Swan profits climb - but mart move on hold?

JOHN Swan, the Borders-based auction company, which is the only Scottish firm of that type to be quoted on the stock exchange, has posted encouraging figures for the half-year ending 31 October.

It made an operating profit of 138,491, up from 100,009 in the same period a year earlier.

However, the balance sheet shows a cash position of 1.95 million, a decrease of 690,000 since the end of April 2006. This is attributed in part to the "normal increase in trade debtors".

These are worrying times for livestock auction companies, and much of the current struggle can be attributed to the foot-and-mouth crisis of 2001, which saw centres throughout the UK shut down for the better part of nine months. Before FMD, Scottish marts were selling about 2,000 prime cattle each week. Currently if the total tops 1,000 head, the various centres can count themselves fortunate.

The reforms of the Common Agriculture Policy are now becoming evident. Farmers no longer need to produce much to qualify for the new single farm payment. The trend is for those of an older generation to consolidate their operations and seek an easier life. That much is acknowledged by Jack Clark, the managing director of Swan, in his statement to shareholders.

He said: "The past six months have witnessed a further rationalisation of the national beef herd, in particular in central and southern Scotland, where we have dispersed some 650 beef cows this past autumn.

"This must have a bearing on future suckled calf production. But with a greater proportion of beef producers now finishing their animals rather than selling them as stores, we shall continue to endeavour to expand our weekly prime cattle sale at St Boswells."

Swan also operates a mart at Wooler in Northumberland, which is in the very heart of one of the most productive livestock regions in the UK. However, that is no guarantee of success for a live market, as Clark explained.

He said: "It was extremely disappointing for us to suspend our Wooler weekly prime cattle sale. This was brought about by the inability to provide a constant supply of stock for wholesalers. Without their support, a prime stock sale cannot be viable. However, if in the future sufficient producers are prepared to support a weekly sale, we will be only too pleased to restart operations."

Clark is the current president of the Institute of Auctioneers and Appraisers in Scotland, and is clearly convinced that selling on the hoof is the best option for farmers.

He said: "It is my opinion that if a greater proportion of prime stock was sold on the open market, a greater proportion of wholesalers would in turn use this facility to purchase their requirements. This would increase competition, which would ultimately benefit the producer."

In late 2006 Swan said it was considering putting its existing site at St Boswells on the market and applying for planning permission for a new multi-purpose rural centre on the opposite side of the main A68 trunk road.

That now looks to be on hold, judging from comments in the accounts, which read: "Such a decision will require to be made on economic grounds. At the moment, it is unlikely that a new mart facility would be viable without a review of funding, and potentially, ownership."

Shares in Swan were trading yesterday on the Alternative Investment Market at 1,450p, giving the group a market value of about 8 million.