Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NWF Group PLC (LSE:NWF, Financial) reported a strong set of results in line with market expectations, despite a slight decrease in revenue.
- The company remains cash positive with a balance of GBP10 million at year-end, providing financial stability and future investment potential.
- NWF Group PLC increased its dividend for the 13th consecutive year, reflecting the Board's confidence in the company's prospects.
- The food business performed strongly, with significant growth in pallet storage capacity and achieving B Corp accreditation, enhancing its sustainability credentials.
- The company successfully managed its cost base and maintained profitability in the feeds segment despite increased electricity costs and stable commodity prices.
Negative Points
- Revenue decreased by 9.8% compared to the prior year, driven by lower commodity prices and product mix changes.
- Headline operating profit and headline PBT were lower than the previous year due to normalization in the fuels and feeds markets.
- The fuels segment experienced a decline in operating profit due to stable oil prices and reduced demand for heating oil.
- The feeds segment saw a decrease in operating profit, impacted by stable commodity prices and increased electricity costs.
- The M&A pipeline in the fuels segment was quieter than expected, delaying potential growth opportunities.
Q & A Highlights
Q: Can you elaborate on the impact of the normalization in the fuels market and how it affected your financial results?
A: Christopher Belsham, Chief Executive, explained that the normalization in the fuels market led to a stable oil price and supply, which resulted in a return to normalized market pricing. This was compounded by a mild winter, reducing heating oil demand and increasing competition for commercial customers, thus pushing down pricing. Despite these challenges, NWF Group managed to grow commercial volumes and maintain flat domestic volumes.
Q: How did the food business perform, and what are the future growth plans?
A: Christopher Belsham highlighted that the food business had a strong performance, with pallets stored peaking significantly above capacity. The new Lymedale warehouse, which increased capacity by 39%, is now operating at 70% capacity. The business achieved B Corp accreditation, enhancing its appeal to customers focused on sustainability. Future growth will focus on expanding the customer pipeline and potentially targeted M&A for further expansion.
Q: What were the key factors affecting the feeds business, and how did you manage them?
A: Christopher Belsham noted that the feeds business experienced stable commodity prices and a lower milk price, yet remained profitable for farmers. Demand varied due to weather conditions, but the management effectively controlled gross margins and costs, particularly managing increased electricity costs. The focus remains on gaining market share through training new salespeople and developing additional products.
Q: Can you discuss the financial performance and strategic investments made during the year?
A: Katie Shortland, Chief Financial Officer, reported a revenue decrease of 9.8% due to lower commodity prices, with headline operating profit at GBP14.2 million. Strategic investments included the acquisition of Geoff Boorman Fuels and the Lymedale warehouse fit-out. Despite these investments, the company remains cash positive with GBP10 million at year-end, supporting future growth plans.
Q: What is the strategy for growth in the fuels segment, particularly regarding M&A?
A: Christopher Belsham outlined a dual M&A strategy in the fuels segment, focusing on acquiring larger regional players while continuing smaller bolt-on transactions. The aim is to increase depot density for fleet efficiency and enhance market share for margin improvement. The M&A pipeline has become more active, presenting opportunities for growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
