NWF Group plc
NWF Group plc: Half Year results for the period ended 30 November 2022
NWF Group plc (‘NWF’ or the ‘Group’), the specialist distributor of fuel, food and feed across the UK, today announces its half year results for the period ended 30 November 2022.
| H1 2022 | H1 2021 | % | |
| Financial highlights | |||
| Revenue | £541.8m | £402.6m | 34.6 |
| Headline operating profit 1 | £6.8m | £4.7m | 44.7 |
| Headline profit before taxation 1 | £6.2m | £4.3m | 44.2 |
| Diluted headline earnings per share 1 | 9.9p | 7.1p | 39.4 |
| Interim dividend per share | 1.0p | 1.0p | |
| Net cash/(debt) 2 | £1.2m | (£7.4m) | |
| Statutory results | |||
| Operating profit/(loss) | £6.7m | (£3.8m) | |
| Profit/(loss) before taxation | £5.9m | (£4.4m) | |
| Diluted earnings per share | 9.3p | (10.6p) | |
| Net debt (including IFRS 16 lease liabilities) | £30.0m | £36.4m | (17.6) |
| 1 | Headline operating profit excludes exceptional items (see note 4) and amortisation of acquired intangibles. Headline profit before taxation excludes exceptional items, amortisation of acquired intangibles and the net finance cost in respect of the Group’s defined benefit pension scheme. Diluted headline earnings per share also takes into account the taxation effect thereon. |
| 2 | Net cash/(debt) excluding IFRS 16 lease liabilities. |
Group highlights
| ● | Record first half results, with Group revenues and headline operating profit significantly ahead of the prior year and the Board’s expectations. |
| ● | All divisions traded ahead of the Board’s expectations at the end of the first half, continuing to demonstrate the resilience of the Group. |
| ● | Strong financial position, with a positive cash position at the end of the half year supporting the £10.0 million acquisition of Sweetfuels Limited (‘Sweetfuels’) in December 2022 and a maintained dividend. |
| ● | The Group has traded well since the period end and carries encouraging momentum into the seasonally busier second half, with the Board confident in delivering its full year expectations. |
Divisional highlights
Fuels – headline operating profit of £2.6 million (H1 2021: £3.6 million). Good performance in the period with strong margins offsetting lower year-on-year volumes. Prior year included a short-term benefit from increased demand during the autumn fuel shortage.
Food – headline operating profit of £2.1 million (H1 2021: £1.5 million). Strong performance with increased distribution activity and continued improvements in operating efficiency.
Feeds – headline operating profit of £2.1 million (H1 2021: £0.4 million loss). Performance ahead of expectations with volume a little lower than prior year, as a result of good grazing conditions. This was more than offset by a strong margin as farmers optimised feed rations to benefit from a significantly higher milk price.
Ri chard Whiting, Chief Executive, NWF Group plc, commented:
“We have delivered a record first half with a good performance from all three divisions in spite of an uncertain economic outlook and inflationary pressures. NWF has continued to demonstrate its resilience as a business and has significant further growth opportunities. The acquisition of Sweetfuels in December highlights delivery of our growth strategy to consolidate the fragmented fuels distribution market. We have started the important winter period well and continue to focus on the long-term growth of the Group, with a clear investment strategy, which is supported by a strong financial position.”
A hybrid meeting is being held today for analysts starting at 9.30am. For login details please contact NWF @mhp group .com or call MHP on 020 3128 8013.
Information for investors, including analyst consensus forecasts, can be found on the Group’s website at www.nwf.co.uk .
| Richard Whiting, Chief ExecutiveChris Belsham, Group Finance DirectorNWF Group plc Tel: 01829 260 260 | Reg Hoare /Catherine Chapman /Christian HarteMHP Communications Tel: 020 3128 8339 | Mike Bell /Ed AllsoppPeel Hunt LLP (Nominated adviser and broker) Tel: 020 7418 8900 |
Chair’s statement
NWF delivered a very strong performance in the first half with all three divisions ahead of the Board’s expectations and, overall, significantly ahead of the prior year. The Group has also continued to make progress towards its longer-term objectives, including the acquisition of Sweetfuels in December 2022, which is in line with the strategy to further consolidate the fragmented fuels distribution market. Fuels’ performance in the first half was robust in spite of reduced demand for heating oil following a mild autumn and inflationary pressures on businesses and consumers. In Food, distribution activity increased compared to the prior year and operating efficiency continued to improve. Feeds’ performance was ahead of expectations with a high milk price supporting farmers in optimising feed rations, which improved our margins. This more than offset slightly lower volumes resulting from good autumn grazing conditions.
Results
Revenue for the half year ended 30 November 2022 was 34.6% higher at £541.8 million (H1 2021: £402.6 million), primarily as a result of higher commodity prices in Fuels and Feeds. Headline operating profit [1] was higher at £6.8 million (H1 2021: £4.7 million), with a strong performance in all three divisions. Headline profit before taxation [1] was up 44.2% to £6.2 million (H1 2021: £4.3 million).
Basic headline earnings per share [1] was 9.9p (H1 2021: 7.1p) and diluted headline earnings per share [1] was 9.9p (H1 2021: 7.1p).
Net cash absorbed from operations for the period amounted to £0.5 million (H1 2021: £5.1 million generated). Cash generation was lower as a result of the investment in additional working capital to manage increased commodity costs and supply constraints in the fuel market. Net capital expenditure in the period was £1.3 million (H1 2021: £1.4 million).
Net cash at the period end, excluding the impact of IFRS 16, was materially higher at £1.2 million (H1 2021: £7.4 million net debt), reflecting the Group’s strong cash generation. This excludes the net cash consideration of £10.0 million for the acquisition of Sweetfuels completed post period end.
The Group’s banking facilities of £65.0 million are committed to October 2023 and NWF continues to operate with substantial headroom. Net debt including the impact of IFRS 16 was £30.0 million (H1 2021: £36.4 million). Refinancing of this facility is in progress as planned.
Net assets at 30 November 2022 increased to £70.2 million (30 November 2021: £53.8 million). The IAS 19R defined benefits pension scheme valuation deficit has increased from £9.3 million as at 31 May 2022 to £10.5 million at the half year, as a result of increases in discount and inflation rate assumptions only partially offsetting lower asset values.
Dividend
The Board has approved an unchanged interim dividend per share of 1.0p (H1 2021: 1.0p), in line with its policy. This will be paid on 2 May 2023 to shareholders on the register as at 17 March 2023. The shares will trade ex-dividend on 16 March 2023. The Group has increased the annual dividend by approximately 5% in each of the last ten years reflecting the Group’s strong underlying financial performance and position.
Operations
Fuels
Revenue increased by 40.2% to £401.8 million (H1 2021: £286.5 million) as a result of significantly higher oil prices and a greater proportion of commercial volume. Headline operating profit was £2.6 million (H1 2021: £3.6 million), ahead of expectations, but behind the prior year which benefitted from additional demand from the short-term retail supply challenges in autumn 2021.
Volumes decreased by 13.5%, to 300 million litres (H1 2021: 347 million litres) with the largest reduction being in domestic heating oil which was over 20.0% lower than prior year. This was a consequence of a warm autumn and consumer concerns over cost of living and the higher price of oil. Diesel volumes increased given the changes to gas oil duty in April 2022, but this did not fully offset the decline in gas oil sales. In the first half Brent Crude averaged $99.08 per barrel (H1 2021: $76.22 per barrel) and ended the reporting period at $85.43 per barrel.
Across the period and particularly in November and December, the oil distribution market suffered from supply issues which have resulted in some constraints on supplying customers and additional haulage costs as product is moved around the country. Against this, NWF benefited from national supply agreements and a UK-wide depot network which has continued to service our domestic and commercial customers.
The acquisition of Sweetfuels in December has added a 20 million litre fuel distributor based in Faringdon, Oxfordshire, supplying fuel to predominantly domestic customers across the Cotswolds. It further expands and infills NWF’s geographic coverage of its Fuels business within the UK. The acquisition is expected to be immediately earnings enhancing to the Group.
The Group will implement its proven post-acquisition integration plan, retaining the local brand and customer facing parts of the business whilst centralising support services. In the 12 months to 31 August 2021, Sweetfuels generated EBITDA of £1.3 million, profit before tax of £1.2 million and had net assets of £2.8 million.
The UK fuels distribution market is highly fragmented, and the Board believes the opportunity for NWF to expand its depot network, broadening the customer base and leveraging scale efficiencies, remains significant. The Group has a strong and established acquisition and integration track record and is actively exploring several opportunities.
Food
Revenue increased by 15.0% to £36.0 million (H1 2021: £31.3 million). Headline operating profit was £2.1 million (H1 2021: £1.5 million).
Demand for ambient grocery products was stable during the period, which was reflected in consistent storage volumes at an average of 122,000 spaces (H1 2021: 122,000), with total capacity now at 135,000 pallet spaces. This utilisation at an average of just over 90% is in line with our plans and highlights the business has the customer base to fully utilise our facilities. In terms of throughput, pallets dispatched were 6% higher than the prior year reflecting a greater stock turn of our customers’ products and generating additional revenue and contribution.
The improvement in profitability has been driven through improved distribution contribution on the back of additional activity and an associated increase in backload opportunities. There were no significant demand spikes as were experienced in prior years and customers’ peak demand was planned for and managed effectively, delivering consistently high levels of service. We have continued to have both the appropriate skills and labour capacity for our warehouse activities, as well as a stable population of drivers in the business.
The packing room operation was well ahead of prior year, working on added value services for a number of our storage customers. Whilst e-fulfilment was similar to prior year, Palletline revenue was significantly lower than prior year, in line with reported lower levels of network activity.
Feeds
Revenue increased by 22.6% to £104.0 million (H1 2021: £84.8 million) as higher commodity and selling prices more than offset slightly lower volumes in the period. Headline operating profit was £2.1 million (H1 2021: £0.4 million loss) as the business passed on inflationary cost increases in commodities, other cost inputs and farmers fed to optimise performance and benefitted from a record high milk price.
Volumes were 1.7% lower at 238,000 tonnes (H1 2021: 242,000 tonnes) as a result of good grazing conditions through the mild autumn period. DEFRA data suggests the ruminant feed market was 2.2% lower.
The market experienced continued volatility of commodity prices linked to the news flow from the Ukraine conflict, harvest data and global economic outlook. In the period, whilst a basket of commodities on the spot market was generally lower, proteins increased in price and grains fell significantly. Average milk prices increased by over 10p per litre over the period which more than offset the impact of higher feed prices and other cost inputs on a dairy farm. Average milk prices at the end of November were 51.1p per litre (November 2021: 33.8p per litre). Milk production was 0.6% higher year-on-year.
Our operational platform, with key mills close to customers in the North, Central and Southern regions, delivered the expected efficiencies and provides an effective base for future development. Investment has continued into NWF’s Feeds training academy to develop our future nutritionists.
ESG framework
The leadership team of NWF continues to develop its work on ESG with measures and targets now embedded in monthly reporting to the Board and a focus on continuous improvement activity. We are in line with our plan to deliver appropriate UK-CFD (United Kingdom – Climate-related Financial Disclosures) reports and disclosures in our 2023 Annual Report.
Board update
As announced in August, I have agreed to remain as Chair until such a time that a successor is appointed. With effect from 1 September 2022, Dawn Moore was appointed as a Non-Executive Director, bringing significant HR experience in public, private and third sectors.
Outlook and future prospects
Following a very strong first half, the Group has continued to trade well since the period end. In Fuels, demand for heating oil increased as cold weather was experienced in December, although we are unclear what the cost of living crisis will mean for domestic demand across the key winter months. Acquisition development activity continues, and the integration of Sweetfuels is following our proven post-acquisition process. In Food, demand was a little greater than anticipated leading into Christmas as retailers increased stocks of core commodity product lines. In Feeds, volumes and margin remain robust; however, there continues to be volatility and uncertainty around commodity prices. Across all three divisions there are inflationary cost pressures in labour and energy which are being managed.
Our financial position is strong and we continue to focus on development opportunities, both organic and through targeted acquisitions, which underpin our continued confidence in NWF’s growth potential and future prospects.
We have made a positive start to the year and consequently the Board remains very confident in its expectations for the full year as we move through the significant winter period for the Group. I look forward to updating shareholders later this year.
Philip Acton
Chair
31 January 2023