TIDMWYN
RNS Number : 8525Q
Wynnstay Group PLC
24 June 2020
24 June 2020
AIM: WYN
Wynnstay Group Plc
("Wynnstay" or the "Group" or the "Company")
Interim Results
For the six months ended 30 April 2020
Resilient Results in Exceptionally Challenging Market
Conditions
Key points
Financial
-- Resilient results, with increased profitability, despite exceptionally
challenging market conditions caused by coronavirus crisis,
subdued farmgate prices, and ongoing Brexit uncertainty
- results benefited from the Group's balanced spread of agricultural
activities, which provide a natural hedge against sector
variation
-- Revenue of GBP229.29m (2019: GBP260.57m), reflecting commodity
price deflation
-- Adjusted operating profit(1) up 8% to GBP4.78m (2019: 4.43m)
-- Reported profit before tax up 4% to GBP4.30m (2019: GBP4.12m)
-- Basic earnings per share up 3% to 17.50p (2019: 17.01p)
-- Net debt on comparable basis to last year reduced to GBP2.54m
at period end (2019: GBP14.70m), helped by commodity price
deflation
- IFRS 16 creates additional lease liabilities of GBP6.42m,
which increase total debt to GBP8.96m
-- Net assets increased to GBP96.84m at period end (2019: GBP92.97m),
which represents c.GBP4.87 per share
-- Short-term and committed bank facilities amounting to GBP20m
recently renewed
-- Interim dividend of 4.60p per share maintained (2019: 4.60p),
reflecting Board's confidence in the strength of the underlying
business
[1] Note 20. Explanation of Non GAAP measure
Operational
-- Agriculture Division - revenue of GBP166.41m (2019: GBP195.05m),
operating profit of GBP1.81m (2019: GBP1.79m)
- extreme wet weather adversely affected winter planting season,
reducing demand for arable inputs
- feed performance improved, although volumes reduced in line
with national market trends
- tight market for grain trading activities with margins under
pressure
-- Specialist Agricultural Merchanting Division - revenue of GBP62.83m
(2019: GBP65.48m), operating profit of GBP3.02m (2019: GBP2.67m)
- 'Order & collect' system established across depot network
to ensure staff and customer safety during coronavirus 'lockdown',
affected some ancillary sales. Nearly all depots have now
resumed more normal trading protocols while ensuring social
distancing
- profitability increased, helped by cost efficiency programme
commenced last year
Outlook
-- Board expects trading backdrop to remain under pressure for
the remainder of the year in light of the coronavirus crisis
and ongoing Brexit-related uncertainties
-- Wynnstay is well-positioned financially and operationally to
navigate the near term challenges and will continue with investment
programme
Gareth Davies, Chief Executive of Wynnstay, commented:
"These resilient results in the face of the headwinds created by
the coronavirus pandemic, continuing Brexit uncertainty and subdued
farmgate prices, demonstrate the robustness of the business.
Wynnstay's broad spread of agricultural activities is a significant
strength, acting as a natural hedge against sector variations.
"We are proud of the way staff responded to the challenges of
trading under the Government's emergency 'lockdown' measures, which
meant that we were able to maintain the supply of products and
services to customers, albeit with necessary adaptations.
"The Group is well-placed financially and operationally to
navigate the ongoing coronavirus crisis. While we expect the
remainder of the year to remain challenging, our confidence in the
long-term prospects for Wynnstay remain undiminished."
Enquiries:
Wynnstay Group Plc Gareth Davies, Chief T: 020 3178 6378
Executive (today)
Paul Roberts, Finance T: 01691 827 142
Director
KTZ Communications Katie Tzouliadis / Dan T: 020 3178 6378
Mahoney
Shore Capital (Nomad Stephane Auton / Patrick T: 020 7408 4090
and Broker) Castle / John More
CHAIRMAN'S STATEMENT
INTRODUCTION
We are pleased to report a resilient trading performance in what
was an exceptionally challenging period. Adjusted operating profit
before non-recurring items(1) in the six months to 30 April 2020
increased by 8% to GBP4.78m (2019: GBP4.43m) on lower revenue of
GBP229.29m (2019: GBP260.57m), largely impacted by commodity price
deflation. Reported profit before tax was 4% higher at GBP4.30m
(2019: GBP4.12m). Both the Agriculture and Specialist Agricultural
Merchanting divisions contributed to this recovery in performance,
which also benefited from the efficiency programme we introduced a
year ago.
The outbreak of the coronavirus and subsequent global pandemic
created significant social and economic disruption. Our overriding
priority has been to ensure the welfare of our colleagues,
customers and supplier partners as well as to mitigate risk for the
wider community. We are very proud of the way in which Wynnstay
colleagues responded to the challenges. Remote working arrangements
were put in place, and as an essential service provider we
continued to trade across all areas of activity. Our depots
initially adjusted to an 'order & collect' process to minimise
infection risks, and our feed, seed and fertiliser processing
activities and other distribution operations continued to function
to plan. All depots, except for three, have now returned to more
normalised operating procedures, with appropriate safe working
practises in place.
These issues and restrictions impacted business opportunities
over the first half, and additional costs were incurred, including
extra short-term resource to cover for those colleagues unavailable
to work because of shielding or isolation requirements. We have not
had to make use of the Government's Coronavirus Job Retention
Scheme and as such no colleagues have been furloughed.
The pandemic created further pressures for farmers, in
particular because of its effect on food distribution channels with
the closure of restaurants and other food service outlets. Some
milk producers were asked to dispose of their milk, rather than
sell it into the market, for a short period of time. This together
with ongoing Brexit uncertainty affected farmer confidence,
constraining spending.
The mild but abnormally wet winter weather conditions inhibited
demand for many of the Group's core product categories,
particularly for arable inputs since many farmers were unable to
sow winter cereal seed due to the heavy rain. Spring cereal seed
was sown towards the end of March, but it has a lower yield and
lower input requirement than winter cereals. Some land that would
have normally been cultivated was also left fallow.
While we expect the remainder of the financial year to remain
challenging, Wynnstay is well-positioned financially and
operationally. Our balanced business model, supplying inputs to
both arable and livestock farmers, provides a natural hedge. We
will continue with our investment programme, upgrading facilities,
systems, and processes, together with efficiency initiatives.
FINANCIAL RESULTS
Revenue for the six months to 30 April 2020 decreased by 12% to
GBP229.29m (2019: GBP260.72m), with commodity price deflation
accounting for an estimated 60% of the year-on-year decrease. The
balance of the decrease reflected lower volumes of certain product
categories adversely affected by the wet weather and some sales
that were impacted by the trading restrictions in the depot
merchanting business as a result of the coronavirus crisis. The
Agriculture Division contributed GBP166.41m to overall revenue
(2019: GBP195.05m) and the Specialist Agricultural Merchanting
Division contributed GBP62.83m (2019: GBP65.48m). Other activity
contributed revenue of GBP0.05m (2019: GBP0.05m).
During the period, the Group adopted the IFRS 16 accounting
standard in relation to Leases, which now requires the recognition
of 'right-of-use' property assets on the balance sheet. The Group
has chosen not to restate comparative figures, so on adoption there
has been an overall comparative negative impact on net
profitability of GBP71,471 in the period. Operating profit shows a
comparative increase of GBP99,445 as some costs, previously
expensed as rental payments, have now been classified as interest
payable.
Adjusted operating profit, before non-recurring corporate
restructuring costs, increased by 8% to GBP4.78m (2019: GBP4.43m).
Operating profit in the Agricultural Division was GBP1.81m (2019:
GBP1.79m), which reflected lower arable product demand due to the
wet weather, offset by an improved feed performance. Fertiliser and
agrochemical sales were very late to commence, in March/April, both
for core farmer customers and within our Glasson business. Grain
volumes and margins were lower due to farmer reluctance to sell
ahead of expected price increases. Operating profit at the
Specialist Agricultural Merchanting Division increased by 13.1% to
GBP3.02m (2019: GBP2.67m), helped by the cost efficiency programme
introduced over the last twelve months. Other activities incurred
an operating loss of GBP0.09m (2019: loss of GBP0.08m). As in prior
years, the contribution from our Joint Ventures will be
consolidated in the second half of our full year results.
Corporate restructuring expenses relating to the efficiency
programme amounted to GBP0.18m (2019: GBP0.09m)(2) , and net
finance costs increased to GBP0.26m (2019: GBP0.16m), which mainly
reflected the adoption of the IFRS 16 interest charges.
The resultant reported profit before tax was GBP4.30m (2019:
GBP4.12m), up 4%. The tax charge for the period was GBP0.82m (2019:
GBP0.76m) and profit after tax increased by 3% to GBP3.48m (2019:
GBP3.36m). Basic earnings per share increased by 3% to 17.50p
(2019: 17.01p).
Net assets at 30 April 2020 increased by 4% to GBP96.84m (2019:
GBP92.97m), which represents approximately GBP4.87 per share (2019:
GBP4.70 per share). The weighted average number of shares in issue
during the period was 19.90m (2019: 19.77m).
Net debt at 30 April 2020 calculated on a comparable basis to
last year reduced by 83% to GBP2.54m (2019: GBP14.70m)(3) .
However, the impact of adopting IFRS 16 has been to create
additional lease liabilities of GBP6.42m, which are now technically
classified as debt, and to increase the balance sheet reported net
borrowings and lease liabilities at the period end to a total of
GBP8.96m. While the Group's cash requirements are at their highest
during the spring months, particularly in April, working capital
utilisation benefitted strongly from the commodity deflation driven
lower revenues in this period. The lower levels of fertiliser
activity have also strongly contributed to this lower cash
requirement, which is a considerable reversal to the trading
pattern experienced last year.
The Group's robust liquidity position is further supported by
recently renewed short-term and committed bank facilities amounting
to GBP20m.
DIVID
The Board is pleased to declare an interim dividend of 4.60p per
share (2019: 4.60p), equivalent to last year's. This reflects the
Board's continuing confidence in the underlying business while
recognising the broader economic uncertainty.
The interim dividend will be paid on 30 October 2020 to
shareholders on the register at the close of business on 25
September 2020. As in previous years, the Scrip Dividend
alternative will continue to be available, with the last day for
election for this scheme being 16 October 2020.
REVIEW OF OPERATIONS
AGRICULTURE DIVISION
Many of the elements affecting UK farmer confidence in our last
financial year, including subdued farmgate prices, extreme weather,
and political uncertainty over Brexit, continued into the current
financial year, and the impact of the global coronavirus pandemic
has heightened farmer caution.
Feed Products
Feed performance improved over the same period last year,
benefiting from higher gross margin, which offset the slight
reduction in overall volumes. While the winter was generally mild,
the extremely wet weather prevented the early turn out of animals
seen in 2019, and we saw a recovery in volumes of sheep feed sold.
Other ruminant categories saw small volume reductions as many
customers switched to straight feeds away from manufactured
compounds in reaction to lower farmgate prices. Through our
dedicated team of poultry specialists, we maintain a significant
presence in the local free-range egg manufactured feed market,
where demand is generally very stable. Our ruminant youngstock team
continued to grow market share within the milk replacer sector at
farm level.
Arable Products
The extreme and prolonged wet weather, which dominated the early
months of 2020, hampered all forms of arable farming. Much of the
winter cereal seed, bought in the autumn, could not be planted and
unused product remains on farm to be sown this autumn. However, we
benefitted from strong demand for spring cereal seed varieties when
the weather improved in April. These spring crops have a shorter
growing period, yield less grain, and require a lower level of
agricultural inputs than winter crops. This was reflected in
reduced demand for fertilisers and agrochemicals, and the grassland
fertiliser market was also delayed due to the wet weather.
While grass seed sales were similarly delayed by the weather, we
took advantage of our strong market presence in this sector once
demand picked up in the drier spring period and volumes were higher
year-on-year.
Grain trading activities started the year well, with good
volumes available from last year's harvest. However, forecast
shortages of grain for next year encouraged farmers to delay
marketing of their grain to take advantage of anticipated higher
prices. This in turn tightened competition for remaining volumes,
pressurising margins. We expect this to continue for the rest of
the current season, and anticipate reduced volumes from the 2020
harvest, reflecting the lower yields from spring sown crops. This
will adversely affect income from grain trading in the fourth
quarter of the financial year.
Glasson Grain
Glasson Grain operates in three main areas, feed raw materials,
fertiliser production and the manufacture of specialist animal feed
products.
Glasson generated a good performance, in line with budget. Feed
activities performed satisfactorily. Demand for fertiliser was
significantly delayed in the first half, however, in April, as
planting conditions improved, volumes rebounded and matched last
year's level over the same period. The sharp drop in oil prices
following the coronavirus outbreak resulted in lower fertiliser
prices and created margin pressure since raw material commitments
needed realising before lower replenishment values could come
through.
SPECIALIST AGRICULTURAL MERCHANTING DIVISION
Specialist Agricultural Merchanting
The Group's chain of 55 depots mainly cater for the needs of
farmers, although rural dwellers also form part of the customer
base. They operate very closely with our Agricultural Division,
providing a strong channel to market for our products.
Total sales decreased slightly during the period, affected by
wet weather and the restricted trading protocols that were
introduced following the coronavirus outbreak. However, the
Division delivered an improved financial contribution, which was
underpinned by the cost efficiency programme commenced last
year.
From the end of March when the Government's 'lockdown' came into
effect, the Division traded as an essential service provider,
albeit adjusting swiftly to an 'order & collect' process, with
customers pre-ordering goods for collection from depots. This meant
that some ancillary sales (such as household, clothing, gardening
and some pet lines) were lost. All but three of our depots have now
returned to more normalised operating procedures, with appropriate
safe working practises in place. Two depots continue to operate
under 'order & collect', and a small depot in South Wales
remains closed.
Youngs Animal Feeds
Revenues at our specialist equine feeds business increased in
the period. This largely reflected customer coronavirus-linked
stockpiling, and, in the short-term, the cancellation of many
summer equine events and shows is expected to restrain sales. The
business is relaunching the Company's manufactured fibre feed range
under the Sweet Meadow brand, which represents an exciting new
opportunity.
JOINT VENTURES AND ASSOCIATES
Results from the Group's joint ventures and associate companies
are not included in this half year report. They will be
consolidated into Wynnstay's full year results as in previous
years.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE ("ESG")
We recognise that our activities have an impact on the
environment and can also affect the wider community. We therefore
incorporate environmental, social and governance factors into
decision-making processes. Furthermore, we also believe that
Wynnstay can play an important role in assisting our customers with
environmental and sustainability objectives.
The Group seeks to operate all its activities in an
environmentally sustainable manner. This includes investing in
energy saving opportunities, reducing all forms of consumables,
securing relevant accreditation for its operations where possible,
and sourcing sustainable products for our supply chain. We are
engaging with the National Farmers Union's goal of reaching 'net
zero' greenhouse gas emissions across the whole of agriculture in
England and Wales by 2040.
Making a positive contribution to the communities we serve is
important and, as well as seeking to be an equitable employer, the
Group provides educational support, charitable contributions and
backs regional social initiatives including agricultural shows,
community events and project support.
The Wynnstay Board is committed to the highest standards of
appropriate corporate and commercial governance so as to deliver
long term shareholder value and ensure the maximum positive impact
it can have on other important stakeholder groups including
colleagues, customers and suppliers. Doing the right thing is the
only way we can be confident of long-term success.
OUTLOOK
There is considerable uncertainty both in the wider economy and
in our specific sector, created by the coronavirus crisis and
Brexit. As we look over the remainder of the year therefore, we
expect the trading backdrop to remain difficult. However, as the
Group's results have shown, we have a resilient business model and
our spread of activities across the arable and feed enterprises
continues to provide a hedge against sector variation.
Notwithstanding the immediate challenges, we view medium and
long-term prospects positively. Our strong balance sheet and
liquidity supports our ongoing programme of investment in
infrastructure and systems to improve operational efficiencies and
reduce cost. We remain focused on aligning ourselves closely with
the changing needs and requirements of our customer base. This
covers all aspects of the business, including the provision of
advisory services direct to farm via our specialist sales team, as
well as through our product offering and routes to our market.
The Board retains its positive view of the opportunities
available to the Group and UK Agriculture.
Jim McCarthy
Chairman
[1] Note 20. Explanation of Non GAAP measure.
(2) Note 10
(3) Note 11
WYNNSTAY GROUP PLC
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 April 2020
Unaudited Unaudited Audited
six months six months year ended
ended ended 31 October
30 April 30 April 2019
2020 2019
Note GBP'000 GBP'000 GBP'000
CONTINUING OPERATIONS
Revenue 229,288 260,572 490,602
Cost of sales (197,781) (228,397) (428,621)
------------ ------------ ------------
Gross profit 31,507 32,175 61,981
Manufacturing, distribution
and selling costs (23,333) (24,381) (48,177)
Administrative expenses (3,561) (3,541) (6,434)
Other operating income 9 168 180 385
------------------------------------- ----- ------------ ------------ ------------
Adjusted operating profit4 20 4,781 4,433 7,755
Amortisation of acquired intangible
assets and share -based payment
expense 10 (44) (59) (77)
Non-recurring items 10 (185) (96) (301)
------------------------------------- ----- ------------ ------------ ------------
Group operating profit 4,552 4,278 7,377
Interest income 55 52 164
Interest expense (310) (209) (348)
Share of profits in joint ventures
and associate accounted for
using the equity method 2 - - 463
Share of tax incurred in by
joint venture and associate - - (103)
Profit before taxation 4,297 4,121 7,553
Taxation 4 (817) (758) (1,421)
Profit for the period and other
comprehensive income attributable
to the equity holders 3,480 3,363 6,132
============ ============ ============
Basic earnings per ordinary
share (pence) 17.50 17.01 30.95
Diluted earnings per ordinary
share (pence) 17.43 16.98 30.95
4 Adjusted operating profit is after adding back amortisation of
acquired intangible assets, share-based payment expense and
non-recurring items - note 20
WYNNSTAY GROUP PLC
CONDENSED CONSOLIDATED BALANCE SHEET
For the six months ended 30 April 2020
Unaudited Unaudited Audited
as at 30 as at 30 as at
April 2020 April 2019 31 October
2019
Note GBP'000 GBP'000 GBP'000
------------------------------------ ----- ------------ ------------ ------------
ASSETS
NON-CURRENT ASSETS
Goodwill 14,968 14,964 14,968
Investment property 2,372 2,372 2,372
Property, plant and equipment 17,964 23,274 23,225
Right-of-use asset 11,264 - -
Investments accounted for
using the equity method 3,175 2,863 3,175
Intangibles 243 281 261
------------------------------------ ----- ------------ ------------ ------------
49,986 43,754 44,001
------------------------------------ ----- ------------ ------------ ------------
CURRENT ASSETS
Inventories 42,002 46,479 42,239
Trade and other receivables 75,501 83,757 63,887
Financial assets - loans
to joint ventures 4,929 3,089 4,413
Cash and cash equivalents 11 3,452 423 10,608
125,884 133,748 121,147
------------------------------------ ----- ------------ ------------ ------------
TOTAL ASSETS 175,870 177,502 165,148
LIABILITIES
CURRENT LIABILITIES
Financial liabilities - borrowings (1,860) (11,648) (3,686)
Lease Liabilities (3,539) - -
Trade and other payables (65,202) (67,987) (62,113)
Current tax liabilities (991) (1,092) (894)
(71,592) (80,727) (66,693)
------------------------------------ ----- ------------ ------------ ------------
NET CURRENT ASSETS 54,292 53,021 54,454
------------------------------------ ----- ------------ ------------ ------------
NON-CURRENT LIABILITIES
Financial liabilities - borrowings (313) (3,468) (3,078)
Lease liabilities (6,701) - -
Trade and other payables (199) (206) (201)
Deferred tax liabilities (228) (132) (228)
(7,441) (3,806) (3,507)
------------------------------------ ----- ------------ ------------ ------------
TOTAL LIABILITIES (79,033) (84,533) (70,200)
------------------------------------ ----- ------------ ------------ ------------
NET ASSETS 96,837 92,969 94,948
------------------------------------ ----- ------------ ------------ ------------
EQUITY
Share capital 6 5,002 4,963 4,974
Share premium 30,509 30,170 30,284
Other reserves 3,455 3,431 3,429
Retained earnings 57,871 54,405 56,261
TOTAL EQUITY 96,837 92,969 94,948
------------------------------------ ----- ------------ ------------ ------------
WYNNSTAY GROUP PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY
For the six months ended 30 April 2020
Share Share Other Retained Total
Capital Premium Reserves Earnings Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 November 2018 4,943 29,941 3,377 52,812 91,073
Profit for the period - - - 3,363 3,363
------------------------------ --------- --------- ---------- ---------- ----------
Total comprehensive income
for the period - - - 3,363 3,363
------------------------------ --------- --------- ---------- ---------- ----------
Transactions with owners
of the Company, recognised
directly in equity
Shares issued during the
period 20 229 - - 249
Own shares disposed by ESOP
trust - - 3 - 3
Dividends - - - (1,770) (1,770)
Equity settled share-based
payment transactions - - 51 - 51
------------------------------ --------- --------- ---------- ---------- ----------
Total contributions by and
distributions to owners
of the Group 20 229 54 (1,770) (1,467)
------------------------------ --------- --------- ---------- ---------- ----------
At 30 April 2019 4,963 30,170 3,431 54,405 92,969
------------------------------ --------- --------- ---------- ---------- ----------
Profit for the period - - - 2,769 2,769
------------------------------ --------- --------- ---------- ---------- ----------
Total comprehensive income
for the period - - - 2,769 2,769
------------------------------ --------- --------- ---------- ---------- ----------
Transactions with owners
of the Company, recognised
directly in equity
Shares issued during the
period 11 114 - - 125
Dividends - - - (913) (913)
Equity settled share-based
payment transactions - - (2) - (2)
------------------------------ --------- --------- ---------- ---------- ----------
Total contributions by and
distributions to owners
of the Group 11 114 (2) (913) (790)
------------------------------ --------- --------- ---------- ---------- ----------
At 31 October 2019 4,974 30,284 3,429 56,261 94,948
------------------------------ --------- --------- ---------- ---------- ----------
Profit for the period - - - 3,480 3,480
------------------------------ --------- --------- ---------- ---------- ----------
Total comprehensive income
for the period - - - 3,480 3,480
------------------------------ --------- --------- ---------- ---------- ----------
Transactions with owners
of the Company, recognised
directly in equity
Shares issued during the
period 28 225 - - 253
Dividends - - - (1,870) (1,870)
Equity settled share-based
payment transactions - - 26 - 26
------------------------------ --------- --------- ---------- ---------- ----------
Total contributions by and
distributions to owners
of the Group 28 225 26 (1,870) (1,591)
------------------------------ --------- --------- ---------- ---------- ----------
At 30 April 2020 5,002 30,509 3,455 57,871 96,837
------------------------------ --------- --------- ---------- ---------- ----------
WYNNSTAY GROUP PLC
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 April 2020
Unaudited Unaudited Audited
six months six months year ended
ended ended 30 31 October
30 April April 2019 2019
2020
Note GBP'000 GBP'000 GBP'000
-------------------------------- ----- ------------ ------------ ------------
Cash flow from operating
activities
Cash (used in)/generated
from operations 13 (1,062) (7,498) 14,756
Interest received 55 52 164
Interest paid (310) (209) (348)
Tax paid (720) (914) (1,680)
Net cash (used in)/generated
from operating activities (2,037) (8,569) 12,892
-------------------------------- ----- ------------ ------------ ------------
Cash flows from investing
activities
Acquisition of subsidiaries
(net of cash acquired) (68) (264) (893)
Proceeds on sale of property,
plant and equipment 6 159 288
Purchase of property, plant
and equipment (505) (1,829) (2,412)
Own shares disposed of by
ESOP trust - 3 3
Dividends received from
Associates - - 132
Net cash used by investing
activities (567) (1,931) (2,882)
-------------------------------- ----- ------------ ------------ ------------
Cash flows from financing
activities
Net proceeds from the issue
of ordinary share capital 253 249 374
Principle paid on lease
liabilities (30 April 2019
and 31 October 2019: finance
lease principle repayments) (2,066) (886) (1,798)
Repayments of loans (869) (980) (1,971)
Dividends paid to shareholders (1,870) (1,770) (2,683)
-------------------------------- ----- ------------ ------------ ------------
Net cash used in financing
activities (4,552) (3,387) (6,078)
-------------------------------- ----- ------------ ------------ ------------
Net decrease in cash and
cash equivalents (7,156) (13,887) 3,932
-------------------------------- ----- ------------ ------------ ------------
Cash and cash equivalents
at beginning of period 10,608 6,676 6,676
-------------------------------- ----- ------------ ------------ ------------
Cash and cash equivalents
at end of period 11 3,452 (7,211) 10,608
-------------------------------- ----- ------------ ------------ ------------
WYNNSTAY GROUP PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
GENERAL INFORMATION
Wynnstay Group Plc has a number of operations. These are
described in the segment analysis in note 8.
Wynnstay Group Plc is a company incorporated and domiciled in
the United Kingdom. The address of its registered office is shown
in note 3.
1. BASIS OF PREPARATION
The Interim Report was approved by the Board of Directors on 23
June 2020.
The condensed financial statements for the six months to the 30
April 2020 have been prepared in accordance with International
Accounting Standard (IAS) 34 Interim Financial Reporting except as
disclosed in note 2.
The financial information for the Group for the year ended 31
October 2019 set out above is an extract from the published
financial statements for that year which have been delivered to the
Registrar of Companies. The auditor's report on those financial
statements was not qualified and did not contain statements under
section 498(2) or 498(3) of the Companies Act 2006. The information
contained in this document does not constitute statutory accounts
within the meaning of section 434 of the Companies Act 2006.
The financial information for the six months ended 30 April 2020
and for the six months ended 30 April 2019 are unaudited.
The consolidated financial statements are presented in sterling,
which is also the Group's functional currency. Amounts are rounded
to the nearest thousand, unless otherwise stated.
The condensed consolidated interim financial statements should
be read in conjunction with the annual consolidated financial
statements for the year ended 31 October 2019, which have been
prepared in accordance with IFRS as adopted by the EU.
The Directors have prepared the condensed consolidated interim
financial statements on a going concern basis, having satisfied
themselves from a review of internal budgets and forecasts and
current banking facilities that the Group has adequate resources to
continue in operational existence for the foreseeable future. The
impact of the coronavirus crisis is discussed under 'Critical
accounting estimates and judgements'.
2. CONSOLIDATION OF SHARE OF RESULTS IN JOINT VENTURES AND ASSOCIATES
The Group has a policy of using audited accounts for the
consolidation of its share of the results of Joint Venture and
Associate activities. No such consolidation has occurred during the
six months to 30 April 2020. Although this is not in accordance
with IFRS the impact on the financial statements is not material.
Relevant results will be accounted for during the second half of
the financial year.
3. SIGNIFICANT ACCOUNTING POLICIES
The condensed financial statements have been prepared under the
historical cost convention other than shared-based payments, which
are included at fair value and certain financial instruments which
are explained in the annual consolidated financial statements for
the year ended 31 October 2019.
The same accounting policies, presentation and methods of
computation are followed in these condensed financial statements as
were applied in the preparing of the Group's financial statements
for the year ended 31 October 2019 except as disclosed in note 2
and note 19. A copy of these financial statements is available from
the Company's Registered Office at Eagle House, Llansantffraid,
Powys, SY22 6AQ.
New standards issued but not yet effective
There are a number of standards, amendments to standards, and
interpretations which have been issued by the IASB that are e
ective in future accounting periods that the group has decided not
to adopt early.
The following amendments are e ective for the period beginning 1
January 2020:
IAS 1 Presentation of Financial Statements and IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors (Amendment -
De nition of Material)
IFRS 3 Business Combinations (Amendment - De nition of Business)
Revised Conceptual Framework for Financial Reporting
In January 2020, the IASB issued amendments to IAS 1, which
clarify the criteria used to determine whether liabilities are
classi ed as current or non-current. These amendments clarify that
current or non-current classi cation is based on whether an entity
has a right at the end of the reporting period to defer settlement
of the liability for at least twelve months after the reporting
period. The amendments also clarify that 'settlement' includes the
transfer of cash, goods, services, or equity instruments unless the
obligation to transfer equity instruments arises from a conversion
feature classi ed as an equity instrument separately from the
liability component of a compound nancial instrument. The
amendments are e ective for annual reporting periods beginning on
or after 1 January 2022.
Wynnstay Group Plc is currently assessing the impact of these
new accounting standards and amendments. The Group does not believe
that the amendments to IAS 1 will have a signi cant impact on the
classi cation of its liabilities.
The Group does not expect any other standards issued by the
IASB, but not yet e ective, to have a material impact on the
Group.
New standards and interpretations
IFRS 16 Leases was adopted on 1 November 2019 and has given rise
to changes in the Group's accounting policies. Details of the
impact of this standard has had are given in note 19.
Other new and amended standards and Interpretations issued by
the IASB that will apply for the rst time in the next annual
nancial statements are not expected to impact the Group as they are
either not relevant to the Group's activities or require accounting
which is consistent with the Group's current accounting
policies.
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 di er from
these estimates and assumptions. The estimates and assumptions that
have a signi cant risk of causing a material adjustment to the
carrying amount of assets and liabilities with the next nancial
year are unchanged from those disclosed in the nancial statements
for the year ended 31 October 2019 except in relation to the
outbreak of the coronavirus crisis.
The coronavirus outbreak occurred during this nancial reporting
period and conditions continue to evolve since the end of the
reporting period (30 April 2020). Wynnstay is classi ed as
operating in a key industry, and as such has been able to continue
activities throughout the crisis adhering, with appropriate
government guidance. The most signi cant impact on trading has been
in the depots within the Special Agricultural Merchanting segment,
which for safety reasons moved to an order and collect trading
policy, temporarily stopping customers coming into the branches
from 27 March 2020. Following risk assessments and modi cations to
working practises to facilitate social distancing requirements a
rolling programme of depot re-opening commenced on 1 June 2020.
Consideration has been given to the assets and liabilities as at
30 April 2020 and an evaluation has been made that there are no
coronavirus connected impairments to record at the time of
authorising these nancial statements. The situation continues to
evolve and as more information becomes available it is possible
that in the future actual experience may di er and hence these
matters are key judgement for these nancial statements.
4. TAXATION
The tax charge for the six months ended 30 April 2020 and 30
April 2019 is based on an apportionment of the estimated tax charge
for the full year.
The effective tax rate is 19.0% (6 months ended 30 April 2019:
18.4%) which is the same as the standard rate of 19.0% (2019:
19.0%).
5. EARNINGS PER SHARE
Basic earnings per 25p ordinary share has been calculated by
dividing profit for the period attributable to ordinary
shareholders by the weighted average number of ordinary shares in
issue during the period. For diluted earnings per share 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.
Unaudited six Unaudited six
months ended months ended
30 April 2020 30 April 2019
Weighted average number of shares
in issue: basic 19,896,621 19,772,234
Weighted average number of shares
in issue: diluted 19,978,002 19,797,827
6. SHARE CAPITAL
During the current period a total of 111,564 (2019: 79,189)
shares were issued with an aggregate nominal value of GBP27,891
(2019: GBP19,797) fully paid up for equivalent cash of GBP253,811
(2019: GBP248,653). Included in these issues were 111,564 (2019:
79,189) shares allotted to shareholders exercising their rights to
receive dividends under the Company's scrip dividend scheme. No
other shares were allocated during the current or prior period. As
at 30 April 2020 a total of 20,007,572 shares are in issue (2019:
19,850,985).
7. DIVIDS
During the period ended 30 April 2020 an amount of GBP1,870,225
(2019: GBP1,769,575) was charged to reserves in respect of equity
dividends paid. An interim dividend of 4.60p per share (2019:
4.60p) will be paid on 30 October 2020 to shareholders on the
register on the 25 September 2020. New elections to receive Scrip
Dividends should be made in writing to the Company's Registrars
before 16 October 2020.
8. 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 segments and to assess 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 segments,
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 a wide range of
specialist products to farmers, smallholders, and pet owners.
Other - miscellaneous operations not classi ed as Agriculture or
Specialist Agricultural Merchanting.
The Board assesses the performance of the operating segments
based on a measure of operating pro t. Non-recurring costs and
nance 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 nancial
statements. No segment is individually reliant on any one
customer.
Details on how IFRS 16 has impacted operating profit and
interest charged in the period ended 30 April 2020 are contained in
note 20. The periods ending 30 April 2019 and 31 October 2019 have
not been restated.
The segment results for the period ended 30 April 2020 and
comparative periods are as follows:
Agriculture Specialist Other Total
Agricultural
Merchanting
Unaudited for the six months GBP'000 GBP'000 GBP'000 GBP'000
ended
30 April 2020:
------------------------------------ ------------ -------------- -------- --------
Revenue from external customers 166,409 62,834 45 229,288
Segment results
Group operating profit before
non-recurring items 1,811 3,017 (91) 4,737
Share of result of Associates
and Joint Ventures - - - -
1,811 3,017 (91) 4,737
Non-recurring items (note
10) (185)
Interest income 55
Interest expense (310)
--------
Profit before taxation 4,297
Taxation (817)
--------
Profit for the period attributable
to shareholders 3,480
--------
Agriculture Specialist Other Total
Agricultural
Merchanting
Unaudited for the six months GBP'000 GBP'000 GBP'000 GBP'000
ended 30 April 2019 for
continuing operations:
------------------------------------ ------------ -------------- -------- --------
Revenue from external customers 195,052 65,475 45 260,572
Segment results
Group operating profit before
non-recurring items 1,791 2,667 (84) 4,374
Share of result of Associates
and Joint Ventures - - - -
------------------------------------ ------------ -------------- -------- --------
1,791 2,667 (84) 4,374
Non-recurring items (note
10) (96)
Interest income 52
Interest expense (209)
--------
Profit before taxation 4,121
Taxation (758)
--------
Profit for the period attributable
to shareholders 3,363
--------
Agriculture Specialist Other Total
Agricultural
Merchanting
Audited for the year ended GBP'000 GBP'000 GBP'000 GBP'000
31 October 2019 for continuing
operations:
------------------------------------ ------------ -------------- -------- --------
Revenue from external customers 358,687 131,843 72 490,602
Segment results
Group operating profit before
non-recurring items 2,417 5,240 21 7,678
Share of result of Associates
and Joint Ventures 534 4 (75) 463
------------------------------------ ------------ -------------- -------- --------
2,951 5,244 (54) 8,141
Non-recurring items (note
10) (301)
Interest income 164
Interest expense (348)
--------
Profit before taxation 7,656
Taxation (1,524)
--------
Profit for the year attributable
to shareholders 6,132
--------
9. OTHER OPERATING INCOME
Unaudited six Unaudited six Audited year
months ended months ended ended
30 April 2020 30 April 2019 31 October
2019
GBP'000 GBP'000 GBP'000
--------------- --------------- --------------- -------------
Rental Income 168 180 385
10. AMORTISATION OF ACQUIRED INTANGIBLE ASSETS AND SHARE-BASED
PAYMENTS AND NON-RECURRING ITEMS
Unaudited six Unaudited six Audited year
months ended months ended ended
30 April 2020 30 April 2019 31 October
2019
GBP'000 GBP'000 GBP'000
----------------------------- --------------- --------------- -------------
Amortisation of acquired
intangible assets and
share-based payments
Amortisation of intangibles 18 8 28
Cost of share-based
reward 26 51 49
----------------------------- --------------- --------------- -------------
44 59 77
----------------------------- --------------- --------------- -------------
Non-recurring items
Business re-organisation
costs 185 92 297
Business combination
expenses - 4 4
185 96 301
----------------------------- --------------- --------------- -------------
Business re-organisation costs relate to the redundancy related
expenses of colleagues leaving the business as a result of
re-organising operations.
Business combination expenses relate to business combinations in
the prior year.
11. CASH AND CASH EQUIVALENTS AND BORROWINGS
Unaudited Unaudited Audited year
six months six months ended 31
ended ended October 2019
30 April 30 April
2020 2019
GBP'000 GBP'000 GBP'000
--------------------------------------- ------------ ------------ --------------
Cash and cash equivalents per
balance sheet 3,452 423 10,608
Bank overdrafts - (7,634) -
--------------------------------------- ------------ ------------ --------------
Cash and cash equivalents per
cash flow statement 3,452 (7,211) 10,608
Bank loans due within one year
or on demand (1,176) (1,860) (1,457)
Loan capital (684) (686) (683)
Lease liabilities (30 April 2019
and 31 October 2019: Net obligations
under finance leases) (3,539) (1,468) (1,546)
--------------------------------------- ------------ ------------ --------------
Net (debt)/cash due within one
year (1,947) (11,225) 6,922
Bank loans due after one year (313) (1,486) (902)
Lease liabilities (30 April 2019
and 31 October 2019: Net obligations
under finance leases) (6,701) (1,982) (2,176)
--------------------------------------- ------------ ------------ --------------
Net (debt) due after one year (7,014) (3,468) (3,078)
--------------------------------------- ------------ ------------ --------------
Total net debt (8,961) (14,693) 3,844
--------------------------------------- ------------ ------------ --------------
On 1 November 2019 net debt increased by GBP7,251,000 as a
result of implementing IFRS 16 (note 18). At 30 April 2020 the
value of these lease liabilities were GBP6,421,000, therefore total
net debt would have been (GBP2,540,000) if IFRS 16 had not been
implemented.
12. RECONCILIATION OF LIABILITIES FROM FINANCING TRANSATIONS
Non-current Current Total Non-current Current Total
loans and loans and loans lease lease Lease
borrowings borrowings and liabilities liabilities liabilities
borrowings
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------------ ------------ ----------- ----------- ------------ ------------ ------------
As at 30 April 2019
(unaudited) 3,468 11,648 15,116 - - -
Cash-flows
* Repayment of overdrafts - (7,634) (7,634) - - -
* Repayment of borrowings - (1,903) (1,903) - - -
Non cash-flows
* New finance leases 879 306 1,185 - - -
- - -
* Finance leases acquired through business combinations - - -
* Non-current becoming current (1,269) 1,269 - - - -
------------------------------------------------------------------ ------------ ----------- ----------- ------------ ------------ ------------
As at 31 October 19
(audited) 3,078 3,686 6,764 - - -
Cash-flows
* Repayments - (869) (869) - (2,066) (2,066)
Non cash-flows
* IFRS 16 ROU - - - 5,116 2,135 7,251
* Finance leases transferring to lease liabilities (2,176) (1,546) (3,722) 2,176 1,546 3,722
* New leases - - - 979 355 1,334
* Non-current becoming current (589) 589 - (1,569) 1,569 -
------------------------------------------------------------------ ------------ ----------- ----------- ------------ ------------ ------------
As at 30 April 2020 313 1,860 2,173 6,702 3,539 10,241
------------------------------------------------------------------ ------------ ----------- ----------- ------------ ------------ ------------
13. CASH (USED IN)/GENERATED FROM OPERATIONS
Unaudited Unaudited Audited year
six months six months ended
ended ended 31 October
30 April 30 April 2019
2020 2019
GBP'000 GBP'000 GBP'000
---------------------------------------- ------------ ------------ -------------
Profit for the period 3,480 3,363 6,132
Adjustments for:
Taxation 817 758 1,421
Depreciation of tangible fixed
assets 1,138 1,723 3,579
Amortisation of other intangible
fixed assets 18 8 28
Amortisation of right-use-assets 1,856 - -
(Profit) on disposal of property,
plant and equipment (6) (99) (170)
Profit from distribution from
Associate - - (84)
Interest income (55) (52) (164)
Interest expense 310 209 348
Share of results of joint ventures
and associate - - (360)
Share-based payment expenses 26 51 49
Changes in working capital (excluding
effects of acquisitions and disposals
of subsidiaries)
(Decrease) in short term loan
to joint venture (516) (277) (1,601)
Decrease in inventories 237 5,931 10,171
(Increase)/decrease in trade and
other receivables (11,596) (12,517) 7,426
Increase/(decrease) in trade and
other payables 3,229 (6,596) (12,019)
Cash (used in)/generated from
operations (1,062) (7,498) 14,756
---------------------------------------- ------------ ------------ -------------
During the six months to 30 April 2020, the Group purchased
property, plant and equipment of GBP1,747,000 (2019: GBP3,079,000)
of which GBP1,665,000 relates to right-of-use assets (2019:
GBP1,665,000) relates to assets acquired under finance leases.
14. FINANCIAL INSTRUMENTS
IFRS 13 requires nancial instruments that are measured at fair
value to be classi ed according to the valuation technique
used:
-- Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities
-- Level 2 - inputs, other than level 1 inputs, that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived form prices)
-- Level 3 - unobservable inputs
-- Derivatives
All derivative nancial assets and liabilities are classi ed as
Level 1 instruments as they are quoted market prices.
-- Contingent consideration
Contingent consideration is measured at fair value using Level 3
inputs such as entity projections of future probability. The amount
recognised relates to the ongoing pro tability of the business
acquired and criteria for this are set out in the sale and purchase
agreements. Consequently, adjustments would only be made if the
business did not perform as originally anticipated, and further
sensitivity analysis is not considered to be required.
Transfers between levels are deemed to have occurred at the end
of the reporting period. There were no transfers between levels in
the above hierarchy in the period.
Reconciliation of movements in Level 3 nancial instruments
Total
GBP000
--------------------------------- -------
As at 30 April 2019 (unaudited) (888)
Additions -
Payment 552
--------------------------------- -------
As at 31 October 2019 (audited) (336)
Additions -
Payments 50
As at 30 April 2020 (unaudited) (286)
--------------------------------- -------
15. OTHER RESERVES
Included in Other reserves are share-based payments; as 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.
The Group operates a number of share option and 'Save As You
Earn' schemes and fair value is measured by use of a recognised
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.
At the 30 April 2020 the ESOP Trust, which is consolidated
within the Group financial statements, held 16,834 (2019: 16,834)
Ordinary Shares in the Group.
16. GROUP FINANCIAL COMMITMENTS
As at the 30 April 2020, the Group's contingent liabilities in
respect of bank guarantees for one of its Associates amounts to
GBP125,000 (2019: GBP125,000).
17. CAPITAL COMMITMENTS
As at 30 April 2020 the Group had capital commitments as
follows:
Unaudited Unaudited Audited as
as at 30 as at 30 April at
April 2020 2019 31 October
2019
GBP'000 GBP'000 GBP'000
----------------------------------- ------------ ---------------- ------------
Contracts placed for future
capital expenditure not provided
in the financial statements 38 248 808
18. RELATED PARTIES
Transactions between the Company and its subsidiaries, which are
related parties have been eliminated on consolidation and are not
disclosed in this note. Transactions between the Group and its
Joint Ventures and Associates are described below:
Transaction value Balance outstanding
Unaudited Unaudited Audited Unaudited Unaudited Audited
six months six months year ended as at as at as at
ended ended 31 October 30 April 30 April 31 October
30 April 30 April 2019 2020 2019 2019
2020 2019
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ------------ ------------ ------------ ---------- ---------- ------------
Sales of goods
to joint ventures
and associate 2,786 3,137 5,651 799 1,109 -
Purchases of
goods from joint
ventures and
associate 35 100 215 - 6 96
Loans with joint
ventures 1,840 277 - 4,929 3,089 4,413
-------------------- ------------ ------------ ------------ ---------- ---------- ------------
19. EFFECTS OF CHANGES IN ACCOUNTING POLICIES
The Group adopted IFRS 16 Leases with a transition date of 1
November 2019. The Group has chosen not to restate comparatives on
adoption of IFRS 16, and therefore, the revised requirements are
not re ected in the prior year nancial statements. Rather, these
changes have been processed at the date of initial application
(i.e. 1 November 2019) and recognised in the opening equity
balances. Other new and amended standards and Interpretations
issued by the IASB did not impact the Group as they are either not
relevant to the Group's activities or require accounting which is
consistent with the Group's current accounting policies.
IFRS 16 Leases
E ective 1 November 2019, IFRS 16 has replaced IAS 17 Leases and
IFRIC 4 Determining whether an Arrangement Contains a Lease.
IFRS 16 provides a single lessee accounting model, requiring the
recognition of assets and liabilities for all leases, together with
options to exclude leases where the lease term is 12 months or
less, or where the underlying asset is of low value. IFRS 16
substantially carries forward the lessor accounting in IAS 17, with
the distinction between operating leases and nance leases being
retained. The Group does not have signi cant leasing activities
acting as a lessor.
Transition Method and Practical Expedients Utilised
The Group adopted IFRS 16 using the rst variation of the modi ed
retrospective approach, and therefore at initial application
recognised a right-of-use asset and lease liability of GBP7.3m
using the Group incremental borrowing rate at 1 November 2019.
Hence there was no impact to net assets on 1 November 2019. The
Group elected to apply the practical expedient to not reassess
whether a contract is, or contains a lease at the date of initial
application. Contracts entered into before the transition date that
were not identi ed as leases under IAS 17 and IFRIC 4 were not
reassessed. The de nition of a lease under IFRS 16 was applied only
to contracts entered into or changed on or after 1 November
2019.
IFRS 16 provides for certain optional practical expedients,
including those related to the initial adoption of the standard.
The Group applied the following practical expedients when applying
IFRS 16 to leases previously classi ed as operating leases under
IAS 17:
(a) Apply a single discount rate to a portfolio of leases with
reasonably similar characteristics;
(b) Exclude initial direct costs from the measurement of
right-of-use assets at the date of initial application for leases
where the right-of-use asset was determined as if IFRS 16 had been
applied since the commencement date;
(c) Reliance on previous assessments on whether leases are
onerous as opposed to preparing an impairment review under IAS 36
as at the date of initial application; and
(d) Applied the exemption not to recognise right-of-use assets
and liabilities for leases with less than 12 months of lease term
remaining as of the date of initial application.
As a lessee, the Group previously classi ed leases as operating
or nance leases based on its assessment of whether the lease
transferred substantially all of the risks and rewards of
ownership. Under IFRS 16, the Group recognizes right-of-use assets
and lease liabilities for most leases. However, the Group has
elected not to recognise right-of-use assets and lease liabilities
for some leases of low value assets based on the value of the
underlying asset when new or for short-term leases with a lease
term of 12 months or less.
On adoption of IFRS 16, the Group recognised right-of-use assets
and lease liabilities as follows:
Classification Classification under IFRS 16
before IFRS 16
Right-of-use assets Lease liabilities
--------------------------------- ----------------------------------
Operating leases Land and buildings: Right-of-use Measured at the present
assets are measured at value of the remaining
an amount equal to the lease payments, discounted
lease liability, adjusted using the Group's incremental
by the amount of any prepaid borrowing rate as at 1
or accrued lease payments. November 2019. The Group's
incremental borrowing
All other: the carrying rate is the rate at which
value that would have a similar borrowing could
resulted from IFRS 16 be obtained from an independent
being applied from the creditor under comparable
commencement date of the terms and conditions.
leases, subject to the The weighted-average rate
practical expedients noted applied was 4.43%.
above.
--------------------------------- ----------------------------------
Finance leases Carrying values brought Carrying values brought
forward, reclassi ed from forward from nancial liabilities
property, plant and equipment - borrowings into lease
into right-of-use assets liabilities
--------------------------------- ----------------------------------
The following table presents the impact of adopting IFRS 16 on
the statement of nancial position as at 1 November 2019:
ASSETS Adjustments As originally IFRS 16 1 November
presented 2019
at
31 October
2019
------------------------- ------------- -------------- -------- -----------
GBP000 GBP000 GBP000
NON-CURRENT ASSETS
Property, plant and
equipment a 23,225 (4,533) 18,692
Right-of-use assets b - 11,784 11,784
LIABILITIES
Current Liabilities
Borrowings c (3,686) 1,546 (2,140)
Lease liabilities d - (3,037) (3,037)
NON-CURRENT LIABILITIES
Borrowings c (3,078) 2,176 (902)
Lease liabilities d - (7,936) (7,936)
Equity
------------------------- ------------- -------------- -------- -----------
Retained earnings e 56,261 - 56,261
------------------------- ------------- -------------- -------- -----------
(a) Property, plant and equipment was adjusted to reclassify
leases previously classi ed as nance type to right-of-use assets.
The adjustment reduced the cost of property, plant and equipment by
GBP6.5m and accumulated amortisation by GBP2.0m for a net
adjustment of GBP4.5m
(b) The adjustment to Right-of-use assets is comprised of
GBP4.5m Finance type leases and GBP7.3m Operating type leases,
resulting in a total adjustment of GBP11.8m
(c) Loans and borrowings were adjusted to reclassify leases
previously classified as finance type to lease liabilities.
(d) The following table reconciles the minimum lease commitments
disclosed in the Group's 31 October 2019 annual financial
statements to the amount of lease liabilities on 1 November
2019
Land and buildings
GBP000
-------------------------------------------------- -------------------
Minimum operating lease commitments at 31
October 2019 7,726
Less: short-term leases not recognised under
IFRS 16 (2)
Less: low value leases not recognised under
IFRS 16 (38)
Undiscounted lease payments 458
-------------------------------------------------- -------------------
8,144
Less: e ect of discounting using the incremental
borrowing rate as at the date of initial
application (893)
-------------------------------------------------- -------------------
Lease liabilities for leases classi ed as
operating type under IAS 17 7,251
Plus: leases previously classi ed as nance
type under IAS 1 3,722
-------------------------------------------------- -------------------
Lease liability as at 1 November 2019 10,973
-------------------------------------------------- -------------------
e) Retained earnings were not impacted as a result of IFRS
16.
20. ALTERNATIVE PERFORMANCE MEASURES
On the Board's preferred alternative performance measure
referred to as Adjusted operating profit which is Group operating
profit adding back amortisation of acquired intangible assets,
share-based payment expense and non-recurring items, the Group
achieved GBP4.78m (2019: GBP4.43m).
Reconciliation with the reported income statement for this
measure, Operating profit before non-recurring items and Underlying
pre-tax profit and the Profit before tax shown on the Condensed
Statement of Comprehensive Income, together with reasons for their
use is given below.
On 1 November 2019 the Group implemented IFRS 16 which resulted
in an increase to operating profit of GBP99,445 and an increase to
finance costs of (GBP170,916); resulting in a net decrease to
profit before tax of (GBP71,471). The following alternative
performance measures for the six months ended 30 April 2019 and the
year ended 31 October 2019 are included as originally presented and
have not been restated to reflect IFRS 16 accounting changes.
Unaudited Unaudited Audited
as at 30 as at 30 as at 31
April 2020 April 2019 October
2019
GBP'000 GBP'000 GBP'000
----------------------------------------- ------------ ------------ ----------
Profit before tax 4,297 4,121 7,553
Share of tax incurred by joint ventures
and associate - - 103
Non-recurring items (note 10) 185 96 301
Net finance costs 255 157 184
Share of results from joint ventures
and associates before tax - - (463)
----------------------------------------- ------------ ------------ ----------
Operating profit before non-recurring
items (note 8) 4,737 4,374 7,678
Share of results from joint ventures
and associate before tax - - 463
----------------------------------------- ------------ ------------ ----------
Segment results plus share of results
from joint ventures and associate
before tax (note 8) 4,737 4,374 8,141
Share-based payments 26 51 49
Net finance charges (255) (157) (184)
----------------------------------------- ------------ ------------ ----------
Underlying pre-tax profit 4,508 4,268 8,006
----------------------------------------- ------------ ------------ ----------
Profit before tax 4,297 4,121 7,553
Share of results from joint ventures
and associate - - (463)
Share of tax incurred by joint ventures
and associate - - 103
Net finance charges 255 157 184
Share-based payments 26 51 49
Amortisation of intangibles 18 8 28
Non-recurring items (note 10) 185 96 301
----------------------------------------- ------------ ------------ ----------
Adjusted operating profit 4,781 4,433 7,755
----------------------------------------- ------------ ------------ ----------
The Board uses alternative performance measures 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 adjustments to the IFRS results for the
following reasons:
-- Share of results from joint ventures and associate
Provides a fuller understanding of activities directly under
management control and those incorporated from joint ventures and
associates.
-- The add back of tax incurred by joint ventures and
associate
The Board believes the incorporation of the gross result of
these entities provides a fuller understanding of their combined
contribution to the Group performance.
-- Net finance charges
Provides an understanding of results before interest received
and paid.
-- 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.
-- Amortisation of acquired intangible assets
This charge relates to intangible assets created from prior
business combinations, hence provides a fuller understanding of
current operating performance.
-- 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.
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June 24, 2020 02:00 ET (06:00 GMT)
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