Board of Directors

Chris Belsham
Chief Executive Officer

Q. How is the strategy going to change under the new leadership team?

A. The strategy of the Group is twofold. Firstly, each of our businesses is aiming to be a leader and the number one benchmark in each of the markets in which they operate. This will be achieved through continuous improvement and change initiatives. Secondly, we will deploy capital into both organic and inorganic step change growth opportunities which give us the best return on investment, and build on our existing core competencies.

Q. What is the overall future investment strategy for the Group?

A. Currently, we believe the best return on investment will be achieved through continuing to consolidate the fragmented fuels distribution market and through supporting customer demand in our Food business through further investment in new warehousing or a target acquisition.

Q. Please tell us more about the normalisation you have seen in the year on margins in Fuels and Feeds?

A. Our Fuels business benefits when there is market concern regarding security of supply. Generally this is caused by a weather event which results in short periods of elevated margins. In recent years both the Covid-19 pandemic and then the conflict in Ukraine caused an extended period of concern around supply of fuel which supported Group margins. In the last financial year, supply conditions have been very stable, which resulted in the rapid normalisation of margins. Our Feeds business similarly benefitted from a rapid rise in the milk price in the summer of 2022, which led to significantly higher margins in the business. The milk price has subsequently declined to more normal levels, resulting in the normalisation of Feeds margins in the second half of FY23 and thereafter.

Q. Please tell us more about the commonalities between the three businesses?

A. All of our businesses provide a critical service connecting customers and suppliers, who otherwise would be unable to trade directly with each other. In our Fuels and Feeds businesses we enable large suppliers to distribute their products efficiently to individually small customers. In Food we enable food manufacturers and importers to integrate with the supply chain of large retailers.

Q. What are the barriers to entry to the markets in which the Group operates?

A. All of our businesses require scale, a well invested asset base, deep sector knowledge and operational capability.

Q. The Group continues to focus on its people and being skilled for growth; how does the people strategy play into the overall refreshed strategy?

A. The continued success and development of our Group is dependent on having a highly motivated and skilled team of colleagues operating across all three of our businesses. The focus in the next 12 months is to train our managers throughout the Group to be more effective in leading teams and delivering operational improvement.

Katie Shortland
Chief Financial Officer

Q. What is your required rate of return on investments?

A. Across the Group, we will continually assess opportunities that are both organic and inorganic and will allocate capital accordingly. Each investment may differ in terms of the nature and timing of the outlay and will be evaluated on individual merit as well as assessing the overall cost and risk to the Group. Typically, we will look to achieve a rate of return comfortably above our internal cost of capital with the most recent Lymedale warehouse reflecting a 20% IRR. Additionally, our most recent Fuels acquisitions have reflected a 6–7x EBIT multiple. With a continued strong balance sheet of £85.4 million net assets, we continue to review our investment opportunities.

Q. What is your approach to funding requirements?

A. With total assets across the Group of £237.7 million, NWF has a strong baseline for investment growth. In addition to this, the business generates a strong cash conversion through its operating activities and has access to key funding facilities to support continued investment, leaving it in a very positive position to support business and dividend growth.

Q. Whilst inflationary pressures have started to ease, have you seen any continuing short-term cost pressures, e.g. around leasing?

A. As a specialist distributor the Group has 358 vehicles, of which over 98% are leased. The leases across the businesses vary marginally but will typically be for five to seven years. With the continuation of high increases in interest rates since autumn 2022, this has led to an increase in vehicle cost and associated lease cost. The Group continues to look for ways to manage this cost pressure through the phasing of fleet renewal, the extension of lease terms, managing the number of leased trucks and reviewing other cost efficiency activities.

Q. What progress have you made on the Group’s energy transition during the year

A. With our last year’s report reflecting our first year of CFD reporting we continue to focus on this as a business to improve our maturity of thinking, discussion and planning across the Group. We have refined this further this year with some subtle changes across our risk and opportunities as well as consideration of the financial impacts of each risk or opportunity. In the more near term we continue to monitor any changes in regulations regarding energy transition to ensure our strategy remains appropriate.