Wynnstay Group – Earnings history and a description of the business

PUBLISHED: Jan 13 2020 @ 04:24 | Comments (0) |

Wynnstay Group’s (LSE:WYN) shares have suffered over the last three years because farmers have little clarity over what type of business environment they will be trading in a few months down the line. The company was set up 100 years ago as a farmer’s cooperative to supply items such as feeds, fertilisers and seeds. It still has 3,000 farmer shareholders, but is now on AIM.

Over half of its profit comes from 56 country supply stores which carry 25,000 product lines to suit not just farmers but also horse enthusiasts, small holders, dog-owners, etc.

In March 2019 the company issued a profit warning saying that for the year to the end of October it is “prudent to anticipate that the full year outturn is likely to be substantially below current market expectations”, so investors are braced for some poor news when the annual results to 31^st October 2019 are reported, due in a fortnight.

The half-year results to the end of April came with some fearful remarks, “more cautious spending patterns by farmers in reaction to a softening in farmgate prices and Brexit uncertainties, created challenges for the agricultural supplies sector… it is clear that infrastructure spending has been delayed by many farmers while the outcome of Brexit remains unclear.”

If Brexit disaster is avoided we have here a well-managed company with a sound business strategy, loyal customers, diversified product line/customer groups, strong finances and a history of good earnings relative to the current share price.

Cyclically adjusted price earnings ratio

Share price 305p – 317p. Market capitalisation 19.7m shares x £3.17 = £62.4m.

	2018	2017	2016	2015	2014
EPS – basic	39.1	-1.4	30.0	34.7	35.3
EPS – underlying	39.1	32.3	30.0	34.7	35.3
Dividend, p	13.4	12.6	12.0	11.1	10.2
Turnover, £m	463	391	368	377	413
Net profit, £m	7.7	-0.3	5.8	6.7	6.7
Shares, m	19.7	19.5	19.4	19.2	19.0

	2013	2012	2011	2010	2009
EPS – basic	36.4	35.0	30.2	27.4	26.4
EPS – underlying	36.4	35.0	30.2	27.4	26.4
Dividends	9.3	8.5	7.8	7.1	6.5
Turnover	413	376	346	244	215
Net profit, £m	6.2	5.8	5.0	4.2	3.8
Shares, m	17.0	16.7	16.5	15.4	14.5

(The loss in 2017 was due to the selling of Just for Pets for peanuts – a loss on discontinued business of 33.72p per share.)

(Wynnstay operates a scrip divided option policy which explains the rise in numbers of shares over time)

Average basic EPS over 10 years: 29.3p

Cyclically adjusted price earnings ratio: 317p/29.3p = 10.8. The market average CAPE is around 15-16 and so Wynnstay is current trading significantly below that.

Note the growth rate of the dividend averaging 8.3% per year, resulting

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