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Looking at NWF Group 15 September 2013


I thought that it might be worth running a quick eye over AIM listed NWF Group, which is focused on the distribution of products for Agriculture, Food and Fuel. Currently £1.21.5p per - share I missed the preliminary results that were released last month, being away at the time.


By all accounts though they were pretty decent and the shares duly responded by moving up briefly to £1.32p from around £1.15p.

As they have now settled back again, I decided that this may be a good time to have a look.


Formerly a co-operative that was once known as North Western Farmers, the Cheshire based business duly joined AIM back in 1995 with the strategy to become a specialist distributor across the farming and food sectors. With its three divisions, the feed operation which supplies its products to some four thousand farmers across the UK accounts for around 25% of total revenues, which for the last Financial year came in at what was a record £545m. Additionally, there is the food business which consists of significant warehousing distribution and storage, dealing with importers and major supermarkets where it delivers on a daily basis. Last, but perhaps not least, there is a fuel arm which delivered something of a turnaround in business over the last year where operating profit jumped to £4.4m against a previous £600k.


Given that we had something of a cold and what seemed a protracted winter, it is perhaps not surprising that its fuel services which include some thirty eight thousand customers were in demand. But, the likes of extreme’s in weather can perhaps also work against the company, as in the past it has warned on profits due to unseasonal mild weather.


Certainly the company appear to have done well enough, while it also pays a reasonable dividend that currently yields close to 4%.

The total payment is 4.8p per share having been increased by 7% and is forecast by Broker Peel Hunt to be raised again to 5.1p next year.

However, while the recently delivered pre–tax profits came in at £8.4m next years consensus forecast is for a figure of £6.9m which would give an EPS figure of 11p against the last 14p number. So, while the most recent figures imply a PER of 8, the forward PER figure actually rises to 11, which doesn’t look quite so attractive to me.

 But, there is decent dividend cover here, which is something I like to see and despite the anticipated drop in profits, a slightly raised dividend would, on those forecast numbers be covered, around 2.2 times earnings.

On the balance sheet net debt has been reduced by 40% to £9.2m which is good to see against a previous £15.5m and it appears to be the boards aim to continue in debt reduction.


The company also has at its disposal a debt facility of up to £55m should it require the need, while current net gearing sits at 32%.

On another note, it is interesting to see that a large stake changed hands here last year, whereby an Icelandic Group formed to hold assets for a number of that Country’s pension funds acquired 25% of the company from Atorka, which was due to be wound up.

For now, I shall continue to keep an eye on NWF, as I would like to see one or two Institutions taking some interest. Although I do note the shares currently trade at a discount to sector peers with the average PER standing at 16.    



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