NWF Group (LSE:NWF) — Investor Presentation

0:00 Good afternoon. Welcome to the NWF GROUP PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time via the q and a tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. And I'd now like to hand you over to Chris Belsham, CEO. Good afternoon,

0:30 sir. Thank you very much, and good afternoon, everyone, and welcome to the NWF, results presentation for the year ended 05/31/2024. I'm Chris Belsham, the group chief executive, and I'm joined today by Katie Shortland, who's our chief financial officer. We will take questions at the end at the end of the presentation, so but please do submit those as we go along as as well. That'd be very helpful. Those of you who attended the last one of these we did as a group, which is a few years ago now, may remember that my six year old daughter gate crashed the presentation, and then my broadband gate out. So, hopefully, we'll be more successful today, but we'll see how we get along. So that's so if I'd if I move on to talking a little bit about us, so I'm very conscious that some of the people on the on the meeting will will know a bit about us and have have been invested in us for a while, and some of you may be new to the group. So it's probably worth giving a brief overview of the group as a refresher for those of those of you who know as well and as an an introduction for those who don't.

1:42 So NWF GROUP is a specialist distributor operating across The UK. And our purpose, our mission is to be a vital link in the supply chain, connecting essential suppliers with their customers. And that's particularly the case where those suppliers and customers are not able to trade directly with each other that need to. We currently operate in three market segments, and in each of those, we benefit from scale and capability barriers to entry. So if I start with our fuel business first, in fuels, we're the third largest bulk liquid fuel distributor in The UK, and we've got over a 100,000 customers who were a combination of SME commercial businesses and domestic customers, people who use oil to heat their homes.

2:34 And in all those cases, we're helping people power their businesses and and heat their homes. And what we're really doing there is acting as a link between the fuel majors and their end use customers who are too small individually to go and pick fuel up from a fuel terminal or from a refinery. They need to buy built, fuel in too much bulk that they they they can't go to a petrol station to get it. I'll then move on to our food business. And in food, we're a leading ambient grocery consolidator. We're enabling a 125 customers to supply UK retailers effectively and efficiently. So here, we're acting for customers who are individually too small to be able to have direct distribution into supermarkets like Tesco or Aldi.

3:28 So they need to come through a consolidation business like ourselves to be able to access those retailers. Similarly, the retailers need a consolidator like us to enable those type of suppliers to integrate into their supply chain. And last but not least, our feeds business is the second largest ruminant feed distributor in The UK, and we're serving servicing over 4,000 farming customers, helping them feed their herds and optimize the yield that they're getting from their livestock. Now the success of all three of our businesses is built on our strategic enablers, there's four of those. So people and culture, clearly, were very dependent on skills and capability of the people across our group and in each of our businesses.

4:19 Being our best is about having a really detailed understanding of our of our operating model in each of our businesses and our processes that underpin that operating model and looking for ways to improve those processes. Change management is an essential skill for us to have as we look to deliver step change projects, whether that's m and a activity or new warehouses, and we'll be talking about both of those a little bit later on. And then data and IT is really important because we're a data heavy business, and using that data effectively is really important in terms of managing our margins and providing an efficient and effective service to our customers.

5:06 So if I then move on to the financial results for the year. So firstly, if we look at, so overall, a very solid financial performance in line with market expectations. Then looking back at some of the detail. So firstly, revenue. Now revenue, for those of us who don't know as well, is not a particularly useful metric in terms of NWF GROUP because over 90% of the revenue in our fuels and feeds businesses is a commodity or duty pass through. So therefore, it's not a guide to our our underlying activity. So whilst it looks like revenue has gone down and it has, that's all because of the oil price. In effect, our overall activity increased in the year. So we saw greater volumes in our fuel business and higher turnover and activity in our food business.

6:00 In terms of headline operating profit and headline PBT, that was down on the prior year as expected. That was due to a normalization of the fuels and feeds markets, partly offset by a very strong performance in our food business. But that was all expected at the time at the start of the year and was built into analyst forecasts, hence why our results met market expectations. In the year, we acquired a fuels business, and we also invested in a new warehouse at Linedale, which we'll talk about. But despite all of that, we still have a a positive cash balance at the end of the year with 10,000,000 on the balance sheet. And along with our funding facilities, that gives us significant firepower to continue our our growth plans.

6:48 And as a result of that, the board has significant confidence in the prospects of the group. And therefore, for the thirteenth year in a row, we've increased our dividend. This year, it'll be 8.1 per share, and that's still 2.4 times covered.

7:07 Then delve into the individual businesses and what happened in the year. So in our fuels business, what we're looking to do is make an absolute pound to no profit for the service we're providing, which is buying the fuel from a fuel major and delivering it to the end use customer. So we are largely indifferent to the price of fuel itself. All we're looking to do is make a little bit of margin on top of that. And what we find is that our margins are higher when our customers become concerned about supply and therefore are less concerned about being too price conscious. And that happens when there's either significant volatility in price or these events which lead people to be a bit concerned there might not be a stable supply.

8:00 And over the last few years, we've seen a number of those type events on a big scale. So firstly, we had the pandemic. And then secondly, we had the Ukraine crisis. And in both of those cases, our customers were worried about getting supply. Therefore, they became less price conscious. Therefore, our margins increased as market pricing went up. Now we didn't expect that to last. We knew that would normalize at some point, and our expectation was was that that would normalize in f y twenty four, and that proved to be the case. In addition, that was compounded by the fact we had our second mildest wind second mild winter in a row, and that led to low demand for domestic heating oil, which keeps the the the sector very busy across the winter.

8:49 That meant that ourselves and our competitors were competing more fiercely for commercial business. And, again, that tends to push down market pricing a little bit. Against that backdrop, I was very pleased that we actually increased our commercial volumes whilst our domestic volumes stayed flat. Also, I was very pleased at how we actively managed our cost base by optimizing our sales team and our tanker fleet to make sure it was matching the level of activity and margins that we were achieving.

9:23 Our growth strategy for this business is very heavily built around m and a. So you look you've seen that we did an acquisition last summer, which was a business called Jet Bourne Fuels, which we acquired in Kent. But we then found the m and a pipeline became quite quiet over the winter, and that makes sense really because if you're a business owner in a normalizing market, it wasn't a sensible time to be considering selling your business. I'm pleased to say that the pipeline has really picked up over the last two or three months, and we've got a number of active discussions taking place. So we will be looking to deploy capital into fuels m and a in the current financial year. Then moving on to our food business, very strong first half performance, continued into the second half.

10:14 So here, our business model is to charge our customers for storing, handling, and distributing their stock. Therefore, the key KPIs are how many pallets are we storing and what's the throughput of pallets through our warehouse facilities. So in the year, we actually peaked with a storage of a 146,000 pallets. Now that's 20,000 above our optimal operating capacity and 11,000 pilots above our maximum capacity. But we knew that was going to happen, so we'd planned the use of third party off-site storage, and we used that early and managed it really effectively. In the past, when we've had to do this, we probably waited a little bit too long to actually start using that off-site storage in an attempt to save money, but then we've ended up spending lots of money through inefficiency.

11:08 Here, we were very disciplined. We got to our optimal capacity, which is about 92% of maximum and started using the off-site storage. Now why would we do that? We were doing that because we were building up a pipeline of new customer business because we wanted to open a new warehouse, and we did. We announced in January that we were, opening a new warehouse at Limedale in Newcastle under Lyme, which is about twenty minutes drive from our our existing warehouses. We commenced the fit out of that immediately, and that completed at the end of June. We were actually storing stock in there, from April onwards. And as we speak, we're operating about 70% capacity at that site, and we'll look to be at optimal capacity in the early autumn in line with our original business plan.

12:04 The other key action in the year in our food business was b corp accreditation. So a number of customers are becoming increasingly focused on the sustainability of their supply chain, and therefore, they want to work with a logistics partner that has very strong ESG capability. So we applied for b corp accreditation. That's very rigorous ESG metric. So we've spent a number of months actually doing the work to ensure we could comply with that, and I'm pleased to say we achieved that in the year. And that does give us a competitive advantage with those customers and those retailers who are really now focused on on that sustainable supply chain.

12:52 And then moving on to feeds. Now if I've been sat here this time last year, I would have been talking about the summer of twenty twenty two. And what happened in in that summer was there was an incredible spike in feed commodities as a result of the Ukraine war. And following that, the dairies significantly increased milk price that our farming customers were receiving. But because we forward buying materials, our costs haven't gone up in line with those two factors. Therefore, we were able to generate about a million pounds plus super profit in f y twenty three as a result of that. We didn't expect that to happen in f y twenty four, and it didn't.

13:38 So, again, similar to fuels, we tend to make more money here where, commodities are quite volatile and the milk price is higher. What what we saw in f y twenty four was a very stable commodity market, and the milk price had reduced from its f y '23 levels. Having said that, it's still at a very profitable level, and it really just reduced in line with farmers' cost. So our our farming customers are still making a decent profit on the current milk price. Our volume in f y twenty four was a sort of bit of game of two halves, really. So in the summer and autumn of twenty twenty three, we had alternating hot and wet weather. That's absolutely fantastic for growing grass. And as a result, farmers went into the winter with plentiful forage stored to feed their their herd over the winter.

14:30 But we then had a very wet, miserable winter and spring, which delayed herds being turned out into the fields, and therefore, we had increased demand towards the back end of the year. So overall, there was a flat market for rumen and animal feed. NWF volumes were were down a little bit, but the gap was some low value low value buying group business, which we've we've actually won back for summer. So I'm pleased with how we manage that volume margin arbitrage. We're also very focused on our cost base, so really good management of the gross margin and operational cost base by our team. And that was particularly the case as our electricity costs doubled in the year as we came off of fixed year contracts that we'd had in place for two years, which enabled us to miss the big price spike in electricity prices at the back end of twenty twenty two.

15:30 But we still had to pass on a doubling in electricity cost. I'm pleased to say the team were able to successfully do that. Our growth in this business will be driven by winning market share, and we're doing that through investing in new salespeople, younger salespeople, salespeople of the future because this is an industry that's typified by an aging sales force. And therefore, as those people retire, we want to have the people in the market who can take their business from them as as they step away. And we've been investing in our academy for a number of years now, and it's proven to be very successful with former academy members now accounting for about 15% of the volume that our feeds business sells.

16:17 I'll now hand over to Katie to talk through the financial results in a bit more detail. Thank you, Chris. Okay. So over the next few pages, I will just give you an overview of the financial performance for full year '24, but I'll also draw out some of the key performance indicators and areas that that we believe are relevant for our future growth, and development of the business. Okay. So if I start with the top half of the income statement first. So as Chris mentioned earlier, for two of our businesses, revenue isn't necessarily a relevant indicator of of growth or performance for us. So that's in, fuels and and feed in particular. But just to to summarize the numbers, so total revenue in the year was, just over 950,000,000, which is 9.8% down from the prior year.

17:08 And you may be aware from some of the previous communications. And as as Chris has said, we saw a normalization of commodity prices, in in two of those markets, and that's what's driven a lot of that that revenue reduction. From a headline operating profit point of view, we reported 14,200,000 in the year. That was broadly in line with, where consensus had us. So although a drop from last year was exactly where we were expecting it to be across the three businesses. If I look at each one in turn then, say, from a fuels point of view, we reported 7,900,000 of operating profit. That reflects the normalization that I've talked about in market prices as oil prices and concerns over, supply stabilized in the year. The key indicator for us for fuels is, the PPL, so the the profit pence per liter that we achieve, for every liter that we sell.

18:01 So in the year, we achieved a PPL of 1.2. And that's slightly lower than than the last couple of years for those points that we've talked about, but actually it's broadly in line with where our long term, performance has been. In terms of our food business, so we delivered, 3,700,000 of operating profit there. And as Chris said, we had a strong half one trading position, with foods, which continued into the second half. The performance in year looks to be deflated slightly because of the investment in Lyondell. So the underlying business performance would have been 1,200,000 higher than that, but, obviously, we've taken on some first year costs associated with, the warehouse lease and and associated business rates and and charges.

18:47 So they had a good strong underlying business performance. Key indicator for them, as Chris has mentioned, is around pallets, so pallets stored and throughput. And we achieved a strong pallet stored of a 137,000 across the year, which is a good performance for the business. And then from a feeds point of view, we reported operating profit of 2,600,000 in the year. So, again, that reflects, that normalization, across the commodity prices and milk prices in the feeds business. And they've managed to achieve profit per ton of £5.21. So that's an indicator for us of the feeds business. So, again, slightly lower than last year for the reasons we've talked about already, but actually a really strong performance against the five year average for that business.

19:38 And then just one point to note before I move on to the next page, you'll see there is an exceptionals number in here, which is which is a credit. That's actually due to the fact that we received income in the first half of the year associated with it, a legacy level claim legal legal claim that goes back several years, and that just got settled in the year. And that's been offset slightly by some costs we've incurred in the year to support the development of a new ERP solution across our businesses. So that that latter project will be multiyear, but those are just the costs incurred in this year associated with that. K. Oops. Moving on to the bottom half of the income statement then. So just a few points to pull out here. Our finance costs in the year, look to have increased year on year.

20:26 So within those finance costs, we have, two particular categories. The first is around bank interest cost. So this, has actually improved year on year. So we went from 0.8 to 0.4 here. That just reflects the active cash management across the business, and our ability to just move cash and and avoid, interest charges on some of our facilities.

20:47 That's been offset by higher interest, costs associated with our IFRS 16, and lease charges. So that's where we have obviously taken on the lease for the Landale warehouse in the year, and that's, incurred an extra interest cost associated with that. In terms of, other aspects in there, our pension scheme in here remains broadly, unchanged year on year, and our effective tax rate is 25.4%. So just a little bit over the corporation tax rate, but that just relates to some business related nondeductibles. So nothing important to to to pull out from there. And as Chris has already mentioned, our dividend has increased again this year to 8.1p. So thirteenth year in a row, 3.8% increase year on year and has good dividend cover as well as good interest cover for us across our facilities as well.

21:44 Okay. Moving on to the balance sheet then. So I think the key point to pull out here is just the strong asset position we find ourselves in, which will support us as we look to to grow and develop the business. So you can see we have, total assets of 237,700,000. Within there, we do have an increase on our right of use assets and liabilities in the year, again, related to the LimeDale warehouse. You'll see a theme coming through here. And we also have vehicles that, go through there as well, and that's likely to increase year on year for us as we look to, renew some of the, rollover programs of some of our vehicles across our our businesses. Working capital for us, is, in a strong place here. So we have a good working capital position across our businesses with our fuels business in particular having a negative working capital cycle. So because of the nature of some of our customers, particularly around domestic customers, we do get cash in relatively quickly. So we have a a good strong working capital cycle with with the fuels business, which is the larger of our businesses.

22:52 And then in terms of our net cash position in here, I'll talk about it a little bit later, but you can see we're in a positive net cash balance position at the end of the year.

23:04 K. Just moving on to our pension then. So for those not aware, so we have a, a DB scheme, which was closed to new members, in 2002. There's around about 400 members in there at the moment, and we have been actively working to reduce that deficit over the last few years. So we make a company contribution of 2,100,000 per annum, which increases in line with our our dividend increase. And as well alongside that, we've also, conducted a triennial valuation, which was conducted for the 12/31/2022. And that shows, that that deficit on an accounting basis has reduced from 9,500,000 to 4.5. So a good positive reduction of 5,100,000 there, the majority of which relates to that company contribution as well as a positive investment, strategy that we've got across our assets.

23:59 In terms of the current cash position, you know, continuing that that contribution, we don't see as a constraint to to group development. I guess it's also worth pointing out that based on that, we think the recovery of the deficit will be where we need it to be in the next three to four years.

24:19 K. Moving on to cash flow then. So as a group overall, we are very cash generative. So, actually, our cash conversion our underlying cash conversion is around about a 100%. It looks to be a little bit lower in the year here at 77.5, but that's just related to a working capital movement from the end of the prior year where a supplier payment just slipped into the current financial year. If you normalize that out, our cash conversion is stronger to a 100%. And we've obviously used, that cash generation to invest in the business. So our development spend in the year relates to the acquisition of Jeff Borman that Chris has already talked about and our Lymedale CapEx. I'll come on to the details a little bit later, but broadly speaking, we were gonna spend about 8,500,000 on Lymedale and around about 6 of that was spent in full year '24.

25:12 And as I mentioned earlier, our working capital is generally in a strong position based on the business cycles that we have. Okay. Final, financial slide before I hand back to Kristen. So this is just, to reiterate the facilities we have around us, to support, the the current business, but also the the the future growth and development for us. So we have 61,000,000 of facilities with accordion access, against those. We do touch on the facilities and dip into them at points through the month and the year depending on our working capital, cycle and also the seasonality of of two of our businesses. But we do still have a lot of firepower there to support us for future growth and development, something of which the board is supportive of.

26:02 So they're happy to support a two times net debt to EBITDA position for us for for future development and growth.

26:09 Okay. With that, I will hand back to Chris. Thanks, Katie. As a new group leadership team, we have considered and reviewed strategy. And as part of that, we talked about our our purpose, why does the group exist, our vision, what is the group going to be, and our values, which is really how do we go about achieving the vision. So I've already mentioned the purpose, but it's worth repeating, which is our purpose is to act as a vital link in the supply chain, connecting essential suppliers with their customers, particularly where they don't have the ability to trade directly with each other. And all three of our businesses, as I've already articulated, fulfill that role.

26:55 Our vision then is to be an innovator in specialist distribution delivering value sustainably. So what does that actually mean? It means being the best at what we do in each of our chosen markets and innovating to ensure we stay the best through improving to ensure that we provide the market leading service in the long term and it's sustainable. And our values will be will help us achieve our vision through the the four c's. I'll not run through each of these in detail, but our overall aim is to drive our strategy by developing, challenging, and keeping our colleagues safe whilst collaborating to make use of our scale and expertise across the group.

27:40 And an example of that would be we're experts at fleet efficiency in our food business. We're now collaborating more effectively and to ensure those skills are deployed into our fuels business. Similarly, our MD of our fuels business is very experienced in terms of, direct sales, and therefore, we're using his skills not only to improve direct selling in our fuels business, but also in our feeds business.

28:10 Our strategy also continues to be underpinned by our ESG framework, and this is based on four pillars, safety, people, partnerships with customers and suppliers, and respect for the environment. And key developments in the year here have been the b corp accreditation, which I've already talked about, an enormous amount of work we've been doing around voice of customer in our fuels and feeds businesses, which we've then built into the growth plan and strategy for each of those two businesses, and further development of our TCFD assessment and disclosure, which you'll see in the report on accounts when those come out. But moving on to the the strategy itself. So each of our businesses has its own plan for growth.

28:57 And as addition in addition, as a group, our strategy is to deploy our capital into step change opportunities, which give a good return on capital employed. Our other job as a group is to ensure that we're deploying our strategic enablers as effectively as possible to help the businesses achieve their own growth plan and to deliver those step change projects. So that could be things around governance, coordinating collaboration, and allocating specialist resource. So we then look at fuels. Our inorganic strategy here is around m and a, and I'll talk about that in more detail in a moment.

29:38 Our organic strategy, has focused at the moment around improving our sales model. So we've taken what we've learned from our voice of customer, and we're doing a significant amount of work around both our domestic customer base and our commercial customer base. So if I'll just give an example of that, in our domestic customer base, we ran a pilot in one of our depots over last winter about the best way to interact with our domestic customers to make sure that we have a model that we're deploying in all of our depots so that if you as a customer ring our depot, you'll have exactly the same customer experience as you would do if you rang our Bobbins Wood depot. So that's been rolled out across the rest of the depots at the moment.

30:28 And then on the commercial side, our customer base has typically been SMEs. And that's meant we've not really leveraged our depot network to serve larger customers who require a multisite offering. And that's really attractive business for us because, actually, there's less competition because few people have our scale and are able to offer a comparative service. So we've just started to to dip our toe into the water doing that. We we have one contract that we won in the year that was starting to operate very successfully, and we're looking to add to that with additional customers in the current financial year. And then the other key area of focus in fuels business is around fleet efficiency.

31:13 So fuel tankers are increasingly expensive.

31:17 We need to be really disciplined around how much we use those to ensure that we've we're providing least cost to serve to our customer base. And, therefore, we've we've instigated a program of of extra discipline around where we locate our vehicles, how we route them, and having very strict delivery stay zones so we're minimizing the kilometers traveled for each delivery. So then move on to our food business. Here, the strategy will always come off growing our customer pipeline. Because if you grow your customer pipeline, you can have the optimal customers in your optimal customer mix in your existing facilities, and it gives you additional customer demand that you can look to service whether through a new warehouse or through some targeted m and a. And and Katie will talk about those in a little bit more detail shortly.

32:12 And lastly, but not least, in terms of our feed business, we're looking to grow market share, as I've already explained, through our academy, but also through direct selling and starting to extend our product range that we're selling to our existing farming customer base. And that's really leveraging our existing national operating platform, which means we have production facilities in all the right locations, transport in all the right locations. So if we can gain that market share, we can service it really effectively.

32:46 So if I talk in a bit more detail around fuels m and a. So fuels, we're number three in the market, but we've got just under 5% market share. Number one in the market is Certas. That's part of DCC. That's got north of 20% market share. Number two is a business called Watson's. That's owned by a US corporate, and that has less than 10% market share. And then below us, there are 10 to 15 large regional players who probably got one to 2% share each, and then there's a long tail of mom and pop businesses. So we have a dual approach to m and a. Firstly, we're focused on the top two to number 15 who all know that we'd be interested in buying their business and have the funding and capability to do it. We keep knocking on the doors. We keep telling them that's the situation.

33:41 We just need one of them to be in a position where they want to sell. We have had active conversations in the past. So at some point, someone will want to undertake that transaction. If we can do that at the right price, then that clearly would be a great way of growing our business in one step. Until somebody is in a position where they want to sell at a price we would want to do it, then we'll continue to do the second strand of our m and a strategy, which is smaller bolt on acquisitions. And here, I'm talking probably deal size of around 3,000,000 up to around 10,000,000. And what we have in the fuels market is lots of businesses that where the owners are near retirement age and therefore are looking to make an exit with a capital gain.

34:28 And therefore, we've got a track record of buying those type of businesses over the last few years, and we'll continue to do that. Once it gets the actual transaction, we've got a very established deal process and functional integration model. And then we're looking to drive value from that transaction in a number of ways. So firstly, if it's near our existing geography, there are cost synergies. Secondly, we're looking to build up depot density. So if we can do that, it means we can service the customers by traveling less distance from each depot, and therefore, we improve our fleet efficiency. Thirdly, we find where our market share exceeds about 10% in any given region, our margins are significantly higher because we come become a market leader on price rather than a market follower.

35:20 So by doing m and a, we start to build our market share up to that level and can benefit from those higher margins. And lastly, the the bigger our national footprint, the more we're going to be able to support those multisite national account type customers that we're now targeting. As I talked about earlier, our pipeline was a little bit quiet over the winter, but it's now really picked up. We're seeing lots of activity, and, hopefully, we'll be converting some of those into transactions over the coming months. The other thing I should just pick up on when I'm talking about fuels are also the opportunities around energy transition. And I split these into two. There's an opportunity around domestic, and there's an opportunity around commercial customers. So on the domestic side, the right solution in the transition period to reduce emissions from home heating would be HVO blend, which is blending in HVO a biofuel with the existing kerosene that people use to heat their homes.

36:21 And we've done a lot of work as an industry to get the previous government to agree to a consultation. Unfortunately, that was delayed by the election. However, there was cross party support for that consultation, and we're now undertaking a big exercise as an industry in contacting all that new crop of MPs to educate them and get them behind supporting this initiative. And we are I'm pleased to say those letters went out to m p MPs last week, and we're already getting some some interaction with those new members of parliament. So that's very positive, but it will take time to work its way through. And then on the commercial side, again, HVO is an opportunity, so it can act as a straight diesel replacement.

37:10 The challenge is at the moment, there's a bit of a supply demand price doom loop. So there is a price differential of about 15 to 20%. Therefore, customers don't want to buy it. Therefore, suppliers are not supplying very much of it. Therefore, there's a price differential of 15 to 20%. So I think there's an opportunity there for government to interact with the market to just break that doom loop a bit, and that would be a good position for us because we'll be well placed to provide that HVO to our customers. Now I'll hand over to Katie to talk about some of the activity we're doing around food expansion. Thank you, Chris. Okay. I will start with the warehouse expansion first. So just as a reminder, our investment in Lyondell is actually our second investment in warehouse growth beyond our Wardle head office site. So our first investment was in our Crewe facility in 2020.

38:10 So prior to that, we had a 100,000 pallet space, broadly speaking, at Wardle. When we invested in Crewe, that adds another 35,000 pallets, and the addition of Lyondell adds another 52,000 pallet spaces for us. So that increases our capacity by 39% to a total of a 187,000 pallets. With regards to where we are on on the project, as I mentioned earlier, we had have a CapEx investment of around about 8,500,000 of which, we will come in just below that. So we'll probably spend around about 8.2 to 8.3 in total, of which a good chunk of that was in full year '24. So our fit out has tracked, in line with plan, and we have all of our, racking and, sprinklers and various safety equipment in place now, and that was in place by the end of June twenty twenty four.

39:00 And our warehouse, as Chris mentioned earlier, is now 70% full and and is expected to be at operational capacity by early autumn. You'll hear us mention operational capacity a few times, and this is where we we won't ever look for the warehouses to be a 100% full because that makes it inefficient in terms of moving, some of the various pallets around. So we'll go for around about 92% full when we're looking at, an optimum optimum operational capacity. And the other big thing for us is is to to keep focusing on our customer pipeline, to support the full filling of the the Lyondell warehouse and to help us look for future growth initiatives. So moving on to other growth initiatives that we're looking at then. So from an m and a point of view, we are starting to look at what a targeted m and a pipeline might look for us.

39:49 So we've grown organically in this business so far to date. And as Chris has mentioned, the geography of those are all quite close together. So they're all based in the Northwest and very close to the M 6. So that means we can support our customers nationally because, as long as we're we're we're near a a motorway network, that's absolutely fine. But if we want to look to expand beyond the geography, actually looking at M and a is probably going to be more helpful for us because it will help establish an existing warehouse with an existing customer group and and just allows for that maturity to to to kind of get us to to the level we need to to be at a more remote location. So there's not a long list of potential m and a targets for us in in this area.

40:35 It's something that we're looking at just developing what that looks like at the moment. So we've had one or two conversations, but that's something we're gonna continue to mature over the next twelve months. Don't see that it's going to be as active as, the fuels, world that that Chris has just, talked about, but it's one for us to look at, exploring. And one of the other key benefits for us of looking for a warehouse that would be based somewhere else in the country, so potentially kind of Midlands to to Southeast, it will enable us to drive better efficiencies in our fleet. So whilst we can support our customers nationally at the moment, we do have periods of time where those where our fleet is effectively idle because we have a driver that needs to take a a rest break. And so those vehicles are effectively not not moving and not transporting things around for us.

41:26 If we can move to get a warehouse in a different part of the country, we effectively have two hubs, which allows us to use our vehicles much more efficiently around those hubs and support our customers whilst driving efficiencies for ourselves. So those are some of the key areas as to why m and a is an interesting area for us to look at from a food point of view, but we are early days in in how we're looking at approaching that. Okay. Just flicking back to Lyondell then in terms of some of the the more accounting side and and the numbers. So just some of the facts and figures here. So Lyondell is a fifteen year lease with a twelve year break clause within there. I've already talked about our investment forecast of 8,500,000, which will be slightly less, once we've finished paid our our final few bills.

42:12 In terms of the expected return here, so we're expecting it to deliver an annualized operating profit of around about 2,800,000 when it's, steady state. So that's kind of full year '26. As I mentioned earlier in full year '24, we did see an outflow as you would expect associated with that investment. So headline operating profit level that was 1,200,000, and at PBT, it was 1.7. In full year '25, we will see, an improvement on that. So there will be a 1,500,000, addition to headline operating profit. But by the time we get to PBT, that, interest lease cost makes up PBT neutral in year. So full year '26 is the first year where we start to see those returns at mature level. So as I said, that's 2,800,000 at operating profit.

43:01 And then from a PBT point of view, our interest charge effectively looks like it's on a decreasing balance basis is the way IFRS 16 tends to calculate it. So it will be 1,200,000 of PBT in full year '26, but that will grow to be 2,500,000 by the end of the lease as that kind of interest charge effectively unwinds for us. I've talked a little bit about right of use assets. So you saw that there was an increase on those in the full year results for full year '24. In totality for Lymedale, we will have a right of use asset of 27,200,000 and a right of use asset of 25,400,000. So the bulk of that will be the warehouse, but we'll also have a vehicle and plant, leases that will also support, the kitting out of the warehouse.

43:50 And overall for us, our business case remains in place, and we expect this to deliver a 20 IRR for the business. K. Thanks, Katie. So you can see our strategy features both organic and inorganic growth opportunities, and that gives us our investment case. So NWF is focused on delivering strong return on capital employed as shown with our recent Lyondell investments and our fuels m and a track record. We have a very strong balance sheet, and that reflects the scale and capability of our asset base. And it also means the board is very confident to invest in future development. We have cash generative businesses, and the development we've undertaken also returns cash.

44:36 So those two things together enables us to increase our dividends, which enables us to give shareholders that return, and we've managed to do that for thirteen years in a row. So that's the investment proposition. If I then just summarize because we can see some really good questions flicking up on the on the right hand side of our screen. So in summary, solid financial performance in 2024. Fuels responding to a normalizing market. Food, very strong performance, supporting Lyondell investments, and successful fit out of that new warehouse. Feeds, really effectively managing gross margin and cost base to give a resilient performance. We remain cash positive with long term funding in place for development.

45:22 We've also been through a period of of board succession. Two people here are part of that. But that concluded in July with our recent non exec director appointees. So the board is is now settled going forward. And from a current outlook perspective, it's very early in our financial year, and it it's the quiet time of our year. But trading to date is is consistent with board's expectations, and the board continues to be confident in our future development opportunities and outlook for the group. That concludes the the presentation. As I said, I can see some interesting questions lining up, so I'll look forward to answering those now. Chris, Katie, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab situated on the top right hand corner of your screen.

46:14 Just while the company take a few moments to review those questions submitted today, I'd like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can be accessed via investor dashboard. As you can see, we received a number of questions throughout today's presentation. If I please ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end. Okay. So I think we'll just take these in order that they've come in if if that works. So the first question we have is, is m and a a possibility in the feeds division? In the Southwest Region, there are a number a small number of family owned agricultural feed companies. I won't it's quite a long question, so I won't do all of it. To answer the question, I think it's not something we're actively looking at. And the reason for that is, this is a market where there's probably overcapacity.

47:11 So if we were to undertake m and a, I think we would almost be doing the rest of an industry a favor by taking capacity out for them, and we probably wouldn't benefit from that ourselves. There is an opportunity in this market for some of the larger players to be put together to take capacity out, and there would be significant synergies around both production and transport. But it's not something we are looking to do at the moment and nor are any of the other market participants looking to do that. The second question is in the fuels division, I believe you only operate from two depots in the Southwest, hence, underrepresented underrepresented in an area with plenty of rural households requiring heating, rural, and agricultural businesses.

48:06 That's absolutely right. It is a a region. We have looked to take m and a activity, and we will continue to do so. So you're right. It's a gap that we're very keen to fill. There are a number of potential targets in that area, and and we continue to target those. The third question we have says, NWF is a mini conglomerate. Is it possible that divesting two of the businesses and focusing on the remaining businesses would deliver better shareholder value? I don't view this business as a mini conglomerate, so that's probably step one. I don't like conglomerates. We are a specialist distributor, and all three of our businesses actually have quite a lot in common with each other. They just operate in quite different end markets.

48:59 However, to deal with the the underlying point to that, if if we were to focus just on one now, it would just make the group smaller, which I don't think would be the interests of shareholders. Our aim is to grow all three of our businesses. As we've articulated, we we see more opportunity for step change growth in our fuels and food business currently. And, clearly, at some future points in time as we grow I'm sorry. The third point to make around there is we actually have plenty of funding fire firepower at the moment for anything we want to do, so I don't have a desperate need for capital. However, as we grow and as we use those those funding sources, there might be a point in time where we need to use one of our existing businesses as a funding chip to support the growth of one or two of of the other businesses.

49:56 And that's something we will always consider and is always on the table. Similarly, we're a PLC. So as a board, if someone comes in and makes an offer for one, two, three, or the group as a whole, we are obliged to consider that seriously if it's in the interest of shareholders to do so, and we will always look at that seriously. Sorry. Where are we next? Yes. So next question is volumes in the feed business seem to have trended lower generally since 2018. Can you provide more detail on this and indicate how your market share has changed over the same period? So I'll I'll deal with the second part of that first. So the feeds market is generally flat.

50:44 There's the same amount of milks produced roughly of roughly the same every year. That means roughly the same amount of feed is produced every year to produce the same amount of milk. We have had a reduction in volume, but you'll note over the same time period, our profitability has improved. So that has reflected really us choosing to give up some pretty low margin volume, which we weren't making very much money from. And quite a lot of that, we could win back if we wanted to, but we still wouldn't make very much money from it. So, there's a reason why we have lost that. We also lost, some salespeople over that period who, again, were quite high volume, but we found once they'd left, they weren't really making huge amounts of contribution to the bottom line.

51:41 So, therefore, I'm actually more comfortable with where we are now, which is that we have volume that is profitable and that we should start to build back up from that base rather than being busy fuels and and chasing unprofitable volume. K. Next question. With reduced volatility in raw material prices, how do you foresee the margin dynamics evolving in the feeds division over the next few quarters? Yeah. So, yeah, I'm pleased with where our feeds business is. I think they managed that transition back to a normal market last year very effectively. The the feeds commodities market has been the least volatile. I've seen it in the seven and a half years I've been with the group. I'm not sure that will last.

52:32 But even so, actually, we're managing the position very effectively. So if it continues to lack volatility, then that's fine. We'll do okay. Yeah. I I don't see an issue for us in in that respect. Do you want to answer that one, Katie? Sure. I was quite I was quite happy just following the questions and getting Chris to answer. Okay. So the next one is in fuels, can you give an idea of what proportion of volumes goes to residential customers? And more broadly, what proportion of your fuels business do you think is directly exposed to electrification? So in terms of the first part, so, our our business is split kind of 75, 25. So around about 75% of our volume goes to commercial, and we we put agriculture in there as well and around about 25% to domestic.

53:21 Within those two businesses, we do have, different gross margins associated with those. So our domestic customers would attract a gross PPL of around about 13 to 14p, and our commercial would be more like 5 to 6. As you can imagine, our domestic customers tend to be a little bit more seasonal, so that would be very much more around kind of winter, and and and maintaining a level of heating through the winter, whereas commercial tends to be a little bit more stable for us. And, equally, our commercial volumes will be larger drops in size, so we'll be more efficient in how we deliver that. But that's broadly speaking how the market is split. And then in terms of electrification, I think Chris talked a little bit earlier about, you know, where we see potentially some of the the developments and what the interim steps might be around, HBO and and looking at how the the the government support a sustainable transition to a better fuel to support homeowners and and commercial.

54:25 And I think there's there's there's two elements to it. I think from a domestic point of view, it really does depend on how the government supports and subsidizes whatever the move is gonna be to to that end point. And I think from a commercial point of view, it really does depend on broader fleets and how, they transition, whether it's going to be around electrification and or, a liquid fuel. And I think that's something that would need to be understood, more globally rather than just UK specific. So that's a it's a trickier one to answer, but it's something that we're keeping our eye on. Yeah. And just to deal because you the the date in the question is sort of 2030. So what would happen over the next six years? On the domestic side, the electric threat would be s or c pumps.

55:11 The average domestic customer lives in a rural home. A rural home is more likely to have been built before 1919 to be detached, and the occupant is more likely to have a below average income. So the cost of actually putting an air source heat pump and it working into that type of home is very, very expensive and beyond the means of of most of the customer base. So we don't see a threat from from that unless it was massively subsidized. And as we all know, the the frankly, the country can't afford to do that. On the commercial side, our HGV is all gonna be electric in in in the short term. No.

55:59 And very little of what we sell goes into cars. So the growth of electric cars are are kind of a interesting, but not particularly relevant to our business. Next question is, given the increase in operating capacity at Linedale, how are you planning to maintain or attract new customers? So if if you think about Linedale, Linedale's adding 52,000 pallet spaces. That's a 39% increase in capacity. In FY '24, we peaked at 20,000 pallets more than our current capacity. So that's that's already 20,000 with the 52. We also aren't looking for 52. We're looking for 92% of 52,000.

56:45 So so that's a big chunk of it we already have with existing customers. We're also some of our existing customers are keen to give us additional products. So in many instances, we may not have all of the customer's product range. So a number of customers are keen to give us additional product range, and we're starting to see those flow through. And then the last element is securing new customers, but that's the smallest element of what we're looking for in terms of increased capacity. And then the next question, I don't know the answer to. So this is I have owned a share since before you became a PLC. I'd like to know what price a share was when you first issued them.

57:37 We'd have to come back to you on that. I'm afraid that massively predates me. So, we will look at the answer for that. As a as a matter of interest, we were having a clear out, and we found the accounts for the group from 1895 a few weeks ago. And I'm pleased to say they were a lot thinner than the current reporting accounts, but there we go. So we'll try and come back with an answer on that, just because it'd be quite interesting. But I think there was a number of share splits along the way, so, I'm not sure it's a straightforward answer. Okay. Questions? I think that's all the questions. So, thank you very much. Chris, Katie, thank you for answering all those questions you can from investors. And, of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet company platform.

58:28 Just before redirecting investors to provide you with their feedback, which I know is particularly important to the company, Chris, could I please just ask you for a few closing comments? Yeah. So thank you everyone for spending an hour with us. Keen to do these going forward to improve our communication with this part of our our shareholder and potential shareholder base. So in summary, we're yeah. We've got a new leadership team here, albeit I have been with the group in a different role for a number of years. We're very excited by our strategy for growth and keen to get on and deliver in that. I'm pleased that in a year where we were transitioning into a more normal market that we've been able to deliver a a solid financial result in line with market expectations and push forward with some of our development plans with the investment in the new warehouse at Linedale. So very excited about the the future and and keen to get going on that.

59:29 Chris, Katie, thanks for updating investors today. Can I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of NWF GROUP PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.