Release Date: February 04, 2025
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 first half performance with headline EBITDA, operating profit, and profit before tax all higher than the prior year.
- The company maintained a robust cash position with GBP 11.4 million at the period end, despite significant investments.
- The fuels segment saw stable volumes with stronger margins and a lower cost base, benefiting from elevated demand for domestic heating oil.
- The feed business outperformed the market with a 9.3% volume growth, driven by favorable market conditions and strategic investments.
- NWF Group PLC (LSE:NWF) has a strong M&A pipeline, particularly in the fuels segment, with several discussions well advanced.
Negative Points
- Overall revenue decreased by 3.9% compared to the prior year, primarily due to lower commodity prices and product mix within the fuels business.
- The food segment faced challenges with slower customer pipeline growth and higher than anticipated startup costs at the Lymedale warehouse.
- Exceptional costs of GBP 1.1 million were incurred, including restructuring costs and an ongoing investigation into a conflict of interest in the food business.
- Finance costs increased from GBP 0.8 million to GBP 1.5 million, largely due to IFRS 16 interest related to the Lymedale warehouse lease.
- The market normalization in the fuels segment has led to reduced profitability compared to the higher margins experienced during COVID and the initial phase of the Ukraine war.
Q & A Highlights
Q: Could you elaborate on the significant increase in like-for-like sales in the feed business? Is it due to new customers, a greater share of wallets, or more salespeople? How sustainable is this growth?
A: The growth is due to both existing customers feeding more and winning new business. The market conditions, such as rising milk prices, are beneficial, but if milk prices fall, volumes might be pressured. However, we hope to retain the new business we've acquired. (Christopher Belsham, Chief Executive)
Q: Regarding the Lymedale warehouse, is the slower-than-expected fill-up purely a timing issue? Have your full-year expectations changed?
A: Yes, it's a timing issue. We expect optimal capacity by the end of this financial year. Our full-year expectations remain unchanged. (Christopher Belsham, Chief Executive)
Q: Are you considering more warehouse space for future growth?
A: Securing further customers is key. We don't currently have a pipeline that necessitates a new warehouse, but expanding our customer base to support further warehouse expansion is a priority. (Christopher Belsham, Chief Executive)
Q: Can you provide more details on the M&A opportunities in the fuels business? Why are you confident about converting the pipeline now?
A: The strategy started in 2019, targeting mom-and-pop businesses whose owners are nearing retirement. The market normalization post-COVID and Ukraine war has made these businesses more inclined to sell. Our pipeline has strengthened over the last 12 months. (Christopher Belsham, Chief Executive)
Q: Regarding food M&A, should we expect any short-term developments?
A: We are focused on strategic M&A that aligns with our strategy. While nothing is imminent, any acquisition would fit well with our strategic goals and be considered good news. (Christopher Belsham, Chief Executive)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
