Wynnstay Annual Report 2015 by WynnstayGroup

ANNUAL REPORT AND ACCOUNTS 2015

STRATEGIC REPORT

www.wynnstay.co.uk

CONTENTS

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

GOVERNANCE

Committed to becoming a leading supplier of products and services Wynnstay Group manufactures and supplies agricultural products to farmers and the wider rural community in Wales, and Central England. The Group operates two core divisions, Agriculture and Specialist Retail which includes the country stores business and the dedicated pet product stores. Additionally the Group has interests in Joint Ventures and Associate Companies. 3

Financial Highlights STRATEGIC REPORT

4-5 6 8-9

Principal Activities and Business Model Group Strategy Chairman’s Statement

12 - 15

Chief Executive’s Review

16 - 18

Finance Review

19 - 20

Key Performance Indicators and Risk Management GOVERNANCE

Board and Advisors

22 - 23

Board of Directors

24 - 25

Directors’ Report

26 - 28

Corporate Governance Statement

29 - 33

Directors’ Remuneration Statement

Independent Auditor’s Report FINANCIAL STATEMENTS

36 - 37

Consolidated Statement of Comprehensive Income Consolidated and Company Balance Sheet

38 - 44

Consolidated and Company Statement of Changes in Equity Consolidated and Company Cash Flow Statement Principal Accounting Policies

45 - 71

Notes to the Financial Statements

SHAREHOLDER INFORMATION Notice of Annual General Meeting

Notes to Notice of Annual General Meeting

Financial Calendar

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

2014

£377.38 million

£413.56 million

36.32 pence

35.28 pence

Shareholders’ Funds

£82.56 million

£77.23 million

Group EBITDA

£11.70 million

£11.37 million

Underlying Group Pre-Tax Profit*

£9.05 million

£8.70 million

Dividend per Share

11.10 pence

10.20 pence

Group Revenue Underlying Earnings per Share**

FINANCIAL STATEMENTS

2015

GOVERNANCE

FINANCIAL HIGHLIGHTS

* Group pre-tax profits include the Group’s share of pre-tax profit from joint ventures and associate investments but excludes the exceptional item and share based payments.

SHAREHOLDER INFORMATION

**Underlying EPS calculation excludes the exceptional item

GROWTH RECORD

Group Revenue (£m)

Underlying Earnings per Share (pence)

£377.38m

36.32p**

Underlying Group Pre-Tax Profit* (£m)

£9.05m

(2014: 35.28p)

(2014: £413.56m)

+2.95%

-8.75%

38.49 413.48 413.56 375.78

34.99 377.38 27.48

346.18

36.43

Dividend per Share (pence)

35.28

(2014: 10.20p)

+4.02%

+8.82%

36.32

8.64

8.70

9.05 9.30

8.02

34.66

30.23

11.10p

(2014: £8.70m)

7.09

7.10

6.13

7.80

10.20

11.10

8.50

243.74

‘10

‘11

‘12

‘13

‘14

‘15

‘10

‘11

‘12

‘13**

‘14

‘15**

‘10

**Underlying EPS calculation excludes the exceptional item

‘11

‘12

‘13

‘14

‘15

‘10

‘11

‘12

‘13

‘14

‘15

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

GOVERNANCE

STRATEGIC REPORT

www.wynnstay.co.uk

PRINCIPAL ACTIVITIES AND BUSINESS MODEL

The Group principally operates as a leading supplier of agricultural products and services in the rural economy with the extension of activities to include specialist pet products in selected urban locations. There are two complementary divisions, Agriculture and Specialist Retail, further strengthened by the involvement in Joint Ventures and Associate Companies. By recognising the importance of quality, value and advice the Group strives to be the “supplier of choice” for its customer base.

AGRICULTURE The Agriculture Division covers the manufacturing and supply of a comprehensive range of agricultural inputs to customers throughout Wales, Central and more recently Southern England. Feed Division

Arable Division

The Feed Division, which operates two compound feed mills and one blending plant, offers a full range of animal nutrition products to the agricultural market. The location of the mills allows for logistically efficient delivery of our 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 Arable Division 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 in Shropshire at the arable base as well as at Woodheads Seeds in 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.

Glasson, which operates from Glasson Dock near Lancaster, has traditionally been a raw materials trader and fertiliser blender. Glasson’s activities also include the packaging of added value products supplied to specialist animal feed retailers. Additionally the business is involved in a joint venture, FertLink, which has fertiliser production facilities at Birkenhead and Goole.

Woodheads Seeds operates a seed processing plant, near Selby in Yorkshire, supplying a full range of cereal and herbage seeds to farmers and wholesale customers. The Company also trades grain and supplies fertiliser to farmers in its trading area.

Wynnstay Stores

Just for Pets

The rural retail outlets are well established and provide a comprehensive range of products for farmers and rural dwellers. The stores, which now number 51, operate throughout the trading area and supply a wide range of specialist products to farmers, smallholders and pet owners. Our dedicated team are happy to provide customers with technical advice on all aspects of the wide range of products available. Our 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.

Just for Pets, which is based in Hartlebury in Worcestershire, currently has 23 specialist pet product stores operating on busy retail sites throughout the West Midlands extending east to Cambridge and south to Bristol. All stores offer a wide range of pet related products and are recognised as convenient one stop shops for all pet owners. Our staff have considerable experience within the pet sector and a significant proportion are qualified to offer specialist advice to pet owners. Eight stores offer a walk in vaccination service and seven stores have groomers on site. Youngs Animal Feeds Youngs Animal Feeds manufactures equine and small animal feeds from its production facility at Standon in Staffordshire. It also has 4 small retail outlets and acts as a distributor of products to the equine market through wholesalers and retailers in the west of the UK.

FINANCIAL STATEMENTS

The Agriculture Division covers the manufacturing and supply of a comprehensive range of agricultural inputs to customers throughout Wales, Central and Southern England.

SHAREHOLDER INFORMATION

SPECIALIST RETAIL

GOVERNANCE

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

GOVERNANCE

STRATEGIC REPORT

www.wynnstay.co.uk

GROUP STRATEGY

The Group is committed to becoming a leading supplier of products and services in the rural and wider economy. In so doing, Wynnstay Group Plc 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.

Operational Strategy The business operates in an environment where fundamental macro-economic drivers are supporting the growth of the principal activities. A growing world population and changing dietary habits are creating an increased demand for food production, which is supported by a political desire to promote greater productivity and self-sufficiency, in a sustainable manner. 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 Group has therefore developed a strategy which is designed to minimise such risks through ensuring a broad and balanced spread of activities across all the main agricultural input areas, rather than relying on any specific single food enterprise. This policy of having a broad based business limits the impact of any adverse performance in any individual activity, and has helped shelter the Group from periodic commodity volatility extremes. The main markets that the Group operates in are currently supplied by a relatively fragmented industry. This provides a strong platform for the development of the business, which has a long track record of both organic and acquisitive growth. The Board is confident that with the expertise, balance sheet strength, and enthusiasm of staff available to the business, the consolidation strategy successfully carried out for a number of years can continue. The Board expect continued geographic expansion of the business’s core operating areas and a broadening of its product offering through the ongoing implementation of this strategy.

Corporate Goals The Group has separate outline goals

for what it identifies as the four main stakeholder groupings in the business, and these include:

Shareholders – where the Group aims to

maximise net worth through a progressive dividend policy and a financial performance that supports capital growth in share value.

Customers – where the Group seeks to excel in terms of 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.

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

GOVERNANCE

LOCATIONS

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

GOVERNANCE

STRATEGIC REPORT

www.wynnstay.co.uk

CHAIRMAN’S STATEMENT Overview The Group has delivered a resilient performance in a year which has seen some very difficult trading conditions for our farming customers, with continuing low farmgate prices. The spread of the Group’s activities across arable, feeds and retail continued to be a major strength and has supported the overall performance. Group pre-tax profit for the year, before exceptional charges and share-based payments, increased by 4% to £9.05m (2014 £8.70m), helped by the successful integration of recent acquisitions and growth across a number of product sectors. Revenues at £377.38m (2014: £413.56m) were impacted by ongoing commodity price deflation. We continued to expand the business during the year, with a number of small acquisitions, benefiting both our Agricultural and Specialist Retail Divisions. Of particular note was the acquisition, at the year end, of Agricentre, the farm supplies operation in the West Country. Its addition extends the Group’s trading area and also provides additional opportunities across the range of our agricultural activities. A more detailed account of the Group’s trading is set out in the Chief Executive’s review and while the business is reported under two Divisions, both are intrinsically linked, with strong synergies. The Agricultural Division benefited from higher feed sales in the first half of the year and a good performance within the raw material sector. There was also

an increased volume of grain reflecting the larger UK harvest. Seed sales were encouraging and, although fertiliser demand was subdued, returns from the Agricultural Division improved over the prior year and were in line with overall expectations. The Specialist Retail Division performed well and continues to develop. Recent acquisitions have integrated successfully and, including Agricentre, there are now 51 Wynnstay Stores, serving the agricultural and rural communities, and 23 Just for Pets outlets, providing a range of pet products predominately in urban areas. Youngs Animal Feeds, which supplies a range of equine and small animal feeds, complements both these activities and contributed positively. Financial Results The Group generated revenues of £377.38m (2014: £413.56m) for the year to 31 October 2015. Agricultural commodity price deflation is estimated to have accounted for approximately £32.00m of the reduction. Sales at the Agricultural Division were £270.05m (2014: £308.71m), reflecting lower unit values for most feed, grain and fertiliser product. The Specialist Retail Division contributed revenues of £107.19m (2014: £104.62m) with the increase mainly reflecting the increased number of outlets. Group pre-tax profit, before sharebased payments and exceptional costs,

increased by 4% to £9.05m (2014: £8.70m). The reduced reported statutory profit of £8.34m (2014: £8.49m) reflected increased share-based payments; reorganisational costs relating to the integration of the Agricentre acquisition and a reduced contribution from joint venture results. Pleasingly both Divisions generated a year-on-year uplift in operating profit contribution. The operating profit contribution from the Agricultural Division increased by 8.7% to £4.13m (2014: £3.80m), with higher volumes in core product categories. The Specialist Retail division contributed a 4.1% increase in operating profit at £5.08m (2014: £4.88m), primarily reflecting the increased number of outlets. Other activities showed a loss of £0.26m (2014: profit of £0.25m), as a result of reduced joint venture income mainly from Agricultural activities and higher sharebased payment costs. Net finance charges reduced to £0.24m (2014: £0.33m) which reflected the continuing reduction in average net debt through the year as a result of strong trading cash flow and lower working capital. Underlying earnings per share, before exceptional costs, increased by 2.9% to 36.32p (2014: 35.28p). Statutory basic earnings per share were 34.66p (2014: 35.28p). Net assets at 31 October 2015 were 7.3% higher at £82.86m or £4.31 per share (2014: £77.23m or £4.07 per share). Cash generation at the year end, normal seasonal capital cycle, net (2014: £2.75m).

remained strong and which represents the low in the working cash stood at £2.14m

Dividend The Board is pleased to propose the payment of a final dividend of 7.40p per share (2014: 6.80p per share). Together with the interim dividend of 3.70p per share, paid on 30 October 2015, this takes the total dividend for the year to 11.10p (2014: 10.20p), an increase of 8.8% on the prior year.

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

GOVERNANCE

The final dividend will be paid on 29 April 2016 to shareholders on the register on 29 March 2016. A scrip dividend alternative will continue to be available as in previous years. The last date for election of the scrip dividend will be 14 April 2016. The Board

Colleagues I remain grateful to my colleagues across Wynnstay for their professionalism and commitment both to the Group and our customers. On behalf of the Board, I would like to take this opportunity to recognise their ongoing input and contribution to the business.

The spread of the groups activities continued to be a major strength

Outlook In a year where the backdrop for our farming customers has been challenging, Wynnstay’s results demonstrate the resilience and progress we have made in continuing to drive the Group’s development. Looking ahead farmgate prices still show little sign of the expected recovery, and continue to impact farmer income. In addition, early trading has seen a slower start, due in part to the late onset of winter. While it is still early in our calendar, a cautious view of the year ahead is appropriate since a continuation of these conditions will impact the Group’s performance.

JIM MCCARTHY

The long term growth trends remain positive for UK agriculture, although the need to drive greater efficiencies through the sector is also a feature. We will continue to develop the Group’s activities and services, both organically and via acquisitions, and ensure that we can provide our farming customers with a breadth of competitively priced products complemented by technical support and advice. Notwithstanding the current challenges in the sector, Wynnstay remains well

placed within its marketplace and is supported by strong cash flows and a robust balance sheet.

Jim McCarthy Chairman 26 January 2016

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

We are delighted to announce the appointment of Stephen Ellwood as a Non-Executive Director. Steve has over 30 years’ experience in the agricultural banking sector, with the majority of his career spent at HSBC Bank Plc, where he was Head of Agriculture for 10 years. Steve currently serves as a Non-Executive Director of several companies in the sector, including Velcourt Farms Ltd, a leading UK farm management business. His appointment, which takes effect in April 2016, follows the retirement of Lord Carlile CBE, QC, who served as a Non-Executive Director for over 16 years. On behalf of the Board, I would like to warmly welcome Steve to the Group and reiterate our sincere thanks to Lord Carlile CBE, QC for his dedicated service and wise counsel over so many years.

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

GOVERNANCE

STRATEGIC REPORT

www.wynnstay.co.uk

ADRODDIAD Y CADEIRYDD Trosolwg Mae’r Grŵp wedi perfformio’n gadarn mewn blwyddyn lle gwelwyd rhai amodau masnachu anodd iawn i’n cwsmeriaid yn y diwydiant ffermio, gyda phrisiau clwyd fferm isel parhaol. Parhaodd gweithgareddau’r Grŵp ym meysydd âr, porthiant a manwerthu i fod yn gryfder mawr ac mae hyn wedi helpu ei berfformiad cyffredinol. Cynyddodd elw cyn treth y Grŵp am y flwyddyn, cyn taliadau eithriadol a thaliadau seiliedig ar gyfranddaliadau, 4% i £9.05m (2014 £8.70m), a gafodd hwb yn sgil integreiddio caffaeliadau diweddar yn llwyddiannus a thwf mewn nifer o sectorau cynnyrch. Effeithiodd datchwyddiant parhaus o ran prisiau nwyddau ar refeniw o £377.38m (2014: £413.56m). Gwnaethom barhau i ehangu’r busnes yn ystod y flwyddyn gyda nifer o gaffaeliadau bach, a oedd o fudd i’n His-adrannau Manwerthu Arbenigol ac Amaethyddol. Yn arbennig, ar ddiwedd y flwyddyn, caffaelwyd Agricentre, sef y cwmni cyflenwadau fferm yn Ne Orllewin Lloegr. Yn sgil hyn, ehangwyd ardal fasnachu’r Grŵp ac mae hefyd wedi esgor ar ragor o gyfleoedd mewn perthynas â’n holl weithgareddau amaethyddol. Manylir weithgareddau masnachu’r Grŵp yn adolygiad y Prif Weithredwr ac, er yr adroddir ar y busnes o dan ddwy Is-adran, mae cysylltiad cynhenid rhwng y ddwy ynghyd â synergeddau cryf. Elwodd yr Is-adran Amaethyddol ar werthiannau porthiant uwch yn ystod hanner cyntaf y flwyddyn a pherfformiodd

yn dda yn y sector deunydd crai. Cafwyd mwy o rawn yn yr ail hanner sy’n adlewyrchu’r cynhaeaf mwy o faint a gafodd y DU. Roedd gwerthiannau hadau yn galonogol ac, er bod y galw am wrtaith yn isel, gwellodd enillion yr Is-adran Amaethyddol o gymharu â’r flwyddyn flaenorol ac roeddent yn unol â disgwyliadau cyffredinol. Perfformiodd yr Is-adran Manwerthu Arbenigol yn dda ac mae’n parhau i ddatblygu. Integreiddiwyd caffaeliadau diweddar yn llwyddiannus a, chan gynnwys Agricentre, ceir 51 o siopau Wynnstay bellach, sy’n gwasanaethu’r cymunedau amaethyddol a gwledig, ynghyd â 23 o siopau Just for Pets, sy’n darparu amrywiaeth o gynhyrchion anifeiliaid anwes, mewn ardaloedd trefol yn bennaf. Mae Youngs Animal Feeds, sy’n cyflenwi amrywiaeth o fwydydd ceffylau ac anifeiliaid anwes, yn ategu’r ddau weithgaredd hyn a gwnaeth gyfraniad cadarnhaol. Canlyniadau Ariannol Cynhyrchodd y Grŵp refeniw o £377.38m (2014: £413.56m) am y flwyddyn a ddaeth i ben 31 Hydref 2015. Amcangyfrifir bod datchwyddiant mewn prisiau nwyddau amaethyddol wedi cyfrif am tua £32.00m o’r gostyngiad. Roedd gwerthiannau yn yr Is-adran Amaethyddol yn £270.05m (2014: £308.71m), sy’n adlewyrchu gwerthoedd uned is am y rhan fwyaf o gynnyrch porthiant, grawn a gwrtaith. Cyfrannodd yr Is-adran Manwerthu Arbenigol refeniw o £107.19m (2014: £104.62m) gyda’r

cynnydd yn adlewyrchu’r ffaith bod mwy o siopau yn bennaf. Cynyddodd elw cyn treth y Grŵp, cyn taliadau yn seiliedig ar gyfranddaliadau a chostau eithriadol, 4% i £9.05m (2014: £8.70m). Mae’r gostyngiad a gofnodwyd o ran elw statudol, sef £8.34m (2014: £8.49m) yn adlewyrchu cynnydd mewn taliadau yn seiliedig ar gyfranddaliadau; costau adsefydlu yn ymwneud ag integreiddio Agricentre a llai o gyfraniad gan ganlyniadau cydfentrau. Mae’n dda nodi i’r ddwy Is-adran sicrhau cynnydd o flwyddyn i flwyddyn o ran eu cyfraniad elw gweithredu. Cynyddodd cyfraniad elw gweithredu’r Is-adran Amaethyddol 8.7% i £4.13m (2014: £3.80m), gyda chategorïau cynnyrch craidd yn cofnodi cyfeintiau uwch. Cyfrannodd yr Is-adran Manwerthu Arbenigol gynnydd o 4.1% mewn elw gweithredu ar £5.08m (2014: £4.88m), sy’n bennaf yn adlewyrchu’r cynnydd yn nifer y siopau. Dangosodd gweithgareddau eraill golled o £0.26m, (2014: elw o £0.25m), o ganlyniad i lai o incwm gan gydfentrau yn deillio’n bennaf o weithgareddau Amaethyddol a thaliadau uwch yn seiliedig ar gyfranddaliadau. Lleihaodd taliadau cyllid net i £0.24m (2014: £0.33m) a adlewyrchodd y gostyngiad parhaus mewn dyled net gyfartalog drwy gydol y flwyddyn o ganlyniad i lif arian parod masnachu cryf a chyfalaf gweithio is. Cynyddodd enillion sylfaenol fesul cyfranddaliad, cyn costau eithriadol, 2.9% i 36.32c (2014: 35.28c). Roedd enillion sylfaenol statudol fesul cyfranddaliad yn 34.66c (2014: 35.28c). Roedd asedau net ar 31 Hydref 2015 7.3% yn uwch ar £82.86m neu £4.31 fesul cyfranddaliad (2014: £77.23m neu £4.07 fesul cyfranddaliad). Parhaodd lefelau cynhyrchu arian parod i fod yn gryf ac, ar ddiwedd y flwyddyn, sef yr isafbwynt tymhorol arferol yn y cylch cyfalaf gweithio, roedd arian parod net yn £2.14m (2014: £2.75m). Difidend Mae’n bleser gan y Bwrdd gynnig talu difidend terfynol o 7.40c fesul

STRATEGIC REPORT GOVERNANCE

cyfranddaliad (2014: 6.80c fesul cyfranddaliad). Ynghyd â’r difidend interim o 3.70c fesul cyfranddaliad, a dalwyd ar 30 Hydref 2015, mae hyn yn creu cyfanswm difidend o 11.10c ar gyfer y flwyddyn (2014: 10.20p), sef cynnydd o 8.8% o gymharu â’r flwyddyn flaenorol.

FINANCIAL STATEMENTS

Caiff y difidend terfynol ei dalu ar 29 Ebrill 2016 i gyfranddalwyr sydd ar y gofrestr ar 29 Mawrth 2016. Bydd difidend sgrip amgen ar gael o hyd, fel mewn blynyddoedd blaenorol. Y dyddiad olaf ar gyfer ethol y difidend sgrip fydd 14 Ebrill 2016.

Rydym yn falch o gyhoeddi y caiff Stephen Ellwood ei benodi’n Gyfarwyddwr Anweithredol. Mae gan Steve fwy na 30 mlynedd o brofiad yn y sector bancio amaethyddol, gyda’r rhan fwyaf o’i yrfa wedi’i threulio yn HSBC Bank plc, lle’r oedd yn Bennaeth Amaethyddiaeth am 10 mlynedd. Ar hyn o bryd, mae Steve yn Gyfarwyddwr Anweithredol gyda sawl cwmni yn y sector, gan gynnwys Velcourt Farms Ltd, sef busnes rheoli ffermydd blaenllaw yn y DU. Daw ei benodiad ym mis Ebrill 2016 yn sgil ymddeoliad yr Arglwydd Carlile CF CBE, sydd wedi bod yn Gyfarwyddwr Anweithredol ers dros 16 mlynedd. Ar ran y Bwrdd, hoffwn estyn croeso cynnes i’r Grŵp i Steve a diolch o waelod calon i’r Arglwydd Carlile am ei waith caled a’i gyngor doeth dros yr holl flynyddoedd. Cydweithwyr Rwy’n parhau’n ddiolchgar i’m gydweithwyr o fewn Wynnstay am eu proffesiynoldeb a’u hymroddiad i’r Grŵp ac i’n cwsmeriaid. Ar ran y Bwrdd, hoffwn cymryd cyfle hwn i gydnabod eu mewnbwn a’u cyfraniad parhaus at y busnes. Rhagolygon Mewn blwyddyn heriol i’n cwsmeriaid yn y diwydiant ffermio, mae canlyniadau Wynnstay yn dangos ei gadernid a’r cynnydd a wnaed wrth barhau i ddatblygu’r Grŵp. Wrth edrych i’r dyfodol, nid oes fawr o arwydd o welliant o ran prisiau clwyd fferm fel y disgwyliwyd, a wnaiff barhau

SHAREHOLDER INFORMATION

Y Bwrdd

Mae lledaeniad gweithgareddau’r Grŵp yn parhau i fod yn gryfder mawr JIM MCCARTHY

i effeithio incwm ffermwyr. Hefyd, bu’r masnachu cynnaryn arafach, yn rhannol am fod y gaeaf wedi dechrau’n hwyr. Er ei bod yn ddyddiau cynnar, mae cymeryd pwyll wrth ystyried y flwyddyn i ddod yn ddoeth, os parheir yr amodau hyn cânt effaith andwyol ar berfformiad y Grŵp. Mae’r tueddiadau hir-dymor o ran twf yn parhau’n gadarnhaol i ddiwydiant amaethyddol y DU er bod yr angen i gyflawni mwy o arbedion effeithlon yn y sector cyfan hefyd yn hanfodol. Byddwn yn parhau i ddatblygu gweithgareddau a gwasanaethau’r Grŵp, yn gyfundrefnol 11

a thrwy gaffaeliadau, ac yn sicrhau ein bod yn gallu darparu ystod eang o gynhyrchion am bris cystadleuol, a ategir gan gymorth a chyngor technegol, i’n cwsmeriaid yn y diwydiant ffermio. Er gwaethaf yr heriau presennol a wynebir gan y sector, mae Wynnstay mewn sefyllfa dda yn y farchnad a chaiff ei gefnogi gan lifau arian parod cryf a mantolen gadarn.

Jim McCarthy Cadeirydd 26 Ionawr 2016

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

GOVERNANCE

STRATEGIC REPORT

www.wynnstay.co.uk

CHIEF EXECUTIVE’S REVIEW Introduction Wynnstay has delivered a pleasing performance in a trading environment that has been impacted by continuing low output prices for farmers. Group pretax profit, before exceptional charges and share based payments, increased by 4% to £9.05m (2014: £8.70m), a new record, on revenues which reduced to £377.38m (2014: £413.56m), reflecting commodity price deflation. These robust results were supported by recent acquisitions as well as increased volumes and efficiency gains in some sectors. Wynnstay’s balanced spread of activities, spanning the arable, livestock and retail sectors, also helped to underpin results, providing a smoothing effect against sector volatility.

well although the full benefits of this acquisition are not expected to come through for another 12 months.

We further expanded our Wynnstay Stores network adding a number of new outlets during the year, which strengthen our existing geographic footprint. At the year end, we completed the acquisition of Agricentre, a well-established farm supplies operation, trading through eight units in the West Country. The move is important as it extends Wynnstay’s presence into a major new geographic region and there are opportunities to enhance both Agricentre’s product range and the breadth of its activities. The integration process has started

The Agricultural Division performed well in a difficult market with operating profit increasing by 8.7% to £4.13m, (2014: £3.80m), helped by strong demand for feed in the first half and an improved raw materials performance. While revenues were impacted by commodity price deflation, decreasing by 13% to £270.05m (2014: £308.71m), we achieved yearon-year volume improvement in many product categories. Although margins remained under pressure, our focus on operational efficiencies contributed to the improved financial performance.

Farmgate prices remain a challenge for the industry, with prices below the realistic cost of production for many farmers. However the longer term macroeconomic growth drivers for the sector remain compelling and we intend to continue to build on the Group’s solid foundations, developing Wynnstay’s presence both organically and through further acquisitions. Review of Activities Agricultural Division

Our Agricultural Division works closely with our Wynnstay Stores network, which has grown significantly over recent years, and our expansion into new geographies provides further opportunities across the breadth of our agricultural activities. Feed Products Total feed volumes increased by 1.5% over the prior year, in line with market trends. After a strong first half, demand for feed was more subdued, reflecting both the prolonged autumn weather and the poor milk and meat prices affecting farmers. As in prior years, the broad spread of the Group’s feed activities, which include products for the ruminant and poultry markets, along with traded raw materials, helped to smooth the overall result. Slightly lower demand for dairy compound was balanced by an increased demand for blends and feed for poultry, beef and sheep. We have continued to develop our team of dairy specialists as part of an ongoing initiative targeting the dairy sector. Working alongside both their farm sales and Wynnstay Stores colleagues, they help to ensure that customers have access to the full range of products and services essential to an efficient dairy

The Glasson business, which operates from port facilities at Glasson Dock, near Lancaster, is a long standing supplier of a broad range of raw materials to the agricultural wholesale market. It also manufactures specialist products for the wholesale merchants and processes fertiliser for both the wholesale sector and our own direct fertiliser sales. While overall volumes of raw materials were down year-on-year, the business generated a good financial contribution, supported by a favourable product mix. Good volumes of fertiliser and specialist products also offset a reduction in unit margins across these categories.

Wynnstay Stores

The Specialist Retail Division, which encompasses Wynnstay Stores, Just for Pets and Youngs Animal Feeds, continued to make pleasing progress over the period, adding 13 new outlets. Total revenues rose by 2.5% to £107.19m (2014: £104.62m) and operating profit increased by 4.1% to £5.08m (2014: £4.88m).

Our network of Wynnstay Stores, which are mainly geared towards farm supplies, has expanded significantly over recent years, and the acquisition of Agricentre, completed at the year end, takes the total number of outlets to 51 from 40 over the past twelve months. Total sales for the year increased by 3.1%, benefiting from the opening of a

FINANCIAL STATEMENTS

Glasson

Specialist Retail Division

SHAREHOLDER INFORMATION

enterprise. We also continued to improve our own efficiencies, which supports our aim of maintaining competitive prices for our customers.

Arable Products Our arable activities cover a full range of arable inputs which are complemented by a farmer-focused grain trading business. We continued to make progress within the sector although margin pressure remained a feature. We were pleased with the performance of our seed activities; sales were strong and volumes were in line with the previous year. Grain yields were good across the trading area although, with output prices remaining disappointing, farmers have been reluctant to market their grain. However, the increased yields provided a good opportunity for the grain trading teams at GrainLink and Woodheads Seeds and combined volumes increased over the previous year. Demand for fertiliser was subdued in the first half as customers held back from buying in anticipation of a reduction in price. The resultant spot market was strong but margins remained under pressure. Autumn demand for fertiliser was tempered by weaker farmer sentiment and we therefore anticipate a shift in seasonal sales activity to the Spring of 2016.

GOVERNANCE

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

Wynnstay’s success reflects the efforts of all staff KEN GREETHAM

CHIEF EXECUTIVE’S REVIEW continued

new store in Aberystwyth in November 2014 and the acquisitions of Ross Feed at Ross-on-Wye in January 2015 and S Jones in Bethania, Ceredigion, in September 2015. Reflecting commodity price deflation, like-for-like sales showed a marginal reduction of 1%. The acquisition of Agricentre was an important strategic move, providing us with a trading entry into the West Country. Bringing an additional eight

units, the business, now rebranded ‘Wynnstay Agricentre’, has been trading across the West Country since 1961. Its model of small units, wholly geared to farmers, mirroring the approach we are taking with certain new stores. Our store network represents an important route to market for UK and international suppliers, and we intend to continue to scale the operation. In an environment where farm incomes are

FINANCIAL STATEMENTS

GOVERNANCE

STRATEGIC REPORT

www.wynnstay.co.uk

under pressure, our increased purchasing power will also help us ensure that we continue to offer our customers a broad range of competitively priced products and services. Just for Pets Total and like-for-like sales at our chain of pet product outlets, ‘Just for Pets’, increased marginally year-on-year. As expected, the contribution was below the prior year, reflecting the costs associated with expansion. We opened two new stores in the year, at Cambourne in June 2015 and Reading in October 2015, with a further outlet opened in Nottingham after the year end, in November 2015. We continue to identify potential new sites for stores and expect to open an additional outlet in the spring of 2016.

SHAREHOLDER INFORMATION

Youngs Animal Feeds Youngs manufactures and distributes a range of equine products that are sold by specialist outlets across the centre of the UK. The business has performed strongly over the year, expanding its position in the market, with further opportunities available from the continuing growth of the Specialist Retail Division. Joint Ventures and Associates The Group has five key joint venture businesses, (Bibby Agriculture, Wyro, GeoGen, FertLink and Total Angling) as well as two associate businesses (Wynnstay Fuels and Celtic Pride). These ventures continued to make a valuable contribution to the Group and the reduced contribution this year, compared to the prior year, mainly reflected the challenges of the agricultural market. Staff Wynnstay’s success to date reflects the efforts of all staff, and I would like to take this opportunity to recognise the commitment, enthusiasm and drive of my colleagues across the Group and to record my personal appreciation. I would also like to echo our Chairman’s thanks to Lord Carlile CBE, QC who retired from the Group in March 2015 after 16 years as a Non-Executive Director. I also have much pleasure in welcoming 14

Stephen Ellwood who will be joining Wynnstay as a Non-Executive Director in April 2016. Steve’s background as an agricultural specialist in commercial banking further strengthens our Board of Directors. Outlook The Group’s broad base of activities continues to underpin its resilient performance and we are pleased with the ongoing development of the business over the year. However output prices for farmers remain low, with the combination of high levels of world food stocks, tempered demand in developing countries and fluctuating international currencies delaying a return to acceptable pricing. This means that our farmer customers will face ongoing challenges which will require further efficiencies throughout the agricultural industry.

remains well placed to progress with it’s strategic plans and we continue to focus on developing opportunities for ongoing growth. Looking further ahead, we remain optimistic about prospects for UK farming which are well supported by macroeconomic factors, including world population growth and increasing demand for food and energy. I look forward to providing a further update at Wynnstay’s AGM in March. For those able to attend the meeting, please be aware that we will be returning to our regular venue, at Shrewsbury Town Football Club, for 2016.

Ken Greetham Chief Executive 26 January 2016

In light of continuing low farmgate prices and subdued farmer sentiment, our view of the outlook for the new financial year ahead has become more cautious. Also the prolonged mild autumn has resulted in a slow start to the feed season. Nonetheless Wynnstay

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

GOVERNANCE

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

STRATEGIC REPORT

www.wynnstay.co.uk

FINANCE REVIEW Group Structure

• Wynnstay (Agricultural Supplies) Limited, an agricultural merchant • Glasson Grain Limited, a feed and fertiliser merchant

• GrainLink Limited, a grain merchant • Woodheads Seeds Limited, a seed and grain merchant • Just for Pets Limited, a pet products retailer • Youngs Animal Feeds Limited, an equine and pet products distributor

FINANCIAL STATEMENTS

GOVERNANCE

The Group is now legally structured as a holding company, Wynnstay Group Plc, which has investments in six wholly owned trading subsidiaries, namely;

Operational results from these trading companies are divided into two main divisional segments for reporting purposes, Agriculture, encompassing the manufacturing and supply of a comprehensive range of agricultural inputs delivered to customers, and Specialist Retail, covering the supply of specialised products 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.

SHAREHOLDER INFORMATION

Additionally Wynnstay Group Plc holds investments in the principal joint ventures and associate companies outlined in Note 18 in the accounts, and certain other property and investment assets, which are again reported within one of the appropriate segments. Trading Results The financial performance of the business has been considered very satisfactory over the last year, considering the commercial environment in which the Group’s predominant farmer customers have had to operate within. A number of economic factors have contributed to further reductions in the prices received for many farm products, particularly for milk and grain, and this reduced farm income has adversely affected the Group. However improved efficiencies within the business, together with recent investment and expansion, has produced an increase of 4% in overall Group pretax profitability before share-based payments and other exceptional items which was £9.05m (2014: £8.70m).

The Group has produced a increase of 4% in underlying pre-tax profit PAUL ROBERTS

The falling commodity prices that have adversely affected farmers have also contributed to a significant fall in Group revenue for the year, which was £377.38m (2014: £413.56m). Agriculture revenue was £270.05m (2014: £308.71m), which experienced generally lower selling prices as a result of commodity price deflation, with our total estimate of this effect being approximately £32.00m across the division. Average manufactured feed prices were some £23 per tonne lower across the year, while

or £9.29m prior to share based payments and exceptional costs (2014: £9.03m). Of this total, Agriculture contributed £4.13m (2014: £3.80m) and the Specialist Retail operations £5.08m (2014: £4.88m). Other activities, which includes the charge for Group share-based payment costs of £0.33m (2014: £0.10m), contributed a loss of £0.26m (2014: profit of £0.25m), primarily as a result of the lower joint venture income and the higher sharebased payment costs.

Group Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) was £11.70m before the exceptional costs (2014: £11.37m), and was made up as follows: £million’s

2015

2014

Group pre-tax profit before share-based payments and exceptional costs

9.05

8.70

Share based payments

(0.33)

(0.10)

Exceptional costs

(0.32)

Share of tax incurred by joint ventures

(0.06)

(0.11)

Statutory profit before taxation

8.34

8.49

Share of tax incurred by joint ventures

0.06

0.10

Net interest

0.24

0.33

Depreciation

2.66

2.51

Intangible amortisation

0.01

Profit on disposal of fixed assets

(0.26)

(0.17)

Share based payments

0.33

0.10

Exceptional costs

0.32

EBITDA

11.70

11.37

Taxation

Earnings Per Share and Dividend

Share Capital

The Group’s tax charge of £1.73m (2014: £1.90m) represented 20.5% (2014: 22.1%) of the Group pre-tax profit, and again has benefited from the reduction in general corporation tax rates and the related reduction in deferred tax provisions. However it remained slightly above the pro-rata standard rate for the period of 20.4% (2014: 21.8%) primarily as a result of certain cost items not being deductible for tax purposes. Actual tax cash payments in the year were £1.52m, (2014: £2.27m), which was lower than the charge for the period due to the payments on account of this financial year made by Glasson Grain and Wynnstay (Agricultural Supplies) Limited during the previous period.

Underlying earnings per share (before exceptional costs) were 36.32p (2014: 35.28p), based on a weighted average number of shares in issue during the year of 19.243m (2014: 18.981m). After the exceptional costs, the basic earnings per share were 34.66p (2014: 35.28p), The Board proposes to recommend the payment of a final dividend of 7.40p per share to be paid on the 29 April 2016, which when added to the interim dividend of 3.70p per share paid on the 30 October 2015, makes a total of 11.10p for the year (2014: 10.20p), an increase of 8.8%. The total dividend is expected to be covered 3.10 times (2014: 3.44 times) by earnings, and represents the eighth consecutive year that the Board has been able to raise the dividend by over 8%.

During the year a total of 282,545 (2014: 258,252) new ordinary shares were issued for a total equivalent cash amount of £0.878m (2014: £0.711m). A total of 200,812 (2014: 195,282) shares were issued in relation to the exercise of employee share options for a total consideration of £0.447m (2014: £0.321m). The remaining 81,733 (2014: 62,970) shares were issued to existing shareholders exercising their right to receive dividends in the form of new shares under the Company’s scrip dividend scheme for a total equivalent cash value of £0.431m (2014: £0.390m). No other shares were issued during the year.

FINANCIAL STATEMENTS

The Group pre-tax profit, which includes the Group’s share of pre-tax profits from joint ventures and associate investments, was £8.40m (2014: £8.60m) or £9.05m prior to share-based payments and exceptional costs (2014: £8.70m) (see table below). Net finance charges amounted to £0.24m (2014: £0.33m), which resulted in Group operating profit, inclusive of joint venture and associate contributions, of £8.64m (2014: £8.93m)

SHAREHOLDER INFORMATION

fertiliser and grain prices averaged falls of £1 and £26 per tonne respectively. Our Specialist Retail operations produced revenue of £107.19m (2014: £104.62m), with the increase from new stores being once again tempered by deflation across a number of important product categories. Both retail chains experienced sales growth, with 3.1% achieved in the Country Stores and 1.2% at Just for Pets Limited.

GOVERNANCE

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

STRATEGIC REPORT

www.wynnstay.co.uk

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

GOVERNANCE

FINANCE REVIEW continued

Balance Sheet Group net assets at the year end amounted to £82.86m (2014: £77.23m). Based on the weighted average number of shares in issue during the year of 19.243m, (2014: 18.981m) this represented a net asset value per share of £4.31 (2014: £4.07). During the financial year the share price traded in a range between a low of £4.79 in May 2015 and a high of £6.00 in January 2015. Capital investment in fixed assets amounted to £3.26m (2014: £3.06m) and a further £3.48m (2014: £0.20m) was invested in four (2014: one) acquisitions which were all structured as asset purchase transactions inclusive of goodwill and other intangibles. Despite the lower commodity prices, responsible for the reduced revenue during the year, Net Working Capital, which is defined as, the net of inventory, trade and other receivables and trade and other payables, increased at the year end, standing at £35.3m (2014: £31.1m). The increase primarily being due to higher inventory levels as a result of the increased number of retail units open at the year end, which was 73 across both chains compared to 60 last year. Cashflow, Net Cash and Banking Facilities The business remains strongly cash generative and has once again funded the

continued growth in activities primarily from internally generated resources. The working capital increase mentioned above limited cashflow generation from operating activities to £6.85m (2014: £9.18m). Total net cash investment, including acquisitions but excluding assets acquired under finance leases amounted to £4.90m (2014: £2.22m). New equity finance, primarily from scrip dividends and employee options, was raised of £0.88m (2014: £0.71m). After the payment of £2.02m (2014: £1.82m) in dividends to shareholders, term debt repayments of £2.95m (2014: £2.85m), and new loans drawn of £3.50m (2014: £0.27m) there was a net increase in cash and cash equivalents in the business of £1.36m (2014: £3.27m increase). When this improvement in cash is added to the net reduction in term and other existing non liquid debts of £1.52m (2014: £2.24m) and after accounting for the new loan of £3.50m (2014: £0.27m), a total negative movement in funding in the year of £0.62m (2014: positive £5.24m) resulted. This left the net cash position at the year end at £2.14m compared to £2.75m at the beginning of the year. However this strong cash position at the year end once again reflects the traditional seasonal trough of the Group’s working capital cycle, and as the business moves into the more usual heavy trading patterns of the winter and spring, short term borrowings will again be required to 18

finance peak trading activities. The Board continues to prioritise the maintenance of adequate banking facilities to accommodate unexpected commodity price volatility. During the year new facilities were agreed with the Group’s primary bankers, HSBC, on improved terms, and which include a significant proportion on a committed five year term basis. The Board believes projected overall debt will remain well within these new arrangements, which currently amount to £20.0m in total. Key Performance Indicators & Risk Management Details of Key Performance Indicators and the risks and uncertainties for the business are given in the Strategic Report on page 19.

Paul Roberts Finance Director 26 January 2016

Revenue: The invoiced value of sales from the Group’s activities, measured at fair value net of all rebates and excluding value added tax. EBITDA: Group pre-tax profit, including share of pre-tax profits of joint ventures and associates and profit on fixed asset disposals, before interest, taxation, depreciation, fixed asset impairment charges and share-based payments. Earnings per Share: 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. Return on Net Assets: Group pre-tax profit, including share of pre-tax profits of joint ventures and associates before intangible and amortisation, share-based payment charges or exceptional costs, divided by the balance sheet net asset value. Net Asset per Share: 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. Risk Management Risks and uncertainties for the business are classified into two main categories, Financial and Operational. The Board monitor such risks and have developed policies for managing the uncertainties they bring. The main elements of these controls operate in the following areas: 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:

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 fair value of these contracts is not material. As at the year end the principal amounts relating to forward purchased currency amounted to £2,767,761 (2014: £3,655,694). 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 manufacturing activities. Position reporting systems are in place to ensure the Board is appraised 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 – 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 – The banking crisis of recent years and fluctuating commodity prices, which can adversely impact working capital levels, demonstrate the need to ensure that adequate financial resources are available 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 new debt facilities have been agreed with HSBC Bank Plc during the year, which include a significant element of committed facilities over a five year period. Internal Controls – As the Group operates across a number of different markets in both its Agriculture and Specialist Retail 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 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, with certain participants growing significantly over the last twelve months. 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

GOVERNANCE

The performance of the business is regularly monitored against Key Performance Indicators (KPI’s), (the results for which are reported in the Chairman’s Statement on page 8 and 9. These indicators are defined as follows:

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 used for the acquisition of vehicles.

FINANCIAL STATEMENTS

Key Performance Indicators

SHAREHOLDER INFORMATION

KEY PERFORMANCE INDICATORS AND RISK MANAGEMENT

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

GOVERNANCE

STRATEGIC REPORT

www.wynnstay.co.uk

KEY PERFORMANCE INDICATORS AND RISK MANAGEMENT continued

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. 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.

Supply Chain Efficiency – The Group’s considerable inventories both in the retail 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 is currently working to optimise stock turn ratios while ensuring adequate availability through challenging seasonal cycles. 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. Fraud – More difficult general economic circumstances 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.

Paul Roberts Finance Director 26 January 2016

BOARD AND ADVISORS

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

B P Roberts Company Number 2704051 Registered Office Eagle House Llansantffraid Ym Mechain Powys SY22 6AQ Auditor KPMG LLP 8 Princes Parade Liverpool L3 1QH Principal Bankers HSBC PLC Corporate Banking Centre 3 Rivergate Bristol BS1 6ER 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 Paulâ&#x20AC;&#x2122;s Square Liverpool L3 9AE

FINANCIAL STATEMENTS

Company Secretary

SHAREHOLDER INFORMATION

J J McCarthy Lord Carlile CBE QC (retired 24 March 2015) B P Roberts K R Greetham D A T Evans P M Kirkham H J Richards

GOVERNANCE

Directors

STRATEGIC REPORT

www.wynnstay.co.uk

BOARD OF DIRECTORS 1.

Kenneth Richard Greetham

Bryan Paul Roberts (Age 52)

David Andrew Thomas Evans (Age 47)

Chief Executive

Finance Director

Retail Director

Ken joined the Board in 2008 when he became Chief Executive. He joined Wynnstay in 1997 following the integration of Shropshire Grain and was responsible for the development of the Group’s arable activities.

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.

Andrew joined the Board in 2008 and has executive responsibility for all the Group’s retail activities. He is also a dairy farmer in Mid Wales.

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

GOVERNANCE

(Age 56)

2. 3.

(Age 60)

Chairman

Philip Michael Kirkham (Age 58)

Vice-Chairman / Senior Independent Non-Executive Director 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 NonExecutive Chairman of National Milk Records Plc and a Director of Meadow Quality Ltd.

Howell John Richards (Age 51)

Non-Executive Director Howell joined the Board in July 2014. He has significant experience within the agricultural supply industry and has established a large dairy enterprise 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.

SHAREHOLDER INFORMATION

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 currently Chief Executive Officer of Poundland Limited.

GOVERNANCE

James John McCarthy

FINANCIAL STATEMENTS

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

4. 5.

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

GOVERNANCE

STRATEGIC REPORT

www.wynnstay.co.uk

DIRECTORS’ REPORT For the year ended 31 October 2015

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 2015. 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 listing on AIM, part of the London Stock Exchange. The Group financial statements were authorised for issue by the Board of Directors on 26 January 2016. Further information on the activities of the business and the Group strategy are presented in the Chairman’s Statement,

Chief Executive’s Review, Strategic Report and Corporate Governance Report included within the Group’s full published Annual Report. Share Capital The movement in the share capital during the period is detailed in note 29 to the financial statements. Results, Dividends, and Transfers to Reserves Reported under IFRS as adopted by the EU the Group profit before taxation is £8,337,000 (2014: £8,493,000). After a taxation charge of £1,667,000 (2014: £1,796,000), the Group profit for the year is £6,670,000 (2014: £6,697,000). The Directors recommend a final ordinary dividend of 7.40p per ordinary 25p share net (2014: 6.80p per ordinary 25p share net), to be paid on 29 April 2016 to

shareholders on the register at the close of business on 29 March 2016. The share price will be marked ex dividend with effect from 24 March 2016. 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 29 April 2016. 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 2015 (refer to note 16) by approximately £3,990,000 (2014: £3,980,000).

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: 25p Ordinary Shares

SAYE Option

Discretionary Options

2015

2014

2015

2014

2015

2014

n/a

33,421

n/a

J J McCarthy Lord Carlile CBE QC (retired March 2015)

102,719

2,508

5,335

31,000

K R Greetham

44,138

42,725

2,371

3,784

31,000

D A T Evans

19,645

19,260

2,371

26,000

P M Kirkham

H J Richards

B P Roberts

In addition to the above shareholdings, Mr B P Roberts and K R Greetham are trustees of the Company’s Employee Share Ownership Plan trust, which at the year end held 52,256 shares (2014: 10,494 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

Directors’ and Officers’ Liability Insurance

Under Article 91, Mr P M Kirkham and Mr K R Greetham retire from the Board by rotation at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election. The Nominations Committee have just completed the process of recruiting a new Non-Executive Director and have announced that Mr Stephen John Ellwood will join the Board in April 2016.

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. 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. 24

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

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

Substantial Shareholdings

Registered Shareholder

Beneficial Holder

Ferlim Nominees Limited

9.0%

Discretionary managed funds of Investec Wealth & Investment Limited

Chase Nominees Limited

6.9%

Schroder Investment Management Limited

Goldman Sachs Securities Limited

5.3%

Polar Capital

Vidacos Nominees Limited

3.5%

Discretionary managed funds of Brown Shipley Private Bank

GOVERNANCE

At 31 October 2015, the following shareholders held 3% or more of the issued share capital of the Company:

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 45 days (2014: 42 days). Auditor Reappointment Pursuant to section 487 of the Companies Act 2006, a resolution proposing the reappointment of KPMG LLP will be submitted to the Annual General Meeting on 22 March 2016. 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 22-23. 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. The Directors consider that these statements taken as a whole are: •

fair, balanced and understandable; and

•

provide the information necessary for shareholders to assess the Company/Group’s position and performance, business model and strategy.

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 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 25

and then apply them consistently; • make judgments 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. 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

Paul Roberts Company Secretary 26 January 2016

SHAREHOLDER INFORMATION

may have occurred, including accidents and near misses.

FINANCIAL STATEMENTS

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.

STRATEGIC REPORT

www.wynnstay.co.uk

CORPORATE GOVERNANCE STATEMENT For the year ended 31 October 2015

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

GOVERNANCE

The Principles of Good Governance 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 have considered the twelve principles of good practice published in the QCA Corporate Governance Guidelines for Smaller Companies updated in 2013. The Board believes that it has incorporated these principles in formulating a Corporate Governance policy appropriate to the size of the Group, and which can provide comfort for the Company’s numerous and widespread shareholder base who have the right to expect the highest possible level of standards. The Directors are pleased to provide the following information: The Board of Directors The Board currently comprises six directors, three of whom are executive and three 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. 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 retail skills, and are all deemed independent under the Guidelines. Mr P M Kirkham, having been appointed in April 2013, is deemed the Senior independent non-executive. The Chairman is responsible for the periodic performance reviews of the Board subcommittees and non-executive directors. Following the retirement of Lord Carlile CBE QC in March 2015, the Nominations Committee concluded that the correct balance of skills and experience for the effective stewardship of the business would be maintained through the appointment of a further non-executive director with specific corporate finance experience.

Following a rigorous recruitment process, the Chairman has just announced that Mr Stephen Ellwood has agreed to join the Board and will take up his appointment in April 2016. Mr Ellwood currently holds a number of non-executive positions in agricultural companies and is Chairman of the European Food & Farming Partnership. He has previously held the roles of Head of Agriculture at HSBC Bank Plc and the top ten professional services firm Smith & Williamson, and therefore will bring considerable broad skills to the Board. A formal schedule of matters requiring Board approval is maintained, and covers such areas as Group strategy, approval of financial budgets and results, Board appointments, approval of major capital expenditure and dividend policy. The Board normally meet once a month with additional meetings as necessary. 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 Board believes that this structure, together with the operation of its sub-committees described below, satisfies the flexible and effective management elements of the QCA guidelines. Board Committees Audit Committee This Committee currently consists of three non-executive directors: Mr P M Kirkham (Committee Chairman), Mr H J Richards and Mr J J McCarthy. Mr H J Richards replaced Lord Carlile CBE, QC on the Committee upon his retirement in March 2015. 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 26

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; and • Ensuring the business operates within all applicable legislation and uses best practice wherever possible. The Audit Committee met twice during the 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 P M Kirkham and was chaired by Lord Carlile CBE QC until his retirement in March 2015, when he was replaced by Mr H J Richards. 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

This Committee of the Board currently consists of Mr J J McCarthy, Mr K R Greetham 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 nonexecutive directors. The Nomination Committee met four times during the year and all committee members attended. Relations with shareholders 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 announced. Mr P M Kirkham is the nominated independent nonexecutive Director who makes himself available to shareholders who may require an independent 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. The Company aims to send out notice of the Annual General meeting at least 21 working days before the meeting. Shareholders also have access to the Company’s website at www. wynnstay.co.uk. Going Concern The Directors have prepared the financial statements on a going concern basis, having satisfied themselves from a review of internal budgets and forecasts and current bank facilities that the Group has adequate resources to continue in operational existence for the foreseeable future.

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: • 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. 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 policies in the following areas of activity: 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 involved 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 27

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 all aspects of the business. Health and safety – the Group takes the health and safety of its staff, customers and everyone else involved with the business 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 10 across the Group, which was an increase on the previous year when there were 2 incidents. Sustainability and limiting environmental impact – the business 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. A significant number of capital investment projects to improve energy efficiency have been completed in recent years, including solar power generation, biomass boiler installations and capacitor controlled electric motors in the feed mills. Recycling processes operate across the Group for plastics, paper, cardboard, metal, wood, electrical equipment and used oils. Central facilities are used for the collection of these items from individual stores by the Group’s own vehicle fleet following product

FINANCIAL STATEMENTS

Nomination Committee

Internal Control

SHAREHOLDER INFORMATION

senior managers, and the supervision of employee benefit structures throughout the Company. The Remuneration Committee met once during the year and all committee members attended.

GOVERNANCE

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

STRATEGIC REPORT

www.wynnstay.co.uk

CORPORATE GOVERNANCE STATEMENT continued For the year ended 31 October 2015

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

GOVERNANCE

deliveries. Fuel efficiency is paramount in vehicle investment decisions, and mileage management is a key task for all fleet responsible personnel. Supporting the community – playing an active part in the communities in which it operates is an important concept for the management of the business. Support includes community event sponsorship, charitable donations, educational and other group visits, provision of work experience, and assistance with time and resource provision for social and charitable initiatives. The Company also supports selected research projects with local educational establishments, and is currently working with the Animal Science Research Centre at Harper Adams University on a number of nutritional trials, and the Institute of Biological, Environmental and Rural Sciences at Aberystwyth University in grassland management projects. Each year the Company selects specified charities and organisations to work with, and has been pleased to support the Royal Agriculture Benevolent Institution and local Young Farmers Clubs to the extent of £5,000 in the current year. Additionally, customers at Just for Pets Limited have continued raising funds for the training of guide dog puppies. The total raised over the last four years now amounts to over £40,000, which has contributed to the training of eight dogs for this very worthy cause.

Auditor independence The Board is satisfied that KPMG 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. By order of the Board

Paul Roberts Company Secretary 26 January 2016

As a Company listed on the Alternative Investment Market of the London Stock Exchange, the Company is exempt from the s420 obligation of the Companies Act 2006 to prepare a directors’ remuneration report, and the s439 obligation to put a written remuneration policy to a shareholders vote once every three years. However the Board continues to believe that it should operate to the highest corporate governance standards appropriate to companies of its size and resource availability. It is therefore pleased to provide the following voluntary information, and to refer to the details

of the directors’ remuneration received during the year which can be found in note 9 to the Accounts which is provided in accordance with AIM Rule 19. Details of director’s current shareholdings are provided in the shareholding section of the Directors report. 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 strategic aims. Proper regard is given to the need to attract 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. 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:

Executive Directors: Element

Purpose

Operation and Review

Basic Salary

To attract and retain effective management to implement Group strategy.

Reviewed by the Committee on an annual basis with effect from the beginning of November, consistent with annual reviews conducted for all other employees. The current values of individual approved salaries effective from November 2015, together with the amounts actually being received are shown in the table on page 30. Paid monthly in arrears.

Annual Performance Bonuses

To reward delivery of pre-agreed annual financial objectives.

Individually constructed performance related schemes measured against specific criteria agreed annually. Paid in the March following the financial year to which the bonus relates, after completion of the annual audit.

Profit Related Pay

To encourage achievement of profit budgets within main trading subsidiaries.

Subsidiary Company wide employee scheme to reward all staff with a pro-rata profit share, based on a pre-set formula set out in the report on page 30. Paid in the February following the announcement of the financial results for the previous year, after completion of the annual audit.

Pension and Death in Service Life Assurance

To facilitate retention and motivate effective management.

Fixed Company contributions expressed as a percentage of current basic salary for each individual paid into a personal pension scheme held in that individual’s name. The 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 in Kind

To assist Directors in the completion of their duties.

Benefits restricted to the provision of a company car and private medical insurance.

Long Term Incentive Plans

To align executive rewards with returns for shareholders and to encourage executive retention and strategic consistency.

Single fixed term schemes, generally running for a minimum period of three years, with performance related conditions, where the maximum payout is set at approximately one year’s basic salary paid in shares, at the end of the scheme, based on the market value of those shares as at commencement.

Other Share Schemes

To align executive rewards with benefits available for other managers in a tax efficient manner.

HMRC Approved tax efficient share schemes as offered to other employees which are also made available to executive directors on the same periodic basis. These include discretionary Company Share Option Plans (CSOP) and eligible Save As You Earn plans (SAYE).

GOVERNANCE

Introductory Statement

FINANCIAL STATEMENTS

For the year ended 31 October 2015

SHAREHOLDER INFORMATION

DIRECTORS’ REMUNERATION STATEMENT

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

www.wynnstay.co.uk

STRATEGIC REPORT

DIRECTORS’ REMUNERATION STATEMENT continued For the year ended 31 October 2015

FINANCIAL STATEMENTS

GOVERNANCE

Non-Executive Directors: Element

Purpose

Operation and Review

Basic Annual Fee

To attract and retain a balanced skill set of individuals to ensure strong stewardship and governance of the Group.

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

To reimburse legitimately incurred costs of attending necessary Board and associated meetings.

Pre-set rates used to reimburse mileage, travel, accommodation and other incurred expenses in line with those used for other employees.

Medical Insurance Benefit in Kind

To assist Directors in the completion of their duties.

Benefits restricted to the provision of private medical insurance for those Directors who do not have alternative arrangements in place.

Remuneration Report

SHAREHOLDER INFORMATION

Executive Director Remuneration In line with the above policy, the Remuneration Committee have approved the following details of executive director remuneration: -

Basic Salaries. A current maximum approved salary limit for the roles of Chief Executive and Finance Director was approved by the Remuneration Committee in April 2012, which are shown in the table below in column A. Within these limits, the basic salaries paid during the last financial year are shown in column B, while the current annualised salaries, which were increased by the standard Company increment of 1.5% in November 2015, are shown in column C.

Basic Salary

Column A

Column B

Column C

Approved Salary £000’s

Basic Salary Nov 14 – Oct 15 £000’s

Current Basic Salary £000’s

K R Greetham

160

142

144

B P Roberts

130

103

105

D A T Evans

n/a

Executive Director

Annual Performance Bonuses and Profit Related Pay. The contractual bonus schemes for K R Greetham and B P Roberts 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 D A T Evans is based on a fixed percentage of the Agriculture and Specialist Retail segment operating contributions adjusted for administrative costs. The respective bonus percentages, and the payments made for the financial year ending October 2014 are shown in the table on page 31 in columns A & B respectively. The Executive Directors also participate in the Company 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, adjusted for a commodity inflationary index, of those companies excluding inter-company turnover, expressed as a percentage. The relevant rate for 2014, paid in February 2015, was 3.6%, with the actual PRP paid shown in Column C below. The anticipated rate for 2015 relating to the last financial year is 3.6% of relevant earnings.

Column B

Column C

Executive Director

Contractual Annual Bonus %

Bonus received Mar 15 £000’s

PRP received Feb 15 £000’s

K R Greetham

0.750%

B P Roberts

0.375%

D A T Evans

0.400%

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 salary, and the amounts paid on behalf of each individual 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 three of the executive directors belong had a total renewal cost at November 2014 of £62,996 (2013: £60,995), and there were 410 (2013: 376) members covered, equating to an average cost of £154 per person (2013: £162).

Pension Column A Executive Pension Director % K R Greetham

Column B Pension Contribution £000’s

9.6%

B P Roberts

6.5% / 9.5%*

D A T Evans

6.5%

13 7 * Increase effective Aug 15 6

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 2015 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 2015 is shown below in column B.

Benefits in kind Executive Director

Column A

Column B

Company Car Value

Private Medical Cover

K R Greetham

£9,409

£560

B P Roberts

£7,882

£560

D A T Evans

£7,760

£560

FINANCIAL STATEMENTS

Column A

SHAREHOLDER INFORMATION

Bonuses

GOVERNANCE

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

www.wynnstay.co.uk

STRATEGIC REPORT

DIRECTORS’ REMUNERATION STATEMENT For the year ended 31 October 2015

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

GOVERNANCE

Long Term Incentives. The Remuneration policy allows for a single long term incentive plan to be in place at any one time, with a targeted overall maximum financial gain, over the life of the scheme, approximating to one years basic salary as at the beginning of the scheme, for a 100% achievement of the performance criteria. Following vesting of the previous scheme in March 2014, a new long term incentive plan was implemented for executive directors in October 2014 in line with the policy criteria outlined above. The scheme is structured as a Long Term Performance Related Unapproved Share Option Scheme with options being exercisable within a six month period commencing on the third anniversary of the grant date, providing the performance conditions have been satisfied. The maximum award available for a 100% achievement of the performance criteria for each executive, in terms of eligible options, is shown in the Share Option table below. The performance conditions relate to the earnings per share (“EPS”) and market capitalisation (“MC”) of the Group as at October 2017, with the size of the award, as a percentage of the maximum available, based on the matrix below. The executive will pay an option price of 25p per share. (MC) (EPS)

< £110m

£110m

£115m

£120m

£125m

£130m

£135m

£140m

>£140m

<36p

nil

36p

nil

30%

40%

50%

60%

70%

80%

90%

100%

37p

nil

40%

50%

60%

70%

80%

90%

100%

38p

nil

50%

60%

70%

80%

90%

100%

39p

nil

60%

70%

80%

90%

100%

40p

nil

70%

80%

90%

100%

41p

nil

80%

90%

100%

42p

nil

90%

100%

>42p

nil

100%

The reported financial value of gains made under the scheme will be defined as the difference between the market price of the shares on the date of option exercise and the option price, which will be £0.25, multiplied by the number of options actually exercised.

Share Option Table 2014 Scheme LTIP Other Outstanding Options Executive Director Maximum Award SAYE CSOP

No. of Options

K R Greetham

23,000

2,371

8,000

B P Roberts

23,000

2,508

8,000

D A T Evans

18,000

2,371

8,000

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. 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, which do not have any performance criteria attached to them are shown in the Share Option table above, and are exercisable between September 2017 and March 2022, with further details provided in the Director’s Report on page 24 and in note 9 to the accounts.

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

Financial Year ended Oct 2015

Basic Fee J J McCarthy

Benefits in kind

2015 / 2016

Travelling Expenses

Current Basic Fee

Benefits in kind

£000’s

P M Kirkham

Lord Carlile CBE, QC*

n/a

H J Richards

*Retired March 2015

By order of the Board.

Philip Kirkham Vice-Chairman & Chairman of Remuneration Committee 26 January 2016

SHAREHOLDER INFORMATION

Non-Executive Director

FINANCIAL STATEMENTS

The remuneration of the Non-Executive Directors, is and has been paid in accordance with the policy outlined 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:

GOVERNANCE

Non-Executive Director Remuneration

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

GOVERNANCE

STRATEGIC REPORT

www.wynnstay.co.uk

INDEPENDENT AUDITOR’S REPORT To the Shareholders of Wynnstay Group Plc

We have audited the financial statements of Wynnstay Group PLC for the year ended 31 October 2015 set out on pages 36 to 40. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU and, as regards the Parent Company financial statements, as applied in accordance with the Companies Act 2006. This report is made solely to the 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 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 Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed. Respective Responsibilities of Directors and Auditor As explained more fully in the Directors’ Responsibilities Statement set on out pages 24 and 25, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the Audit of the Financial Statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council website at www.frc.org.uk/auditscopeukprivate.

Opinion on Financial Statements In our opinion: • the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 October 2015 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 EU; • the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on Other Matters Prescribed by the Companies act 2006 In our opinion: • The information given in the Strategic Report and Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to Report by Exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept, by the Parent Company, 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;

Nicola Quayle (Senior Statutory Auditor) For and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants 8 Princes Parade Liverpool L3 1QH Date:

26 January 2016

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

GOVERNANCE

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

STRATEGIC REPORT

www.wynnstay.co.uk

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 October 2015

GOVERNANCE

2015 Note

£000

FINANCIAL STATEMENTS

£000

377,382

413,558

Cost of sales

(321,874)

(360,353)

Gross profit

55,508

53,205

(42,265)

(40,838)

(4,666)

(4,455)

476

588

payment costs and exceptional item

9,053

8,500

Intangible amortisation and share-based payments

(344)

(109)

Revenue

Manufacturing, distribution and selling costs

SHAREHOLDER INFORMATION

2014 £000

Administrative expenses Other operating income

Group operating profit before intangible amortisation, share-based

Exceptional item

(319)

Group operating profit

8,390

8,391

Interest income

Interest expense

(290)

52 (240)

(378)

187

(108)

(326)

Share of profits/losses in associates and joint ventures 245

accounted for using the equity method Share of tax incurred by associates and joint ventures

(58)

Profit before taxation

536 428

8,337

8,493 (1,796)

Taxation

(1,667)

Profit for the year

6,670

6,697

Earnings per 25p share before exceptional item

36.32p

35.28p

Diluted earnings per 25p share before exceptional item

35.91p

34.63p

Earnings per 25p share Diluted earnings per 25p share

34.66p

35.28p

34.27p

34.63p

All of the above are derived from continuing operations. The notes on pages 41 to 71 form part of these financial statements. There was no other comprehensive income during the current and prior years.

Registered number 2704051

Group

Note

2015

2014

Company 2015

£000

18,155

17,209

2014

Assets Non-current assets Goodwill

Investment property

2,372

Property, plant and equipment

19,424

18,289

7,984

8,258

Investments in subsidiaries

18,182

Investments accounted for using equity method

3,680

3,643

599

749

Intangibles

124

43,755

39,230

29,137

27,189

Current assets Inventories

31,694

29,758

Trade and other receivables

48,607

48,749

32,578

29,896

Held for sale assets

2,372

2,802

Financial assets

- loan to joint venture

Cash and cash equivalents

Total assets

9,750

8,990

92,853

92,671

35,381

35,082

136,608

131,901

64,518

62,271

Liabilities Current liabilities Financial liabilities - borrowings

(3,643)

(3,938)

(2,788)

(2,600)

Trade and other payables

(44,739)

(47,088)

(2,184)

(3,167)

Current tax liabilities

(861)

(678)

(18)

(13)

(49,243)

(51,704)

(4,990)

(5,780)

43,610

40,967

30,391

29,302

Net current assets Non-current liabilities Financial liabilities – borrowings

(3,972)

(2,300)

(2,765)

(1,369)

Trade and other payables

(246)

(339)

(94)

Deferred tax liabilities

(292)

(327)

(4,510)

(2,966)

(2,765)

(1,463)

(53,753)

(54,670)

(7,755)

(7,243)

82,855

77,231

56,763

55,028

4,848

4,777

4,848

4,777

Share premium

28,439

27,633

28,439

27,633

Other reserves

2,890

2,796

2,721

2,627

Retained earnings

46,678

42,025

20,755

19,991

Total Equity

82,855

77,231

56,763

55,028

Total liabilities Net assets Equity Share capital

The financial statements were approved by the Board of Directors on 26 January 2016 and signed on its behalf.

The notes on pages 41 to 71 form part of these financial statements.

J J McCarthy – Director

B P Roberts - Director

FINANCIAL STATEMENTS

As at 31 October 2015

SHAREHOLDER INFORMATION

CONSOLIDATED AND COMPANY BALANCE SHEET

GOVERNANCE

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

STRATEGIC REPORT

www.wynnstay.co.uk

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 October 2015

Share capital £000

Share premium account £000

Other reserves £000

Retained earnings £000

Total £000

4,713

26,986

2,697

37,153

71,549

Profit for the year

6,697

Total comprehensive income for the year Transactions with owners of the Company, recognised directly in equity Shares issued during the year Dividends Equity settled share-based payment transactions Total contributions by and distributions to owners of the Company

6,697

64 64

647 647

99 99

(1,825) (1,825)

711 (1,825) 99 (1,015)

4,777

27,633

2,796

42,025

77,231

Profit for the year

6,670

Total comprehensive income for the year

6,670

71 71

806 806

(380) 140 334 94

(2,017) (2,017)

877 (380) 140 (2,017) 334 (1,046)

4,848

28,439

2,890

46,678

82,855

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

GOVERNANCE

Group At 1 November 2013

At 31 October 2014

Transactions with owners of the Company, recognised directly in equity Shares issued during the year Own shares acquired by ESOP trust 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 2015

There was no other comprehensive income during the current or prior year. The notes on pages 41 to 71 form part of these financial statements.

Share capital £000

Share premium account £000

Other reserves £000

Retained earnings £000

Total £000

4,713

26,986

2,528

21,635

55,862

Profit for the year

181

64 64

647 647

99 99

(1,825) (1,825)

711 (1,825) 99 (1,015)

4,777

27,633

2,627

19,991

55,028

Profit for the year

2,781

Total comprehensive income for the year

2,781

71 -

806 -

(380) 140

877 (380) 140

806

334 94

(2,017) (2,017)

(2,017) 334 (1,046)

4,848

28,439

2,721

20,755

56,763

Company At 1 November 2013

At 31 October 2014

There was no other comprehensive income during the current or prior year. The notes on pages 41 to 71 form part of these financial statements.

FINANCIAL STATEMENTS

For the year ended 31 October 2015

SHAREHOLDER INFORMATION

COMPANY STATEMENT OF CHANGES IN EQUITY

GOVERNANCE

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

STRATEGIC REPORT

www.wynnstay.co.uk

CONSOLIDATED AND COMPANY CASH FLOW STATEMENT For the year ended 31 October 2015

Group

GOVERNANCE

Note

FINANCIAL STATEMENTS

2014 £000

2015 £000

2014 £000

Cash flows from operating activities Cash generated from operations Interest received Interest paid Tax paid

8,609 50 (290) (1,519)

11,773 52 (378) (2,271)

(3,199) -

1,759 (26) (110)

6,850

9,176

(3,199)

1,623

Cash flows from investing activities Acquisitions in the year Proceeds from sale of property, plant and equipment Purchase of property, plant and equipment Proceeds on sale of investments Investments in assets held for resale Own shares acquired by ESOP trust Own shares disposed of by ESOP trust Dividends received

(3,287) 313 (1,836) 150 (380) 140 -

(120) 289 (2,450) 150 (85) -

119 (35) 150 (380) 140 2,750

132 (695) 150 (85) -

Net cash used by investing activities

(4,900)

(2,216)

2,744

(498)

Cash cash generated from financing activities Net proceeds from the issue of ordinary share capital Net proceeds from drawdown of new loans Finance lease principal repayments Repayment of borrowings Dividends paid to shareholders

877 3,500 (985) (1,967) (2,017)

711 272 (792) (2,054) (1,825)

877 3,500 (1,916) (2,017)

711 (646) (1,825)

Net cash generated from financing activities

(592)

(3,688)

444

(1,760)

Net increase/(decrease) 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

1,358 8,389 9,747

3,272 5,117 8,389

(11) 12 1

(635) 647 12

Net cash flows from operating activities

SHAREHOLDER INFORMATION

2015 £000

Company

The notes on pages 41 to 71 form part of these financial statements.

PRINCIPAL ACCOUNTING POLICIES

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. 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 25 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.

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. Group inter-company transactions are eliminated in full. Results of subsidiary undertakings acquired are included in the financial statements from the effective date of control. The net assets, both tangible and intangible, of acquired subsidiary undertakings are incorporated into the financial statements on the basis of their fair value as at the effective date of control. All business combinations are accounted for by applying the acquisition method. Subsidiaries are entities where the Group has the power to govern the financial and operating policies, generally accompanied by a share of more than 50% of the voting rights. Subsidiaries are consolidated from the date on which control is assumed by the Group and are included until the date the Group ceases to control them. 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 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. 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. Non-recurring items Non-recurring items that are material by size and/or by nature are disclosed on the face of the consolidated statement of comprehensive income and within a note to the financial statements as “exceptional items”. Management consider that the separate disclosure of non-recurring items helps provide a better indication of the Group’s underlying business performance. 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 ‘availablefor-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

GOVERNANCE

Revenue recognition

FINANCIAL STATEMENTS

Basis of preparation

The Group’s forecasts and projections, taking account of reasonable 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 four years, and overdraft facilities scheduled for review, as usual, in April 2016. 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.

SHAREHOLDER INFORMATION

The Group’s principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

GOVERNANCE

STRATEGIC REPORT

www.wynnstay.co.uk

PRINCIPAL ACCOUNTING POLICIES continued

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.

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

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. Trade payables Trade and other payables are recognised at fair value. 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 Groupâ&#x20AC;&#x2122;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. 42

Any incentives to enter into operating leases are recognised as a reduction of rental expense over the lease term on a straight-line basis. 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 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.

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

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

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.

Dividends

Employee share ownership trust

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.

The Company operates an employee share ownership trust. The assets, liabilities, income and cost of the ESOP are incorporated into the financial statements of the Group.

Share-based payments The Group issues equity-settled sharebased 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 nontransferability, exercise restrictions and behavioural considerations. The movements in respect of equity-settled share-based payments are recognised in other reserves. 43

Significant judgments, key assumptions and estimates Application of certain Group accounting policies requires management to make judgments, assumptions and estimates concerning the future as detailed below: 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. They continue to be held in accordance with the Group’s expected purchase, sale and/or usage requirements.

GOVERNANCE

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.

Investments

FINANCIAL STATEMENTS

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 amount. The 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.

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.

SHAREHOLDER INFORMATION

Impairment of assets

STRATEGIC REPORT

www.wynnstay.co.uk

PRINCIPAL ACCOUNTING POLICIES continued

GOVERNANCE

Valuation of share-based payments The fair value of share-based payments is determined using valuation models and is charged to the Group Statement of Comprehensive Income over the vesting period. Estimations of vesting and satisfaction of performance criteria are required to determine fair value.

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

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.

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.

Provision for impairment of trade receivables

The financial statements include a provision for impairment of inventories that is based on management’s estimation of recoverability. There is a risk that the provision will not match the inventories that ultimately prove to be impaired.

The financial statements include a provision for impairment of trade receivables that is based

Provision for impairment of inventories

New standards and interpretations The following new accounting standards, amendments and interpretations to published standards are not yet effective and have not been adopted early by the Group EU effective date for accounting periods commencing on or after

International Financial Reporting Standards (“IFRS”) Defined Benefit Plans: Employee Contributions – IAS 19

1 February 2015

Amendments to existing standards Certain elements of Annual Improvements to IFRSs 2010 - 2012 Cycle

1 February 2015

Certain elements of Annual Improvements to IFRSs 2011 - 2013 Cycle

1 January 2015

Accounting for acquisitions of interest in joint operations – amendment to IFRS11

1 January 2016

Clarification of Acceptable Methods of Depreciation and Amortisation – Amendments to IAS 16 and IAS 38

1 January 2016

Agriculture: Bearer Plants – Amendments to IAS 16 and IAS 41

1 January 2016

There have been a number of minor changes to standards which became applicable for the year ended 31 October 2015, none of which have been assessed as having a significant impact on the Group.

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 segments 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 segments, based on these reports, are Agriculture, Specialist Retail 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 Retail – Supplies of a wide range of specialist products to farmers, smallholders, and pet owners.

Other – Miscellaneous operations not classified as Agriculture or Specialist Retail.

The Board assesses the performance of the operating segments 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.

Inter-segmental transactions are entered into under the normal commercial terms and conditions that would be available to unrelated third parties.

The segment results for the year ended 31 October 2015 are as follows: Agriculture Year ended 31 October 2015 Revenue from external customers Segment result Share of results of associates and joint ventures before tax

Specialist Retail

Other

Total

£000

270,047

107,193

142

377,382

3,953

5,006

(250)

8,709

181

(12)

245

4,134

5,082

(262)

8,954 (319)

Exceptional item

Interest Income Interest expense

(290)

Profit before tax

8,395 (1,725)

Income taxes (includes tax of associate and joint ventures)

6,670

Profit for the year attributable to equity shareholders 30,843

Segment net assets

42,727

7,150

80,720 2,135

Corporate net cash (note 26)

82,855

Total net assets

FINANCIAL STATEMENTS

SHAREHOLDER INFORMATION

NOTES TO THE FINANCIAL STATEMENTS

GOVERNANCE

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

STRATEGIC REPORT

www.wynnstay.co.uk

NOTES TO THE FINANCIAL STATEMENTS continued

Segmental Reporting continued Agriculture

Specialist Retail

Other

Total

£000

308,711

104,617

230

413,558

3,476

4,798

117

8,391

326

133

536

3,802

4,875

250

8,927

GOVERNANCE

Year ended 31 October 2014 Revenue from external customers Segment result Share of results of associate and joint ventures before tax

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

Interest Income Interest expense

(378)

Profit before tax

8,601 (1,904)

Income taxes (includes tax of associate and joint ventures)

6,697

Profit for the year attributable to equity shareholders 29,449

Segment net assets

7,181

37,849

77,231

Total net assets

74,479 2,752

Corporate net cash (note 26)

Finance Costs 2015

2014

£000

Interest payable on borrowings

(176)

(271)

Interest payable on finance leases

(114)

(107)

Interest and similar charges payable

(290)

(378)

Interest expense:

Interest income Interest receivable Finance costs

52 (326)

2015

2014

£000

393

375

Other Operating Income

Rental income Profit on sale of Acocks Green Other operating income

50 (240)

136

476

588

2015

2014

£000

(319)

Exceptional item

Exceptional costs

Exceptional costs relate to the expenses associated with the acquisition and re-organisation of the business and certain trading assets of the Agricentre Farm Supplies.

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

Group Operating Profit

£000

25,428

23,816

- owned assets

1,968

1,945

- under finance

697

564

Amortisation of intangibles

(Profit) on disposal of fixed assets

(260)

(171)

Other operating lease rentals payable

3,243

2,858

Repairs and maintenance expenditure on plant, property and equipment

1,693

1,630

116

2015

2014

£000

Tax services

XBRL tagging

Trade receivables impairment

Services provided by the Group’s auditor During the year the Group obtained the following services from the Group’s auditor:

Audit services – statutory audit

Included in the Group Audit fee are fees of £5,000 (2014: £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 subsidiaries.

Share of Post-Tax Profits / (Loss) of Associates and Join Ventures

Share of post-tax profit in associates

2015

2014

£000

Share of post-tax profits/(loss) in joint ventures

148

343

Total share of post-tax profits / (loss) of associates and joint ventures

187

428

Staff Costs The aggregate payroll costs, including Directors’ emoluments, charged in the financial statements for the Group were as follows: 2015

2014

£000

Wages and salaries

22,262

21,041

Social security costs

2,044

1,887

Pension and other costs

788

789

Cost of share-based reward

334

25,428

23,816

FINANCIAL STATEMENTS

Depreciation of property, plant and equipment:

2014

£000

SHAREHOLDER INFORMATION

Staff costs

2015

GOVERNANCE

The following items have been included in arriving at operating profit:

STRATEGIC REPORT

www.wynnstay.co.uk

NOTES TO THE FINANCIAL STATEMENTS continued 8.

Staff Costs continued

GOVERNANCE

The average number of employees, including Directors’ employed by the Group during the year was as follows:

Administration

FINANCIAL STATEMENTS

No.

103

97 91

809

793

1,010

981

Sales, distribution and retail

SHAREHOLDER INFORMATION

2014

No. 98

Production

2015

Directors’ Remuneration Aggregate Directors’ remuneration

Directors’ emoluments

2015

2014

£000

638

621

Company contributions to money purchase pension schemes

Aggregate gains made on the exercise of Approved SAYE options

296

677

942

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. Benefits

Annual

2015

2014

Basic salary

in kind

bonuses

Total

£000

K R Greetham

142

224

216

B P Roberts

103

148

144

D A T Evans

134

121

Name of Director Executives

Non-Executives J J McCarthy J C Kendrick (retired 18 March 2014)

Lord Carlile CBE, QC (retired 24 March 2015)

P M Kirkham

H J Richards

146

638

621

463

Retirements benefits are accruing to the following number of Directors under:

Money purchase pension scheme

2015

2014

No.

£000

Contribution paid by the Group to money purchase pension schemes in respect of such Directors were: K R Greetham B P Roberts D A T Evans

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

£000

K R Greetham

136

B P Roberts

D A T Evans

10.

296

Taxation Analysis of tax charge in year

2015

2014

£000

1,736

1,839

(34)

(111)

1,702

1,728

(35)

Current tax - Continuing operations - Adjustments in respect of prior years Total current tax Deferred tax - Accelerated capital allowances - Effect of decrease of rate Total deferred tax Tax on profit on ordinary activities

(9)

(35)

1,667

1,796

Factors affecting tax charge for the year

The tax assessed for the year is lower than (2014: lower) the standard rate of corporation tax in the UK applicable to the Group 20.42% (2014: 21.83%), explained as follows: 2015

2014

£000

Profit on ordinary activities before tax

8,337

8,493

Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 20.42% (2014: 21.83%)

1,703

1,854

(38) 1 (35) 36

(93) 23 (111) 7 116

1,667

1,796

Effects of: Tax effect of share of profit of associates and joint ventures Expenses not deductible for tax purposes Adjustment to tax charge in respect of prior years Utilisation of tax losses Other items Total tax charge for year

Factors that may affect future tax charges

Reductions in the UK corporation tax rate from 23% to 21% (effective from 1 April 2014) and 20% (effective from 1 April 2015) were substantively enacted on 2 July 2013. In the Budget on 8 July 2015, the Chancellor announced additional planned reductions to 18% by 2020. This will reduce the company’s future current tax charge accordingly.

FINANCIAL STATEMENTS

2014

£000

SHAREHOLDER INFORMATION

2015

GOVERNANCE

Gains made on exercise of approved and unapproved share option schemes:

STRATEGIC REPORT

www.wynnstay.co.uk

NOTES TO THE FINANCIAL STATEMENTS continued

11.

Final dividend paid for prior year

GOVERNANCE FINANCIAL STATEMENTS SHAREHOLDER INFORMATION

Dividends

Interim dividend paid for current year

2015

2014

£000

1,300

1,177

717

648

2,017

1,825

Subsequent to the year end it has been recommended that a final dividend of 7.40p net per ordinary share (2014: 6.80p) be paid on 29 April 2016. Together with the interim dividend already paid on 30 October 2015 of 3.70p net per ordinary share (2014: 3.40p) this would result in a total dividend for the financial year of 11.10p net per ordinary share (2014: 10.20p). 12.

Earnings per share Basic earnings per share before exceptional item

Basic earnings per share

Diluted earnings per share before exceptional item

Diluted earnings per share

2015

2014

2015

2014

2015

2014

2015

2014

Earnings attributable to shareholders (£000)

6,989

6,697

6,670

6,697

6,989

6,697

6,670

6,697

Weighted average number of shares in issue during the year (number ‘000)

19,243

18,981

19,243

18,981

19,463

19,338

19,463

19,338

Earnings per ordinary 25p share (pence)

36.32

35.28

34.66

35.28

35.91

34.63

34.27

34.63

Basic earnings before exceptional item per 25p ordinary share is calculated by dividing the earnings with the full exceptional item added back, without any tax adjustment, attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year. Basic earnings per 25p ordinary share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year. For diluted earnings before exceptional item per share, the weighted average number of ordinary shares is adjusted to assume conversion of all dilutive potential ordinary shares (share options) taking into account their exercise price in comparison with the actual average share price during the year. 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) taking into account their exercise price in comparison with the actual average share price during the year.

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

13. Goodwill

At 31 October 2014 Additions (note 19)

18,846 946

19,792

At 31 October 2015

Aggregate impairment At 1 November 2013 and 31 October 2014 Impairment charge

1,637 -

At 31 October 2015

1,637

Net book value At 31 October 2015

18,155

At 31 October 2014

17,209

Company Cost At 1 November 2013 Transfer to subsidiary

7,554 (7,554)

At 31 October 2014 and 31 October 2015 Aggregate impairment

894 (894)

At 31 November 2013 Transferred to subsidiary At 31 October 2014 and 31 October 2015

Net book value At 31 October 2015

At 31 October 2014

During the previous year the goodwill was transferred to the trading subsidiary, Wynnstay (Agricultural Supplies) Limited as part of the hive down of the company’s trade and assets of the trading business of Wynnstay Group Plc.

FINANCIAL STATEMENTS

18,651 195

£000

SHAREHOLDER INFORMATION

Group Cost At 1 November 2013 Additions

GOVERNANCE

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.

STRATEGIC REPORT

www.wynnstay.co.uk

NOTES TO THE FINANCIAL STATEMENTS continued

13.

Goodwill continued

GOVERNANCE

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.

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

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 five 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 2015 and 2014 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 Retail sectors. The carrying amount of goodwill allocated to the Agriculture CGUs is £7,774,010 (2014: £7,681,510), and to Specialist Retail is £10,381,641 (2014: £9,527,640). The pre-tax discount rates used to calculate value in use range from between 8.3% to 10.3% (2014:10.4%) for Agriculture and 10% to 11% (2014:10.4%) for Specialist Retail. These discount rates are derived from the Group’s weighted average cost of capital adjusted for the specific risks relating to each operating segment. The forecasts are extrapolated based on estimated long term average growth rates of 2% - 3% (2014:0% - 3%) for both Agriculture and Specialist Retail. The directors have considered the sensitivity to key assumptions and are satisfied that there are no reasonably probable changes in key assumptions which would cause the carrying amount of a CGU to exceed its recoverable amount.

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

Intangible Assets £000

Group Cost

100

Balance as at 1 November 2014

Additions

GOVERNANCE

14.

145

At 31 October 2015 Balance as at 1 November 2014

Amortisation charge for the period

At 31 October 2015

Net book value 124

At 31 October 2015

During the year the fair value of intangibles of £45,000 were identified in the Acquisition of Agricentre Farm Supplies.

Investment Property £000

Group Fair value

At 1 November 2014 Transferred from assets held for resale

2,372

At 31 October 2015

2,372

Company -

At 1 November 2014 Transferred from assets held for resale

2,372

At 31 October 2015

2,372

Investment property relates to a redeveloped property in Pwllheli, which has been reclassified to investment property as no realistic offers have been received . 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 £202,500.

SHAREHOLDER INFORMATION

At 31 October 2014

15.

FINANCIAL STATEMENTS

Aggregate amortisation

STRATEGIC REPORT

www.wynnstay.co.uk

NOTES TO THE FINANCIAL STATEMENTS continued

16.

Property, Plant and Equipment

GOVERNANCE

Plant,

Company

Additions Reclassification FINANCIAL STATEMENTS

Freehold land

machinery

Motor

land and

and

and office

vehicles

buildings

equipment

£000

1,432

12,071

18,612

6,687

38,802 3,055

Total

Cost At 1 November 2013

Disposals At 31 October 2014

926

1,256

834

(362)

362

(100)

(24)

(705)

(829)

1,109

13,259

19,844

6,816

41,028

Additions 35

2,279

1,503

3,853

(76)

(128)

(867)

(1,071)

1,145

13,218

21,995

7,452

43,810

529

3,743

12,490

4,179

20,941

279

1,135

1,029

2,509

(76)

(25)

(20)

(666)

(711)

At 31 October 2014

519

4,073

13,605

4,542

22,739

Charge for the year

302

1,209

1,097

2,665

(51)

(188)

(779)

(1,018)

576

4,324

14,626

4,860

24,386

At 31 October 2015

569

8,894

7,369

2,592

19,424

At 31 October 2014

590

9,186

6,239

2,274

18,289

Disposals At 31 October 2015

SHAREHOLDER INFORMATION

Leasehold

Depreciation At 1 November 2013 Charge for the year Reclassification On disposals

On disposals At 31 October 2015 Net book value

The net book value of plant and machinery and motor vehicles above includes amounts of £2,377,614 (2014: £1,655,446) representing assets held under finance leases.

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

Plant, Freehold

machinery

Motor

land and

and office

vehicles

buildings

equipment

£000

11,437

11,955

5,975

29,367

Additions

695

Disposals

(100)

(11,955)

(5,975)

(17,930)

12,032

At 1 November 2013

Transfer to subsidiary on hive down At 31 October 2014

Additions

Disposals

(76)

11,991

At 31 October 2015

35 (76)

Depreciation 3,529

8,959

3,755

16,243

Charge for the year

270

On disposals

(25)

(8,959)

(3,755)

(12,714)

3,774

Charge for the year

284

On disposals

(51)

4,007

At 31 October 2015

7,984

At 31 October 2014

8,258

At 1 November 2013

Transfer to subsidiary on hive down At 31 October 2014

At 31 October 2015 Net book value

The net book value of plant and machinery and motor vehicles above includes amounts of £nil (2014: £nil) representing assets held under finance leases.

GOVERNANCE FINANCIAL STATEMENTS

Cost

SHAREHOLDER INFORMATION

Company

Total

STRATEGIC REPORT

www.wynnstay.co.uk

NOTES TO THE FINANCIAL STATEMENTS continued

17.

Fixed Asset Investments Joint

Associates

GOVERNANCE

ventures

FINANCIAL STATEMENTS

Total

investments £000

£000

2,682

597

182

3,461

343

428

Disposal

(150)

At 31 October 2014

2,875

682

182

3,739

148

187

(150)

2,873

721

182

3,776

At 31 October 2015

2,804

721

155

3,680

At 31 October 2014

2,806

682

155

3,643

Share in group

Joint

Associates

Other

Total

undertakings

ventures

Group Cost At 1 November 2013 Share of profit /(loss) or Investment income

Share of profit /(loss) or Investment income Disposal At 31 October 2015 Provision for impairment At 1 November 2013, 31 October 2014 and 31 October 2015

SHAREHOLDER INFORMATION

Other unlisted

Net Book Value

unlisted investments

£000

18,182

920

176

19,326

Disposal

(150)

Transferred to subsidiary company on hive down

(176)

18,182

770

19,000

(150)

18,182

620

18,850

At 1 November 2013

Transferred to subsidiary company on hive down

(27)

At 31 October 2014 and 31 October 2015

18,182

551

18,781

18,182

701

18,931

Company Cost At 1 November 2013

At 31 October 2014 Disposal At 31 October 2015 Provision for impairment

Net book value At 31 October 2015 At 31 October 2014

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

Principal Subsidiaries, Joint Venture and Associates

Subsidiary undertakings represent the following limited companies, all of which were incorporated in the UK:

Nature of business

Glasson Group (Lancaster) Limited

100

Holding company

Glasson Grain Limited

100

Feed and Fertiliser merchant

Just for Pets Limited

100

Pet products retailer

Wynnstay (Agricultural Supplies) Limited

100

Agricultural merchant

Woodheads Seeds Limited

100

Seed merchants

Youngs Animal Feeds Limited

100

Equine and pet products distributor

Grainlink Limited

100

Grain merchant

Wrekin Grain Limited

100

Dormant company

Eifionydd Farmers Limited

100

Dormant company

Glasson Shipping Services Limited

100

Dormant company

Glasson Fertilisers Limited

100

Dormant company

Westhope Livestock Supplies Limited

100

Dormant company

MVZ Farm Supplies Limited

100

Dormant company

Shropshire Grain Limited

100

Dormant company

Welsh Feed Producers Limited

100

Dormant company

Wynnstay Country Farmstock Limited

100

Dormant company

Petssesories Limited

100

Dormant company

C & M Transport Limited

100

Dormant company

PSB (Country Supplies) Limited

100

Non trading company

Banbury Farm and General Supplies Limited

100

Dormant company

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 Shipping Services Limited Glasson Grain Limited Glasson Fertilisers Limited Youngs Animal Feeds Limited

Eifionydd Farmers

Just for Pets Limited

Petssesories Limited

FINANCIAL STATEMENTS

Company name

Proportion of shares held (Ordinary) %

GOVERNANCE

Principal subsidiaries

SHAREHOLDER INFORMATION

18.

STRATEGIC REPORT

www.wynnstay.co.uk

NOTES TO THE FINANCIAL STATEMENTS continued

18.

Principal Subsidiaries, Joint Venture and Associates continued

GOVERNANCE

Principal joint ventures

The above interests in joint ventures are represented by the following limited companies, all of which were incorporated in the UK:

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

Company name

Interest

Nature of business

Wyro Developments Limited

50%- Ordinary

Property development

Bibby Agriculture Limited

50% - Ordinary Distribution of compound animal feeds 50% - Preference

Geogen Technologies Limited

50% - Ordinary

Supplier and installation of renewable energy

Total Angling Limited

50% - Ordinary

Retailer of angling products

Fertlink Limited

50% Ordinary

Fertiliser blending

Investments in joint ventures listed above are held directly by Wynnstay Group Plc, with the exception of Fertlink Limited which is a joint venture with Glasson Grain Limited. Joint ventures are accounted for using the equity method. The aggregate amounts of the Group’s share of joint venture assets and liabilities are: 2015

2014

£000

Non-current assets

1,095

1,019

Current assets

7,286

5,513

(5,805)

(4,081)

Current liabilities Non-current liabilities

(121)

(95)

Net assets

2,455

2,356

The aggregate amount of the Group’s share of joint venture revenue and expenses not included in these financial statements are: 2015

2014

£000

Revenue

28,266

31,251

Expenses

(28,069)

(30,823)

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

2015

2014

£000

197

428

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

Principal associates

Company name

Interest

Nature of Business

Wynnstay Fuels Limited

40%

Supply of petroleum products

Celtic Pride Limited

33.3%

Production and marketing of premium welsh beef

GOVERNANCE

The above interests in associates is represented by the following limited company, which was incorporated in the UK:

Total liabilities Net assets Group’s share of associate net assets Total revenue Profit for the period Group’s share of associate profit before tax

2014

£000

3,533

3,388

(1,747)

(1,806)

1,786

1,582

707

633

20,583

19,809

121

270

108

For the purposes of consolidation, the following periods of account have been used for each of the associated undertakings and joint ventures: Company name

Accounting period

Wyro Developments Limited Wynnstay Fuels Limited Bibby Agriculture Limited Fertlink Limited Geogen Technologies Limited Total Angling Limited Celtic Pride Limited

31 October 2015 31 December 2014 31 August 2015 31 October 2015 31 October 2015 31 October 2015 31 January 2015

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. Trading transactions

During the year, the Group and Company entered into the following trading transactions with subsidiaries, associates and joint ventures: Company

Transactions and balances with subsidiaries

2015

2014

£000

Amounts due from subsidiary undertakings: Trade receivables

Amounts due to subsidiary undertakings: Trade payables

Transactions reported in the statement of comprehensive income: Revenue Purchases

SHAREHOLDER INFORMATION

Total assets

2015

FINANCIAL STATEMENTS

Summarised financial information in respect of the Group’s associate is as follows:

STRATEGIC REPORT

www.wynnstay.co.uk

NOTES TO THE FINANCIAL STATEMENTS continued 18.

Principal Subsidiaries, Joint Venture and Associates continued

GOVERNANCE

Group 2015 £000

Transactions and balances with associates

FINANCIAL STATEMENTS

2014 £000

2015 £000

2014 £000

Amounts due from associate undertakings: Trade receivables

Amounts due to associate undertakings: Trade payables

SHAREHOLDER INFORMATION

Company

Transactions reported in the statement of comprehensive income: Revenue Purchases

104

22 356

35 545

Group 2015 £000

Transactions and balances with joint ventures

Company 2014 £000

2014 £000

2015 £000

Amounts due from joint ventures: Trade receivables Loans

2,802

4,181 2,802 6,983

2,082 2,802 4,884

338 2,802 3,140

369 369

290 290

38 38

19,593 7,675 60

24,919 14,507 67

4,757 215 -

2,802

Amounts due to joint ventures: Trade payables

Transactions reported in the statement of comprehensive income: Revenue Purchases Income received

Sales of goods to related parties were made at the Group’s usual list prices, less average discounts. Purchases were made at market price discounted to reflect the quantity of goods purchased and relationships between the parties.

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

19.

Business Combinations

Details of the trade, asset values acquired and the consideration are given below, together with details of historic revenue and operating profits, based on the latest practical available information: Horti- Stores Date of acquisition

Ross Feed S. Jones & Sons

Agricentre

Total

1 Sept 2015

12 Jan 2015

21 Sept 2015

30 Oct 2015

Fair Value

£000

571

590 2,223

Fair value of net assets on acquisition: Plant and equipment Inventories

116

1,996

Other intangible assets

Other current liabilities

(324)

312

455

946

Total fair value of net assets on acquisition

147

447

143

2,743

3,480

Net cash paid on completion and asset confirmation

101

387

106

2,693

3,287

193

147

447

143

2,743

3,480

Total anticipated goodwill

Fair value of contingent consideration Total fair value of consideration Historical annual revenue

295

Historical operating profit

Notes:

- For the financial year to 31 March 2015

- For the financial year to 30 June 2014

- For the financial year to 31 March 2014

- For the financial year to 31 December 2014

1,044

1,168

17,067

19,574

123

377

599

All these transactions extend the Group’s geographic trading area and farmer customer base, as well as adding additional outlets to the Group’s Country Store chain. Payment of the contingent consideration for each transaction is dependent on the future financial performance of that respective acquired business, with the maximum and total anticipated contingent payment in each case being in line with the fair value that the Directors consider to be the most likely outcome. 61

FINANCIAL STATEMENTS

On the 1 September 2015 Glasson Grain Limited completed the purchase of certain assets of Horti-Stores Limited, a supplier of packaging materials to the horticultural and agricultural industries based in Skelmersdale, West Lancashire.

SHAREHOLDER INFORMATION

On the 12 January 2015, Wynnstay (Agricultural Supplies) Limited completed the purchase of certain assets of Ross Feed Limited, a supplier of agricultural and hardware goods based in Ross on Wye, Herefordshire. On the 21 September 2015 the assets of S. Jones & Sons were acquired, which is an agricultural merchant based in Llanon, Ceredigion. Finally on the 30 October 2015 Wynnstay (Agricultural Supplies) Limited purchased the trade and assets of the West Country based Agricentre farm supplies business from T.G. Jeary Limited.

GOVERNANCE

During the year the Wynnstay (Agricultural Supplies) Limited completed three acquisitions and Glasson Grain Limited completed one acquisition all structured as purchases of goodwill and other certain assets.

STRATEGIC REPORT

www.wynnstay.co.uk

NOTES TO THE FINANCIAL STATEMENTS continued

20.

Inventories

FINANCIAL STATEMENTS

GOVERNANCE

Group

Company

2015 £000

2014 £000

2015 £000

3,388 28,306

6,584 23,174

31,694

29,758

2014 £000

Raw materials and consumables Finished goods and goods for resale

21.

Trade and Other Receivables Group 2015 £000

Company 2014 £000

2015 £000

2014 £000

SHAREHOLDER INFORMATION

Current Trade receivables Amounts owed by group undertakings Other receivables Fair value of derivatives

45,834 2,682 91

45,876 2,598 275

32,578 -

29,891 5 -

48,607

48,749

32,578

29,896

Trade receivables are stated after a provision for impairment of £835,536 (2014: £910,695) (Company £ nil (2014: £nil)). 22. Held for Sales Assets Held for sale assets relate to a property formerly included within fixed assets but now held for resale. Group

Company

2015 £000

2014 £000

2015 £000

2,372 (2,372) -

2,372 2,372

2,372 (2,372) -

2014 £000

Held for sale assets as at 1 November 2014 Transferred to Investment property

2,372 2,372

The assets previously categorised as ‘Held for sale assets’ representing a re-developed property in Pwllheli have been reclassified to investment property as no realistic offers have been received. The Group continues to actively market the property.

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

Trade and Other Payables Company

2015 £000

2014 £000

2015 £000

39,310 650 1,537 2,893 244 105

42,160 783 674 2,694 365 412

2,070 63 51 -

2,783 45 339 -

44,739

47,088

2,184

3,167

2014 £000

Trade payables Amounts owed to group undertakings Other taxes and social security Other payables Accruals and deferred income Contingent consideration Fair value of derivatives

Included within the Company’s trade payables are £nil (2014: £nil) of inter-company trade creditors. Non-current

Group

Company

2014 £000

2015 £000

2014 £000

2015 £000

146 25 75

166 29 144

246

339

Other payables Government grants Contingent consideration

24.

Current Tax Liabilities Group

Company

2015 £000

2014 £000

2015 £000

861

678

861

678

2014 £000

Current tax liabilities

GOVERNANCE

Group

FINANCIAL STATEMENTS

Current

SHAREHOLDER INFORMATION

23.

STRATEGIC REPORT

www.wynnstay.co.uk

NOTES TO THE FINANCIAL STATEMENTS continued

25.

Cash and Cash Equivalents and Bank Overdrafts

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

GOVERNANCE

Group

Company

2015 £000

2014 £000

2015 £000

Cash and cash equivalents per balance sheet Bank overdrafts

9,750 (3)

8,990 (601)

1 -

12 -

Cash and cash equivalents per cash flow statement

9,747

8,389

2014 £000

26.

Financial Liabilities - Borrowings Current

Group 2015 £000

Company 2014 £000

2015 £000

2014 £000

Bank loans and overdrafts due within one year or on demand: Secured overdrafts Secured loans

3 2,162

601 1,979

2,105

1,927

Loan capital (unsecured) Other loanstock (unsecured) Net obligations under finance leases

2,165 667 16 795

2,580 656 16 686

2,105 666 17 -

1,927 656 17 -

3,643

3,938

2,788

2,600

Non-current

Group 2015 £000

Company 2014 £000

2015 £000

2014 £000

Bank loans: Secured

2,888

1,549

2,765

1,369

Net obligations under finance leases

2,888 1,084

1,549 751

2,765 -

1,369 -

3,972

2,300

2,765

1,369

After 31 August 2006 the loanstock is redeemable at par at the option of the Company. Interest at 1.5% per annum is payable to the holders of the convertible unsecured loanstock.

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

Non-current

Balance outstanding 2014

Interest rate

Maturity date

Barclays Bank Plc

£53,774

£314,772

£944,197

2.00% over base rate

May 2016

HSBC Bank Plc

£52,389

£671,623

£1,277,277

1.80% over base rate

Nov 2016

HSBC Bank Plc

£57,730

£383,572

£1,076,336

2.00% over base rate

June 2016

£5,111

£183,759

£231,433

4.75% per annum

Dec 2018

£68,811

£3,500,000

Lombard Bank Loan HSBC Bank Plc

0.75% over base rate

March 2020

These loans are secured by legal charges over certain of the Company’s freehold property. Bank loans and overdrafts include overdrafts totalling £222,233 (2014:£600,271) relating to subsidiary companies, which are secured by debentures over the assets of those companies. Finance lease obligations are secured on the assets to which they relate. Group 2015 £000

Company 2014 £000

2015 £000

2014 £000

Borrowings are repayable as follows: 3,643 1,473 2,499 -

3,938 1,791 509 -

2,788 848 1,917 -

2,600 1,369 -

7,615

6,238

5,553

3,969

795 572 512 -

686 419 332 -

1,879

1,437

Borrowings as above Cash and cash equivalents

7,615 (9,750)

6,238 (8,990)

5,553 (1)

3,969 (12)

Net (cash)/debt

(2,135)

(2,752)

5,552

3,957

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:

FINANCIAL STATEMENTS

Balance outstanding 2015

SHAREHOLDER INFORMATION

Monthly instalment

GOVERNANCE

The bank loans include term loans repayable by instalments as follows:

STRATEGIC REPORT

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NOTES TO THE FINANCIAL STATEMENTS continued

27.

Financial Instruments

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

GOVERNANCE

Fair values of non-derivative financial assets and financial liabilities

The fair value of current assets and current liabilities are assumed to approximate to book value due to the short-term maturity of these instruments. Where market values are not available, fair values of financial assets and financial liabilities have been calculated by discounting expected future cash flows at prevailing interest rates. The fair value of current assets and current liabilities are assumed to approximate to the book value due to the short term maturity of the instruments. The fair value of the non current borrowings have been assessed and are not deemed to differ materially from book value. Fair values of derivative financial assets and financial liabilities

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 Group’s derivative financial assets and liabilities that are measured at fair value at 31 October 2015, have been considered against the following hierarchical criteria to assess their classification level: - 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 - inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3). All derivative financial assets and liabilities are classified as Level 1 instruments as they are valued at quoted market prices. 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. • 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 £2,767,761 (2014: £3,655,694).

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

•

Commodity price risk

•

Credit risk

Group

GOVERNANCE FINANCIAL STATEMENTS

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. Included within the Company trade receivables are £nil (2014: £nil) of inter-company trade debtors. At 31 October 2015 trade receivables of £8,790,230 (2014 £7,392,623), (Company £Nil (2014:£nil)) were past due but were not impaired. These relate to a number of independent customers for whom their is no recent history of default the aging analysis is as follows:

SHAREHOLDER INFORMATION

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 appraised 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.

Company

2015 £000

2014 £000

2015 £000

Up to 3 Months

7,557

5,954

Over three months

1,233

1,439

2014 £000

•

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 facilities in place to allow flexibility in managing liquidity. The effective interest rates at the balance sheet dates were as follows: Group

Company

2015 £000

2014 £000

2015 £000

1.25%

2.0%

1.25%

2.0%

Bank borrowings

1.7%

2.4%

1.6%

2.4%

Loan capital

1.5%

Finance leases

6.1%

5.9%

2014 £000

Bank overdraft

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NOTES TO THE FINANCIAL STATEMENTS continued

28. Deferred Taxation

GOVERNANCE

Group 2015 £000

2014 £000

2015 £000

327 (35) 292

259 68 327

2014 £000

At 1 November Transferred to subsidiary company Charge for the year At 31 October

FINANCIAL STATEMENTS SHAREHOLDER INFORMATION

Company

105 (105) -

The provision for deferred taxation is made up as follows: Group

Company

2015 £000

2014 £000

2015 £000

292

327

2014 £000

Accelerated capital allowances

29.

Share Capital 2015 No. of shares 000

2014

£000

No. of shares 000

£000

40,000

10,000

40,000

10,000

19,391

4,848

19,108

4,777

Authorised Ordinary shares of 25p each

Allotted, called up and fully paid Ordinary shares of 25p each

During the year 81,733 shares (2014: 62,970) were issued with an aggregate nominal value of £20,433 (2014: £15,743) and were fully paid up for equivalent cash of £430,808 (2014: £390,418) to shareholders exercising their right to receive dividends under the Company’s scrip dividend scheme. A total of 200,812 (2014:195,282) shares with an aggregate nominal value of £50,203 (2014: £48,821) were issued for a cash value of £446,868 (2014: £320,511) to relevant holders exercising options in the Company. No other shares were issued for cash in this financial year (2014: Nil).

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

30.

Share-based Payments As at 1 November 2014

(Exercised)/ Issued in year

Lapsed in year

As at 31 October 2015

42,350 40,000 373,000 100,000

(15,396)

(154) (8,000) -

26,800 40,000 365,000 100,000

555,350

(15,396)

(8,154)

531,800

185,416 140,487 350,031 675,934 1,231,284

(185,416) (185,416) (200,812)

(5,291) (28,438) (33,729) (41,883)

135,196 321,593 456,789 988,589

Discretionary Share Option Schemes Granted August 2008 Granted April 2012 Granted October 2014 Granted October 2014

2.5300 3.7500 5.4750 0.2500

Sept 2013 - Aug 2018 April 2015 - March 2022 Oct 2017 - Oct 2024 Oct 2017 - Mar 2018

Savings Related Option Schemes Granted March 2010 Granted August 2012 Granted July 2014

2.2000 3.4000 5.0600

April 2015 - Sept 2015 Sept 2017 - Feb 2018 Aug 2019 - Jan 2020

During the year 15,396 (2014: 184,779) Discretionary Share Options and 185,416 (2014: 10,503) Savings Related Options were exercised and satisfied by the allotment of new shares by the Company. The change in the number of other 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 £333,908 (2014: £99,269) 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 Number of options exercisable

2015

2014

£5.17 £5.44 £4.08 19.95% 1.99 years 1,147,205 0.50% 66,800

£5.47 £6.16 £4.10 9.43% 2.92 years 1,188,934 0.50% 42,350

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 year end. 31. 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 £nil (2014: £nil).

FINANCIAL STATEMENTS

Exercisable by

SHAREHOLDER INFORMATION

Exercise Price per share £

GOVERNANCE

The following options were exercised, lapsed and outstanding at the year end:

STRATEGIC REPORT

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NOTES TO THE FINANCIAL STATEMENTS continued

32. Capital Commitments At 31 October 2015 the Group and Company had capital commitments as follows:

FINANCIAL STATEMENTS

GOVERNANCE

Group

Company

2015 £000

2014 £000

2015 £000

2014 £000

Contracts placed for future capital expenditure not provided in the financial statements

33.

377

598

Operating Lease Commitments Non-cancellable operating leases are payable as follows: Land and buildings 2015 £000

Other 2014 £000

2015 £000

2014 £000

SHAREHOLDER INFORMATION

34.

Group Expiry date: Within 1 year Between 2 and 5 years Over 5 years

3,167 8,805 6,746

2,720 7,354 4,520

98 191 -

79 167 -

Company Expiry date: Within 1 year Between 2 and 5 years Over 5 years

423 665 274

781 1,836 917

Group Financial Commitments The Group has guaranteed the overdrafts of one of its associates to a maximum of £125,000 (2014: £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 £787,649 (2014: £789,126). The liability owed to the pension schemes at 31 October 2015 was £73,357 (2014: £74,623).

36.

Employee Share Ownership Trust The Company operates an employee share ownership trust (ESOP). As at 31 October 2015, 52,256 ordinary 25p shares (2014: 10,494 ordinary 25p shares) were held by the trust with an aggregate market value of £270,425 (2014: £57,402). The assets, liabilities, income and costs of the ESOP are incorporated into the financial statements of the Group.

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

37. Related Party Transactions

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 8).

2015 £000

2014 £000

691 263,647 296 368,224 2,946,862 3,579,720

849 281,696 385 298,262 2,093,523 2,674,715

45 53,779 43 33,335 447,084 534,286

31 October 2014 £000

J J McCarthy Lord Carlile CBE QC (retired 24 March 2015) K R Greetham D A T Evans B P Roberts P M Kirkham H J Richards

23 31,720 78 33,327 395,402 460,550

38. Cash Generated From/ (Used In) Operations Group

Company

2015 £000

2014 £000

2015 £000

6,670

6,697

2,781

181

1,667 2,665 10 (260) (50) 290 (187) 334

1,796 2,509 10 (171) (52) 378 (428) 99

5 (2,750) 284 (94) 334

123 270 (57) 26 99

287 143 (2,960)

265 844 2,522 (2,696)

(2,682) (1,077)

265 1,625 (773)

8,609

11,773

(3,199)

1,759

2014 £000

Profit for the year Adjustments for: Tax Dividend received Depreciation of tangible fixed assets Amortisation of other intangible fixed assets Profit on disposal of property, plant and equipment Interest income Interest expense Share of results of joint ventures and associate Share based payments Changes in working capital (excluding effects of acquisitions and disposals of subsidiaries): Decrease in short term loan to joint venture Decrease inventories Decrease/(increase) in trade and other receivables (Decrease) in payables Cash generated from/ (used in) operations

FINANCIAL STATEMENTS

Balance Outstanding 31 October 2015 £000

SHAREHOLDER INFORMATION

Total Sales

GOVERNANCE

During the year trading took place between the Group and a number of its Directors. All transactions were carried out on an arm’s length basis.

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

GOVERNANCE

STRATEGIC REPORT

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NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the twenty fourth Annual General Meeting (the “Meeting”) of Wynnstay Group plc (the “Company”) will be held at The Sovereign Suite, Shrewsbury Town Football Club, Oteley Road, Shrewsbury, Shropshire, SY2 6ST on 22 March, 2016 at 11.45 am to transact the following business:

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 80 of the Companies Act 1985 or Section 551 of the Companies Act 2006, but without prejudice to the allotment of any relevant securities already made or to be made pursuant to such authorities.

Ordinary Business 1. To receive and adopt the Company’s annual accounts for the financial year ended 31 October 2015 together with the Directors’ Report and Auditors’ Report on those accounts. 2. To declare a final dividend for the year ended 31 October 2015. 3. To re-appoint the following Director who retires by rotation under Article 91:

Philip Michael Kirkham

4. To re-appoint the following Director who retires by rotation under Article 91:

7. That, subject to passing Resolution 8 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:-

Special Business

(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

To consider and, if thought fit, pass the following Resolutions which will be proposed as Special Resolutions:

(b) otherwise than pursuant to subparagraph (a) above up to an aggregate nominal amount of £450,000,

6. 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

Kenneth Richard Greetham

5. To re-appoint KPMG 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.

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 many, 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.

8. 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 2.6% 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

Paul Roberts 26 January 2016

Company Secretary Wynnstay Group plc Eagle House Llansantffraid-ym-Mechain Powys SY22 6AQ

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 Companies 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. Authority to continue to offer Scrip Dividends

Under the Articles of Association of the Company, the Directors may with the authority of shareholders offer the opportunity to elect to receive scrip dividends in the form of new Ordinary Shares instead of cash. Ordinary resolution 7 is put forward to allow the continuation of such shareholder authority following the expiry of a routine period, and simply grants approval for the continuation of the existing scheme for a further five years. The Board have no plans to alter or amend the terms or other conditions of the operation of the existing mandate based scheme and all existing instructions would be honoured on the approval of this resolution.

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.

5. Documents on display

Copies of necessary documents will be available for at least 15 minutes prior to the Meeting and during the Meeting.

6. 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 Companyâ&#x20AC;&#x2122;s external registrar at the following address: Neville Registrars, 18 Laurel Lane, Halesowen, West Midlands, B63 3DA (Tel. 0121 585 1131)

3. Authority to allot shares

Special resolutions 8 and 9 are put forward to give the directors authority to allot new shares (including to those shareholders exercising their preference to 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.

GOVERNANCE

4. Authority to purchase shares

FINANCIAL STATEMENTS

1. Appointment of proxies

SHAREHOLDER INFORMATION

NOTES TO THE NOTICE OF ANNUAL GENERAL MEETING

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

STRATEGIC REPORT

www.wynnstay.co.uk

FINANCIAL CALENDAR

Announcement of 2015 results

GOVERNANCE

27 January 2016 22 March 2016

Annual General Meeting

29 March 2016

Dividend Record Date

29 April 2016

Payment of Final 2015 Dividends

June 2016

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

Announcement of 2016 Interim Results

SHAREHOLDER INFORMATION

FINANCIAL STATEMENTS

GOVERNANCE

NOTES

STRATEGIC REPORT

Wynnstay Group Plc ANNUAL REPORT 2015

Wynnstay Group Plc Eagle House, Llansantffraid, Powys, SY22 6AQ

01691 828512