LONDON (Alliance News) - Wynnstay Group PLC Wednesday reported a 10% drop in first-half pretax profit as the agricultural supplies and specialist retail business was hit by a mild winter in the UK, which put pressure on margins.
But Wynnstay said its prospects for the second-half are encouraging as it expects a good harvest.
Wynnstay said the recent mild UK winter shortened the housing period for livestock, reducing demand for feed. Such weather conditions prompted Wynnstay to caution in March that its first-half results were expected to be behind last year's. The fall in demand for feed was partially offset by higher fertiliser volumes, due to an earlier spring.
In a statement Wednesday, Wynnstay said it made a GBP4.7 million pretax profit in the six months ended April 30, compared with GBP5.2 million a year earlier. Manufacturing, distribution and selling costs increased to GBP19.8 million from GBP18.0 million, while administrative expenses increased to GBP2.7 million from GBP2.5 million.
Revenue increased to GBP222.5 million from GBP216.1 million, though Wynnstay admitted this was due to a GBP9.0 million contribution from Carmathen & Pumsaint Farmers, which acquired in October 2013. While the acquisition did not contribute to profitability in the first-half, Wynnstay said it will do so in the second-half. However, the mild winter also resulted in a "different demand pattern" across Wynnstay's products and market segments.
"The unit margin picture across our agricultural supplies also varied against last year, with lower comparisons seen in raw materials, manufactured fertiliser and wholesale seed," Chairman Jim McCarthy said in a statement.
"Within our specialist retailing activities, the unseasonably mild weather drove a change in the sales mix and performance across Wynnstay Stores, with the reduction in the normal levels of feed sales contrasting against the exceptionally high demand in the same period last year. Our pet products chain, Just for Pets, increased like-for-like sales and the current performance is encouraging," McCarthy added.
The chairman said the UK agricultural industry appears to be returning to more normal levels of production after two years of "unusual" weather. He said that Wynnstay expects pricing pressure from end users of agricultural products to continue, with price volatility for agricultural outputs to remain influenced by world markets. McCarthy added that the need for agriculture to become more efficient remains an ongoing trend.
"Nonetheless, the long-term outlook for UK agriculture continues to read very positively, supported by increasing world food demand as well as domestic factors including targets for greater self-sufficiency in foods," McCarthy said.
"Wynnstay remains well-placed for continued development and its broad base of activities provides firm foundations for growth. Current trading is in line with management budgets and, with a good harvest expected, the board remains confident of prospects for the remainder of the financial year and beyond," he added.
Wynnstay increased its interim dividend to 3.4 pence from 3.1p.
Wynnstay shares were Wednesday quoted at 607.50 pence, up 0.4%.