NWF : Half Year Report 2020/21

NWF Group is a specialist distributor of fuel, food and feed across the UK

Fuels

Positive H1 trading

NWF Fuels is a leading distributor of fuel oil and fuel cards delivering over 665 million litres across the UK to 116,000 customers.

Food

Growth with volatile demand patterns

Boughey Distribution is a leading consolidator of ambient grocery products to UK supermarkets with over one million ft2 of warehousing and significant distribution assets.

Feeds

Trading as planned

NWF Agriculture has grown to be a leading national supplier of ruminant animal feed to 4,750 customers in the UK, feeding one in six dairy cows in Britain.

Contents

Overview

• 1 Financial highlights

2

Chair's statement

Financial statements

4 Condensed consolidated income statement

5

Condensed consolidated statement of comprehensive income

• 6 Condensed consolidated balance sheet

• 7 Condensed consolidated statement of changes in equity

• 8 Condensed consolidated cash flow statement

• 9 Notes to the condensed consolidated half year report

Shareholder information

• 17 2021 financial calendar

• 17 Advisors

• 17 Divisional contacts

Financial highlights

Group highlights

• • Overall trading performance in the first half in line with the Board's expectations and expectations for the full year unchanged.

• • Results behind prior year, as anticipated, with the resilience of the Group demonstrated by consistent trading despite Brexit uncertainty and the ongoing challenge of Covid-19.

• • The Group's financial position remains very strong, with leverage at <1.0x which provides capacity for continued investment in support of strategic initiatives, the pursuit of further acquisition opportunities in the Fuels division and a maintained interim dividend.

• • The Group is pleased to confirm that the cyber incident at the end of October has been successfully contained and has not materially impacted the trading or commercial performance of the business.

• • All divisions fully operational in current lockdown, employees designated as key workers and no significant change in demand levels.

Divisional highlights Fuels

Headline operating profit

£1.9m

(H1 2019: £1.4 million)

Food

Headline operating profit

£0.5m

(H1 2019: £1.4 million)

Feeds

Headline operating profit

£0.6m

(H1 2019: £0.7 million)

Positive trading across the network, with increased underlying sales of gas oil offsetting lower underlying demand for heating oil and diesel, alongside a positive contribution from acquisitions.

Increased activity with the new Crewe warehouse fully operational and performing as planned. Significant demand volatility due to the Covid-19 lockdowns and Brexit created inefficient working in the short term and a changed business mix with a lower proportion of high value foodservice volumes.

Stable performance with lower feed volumes offset by a focus on cost control and commodity purchasing in highly volatile commodity markets.

Overview

309.4

348.9 330.5

Interim dividend per share

1.0p

20 19 18

3.0

3.5

2.6

Fully diluted headline EPS1

4.3p

-15.7%

Headline profit before tax1

£2.5m

-16.7%

20 2.5

19

18 2.4

3.0

Net debt to headline EBITDA (excl. IFRS 16 lease liabilities)2

0.9x

20 19 18

1.0 1.0 1.0

20 19 18

4.3

20

0.9

5.1

19 1.0

3.8

18 1.0

Statutory results

Net debt Operating profit Profit before taxation Fully diluted EPS

H1 2020

H1 2019

£16.5m £2.7m £2.0m 3.3p

• £14.9m +10.7%

• £3.1m -16.7%

• £2.4m -16.7%

• 4.0p -17.5%

1

Headline operating profit excludes exceptional items (see note 4) 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 debt to headline EBITDA is calculated based on net debt excluding IFRS 16 lease liabilities. The headline EBITDA calculation excludes the impact of IFRS 16 depreciation.

%

NWF Group plc nwf.co.uk

1

Overview

Chair's statement

Solid performance in line with expectations

NWF has delivered a solid performance in the first half with overall results in line with the Board's expectations. The Group has now recommenced development activity, particularly targeting further acquisitions in the highly fragmented Fuels market. Fuels delivered ahead of expectations with improved gas oil sales and a positive contribution from the businesses acquired last year. In Food, the new Crewe warehouse is performing as planned and sets a benchmark in operating efficiency. The business has been negatively impacted by the unprecedented volatility in demand patterns, largely as a result of Covid-19 uncertainty for consumers and retailers, as well as a weaker business mix with less higher value food service work undertaken. Feeds has delivered in line with expectations with volumes lower most significantly as a result of less demand from other UK compounders in the first half.

With the ongoing challenge of Covid-19 we continue to prioritise the safety of our employees with safe methods of working across the Group and home working where practical. I am also pleased to confirm that NWF has not utilised any form of Government support, furloughed any employees or delayed payments.

Results

Revenue for the half year ended 30 November 2020 was 11.3% lower at £309.4 million (H1 2019: £348.9 million) as a result of the lower price of oil and lower volumes in Feeds. Headline operating profit1 was lower at £3.0 million (H1 2019: £3.5 million),

1

Headline operating profit excludes exceptional items (see note 4) 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

NWF Group plc

Half Year Report 2020/21

with Fuels' outperformance not sufficient to offset the reduction in Food in the half year. Headline profit before taxation1 was down 16.7% to £2.5 million (H1 2019: £3.0 million).

Headline basic earnings per share1 was 4.3p (H1 2019: 5.1p) and headline diluted earnings per share1 was 4.3p (H1 2019: 5.1p).

Net cash generated by operations for the period amounted to £4.0 million (H1 2019: £8.6 million). Cash generation was lower as a result of working capital outflows driven by the changing mix in Fuels and the increase in commodity prices in Fuels and Feeds during the half year.

Net capital expenditure in the period was £1.8 million

(H1 2019: £2.3 million), lower than planned as we retained a cautious approach to investment against an uncertain backdrop. During the period, the final balance of £1.1 million was paid for the acquisition of Ron Darch & Sons Co Limited, following finalisation of completion accounts. Net consideration on acquisitions in the prior period was £3.2 million.

Net debt at the period end, excluding the impact of IFRS 16, was £16.5 million (H1 2019: £14.9 million) with net debt to headline EBITDA slightly lower at 0.9x (H1 2019: 1.0x). The Group's banking facilities of £65.0 million are committed to October 2023 and NWF continues to operate with substantial headroom. Net debt including the impact of IFRS 16 was £42.2 million

(H1 2019: £33.5 million) with the increase largely as a result of the Crewe development in Food.

Net assets at 30 November 2020 increased to £52.9 million

(30 November 2019: £48.8 million). The IAS 19R defined benefits pension scheme valuation deficit has reduced from £21.0 million as at 31 May 2020 to £18.7 million at the half year, driven by increased asset value and changes in mortality assumptions.

Dividend

The Board has approved an interim dividend per share of 1.0p (H1 2019: 1.0p). This will be paid on 5 May 2021 to shareholders on the register as at 19 March 2021. The shares will trade ex-dividend on 18 March 2021. The Group has a progressive dividend policy and has increased the annual dividend by approximately 5% in each of the last five years.

Operations

Fuels

Revenue decreased by 16.3% to £205.7 million (H1 2019: £245.9 million) as a result of lower oil prices more than offsetting the increase in volumes sold in the period. Headline operating profit was £1.9 million (H1 2019: £1.4 million) benefitting from higher volumes, improved product mix and prior period acquisitions.

Volumes increased by 4.8% to 329 million litres (H1 2019: 314 million litres) with underlying volumes stable, but with an increase in gas oil offsetting lower sales of heating oil and diesel. Brent Crude, whilst significantly lower than the same period in the prior year, broadly increased during the first half to an average of $42.71 per barrel (H1 2019: $61.87 per barrel) and ended the reporting period at $47.59 per barrel.

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