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TOPpick: Shareholders in clover at Wynnstay Wynnstay Group is perfectly positioned to benefit from rising global food demand. Headquartered in Wales, Wynnstay Group is principally a supplier to farms and rural communities. Wynnstay comprises two divisions: Agricultural (seed, feed, fertiliser) and Specialist Retail (farm/country supplies and pet products). In the last five years, sales have grown at an average rate of 12.0% per year. Dividend growth in that time has averaged 9.2% a year, increasing for each of the last nine years. This success puts Wynnstay among the top 1% of all AIM-quoted businesses. In October 2013, Wynnstay purchased Carmarthen & Pumsaint Farmers Ltd (CPF), a farming supplies co-operative. This acquisition extended Wynnstay’s footprint in the SouthWest Wales region, where it had previously been under-represented. The CPF acquisition boosted the size of Wynnstay’s Specialist Retail portfolio and brings supply synergies. Seed and fertiliser sales will also gain.

Wynnstay has a trading presence in Wales, the Midlands and northern England The acquisition of CPF is the latest in a series of acquisitions that have been integrated into the Group over the last sixteen years. Today, Wynnstay has a trading presence in Wales, the Midlands and northern England. Wynnstay’s Agricultural business delivered £172m of revenues (77% of

a Just For Pets superstore

group) and £2.3m (47%) of operating profit in the first half of 2014. Although these margins are low, there are some important factors to consider. First, the company is operating in a sector where price increases are on an upward trend. Global cereal demand is expected to grow 50% according to forecasts for future population growth (from current seven billion to nine billion by 2050) and dietary changes (3−4 billion people will become richer and consume more meat & dairy). Domestically, declining food self-sufficiency means that Britain now produces less than two-thirds of food consumed, down from 75% in 1991. Second, much of Wynnstay’s sales enjoy a natural hedge whatever the weather: when cattle feed demand falls, seed and fertiliser demand typically rises. Finally, bulk supply to farmers is a substantial logistical undertaking. Wynnstay is wellembedded in the regions that it serves

sales enjoy a natural hedge whatever the weather after skilful integration of a series of past acquisitions. Wynnstay’s competitors in this sector are typically fragmented, smaller operations. Wynnstay has a market position that would be extremely difficult to replicate. The upshot is that demand for Wynnstay’s livestock feed, healthcare products, seed (Wynnstay has 14% of the UK market for seed), fertilisers and crop protection products looks set to continue rising well into the future. 5

July 2014 AIM Prospector  
July 2014 AIM Prospector  

Featuring five AIM-quoted companies: European Wealth Group, LiDCO, Tasty , Tricorn and Wynnstay Group.