NWF LON:NWF, the food, animal feed and fuel distribution company announced on Monday (10th March) that it had completed the acquisition of Northern Energy Oil as part of its strategy to grow its fuels distribution business through consolidation.
Northern, a 42-million-litre fuel distributor operating across five sites in North Yorkshire, Northumbria, and Lincolnshire, primarily serves domestic customers. The acquisition strengthens NWF’s presence in the North-East of England, where it had been underrepresented, and increases total fuel volumes by approximately 6% on a pro forma basis.
NWF will pay £8.3m, with £7.3m paid upfront in cash from NWF’s existing resources. The remaining £1m is held in retention, to be released in three tranches over 18 months, subject to post-completion conditions.
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NWF is consolidating a ‘fragmented’ market
Chris Belsha, NWF’s chief executive highlighted the acquisition as a prime example of NWF’s ongoing strategy to consolidate the fragmented fuels distribution market. He reiterated NWF’s commitment to pursuing further earnings-accretive acquisitions, supported by a strong financial position, and welcomed Northern’s team to the group.
This acquisition follows NWF’s purchase of Geoff Boorman Fuels in 2023 and reflects the company’s active pipeline of potential deals to expand its market share in the UK’s fuels sector.
As previously reported the AIM-listed Cheshire-based company has three divisions: Food, Fuels and Feed and operates nationally from headquarters in Wardle.
In the company’s last set of results, for the six months to end-November NWF reported a 25% increase in headline operating profit to £5m compared to 1H23. This was despite a 4% y-o-y reduction in revenue to £454.3m. However, once exceptional items including a legal settlement and ERP cost were stripped out and amortization of acquired intangibles, net finance costs, restructuring costs within the Fuels division, and pensions contributions were accounted for, operating profits fell from £4.6m to £3.6m, with profit before taxation down nearly 45% y-o-y to £2.1m, which impacted diluted EPS. Net debt also grew from £14.3m to £39.1m y-o-y.
Northern move is an earnings-accretive transaction
Northern was bringing in £35.1m of revenue for the year-ending August 2024, with earnings of £600,000 and pre-tax profit of £100,000, holding assets of around £2.7m and the transaction will be immediately earnings-accretive, with, said the company: “further margin improvements anticipated as Northern is integrated into NWF’s infrastructure.”
Fuels and Feeds were the primary contributors to NWF’s revenue. However, its Food division disappointed, partially-explained by start-up costs of NWF’s new warehousing facilities in Lymedale. Over the longer-term the Lymedale expansion will be beneficial to the whole group as it increases capacity and storage space and, said the company, will contribute an anticipated additional profit of £2.9m
Although the company’s last set of results were underwhelming, management noted that 1H24 was a period of change and operational reorganisation, and traditionally NWF has always had a stronger, more-profitable second-half of the year. It maintained its positive outlook.
NWF shares opened the week at 176p, down 9.75% over one-year, but up 12.9% year-to-date. The company has a market cap of £86.3m.
