LONDON (ShareCast) - (Sharecast News) - Agricultural supplier Wynnstay updated the market on the recently-closed financial year on Monday, reporting that it was now "clear" its results would be ahead of market forecasts issued after its positive update on 6 September.
The AIM-traded firm said that reflected a favourable trading performance in the final months of the year ended 31 October, as well as higher-than-expected contribution from joint venture activities and an additional non-cash profit from grain trading operations within its agriculture division, of about £0.5m.

It said the beneficial trading conditions it described in September continued through to year-end, further benefiting its arable performance, with additional income across grain, seed and fertiliser categories.

Joint venture businesses Bibby Agriculture and Wyro Developments both "substantially exceeded" their initial financial performance expectations, meanwhile, with the contribution from those activities set to be be higher than budgeted.

"Wynnstay's agriculture division's reported profit will be increased by the accounting treatment in relation to financial derivatives used to commercially hedge forward physical transactions," the company explained in its statement.

"The group's accounting policies, in accordance with International Financial Reporting Standard 9, require certain open derivative contracts to be valued by reference to a recognised market price as at the financial year-end.

"On 31 October - the date of the group's financial year-end - there was a spike in London wheat futures prices caused by the Russian government's announcement of its withdrawal from the Ukraine grain export agreement on 29 October."

Those closing reference prices had the effect of generating an additional £0.5m of non-cash reported profit in the financial year.

On 2 November, the Russian government announced the reversal of its decision, and London wheat futures decreased by about the same amount as they had initially increased.

"This effectively extinguished the reported additional non-cash profit, but the reversal will be accounted for in the new financial year.

"This accounting treatment has no effect on the grain trading book of Wynnstay's agricultural division, where the derivative contracts in place at the financial year-end are used to commercially hedge physical contracts to be executed in the next financial year.

"It simply accelerates the recognition of the fair value from the relevant transactions."

As it had previously announced, Wynnstay said it was "very conscious" of inflationary pressures for the business, farmers and the end-consumer, and of the uncertain macroeconomic background.

"It therefore believes it prudent to leave its expectations for the new financial year and beyond unchanged."

At 1619 GMT, shares in Wynnstay Group were up 0.63% at 634p.

Reporting by Josh White for Sharecast.com.

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