Profits down but growth continues at Countrywide

Leading supplier of products and advice to the rural community, Countrywide, yesterday released full year results to 31st May 2012 showing a fall in group operating profits to £1.3m, compared to record profits of £4.0m in the previous year.

Witney Countrywide store

“It has been a difficult year”, reports Chairman Nigel Hall, “with the impact of tough economic conditions and a mild winter lowering demand and reducing margins”.

Despite these challenging trading conditions, group sales have increased by 18% to £266.7m compared to £226.3m in 2011, principally reflecting new business and recent acquisitions.

“As I reported at the half year in November 2011, the shortfall in performance stimulated a review of operational structure”, says Mr Hall. “The business has reacted swiftly to the fundamental shift in the market and has implemented cost reductions of £2.5m on an annualised basis. Coupled with a major repositioning of the retail business across our 50 stores and considerable acquisition activity in the agriculture sector the board is confident that the business has laid the foundations for a significant recovery in profitability in 2013”, concludes Mr Hall.

“The last twelve months have provided the most difficult market conditions I can ever remember “, said John Hardman, Countrywide Chief Executive. “The retail business in particular has suffered from consumers lower disposable income, a situation we feel is unlikely to change in the foreseeable future and a backdrop to the substantial changes we have implemented over the last 8 months. Agriculture has continued to perform well and has contributed substantially to the overall growth of the business. A mild winter impacted our fuels business, however LP Gas and renewables performed well and above expectation. Revenues for agriculture and energy combined grew by 24% to £182.8m during the year reflecting strong agricultural performance in particular.”

“Agriculture remains at the heart of our business and a core part of our ongoing strategy,” continues Mr Hardman. “Our activity over the last financial year demonstrates our commitment to continue to grow our agri business particularly in the area of grain trading, where we see ourselves becoming a credible alternative to the large global traders. The significant purchases of leading grain trader, Heart of England Grain and specialist animal health business H&C Pearce & Sons both complement the opening of our new trading office in Wetherby, West Yorkshire. We continue to look for suitable acquisitions and I am delighted that since the year end we have acquired Leicestershire based agriculture merchant SM Hackett & Son, extending our geographic coverage and adding to the scale and credibility of our offer to farmers.

“Compound feed volumes increased by 5% reflecting continued expansion of our ruminant field sales team and the first full year’s contributions of Gloucester Animal Feeds, following their acquisition in 2011. Blends and straights grew over last year and our arable business posted an 8% increase largely due to commodity prices, particularly fertiliser.

Retail sales increased by 7% to £84m however margins were significantly down, delivering an operating profit before overheads of £1.3m (2011: £3.8m).

John Hardman (left), with Mayor of Towcester Martin Johns and Charles Behrens (right) from H and C Pearce, open the new Countrywide store in Towcester (pic from March 2012)

“We have enjoyed significant growth in retail over the last 4 years”, said Mr Hardman, “however by the latter part of 2011 it was obvious that there had been a fundamental shift in the market resulting in the collapse of discretionary spend on categories such as clothing and footwear whilst traditional agriculture, smallholder and equestrian categories continued to perform well. This stimulated an operational review including associated supply chain and support services and has resulted in a repositioning of our retail offer. In addition to annualised cost reductions of £2.5m the main thrust of the repositioning has been a greater focus on farming and business to business sales. Although this will take time to fully implement we have made considerable progress during the second half of this year. Our market research and Customer Relationship Management (CRM) system has provided detailed management information and underpinned our strategy, influencing product range, presentation and competitive pricing. This new approach has been rolled out across many of our stores along with a continued focus on advice, expertise and customer service, delivered by fully qualified staff.”

“In March 2012 we opened our 50th retail store, at Towcester in Northamptonshire. This brand new 10,000 sq ft store is the first to reflect many of the new product presentations that we are now incorporating and rolling out to the rest of our store network as part of our wider retail repositioning.”

“Trading in the first 3 months of the 2013 financial year has started well and is currently ahead of our expectations. The major repositioning work we have completed thus far, both in the company’s infrastructure and customer offering will undoubtedly bring benefits and sets the framework for the foreseeable future. The outlook for the general economy remains extremely tough, interest rates are expected to stay low and considerable uncertainty remains in the weaker euro zone countries, the outcome of which will have major implications for the wider UK economy.”

“Variable weather around the globe coupled with a growing demand for food continues to drive volatile world commodity prices as crop yields and subsequent prices fluctuate. The outlook for UK agriculture remains more positive, particularly for the arable sector where grain prices are expected to remain strong. We continue our policy of buying compound feed ingredients up to twelve months in advance to provide a hedge against commodity price increases and to ensure we continue to deliver long term value to our customers. Despite the many challenges we face, this is a very exciting time for UK agriculture and Countrywide as the business continues to invest in its future.”

“A final thank you is reserved for all our employees – despite this difficult year they have been supportive of the decisions that have been made and remain committed and dedicated to Countrywide and our loyal customer base.”