NWF : Annual Report and Accounts 2022

Divisional highlights

Fuels

Page 7

Significant outperformance

NWF Fuels is a leading distributor of fuel oil and fuel cards delivering over 663 million litres across the UK to 109,000 customers.

Headline operating profit

£17.2m

+84.9%

Strong performance across the year with improved returns from a focus on customer service across our 25 depots, with significant one-off gains from providing service to customers when market pricing and availability was challenging in our

final quarter.

  Read more on pages 7 - 9

Headline operating profit

£2.8m

+47.4%

Consistent improvement in performance across the year. Warehouses were at an effective operating capacity and delivering high levels of customer service, with anticipated improvements in operating efficiency delivered ahead of plan.

  Read more on pages 10 - 11

Headline operating profit

£1.8m

+5.9%

A strong recovery in the second half, following a disappointing first half, successfully navigating unprecedented volatility and increases in feed commodities supported by an increasing milk price across the country.

  Read more on pages 12 - 13

1

Financial highlights for the year ended 31 May 2022

• Headline operating profit excludes exceptional items 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.

Overview

Overview

IFC Divisional highlights

1. Financial highlights
2. Chair's statement

Strategic report

1. Chief Executive's review

1. Divisional review: Fuels

1. Divisional review: Food

1. Divisional review: Feeds

1. Business model

1. Group financial review

1. Principal risks and uncertainties

ESG framework

23 ESG

34 Section 172

38 Board of Directors and Company Secretary

1. Senior management

1. Advisors
2. Corporate governance statement

47 Audit Committee report

1. Directors' remuneration report

1. Nomination Committee report

1. Directors' report

1. Statement of Directors' responsibilities

Financial statements

1. Independent auditors' report

1. Consolidated income statement
2. Consolidated statement of comprehensive income
3. Consolidated balance sheet
4. Consolidated statement of changes in equity
5. Consolidated cash flow statement
6. Notes to the Group financial statements

1. Parent Company balance sheet
2. Parent Company statement of comprehensive income

1. Parent Company statement of changes in equity
2. Notes to the Parent Company financial statements

113 Divisional contacts

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NWF GROUP PLCNWF.CO.UK

Summary

• Record results for the Group, reflecting very strong operational and commercial execution in a challenging environment.
• Continued increase in shareholder returns; proposed increase in the total dividend of
  4.2% to 7.5p per share, reflecting the strong performance and the Board's confidence in the prospects of the business.

Overview

I am pleased to report another year of significant outperformance for the Group, exceeding the market expectations that were established at the start of the financial year. There have been significant challenges in our markets with periods of supply shortage, unprecedented volatility of key commodities and inflationary pressures. I am pleased to report our teams across the Group have managed these challenges very effectively and have delivered outperformance as a result of their response in difficult times.

As a consequence of the good progress achieved, the Group's strong cash generation and growing confidence in the Group's future prospects, the Board is recommending a final dividend of 6.5p per share, to be paid to shareholders on 9 December 2022 (2021: 6.2p) giving a total dividend of 7.5p per share (2021: 7.2p), a 4.2% increase on the prior year. This is the eleventh year that the Group has increased the dividend, highlighting continual sustained improvements in performance.

ESG highlights 2022

• Since our last report, the Group has further developed its commitment to delivering long-term sustainable value by defining our
  2040 ambitions, including a net zero carbon emissions target.
• In our ESG Roadmap, developed during the year, the Group reflects on its progress to date and begins to map out the planned work for the next two years, and in the longer term.
• Key ESG reporting metrics have been established and initiatives identified to drive progress towards the Group's long-term ambitions.
• The Group has established an ESG Steering Committee, comprising members of the Executive Directors and Senior Management Team, to further drive the sustainability agenda across the business. The Committee met four times during FY22 and will meet monthly during FY23.
• The Group is preparing to share its first full TCFD disclosure, which will be reported in the year ending 31 May 2023.

Our business

NWF Group is a specialist distributor delivering fuel, food and feed across the UK. Each of our trading divisions has scale and good market position and is profitable and cash generative. Each division trades under different brands with their own brand architecture as follows:

• Fuels NWF Fuels (including a number of local sub-brands)
• Food Boughey
• Feeds NWF Agriculture, SC Feeds, New Breed and Jim Peet

  Read more about our divisions on pages 7-13

Key areas of focus for the Board in 2022

Responding proactively to market conditions

The Group has responded well to challenging market conditions throughout the year. In the autumn, fuel shortages at retail sites across the country led to concerns for Fuels' commercial and domestic customers. We were able to maintain full supply and had no supply shortages. In the final quarter, as a result of the Ukraine conflict, the price of oil rose sharply and with the move away from Russian oil, supply shortages were experienced across the country. Through a combination of supply agreements in place across the UK and our local depot network focused on maintaining supplies to regular customers, we were able to maintain service even when this has involved trunking fuel across the country. In Food, customer demand has been more stable; however, labour shortages experienced by customers resulted in lower than anticipated stock levels in the run up to Christmas. In Feeds, commodity prices increased to unprecedented levels in our final quarter and we have been able to pass these through to our customers who in turn have been supported by increasing milk prices.

Delivering on strategy

The Group has a clearly articulated strategy which has a focus on expanding the fuel depot network through acquisitions and consolidating a fragmented market. There is a strong pipeline of opportunities and this remains a focus for the Group. In Food, following the successful expansion with the Crewe warehouse, we continue to discuss additional contracts with customers which will support further expansion of the warehousing and distribution business. In Feeds we are focused on developing nutritionists through the NWF Academy who can increase volumes and utilise our national operations platform.

Cash generation

Cash generation remains a focus for the Group and it is pleasing to report a positive year end net cash balance for the first time,

of £9.0 million (excluding lease liabilities), which highlights both the cash-generative nature of our business and the capability and funding for development opportunities.

Rewarding good service

The consistent focus on excellence in customer service has been critical to managing unprecedented market conditions and supporting our continued development.

ESG framework

The Board recognises the importance of ESG and the Group has made significant progress on its ESG framework in 2022. We have established a target of net zero by 2040 and increased the focus of our four pillars across the Group. An executive steering committee has been established, detailed measures developed and we are establishing targets and goals for the short, medium and long term. We will report in more detail on our ESG framework on pages 23 to 33. We continue to adopt the Quoted Companies Alliance Corporate Governance Code ('the QCA Code') which we believe has been constructed in a simple, practical and effective style and that meaningful compliance with its ten main principles should provide shareholders with confidence in how the Group operates.

Read more about our ESG ambitions on pages 23-33 Read our Section 172(1) Statement on page 34

Employees

The Group now employs in excess of 1,300 people across our three divisions and Head Office. I would like to offer my personal thanks to all of our employees for their outstanding efforts and commitment to the Group during these challenging times.

Board changes

In line with NWF's governance policy, and as previously reported,

I will be stepping down from the Board at the time of the 2022 AGM in September, having completed nine years' service with NWF. David Downie, currently Senior Independent Non-Executive Director, will be appointed as Chair at that time and Richard Armitage, currently a Non-Executive Director, will be appointed as Senior Independent Non-Executive Director. We are pleased to welcome Dawn Moore, who will be joining the Board as a Non-Executive Director and Chair of the Remuneration Committee.

I look forward to updating shareholders on the Group's continuing progress at the time of the Annual General Meeting on 29 September 2022.

Philip Acton

Non-Executive Chair

2 August 2022

Overview