Wynnstay Group

STRONG BUY

21/01/2010 James Crux

Wynnstay, the Wales-based maker and supplier of agricultural products and services, is showcasing its resilience throughout this recession.

Guided by enthusiastic CEO Ken Greetham, the company's diverse activities span arable and animal feed supplies as well as specialist retail chains offering products for farmers and other rural dwellers and also pet products. Despite tougher trading conditions in the year to October, with reduced demand for feed and fertiliser reflecting wider industry trends, Wynnstay still wowed investors with robust financials. Pre-tax profits were maintained at £5.2m, despite lower sales of £215m (2008: £234.6m) and underpinned by tight cash management, a final dividend of 4.3p was declared, taking the annual total to 6.5p (2008: 6p).

Greetham attributed this dependable performance to 'our broad range of products and very loyal customer base’, and was especially delighted by growth in the specialist retail operations, where like-for-like sales and profits pushed north and a good expansion platform has been established.

Meanwhile, a robust performance was achieved over in the core agricultural business (circa 75% of sales), where the long-term trends are positive, driven by the need to securely feed the growing global population and where Wynnstay, with conservative gearing, is well placed to further consolidate the UK market.

Based on current year estimates – pointing to improved profits, earnings and dividends of £5.35m, 26.7p and 7p respectively – the shares sell for less than 9 times earnings and offer a yield of 3%. Moreover, the group's valuation is strongly underpinned by its net assets, which increased to £39.5m or 273p per share last year, leaving the present share price and sub-£35m market cap looking distinctly miserly.