Increase in demand will lead to significant trading upturn for NWF

Cheshire food and fuel distributor NWF reported stronger demand for its services in the third quarter of its fiscal year, which it believes will lead to a significant improvement in overall trading.

In an update today it said it has seen a significant increase in demand and activity levels during March and April, so far.

While some cost and operational restructuring has been required to accommodate this during the coronavirus pandemic, it has resulted in an acceleration of the trading momentum through the final quarter of the year.

It said its fuels business and its customers have benefited from a significant fall in oil prices over recent weeks which will make a material contribution to profits in the short term.

In food, demand reached unprecedented levels during March and April as food retailers managed a significant surge in demand for ambient groceries.

NWF said it has worked with food manufacturers and retailers to meet this demand and has now established a sustainable supply position.

While operations were initially inefficient through the demand spike, performance is now at optimised levels in the circumstances with the some of the additional revenue from this activity being offset by additional costs required to ensure safe working.

Progress is being made in the group’s new warehouse at Crewe with 12,000 racking spaces available to date, stock being stored and shipments commencing broadly in line with plans.

In feeds, demand has been in line with expectations and the group continues to deliver greater volumes of ruminant feed than the prior year.

A recent significant increase in feed commodity prices, particularly proteins, is impacting the business in the short term, it said.

In fuels, performance across both the core and acquired businesses was strong through to the end of February with the former trading well ahead of prior year.

Demand for heating oil increased significantly in March and into April combined with a deep, sharp and sustained fall in the oil price that has enhanced margins.

Demand from commercial customers has been significantly reduced given lower levels of economic activity during lockdown.

The group said it is responding effectively to the disruption presented by the COVID-19 outbreak and has been able to maintain its operations on a continuing basis, supporting customers at this challenging time.

It has not sought any government support for operations, nor furloughed any staff, to date.

Significant work has been undertaken on short- and medium-term cash flow forecasting to support decision making and, consequently, the board said it is confident that the group is in a strong position to manage through this period of uncertainty.

Net debt, excluding the impact of IFRS 16, at November 30, 2019, was £14.9m. The group has committed bank facilities of £65m, running to October 2023, of which £47.6m was undrawn as at the end of March 2020.

In today’s update it said that, in light of the backdrop, visibility remains limited and the board is mindful of the considerable uncertainty as to outlook moving forward.

However, while it is expected that activity levels will reduce in May, given the previous strong underlying performance of the group, combined with benefits to date of the higher demand and a lower oil price experienced recently, the board now anticipates that overall trading for the full year will be significantly ahead of prior year.

The board added that, at this point, and in light of the ongoing uncertainty, it does not believe it is appropriate to provide guidance on performance for the year ending May 31, 2021.

However, it has been encouraged both by the strong performance of the group, as well as the exceptional response by its people to the COVID-19 outbreak and remains confident in the long term prospects of the group.