP is dependent upon performance conditions based
upon:
•
•
EPS growth (75% weighting)
Return on capital employed (25% weighting)
The Remuneration Committee believes the chosen metrics are suitably aligned with the Group’s strategy and are focused on
delivering long-term growth and shareholder return.
All-employee
share plans
Purpose: To align the interests of the broader employee base with the interests of shareholders and to assist with recruitment
and retention.
Operation: The Group currently operates an HM Revenue and Customs-approved Save As You Earn plan. In accordance
with the relevant tax legislation, the executive directors are entitled to participate on the same basis (and subject to the same
maximums) as other Group employees.
Maximum opportunity: As determined by the statutory limits in force from time to time.
Performance measures: None.
Pension
Purpose: To provide an income for executive directors during their retirement and enable the Group to recruit and retain
suitable individuals.
Operation: Fixed company contributions expressed as a percentage of current basic salary for each individual are paid into
a personal pension scheme held in that individual’s name. In addition, death in service cover provides for four times current
annual salary paid into trust, where death occurs during the term of the Director’s employment contract.
Benefits
Purpose: To attract and retain suitable executive directors and assist executive directors in the performance of their duties.
Operation: The benefits provided by the Group to executive directors are currently restricted to the provision of a company
car and private medical insurance.
Maximum opportunity: Dependent upon the cost of providing the relevant benefits and the individual’s personal
circumstances. The Remuneration Committee examines the cost of benefit provision and will only agree to provide benefits
that are in line with market practice and cost-effective for the Group.
Performance measures: None.
The executive director’s remuneration terms are detailed in individual contracts of employment and associated amendment documentation,
which amongst other points contain standard details as follows:
- Notice period to be given by the Company is twelve months.
- Notice period to be given by the Director is six months.
- Paid holiday entitlement of 23 days plus bank holidays.
- Post employment restrictive covenants lasting twelve months.
- Standard non-compete restrictions during employment.
Non-Executive Directors:
Basic Annual
Fee
Purpose: To attract and retain a balanced skill set of individuals to ensure strong stewardship and governance of the Group.
Operation: Fees are set so as to reflect the factors pertinent to respective positions, taking into account the anticipated
amount of time commitment, and comparative rates paid by other companies of a similar size. The non-executive directors
do not participate in share option awards, performance bonuses or pension arrangements. Fees are reviewed by the
Remuneration Committee on an annual basis.
Travelling
Expenses
Medical
Insurance
Benefit
Purpose: To reimburse legitimately incurred costs of attending necessary Board and associated meetings.
Operation: Pre-set rates used to reimburse mileage, travel, accommodation and other incurred expenses in line with those
used for other employees.
Purpose: To assist Directors in the completion of their duties.
Operation: Benefits restricted to the provision of private medical insurance for those directors who do not have alternative
arrangements in place.
The non-executive director’s remuneration terms are detailed in individual letters of appointment, which amongst other points contain standard
details as follows:
Initial appointment for a period of twelve months.
-
- Renewal of appointment for a fixed period of three years after initial twelve months.
- Post employment restrictive covenants lasting twelve months.
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www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018
Remuneration Report
EXECUTIVE DIRECTOR REMUNERATION
Following the announcement in May 2018 of the appointment of a new Group Chief Executive Officer, the Remuneration Committee carried
out a review process with regard to current and future remuneration arrangements for senior executives. This review concluded that a number
of adjustments to current packages were required to ensure both the continued competitiveness of remuneration levels, and the satisfaction
of current investor expectations with regard to governance arrangements for Long Term Incentive Plans. The Remuneration Committee
consequently agreed terms for the new Group Chief Executive Officer, reviewed the pay structures for the other executive directors, and
commissioned RSM Tax and Advisory Services LLP to devise and implement a new Long Term Incentive Plan, subject to the approval of
shareholders at the forthcoming AGM.
Therefore, in line with the above policy, the Remuneration Committee have approved the following details of executive director remuneration:
-
Basic Salaries. A current annual salary effective from July 2018, is shown in the table below in column A. The previous annual salary,
where relevant, is shown in column B, with the actual amounts received during the last financial year shown in column C, which in
respect of Mr K R Greetham and Mr G W Davies relates only to the respective periods when they were members of the Board.
Basic Salary
Note
Column A
Column B
Column C
Executive Director
Current Basic
Salary
Previous Basic
Salary
K R Greetham
G W Davies
B P Roberts
D A T Evans
*1
*2
£000
147
200
160
145
£000
147
n/a
121
107
Actual Salary
Received as a Director
Nov 17 – Oct 18
£000
98
99
135
119
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Notes: *1 Mr K R Greetham retired from the Board on the 11 July 2018.
*2 Mr G W Davies was appointed to the Board on the 8 May 2018.
While Mr K R Greetham stepped down from the Board on the 11th July 2018, he remains in the Company’s employment in an advisory capacity
during his notice period which runs until 30th April 2019. He continues to receive remuneration for his services during this period on the
contractual terms in place as at July 2018.
-
Annual Performance Bonuses and Profit Related Pay. The contractual bonus schemes for K R Greetham and B P Roberts for the
financial year 2017/18 are based on a fixed percentage of the Group pre-tax Profit, which includes the Group’s share of pre-tax profits
from joint ventures and associate investments. The scheme for G W Davies and D A T Evans for the financial year 2017/18 is based on
a fixed percentage of the pre-tax Profit of Wynnstay (Agricultural Supplies) Limited. The respective bonus percentages, and the payments
made for the financial year ending October 2017, received in March 2018, are shown in the table below in columns A and B respectively.
The executive directors also participate in the Wynnstay Profit Related Pay Scheme, (“PRP”) which is a scheme for employees of
Wynnstay Group Plc and GrainLink Limited, and which pays an annual bonus based on a formula which produces a percentile result
which is then applied to the relevant individual’s prior year earnings. The formula calculation is the aggregate of the pre-tax profit of
Wynnstay (Agricultural Supplies) Limited and GrainLink Limited divided by the aggregate of the combined revenues. The scheme is
subject to a limiting factor preventing the total paid under the arrangements from exceeding 10% of the profits of the participating
companies. The relevant rate for 2017, paid in February 2018, was 3.0% (2017: 2.9%), with the actual PRP paid to each individual
executive shown in Column C below. The anticipated rate for 2018 relating to the last financial year is 3.1% of relevant earnings.
Bonuses
Executive Director
K R Greetham
G W Davies
B P Roberts
D A T Evans
Column A
Column B
Column C
Annual
bonus %
0.750%
0.750%
0.550%
0.750%
Bonus received
£000
Mar 18
Mar 17
PRP received
£000
Feb 18
Feb 17
10
n/a
7
35
54
n/a
40
38
5
n/a
4
4
6
n/a
5
4
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Directors’ Remuneration Report continued
Pension and death in service life cover. Individual Company contributions to personal pension plans are based on the value of the
executive directors basic salary only. The annual defined Company contributions to a personal pension scheme held in the individual’s
name, expressed as a percentage of basic salary, and the amounts paid on behalf of each individual for their period of service as a director
during the last financial year, are shown in the table below under column A and column B respectively. The death in service life assurance
cover is provided in a Group policy covering all members, with individual costs attributed to separate members being unavailable. However, the
scheme to which all the executive directors belong, had a total renewal cost at November 2017 of £74,219 (2016: £76,586), and there
were 577 (2016: 607) members covered, equating to an average cost of £129 per person (2016: £126).
Pension
Column A
Column B
Executive Director
Pension %
Pension Contribution
£000
K R Greetham
G W Davies
B P Roberts
D A T Evans
9.6%
9.6%
9.6%
9.6%
Eight months to June 2018
Six months from May 2018
9
10
10
7
Benefits in kind. Each executive director is supplied with a company car, primarily for the furtherance of their duties. However these
vehicles are available for the executive’s private use and as such have a taxable benefit in kind value calculated in accordance with HMRC
rules. These values for the tax year ending April 2018 are shown in the table below in column A. Executives refund the cost of fuel they
use for private motoring on a monthly basis. Additionally, the Company pays the cost of providing private medical insurance for the
executives to ensure that should they require treatment this is provided as quickly as possible, and minimises any period of potential
absence from their duties. The cost to the Company of this cover for each individual in 2017 is shown below in column B.
Benefits in kind
Column A
Column B
Executive Director
Company
Car Value
Private
Medical Cover
K R Greetham
G W Davies
B P Roberts
D A T Evans
£11,591
n/a
£9,966
£10,136
£763
n/a
£763
£763
Long Term Incentives. The Remuneration policy provides for a single long term incentive plan to be in place at any one time. Historic
arrangements involved a triennial award of low cost options, with performance criteria targeting an overall maximum financial gain, over
the three year life of the scheme, approximating to one year’s basic salary as at the beginning of the scheme, for a 100% achievement
of the performance criteria. The last of these schemes matured in October 2017, having been implemented for executive directors
in October 2014. The performance conditions related to the earnings per share (“EPS”) and market capitalisation (“MC”) of the Group
as at October 2017, with the minimum successful achievement required for any options to be exercisable being an EPS of 36p and an
MC of £110m. Upon assessment, after the 31st October 2017, the minimum performance conditions for this scheme were not achieved,
and as such, a Nil award was receivable, and no benefits were obtained by any participant.
Therefore, the number of current options as at October 2018 under various schemes held by executive directors who have held office
during the year is shown in the table below:
Share Option Table
LTIP Schemes
Other Outstanding Options
Executive Director
Maximum Award
No. of Options
SAYE
No. of Options
CSOP
No. of Options
K R Greetham
G W Davies
B P Roberts
D A T Evans*
Nil
Nil
Nil
Nil
6,425
7,986
4,306
3,243
8,000
8,000
8,000
Nil
-
-
-
46
www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018
Following advice received from RSM Tax and Advisory Services LLP, a new Performance Share Plan (PSP) has been devised, the rules
and terms of which will be tabled for the approval of shareholders at the forthcoming AGM. Whilst the Committee reached a view on its
preferred structure and initial award quanta earlier in the financial year, and although shareholder approval for the PSP is not a legal
requirement, the Committee wished to obtain shareholder approval for the new PSP before granting any awards. Should the PSP be
approved at the 2019 AGM, the Committee intends that the performance period for the initial awards granted under the plan will be 1
November 2017 to 30 October 2020. This has been deemed appropriate to ensure that the executive directors are adequately incentivised
during the period awaiting shareholder approval. Further details on the performance conditions introduced are included below.
-
Other Share Schemes. The executive directors participate in the discretionary Approved Company Share Option Plan (CSOP), which is
a tax efficient scheme providing the opportunity to hold up to £30,000 of option value, which, if the scheme rules and legislation are
complied with, can be exercised free of income tax liability for the holder. The current outstanding options are shown in a table above, and
are exercisable up to March 2022 without any performance criteria attached to them. Additionally, the current executive directors are
eligible to participate in Save As You Earn (SAYE) option invitations, subject to the scheme and legislative limitations. Such options held
by the executive directors, as at October 2018 are shown in the table above, and again do not have any performance criteria attached
to them. Depending on the particular scheme, they are exercisable between September 2017 and January 2022, with further details
provided in the Director’s Report on page 36 and in Note 9 to the accounts. During the year D A T Evans* exercised 8,000 CSOP options
at a price of £3.75 per share, and subsequently immediately sold them at a price of £4.8875 per share, realising a disclosable gain on
equity-based remuneration of £9,100.
NON-EXECUTIVE DIRECTOR REMUNERATION
The remuneration of the non-executive directors, is and has been paid in accordance with the policy outlined above and has been set so as to
reflect the factors pertinent to their respective positions. Details of the amounts received during the last financial year and the current levels of
Basic Annual Fees being paid are given in the table below:
Non-Executive Director
Financial Year ending Oct 2018
2018 / 2019
Basic Fee
£000
Benefits
in kind
£000
Travelling
Expenses
£000
Current
Basic Fee
£000
Benefits
in kind
£000
J J McCarthy
P M Kirkham
S J Ellwood
H J Richards
50
34
34
34
-
1
-
1
1
1
1
1
50
34
34
34
-
1
-
1
PERFORMANCE SHARE PLAN
As reported above, the Remuneration Committee commissioned RSM Tax and Advisory Services LLP during the year, to consider and advise
on a replacement Long Term Incentive Plan for senior executives. This followed a review that concluded that the historically used scheme, where
options were granted with a fixed three year term, no longer met appropriate compliance requirements. The Board therefore intends to introduce
a new long term incentive plan, known as the Wynnstay Performance Share Plan 2018 (the “PSP”) to help recruit and retain key employees and
to motivate them to achieve the Group’s business objectives. The PSP has been designed to achieve compliance with the latest principles of
sound corporate governance and to bring the Group’s incentivisation arrangements in line with current market practice. Adoption of the PSP is
subject to obtaining shareholder approval, a resolution for which will be put to the forthcoming AGM.
Further information relating to the proposed PSP is provided on pages 96-97 of this annual report, and set out in the Rules of the scheme which
are published on the Group’s website at https://www.wynnstay.co.uk/corporate-governance/wynnstay-performance-share-plan/
Vice-Chairman and Chairman of Remuneration Committee
Philip M. Kirkham
22 January 2019
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Independent auditor’s report to the members of Wynnstay Group Plc
OPINION
We have audited the financial statements of Wynnstay Group Plc
(the ‘parent company’) and its subsidiaries (the ‘group’) for the year
ended 31 October 2018 which comprise consolidated statement
of comprehensive income, the consolidated and parent company
balance sheets, the consolidated and parent company statement of
changes in equity, the consolidated and parent company cash flow
statement and notes to the financial statements, including a summary
of significant accounting policies.
The financial reporting framework that has been applied in the
preparation of the group and parent company financial statements
is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union and, as regards the parent
company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state
of the group and of the parent company’s affairs as at 31
October 2018 and of the group’s profit for the year then ended;
the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
the parent company financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union and as applied in accordance with the
provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance
the Companies Act 2006.
with
requirements of
the
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on
Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the Auditor’s responsibilities
for the audit of the financial statements section of our report. We are
independent of the parent company and the group in accordance with
the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied
to listed entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
CONCLUSIONS RELATING TO GOING CONCERN
We have nothing to report in respect of the following matters in relation
to which the ISAs (UK) require us to report to you where:
•
•
the directors’ use of the going concern basis of accounting
in the preparation of the financial statements is not appropriate;
or
the directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the group’s or the parent company’s ability to
continue to adopt the going concern basis of accounting for
a period of at least twelve months from the date when the
financial statements are authorised for issue.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement,
were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including
those which had the greatest effect on: the overall audit strategy, the
allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our
audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
48
IMPAIRMENT OF GOODWILL
As described in Note 1 (accounting policies) and Note 14 (Goodwill), the
Group recognises goodwill of £14.9m (2017: £14.3m). Management
are required to review the carrying value of annually for impairment.
The group continues to operate in an environment of fluctuating
commodity prices, competitor activity and pressure on margins.
Management exercise significant judgement in determining the
underlying assumptions used
the
in
assumptions include the discount rate used, the allocation of assets
to cash generating units (CGU) and the future cash flows attributed to
each CGU. The sensitivities associated with these reviews have been
disclosed in Note 14.
impairment
review;
the
The potential impairment of the group’s goodwill is a significant risk
for the audit.
How we addressed the key audit matter:
•
•
•
We have assessed the reasonableness of the assumptions
underlying management’s assessment of goodwill, including
those around i) short term and long term growth rates, ii) future
changes in cash flows in particular within the GrainLink and
Youngs Animal Feed CGU’s and iii) the discount rates used by
comparing these with internally and externally derived data and
using our own valuation specialists;
We have performed sensitivity analysis on the key assumptions
noted above; and
We have also assessed whether the group’s disclosures
about the sensitivity of the outcome of the impairment
assessment to changes in key assumptions reflected the risks
inherent in the valuation of goodwill.
OUR APPLICATION OF MATERIALITY
Group materiality
2018
Group materiality
2017
Basis for materiality
£380,000
£400,000
4% of profit before
tax (2017: 5% of
profit before tax)
We apply the concept of materiality both in planning and performing
our audit, and in evaluating the effect of misstatements. We consider
materiality to be the magnitude by which misstatements, intruding
omissions, could influence the economic decisions of reasonable
users that are taken on the basis of the financial statements.
Importantly, misstatements below these levels will not necessarily
be evaluated as immaterial as we also take account of the nature of
identified misstatements, and the particular circumstances of their
occurrence, when evaluating their effect on the financial statements
as a whole.
We consider profit before tax to be the most significant determinant of
the group’s financial performance used by shareholders.
Performance materiality is the application of materiality at the
individual account or balance level set at an amount to reduce to an
appropriately low level the probability that the aggregate of uncorrected
and undetected misstatements exceeds materiality for the financial
statements as a whole. Performance materiality was set at £247,000
(2017: £300,000) which represents 65% (2017:75%) of the above
materiality levels.
We agreed with the Audit Committee that we would report to the
committee all individual audit differences identified during the course
of our audit in excess of £11,400. We also agreed to report differences
below these thresholds that, in our view, warranted reporting on
qualitative grounds.
There were no misstatements identified during the course of our audit
that were individually, or in aggregate, considered to be material in
terms of their absolute monetary value or on qualitative grounds.
www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Our group audit was scoped by obtaining an understanding of the
Group and its environment, including group-wide controls, and
assessing the risks of material misstatement at the group level.
The Group has 11 subsidiaries, 8 of which were determined to be
significant to the group and were subject to full scope audits for group
purposes.
Together with the parent company and its group consolidation, which
was also subject to a full scope audit, these subsidiaries represent
the principal business units of the group and account for 100% of the
group’s revenue and profit before tax and 99% of the group’s assets.
Whilst materiality for the financial statements as a whole was
£380,000 (2017: £400,000), each component of the group was
audited to a lower level of materiality. Audits of the components were
performed at a materiality level calculated by reference to a proportion
of group materiality appropriate to the relative scale of the business
concerned. The work on all components, including the audit of the
parent company, was performed by the Group team. We applied the
component materiality’s, which ranged from £52,000 to £267,000,
having regard to the mix of size and risk profile of the Group across
the components.
The remaining 1% of the total group assets is represented by 3
reporting components none of which contributed to the group’s
revenue or profit before tax and none of which individually represented
more than 1% of total group assets. For these residual components,
we performed analytical reviews at an aggregated group level to re-
examine our assessment that there were no significant risk of material
mis-statement within these.
OTHER INFORMATION
The directors are responsible for the other information. The other
information comprises the information included in the annual report,
other than the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we
are required to determine whether there is a material misstatement
in the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information; we are
required to report that fact. We have nothing to report in this regard.
OPINIONS ON OTHER MATTERS PRESCRIBED BY THE
COMPANIES ACT 2006
In our opinion, based on the work undertaken in the course of the
audit:
•
•
the information given in the strategic report and the directors’
report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been
prepared in accordance with applicable legal requirements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY
EXCEPTION
In the light of the knowledge and understanding of the group and the
parent company and its environment obtained in the course of the
audit, we have not identified material misstatements in the strategic
report or the directors’ report.
We have nothing to report in respect of the following matters in relation
to which the Companies Act 2006 requires us to report to you if, in
our opinion:
•
•
•
•
adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches
not visited by us; or
the parent company financial statements are not in agreement
with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law
are not made; or
we have not received all the information and explanations we
require for our audit.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the directors’ responsibilities statement set
out on page 37, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the directors determine
is necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the group’s and the parent company’s ability to continue as
a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company or
to cease operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE
FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the
aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of
our auditor’s report.
USE OF OUR REPORT
This report is made solely to the parent company’s members, as a
body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to
the parent company’s members those matters we are required to state
to them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the parent company and the parent company’s
members as a body, for our audit work, for this report, or for the
opinions we have formed.
Stuart Wood (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Manchester
United Kingdom
22 January 2019
BDO LLP is a limited liability partnership registered in England and
Wales (with registered number OC305127).
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
50
www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018
Financial Statements
Consolidated Statement of Comprehensive Income
Consolidated and Company Balance Sheet
Consolidated and Company Statement of Changes in Equity
Consolidated and Company Cash Flow Statement
Principal Accounting Policies
Notes to the Financial Statements
52
53
54-55
56
57-61
62-92
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
51
03
Consolidated Statement of Comprehensive Income
For the year ended 31 October 2018
2018
2017
Note
£000
£000
£000
£000
CONTINUING OPERATIONS
Revenue
Cost of sales
Gross profit
Manufacturing, distribution and selling costs
Administrative expenses
Other operating income
Adjusted operating profit1
Amortisation of acquired intangible assets and share-based
payment expense
Non-recurring items
Group operating profit
Interest income
Interest expense
Share of profits/losses in associates and joint ventures accounted
for using the equity method
Share of tax incurred by associates and joint ventures
Profit before taxation from continuing operations
Taxation
Profit for the year from continuing operations
DISCONTINUED OPERATIONS
Loss for the year from discontinued operations after tax
Profit/(loss) for the year and other comprehensive income
attributable to the equity holders
Basic earnings per ordinary share (pence)
Profit from continuing operations
(Loss) from discontinued operations
Diluted earnings per ordinary share (pence)
Profit from continuing operations
(Loss) from discontinued operations
2
4
5
5
3
3
7
10
11
13
13
92
(283)
376
(82)
66
(219)
267
(70)
462,657
(400,950)
61,707
(46,718)
(5,896)
335
9,428
(71)
69
9,426
(191)
294
9,529
(1,821)
7,708
-
7,708
39.11
-
39.11
38.94
-
38.94
390,724
(337,835)
52,889
(40,009)
(5,335)
326
7,871
(156)
(95)
7,620
(153)
197
7,664
(1,359)
6,305
(6,586)
(281)
32.29
(33.72)
(1.43)
31.87
(33.29)
(1.42)
The notes on pages 62 to 92 form part of these financial statements.
There was no other comprehensive income during the current and prior year.
1Adjusted results are after adding back amortisation of acquired intangible assets, share-based payment expense and non-recurring items.
52
www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018
Consolidated and Company Balance Sheet
For the year ended 31 October 2018
Registered Number 2704051
Group
Company
2018
£000
2017
£000
2018
£000
2017
£000
Note
14
16
17
18
18
15
20
21
19
24
25
22
23
25
22
27
28
14,818
2,372
21,979
-
2,863
89
42,121
52,250
70,907
2,812
6,676
132,645
174,766
(3,887)
(74,522)
(1,102)
(79,511)
53,134
(3,766)
(157)
(259)
(4,182)
(83,693)
91,073
4,943
29,941
3,377
52,812
91,073
14,266
2,372
18,709
-
3,444
95
38,886
30,056
62,961
2,844
8,914
104,775
143,661
(2,512)
(52,738)
(847)
(56,097)
48,678
(1,896)
(22)
(254)
(2,172)
(58,269)
85,392
4,916
29,529
3,319
47,628
85,392
-
2,372
8,489
42,562
191
-
53,614
-
2,799
2,812
4
5,615
59,229
(2,647)
(249)
(55)
(2,951)
2,664
-
2,372
7,748
12,828
259
-
23,207
-
30,318
2,844
1
33,163
56,370
(1,494)
(1,980)
-
(3,474)
29,689
(2,356)
(1,111)
-
-
(2,356)
(5,307)
53,922
4,943
29,941
3,208
15,830
53,922
-
-
(1,111)
(4,585)
51,785
4,916
29,529
3,150
14,190
51,785
ASSETS
NON-CURRENT ASSETS
Goodwill
Investment property
Property, plant and equipment
Investment in subsidiaries
Investments accounted for using equity method
Intangibles
CURRENT ASSETS
Inventories
Trade and other receivables
Financial assets
- loan to joint venture
Cash and cash equivalents
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Financial liabilities - borrowings
Trade and other payables
Current tax liabilities
NET CURRENT ASSETS
NON-CURRENT LIABILITIES
Financial liabilities – borrowings
Trade and other payables
Deferred tax liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital
Share premium
Other reserves
Retained earnings
TOTAL EQUITY
J J McCarthy – Director
B P Roberts - Director
The Company generated profit of £4,164,000 (2017: loss of £3,166,000).
The notes on pages 62 to 92 form part of these financial statements.
The financial statements were approved by the Board of Directors on 22 January 2019 and signed on its behalf.
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Consolidated Statement of Changes in Equity
As at 31 October 2018
Group
At 1 November 2016
Loss for the year
Total comprehensive loss for the year
Transactions with owners of the Company, recognised directly in equity:
Shares issued during the year
Own shares disposed of by ESOP trust
Dividends
Equity settled share-based payment transactions
Total contributions by and distributions to owners of the Company
At 31 October 2017
Profit for the year
Total comprehensive income for the year
Transactions with owners of the Company, recognised directly in equity:
Shares issued during the year
Own shares disposed of by ESOP trust
Dividends
Equity settled share-based payment transactions
Total contributions by and distributions to owners of the Company
Share
capital
£000
Share
premium
account
£000
Other
reserves
£000
Retained
earnings
£000
Total
£000
4,874
28,848
2,933
50,293
86,948
-
-
42
-
-
-
42
-
-
681
-
-
-
681
-
-
-
244
-
142
386
(281)
(281)
-
-
(2,384)
-
(2,384)
(281)
(281)
723
244
(2,384)
142
(1,275)
4,916
29,529
3,319
47,628
85,392
-
-
27
-
-
-
27
-
-
412
-
-
-
412
-
-
-
3
-
55
58
7,708
7,708
7,708
7,708
-
-
(2,524)
-
(2,524)
439
3
(2,524)
55
(2,027)
At 31 October 2018
4,943
29,941
3,377
52,812
91,073
The notes on pages 62 to 92 form part of these financial statements
There was no other comprehensive income during the current and prior years.
54
www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018 Company Statement of Changes in Equity
As at 31 October 2018
Company
At 1 November 2016
Loss for the year
Total comprehensive loss for the year
Transactions with owners of the Company, recognised directly in equity:
Shares issued during the year
Own shares disposed of by ESOP trust
Dividends
Equity settled share-based payment transactions
Total contributions by and distributions to owners of the Company
At 31 October 2017
Profit for the year
Total comprehensive income for the year
Transactions with owners of the Company, recognised directly in equity:
Shares issued during the year
Own shares disposed of by ESOP trust
Dividends
Equity settled share-based payment transactions
Total contributions by and distributions to owners of the Company
Share
capital
£000
Share
premium
account
£000
Other
reserves
£000
Retained
earnings
£000
Total
£000
4,874
28,848
2,764
19,740
56,226
-
-
42
-
-
-
42
-
-
681
-
-
-
681
-
-
-
244
-
142
386
(3,166)
(3,166)
(3,166)
(3,166)
-
-
(2,384)
-
(2,384)
723
244
(2,384)
142
(1,275)
4,916
29,529
3,150
14,190
51,785
-
-
27
-
-
-
27
-
-
412
-
-
-
412
-
-
-
3
-
55
58
4,164
4,164
4,164
4,164
-
-
(2,524)
-
(2,524)
439
3
(2,524)
55
(2,027)
At 31 October 2018
4,943
29,941
3,208
15,830
53,922
The notes on pages 62 to 92 form part of these financial statements.
There was no other comprehensive income during the current and prior years.
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Consolidated and Company Cash Flow Statement
As at 31 October 2018
Note
38
Cash flows from operating activities
Cash generated from/(used in) continuing operations
Interest received
Interest paid
Tax paid
Net cash flows from/(used by) operating activities in continuing
operations
Net cash generated from operating activities in discontinued operations
Net cash generate from/(used by) operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Purchase of property, plant and equipment
Proceeds on sale of investments
Acquisition of subsidiaries, net of cash acquired
Disposal of subsidiary, net cash disposed of
Own shares disposed of by ESOP trust
Dividends received from associates
Dividends received from subsidiaries
Net cash (used by)/from investing activities in continuing operations
Net cash used by investing activities in discontinued operations
Net cash used by investing activities
Cash flows from financing activities
Proceeds from the issue of ordinary share capital
Finance lease principal repayments
Proceeds from borrowings
Repayment of borrowings
Dividends paid to shareholders
Net cash (used by)/ generated from financing activities in continuing
operations
Net cash used by financing activities in discontinued operations
Net cash (used by)/generated from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
Group
Company
2018
£000
2,831
92
(283)
(1,674)
966
-
966
548
(2,310)
20
(1,021)
-
3
755
-
(2,005)
-
(2,005)
439
(1,453)
3,500
(1,161)
(2,524)
(1,199)
-
(1,199)
(2,238)
8,914
6,676
2017
£000
6,053
66
(219)
(1,496)
4,404
282
4,686
177
(2,018)
150
-
(678)
244
-
-
(2,125)
(36)
(2,161)
723
(1,152)
-
(896)
(2,384)
(3,709)
(13)
(3,722)
(1,197)
10,111
8,914
2018
£000
(2,154)
-
(39)
(20)
(2,213)
-
(2,213)
362
(1,187)
20
-
-
3
755
1,950
1,903
-
1,903
439
-
3,500
(1,102)
(2,524)
313
-
313
3
1
4
2017
£000
538
-
-
(93)
445
-
445
-
(239)
150
-
-
244
-
1,900
2,055
-
2,055
723
-
-
(839)
(2,384)
(2,500)
-
(2,500)
-
1
1
The notes on pages 62 to 92 form part of these financial statements.
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Principal Accounting Policies
GENERAL INFORMATION
Wynnstay Group Plc has a number of operations. These are described in the segmental analysis in note 3.
Wynnstay Group Plc is a company incorporated and domiciled in the United Kingdom. The address of its registered office is shown on page
30. The Company has its primary listing on AIM, part of the London Stock Exchange.
ACCOUNTING POLICIES
The Group’s principal accounting policies adopted in the preparation of these financial statements are set out below.
Basis of preparation
The Group’s financial statements have been prepared in accordance
with International Financial Reporting Standards as adopted by the
EU (IFRS), International Financial Reporting Interpretation Committee
(IFRIC) interpretations and those provisions of the Companies Act
2006 applicable to companies reporting under IFRS. The Group
financial statements have been prepared under the historical cost
convention other than certain assets which are at deemed cost under
the transition rules, share-based payments which are included at fair
value and certain financial instruments which are explained in the
relevant section below. A summary of the material Group accounting
policies is set out below and have been applied consistently.
The preparation of financial statements in conformity with IFRS requires
the use of certain critical accounting estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Although these estimates are
based on management’s best knowledge of the amount, event or
actions, actual results ultimately may differ from those estimates.
Going concern
As highlighted in note 24 to the financial statements, the Group meets
its day to day working capital requirements through the use of cash
balances and overdraft facilities which are due for review on an annual
basis. The current economic conditions create uncertainty, particularly
over: (a) the level of demand for the Group’s products; (b) the exchange
rate between sterling and the US dollar which has consequences for
the cost of the Group’s raw materials; and (c) the availability of bank
finance in the foreseeable future.
The Group’s forecasts and projections, taking account of reasonably
possible changes in trading performance, show that the Group should
be able to operate within the level of its current cash balances and
debt facilities. These debt facilities consist of term and revolving
credit loans, with an average maturity of three years and overdraft
facilities scheduled for review, as usual, in April 2019. No matters
have been drawn to the Group’s attention by its bankers to suggest
that the facilities or the existing overdraft arrangements may not be
forthcoming.
Basis of consolidation
The Group’s consolidated financial statements incorporate the financial
statements of Wynnstay Group Plc (‘the Company’) and entities
controlled by Wynnstay Group Plc (its ‘subsidiaries’) together with the
Group’s share of the results of its associates and joint ventures.
Where the company has control over an investee, it is classified as a
subsidiary. The company controls an investee if all three of the following
elements are present: power over the investee, exposure to variable
returns from the investee, and the ability of the investor to use its
power to affect those variable returns. Control is reassessed whenever
facts and circumstances indicate that there may be a change in any of
these elements of control.
De-facto control exists in situations where the company has the
practical ability to direct the relevant activities of the investee without
holding the majority of the voting rights. In determining whether de-
facto control exists the company considers all relevant facts and
circumstances, including:
- The size of the company’s voting rights relative to both the size
and dispersion of other parties who hold voting rights
- Substantive potential voting rights held by the company and
by other parties
- Other contractual arrangements
- Historic patterns in voting attendance.
The consolidated financial statements present the results of the
company and its subsidiaries (“the Group”) as if they formed a single
entity. Intercompany transactions and balances between group
companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of
business combinations using the acquisition method. In the statement
of financial position, the acquiree’s identifiable assets, liabilities and
contingent liabilities are initially recognised at their fair values at the
acquisition date. The fair value of contingent consideration is assessed
using management judgement to reflect the likelihood of the pertinent
matters being achieved. The results of acquired operations are
included in the consolidated statement of comprehensive income from
the date on which control is obtained. They are deconsolidated from
the date on which control ceases.
Associates are entities over which the Group has significant influence
but not control, generally accompanied by a share of between 20%
and 50% of the voting rights. Joint ventures are entities over which the
Group has joint control. Investments in associates and joint ventures
are accounted for using the equity method.
Revenue recognition
Revenue represents the invoiced value of sales which fall within
Wynnstay Group’s ordinary activities. Revenue is measured at the fair
value of the contract net of rebates excluding value added tax and
after eliminating sales within the Group.
Agriculture
Revenue from the sale of goods is recognised when the Group has
transferred the significant risks and rewards of ownership of goods
to the buyer, for example, delivering products into the customer’s
possession, and when the amount of revenue can be measured
reliably and when it is probable that the economic benefits associated
with the transaction will flow to the Group.
Specialist Agricultural Merchanting
Revenue from the sale of goods is recognised either at the point of
sale through the till or when the Group has transferred the significant
risks and rewards of ownership of goods to the buyer, for example,
delivering products into the customer’s possession, and when the
amount of revenue can be measured reliably and when it is probable
that the economic benefits associated with the transaction will flow to
the Group.
Discontinued operations
Where an asset or group of assets (a disposal group) is available for
immediate sale and the sale is highly probable and expected to occur
within one year then the disposal group is classified as held for sale.
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Principal Accounting Policies continued
The disposal group is measured at the lower of the carrying amount
and fair value less costs to sell. Depreciation is not charged on such
assets.
Trade payables
Trade and other payables are recognised at fair value.
Where a group of assets that comprises operations that can be clearly
distinguished operationally and for financial reporting purposes from
the rest of the group (a component), has been disposed of or classified
as held for sale, and it:
•
•
represents a separate major line of business or geographical
area of operations; or
is part of a single co-ordinated plan to dispose of a separate
major line of business or geographical area of operations; or
•
is a subsidiary acquired exclusively with a view to resale;
then the component is classified as a discontinued operation.
Amortisation of acquired intangible assets, share-based
payment expense and non-recurring items
Amortisation of acquired intangible assets, share-based payment
expense and non-recurring items that are material by size and/or by
nature are presented within their relevant income statement category
but highlighted separately on the face of the consolidated statement of
comprehensive income and within a note to the financial statements,
see note 5. The separate disclosure of profit before these items
helps provide a better indication of the Group’s underlying business
performance is discussed in the non-IFRS alternative performance
measure ‘Underlying pre-tax profit’ in the Finance Review on page 22.
Events which may give rise to non-recurring items include, but are not
limited to, gains or losses on the disposal of subsidiaries/businesses,
gains or losses on the disposal or revaluation of properties, gains
or losses on the disposal of investments, the restructuring of the
business, the integration of new businesses, acquisition related
costs, changes to estimates in relation to contingent consideration for
prior period business combinations and asset impairments including
impairment of goodwill.
Financial instruments
Financial assets and liabilities are recognised on the Company and
Group’s consolidated balance sheet when the Company and/or Group
becomes a party to the contractual provisions of the instrument. The
main categories of financial instruments are:
Trade receivables
Trade and other receivables are recognised at fair value, less any
impairment losses.
Investments
Investments are initially measured at cost. They are classified as
either ‘available-for-sale’, ‘fair value’, or ‘held to maturity’. Where
securities are designated as at ‘fair value’ gains or losses arising
from changes in fair value are included in the net profit or loss for
the period. For ‘available-for-sale’ investments, gains or losses arising
from changes in fair value are recognised directly in equity, until the
security is disposed of or is determined to be impaired, at which time
the cumulative gain or loss previously recognised in equity is included
in the net profit or loss for the period. Equity investments that do not
have a quoted market price in an active market and whose fair value
cannot be reliably measured by other means are held at cost.
Interest-bearing borrowings
Interest-bearing bank loans and overdrafts are initially recorded at
fair value, net of attributable transaction costs. Subsequent to initial
recognition, interest-bearing borrowings are stated at amortised cost
with any difference between proceeds and redemption value being
recognised in the Group Statement of Consolidated Income over the
period of the borrowings on an effective interest basis.
Financial Guarantees
The Group enters into financial guarantees with its subsidiaries. These
guarantees are accounted for as insurance contracts.
Equity instruments
Equity instruments issued by the Group and/or Company are recorded
at the proceeds received, net of direct issue costs. An equity instrument
is any contract that evidences a residual interest in the assets of the
Group and/or Company after deducting all of its liabilities.
Derivative financial instruments and hedging
The Group uses derivative financial instruments to hedge its exposure
to foreign exchange, and commodity risks arising from day to day
activities. The Group does not hold or issue derivative financial
instruments for trading purposes, however, if derivatives do not qualify
for hedge accounting they are accounted for as such.
Derivative financial instruments are recognised and stated at fair value.
Where derivatives do not qualify for hedge accounting, any gains or
losses on re-measurement are immediately recognised in the Group
Statement of Consolidated Income. Where derivatives qualify for hedge
accounting, recognition of any resultant gain or loss depends on the
nature of the hedge relationship and the item being hedged. In order
to qualify for hedge accounting, the Group is required to document
from inception the relationship between the item being hedged and
the hedging instrument. The Group is also required to document and
demonstrate an assessment of the relationship between the hedged
item and the hedging instrument, which shows that the hedge will
be highly effective on an ongoing basis. This effectiveness testing is
performed at each period end to ensure that the hedge remains highly
effective.
Derivative financial instruments with maturity dates of more than one
year from the balance sheet date are disclosed as non-current.
Fair value hedging
Derivative financial instruments are classified as fair value hedges
when they hedge the Group’s exposure to changes in the fair value of
a recognised asset or liability. Changes in the fair value of derivatives
that are designated and qualify as fair value hedges are recorded in
the Group Statement of Comprehensive Income together with any
changes in the fair value of the hedged item that is attributable to the
hedged risk.
Leases
Leases are classified as finance leases at inception where substantially
all of the risks and rewards of ownership are transferred to the Group.
Assets classified as finance leases are capitalised on the balance
sheet and are depreciated over the expected useful life of the asset.
The interest element of the rental obligations is charged to the
Group Statement of Comprehensive Income over the period of the
lease. Rentals paid under operating leases are charged to the Group
Statement of Comprehensive Income on a straight-line basis over the
term of the lease. Leasehold land is normally classified as an operating
lease. Payments made to acquire leasehold land are included in
prepayments at cost and are amortised over the life of the lease. Any
incentives to enter into operating leases are recognised as a reduction
of rental expense over the lease term on a straight-line basis.
Goodwill
Goodwill represents the excess of the cost of acquisition over the fair
value of the identifiable assets, liabilities and contingent liabilities of the
acquired entity at the date of the acquisition. At the date of acquisition,
goodwill is allocated to cash generating units for the purpose of
impairment testing. Goodwill is recognised as an asset and assessed
for impairment annually. Any impairment is recognised immediately in
the Group Statement of Comprehensive Income. Once recognised, an
impairment of goodwill is not reversed.
Impairment of assets
At each reporting date, the Group assesses whether there is any
indication that an asset may be impaired. Where an indicator of
impairment exists, the Group makes an estimate of recoverable
amount. Where the carrying amount of an asset exceeds its
recoverable amount the asset is written down to its recoverable
58
www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018 amount. Recoverable amount is the higher of fair value less costs to
sell and value in use, and is considered for each individual asset. If the
asset does not generate cash flows that are largely independent of
those from other assets or groups of assets, the recoverable amount
of the cash generating unit to which the asset belongs is determined.
Discount rates reflecting the asset specific risks and the time value of
money are used for the value in use calculation.
Investment property
Investment properties are properties which are held either to earn
rental income or for capital appreciation or for both. Investment
properties are stated at fair value.
Any gain or loss arising from the change in fair value is recognised in
profit and loss. Rental income from investment property is accounted
for on a receivable basis.
Property, plant and equipment
Property, plant and equipment are stated at cost, net of accumulated
depreciation and any provision for impairment losses. Depreciation is
provided at rates calculated to write off the cost less estimated residual
value of fixed assets over their expected useful lives as follows:
• Freehold property - 2.5% - 5% per annum straight line
• Lease premium
- over the period of the lease
• Leasehold land and buildings
- over the period of the lease
• Plant and machinery and office equipment
- 10% - 33% per annum straight line
• Motor vehicles
- 20% - 30% per annum straight line
Intangible assets
The cost of an intangible asset acquired in a business combination is
its fair value at its acquisition date.
Amortisation is charged to the profit and loss account on a
straight-line basis over the estimated useful lives of intangible assets.
Intangible assets are amortised from the date they are available for
use. The estimated useful lives are as follows:
• Customer order book - 5-10 years
• Trademarks - 5 years
Employment benefit costs
The Group operates a defined contribution pension scheme.
Contributions to this scheme are charged to the Group Statement of
Comprehensive Income as they are incurred, in accordance with the
rules of the scheme.
Inventories
Inventories are stated at the lower of cost and net realisable value.
Cost comprises direct materials and, where applicable, direct labour
costs and those overheads that have been incurred in bringing the
inventories to their present location and condition. Where appropriate,
cost is calculated on a specific identification basis. Otherwise
inventories are valued using the first-in-first-out method. Net realisable
value represents the estimated selling price less all estimated costs
to completion and costs to be incurred in marketing, selling and
distribution.
Taxation including deferred taxation
The income tax expense represents the sum of the current income
tax and deferred income tax. Current income tax is based on
the taxable profits for the year. Taxable profit differs from the profit
as reported in the Group Statement of Comprehensive Income
because it excludes items of income and expense that are taxable or
deductible in other years and it further excludes items that are never
taxable or deductible. The Group’s liability for current tax is calculated
using tax rates that have been enacted or substantively enacted by
the balance sheet date.
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the Group financial statements.
However, deferred income tax is not accounted for if it arises from initial
recognition of an asset or liability other than a business combination.
Deferred income tax is determined using tax rates (and laws) that
have been enacted or substantively enacted by the balance sheet
date and are expected to apply when related deferred income tax
asset is realised or the deferred income tax liability settled. Deferred
income tax assets are recognised to the extent that it is probable that
future taxable profits will be available against which the temporary
differences can be utilised.
Dividends
Final equity dividends to the shareholders of the Company are
recognised in the period that they are approved by the shareholders.
Interim equity dividends are recognised in the period that they are paid.
Share-based payments
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. Fair value is measured
by use of a 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. The movements in respect of equity-settled share-
based payments are recognised in other reserves.
Investments
Investments held as fixed assets are shown at cost less provisions for
impairment.
Cash and cash equivalents
Cash and cash equivalents, for the purposes of the consolidated
cash flow statement, comprise cash at bank and in hand, money
market deposits and other short term highly liquid investments with
original maturities of three months or less and bank overdrafts. Bank
overdrafts are presented in borrowings within current liabilities in the
balance sheet.
Foreign currencies
Monetary assets and liabilities denominated in foreign currencies are
translated into sterling at the rate of exchange ruling at the balance
sheet date. Transactions in foreign currencies are translated into
sterling at the rate ruling on the date of the transaction. Exchange gains
and losses are recognised in the Group Statement of Comprehensive
Income.
Employee share ownership trust
The Company operates an employee share ownership trust it is
accounted for as a separate entity, and therefore the assets, liabilities,
income and cost of the ESOP are incorporated into the financial
statements of the Group.
Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the
future. 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.
In the future, actual experience may differ from these estimates and
assumptions. The estimates and assumptions that have a significant
risk of causing a material adjustment to the carrying amount of assets
and liabilities within the next financial year are discussed below.
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Principal Accounting Policies continued
Judgements
Application of the “own use” exemption
Forward contracts are entered into by the Group to purchase and/
or sell grain and other agricultural commodities, and management
judge that these forward commodity contracts are entered into for
the Groups “own use” rather than as trading instruments when they
are entered into. The IAS 39 Financial Instruments: Recognition and
Measurement “own use” exemption removes the otherwise required
requirement to revalue all open forward contracts to fair value at the
year end.
The Group does utilise derivative grain futures contracts to commercially
hedge its open positions. At the period end any open derivatives are
fair valued, see note 26.
Estimates and assumptions
Impairment of goodwill
The carrying value of goodwill must be assessed for impairment
annually. This requires an estimation of the value in use of the cash
generating units to which goodwill is allocated. Value in use is dependent
on estimations of future cash flows from the cash generating unit and
the use of an appropriate discount rate to discount those cash flows
to their present value.
Directors consider the sensitivity to key assumptions and one cash
generating unit (GrainLink) contains reasonably possible changes in
key assumptions which could have a material impact on the carrying
value of goodwill, see note 14.
Provision for impairment of trade receivables
The financial statements include a provision for impairment of trade
receivables that is based on management’s estimation of recoverability.
There is a risk that the provision will not match the trade receivables
that ultimately prove to be irrecoverable, see note 26.
Fair value measurement
A number of assets and liabilities included in the Group’s financial
statements require measurement at, and/or disclosure of, fair value.
The fair value measurement of the Group’s financial and non-financial
assets and liabilities utilises market observable inputs and data as far
as possible. Inputs used in determining fair value measurements are
categorised into different levels based on how observable the inputs
used in the valuation technique are (the ‘fair value hierarchy’):
- quoted prices (unadjusted) in active markets for identical assets
or liabilities (Level 1);
-
inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (that is, as
prices) or indirectly (that is, derived from prices) (Level 2); and
New standards and interpretations
There have been a number of minor changes to standards which
became applicable for the year ended 31 October 2018, none of which
have been assessed as having a significant impact on the Group.
At the date of authorisation of these financial statements the following
Standards and Interpretations, which have not been applied in these
financial statements, were in issue but not yet effective (not all of which
have been endorsed by the EU):
EU effective date for
accounting periods
commencing on or after
New or amendments to existing
standards
IFRIC 22 Foreign Currency Translations and
Advance Consideration
1 January 2018
Amendments to IFRS 2 Classification and
Measurement of Share-based payment
Transactions
IFRS 15 Revenue from Contracts with
Customers
Amendments to IAS 40: Transfers of
Investment Property
Annual Improvements to IFRS Standards
2014 – 2016 cycle dealing with matters
in IFRS 1 First-time Adoption and IAS
28 Investments in Associates and Joint
Ventures
Amendments to IFRS 4: Applying IFRS 9
Financial Instruments with IFRS 4 Insurance
Contracts
IFRS 9 Financial Instruments
Clarifications to IFRS 15 Revenue from
Contracts with Customers
IFRS 16 Leases
Amendments to IFRS 9 Prepayment
Features with Negative Compensation
IFRIC 23 Uncertainty over Income Tax
Positions
Amendments to IAS 28: Long-term
Interests in Associates and Joint Ventures
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2019
1 January 2019
1 January 2019
1 January 2019
Annual Improvements to IFRSs (2015-2017
cycle)
1 January 2019
inputs for the asset or liability that are not based on observable
-
market data (that is, unobservable inputs) (Level 3).
Amendments to IAS 19: Plan Amendment,
Curtailment or Settlement
1 January 2019
The classification of an item into the above levels is based on the
lowest level of the inputs used that has a significant effect on the fair
value measurement of the item. Transfers of items between levels are
recognised in the period they occur.
The Group measures a number of items at fair value:
-
-
Investment property (note 16)
Financial instruments (note 26)
- Contingent consideration (note 31)
- Equity settled share-based payment liabilities (note 29)
Amendments to References to the
Conceptual Framework in IFRS Standards
Amendments to IFRS 3: Business
Combinations
Amendments to IAS 1 and IAS 8: Definition
of Material
IFRS 17 Insurance Contracts
1 January 2020
1 January 2020
1 January 2020
1 January 2021
It is considered that the above standards and amendments, with the
exception of IFRS 9 ‘Financial instruments’ and IFRS 16 ‘Leases’, will
not have a significant effect on the results or net assets of the Group
or Company.
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Consequently, the adoption of IFRS 9 will not have a material effect on
the Financial statements.
IFRS 16
IFRS 16, ‘Leases’, is effective for period beginning on or after 1
January 2019, and will therefore first apply to the Group in the year
ending 31 October 2020. The first interim accounts that will be
prepared in accordance with the new standard are the 2020 half-year
results. Adoption of IFRS 16 will result in the Group recognising right
of use assets and lease liabilities for all contracts that are, or contain, a
lease. For leases currently classified as operating leases, under current
accounting requirements the Group does not recognise assets or
liabilities, and instead spreads the lease payments on a straight-line
basis over the lease term, disclosing in its annual financial statements
the total commitment.
The Board has decided it will apply the first variation of the modified
retrospective approach and therefore at initial application an amount
equal to the lease liability, using the entity’s current incremental
borrowing rate. This will ensure that there is no immediate impact to
net assets on that date.
Assuming the Group’s lease commitments remain at a similar level to
those at 31 October 2018 and the incremental borrowing rate is 6%,
the effect of adopting IFRS 16 is expected to result in the recognition of
right-of-use assets and lease liabilities of approximately £8.8 million at
1 November 2019. However, the actual number of leases in existence
and the incremental borrowing rate in force could change and this may
result in the actual right-of-use assets and lease liabilities being higher
or lower than this.
Instead of recognising an operating expense for its operating lease
payments, the Group will instead recognise interest on its lease
liabilities and amortisation on its right-of-use assets. The overall
financial results in the year ending 31 October 2020 are expected to
be adversely impacted by approximately £270,000 due to the front
end loading of interest versus smooth operating lease rentals but
this may change due to the number of leases in existence and the
incremental borrowing rate in force at the time of adoption.
IFRS 15
IFRS 15 ‘Revenue from Contracts with Customers’, is effective for
accounting periods beginning on or after 1 January 2018 and will
therefore first apply to the Group in the year ending 31 October
2019. The first interim accounts that will be prepared in accordance
with the new standard are the 2019 half-year results. The Group has
assessed its income streams using the five-stage revenue recognition
model and agent versus principal considerations and concluded that
the Group results and net assets will not be materially impacted by
this standard.
As a manufacturer and specialist merchant, the Group earns the
majority of its revenues from the sale of goods rather than services,
and hence recognises revenue at a point of time, typically on delivery
of the goods to the customers’ premises or at the point of shipping.
Contracts are identified at the point an order is placed, and the
performance obligations, transaction price and the separate contract
obligations are all clearly defined. There is limited judgement needed
in identifying the point control passes: once physical delivery of the
products to the agreed location has occurred, the Group no longer
has physical possession, usually will have a present right to payment
(as a single payment on delivery) and retains none of the significant
risks and rewards of the goods in question. Some contracts provide
customers with a limited right of return, these relate to the Group’s
Specialist Agricultural Merchanting activities. Experience has shown
that the value of these returns is immaterial.
IFRS 9
IFRS 9, ‘Financial instruments’, (which replaces IAS 39 Financial
Instruments: Recognition and Measurement) is effective for accounting
periods beginning on or after 1 January 2018 and will therefore first
apply to the Group in the year ending 31 October 2019. The first interim
accounts that will be prepared in accordance with the new standard
are the 2019 half-year results. IFRS 9 requires entities to provide
for possible future credit losses on loans and receivables, including
trade receivables, even if it is highly likely that the loan or receivable
will be fully collectible. The standard introduces an “expected credit
loss” model that focuses on the risk that a loan or receivable will
default rather than whether a loss has been incurred. This will result
in increased impairment provisions and greater judgement due to
the need to factor in forward looking information when estimating
the probability of default occurring over the contractual life of its
trade receivables on initial recognition of these assets. Under the
existing incurred loss model, the provision amounted to £708,456 at
31 October 2018 and £718,597 at 31 October 2017 (see note 21).
The adoption of the expected credit loss model from IFRS 9 is not
expected to have a material impact on the financial statements. This
is due to the diversified customer base and low history of default,
together with partial credit insurance being in place for some debts.
Forward looking information has been considered when estimating
the probability of default. The UK and devolved Governments have
announced continued agricultural funding support schemes for the
Group’s farmer customer base following the termination of current EU
Common Agricultural Policy (CAP) payments, and therefore no factors
have been identified at this time to indicate an adjustment is necessary
to the historic default rate.
The Group has decided to adopt the hedge accounting provisions in
IFRS 9 to enable it to apply hedge accounting for hedging relationships
which failed to qualify for hedge accounting under IAS 39 due to its
80-125% hedge effectiveness criterion. This change will be applied
prospectively from 1 November 2018 and there is no change to net
assets as at 31 October 2018 or reported profit for the year then
ended.
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Notes to the Financial Statements
For the year ended 31 October 2018
1.
2.
The Company is taking advantage of the exemption in s408 of the Companies Act 2006 not to present its individual income statement
and related notes that form part of these approved financial statements.
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 divisions and to access 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 divisions, 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 of a wide range of specialist products to farmers, smallholders, and pet owners.
Other – Miscellaneous operations not classified as Agriculture or Specialist Agricultural Merchanting.
The Group disposed of Just for Pets Limited, a part of the Specialist Agricultural Merchanting segment, on 10 October 2017 when Just
for Pets Limited entered administration.
The Board assesses the performance of the operating divisions based on a measure of operating profit. Finance 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 financial statements.
No segment is individually reliant on any one customer.
The segment results for the year ended 31 October 2018 for continuing operations are as follows:
Year ended 31 October 2018
Revenue from external customers
Segment result
Group operating profit before non-recurring items
Share of results of associates and joint ventures before tax
Non-recurring items
Interest income
Interest expense
Profit before tax from continuing operations
Income taxes (includes tax of associates and joint ventures)
Profit for the year attributable to equity shareholders from
continuing operations
Assets
Segment net assets
Corporate net debt (note 25)
Segment net assets after corporate net cash
Agriculture
£000
334,337
3,859
427
4,286
Specialist
Agricultural
Merchanting
£000
128,258
5,548
(12)
5,536
Other
£000
62
(50)
(39)
(89)
Total
£000
462,657
9,357
376
9,733
69
92
(283)
9,611
(1,903)
7,708
43,878
41,848
6,324
92,050
(977)
91,073
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2.
SEGMENTAL REPORTING continued
The segment results for the year ended 31 October 2017 for continuing operations are as follows:
Year ended 31 October 2017
Revenue from external customers
Segment result
Group operating profit before non-recurring items
Share of results of associates and joint ventures before tax
Non-recurring items
Interest income
Interest expense
Profit before tax from continuing operations
Income taxes (includes tax of associates and joint ventures)
Profit for the year attributable to equity shareholders from
continuing operations
Assets
Segment net assets
Corporate net debt (note 25)
Segment net assets after corporate net cash
Agriculture
£000
280,870
3,017
320
3,337
Specialist
Agricultural
Merchanting
£000
109,727
4,740
-
4,740
Other
£000
127
(42)
(53)
(95)
Total
£000
390,724
7,715
267
7,982
(95)
66
(219)
7,734
(1,429)
6,305
33,908
39,739
7,239
80,886
4,506
85,392
3.
FINANCE COSTS
Interest expense:
Interest payable on borrowings
Interest payable on finance leases
Interest and similar charges payable
Interest income
Interest receivable
Finance costs
2018
£000
2017
£000
Continuing
operations
Discontinued
operations
Continuing
operations
Discontinued
operations
(158)
(125)
(283)
92
92
(191)
-
-
-
-
-
-
(114)
(105)
(219)
66
66
(153)
-
(3)
(3)
-
-
(3)
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Notes to the Financial Statements continued
4.
OTHER OPERATING INCOME
Rental income
Other operating income
2018
£000
2017
£000
Continuing
operations
Discontinued
operations
Continuing
operations
Discontinued
operations
335
-
335
-
-
-
326
-
326
22
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5.
AMORTISATION OF ACQUIRED INTANGIBLE ASSETS, SHARE-BASED PAYMENTS AND NON-RECURRING ITEMS
Continuing operations
Amortisation of acquired intangible
assets and share-based payments
Amortisation of intangibles
Cost of share-based reward
Non-recurring items
Goodwill and Investment impairment
Costs of corporate restructuring
Business combination expenses
Profit on disposal of freehold property
2018
£000
16
55
71
138
-
70
(277)
(69)
2017
£000
14
142
156
60
35
-
-
95
The investment impairment relates to unlisted investments.
The goodwill impairment relates to goodwill held on the balance sheet of one of our subsidiaries which related to an acquisition
which took place prior to the subsidiary becoming part of the Wynnstay Group.
The business combination expenses relate to business combinations in the year.
The costs of corporate restructuring in the prior year relates to the dissolution of dormant subsidiaries.
The profit on disposal of property is in relation to the sale of freehold property for one of our depots which was relocated.
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6.
GROUP OPERATING PROFIT
The following items have been included in arriving at operating profit:
2018
£000
Continuing
operations
Discontinued
operations
Staff costs
Cost of inventories recognised as an expense
Depreciation of property plant and equipment:
- owned assets
- under finance leases
Amortisation of intangibles
(Profit) on disposal of fixed assets
Other operating lease rentals payable
Repairs and maintenance expenditure on plant,
property and equipment
Trade receivables impairment
28,132
344,695
2,888
269
16
(328)
2,858
1,809
113
-
-
-
-
-
-
-
-
-
Services provided by the Group’s auditor
During the year the Group obtained the following services from the Group’s auditor:
2017
£000
Discontinued
operations
2,838
-
320
4
-
(8)
2,073
92
-
Continuing
operations
24,975
294,766
1,947
710
14
(73)
2,242
1,851
65
Audit services – statutory audit
Other services relating to taxation
Other services - XBRL tagging
2018
£000
2017
£000
Continuing
operations
Discontinued
operations
Continuing
operations
Discontinued
operations
92
-
-
-
-
-
102
8
2
8
-
-
Included in the Group audit fee are fees of £4,000 (2017: £5,000) paid to the Group’s auditor in respect of the parent company. The
fees relating to the parent company are borne by one of the Group’s and not recharged.
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Notes to the Financial Statements continued
7.
SHARE OF POST-TAX PROFITS OF ASSOCIATES AND JOINT VENTURES
Continuing operations
Share of post-tax profits in associates
Share of post-tax profits in joint ventures
Total share of post-tax profits of associates and joint ventures
2018
£000
19
275
294
2017
£000
17
180
197
8.
STAFF COSTS
The aggregate payroll costs, including Directors’ emoluments, charged in the financial statements for the Group were as follows:
Wages and salaries
Social security costs
Pension and other costs
Cost of share-based reward
2018
£000
2017
£000
Continuing
operations
Discontinued
operations
Continuing
operations
Discontinued
operations
24,864
2,374
839
55
28,132
-
-
-
-
-
22,002
2,030
801
142
24,975
2,672
135
31
-
2,838
The average number of employees, including Directors, employed by the Group during the year was as follows:
Administration
Production
Sales, distribution and retail
2018
No.
2017
No.
Continuing
operations
Discontinued
operations
Continuing
operations
Discontinued
operations
104
126
700
930
-
-
-
-
99
110
614
823
13
-
227
240
The parent company did not have any employees in the current or prior year.
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DIRECTORS’ REMUNERATION
Directors’ emoluments
Social security costs
Company contributions to money purchase pension schemes
Aggregate gains made on the exercise of Approved SAYE options
2018
£000
704
79
36
9
828
2017
£000
687
79
30
2
798
Details of the Directors’ interest in the share capital of the company, including outstanding share options at the year end, are provided
in the Directors’ Report. The following remuneration detail is provided in accordance with AIM Rule 19.
Basic salary
Benefits
in kind
£000
£000
Annual
bonuses
£000
2018
Total
£000
2017
Total
£000
Name of Director
Executives
K R Greetham (retired 11 July 2018)
G W Davies (appointed 8 May 2018)
B P Roberts
D A T Evans
Non-Executives
J J McCarthy
S J Ellwood
P M Kirkham
H J Richards
98
99
135
119
50
34
34
34
603
12
-
11
11
-
-
1
1
36
15
-
11
39
-
-
-
-
65
125
99
157
169
50
34
35
35
704
Retirement benefits are accruing to the following number of directors under:
Money purchase pension scheme
Contribution paid by the Group to money purchase pension schemes in
respect of such directors were:
K R Greetham (retired 11 July 2018)
G W Davies (appointed 8 May 2018)
B P Roberts
D A T Evans
Gains made on exercise of approved and unapproved share option schemes:
K R Greetham (retired 11 July 2018)
G W Davies (appointed 8 May 2018)
B P Roberts
D A T Evans
2018
No.
4
£000
9
10
10
7
36
2018
£000
-
-
-
9
9
218
-
169
146
50
34
35
35
687
2017
No.
3
£000
14
-
10
6
30
2017
£000
-
-
2
-
2
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Notes to the Financial Statements continued
10.
TAXATION
Analysis of tax charge in year:
Continuing operations
Current tax
- continuing operations
- adjustments in respect of prior years
Total current tax
Deferred tax
- accelerated capital allowances
Total deferred tax
Tax on profit on ordinary activities
Factors affecting tax charge for the year
2018
£000
1,886
(70)
1,816
5
5
1,821
2017
£000
1,490
(56)
1,434
(75)
(75)
1,359
The tax assessed for the year is higher (2017: lower) than the standard rate of corporation tax in the UK applicable to the Group
19.00% (2017: 19.41%) and is explained as follows:
Continuing operations
Profit on ordinary activities before tax
Profit on ordinary activities multiplied by standard rate of corporation tax in
the UK of 19.00% (2017: 19.41%)
Effects of:
Tax effect of share of profit of associates and joint ventures
Other items
Expenses not deductible for tax purposes
Adjustment to tax charge in respect of prior years
Movement on unrecognised deferred tax
Total tax charge for year
Factors that may affect future tax charges
2018
£000
9,529
1,811
(56)
13
19
(70)
104
1,821
2017
£000
7,664
1,488
(38)
(4)
36
(56)
(67)
1,359
A reduction in the UK corporation tax rate from 19% to 17% (effective 1 April 2020) was substantively enacted on 6 September 2016.
This will reduce the Group’s future current tax charge accordingly.
11.
DISCONTINUED OPERATIONS
In the prior year, the Group disposed of Just for Pets Limited, a part of the Specialist Agricultural Merchanting division - the loss on
disposal was £6,586,000 and the net cash outflow was £678,000.
There have been no discontinued operations in the current year.
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DIVIDENDS
Final dividend paid for prior year
Interim dividend paid for current year
2018
£000
1,653
871
2,524
2017
£000
1,559
825
2,384
Subsequent to the year end it has been recommended that a final dividend of 8.95p net per ordinary share (2017: 8.40p) be paid on
30 April 2019. Together with the interim dividend already paid on 31 October 2018 of 4.41p net per ordinary share (2017: 4.20p) this
would result in a total dividend for the financial year of 13.36p net per ordinary share (2017: 12.60p).
13.
EARNINGS PER SHARE
Basic earnings per
share
Diluted earnings per
share
2018
2017
2018
2017
Continuing operations
Earnings attributable to shareholders (£000)
7,708
6,305
7,708
6,305
Weighted average number of shares in issue during the
year (number ‘000)
19,708
19,529
19,797
19,782
Earnings per ordinary 25p share (pence)
39.11
32.29
38.94
31.87
Discontinued operations
(Loss)/earnings attributable to shareholders (£000)
Weighted average number of shares in issue during the
year (number ‘000)
(Loss)/earnings per ordinary 25p share (pence)
-
-
-
(6,586)
19,529
(33.72)
-
-
-
(6,586)
19,782
(33.29)
Continuing Operations
Basic earnings per 25p ordinary share from continuing operations is calculated by dividing profit for the year from continuing operations
attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year.
For diluted earnings per share from continuing operations, 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.
Discontinued Operations
Basic earnings per 25p ordinary share from discontinued operations is calculated by dividing (loss)/profit for the year from discontinued
operations attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year.
For diluted earnings per share from discontinued operations, 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.
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Notes to the Financial Statements continued
14.
GOODWILL
After initial recognition, goodwill is subject to annual impairment tests or more frequently if events or changes in circumstances indicate
that it might be impaired, in accordance with IAS 36.
Group
Cost
At 1 November 2016
Disposals
Subsidiary disposed
At 31 October 2017
Additions
At 31 October 2018
Aggregate impairment
At 1 November 2016
Disposals
At 31 October 2017
Impairment
At 31 October 2018
Net book value
At 31 October 2018
At 31 October 2017
£000
19,784
(4,003)
(245)
15,536
590
16,126
1,637
(367)
1,270
38
1,308
14,818
14,266
Goodwill impairment
Goodwill arising on business combinations is not amortised but is reviewed for impairment on an annual basis, or more frequently
if there are indications that goodwill may be impaired. Goodwill acquired in a business combination is allocated to groups of cash
generating units according to the level at which management monitor that goodwill.
Recoverable amounts for cash generating units are based on the higher of value in use and fair value less costs to sell. Value in use
is calculated from cash flow projections for the next 5 years using data from the Group’s latest internal forecasts, the results of which
are reviewed by the Board.
The key assumptions for the value in use calculations are those regarding discount rates, growth rates and expected changes in
margins. Management estimate discount rates using pre-tax rates that reflect the current market assessment of the time value of
money and the risks specific to the cash generating units. Changes in selling prices and direct costs are based on past experience
and expectations of future changes in the market. Given the current economic climate, a sensitivity analysis has been performed in
assessing the recoverable amounts of goodwill.
In October 2018 and 2017 impairment reviews were performed by comparing the carrying value of goodwill with the recoverable
amount of the cash generating units to which goodwill has been allocated.
Goodwill is allocated to specific cash generating units (“CGUs”) as it arises.
The Group has a number of CGUs in both the Agriculture and the Specialist Agricultural Merchanting sectors. The carrying amount of
goodwill allocated to the Agriculture CGUs is £8,158,797 (2017: £7,776,514), and to Specialist Agricultural Merchanting is £6,658,947
(2017: £6,489,577).
The pre-tax discount rates used to calculate value in use were 9.5% (2017: 9%) for Agriculture and 9.5% (2017: 9%) for Specialist
Agricultural Merchanting. These discount rates are derived from the Groups weighted average cost of capital and adjusted for the
specific risks relating to each CGU.
The forecasts are extrapolated based on estimated long-term average growth rates of 2.0% (2017: 2.7%) for both Agriculture and
Specialist Agricultural Merchanting.
The Directors have considered the sensitivity to key assumptions and the majority of the Group’s impairment tests have significant
headroom. However, one CGU within the agricultural sector contains reasonably possible changes in key assumptions which could
have a material impact on the carrying value of goodwill which therefore require disclosure.
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GOODWILL continued
Goodwill is allocated to this CGU as follows:
GrainLink
2018
£000
2017
£000
4,206
4,206
The recoverable amount of this CGU is based upon its value in use, determined by discounting future cashflows to be generated
from the continuing use for the CGU. The estimated value in use at 31 October 2018 exceeded the carrying value by approximately
£520,000 for GrainLink.
The key assumptions used in the estimation of the recoverable amount is set out below. The values assigned to the key assumptions
represent management’s assessment of future trends in the relevant industries and have been based on historical data and future
forecasts from both internal and external sources.
GrainLink
Discount rate
Terminal value growth rate
Budgeted EBIT
2018
9.5%
2.0%
2017
9.0%
2.7%
Increase of £203k in year 1 followed by £107k
in year 2 followed by 1% growth in years 3-5
Increase of £122k in year 2 followed by
1% growth in years 3-5
Management have prepared the discounted future cashflows on a basis which they believe is achievable and there are events in place
to support the increased EBIT.
• Trading conditions are expected to improve
In 2018, trading conditions, particularly in the first half of the financial year were very challenging as result of significant regional
variances in product quality and availability after a difficult harvest in the autumn of 2017.
These conditions created an almost unique set of circumstances where pricing spreads between local physical values and market value
indications on the London LIFFE derivatives market became the largest in living memory. Generating levels of forward trade under such
circumstances can increase margin risks and as such, acts to limit the amount of profitable trading that can be undertaken.
These conditions undoubtedly restricted the financial performance of the business during the current year causing a number of
competitors to suffer trading and financial stress, which it is believed will create future opportunities for the business.
• Business expansion in the East of England
In June 2018, the Company established a satellite office in Grantham, Lincolnshire and recruited a number of experienced grain traders
with a view to commencing trading in a new geographical region for the business.
However, should these expected future events not be realised, there are a range of reasonably possible changes to the assumptions,
some of which may indicate a potential impairment. Specifically, detrimental changes in any of the three key assumptions could cause
the carrying amount to exceed the recoverable amount.
The following table shows the amounts by which these key assumptions would need to change individually for the estimated recoverable
amount to be equal to the carrying amount.
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GrainLink
Discount rate
Terminal value growth rate
Budgeted EBIT growth rate (average of next 5 years)
Change required for carrying
amount to be equal to
recoverable amount
2018
0.5
(0.7)
(7.7)
2017
0.4
(0.5)
(2.3)
Notwithstanding the above sensitivities, the Directors are satisfied that they have applied reasonable and supportable assumptions
based on their best estimate of the range of future economic conditions that are forecast and consider that an impairment is not
required in the current year, however the position will be monitored on a regular basis.
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Notes to the Financial Statements continued
15.
INTANGIBLE ASSETS
Customer
order books
£000
Trademarks
Total
£000
£000
-
10
10
-
-
-
1
1
9
-
145
10
155
36
14
50
16
66
89
95
Group
Cost
Balance as at 1 November 2016 and 31 October 2017
Additions
At 31 October 2018
Aggregate amortisation
Balance as at 1 November 2016
Charge for the year
At 31 October 2017
Charge for the year
At 31 October 2018
Net book value
At 31 October 2018
At 31 October 2017
16.
INVESTMENT PROPERTY
Group
Fair value
At 1 November 2016, 31 October 2017 and 31
October 2018
Company
At 1 November 2016, 31 October 2017 and 31
October 2018
145
-
145
36
14
50
15
65
80
95
£000
2,372
2,372
Investment property relates to a redeveloped property in Pwllheli, the Group continues to actively market the property.
The Directors have determined the fair value of the investment property at the year end, this is with reference to market evidence. The
amount of rent receivable from the Investment property was £216,945 (2017: £198,100).
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www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018 17.
PROPERTY, PLANT AND EQUIPMENT
Leasehold
land and
buildings
£000
Freehold
land and
buildings
£000
Plant, machinery
and office
equipment
£000
Motor
vehicles
£000
Group
Cost
At 1 November 2016
Additions
Disposals
Disposal of subsidiary
At 31 October 2017
Additions
Acquisitions
Disposals
Reclassification
1,220
89
-
(723)
586
168
-
(4)
420
Total
£000
46,477
2,736
(922)
(4,978)
13,330
239
-
-
23,746
1,267
(188)
(4,149)
8,181
1,141
(734)
(106)
13,569
20,676
8,482
43,313
1,072
231
(196)
(392)
1,367
1,229
(1,359)
(28)
2,505
75
(939)
-
5,112
1,535
(2,498)
-
At 31 October 2018
1,170
14,284
21,885
10,123
47,462
Depreciation
At 1 November 2016
Charge for the year
On disposals
Disposal of subsidiary
At 31 October 2017
Charge for the year
On disposals
Reclassification
601
55
-
(563)
93
82
(4)
80
4,661
312
-
-
15,703
1,393
(146)
(2,875)
4,977
1,221
(672)
(63)
25,942
2,981
(818)
(3,501)
4,973
14,075
5,463
24,604
313
(111)
127
1,348
(1,307)
(137)
1,414
(856)
(70)
3,157
(2,278)
-
At 31 October 2018
251
5,302
13,979
5,951
25,483
Net book value
At 31 October 2018
At 31 October 2017
919
493
8,982
8,596
7,906
6,601
4,172
21,979
3,019
18,709
The net book value of plant and machinery and motor vehicles above includes amounts of £3,458,457 (2017: £1,937,682)
representing assets held under finance leases.
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Notes to the Financial Statements continued
17.
PROPERTY, PLANT AND EQUIPMENT continued
Company
Cost
At 1 November 2016
Additions
At 31 October 2017
Additions
Disposals
Reclassification/transfers
At 31 October 2018
Depreciation
At 1 November 2016
Charge for the year
At 31 October 2017
Charge for the year
On disposals
Reclassification/transfers
At 31 October 2018
Net book value
At 31 October 2018
At 31 October 2017
Freehold
land and
buildings
£000
Leasehold
land and
buildings
£000
12,103
239
12,342
1,003
(196)
(392)
12,757
4,295
299
4,594
295
(111)
(57)
4,721
8,036
-
-
-
-
192
-
420
612
-
-
-
67
-
92
159
453
7,748
Total
£000
12,103
239
12,342
1,195
(196)
28
13,369
4,295
299
4,594
362
(111)
35
4,880
8,489
7,748
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www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018 18.
FIXED ASSET INVESTMENTS
Group
Cost
At 1 November 2016
Share of profit or investment income
Disposal
Impairment
Transfers
At 31 October 2017
Transfer
Share of profit or investment income
Preference shares/Ordinary distributions
Corporate simplification
At 31 October 2018
Provision for impairment
At 1 November 2016, 31 October 2017 and 31 October 2018
Transfer
At 31 October 2018
Net book value
At 31 October 2018
At 31 October 2017
Joint
ventures
£000
Associates
£000
Other
unlisted
investments
£000
2,619
180
(150)
-
(33)
2,616
(69)
275
(20)
(81)
2,721
69
(69)
-
2,721
2,547
752
17
-
-
19
788
-
19
(755)
-
52
-
-
-
52
788
182
-
-
(60)
14
136
(27)
-
-
(19)
90
27
(27)
-
90
109
Total
£000
3,553
197
(150)
(60)
-
3,540
(96)
294
(775)
(100)
2,863
96
(96)
-
2,863
3,444
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Notes to the Financial Statements continued
18.
FIXED ASSET INVESTMENTS continued
Company
Cost
At 1 November 2016
Disposal
At 31 October 2017
Capital contribution
Transfer
Preference shares/Ordinary distributions
Corporate simplification
At 31 October 2018
Provision for impairment
At 1 November 2016 and 31 October 2017
Transfer
At 31 October 2018
Net book value
At 31 October 2018
At 31 October 2017
Share in
group
undertakings
£000
Joint
ventures
£000
Associates
£000
Total
£000
18,182
(5,354)
12,828
30,000
-
-
(266)
42,562
-
-
-
42,562
12,828
430
(150)
280
-
(69)
(20)
-
191
69
(69)
-
191
211
48
-
48
-
-
(48)
-
-
-
-
-
-
18,660
(5,504)
13,156
30,000
(69)
(68)
(266)
42,753
69
(69)
-
42,753
48
13,087
During the year, the Directors of Wynnstay Group Plc made a decision that £30,000,000 of the total loan between the Company and
Wynnstay (Agricultural Supplies) Limited would no longer be repayable. Consequently, in line with generally accepted accounting
practices, this sum has been treated as a capital contribution and is now shown as an increase in investment in group undertakings.
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www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018 19.
SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES
Subsidiaries
Subsidiary undertakings represent the following limited companies, all of which were incorporated in the UK:
Company name
Proportion of shares
held (Ordinary) %
Nature of business
Registered office address
Glasson Group (Lancaster) Limited
Glasson Grain Limited
Wynnstay (Agricultural Supplies) Limited
Woodheads Seeds Limited
Youngs Animal Feeds Limited
GrainLink Limited
Wrekin Grain Limited
Eifionydd Farmers Limited
Shropshire Grain Limited
Welsh Feed Producers Limited
Banbury Farm and General Supplies Limited
100
100
100
100
100
100
100
100
100
100
100
Holding company
West Quay, Glasson Dock, Lancaster, Lancs, LA2 0DB
Feed and Fertiliser merchant
West Quay, Glasson Dock, Lancaster, Lancs, LA2 0DB
Agricultural merchant
Seed merchants
Eagle House, Llansantffraid Ym Mechain, Powys, SY22 6AQ
Eagle House, Llansantffraid Ym Mechain, Powys, SY22 6AQ
Equine and pet products distributor
Eagle House, Llansantffraid Ym Mechain, Powys, SY22 6AQ
Grain merchant
Dormant company
Dormant company
Dormant company
Dormant company
Dormant company
Eagle House, Llansantffraid Ym Mechain, Powys, SY22 6AQ
Eagle House, Llansantffraid Ym Mechain, Powys, SY22 6AQ
Eagle House, Llansantffraid Ym Mechain, Powys, SY22 6AQ
Eagle House, Llansantffraid Ym Mechain, Powys, SY22 6AQ
Eagle House, Llansantffraid Ym Mechain, Powys, SY22 6AQ
Eagle House, Llansantffraid Ym Mechain, Powys, SY22 6AQ
Investments in the subsidiaries listed above are held directly by Wynnstay Group Plc, with the exception of the following which are
direct subsidiaries of the respective following companies:
Glasson Group (Lancaster) Limited
Glasson Grain Limited
Youngs Animal Feeds Limited
Eifionydd Farmers
During the year, Glasson Grain Limited entered into a business combination and acquired the majority of the assets and liabilities of
FertLink Limited, see note 34 for more details. Following this transfer of assets and liabilities, a process was initiated to strike off the
FertLink Limited legal entity, which is expected to be completed in the next financial year.
Joint ventures
The above interests in joint ventures are represented by the following limited companies, all of which were incorporated in the UK:
Company name
Interest
Nature of business
Registered office address
Wyro Developments Limited
50% - Ordinary
Property development
Eagle House, Llansantffraid Ym Mechain, Powys, SY22 6AQ
Bibby Agriculture Limited
Total Angling Limited
50% - Ordinary
50% - Preference
50% - Ordinary
Distribution of compound animal feeds
Old Croft, Stanwix, Carlisle, Cumbria, United Kingdom, CA3 9BA
Retailer of angling products
Eagle House, Llansantffraid Ym Mechain, Powys, SY22 6AQ
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Investments in joint ventures listed above are held directly by Wynnstay Group Plc.
Joint ventures are accounted for using the equity method.
The aggregate amounts of the Group’s share of joint venture assets and liabilities are:
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net Assets
2018
£000
678
5,233
(3,292)
-
2,619
2017
£000
922
5,802
(4,192)
(8)
2,524
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Notes to the Financial Statements continued
19.
SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES continued
The aggregate amount of the Group’s share of joint venture revenue and expenses not included in these financial statements are:
Revenue
Expenses
2018
£000
2017
£000
16,876
20,247
(16,507)
(20,002)
The aggregate amount of the Group’s share of pre-tax profits included in these financial statements is:
Group’s share of joint ventures profit before tax
2018
£000
351
2017
£000
245
Principal associates
The above interests in associates is represented by the following limited companies, which are incorporated in the UK:
Company name
Interest
Nature of business
Registered office address
Wynnstay Fuels Limited
40%
The trade of the business (supply of petroleum
products) was sold to Rix Petroleum (Mercia)
Ltd on 22 June 2018. The remaining assets
and liabilities of the legal entity are in the
process of being realised.
Eagle House, Llansantffraid Ym Mechain, Powys, SY22 6AQ
Celtic Pride Limited
33.3%
Production and marketing of premium welsh
beef
Castell Howell Foods Ltd, Celtic Pride Ltd Cross Hands Food Park,
Cross Hands, Llanelli, Carmarthenshire, Wales, SA14 6SX
Summarised financial information in respect of the Group’s associates are as follows:
Total assets
Total liabilities
Net assets
Group’s share of associates’ net assets
Total revenue
Profit for the period
Group’s share of associates’ profit before tax
2018
£000
3,265
(1,416)
1,849
740
2017
£000
3,901
(1,984)
1,917
760
11,716
15,463
61
24
55
22
For the purposes of consolidation, the following periods of account have been used for each of the associated undertakings and joint
ventures:
Company
Wyro Developments Limited
Wynnstay Fuels Limited
Bibby Agriculture Limited
FertLink Limited
Total Angling Limited
Celtic Pride Limited
Accounting period
31 October 2018
31 December 2017
31 August 2018
31 October 2018
31 October 2018
31 January 2018
IAS 27 “Consolidated and separate financial statements” and IAS 28 “Investments in Associates” require the use of accounting periods
within three months of the year end. Because of the other parties involved, Wynnstay Group Plc are unable to influence a change in
accounting reference date of Wynnstay Fuels Limited and Celtic Pride Limited. In the opinion of the Directors there is no material effect
on the reported figures as a result of this departure.
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www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018
19.
SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES continued
Trading transactions
During the year, the Group and Company entered into the following trading transactions with subsidiaries, associates and joint ventures:
Transactions and balances with subsidiaries
Amounts due from subsidiary undertakings:
Trade receivables
Loans
Amounts due to subsidiary undertakings:
Trade payables
Eagle House, Llansantffraid Ym Mechain, Powys, SY22 6AQ
Transactions reported in the statement of comprehensive income:
Income received
Purchases
Transactions and balances with associates
Trade receivables
Amounts due to associated undertaking:
Trade payables
Transactions reported in the statement of comprehensive
income:
Revenue
Purchases
Transactions and balances with joint ventures
Amounts due from joint ventures:
Trade receivables
Loans
Amounts due to associated undertaking:
Trade payables
Transactions reported in the statement of comprehensive
income:
Revenue
Purchases
Income received
Company
2018
£000
2017
£000
-
2,799
2,799
-
266
193
-
30,318
30,318
-
298
298
Group
2018
£000
2017
£000
Company
2018
£000
2017
£000
-
-
-
-
7
7
24
24
17
381
19
375
-
-
-
-
-
-
-
-
-
-
-
-
Group
Company
2018
£000
880
2,812
3,692
23
23
2017
£000
8,671
2,844
11,515
2,278
2,278
10,566
12,836
-
21,236
13,700
58
2018
£000
-
2,812
2,812
-
-
-
-
-
2017
£000
-
2,844
2,844
-
-
-
-
-
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Notes to the Financial Statements continued
20.
INVENTORIES
Raw materials and consumables
Finished goods and goods for resale
Group
2018
£000
14,938
37,312
52,250
2017
£000
4,098
25,958
30,056
Company
2018
£000
2017
£000
-
-
-
-
-
-
Inventories are stated after a provision for impairment of £345,000 (2017: £260,000) (Company £nil (2017: £nil)).
21.
TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Amounts owed by group undertakings
Other receivables
Current tax asset
Fair value of derivatives
Group
2018
£000
2017
£000
Company
2018
£000
2017
£000
67,446
-
3,287
-
174
70,907
60,658
-
2,146
-
157
62,961
-
2,799
-
-
-
2,799
-
30,317
-
1
-
30,318
Trade receivables are stated after a provision for impairment of £708,456 (2017: £718,597) (Company £nil (2017: £nil)).
22.
TRADE AND OTHER PAYABLES
Current
Trade payables
Amounts owed to group undertakings
Other taxes and social security
Other payables
Accruals and deferred income
Contingent consideration
Fair value of derivatives
Non-current
Government grants
Contingent consideration
23.
CURRENT TAX LIABILITIES
Current tax liabilities
80
Group
2018
£000
2017
£000
Company
2018
£000
2017
£000
68,756
-
604
1,142
3,293
651
76
74,522
48,889
-
516
847
2,211
112
163
52,738
-
-
-
239
10
-
-
249
82
1,680
-
141
77
-
-
1,980
Group
2018
£000
2017
£000
Company
2018
£000
2017
£000
20
137
157
22
-
22
-
-
-
-
-
-
Group
Company
2018
£000
1,102
2017
£000
847
2018
£000
55
2017
£000
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www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018 24.
CASH AND CASH EQUIVALENTS AND BANK OVERDRAFTS
Cash and cash equivalents per balance sheet
Bank overdrafts
Cash and cash equivalents per cash flow statement
25.
FINANCIAL LIABILITIES - BORROWINGS
Current
Bank loans and overdrafts due within one year or on demand:
Secured loans
Loan capital (unsecured)
Other loanstock (unsecured)
Net obligations under finance leases
Non-current
Bank loans:
Secured
Net obligations under finance leases
Group
2018
£000
6,676
-
6,676
2017
£000
8,914
-
8,914
Company
2018
£000
2017
£000
4
-
4
1
-
1
Group
2018
£000
2017
£000
Company
2018
£000
2017
£000
1,978
1,978
665
14
1,230
3,887
866
866
672
16
958
1,968
1,968
665
14
-
806
806
672
16
-
2,512
2,647
1,494
Group
2018
£000
2017
£000
Company
2017
£000
2018
£000
2,356
2,356
1,410
3,766
1,120
1,120
776
1,896
2,356
2,356
-
1,111
1,111
-
2,356
1,111
The loan capital and loanstock is redeemable at par at the option of the Company. Interest at 1.5% per annum is payable to the holders
(2017: 1.5%) of the unsecured loan capital and unsecured loanstock.
The bank loans include term loans repayable by instalments as follows:
Monthly
instalment
(inc’ interest)
Balance
outstanding
2018
Balance
outstanding
2017
Interest rate
Maturity
date
Lombard Bank Loan
£5,111
£10,149
£69,459
4.75% per annum
December 2018
HSBC Bank Plc
£99,264
£3,219,575
-
0.85% over base per annum
August 2021
HSBC Bank Plc
£68,811
£1,103,946
£1,917,369
0.75% over base per annum
March 2020
The outstanding loans are secured by an unlimited composite company guarantee by all the trading entities within the Group.
Bank loans and overdrafts of £1,994,367 (2017: £nil) relating to subsidiary companies, are secured by an unlimited composite
guarantee by all the trading entities within the Group.
Finance lease obligations are secured on the assets to which they relate.
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Notes to the Financial Statements continued
25.
FINANCIAL LIABILITIES - BORROWINGS continued
Borrowings are repayable as follows:
On demand or within one year
In the second year
In the third to fifth years inclusive
Over five years
Finance leases included above are repayable as follows:
On demand or within one year
In the second year
In the third to fifth years inclusive
Over five years
The net borrowings are:
Borrowings as above
Cash and cash equivalents
Net (cash)/debt
Group
2018
£000
2017
£000
Company
2018
£000
2017
£000
3,887
2,352
1,414
-
7,653
1,230
898
513
-
2,641
2,512
1,316
580
-
4,408
958
491
285
-
1,734
2,647
1,456
900
-
5,003
-
-
-
-
-
1,494
817
294
-
2,605
-
-
-
-
-
7,653
(6,676)
4,408
(8,914)
977
(4,506)
5,003
(4)
4,999
2,605
(1)
2,604
26.
FINANCIAL INSTRUMENTS
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
-
-
-
-
-
-
-
Trade receivables
Cash and cash equivalents
Investments in unquoted equity securities
Trade and other payables
Bank overdrafts
Fixed and floating rate bank loans
Futures based commodity contracts
Financial instruments by category
Financial assets
Cash and cash equivalents
Trade and other receivables
Derivatives
Investments in unquoted equity securities
Financial assets at fair value
through profit or loss
Loans and receivables
2018
£000
-
-
174
2,863
3,037
2017
£000
-
-
157
3,444
3,601
2018
£000
2017
£000
6,676
70,733
-
-
8,914
62,804
-
-
77,409
71,718
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www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018 26.
FINANCIAL INSTRUMENTS continued
Financial liabilities
Trade and other payables
Loans and borrowings
Contingent consideration
Derivatives
Financial assets at fair value
through profit or loss
Amortised cost
2018
£000
2017
£000
2018
£000
2017
£000
-
-
788
76
864
-
-
112
163
275
73,191
7,653
-
-
51,947
4,408
-
-
80,844
56,355
Financial instruments not measured at fair value include cash and cash equivalents, trade and other receivables, trade and other payables
and loans and borrowings. Due to their short-term nature, the carrying value of these current assets and liabilities approximates to
their fair value. The fair value of the non-current borrowings have been assessed and are found not to differ materially from book value.
Fair value hierarchy of financial instruments measured at fair value
IFRS 13 requires financial instruments that are measured at fair value to be classified according to the valuation technique used. For
details of the IFRS 13 hierarchy refer to the ‘Estimates’ section of the Principal Accounting Policies on page 60. There were no transfers
between IFRS 13 hierarchy levels during the period.
Derivatives
Derivatives are used to hedge exposure to market risks, and those that are held as hedging instruments are formally designated as
hedges as defined in IAS 39. Derivatives may qualify as hedges for accounting purposes and the Group’s hedging policies are further
described below.
-
Fair value hedges
The Group maintains futures based commodity contracts to hedge against the open long or short physical positions on its forward
purchase and sales books. Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded
in the Group Statement of Comprehensive Income, together with any changes in the fair value of the hedged asset or liability that are
attributable to the hedged risk. The gain or loss on the hedging instrument and hedged item is recognised in the Group Statement of
Comprehensive Income. If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying value of the
hedged item is amortised to the Group Statement of Comprehensive Income under the effective interest rate method. The ineffective
element of these fair value hedges are not material in this year or the prior year.
All derivative financial assets and liabilities are classified as Level 1 instruments as they are valued at quoted market prices.
Investments in unquoted equity securities
The Group holds shares in several private limited companies. These have been classified as unquoted investments for which fair value
cannot be reliably measured and are held at cost less accumulated impairment. Had fair value been applied this financial asset would
have been Level 3.
Contingent consideration
Contingent consideration is measured at fair value using Level 3 inputs such as entity projections of future profitability. For details on
the movement on contingent consideration in the period refer to note 31.
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Risks associated with financial instruments
The main risks to which the Group is exposed are as follows:
•
Market Risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices that will affect the
Group’s income or the value of its holdings of financial instruments.
•
Interest rate risk
While currently most of the Group’s term debt is floating base rate linked, the Board constantly review their option to fix the rates
attached to this debt through the use of Interest rate swap derivatives. Fixed rate term finance is used for the acquisition of vehicles.
During 2018 and 2017, the Group’s borrowings at variable rate were denominated in sterling.
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Notes to the Financial Statements continued
26.
FINANCIAL INSTRUMENTS continued
Sensitivity analysis
The impact of a decrease or increase in interest rates during the year is shown in the table below. The Directors consider that a
1% movement in interest rates represents a reasonable possible change.
Loans and receivables
1% decrease
2018
£000
1% decrease
2017
£000
1% increase
2018
£000
1% increase
2017
£000
Impact on profit after taxation (continuing operations)
Impact on total equity
140
140
114
114
(140)
(140)
(114)
(114)
The sensitivity analysis is not an indication of actual results, which may materially differ. For the purposes of this sensitivity analysis
all other variables have been held constant. The method and assumptions used in the preparation of the sensitivity analysis were
the same in 2018 and 2017.
•
Foreign currency risk
The main currency related risk to the Group comes from the forward purchasing of imported raw materials for our Glasson Grain
business. This risk is mainly managed by entering into currency purchase agreements at the time the underlying transaction is
completed. The fair value of these contracts is not material.
As at the year end the principal amounts relating to forward purchased currency amounted to £11,849,003 (2017: £8,529,816).
•
Commodity price risk
While the Group does not engage in the taking of speculative commodity positions, it does have to make significant forward
purchases of certain raw materials, particularly for use in its animal feed manufacturing activities. Position reporting systems are in
place to ensure the Board is apprised of the exposure level on a regular basis, and where possible hedging tools, primarily wheat
futures contracts on the London LIFFE market, are used to manage price decisions.
•
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations and arises principally from the Group’s receivables from customers and investment securities.
A significant proportion of the Group’s trade is conducted on credit terms and as such a risk of non-payment is always present.
Detailed systems of credit approval before initial supply, the operation of credit limits and an active credit control policy act to
minimise this risk and historically the incidence of bad debts is low. The Group’s grain trading activities has exposed it to certain
substantial customer credit balances, and to assist in mitigating this perceived risk, a credit insurance policy has been purchased
to provide partial cover against default by certain customers.
The overdue accounts are reviewed monthly at divisional management meetings to mitigate exposure to credit risk and make
provisions accordingly.
Concentration of credit risk with respect to trade receivables is limited due to the Group’s customer base being large and
unrelated. Due to this, management believes that there is no further credit risk provision required in excess of the normal provision
for doubtful receivables.
The aging analysis is as follows:
2018
Gross
£000
Impairment
£000
Past due but
not impaired
£000
2017
Gross
£000
Impairment
£000
Past due but
not impaired
£000
Not past due
Up to 3 months
Over 3 months
50,064
14,585
3,505
68,154
-
-
(708)
(708)
N/A
14,585
2,797
17,382
49,083
9,861
2,433
61,377
-
-
(719)
(719)
N/A
9,861
1,714
11,575
Past due but not impaired receivables relate to a number of independent customers for whom there is no recent history of default.
The Company has no trade receivables (2017: none).
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26.
FINANCIAL INSTRUMENTS continued
•
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
The Group has appropriate overdraft and revolving credit facilities in place to allow flexibility in managing liquidity. It is the Group’s
policy to maintain committed undrawn facilities in order to provide flexibility in the management of the Group’s liquidity.
The table below analyses the Group and Company’s financial liabilities which will be settled on a net basis into relevant maturity
groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the
tables are the contractual undiscounted cash flows.
Group
2018
One
to two
years
£000
Within
one
year
£000
Total
£000
Two to
five
years
£000
Over
five
years
£000
Total
£000
2017
One
to two
years
£000
Within
one
year
£000
Two to
five
years
£000
Over
five
years
£000
Bank loans and other borrowings
Finance lease liabilities
Derivatives
Trade and other payables
5,104
2,755
76
73,978
2,716
1,299
76
73,841
1,481
931
-
53
907
525
-
84
81,913
77,932
2,465
1,516
-
-
-
-
-
2,714
1,776
163
52,059
1,593
984
163
52,059
826
502
-
-
56,712
54,799
1,328
295
290
-
-
585
-
-
-
-
-
2018
One
to two
years
£000
Within
one
year
£000
Total
£000
Two to
five
years
£000
Over
five
years
£000
Total
£000
2017
One
to two
years
£000
Within
one
year
£000
Two to
five
years
£000
Over
five
years
£000
Company
Bank loans and other borrowings
Loans from Group undertakings
Trade and other payables
5,094
-
249
2,706
-
249
1,481
-
-
5,343
2,955
1,481
907
-
-
907
-
-
-
-
2,645
1,680
300
1,524
1,680
300
4,625
3,504
826
-
-
826
295
-
-
295
-
-
-
-
Trade and other payables in the tables above exclude other taxes and social security as they so not meet the definition of financial
liabilities under IAS 39 and are not within the scope of IFRS 7.
The effective interest rates at the balance sheet dates were as follows:
Group
Company
2018
1.3%
1.5%
1.5%
5.7%
2017
1.0%
1.7%
1.5%
6.7%
2018
N/A
1.5%
1.5%
-
2017
N/A
1.6%
1.5%
-
Bank overdraft
Bank borrowings
Loan capital
Finance leases
•
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide
returns for shareholders and benefits for other stakeholders and to maintain an efficient capital structure to optimise the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital
to shareholders, issue new shares or sell assets to reduce debt.
The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total equity. Net debt is
calculated as total borrowings (including current and non-current borrowings) as shown in the consolidated balance sheet less cash
and cash equivalents. Total equity is as shown in the consolidated balance sheet.
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Notes to the Financial Statements continued
26.
FINANCIAL INSTRUMENTS continued
Loans and borrowings
Less: cash and cash equivalents
Net debt/(cash)
Total equity
2018
£000
7,653
(6,676)
2017
£000
4,408
(8,914)
977
(4,506)
91,073
85,392
Net debt/(cash) to equity ratio (%)
1.07%
(5.28%)
The Group monitors cash balances and net debt on a daily basis to ensure adequate headroom exists on banking facilities and that it
is compliant with banking covenants.
27.
DEFERRED TAXATION
At 1 November
Charge for the year
Disposal of subsidiary
At 31 October
The provision for deferred taxation is made up as follows:
Accelerated capital allowances
Group
2018
£000
254
5
-
259
2017
£000
358
(75)
(29)
254
Company
2018
£000
2017
£000
-
-
-
-
-
-
-
-
Group
Company
2018
£000
259
2017
£000
254
2018
£000
-
2017
£000
-
Deferred tax is calculated in full on temporary differences under the liability using a tax rate of 17% (2017: 17%). The reduction in the
main rate of corporation tax to 17% was substantively enacted on 6 September 2016. This new rate has been applied to deferred tax
balances which are expected to reverse after 1 April 2020, the date on which that new rate becomes effective.
28.
SHARE CAPITAL
Authorised
Ordinary shares of 25p each
Allotted, called up and fully paid
Ordinary shares of 25p each
2018
No. of shares
000
2018
£000
2017
No. of shares
000
2017
£000
40,000
10,000
40,000
10,000
19,772
4,943
19,665
4,916
During the year 18,816 shares (2017: 110,896) were issued with an aggregate nominal value of £4,705 (2017: £14,822) and were
fully paid up for equivalent cash of £66,656 (2017: £344,979) to shareholders exercising their right to receive dividends under the
Company’s scrip dividend scheme.
A total of 87,602 (2017: 59,289) shares with an aggregate nominal value of £21,900 (2017: £27,724) were issued for a cash value of
£372,642 (2017: £377,614) to relevant holders exercising options in the Company. No other shares were issued in this financial year
(2017: nil).
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29.
SHARE-BASED PAYMENTS
The following options were exercised, lapsed and outstanding at the year end:
Exercise
Price per
share £
Exercisable by
As at
01 November
2017
(Exercised)/
Issued in
year
Lapsed
in year
As at
31 October
2018
Discretionary Share Option Schemes
Granted April 2012
Granted October 2014
3.7500
5.4750
April 2015 - March 2022
Oct 2017 - Oct 2024
40,000
333,000
(8,000)
-
-
(25,000)
32,000
308,000
Savings Related Option Schemes
Granted August 2012
Granted July 2014
Granted July 2016
Granted September 2018
3.4000
5.0600
3.7000
4.0000
Sept 2017 - Feb 2018
Aug 2019 - Jan 2020
Aug 2021 - Jan 2022
Oct 2023 - Mar 2024
373,000
(8,000)
(25,000)
340,000
11,641
155,038
404,382
-
571,061
944,061
(11,641)
-
(9,008)
330,345
-
(34,132)
(61,106)
(3,975)
-
120,906
334,268
326,370
309,696
301,696
(99,213)
(124,213)
781,544
1,121,544
During the year 8,000 (2017: nil) Discretionary Share Options and 20,649 (2017: 111,390) Savings Related Options were exercised and
satisfied by the allotment of 18,816 (2017: 110,896) new shares by the Company, and 9,833 (2017: 494) transferred by the Company’s
ESOP Trust. The change in the number of other Discretionary and Savings Related Options relates to members withdrawing from the
scheme by leaving employment or closing their savings contracts.
Fair Value of Options after 7 November 2002
During the year, the Group charged £55,427 (2017: £141,859) of share-based remuneration cost to its Group Statement of
Comprehensive Income based on a movement in the fair value of outstanding options granted after November 2002.The weighted
average fair value of these options were estimated by using the Black-Scholes option-pricing model and the following assumptions:
Weighted average assumptions
Share price at year end
Average share price
Exercise price
Expected volatility
Expected life
Number of options
Risk free interest rate at inception
Number of options exercisable
2018
£000
2017
£000
£4.20
£4.65
£4.04
26.59%
3.26 years
781,544
0.50%
340,000
£4.95
£5.58
£4.08
23.02%
3.11 years
559,420
0.50%
384,641
The expected volatility used was the standard deviation of the daily share price over the previous year and the risk fee interest rate was
based on bank base rate at the inception of each scheme.
30.
CONTINGENT LIABILITIES
The Company is part of a corporate cross guarantee arrangement between companies of Wynnstay Group Plc.
Under the terms of the agreement the bank is authorised to offset credit balances to reduce the liabilities of the other companies
included in the agreement. At the balance sheet date the potential combined liability to the companies was £1,994,000 (2017: £nil).
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Notes to the Financial Statements continued
31.
BUSINESS COMBINATIONS
Montrose
On 1 November 2017, Glasson Grain Limited entered into a business combination and acquired 100% of certain trade and assets,
which together comprise a mill and related processing facilities, located at Montrose in Scotland. The business is intended to be
run as a going concern. The acquisition will enable Glasson Grain Limited to better service customers throughout Scotland. The
consideration was £550,000, which is represented by £1 paid on 1 November 2017 and £549,999 payable by 1 November 2020.
The payment of the deferred consideration is contingent on the resolution of certain conveyancing issues which management
expect to be satisfactorily resolved within the three year period. No discount for the time value of money has been recognised as
it is uncertain as to when the resolution will be made of the conveyancing issues.
Provisional fair value of assets acquired:
Property, plant and equipment
Deferred consideration
£000
550
550
The Directors consider it impractical to estimate the recent historical financial performance of the acquired trade and assets, as
the operation was one element of a larger business recently initially acquired by Origin UK Operations Limited, and which was
subsequently required to be divested for competition remedy purposes. Amounts included in the Consolidated Statement of
Comprehensive Income for the year ended 31 October 2018 are revenue of £11,421,000 and profit of £318,000. Acquisition costs
of £35,000 arose as a result of the transaction, these have been recognised as part of non-recurring items.
Countrywide
On 30 April 2018, Wynnstay (Agricultural Supplies) Ltd entered into a business combination and acquired 100% of certain trade
and assets of eight former Countrywide Farmers Plc agricultural depots located in Thame, Raglan, Bridgnorth, Dartington,
Otterham, Wadebridge, Helston, and Crewkerne. The acquisition will extend the Group’s geographical trading area and farmer
customer base. The consideration was £681,000 which may be adjusted for final inventory valuation.
The Directors consider it impractical to estimate the recent historic profit performance of the acquired trade and assets as the
operations acquired were constituent parts of a larger legal entity, however, management information indicated that these units
generated aggregate revenues of £16.4m in the year to November 2017. Amounts included in the Consolidated Statement of
Comprehensive Income for the year ended 31 October 2018 are revenue of £5,328,000 and a loss of (£182,000). Acquisition
costs of £35,000 arose as a result of the transaction, these have been recognised as part of non-recurring items.
Provisional fair value of assets acquired:
Intangible assets - trademarks
Property, plant and equipment
Inventories
Consideration settled in cash at completion
Licence to occupy leasehold premises for 3 months
£000
10
310
361
681
159
840
FertLink
On 1 May 2018, Glasson Grain Limited entered into a business combination and acquired the majority of the assets and liabilities
of FertLink Limited, a 50% joint venture fertiliser manufacturing facility based in Birkenhead established between Glasson and NW
Trading for £100.
The acquisition will increase the fertiliser division’s sales volume and allow it to better service the market on the east side of the UK.
The Directors consider it impractical to estimate the recent historical performance of the acquired assets and liabilities as they are
constituent parts of a larger legal entity. Amounts included in the Consolidated Statement of Comprehensive Income for the year
ended 31 October 2018 are revenue of £6,056,000 and profit of £111,000.
Prior to the acquisition FertLink had revenue of £16,404,000 and pre-tax losses of (£167,000) in the six months to 30 April 2018.
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BUSINESS COMBINATIONS continued
Provisional fair value of assets and liabilities acquired:
£000
Goodwill
Property, plant and equipment
Inventories
Cash and cash equivalents
Trade and other payables
Current tax liability
Consideration settled in cash at completion
266
600
2,559
63
(3,375)
(113)
-
The goodwill represents future sales opportunities and economies of scale from combining the operations of Glasson Grain Limited
and FertLink Limited. None of the goodwill is expected to be deductible for tax purposes.
Others
In addition to the acquisitions set out above, the Group has also completed a number of smaller acquisitions for total consideration of
£529,000 which is shown below. The consideration may be adjusted for final inventory valuation. The deferred consideration is also
contingent upon future profitability and continued employment of the former owners. The fair value of the contingent consideration
has been based on management expectations of the future performance of the businesses. The contingent consideration could
range from £130,000 to an unlimited maximum (based on the enterprise contribution of the businesses acquired). The Directors
best estimate of the deferred consideration payable is £189,000 shown in the following table. The goodwill represents future sales
opportunities to the farmer customer base and is not deductible for tax purposes.
The Directors consider it impractical to estimate the recent historical performance of the acquired trade and assets as the operations
acquired were constituent parts of larger legal entities. Amounts included in the Consolidated Statement of Comprehensive Income for
the year ended 31 October 2018 are revenue of £2,503,000 and profit of £36,000.
Provisional fair value of assets acquired:
Goodwill
Property, plant and equipment
Inventories
Total consideration
Deferred consideration
Settled in cash at completion
£000
324
75
130
529
189
340
Contingent and deferred consideration of £63,000 was also paid during the period which related to prior period acquisitions, resulting
in a total net cash outflow of £1,021,000.
32.
CAPITAL COMMITMENTS
At 31 October 2018 the Group and Company had capital commitments as follows:
Group
2018
£000
2017
£000
Company
2018
£000
2017
£000
Contracts placed for future capital
expenditure not provided in the financial
statements
1,239
386
740
-
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Notes to the Financial Statements continued
33.
OPERATING LEASE COMMITMENTS
Non-cancellable operating leases are payable as follows:
Group
Expiry date:
Within 1 year
Between 2 and 5 years
Over 5 years
Company
Expiry date:
Within 1 year
Between 2 and 5 years
Over 5 years
Land and buildings
Other
2018
£000
1,848
4,303
1,090
441
1,112
24
2017
£000
1,982
5,067
2,574
369
1,219
758
2018
£000
2017
£000
52
37
-
-
-
-
72
53
-
-
-
-
34.
GROUP FINANCIAL COMMITMENTS
The Group has guaranteed the overdrafts of one of its associate companies to a maximum of £125,000 (2017: £125,000).
35.
PENSION COMMITMENTS
The Group operates two defined contribution pension schemes which are administered on separate bases. The pension and
associated costs charge for the year was £838,922 (2017: £832,538). The liability owed to the pension schemes at 31 October
2018 was £121,736 (2017: £106,710).
36.
EMPLOYEE SHARE OWNERSHIP TRUST
The Company operates an employee share ownership trust (ESOP). As at 31 October 2018, 6,834 ordinary 25p shares (2017:
8,724 ordinary 25p shares) were held by the trust with an aggregate market value of £28,876 (2017: £43,183). The assets,
liabilities, income and costs of the ESOP are incorporated into the financial statements of the Group.
37.
RELATED PARTY TRANSACTIONS
During the year sales and purchases took place between the Group and a number of its Directors. All transactions were carried
out on an arm’s length basis.
Transactions with Key Management Personnel
Key management personnel are considered to be Directors and their remuneration is disclosed within the Director’s Remuneration
disclosure (note 9).
J J McCarthy
K R Greetham (retired 11 July 2018)
G W Davies (appointed 8 May 2018)
D A T Evans
B P Roberts
P M Kirkham
H J Richards
S J Ellwood
Total sales
2018
£000
1,337
468
64
277,770
407
306,464
3,329,161
-
3,915,671
2017
£000
-
604
-
223,422
295
314,071
2,704,798
-
3,243,190
Balance outstanding
2017
£000
2018
£000
-
-
11
69,922
41
23,547
947,817
-
1,041,338
-
189
-
62,486
47
34,454
1,073,974
-
1,171,150
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37.
RELATED PARTY TRANSACTIONS continued
The Group has had transactions with the following company whose Directors include S J Ellwood:
Company
Total sales
NIAB
2018
£000
61
2017
£000
5
Balance outstanding
2017
£000
2018
£000
38
8
38.
CASH GENERATED FROM/(USED IN) CONTINUING OPERATIONS
Profit/(loss) for the year from continuing operations
Adjustments for:
Tax
Dividend received
Investment and goodwill impairment
Depreciation of tangible fixed assets
Amortisation of other intangible fixed assets
Profit on disposal of property, plant and equipment
Profit from distribution from Associate
Interest income
Interest expense
Share of results of joint ventures and associates
Share-based payments
Changes in working capital (excluding effects of
acquisitions and disposals of subsidiaries):
Decrease/(increase) in short term loan to joint venture
(Increase) in inventories
(Increase)/decrease in trade and other receivables
Increase/(decrease) in payables
Cash generated from/(used in) continuing operations
Group
Company
2018
£000
7,708
1,821
-
138
3,157
16
(328)
-
(92)
283
(294)
55
2017
£000
6,305
1,359
-
60
2,657
14
(73)
-
(66)
219
(197)
142
32
(19,144)
(7,946)
17,425
2,831
(58)
(1,048)
(13,654)
10,393
6,053
2018
£000
4,164
76
(3,630)
266
361
-
(277)
(707)
-
39
-
55
32
-
(2,482)
(51)
(2,154)
2017
£000
(3,166)
(19)
(1,900)
5,354
299
-
-
-
-
-
-
142
(58)
-
99
(213)
538
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Non-
Current
loans and
borrowings
£000
(Note 25)
Company
Current
loans and
borrowings
£000
(Note 25)
Total
£000
1,916
-
1,528
(839)
3,444
(839)
-
-
(805)
1,111
2,356
-
-
-
-
805
-
-
-
1,494
2,605
1,144
(1,102)
3,500
(1,102)
-
-
-
(1,111)
1,111
2,356
2,647
5,003
Notes to the Financial Statements continued
39.
RECONCILIATION OF LIABILITIES FROM FINANCING TRANSACTIONS
Non-
Current
loans and
borrowings
£000
(Note 25)
Group
Current
loans and
borrowings
£000
(Note 25)
As at 1 November 2016
Cash-flows
Non-cash flows
- New finance leases
- Amounts derecognised on
operations disposed
-Loans and borrowings
classified as non-current at
31 October 2016 becoming
current during year ended 31
October 2017
As at 31 October 2017
Cash-flows
-New borrowings
-Repayments of borrowings
Non-cash flows
- New finance leases
-Loans and borrowings
classified as non-current at
31 October 2017 becoming
current during year ended
31 October 2018
As at 31 October 2018
3,202
-
462
(14)
(1,754)
1,896
2,356
-
1,551
2,626
(2,048)
193
(13)
1,754
2,512
1,144
(2,614)
808
(2,037)
3,766
2,037
3,887
Total
£000
5,828
(2,048)
655
(27)
-
4,408
3,500
(2,614)
2,359
-
7,653
92
www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018
Shareholder Information
Notice of Annual General Meeting
Notes to Notice of Annual General Meeting
Information Relating to the Proposed New Performance Share Plan
Financial Calendar
Shareholder Fraud Warning
94
95
96-97
98
98
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
93
04
Notice of Annual General Meeting
Notice is hereby given that the twenty seventh Annual General Meeting
(the “Meeting”) of Wynnstay Group Plc (the “Company”) will be held in
The Sovereign Suite, Shrewsbury Town Football Club, Oteley Road,
Shrewsbury, Shropshire, SY2 6ST on Tuesday 26 March 2019 at
11.45 am to transact the following business:
9.
ORDINARY BUSINESS
1.
2.
3.
4.
5.
6.
7.
To receive and adopt the Company’s annual accounts
for the financial year ended 31st October 2018 together
with the Directors’ Report and Auditors’ Report on those
accounts.
To declare a final dividend for the year ended 31 October
2018.
To re-appoint the following Director who retires by rotation
under Article 91:
Philip Michael Kirkham
To re-appoint the following Director who retires by rotation
under Article 91:
David Andrew Thomas Evans
To re-appoint the following Director who retires under Article
86:
Gareth Wynn Davies
To re-appoint BDO LLP as auditors, to hold office from the
conclusion of the Meeting to the conclusion of the next
Meeting at which accounts are laid before the Company at
a remuneration to be determined by the Directors.
To approve the rules of the Wynnstay Performance Share
Plan (“PSP”), the principal terms of which are summarised in
the annual report on pages 96-97 and which are produced
in final form to this meeting and initialled by the Chairman
of the meeting for the purposes of identification, and to
authorise the Directors to:
(a) adopt the PSP and to do all such other acts and
things as they may consider appropriate to implement
the PSP (including, for the avoidance of doubt, the
operation of and/or establishment of an employee
benefit trust relating to operation of the PSP); and
(b) establish any sub-plans based on the PSP for
the benefit of employees inside or outside the UK,
modified as necessary to take account of any relevant
existing, revised or new exchange control, taxation or
securities laws in the relevant jurisdiction, provided
that any shares made available under such sub-plans
are treated as counting against any limits on individual
or overall participation in the PSP.
SPECIAL BUSINESS
To consider and, if thought fit, pass the following Resolutions which
will be proposed as Special Resolutions :
8.
That, the Directors be and they are hereby generally and
unconditionally authorised for the purposes of Section 551
of the Companies Act 2006 (the “Act”) to exercise all powers
of the Company to allot equity securities up to an aggregate
nominal amount of £450,000 provided that this authority
shall, unless renewed, varied or revoked by the Company
in General Meeting, expire on the earlier of the next Annual
General Meeting of the Company and 15 months from the
date of this Resolution save that the Company may, before
such expiry, make an offer or agreement which would or
might require relevant securities to be allotted after such
expiry, and the Directors may allot relevant securities in
pursuance of such offer or agreement notwithstanding
that the authority conferred by this Resolution has expired.
This authority is in substitution for all previous authorities
conferred upon the Directors pursuant to Section 551 of
the Companies Act 2006, but without prejudice to the
94
allotment of any relevant securities already made or to be
made pursuant to such authorities.
That, subject to passing Resolution 8 earlier, the Directors
be and they are empowered pursuant to Section 570 of the
Act to allot equity securities wholly for cash pursuant to the
authority conferred by the previous Resolution as if Section
561 of the Act did not apply to any such allotment, provided
that this power shall be limited to the allotment of equity
securities:-
(a) in connection with an offer of such securities
by way of rights to holders of Ordinary Shares in
proportion (as nearly as may be practicable) to their
respective holdings of such shares, but subject to such
exclusions or other arrangements as the Directors may
deem necessary or expedient in relation to fractional
entitlements or any legal or practical problems under
the laws of any territory, or the requirements of any
regulatory body or stock exchange; and
(b) otherwise than pursuant to sub-paragraph (a) above
up to an aggregate nominal amount of £450,000, and
shall expire on the earlier of the next Annual General
Meeting of the Company and 15 months from the
date of this Resolution save that the Company may,
before such expiry make an offer or agreement which
would or might require equity securities to be allotted
after such expiry and the Directors may allot equity
securities in pursuance of any such offer or agreement
notwithstanding that the power conferred by this
Resolution has expired.
10. That, the Company be and is generally and unconditionally
authorised for the purposes of Section 701 of the Act to
make one or more market purchases (within the meaning of
Section 693 of the Act) on the London Stock Exchange of
Ordinary Shares of £0.25 each in the capital of the Company
provided that:-
(a) the maximum aggregate number of Ordinary Shares
authorised to be purchased is 500,000 (representing
approximately 2.5% of the Company’s issued ordinary
share capital);
(b) the minimum price which may be paid for such
shares is £0.25 per share;
(c) the maximum price which may be paid for an
Ordinary Shares shall not be more than 5% above
the average of the middle market quotations for an
ordinary share as derived from the London Stock
Exchange Daily Official List for the five business days
immediately preceding the date on which the ordinary
share is purchased;
(d) unless previously renewed, varied or revoked, the
authority conferred shall expire at the conclusion of the
Company’s next Annual General Meeting or 15 months
from the date of passing this Resolution, if earlier; and
(e) the Company may make a contract or contracts
to purchase Ordinary Shares under the authority
conferred prior to the expiry of such authority which will
or may be executed wholly or partly after the expiry of
such authority and may make a purchase of ordinary
shares in pursuance of any such contract or contracts.
By Order of the Board
Bryan Paul Roberts
22 January 2019
Company Secretary
Wynnstay Group Plc
Eagle House
Llansantffraid-ym-Mechain
Powys, SY22 6AQ
www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018
Notes to Notice of Annual General Meeting
1.
Appointment of proxies
A member of the Company is entitled to appoint a proxy
to exercise all or any of their rights to attend, speak and
vote at the Meeting. A form of proxy accompanies this
document and if it is to be used, it must be deposited at
the Company’s Head Office not less than 24 hours before
the meeting. A proxy does not need to be a member of the
Company but must attend the Meeting to represent you.
2.
Re-appointment of Director
Under Article of Association No. 86, the Board did, during
the year exercise its authority to appoint an additional
director. Under that authority the appointed director has to
resign at the first annual general meeting after appointment,
and if they are eligible may seek re-election. Therefore
under resolution 5, Mr Gareth Wynn Davies duly seeks
shareholder approval for re-election.
3.
Approval of new Performance Share Plan
Resolution 7 relates to the proposal to adopt a new employee
share plan to reward and incentivise the executive directors
and key members of senior management. The reasons for
the proposal of the PSP are described in the Directors’
Remuneration Report for the year ended 31 October 2018
and a summary of the principal terms of the PSP is set out
on pages 96-97 of this document.
The draft rules of the PSP will be available for inspection
at the Company’s registered office (at Eagle House,
Llansantffraid, Powys SY22 6AQ) during usual business
hours on any weekday (Saturday, Sunday and public
holidays in the United Kingdom excluded) from the date of
this Notice until the end of the Annual General Meeting.
4.
Authority to allot shares
their preference
Special resolutions 8 & 9 are put forward to give the
directors authority to allot new shares (including to those
shareholders exercising
receive
dividends in the form of Scrip shares). The resolutions limit
the requested authority to the stated maximum as an added
shareholder protection. These authorities give the directors
the flexibility in financing possible business opportunities
and are normal practise for a company of this size, and are
routinely put to shareholders.
to
5.
Authority to purchase shares
Special resolution 10 is put forward to give the directors the
ability to buy back and cancel existing shares if they feel
that such action would benefit all remaining shareholders
and are normal practise for a company of this size, and are
routinely put to shareholders.
6.
Documents on display
Copies of necessary documents will be available for at least
15 minutes prior to the Meeting and during the Meeting.
7.
Enquiries relating to the Meeting
Members are welcome to contact the Company Secretary
with any enquiries relating to the Meeting or the Agenda
during normal business hours at any time prior to the
Meeting. Enquiries concerning shareholdings should be
directed to the Company’s external registrar at the following
address : Neville Registrars, Neville House, Steelpark Road,
Halesowen, West Midlands, B62 8HD. (Tel. 0121 585 1131)
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Information Relating to the Proposed New Wynnstay Performance
Share Plan
PERFORMANCE SHARE PLAN
The Company is proposing to adopt the Wynnstay Performance
Share Plan (“PSP”) to incentivise the executive directors and other key
employees to focus on the long–term strategic objectives of the Group
and to deliver sustainable shareholder value, aligning their interests
with the interests of Shareholders. Although obtaining shareholder
approval for the PSP is not a legal requirement for the Company, the
Remuneration Committee wishes to obtain shareholder approval for
the new PSP before granting any awards.
The PSP has been developed with the advice of RSM Tax and Advisory
Services LLP and the main provisions of the PSP are summarised
below. The draft rules of the PSP will be available for inspection at the
Company’s registered office (at Eagle House, Llansantffraid, Powys
SY22 6AQ) during usual business hours on any weekday (Saturday,
Sunday and public holidays in the United Kingdom excluded) from the
date of this Notice until the end of the Annual General Meeting and will
be available for inspection at the place of the Annual General Meeting
for at least 15 minutes prior to and during the Annual General Meeting.
Resolution 7 and the accompanying explanatory notes relate to the
approval of the PSP.
The following is a summary of main provisions of the PSP proposed to
be adopted by the Company pursuant to Resolution 7.
This Part summarises the PSP, but does not form part of the rules of the
PSP (“Rules”) and should not be taken as affecting the interpretation of
the detailed terms and conditions constituting the Rules. Capitalised
terms not otherwise defined in this document shall have the meaning
given to them as stated in the Rules.
The Rules will be available for inspection at the registered office of the
Company (at Eagle House, Llansantffraid, Powys SY22 6AQ) during
usual business hours on any weekday (Saturday, Sunday and public
holidays in the United Kingdom excluded) from the date of this Notice
until the end of the Annual General Meeting and will be available for
inspection at the place of the Annual General Meeting for at least 15
minutes prior to and during the Annual General Meeting.
OPERATION
The PSP will be operated and supervised exclusively by the
Remuneration Committee of the Board of Directors of the Company.
ELIGIBILITY
The Remuneration Committee will solely determine who may
participate in the PSP. Participation may be extended to any employee
(including but not limited to any executive director) of a Group
Company (“Employees”).
GRANT OF AWARDS
Awards granted under the PSP may take the form of:
•
•
•
•
a conditional right to acquire Ordinary Shares for no cost;
an award of Ordinary Shares which are subject to forfeiture;
an option to acquire Ordinary Shares (either at nil cost, Market
Value or nominal value); or
an interest in Ordinary Shares where the beneficial interest is
held jointly with a nominee (collectively, “Awards”).
Awards may only be granted in the period of 42 days immediately
following the end of any Closed Period, the period of 42 days
immediately following the adoption date, or in any other period in
which the Remuneration Committee has decided to grant an Award
due to exceptional circumstances which justify such a decision. The
Remuneration Committee may not grant Awards during a Closed
Period or after the tenth anniversary of the date the PSP is adopted.
INDIVIDUAL LIMIT
Employees may not receive Awards in any year having a market value
in excess of 100% of their Base Salary.
OVERALL PLAN LIMITS
In a ten-year period ending on the date of proposed grant, the
Company may not grant Awards that would require it to issue more
than:
•
•
10% of the issued share capital of the Company pursuant to
the PSP and all other employee share plans adopted by the
Company; or
5% of the issued share capital of the Company pursuant to the
PSP and any other discretionary share plan adopted by the
Company.
Awards that can only be settled by the transfer of Ordinary Shares
(other than the transfer of treasury shares) do not count towards these
limits.
PERFORMANCE CONDITIONS
Awards will be subject to the satisfaction of one or more Performance
Condition(s) measured over a Performance Period of at least three
years, which will determine the proportion (if any) of the Award which
will be capable of vesting.
Performance Conditions may be varied or substituted provided that
any varied or substituted performance condition shall be: (i) a fairer
measure of performance than the original Performance Conditions; (ii)
be no more difficult to satisfy than the original Performance Conditions
was at the date of grant; and (iii) be not materially easier to satisfy
than the original Performance Condition was at the grant date unless
such variation or substitution has been approved in advance by the
Company in a general meeting.
VESTING OF AWARDS
To the extent to which the Performance Conditions have been satisfied,
Awards will normally vest on the third anniversary of the date of grant
in line with the minimum Performance Period. Vesting of Awards is
followed by a holding period that the Remuneration Committee shall
specify in the Award Certificate. Such holding period shall apply except
in certain limited circumstances.
The Remuneration Committee will apply a holding period in respect of
50% of the Ordinary Shares in any vested Award. The holding period
shall commence on the third anniversary of the date of grant, and
one-half of the Ordinary Shares subject to the holding period shall be
released after one year and one-half after two years.
CESSATION OF EMPLOYMENT
Where an Employee dies or ceases to be employed within the Group
prior to the vesting of an Award as a result of permanent disability
or incapacity due to ill-health or injury, redundancy, retirement or any
other exceptional circumstances that the Remuneration Committee
considers to be analogous to the foregoing (a “Good Leaver Reason”),
Awards will normally vest at the normal vesting date, pro-rated for time
served and remaining subject to the original Performance Conditions.
Any Ordinary Shares held for the compulsory holding period (i.e.
after the end of the Performance Period) will vest immediately. If the
termination of employment is as a result of anything other than a Good
Leaver Reason, any unvested Awards will lapse in full.
CORPORATE EVENTS
In the event of a change of control, scheme of arrangement or winding
up of the Company, Awards may vest early to the extent that the
Performance Conditions have, in the opinion of the Committee, been
satisfied at that time. There may also be a pro-rata reduction in the size
of the Award to take into account the proportion of the Performance
Period that has elapsed.
96
www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018
ADJUSTMENT OF AWARDS
In the event of a variation of the Company’s share capital or a
demerger, special dividend, rights issue or other specified event which
may, in the opinion of the Remuneration Committee, affect the current
or future value of the Ordinary Shares, the number of Ordinary Shares
subject to an Award may be adjusted.
MALUS AND CLAWBACK
Malus provisions apply for the duration of the Performance Period
and to Ordinary Shares under the holding period, allowing the
Remuneration Committee to reduce to zero any unvested or held
awards.
Clawback provisions apply to cash amounts paid and Ordinary Shares
or cash, allowing the Remuneration Committee to claim back all or
part of any amount paid or released.
Malus and/or clawback provisions may be triggered in scenarios
including, inter alia:
•
•
•
there was material error in assessing the extent to which any
Performance Condition(s) were satisfied;
the Remuneration Committee determines that a Group
Company has mis-stated any financial information (whether or
not audited) for any part of any financial year and such
information was taken into account in assessing the extent to
which any Performance Condition was satisfied; or
the Company has reasonable evidence of fraud or material
dishonesty on the part of the holder of the Award.
AMENDING THE PSP
The Remuneration Committee may amend the PSP from time to time,
provided that the Remuneration Committee:
•
•
may not amend the PSP if it (i) applies to Awards granted
before the amendment was made and (ii) it material adversely
affects the interests of holders of Awards (except to the extent
that such holders who would be adversely affected consent to
the application of the proposed amendments); and
may not make certain amendments to the advantage of holders
of Awards without the prior approval of the Company in general
meeting (except for minor amendments to the benefit of
administration of the Plan, to take account of a change in
legislation or to obtain or maintain favourable tax, exchange
control or regulatory treatment for holders of Awards or a
Group Company).
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
Financial Calendar
23 January 2019 Announcement of 2018 Results
26 March 2019 Annual General Meeting
29 March 2019 Dividend Record Date
30 April 2019 Payment of Final 2018 Dividends
June 2019 Announcement of 2019 Interim Results
Shareholder Fraud Warning
Shareholders are advised that as the Company’s share register is a
public document, details concerning individual shareholdings may be
available to people who may try to use such information for fraudulent,
scam or other criminal purposes. Extreme diligence is recommended
whenever you receive any un-solicited contact about your Wynnstay
Group Plc shares or any other investment holding. Fraudsters can
be very persuasive and will use high pressure tactics to try to scam
investors they believe to have disposable resources. Such contact
may be used to sell shares or other investments which may be fake or
worthless, or to try to persuade you to dispose of existing investments
for below their market value.
The Financial Conduct Authority (FCA) has a very useful website
providing information on known frauds and scams, and identifying
companies that may be operating in an unauthorised or illegal manner,
which is likely to increase the risk associated with doing business with
them. Please visit http://scamsmart.fca.org.uk/.
Some simple advice to avoid investment scams and share frauds
include :
1.
2.
3.
4.
Hang up on cold calls – if you are cold called in relation
to investment opportunities there is a high risk that it may
involve an attempted scam. The safest thing to do is to
hang up.
Check out any firm – before considering any relationship
with a new individual or firm offering financial services,
check them out on the Financial Services Register on the
FCA website. Generally all businesses legally authorised to
offer such services will be regulated by the FCA.
Get impartial advice – before handing over any money in
relation to new investments, think about seeking advice
from someone unconnected to the new contact or entity
that would receive your funds.
Report a scam – if you suspect you have been approached
by attempted fraudsters, then please report it to the FCA
by using the reporting form available on the FCA website.
If you have actually lost money to an investment fraud,
you should report it to the police using the Action Fraud
National Reporting scheme on 0300 123 2040 or http://
www.actionfraud.police.uk/.
REMEMBER, IF IT SOUNDS TOO GOOD TO
BE TRUE, IT PROBABLY IS !
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www.wynnstay.co.uk ANNUAL REPORT AND ACCOUNTS 2018
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ANNUAL REPORT AND ACCOUNTS 2018 Wynnstay Group Plc
99
Wynnstay Group Plc
01691 828512
www.wynnstay.co.uk
Registered in Wales and England