Focus on core business delivers record profits for NWF
DISTRIBUTOR NWF Group believes that its decision to sell off its garden centres and other peripheral interests is paying off after delivering a record pre-tax profit of £7.1m in the year to May 31 (20009: £6.2m) despite flat sales of £379.8m.
The Nantwich-based firm, which also recently agreed a new £51m debt facility with its bank RBS until October 2013, said that it had also managed to cut its net debt by 28 per cent to £13.9m and announced an increase in its full-year dividend of almost 5 per cent to 4.3p per share.
Chief executive Richard Whiting told TheBusinessDesk.com that when he joined the business three years ago the company’s net debt level was over £50m, but the sale of its lossmaking garden centres had allowed it both to concentrate on its core distribution offer as well as reduce net debts to its current level, where the group’s debt-to-ebitda ratio has fallen to 1.1x.
“When I joined we were a bit of an industrial conglomerate but we had three distribution businesses and a retail business, which didn’t make a lot of sense and wasn’t performing,” he said.
“NWF is now a focused and specialist distributor of food, feed and fuel. We are operating in large resilient markets which we understand well. Our trading divisions have scale, good market positions, are profitable and cash generative. “
He added that a decision taken in 2008 to invest £18m in doubling the capacity of its food distribution business was paying off. The division, which stores products from firms such as Typhoo, Princes and Patak’s before delivering full loads to supermarkets, achieved a record operating profit of £3.1m in the year and that around 250 jobs have been created since the investment was made.
Its feeds division was hit by a poor autumn in the first half of its financial year and operating profits were down by £700,000 to £2.1m as a result, but this was more than compensated for by its fuel business, which achieved an additional £800,000 of operating profit during the cold winter. Its profits were down by £300,000 from last year’s record high of £4.1m.
Whiting added that despite a massive spike in wheat prices in recent weeks, it has been able to pass on price increases to customers in its feeds business and he said the current outlook for the firm remained in line with analysts’ expectations.
“Raw material volatility is something we have experience of and we manage it well,” he said. “In fact, we do better with volatility than we do without it.”
NWF Group’s shares were up in early trading from 108p to 112.5p Broker Charles Stanley has issued a new Buy recommendation on the stock this morning, setting a target price of 125p.
