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LONDON (Alliance News) - Specialist agricultural and distribution business NWF Group PLC Tuesday reported an increase in both revenues and profits for the first half of the year, driven by a good performance from its animal feeds division, which posted volumes increases.
For the six months ended November 30 2013, NWF reported a pretax profit of GBP2.9 million, up from GBP2.0 million for the same period a year earlier, boosted by a slight uptick in revenues, which came in at GBP259.1 million for the period, compared with GBP256.5 million the prior year.
The group's feeds business supplies ruminant animal feed for cows and sheep, to over 4,000 farmers up and down the UK. The division supplied 481,000 tonnes of feed in the previous financial year ended May 31, 2013. In the first half of the current financial year, volume was up 5% to 225,000 tonnes, a percentage increase Whiting sees for the financial year as a whole. NWF said revenue from its feeds division increased by 3.3% in the first half to GBP68.4 million, boosted by increased feed volumes.
"We used to feed one in seven dairy cows in Britain, and now we are feeding one in six cows in Britain, so we are gaining share and consolidating the feeds market. So if we continue that, we could get 5% overall volume increases," Chief Executive Officer Richard Whiting told Alliance News after the results.
The group recently acquired Staffordshire-based animal feed manufacturer SC Feeds Ltd for GBP6.75 million, which adds 80,000 tonnes of feed per year, and is expecting to be earnings enhancing as early as this year.
"Analysts are saying it will add around GBP200,000 to GBP300,000 to our pretax profit this financial year, and are looking at around GBP500,000 next year," said Whiting.
NWF said the recent acquisition was in line with its strategy of increasing investment in agriculture, what Whiting described as the heritage of the business. Whiting said that while there are no acquisitions in the pipeline, the group will continue to pump investment into the business.
"We have spent around GBP1.6 million in the first half, and we are expecting capital expenditure to be around GBP3.5 million this year as a whole. That is a sustainable level, as we need to invest in trucks, equipment and IT. If there are acquisitions, they would be on top of that," said Whiting.
Although the group's feeds division drove its trading performance in the first half of the year, Whiting said he was disappointed with the trading performance of NWF's fuel division, which represents the biggest division for the group in terms of revenue. Whiting said this was caused by lower demand for heating oil in the period, due to warmer winter weather.
NWF's much smaller food division has been lagging in both revenue and profit over the past year or so, in comparison to the rest of the group's bigger and better-performing divisions. In the first half, revenues declined by 2.1% to GBP18.5 million, although its operating profit increased significantly to GBP1.1 million from GBP0.7 million the prior year.
NWF said the business has successfully transferred customers from its Deeside facility to its principal operating site at Wardle, which has improved the division's trading performance, as well as new long-term contract wins with several major customers, which it said should boost future volumes.
"Other key customers are Typhoo Tea, Lavazza Coffee, Swizzels Matlow and All About Food, who do the MasterChef range," said Whiting.
Average storage levels in the period were slightly higher than expected at 102,000 pallet spaces, due to the delayed movement of consolidating customers to the Wardle site, although the group said storage volumes have now normalised, at around 95,000 pallet spaces.
The group left its interim unchanged at 1.0 pence per share, but said its still on track to recommend a full-year dividend payment of around 5 pence per share for the financial year, as part of its progressive dividend policy.
"We want to be more than twice covered, but we are looking to prudently increase the dividend in a progressive manner. We are a small-cap business, so we are looking for a combination of share price appreciation and progressive dividend, and that seems to meet the need of most of our stakeholders," Whiting said.
Current analyst consensus is for NWF to report revenues of GBP500 million, and a pretax profit of around GBP7.5 million for the full financial year, forecasts Whiting said he is confident in the business achieving.
Shares in NWF were trading 1.5% higher at 137.00 pence per share Tuesday morning.
By Rowena Harris-Doughty; rowenaharrisdoughty@alliancenews.com; @rharrisdoughty
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