NWF posts record results after 'outstanding' year for fuel division

Farming supplies and food distributor provider NWF Group on Tuesday posted record annual results after benefiting from some exceptional conditions, principally in the fuels division.

The Cheshire-based agriculture firm generated turnover of £611m, a 9.9% increase on last year, while pre-tax profits soared 44.8% to £9.7m in the year ended 31 May.

Revenue growth was achieved in all three of NWF’s divisions, with the fuel division delivering an “outstanding” increase in operating profit of 53% to £6.9m after demand increased through a long and cold winter with spells of extreme weather.

Meanwhile the food division reported an operating profit of £0.7m compared with £3m last year. Feeds saw benefits from investment the prior year in its mill network and as a relatively benign dairy market drove farmers to invest in feeds to enhance herd yields.

Richard Whiting, chief executive of NWF Group, said: "Food has won contracts that underpin its future development and we have delivered the planned increase in returns in Feeds as a result of the capital investment in the prior year and effective management of the business against a backdrop of more stable milk prices."

NWF’s net debt fell to £6.4m from last year’s figure of £13m after the AIM traded company generated net cash of £7.1m after interest, tax, dividends and net replacement and maintenance capital expenditure of £2.9m.

"The benefits of the record year have been converted into cash and the lower level of debt is supported by a renewed five year banking facility. We are proposing an increased dividend and continue to see opportunity for further strategic and operational progress. Trading in the current financial year to date has been in line with our expectations," said Whiting.

NWF Group’s shares were down 2.90% at 191.77p at 1622 BST.

Broker Panmure Gordon noted that the Food division secured 20,000 pallets of new business to take the operation back to full capacity, but mobilisation costs were higher than expected, meaning second-half margins suffered, and the division only delivered £0.7m of EBIT compared to £3m the year before but in broadly in-line with expectations.

Looking forward, analysts said assuming the 'Beast from the East' does not return in 2019 it was maintaining earnings estimates for EBIT of £9.5m for 2019 from £10.6m this past year.

"Whilst the forward P/E is currently sitting at a premium to the three-year average (14.3x vs 12.0 average), it remains within the historical trading range. Moreover, FY18 results provide further evidence that NWF is a well-run balanced business that consistently generates decent cash flow and we are maintaining our 12-month target price of 220p."