Welcome to the Wynnstay Group interim results webinar. All attendees are in listen-only mode, and questions will be answered at the end of the presentation. Written questions can be submitted at any time by clicking on the Q&A button. This webinar is being recorded. I now hand over to Gareth Davies, CEO, and Paul Roberts, Finance Director. Gareth, over to you.
Thank you very much, good afternoon, everybody. Thank you for joining us for the presentation of our interim results ending 23 April 2023 . Just a brief presentation to summary rather, of those who don't know us, I'm Gareth Davies, I'm Chief Exec. I've been Chief Exec now for five years. Whilst I've been with the business, with Wynnstay since 1999. My background is very much agricultural sales and commercial sales management, and prior to my appointment as CEO, I was overseeing the agricultural division for the previous 10 years. Just introduce Paul to you.
Just complementing the sentiment of an experienced management team, I've been with the business over 35 years, have just recently announced my intention to retire.
Thank you, Paul. The slide here gives an overview as to what the business is for those who's not so familiar with the business, maybe. Our business is very much about supplying farmers and customers in the rural communities. The business itself started as a cooperative in 1918, becoming a PLC in 1992, and onto the AIM market in 2004. I'm often asked a question as to what does our business actually do? I summarize it very clearly, really, that we help farmers, both arable and livestock farmers, produce food in a sustainable manner. We have a very clear strategy. It is based upon supplying both agricultural inputs and also services to farmers within Great Britain. We don't export as such.
We're predominantly GB mainland, and we supply most products, with the exception of agricultural machinery. Therefore, we don't supply tractors and combine harvesters, et cetera. Our product portfolio is as much as 25,000 SKUs or thereabouts. A key difference to our business, to many, is that we do have a balanced business model. By that I mean that we do supply both livestock and arable farmers, and generally speaking, our revenues from those two divisions are pretty well similar. The fact that we supply both sectors of farmers basically gives us a natural hedge within the business. Some of you would have heard me say previously, the term horn v corn. What that basically means, that you'll often find that the arable farmer is doing particularly well and therefore, having good returns for what he's doing.
Because wheat is then used in feed materials to feed animals, sometimes the cost of production for those people is more than it was. Therefore, the arable farmer is doing well, and maybe the livestock farmer, not so good. That actually has reversed as well. That natural hedge within our business does help us deliver consistent results. The slide here shows that we actually report in two divisions, and that's agriculture and specialist agricultural merchanting. Within agriculture, we have a feed division, which manufactures and supplies feed to a range of animals. Arable, processing fertilizer, processing seed, both grass and cereal seeds, a small agrichemical business, but also complemented by a grain marketing business known as GrainLink.
A subsidiary within the agricultural division is Glasson Grain Limited, which is based up in Lancashire, so it's actually on a small dock on the River Lune. The Glasson business trades feed raw materials, some of which are imported into that dock. On the dock side, also has a small manufacturing facility, and whilst the rest of the business manufactures feed for larger farm animals, this business actually manufactures feed for pet and wild birds. Also within the Glasson business is our fertilizer blending operation. The other division is specialist agricultural merchanting, which comprises of our 53 depots, which predominantly cater for farmers within the communities. These depots are very akin, really, to a builder's merchant. Effectively, 80% of the trade will be done with farmers on account, no different to a builder.
At the same time, both you and I can go into those builders merchants and into our depots to be able to purchase product either by cash or card. Again, a subsidiary within the division is Youngs Animal Feeds, which manufactures and distributes equine products. The reason for the fact that Glasson and Youngs are in the subsidiaries is that whilst fully owned by the business, they do actually supply product to some of the competitors that we have as Wynnstay. Whilst those competitors are fully aware that the business is owned by Glasson, it does give a difference that the invoice may come from Glasson or Youngs Animal Feeds. Our routes to market are varied. Farmers come and collect from the depots, have product delivered to farm.
Effectively, those depot collections could well be two or three- times a week. Same farmers, whilst in the agricultural division, most of those products are either in bulk form or full load form and will be delivered to farmers. At the same time, you'd often find that we have the same customers in the depots as what we do in the agricultural division. Our link with farmers is two-fold. Either expert advisors, who, by appointment, would go and see farmers and discuss their business and their requirements. We'd have advisors across the whole sector, be it dairy, beef and sheep, free-range eggs, arable, for example, and also going to the depots. Whilst at the depots, they will also have the opportunity of taking specialist catalogs with them, which would be dairy, beef, sheep, or poultry.
We'd often find that, when we go into new areas, particularly new areas, that these catalogs are very similar really, to an Argos catalog as such. People will take these catalogs away, and in due course, would be in touch, having seen something maybe on a certain page that have a certain interest in. Very much in its infancy form, is our digital platform. We have about 23,000 active accounts now at this moment in time, and of those, 3,000 are signed up to the digital platform. A digital portal, in fact, but the majority of the activity on that portal is people accessing their accounts and looking to pay by that form.
The actual amount of online trading that we do is very small, and we do surveys across the industry and across our customers to understand how they want to deal. Certainly at this moment in time, whilst we do as farmers do seek information in a digital manner, actually trading with people is fairly small, and the fact of that is that most of them are on accounts. Many farmers like to barter, and also, their requirements will change from month to month, depending on weather conditions and seasonality, et cetera. Just going on to our geographical reach. That map there will give you an indication of where we actually trade, the map on the left-hand side, is our market share within a certain area.
We're here, we're based on the borders of England and Wales, and that's where you expect, I guess, where our greatest market penetration is, but certainly over a period of time, we spread out across England and right up into Scotland as well, and within the, within the appendix of the presentation, there is a page showing our acquisitions. I think it's just over 33, 34 now, since 2004. The green circles indicate where our fertilizer plants are, either in the north of England and Montrose in Scotland. The orange circles indicate where our feed manufacturing sites are, predominantly on the western side of the country, because that's where the animals are. The exception to that being the recent Humphrey acquisition, which is down in Hampshire. Right in the middle is our seed processing plant at Shrewsbury.
Size of the business, people-wise, it's just about 960 as we speak now. The majority of the product we actually deliver to farm is in within our own vehicles, 110 commercial vehicles as we speak. The right-hand map is an indication of where our depots are. You notice that on the left-hand side of the country, because our model is based around livestock farmers. Arable farmers, which we deal with in the eastern side, predominantly, would buy maybe two or three times a year, a limited amount of product, being fertilizer, cereal, seed, and agrochemicals, predominantly. While the livestock farmer would buy a wider portfolio of products and may well go to those depots even two or three times a week, and they're based on the left-hand side.
Just coming to the first half-year that we've just reporting on. I'm very pleased with the performance of the business. It's been robust, and the underlying performance is certainly in line with our expectations. Trading conditions have softened as we've gone into the new year, particularly into Q2 , in some sectors of the agricultural community, which has resulted in weaker farmer sentiment in some sectors. In contrast to last year, Glasson's blended fertilizer operations did contend with adverse stock value realizations, which has impacted our profits by about GBP 1,500,000 but Paul will give you more detail on that later in the presentation. Over the period, volatility continues, certainly in commodities and also inflation, cost pressures have impacted some sectors.
When I look at the business, our balanced business model of supplying both livestock and arable farmers with that natural hedge, has certainly helped us as a business to smooth the variations in sector profitability. The balanced business model is very much core of our strategy. The financial base that we have, the strong financial base and balance sheet, has certainly enabled us to be able to continue to grow the business. The recent acquisitions of Humphrey back in March 2022, and Tamar, right at the beginning of this period, will deliver long-term strategic benefits. In relation to the Humphrey business, it has delivered a positive contribution in the first half, whilst it is lower than what we would have anticipated, and the reason for that is avian influenza.
The disruption caused by avian influenza, reducing the number of birds to feed over the short term, and therefore reducing the amount of tons that we've manufactured into that sector. However, in the long term, that business will certainly contribute to the long-term growth of Wynnstay. Tamar is the first manufacturing facility that we've got in the southwest of England, as far as ruminant feed goes, and is very much an important strategic move for us, and it's certainly bedded in well over that six-month period. A small incorporation into the business is a trading business of SG Deakins on the border of Powys and Herefordshire, which came in December, and it's certainly helped the business over that period of time.
The financial strength that we have as a business has enabled us to continue to invest in the facilities that we have, particularly feed and seed, and also significant investment in renewable energy. Paul will give you more detail on that later in the presentation. In order to propel growth and take our strategy forward, I have made some significant changes to the executive team. Neil Richardson, who came into our business as MD of Humphrey Feeds and Pullets, vast experience in feed logistics and engineering, now takes the role of Group Feed Operations and Engineering Director. Andrew Evans, who was previously overseeing feed, in addition to sustainability, which he maintains, now takes on the role of Supply Chain and Innovation Director. A new position that I've brought into the business is Head of Strategic Delivery.
This has been taken by Paul Godwin, who's been with the business for a number of years, and this role will be very much key to work with the Executive team to ensure that we look for projects, look for opportunities to be able to deliver our strategic ambitions. I think in summary of the first half, I mean, despite the short-term challenges that the business has encountered, we are now a bigger business, and we certainly have the capability of expanding further in line with our strategic plan. I'd now like to ask Paul to go through the financial highlights.
Thanks, Gareth. Just to recap, we are our business model is very much what I refer to as absolute unit margin, excuse me, absolute unit margin model, which really means that underlying revenue is not necessarily the best metric to measure the performance of the business. I mention that because the last two years have been a period of particularly inflationary environment for commodity prices, and that has been the story in the interim results that we have just reported. During that period, we have experienced just under GBP 50 million of increased revenue, simply as a result of underlying commodity price increases, which we have had to pass on through to customers. That inflationary trajectory actually changed towards the end of this period.
From the beginning of March, most prices are now showing downward downward progression signs. The impact on the net profit of the business during the period has been impacted by what Gareth's already alluded to, a one-off impact on fertilizer stock values, which is the total reverse of what happened during the previous year, where the company experienced a series of upward lifts in fertilizer values caused by events primarily around the Ukaine war. Towards the beginning of March this year, the global prices for arable nutrients did take a violent drop, some 30% fall in the price of ammonium nitrate, the primary product that we're involved in trading.
Our position for manufacturing raw materials, meant that that fall in prices actually created a GBP one and a half million stock impact on our bottom line results. Having said that, our underlying PBT was GBP 5,250,000 million , in, after incorporating that impact. That is obviously falling through to earnings per share, which was also impacted by the near 30% increase in the headline rate of corporation tax, introduced from the 1 April 2023 . The higher revenue numbers, although not necessarily contributing any additional contribution to the performance of the business, does have a substantial impact on working capital. That funding requirement did cause overall net debt to increase to GBP ten and a half million in the period. I'll share a little bit more detail on that in the slides to come.
We are a strongly asset-backed business with GBP 132 million of net assets, which represents some GBP 5.90 per share, and we're very proud of our dividend record, which has shown an average annual growth of some 7% over every year since the company joined the AIM market in 2004. The interim dividend has been increased by 2%, and we're confident that we will be able to report the 20th year of annual growth when those numbers come through at the end of the financial year. The track record graphs are really just to demonstrate the trend line, the progression of the business over the last five years.
The detail of the results, I think, have generally been touched on as far as the headlines are concerned, so I won't dwell on the income statement. The balance sheet, again, I've highlighted the asset-backed nature of the business and would just emphasize that we have no pension deficit on our balance sheet, as we have no defined benefit obligations. As far as cash flow is concerned, the strong cash annual figure is probably better demonstrated on the next slide, which is an old-fashioned debt reconciliation statement, which shows profit in cash terms.
Obviously, compared to last year, we don't have the one-off gains that were being reported. The substantial outflow is evident on this slide as far as working capital is concerned, reconciling down to the reported debt numbers, which again, are better described by reference to a net debt cycle graph, where the seasonality of our business always reverses in the second half. The income that we're anticipating to come from the unwinding of the previous inflationary environment is likely to exacerbate that. We are anticipating reporting significant cash balances at the end of the year as the interim peak reverses into the second half.
Even though the peak, at GBP 10.7 million during the period, we still have substantial banking facilities of just under GBP 30 million, with more than adequate headroom to fund the significant and exciting investment program that we have in mind. Just by way of introduction for Gareth to give you a little bit more divisional details, the segment diagrams here are designed to demonstrate the balanced business model that we operate.
Okay. As an introduction to the agricultural division, I'll just give an overview here of the current agricultural trading environment. The top of the table, or yes, the top half of the table, is very much in relation to farm output and commodities, so therefore, what the farmers have for their product. You can see from this, there's been significant volatility in farm outputs over the past 18 months, and during the first half of our financial year, we've certainly seen farmer sentiment weaken in some of these sectors, particularly grain and milk. If you take grain, significant swings there. Grain levels are now very much back to effectively what they were pre the U.K.raine crisis, and this is as a result of large global stocks.
Milk from, at farm gate level, did reach about GBP 0.50 per liter, actually, which is a record level for milk, just about the turn of the calendar year. These levels have come back now as supply has gone above weakening demand, although very much short, and particularly on a global basis from China, we're back now to about GBP 0.36 per liter. Beef, we've seen a very, very strong beef market, again, to record highs, certainly in the first half. Weakened a little bit of late, actually, probably as a result of the cost of living crisis having an impact. On a very positive note, free range eggs, which you heard me say earlier in the presentation, had suffered a little bit.
We've now seen the price of egg turn now again to a record level, while at the same time we've also seen a weakening of the feed price. About 60% of the cost of producing an egg is actually feeding the hen, and the main ingredient of that feed would be wheat. You can see really that the balance that I referred to earlier on certainly has an impact when it comes to how our customers are performing. Despite some of these, some of these sectors having a drop in income as such, certainly from farm outputs, what they receive for their materials, the bottom table clearly demonstrates that costs have also come down.
I've concentrated here on what I see as some of the higher costs for our farmers, and that being diesel, power in other words. You can see that has dropped. Within the table, I've highlighted fertilizer by a table because it actually relates to what we spoke about with Glasson, and you can see those significant swings there. Overall, I would say, as far as challenges for our customers, it's right through the food supply chain, and that's labor, whether it be the supply of skilled labor, but also the increased cost as well, and that's true whether it's our producers, whether it's ourselves, and the processors who process food into the retail chain.
Giving an overview of the feed division, we've certainly expanded our geographical reach, and as a result of that, with the acquisitions, we've also increased our manufacturing facilities. However, during the period, like-for-like sales, they reduced by about 7%. The differential between our actual at 1.3% and 7% is the differential from Tamar, the tons that came in from Tamar. The Humphrey tonnage or the business is actually separate to this because, due to the year end period, we actually run Humphrey as a subsidiary for this period of time.
This reduction is very much in line with national trend, partly for the reasons I've said earlier, a reduction in folk and the free range hens, and also in the Q2, dairy farm, farmers would have tightened their belts a little bit as milk prices were coming down. Whilst the free range egg sector has certainly been challenging, the integration of Humphrey Feeds & Pullets into Wynnstay Agricultural Supplies is certainly on track, and we have now combined the brands to be rebranded as Wynnstay Humphrey Feeds and Pullets. As we look forward, the Carmarthen Mill project is certainly progressing well, and Paul will give you a little bit more detail later in the presentation.
As far as the Carn project is concerned, if you recall, when we bought the Humphrey business, we were operating on a lease until 2026 at the current site, the Twyford site, which is the ownership has been retained by the Humphrey family. We also bought a mothball plant at Carn, which would give us opportunities of considering our options as we go forward. We're certainly still in that position, as we consider what is the best option to go forward to give the best return on capital. I can assure you that we are committed to a feed manufacturing facility in that part of the world to service the M4 corridor and the west of England.
Very much what we are doing, I'd like to highlight, is working with our farmers to deliver their environmental outcomes, which is a key point of difference for us. All the soy and the palm kernel that we source for our customers are grown in a sustainable manner. We've just carrying out, we're engaged in a trial with free-range egg producers actually, to feed a certain type of phosphate that will end with a reduction in the amount of phosphate that goes through into farmyard manure. You may be aware that in certain parts of the country, there are issues, seemingly with agricultural pollution and maybe phosphates going into certain river courses. Also we're working with our suppliers in terms of methane inhibitors.
We're already including a methane inhibitor in some of our feeds, and we're looking at extra trials as well to reduce the amount of methane that comes from ruminant animals. The balanced model within the arable division has certainly helped us deliver a strong performance. GrainLink, our marketing business, traded volumes as much as 27% above the same period last year. The majority of this increase coming in the eastern side of the country, an area which we have for a number of years now, targeted for geographical expansion. Coupled with that, our sales of spring cereal seed has been good, about 6% above last year, which is outperforming the marketplace.
In addition to a large acreage planted in the autumn, which I referred to at the full year results back in January, our expectations are now of a very large harvest this year. Crops are looking good, there'll be a good amount of grain to trade, which is good news for GrainLink, because that's exactly what we do. As we look forward, we're very much focused on increasing market share, particularly in grain trading. Also following our recent capital investment in Astley at Shrewsbury, we are very confident of increasing our market share of grass seed, not only in traditional grass seed mixtures, but also, and particularly so, in our environmental seed offering of grass seed mixtures, which include wildflowers, pollinators, and herbs.
As farmers now respond to incentives from the various government schemes, central government, the Environmental Land Management Scheme, and the devolved nation, particularly in Wales, of the Sustainable Farming Scheme, which will reward farmers to improve both wildlife habitats and also soil structure. The Glasson business, which I referred to as a subsidiary up in Lancashire, and part of this, I think, we've covered earlier in the presentation, particularly around the fertilizer situation in the first half. I am particularly pleased that how well the Glasson executive have managed this challenge by ensuring that our fertilizer stock levels throughout the process were kept to a minimum during critical periods.
As a processor of blended fertilizer, we will always be in a position of, what I call long on material, in other words, having more material than what you particularly sold, because that's what you need to do as a manufacturer. As fertilizer prices are now at more sustainable levels, we are more confident that this will encourage increased sales going forward. In addition to the fertilizer business within Glasson, the feed trading activity performed well and certainly in line with expectations. However, the cost of living crisis has impacted sales of product manufactured within the specialist feed operation. I mentioned earlier on, that, we manufacture wild bird food, particularly, and the cost of living crisis has certainly reduced volumes there.
Looking forward, those government and environmental policies, that will reward farming for their environmental outcomes, we believe will reduce the total volume of fertilizer that will be used in the U.K. We see that as an opportunity at Glasson, because each farm will be now required to do a nutrient management plan. What that means is that each farm will need to analyze their soil, to understand what is the nutrient value of the soil, phosphate, potash, for example. They'll also have to do a nutrient management plan, that if they are applying any livestock manures, becomes part of the fertilizer requirement. The differential for optimum crop growth will then be from bought-in fertilizers.
The analysis of fertilizer will vary from farm to farm, and I think we at Glasson have an opportunity there, because we are able to manufacture product, small runs of materials, i.e., lower volumes of tons in one go, so therefore, we'll be able to manufacture product which is specific to a certain farm. Whilst volumes will reduce to a degree, we see the opportunity of being able to enhance margin from bespoke fertilizer manufacture. Across the business at Glasson, we'll continue to seek efficiencies, particularly in that corn miller I referred to reduce the cost of manufacturing, and that cost-saving program is already underway. The depots, the 53 depots. Revenues within the depots did increase over the period by 4%, but that was particularly driven by agricultural inflation, product inflation, and the profitability within the sector was impacted.
Sales of certain good margin product groups, such as the Wednesday branded bagged feed, were down 10%. The main reason for that is that chicken feed was down because of avian influenza. Many people with small chicken flocks, backyard flocks, as I call them, they were reduced because of avian influenza. Also bagged feed to the sheep market was also reduced because April was a particularly mild, open month, whilst it was wet. Feed sheep feeding season was rather short as well. On hardware sales, within hardware, it's fencing materials, so farmer sentiment weakened, farmers tightened their belt a bit and would have put off replacing the fences for another year, maybe. Also, costs within the sector would have increased.
We were fortunate within the wider business that we had electricity contracts in place for our feed manufacturing sites, which absorbed the majority of electricity, within the depots, we didn't. Therefore, we did enter new contracts from the 1 November 2023 to the end of April. I'm pleased to say now that the contracts we've entered now since the 1 April 2023 , for 1 May 2023 forward, rather, are certainly more advantageous to the business. The depots do remain a very, very key route to market for Wynnstay, and what we will continue to do is upskill the staff that we have. Many of our staff, as Paul mentioned earlier, do come from agricultural backgrounds. They have a good knowledge of the sector, our role is to increase their product knowledge, whether it be in animal health.
We are one of the leading suppliers of animal health in the country. You'll notice on the right-hand side, the quoted market shares there. It is a very fragmented market that we operate in. Wednesday would be the leading animal health supplier in the country, at 12% market share. In order to do that, we have to have qualified people. Within the depots, we have about 200 people now, who are qualified to be able to advise and sell animal health products. In addition to animal health, we train people on feed, on grassland products, on seed, and it does give us a point of difference over some of our competitors. Just moving forward to recap on our growth strategy. We also presented this on a number of times before.
We do have a very clear growth strategy. It does contain a number of key pillars. The market we operate in, U.K. agriculture, is fairly mature. Our pillar of growth is very much organic, on a slow, slowly but surely basis, also by acquisition, which we referred to earlier on. Manufacturing is key to our strategy. We seek those opportunities where we can bring more manufacturing to the business. Good example being Humphrey and Tamar of late. ESG is a key sector, key pillar, which I'll refer to in a second. Digital, which I've already referred to. As we look to grow the business, we'll do it both organically and by acquisition.
We are very proactive in searching for those acquisitions, but those acquisitions will need to add long-term value to the business and across both divisions, because it is absolutely clear that we do have the aim of maintaining a balanced business model right across the Group. I'll ask Paul to just go on to our investment, if you would, please.
As Gareth has mentioned, a clear pillar of our communicated strategy is investment in manufacturing efficiency, and where possible, adding value to a number of the commodities that we're involved with. We see this as the essential way of improving the net margins of the business. There is a significant investment program in place for the business, where we anticipate investing up to GBP 25 million over the next three years in such manufacturing efficiency programs. Gareth's already explained the Carn mill redevelopment program that was associated with the Humphrey acquisition, which we had previously highlighted at an approximate cost of some GBP 13 million, representing about half of that investment program.
In addition to this, we have already improved the production capacity and efficiency elements of our seed processing plant in Shrewsbury, and we have further plans now to invest in 30,000 sq ft of additional warehousing to improve distribution efficiency on that site, at probably a cost of some GBP 3 million. The Carmarthen mill project, Gareth has mentioned earlier on, a project to potentially double the manufacturing capabilities at that site, and the photograph on the right-hand side is the first phase of that, the finished product, and finished product storage and dispatch facility. We're about halfway through that GBP 6 million project.
Also excitingly, we have an interest in renewable energies program, where we've allocated GBP 5 million to effectively produce electricity to eliminate the majority of our Scope 2 carbon emissions, those from bought in electricity. GBP 1 million will be spent on that project in the first year. As well as ticking the important milestones towards our net zero target, it's an extremely attractive proposition, providing a 25% return on investment, because we are very much able to consume the electricity that is generated directly within the manufacturing sites, where we're going to be installing these solar arrays. Again, when that building on the right-hand side is actually fully clad, the roof will basically consist of solar panels.
Again, as has already been mentioned, we continue our investment in our colleague base, where upskilling of staff is a critical USP for this business.
ESG is a pillar of our strategy, and as a business, we have a clear ambition of becoming carbon neutral by 2040. That will be as a result of activities that we do within the business. We most certainly have no intention at all of greenwashing. We are progressing well, and we will prepare a TCFD report for the 2023 annual report. To help us deliver our ambitions, we have now engaged with a sustainable farm advisory team, and that's working well. That team consists of experts from within the industry, senior experts who have a knowledge and experience of sustainability, and also the appointment of recently now, the non-executive director, Steven Esom.
He also brings a wide knowledge of the food industry supply or the food supply chain to our business as well. I'd just like to mention really that in addition to some of the national charities that we seem to support, whether it be Children with Cancer U.K. or the Royal Agricultural Benevolent Institution, or RABI, is often known. Many of us work and live within the communities, the rural communities. I was just looking last week, actually, that we're currently supporting in excess of 230 projects, events, agricultural shows, et cetera, within the communities that we work and live. How are we supporting our farmers deliver their environmental outcomes? As you're aware, environmental legislation, which is now being introduced to our farmers by both central and devolved governments, actually does support our growth strategy exceptionally well.
We're engaged with our farmers, as I mentioned earlier on, with nutrient management plans, to enable them to seek optimum plant growth and reduction of pollution, improving their soil health with deep-rooted herbs and rotations. From the livestock sector, improving animal health through animal health plans. Those trials that we're carrying out to reduce phosphate, for example, and to ensure right across the business that we are committed to seeking both raw materials and products for resale that have been sustainably manufactured and grown. As a business, we continue to seek both innovative products and to provide help and advice so that our farmers can deliver their environmental and sustainability targets by collaboration throughout the food chain. A good example of that collaboration is a trial that was sponsored at Harper Adams University College.
That is a 15-acre site looking at varieties of soy. Soy, there's no soy actually grown commercially in the U.K. at this moment in time. The majority comes from the Americas. I was thinking myself, actually, about 25 years ago, there was very little forage maize grown in the western side of the country. That is now very much part of the rotation, crop rotation of many dairy farmers. Maybe there will be the opportunity, once we look at varieties, et cetera, of growing soy in the country. I'll certainly keep you updated with the developments of that opportunity over the next year or so. I'd just like to highlight a point of difference that we do have as a business, that's the agricultural events that we hold for our customers.
Very clearly, a point of difference over many of our competitors. We hold an arable event on an annual basis. It's held at Shifnal, near Telford, on a biannual basis, we hold a beef and sheep event. This is really for our customers to look at new technologies, sustainable farming techniques, as I mentioned earlier on, whether it be soil health. If you look at the picture on the left-hand side, in the bottom left, that's a working demonstration of minimum tillage, so therefore, disturbing the soil less, and there'll be less carbon going to the atmosphere. There's trial plots, up-to-date varieties, new varieties being introduced, so our farmers can come and see whether those varieties are appropriate for them to use in the future.
Industry speakers and also workshops across the products that we sell. What we're looking to do here as a business is promote Wynnstay very much as the one-stop shop for innovation, products, and advice, and effectively helping our farmers to feed the U.K. in a sustainable way. I think in summary, on the outlook, the business has performed well. It has been a challenging environment, and whilst the full year outcome is likely to remain dented as a result of the adverse stock realisations at Glasson, prospects for H2 are encouraging, particularly within the arable sector and also the recovery of the free-range egg sector. Looking forward, the long-term future of British agriculture and food, and food production remains strong, as both food security and food self-sufficiency have certainly risen up the political agenda.
That's really as a result of some of the global issues, the Ukriane crisis, for example, and also the COVID pandemic as well. The Wynnstay Group board is very confident that, as a business, Wynnstay is well-placed to deliver objectives, not only in the short term, but the full trading year, but also beyond. Our strong cash position, our robust balance sheet, and particularly that balanced business model, which does provide us with the internal hedge, will allow us to continue to invest not only within the business, but also seek those acquisitions, which will add scale and the ability to deliver long-term growth alongside our strategic ambitions. That brings me to the end of the presentation, and we're very happy to take questions in due course.
Many thanks, Gareth. If you have a question, click on the Q&A button and type your question in. The first question is about the egg market, which has been through a difficult time with bird flu. I noticed that your statement mentioned that the free-range egg market is now beginning to recover. It's obviously an important feed sector for you. Can you update us on the current state of the market?
Yeah, there's 2 sides to that, then there's the economics, in addition to bird. Maybe if I look at the economics first and foremostly. I think over the last 12, 18 months, margins within free-range egg production has certainly been impacted, twofold in many respects. Price of egg, to start with, the supermarkets were keeping egg at a reasonably low level, and also at the same time, the cost of feeding the hen went up because grain went up. As a result of that, some farmers chose not to restock. The facilities were kept there. The bird cycle, a laying bird cycle, a bird comes into lay at 16 weeks of age, and then ends its laying life effectively at 76 weeks of age. It is a fairly quick turnaround cycle as such.
Some people chose not to restock. What we've seen then, since then, is that feed has come down in cost, and the price of egg has gone up, now at a record level. Margins are looking particularly strong, and certainly we'll see that coming through into the end of the second half of our financial year, which means next year. The impact of avian influenza did. That has tailed off to a degree. I mean, they haven't gone away, so please don't get me wrong there, but we're certainly seeing in our pullet business now, that farmers are placing orders for pullets. The Humphrey pullet business is about rearing chicks from one day of age up to 16 weeks, and then they become a laying bird.
Our orders for there, we've effectively got a full book now. I know that our competitors will be in the same situation, certainly confidence has come back to the free-range egg sector.
Tremendous. Thank you. I see that inventories reduced as fertilizer replacement costs fell, but this was more than balanced by adverse year-on-year movements in receivables and payables. Were these year-on-year movements linked, or were there other factors? Is working capital fairly normal for this time of year?
Quite a few, quite a few elements to that question. Just taking the inventories, firstly, that fall in price scenario has certainly impacted the carrying volumes and indeed, the lower values of fertilizer inventories. That was a significant element. The prices were already slipping, we were being particularly cautious. Obviously, that didn't compensate sufficiently for the very violent drop in prices, the 30% drop that was experienced in March. It very much is a fertilizer-driven scenario as far as stocks are concerned, but also that crosses over into other elements of working capital, particularly on the payable side, which has reduced year-on-year. A lot of the fertilizer raw materials are actually offered from traditional suppliers on extended credit terms.
The absence of some of those suppliers, partly because of the sanction regimes and partly because of the reorganization of the shortage of materials, we've not been able to benefit from some of those extended payment terms. They've all contributed to those balance sheet numbers that were reported at the end of April. Certainly, as far as working capital is concerned, we are already experiencing the reversal that was anticipated, which, as I said earlier on in the presentation, has actually been exacerbated by the deflationary environment that we're now operating in, which will result in a lot less cash being tied up by the time we get to this year and, or probably compared to the previous year.
Thank you very much. It's 16 months since the company's acquisition of Humphrey Feeds in March 2022, you mentioned that the redevelopment of the Moss Boar Mill at Carn remains under consideration. When is the decision likely, what are the current cost estimates involved? Should the redevelopment not proceed in the manner you originally proposed, will this result in a write-down in the value of the acquisition, and if so, to what extent?
I'll cover just the first part of that, maybe, and Paul will cover the financials of us, okay. As far as the development of the site at Carn, we cleared the lease, a peppercorn rent, on the site at Twyford until 2026. We purchased the site at Carn from the Humphrey business. It was already part of the Humphrey business and whilst it was closed. That gave us the opportunity then to consider whether that was the right place to develop the our next manufacturing facility. When we bought it, we had tabled the fact that we felt we could redevelop it for GBP 13.5 million. We put that in the public domain.
costs increased from there with the COVID pandemic and the Ukraine crisis, et cetera. Certainly the Ukraine crisis in this particular case. At this moment in time, we are considering a number of options. You asked the question as to when do I think we'll be in a position to give more detail on those options? It'll be into the autumn months when we've concluded as to the best way forward. I can assure you, there's a number of options ongoing, and we will have a facility in the Southwest.
The board is very confident that those options will provide the ability to actually satisfy the acquired Humphrey volumes. The risks of write-downs, as was mentioned in the question is minimal. There are various alternatives that the company can use to manufacture the required Humphrey volume. Obviously, our preferred opportunity remains the development of a multi-species mill, Humphrey being poultry only. The strategic opportunity in the Southwest is for us to develop a ruminant feed activity, and because of inflationary pressures on the initial costs, it's those added complications that we are currently in the process of refining before we finalize what our end decision is going to be, and the precise nature of the development that we're going to initiate.
Thank you very much indeed. Is there an earn out for Humphrey? Sorry, is there an earn out for Humphrey?
The acquisition arrangements did include an earn-out arrangement, which was based on volumes. That earn-out period has now concluded, and the earn-out arrangements have been paid and are recorded within the results that we have announced. The earn-out did not reach the maximum amount, which was a total of some GBP 2 million, with the payout actually being GBP 1.1 million, based on volumes, with obviously volumes being depressed for the reasons that Gareth explained. The avian influenza affected the volume and therefore the level of earn-out, but that is now all reported and concluded in those interim results.
Tremendous. Thank you very much. Can you say a bit more about the fertilizer market? Has some of the competition dropped out, and are there acquisition opportunities in this market?
As far as the, the market is then, if we take the last two-year period, volumes have dropped to a degree as the price of fertilizer went to a GBP 1,000 return, certainly in the livestock sector. Maybe some of those volumes have dropped as people have utilized, quite understandably, farm revenue is far better than they did previously. Within that period, there's a large U.S. business by the name of CF Industries. They were the largest manufacturer, or the only manufacturer of ammonium nitrate in the U.K.
You may recall back to the period when carbon dioxide shortages were seen as an issue. The government actually came when CF actually closed production because of economics, the government came to an agreement that they would subsidize that to a degree to continue. Anyway, post that, CF have now closed the one plant at Ellesmere Port, which is, broadly speaking, has a capacity of 1 million tons of fertilizer, both ammonium nitrate and what we call NPK compounds. The only plant they now have in the U.K. is up in Billingham, in the Northeast. Yes, the competition has decreased. What opportunities does that bring for us as Glasson? There is a void because the market certainly isn't back to the scale that CF closed production of.
There's a void there and the opportunity, particularly in NPK blended manufacturers. Yeah, there is an opportunity. We, as Glasson, we still use CF as a supplier of ammonium nitrate, as a raw material, in addition to importing as well.
Tremendous. Thank you very much. Can you say a bit more about the digital offering? Do you think that you'll be able to develop it further?
Yes. The continued use of our online trading is inevitable in our marketplace. I think in agriculture, it probably has lagged a little behind other sectors for some of the reasons that Gareth explained. Our investment in this area continues because we recognize that ultimately, more and more activity is likely to migrate online. Although our current offering requires customer identification, because primarily those people who do want to trade would like to book the transaction to their credit account, and that remains, you know, an important differentiator for us. We want to maintain the offering of that benefit, but whilst making the site wider and easier to use.
We currently have around 5,000 lines listed on the site. We're rapidly commencing our next phase of development, which will be effectively click and collect in customers' local depots. We're certainly committed to the process. We're seeing it gradually move, albeit at a fairly slow place, but we're confident that we'll be ready for when the takeoff is actually upon us.
Great. Many thanks indeed. At this stage, a final question: Can you say a bit more about the new Environmental Land Management Schemes that you referred to? Is there increased impact over time, positive or negative, for you over the next few years?
Yeah. The Environmental Land Management Scheme is a scheme which is related to central government, so therefore, England. Will it be positive? What's the change? Let me start with the change of it all then, really. Under the Common Agricultural Policy, farmers were effectively paid for how many acres they farmed. Irrespective of whether you were efficient or not, if you had similar acreage, me farming 300 or to the farm, guy next door farming 300, irrespective how good we were or indifferent, we get the same amount. That is certainly changing now. The Environmental Land Management Scheme is very much about coming out of that Common Agricultural Policy scheme. 2024, there will be a halfway point in the transition.
In 2024, farmers' incomes, as far as government support, 50% will come from the old land-based scheme and 50% will be from environmental and efficiency programs. For Wednesday, long term, we see this as very positive because those farmers who will be rewarded will be the efficient farmers who are seeking to invest in the business, and we sell products and services, and also those who are very keen to support environmental outcomes. You know, our product offering, whether it be environmental seed mixtures, the nutrient management plans and the bespoke fertilizers, investment in the infrastructure of containing farm manures and slurries, and new seed varieties and newer farming practices, is very much what we do. For Wednesday, we see it as positive long term.
Tremendous. Thank you very much. Another final question has come in: Wishing Paul a happy retirement, do you have a succession plan in place for other members of the senior management team?
As far as replacing Paul is concerned, we're very much down the process, the interview process, and in fairness to Paul, he has committed that he will remain with the business until that transition takes place. Paul, anything to add to that?
No. I wish my successor the very best of luck.
Tremendous. Thank you very much indeed. That's the end of questions. Gareth, do you have any closing remarks?
Other than to thank everybody for joining us this afternoon, and if anybody should wish to follow up the presentation with a discussion with Paul or myself, we're always available.
Thank you very much to both of you and to everyone for joining. For everyone listening, you'll now be taken to a webpage to give feedback on today's presentation. If you can't complete it now, you'll receive a follow-up email. We'd be really grateful if you could take a few minutes to complete. Many thanks for joining. This is the end of the webinar.