TIDMNWF
RNS Number : 9971U
NWF Group PLC
04 August 2020
NWF Group plc
NWF Group plc: Final results for the year ended 31 May 2020
NWF Group plc ('NWF' or 'the Group'), the specialist distributor
of fuel, food and feed across the UK, today announces its audited
final results for the year ended 31 May 2020.
2020 2019 %
----------------------------------------------------- --------- --------- ------
Financial highlights
Revenue GBP687.5m GBP671.3m +2.4%
Headline operating profit1 2 GBP14.3m GBP10.2m +40.2%
Headline profit before taxation1 2 GBP13.2m GBP9.7m +36.1%
Fully diluted headline earnings per share1 20.3p 15.8p +28.5%
Total dividend per share 6.9p 6.6p +4.5%
Net debt (excluding IFRS 16 lease liabilities) GBP12.3m GBP10.4m +18.3%
Net debt to headline EBITDA (excluding IFRS 16 lease
liabilities)3 0.7x 0.7x -
----------------------------------------------------- --------- --------- ------
Statutory results
Operating profit2 GBP13.5m GBP9.6m +40.6%
Profit before taxation2 GBP12.0m GBP8.7m +37.9%
Fully diluted earnings per share 18.1p 13.9p +30.2%
Net debt (including IFRS 16 lease liabilities) GBP38.6m
----------------------------------------------------- --------- --------- ------
1 Headline operating profit excludes exceptional items (see note
5) and amortisation of acquired intangibles. Headline profit before
taxation excludes exceptional items, amortisation of acquired
intangibles and the net finance cost in respect of the Group's
defined benefit pension scheme. Diluted headline earnings per share
also take into account the taxation effect thereon.
2 Results for the year ended 31 May 2020 are presented following
the adoption of IFRS 16 'Leases', the impact of which is to
increase operating profit and headline operating profit by GBP0.2
million. Profit before taxation and headline profit before taxation
are reduced by GBP0.2 million with the inclusion of GBP0.4 million
of finance costs under the new standard. The Group has elected to
apply the simplified transition approach and as such comparative
periods have not been restated.
3 Net debt to headline EBITDA is calculated based on net debt
excluding IFRS 16 lease liabilities. The headline EBITDA
calculation excludes the impact of IFRS 16 depreciation.
Highlights:
-- Sustained delivery throughout the year, revenue growth with
increased activity levels in all divisions.
-- Market share gains in Fuels and Feeds and solid operational performance in Food.
-- Three Fuels acquisitions completed and successfully
integrated during the year in line with our strategy, increasing
the scale of the business by over 20%.
-- Food's new 240,000ft(2) warehouse now fully racked increasing
our total storage capacity by 35% to 135,000 pallets, underpinned
by long-term customer contracts.
-- Significant outperformance in Fuels as a result of an
unprecedented fall in the oil price, and a significant increase in
domestic demand during lockdown delivered one-off gains.
-- Swift and effective response to Covid-19:
-- All divisions have remained open and operational, providing essential services.
-- Effective safe working practices implemented, enabling an
efficient response to increased demand.
-- High service levels maintained.
-- No Government support utilised and no staff furloughed.
-- Balance sheet remains in a strong position with leverage at
0.7x, after having invested GBP7.9m in acquisitions and
expansion.
-- Proposed 4.5% increase to the total dividend to 6.9p per
share, reflecting the Board's confidence in the resilience and
prospects of the business.
Divisional highlights:
Fuels - headline operating profit of GBP11.0 million (2019:
GBP5.6 million), ahead of previous expectations. Significant growth
attributable to an increase in volume and expansion of geographic
coverage from acquisitions. A dramatic fall in the oil price and an
increase in demand for heating oil from domestic customers during
lockdown delivered substantial one-off gains.
Food - headline operating profit of GBP1.4 million (2019: GBP1.8
million). The underlying performance from the business was in line
with expectations. The business incurred one-off start-up costs of
GBP0.5 million as planned for the significant warehouse expansion
in Crewe, which is backed by customer contracts. Operationally the
business successfully managed the increase in supermarket demand
during lockdown.
Feeds - headline operating profit of GBP1.9 million (2019:
GBP2.8 million). Strong volume and market share growth in a smaller
ruminant market. However, these volume benefits were offset by
higher energy costs and margin pressure in the second half
following commodity cost increases. Investment in the future with
the launch of the NWF Academy training our future nutritionists to
support continued growth.
Richard Whiting, Chief Executive, NWF Group plc, commented:
"NWF has delivered a very strong set of results, ahead of
previous expectations, demonstrating both resilience and growth.
Three acquisitions have been completed in Fuels and we have added
significant additional warehouse capacity to support long-term
customer contracts in Food. Feeds gained share with volume growth
in a contracting market. The fundamental resilience of the Group
has been highlighted with the response to the Covid-19 crisis. Huge
thanks must go to all our employees for their outstanding efforts
in very challenging times. All our employees were designated as key
workers, demand increased, deliveries to customers were completed
and safe working and home working where possible were implemented
in early March and remain effective today."
A virtual meeting is being held today for analysts at 9.30 a.m.
For login details please contact Alice McLaren at MHP
Communications alice.mclaren@mhpc.com.
Information for investors, including analyst consensus
forecasts, can be found on the Group's website at
www.nwf.co.uk.
Richard Whiting, Chief Reg Hoare / James Bavister
Executive / Mike Bell / Ed Allsopp
Chris Belsham, Group Finance
Director Alice McLaren
NWF Group plc MHP Communications Peel Hunt LLP
(Nominated Advisor)
Tel: 01829 260 260 Tel: 020 3128 8591 Tel: 020 7418 8900
Chair's statement
Overview
I am pleased to report a year of significant growth for the
Group with all three divisions making progress. I am proud of the
response of all our employees to the Covid-19 pandemic and would
like to thank them for their ongoing efforts during this difficult
time. NWF is a resilient business and plays a key role in providing
food, feed and fuel to the country. We continued to operate at full
capacity and satisfied the increased demand from our customers
during the lockdown period. Employees are designated key workers,
their safety is paramount and we swiftly introduced safe ways of
working across the Group and moved all employees to home working
where practical. I am also pleased to report that NWF has not
utilised any form of Government support, furloughed any employees
or delayed payments through this critical time.
As a consequence of the good progress achieved, the Group's cash
generation, and confidence in the Group's resilience and future
prospects, the Board is recommending a final dividend of 5.9p per
share, to be paid to shareholders on 8 December 2020 (2019: 5.6p)
giving a total dividend of 6.9p per share (2019: 6.6p), a 4.5%
increase on the prior year.
Our business
NWF Group is a specialist distributor delivering fuel, food and
feed across the UK. Each of our trading divisions has scale and
good market position, and is profitable and cash generative. Each
division trades under different brands with their own brand
architecture as follows:
Fuels NWF Fuels (including a number of local sub-brands)
Food Boughey
Feeds NWF Agriculture, SC Feeds, New Breed and Jim Peet
Key areas of focus for the Board in 2020 were:
Responding proactively to market conditions
The Group has responded well to market conditions experienced
during the year. The demand for fuel was robust through the summer
and into the winter. As lockdown commenced there was a significant
increase in demand for heating oil across the country which we
delivered effectively from our 25 depots. This increased demand,
coupled with the sharp fall in the oil price, enabled lower prices
to be passed on to customers whilst improving margins. In Food we
successfully managed the volatility of demand during the period of
Brexit uncertainty in the autumn when stocks were built up in the
supply chain. From February 2020 as the impact of the Covid-19
pandemic was apparent, demand for ambient groceries from
supermarkets increased dramatically. We were able to respond and
meet this increased demand, whilst implementing safe ways of
working. Against a backdrop of lower feed market volumes, NWF
increased its volumes by focusing on the nutritional needs of our
farming customers.
Delivering on strategy
The Group completed the acquisition of three Fuels businesses
during the year in line with our strategic plan. Our geographic
reach was broadened through these acquisitions. Ribble Fuel Oils
and Caldo operate in the North West extending our presence north
and into Yorkshire. Darch in Somerset and Devon expands our
presence in the South West. All these businesses have been
successfully integrated into Fuels. The Covid-19 pandemic has
caused us to put a temporary pause on our Fuels acquisition
strategy. In Food we have significantly expanded our warehousing
capability by leasing and operating a new 240,000ft(2) warehouse
backed by customer contracts. This increases our storage capacity
by 35%. The fit out of this warehouse was completed during the
lockdown period and it is now fully operational. The NWF Academy in
Feeds has been launched, which trains future nutritionists over a
structured 18-month programme.
Cash generation
Cash generation remains a focus for the Group and net debt has
been maintained at less than 0.7x EBITDA having completed three
acquisitions in the year and with the investment in a significant
warehouse expansion.
Rewarding good service
The consistent focus on excellence in customer service across
the Group has been critical to our continued development and has
enabled gains to be achieved in each of the three divisions in the
year.
Commodity volatility
Volatility in oil and feed commodity prices was significant and
the businesses managed this effectively. In Fuels, the price of oil
(which is purchased on the spot market) moved dramatically with a
high point of $69 per barrel and a record low of $19 per barrel for
Brent Crude. In line with market practice, Feeds buys most of its
raw materials under forward purchase contracts. Significant changes
in feed input commodities were managed through feed prices during
the year.
ESG framework
The Board recognises the importance of good corporate governance
and continues to adopt the Quoted Companies Alliance Corporate
Governance Code ('the QCA Code') which we believe has been
constructed in a simple, practical and effective style and that
meaningful compliance with its ten main principles should provide
shareholders with confidence in how the Group operates. Our ESG
framework has been expanded with the development of our
sustainability policy which is now on our website and is detailed
in the Annual Report.
Employees
The Group now employs in excess of 1,200 people across the three
divisions and Head Office. I would like to offer my personal thanks
to all of our employees for their outstanding efforts and
commitment to the Group during these challenging times.
Board of Directors
I would like to personally thank Yvonne Monaghan, who steps down
from the Board in September 2020, for her contribution as a highly
valued member of the Board in her role as Senior Independent
Non-Executive Director and Chair of the Audit Committee. We are
pleased to welcome Richard Armitage, who joined the Board on 1 July
2020, and will succeed Yvonne as Chair of the Audit Committee in
September 2020. I am also pleased to report that David Downie will
succeed Yvonne in the role of Senior Independent Non-Executive
Director.
I look forward to updating shareholders on the Group's
continuing progress at the time of the Annual General Meeting on 24
September 2020.
Philip Acton
Chair
4 August 2020
Business and financial review
NWF has delivered a very strong set of results demonstrating
both resilience and growth. Three acquisitions have been completed
in Fuels and we have added significant additional warehouse
capacity to support long-term customer contracts in Food. Feeds
gained share with volume growth in a contracting market. The
fundamental resilience of the Group has been highlighted with the
response to the Covid-19 crisis. Huge thanks must go to all our
employees for their outstanding efforts in very challenging times.
All our employees were designated as key workers, demand increased,
deliveries to customers were completed and safe working and home
working where possible were implemented in early March and remain
effective today.
A strong focus on cash has continued and the record profit
performance has been converted into cash ensuring the Group has
significant headroom under its banking facilities and against its
covenants during this period of uncertain economic outlook. We are
proposing an increased dividend, demonstrating the Board's
confidence in the resilience of the Group, and have a number of
strategic development opportunities which we continue to
review.
Fuels has delivered an outstanding result in the year,
completing and successfully integrating three acquisitions and
trading ahead of expectations throughout the year. The business
successfully delivered the significant increase in demand for
heating oil during lockdown. The Food division's underlying
performance was solid and the business expanded significantly with
the addition of a new 240,000ft(2) warehouse backed by customer
contracts. The demand for Food increased dramatically as lockdown
commenced and the business satisfied this additional demand and
completed the fit out of the new warehouse by the year end as
planned. Feeds grew volume in a smaller market, gaining share with
demand remaining reasonably robust during lockdown. We also
launched the NWF Academy, which will train our future nutritionists
over a structured 18-month programme, to support further business
development.
The Group delivered headline operating profit of GBP14.3 million
(2019: GBP10.2 million) and headline profit before tax was 36.1%
higher at GBP13.2 million (2019: GBP9.7 million). Operating profit
increased by 40.6% to GBP13.5 million (2019: GBP9.6 million).
Diluted headline earnings per share were 28.5% higher at 20.3p
(2019: 15.8p).
Cash management remains strong with net debt of GBP12.3 million
(2019: GBP10.4 million) excluding lease liabilities, representing
0.7x EBITDA, after GBP7.9 million of development expenditure and
GBP3.8 million of normal net capital expenditure. Development
expenditure was GBP6.0 million on Fuels acquisitions and GBP1.9
million capital investment in the new Food Crewe warehouse.
Fuels
Fuels' outstanding performance was a consequence of solid
trading throughout the year with an improved product mix, the
benefit of three acquisitions in 2020 and the full year impact of
acquisitions completed in the prior year. In addition, there was a
significant demand increase throughout lockdown which resulted in
over 37% more deliveries than the prior year on a like-for-like
basis. Leveraging the benefits of a newer, modern fleet the
business was able to prioritise domestic customers as commercial
demand fell during lockdown. At the same time the price of oil fell
dramatically throughout March and April, enabling the business to
pass on lower prices whilst strengthening margins.
Volumes rose 20.5% to 665 million litres (2019: 552 million
litres), and revenue increased by 6.1% to GBP470.2 million (2019:
GBP443.0 million) as a result of higher volumes more than
offsetting lower oil prices. On a like-for-like basis (excluding
acquisitions in the year) volumes were stable, but with a
significantly increased proportion of heating oil. The average
Brent Crude oil price in the year was $54 per barrel compared to
$70 per barrel in the prior year. Oil hit a record low of $19 per
barrel in April 2020.
Headline operating profit was GBP11.0 million (2019: GBP5.6
million) as a consequence of increased volumes, both organic and
from acquisitions, positive product mix and improved margins across
the year. Net profits of 1.6 pence per litre highlight the one-off
gain of approximately 0.6 pence per litre in the year as a result
of the unprecedented fall in the oil price and the dramatic
increase in demand for heating oil.
Good strategic progress has been made with three acquisitions
successfully completed and integrated, Ribble Fuel Oils and Caldo
(North West) and Darch (South West), expanding the depot network
with six additional locations and adding 120 million litres to the
volume of the division, an increase of over 20%.
The Fuels division operates on a de-centralised model with depot
management teams focused on optimising performance for the specific
conditions of their local market. This model supported our ability
to respond swiftly and effectively to the increased consumer demand
and significant commodity price volatility experienced during
lockdown. We continue to believe that our model is the most
effective way to maximise performance, given the industry
structure, but we also believe there are opportunities to leverage
benefits from the breadth of our growing network. As such we
continue to invest in enhancing systems and capabilities for the
Fuels division which we believe will improve efficiencies and
provide a strong platform for continued growth.
With over 116,000 customers (2019: 63,000) being supplied across
25 fuel depots in the year (2019: 19), Fuels operates in large and
robust markets and as a business it has consistently proved it can
effectively manage the impact of volatility in oil prices. The
industry remains highly fragmented, with many small operators,
which provides NWF with further opportunities to consolidate the
market and increase share.
Food
This has been a year of significant development with the
planning and investment in a new 240,000ft(2) warehouse in Crewe
backed by long-term customer contracts, which increases the storage
capacity of the business by 35% to 135,000 pallet spaces. The
underlying performance has been in line with expectations and the
business managed the huge demand peak in ambient groceries from the
supermarkets in February and March.
Revenue increased by 0.8% to GBP48.3 million (2019: GBP47.9
million). Storage overall was at an average of 103,000 pallets
(2019: 100,000 pallets), with external warehousing being utilised
until April. Significantly, pallets despatched increased by 4% on
the prior year, reflecting the increased activity of new customer
contracts and the additional demand experienced before and during
lockdown.
Headline operating profit was GBP1.4 million (2019: GBP1.8
million), reflecting the solid underlying business performance
offset by GBP0.5 million of one-off start-up costs incurred at
Crewe. Demand continued to increase for e-fulfilment business with
additional customers now utilising the facility, and the packing
room and Palletline were in line with expectations.
In February 2020 the Group commenced operations in an additional
leased 240,000ft(2) warehouse in Crewe conveniently located close
to the M6 and to its main Wardle site. This newly constructed,
state-of-the-art facility is backed by long-term customer
contracts. The facility was fully racked out and completed on time
and in line with budget in spite of lockdown and is fully
operational with stock build underway.
Demand for our customers' products continues to be stable and
the outlook for most product categories handled by the business is
resilient. The business operates in a competitive supply chain and
needs to continually demonstrate the value and service that it
provides to food manufacturers and importers. The business has a
leading position in consolidating ambient grocery products in the
North West, with high service levels, industry leading systems and
a strong operating performance being the key components of its
customer proposition.
Feeds
Feeds increased market share across the country supplying more
feed direct to farms, to feed merchants and to other compounders.
Total feed volume increased by 5.8% to 625,000 tonnes (2019:
591,000 tonnes). Feed market volumes ended the year 6% down
compared to the prior year, in part owing to good silage stocks on
farm and partly as a result of a lower milk price for a number of
farmers who looked to reduce feed inputs.
Commodity prices gradually declined in the first half to
November 2019 and then increased steadily before a sharp peak in
early April 2020 at a level 30% higher than the low point, then
subsequently reducing. This resulted in price increases in the
second half following the commodity cost increases.
Revenue was lower at GBP169.0 million (2019: GBP180.4 million)
reflecting the lower average feed and commodity prices in 2020.
Headline operating profit was GBP1.9 million (2019: GBP2.8
million). Higher energy costs and increases in commodity prices
impacted margins and offset the volume benefits.
Feeds launched the NWF Academy in September 2019 in which new
trainees engage on an 18-month structured training programme to
become future NWF nutritionists. The Academy has recruited a second
group to the programme which has been well received across the
industry.
Average milk prices in Great Britain were reasonably stable,
moving from 28.0p to 26.8p per litre over the period with a high of
29.9p per litre in November 2019. During lockdown, with lower
levels of demand from the food service sector, milk pricing came
under short-term pressure. Reflecting this environment, milk
production fell marginally by 0.8% to 12.5 billion litres (2019:
12.6 billion litres).
Feeds has a very broad customer base, working with over 4,750
farmers across the country. This base, and the underlying robust
demand for milk and dairy products, results in a reasonably stable
overall demand for our feed in most market conditions.
Outlook
In Fuels, we have a proven depot operating model and are
leveraging our capability by increasing the depot network through
acquisitions. The opportunity to consolidate the market remains
significant. In the new financial year Fuels will benefit from a
full year contribution from the 2020 acquisitions, but does not
anticipate a repeat of the exceptional conditions in the oil
market.
In Food, we are focused on continuing to fill and fully utilise
our new warehouse in Crewe, having incurred significant start-up
costs as planned during 2020. We are also continuing to improve
efficiency, working with our customers and managing the variable
demand patterns that have been a consequence of Covid-19 and the
end of the Brexit transitional arrangements.
In Feeds, current margins and volumes are in line with our
expectations for this time of the year. Our mills in the North,
Cheshire and the South West are aligned to the needs of our farming
customers in these key areas of the country.
The Group has clearly demonstrated its resilience and capability
to deliver growth, and has strong cash flows and flexible banking
facilities to fund growth alongside a strong asset base. We will
therefore continue to consider acquisition opportunities, building
on our successful track record of acquiring and integrating
businesses, as well as investment in organic development.
Performance to date in the current financial year has been in
line with the Board's expectations. Overall, the Board continues to
remain confident about the Group's future prospects.
Group results
For the year ended 31 May
2020 2019
GBPm GBPm
------------------------------------------------------- ------- -------
Revenue 687.5 671.3
Cost of sales and administrative expenses (674.0) (661.7)
------------------------------------------------------- ------- -------
Headline operating profit(1) 14.3 10.2
Exceptional items (0.5) (0.5)
Amortisation of acquired intangibles (0.3) (0.1)
------------------------------------------------------- ------- -------
Operating profit(3) 13.5 9.6
Financing costs (1.5) (0.9)
------------------------------------------------------- ------- -------
Headline profit before tax(1) 13.2 9.7
Exceptional items (0.5) (0.5)
Amortisation of acquired intangibles (0.3) (0.1)
Net finance cost in respect of defined benefit pension
scheme (0.4) (0.4)
------------------------------------------------------- ------- -------
Profit before taxation(3) 12.0 8.7
Income tax expense(2) (3.1) (1.9)
------------------------------------------------------- ------- -------
Profit for the year 8.9 6.8
------------------------------------------------------- ------- -------
Headline EPS(1) 20.5p 15.8p
------------------------------------------------------- ------- -------
Diluted headline EPS(1) 20.3p 15.8p
------------------------------------------------------- ------- -------
Dividend per share 6.9p 6.6p
------------------------------------------------------- ------- -------
Headline dividend cover(1) 2.9 2.4
------------------------------------------------------- ------- -------
Headline interest cover 20.4 20.4
------------------------------------------------------- ------- -------
1 Headline operating profit is statutory operating profit of
GBP13.5 million (2019: GBP9.6 million) before exceptional items of
GBP0.5 million (2019: GBP0.5 million) and amortisation of acquired
intangibles of GBP0.3 million (2019: GBP0.1 million). Headline
profit before taxation is statutory profit before taxation of
GBP12.0 million (2019: GBP8.7 million) after adding back the net
finance cost in respect of the Group's defined benefit pension
scheme of GBP0.4 million (2019: GBP0.4 million), the exceptional
items and amortisation of acquired intangibles. Headline EPS also
takes into account the taxation effect thereon. Headline dividend
cover is calculated using diluted headline EPS.
2 Taxation on exceptional items in the current period has
reduced the charge by GBPNil (2019: GBP0.1 million).
3 During the year ended 31 May 2020, the application of IFRS 16
resulted in an increase in operating profit in the consolidated
income statement of GBP0.2 million in comparison to treatment under
IAS 17, as operating lease payments under IAS 17 were replaced by a
depreciation charge on right of use assets. Profit before taxation
reduced by GBP0.2 million with the inclusion of GBP0.4 million of
finance costs under the new standard.
Group revenue increased by 2.4% to GBP687.5 million (2019:
GBP671.3 million) with higher activity levels and revenue from
acquisitions largely offset by the impact of the lower oil price in
the final quarter and lower feed revenues. Headline operating
profit was GBP14.3 million, an increase of 40.2% (2019: GBP10.2
million). Operating profit increased 40.6% to GBP13.5 million
(2019: GBP9.6 million).
Financing costs (excluding those in respect of the defined
benefit pension scheme) increased by GBP0.6 million to GBP1.1
million, with the addition of GBP0.4 million of interest on IFRS 16
lease liabilities. The interest on bank debt was GBP0.7 million
(2019: GBP0.5 million) and headline interest cover was 20.4x
(excluding IAS 19 net pension finance costs and IFRS 16 lease
interest) (2019: 20.4x).
Headline profit before taxation increased by 36.1% to GBP13.2
million (2019: GBP9.7 million). Profit before taxation increased by
GBP3.3 million to GBP12.0 million (2019: GBP8.7 million). There
were exceptional items in the year of GBP0.5 million relating to
acquisition costs (2019: GBP0.5 million).
The tax charge for the year was GBP3.1 million (2019: GBP1.9
million) which included an increase in the deferred tax liability
of the Group following the Government's decision to maintain the
corporation tax rate at 19% rather than reduce it to 17% from 1
April 2020. This resulted in a one-off tax charge of GBP0.5
million. Excluding the impact of deferred tax, the effective
underlying tax rate for the year was 21.7% (2019: 20.8%). The
post-tax profit for the year was GBP8.9 million (2019: GBP6.8
million).
The headline earnings per share of 20.5p represented an increase
of 29.7% (2019: 15.8p), diluted headline earnings per share
increased by 28.5% to 20.3p (2019: 15.8p). The proposed full year
dividend per share increased by 4.5% to 6.9p which reflects the
Board's confidence in the Group, its strong underlying cash
generation and its future prospects. The proposed dividend equates
to a dividend cover ratio of 2.9x.
The finance costs in respect of the defined benefit pension
scheme were in line with the prior year at GBP0.4 million (2019:
GBP0.4 million).
Balance sheet summary
As at 31 May
2020 2019
GBPm GBPm
----------------------------------------------- ------ ------
Tangible and intangible fixed assets 79.9 70.2
Right of use assets 27.3 -
Net working capital 4.8 6.1
Derivative financial instruments 0.1 0.2
Net debt (excluding IFRS 16 lease liabilities) (12.3) (10.4)
Lease liabilities (26.3) -
Current tax liabilities (0.9) (1.1)
Deferred tax liabilities (net) (0.5) (0.6)
Retirement benefit obligations (21.0) (17.3)
----------------------------------------------- ------ ------
Net assets 51.1 47.1
----------------------------------------------- ------ ------
The Group increased net assets by GBP4.0 million to GBP51.1
million (31 May 2019: GBP47.1 million). This reflects the robust
trading performance during the year with a retained profit for the
year of GBP5.7 million (2019: GBP3.7 million) partially offset by
an increase in the accounting valuation of the pension deficit.
Tangible and intangible fixed assets increased by GBP9.7 million
to GBP79.9 million as at 31 May 2020 (31 May 2019: GBP70.2 million)
largely as a result of the intangible assets arising on
acquisitions. The depreciation (excluding IFRS 16 depreciation on
right of use assets) and amortisation charges for the year to 31
May 2020 were GBP4.1 million and GBP0.6 million respectively (2019:
GBP3.9 million and GBP0.8 million respectively).
Group level ROCE (based on headline operating profit) is 16.7%
as at 31 May 2020 (31 May 2019: 13.4%).
Net working capital decreased by GBP1.3 million in the year as a
result of a reduction in the value of stock at the year end
reflecting the lower oil and commodity prices. The Group's
inventories decreased by GBP0.9 million to GBP4.7 million (31 May
2019: GBP5.6 million) with trade and other receivables decreasing
to GBP56.7 million (31 May 2019: GBP67.2 million) and a decrease in
trade and other payables to GBP56.6 million (31 May 2019: GBP66.7
million).
Net debt increased by GBP1.9 million to GBP12.3 million (31 May
2019: GBP10.4 million), reflecting the combined impact of the
acquisitions in the year, the investment in the Crewe warehouse and
the strong trading performance. At the year end, the Group's net
debt to EBITDA ratio was 0.7x (2019: 0.7x).
The deficit of the Group's defined benefit pension scheme
increased by GBP3.7 million to GBP21.0 million (31 May 2019:
GBP17.3 million). The value of pension scheme assets increased by
GBP2.1 million to GBP40.1 million (31 May 2019: GBP38.0 million)
predominantly as a result of employer contributions, and the value
of the scheme liabilities increased by GBP5.8 million to GBP61.1
million (31 May 2019: GBP55.3 million) largely as a result of the
decrease in the discount rate used to calculate the present value
of the future obligations (31 May 2020: 1.65%; 31 May 2019:
2.50%).
Cash flow and banking facilities
For the year ended 31 May
2020 2019
GBPm GBPm
--------------------------------------------------------------- ------ -----
Operating cash flows before movements in working capital
and provisions 23.8 12.8
Working capital movements 1.7 (3.9)
Utilisation of provision - (0.1)
Interest paid (1.1) (0.5)
Tax paid (2.7) (1.9)
--------------------------------------------------------------- ------ -----
Net cash generated from operating activities 21.7 6.4
--------------------------------------------------------------- ------ -----
Capital expenditure (net of receipts from disposals) (5.7) (2.8)
Acquisition of subsidiaries - cash paid (net of cash acquired) (6.0) (3.5)
Capitalised legal costs associated with leases (0.3) -
Payment of contingent deferred consideration - (0.8)
--------------------------------------------------------------- ------ -----
Net cash absorbed by investing activities (12.0) (7.1)
Net increase in bank borrowings 1.6 6.2
Capital element of leases (5.6) (0.1)
Dividends paid (3.2) (3.1)
--------------------------------------------------------------- ------ -----
Net increase in cash and cash equivalents 2.5 2.3
Cash and cash equivalents at beginning of year 2.8 0.5
--------------------------------------------------------------- ------ -----
Cash and cash equivalents at end of year 5.3 2.8
--------------------------------------------------------------- ------ -----
The Group has completed three acquisitions in the year with a
total consideration (net of cash acquired) of GBP6.0 million. The
closing net debt (excluding IFRS 16 lease liabilities) of GBP12.3
million represents a net debt to EBITDA ratio of 0.7x.
The cash impact of working capital movements was GBP1.7 million,
driven by the reduction in the value of stock at the year end,
reflecting the lower oil and commodity prices. There were net
non-cash movements of GBP0.4 million within working capital. Net
cash generated from operating activities and after IFRS 16 lease
payments was GBP16.1 million (2019: GBP6.4 million) representing a
cash conversion ratio of 112.6% of headline operating profit (2019:
62.7%).
Net capital expenditure in the year at GBP5.7 million (2019:
GBP2.8 million) exceeded the annual depreciation charge, excluding
IFRS 16 depreciation, of GBP4.1 million (2019: GBP3.9 million)
reflecting the investment in Crewe.
The Group's banking facilities, totalling GBP65.0 million, were
renewed in June 2018 and are committed through to 31 October 2023
with the exception of the bank overdraft facility of GBP1.0 million
and the GBP4.0 million bank guarantee facility which are renewed
annually. There remains substantial facility headroom available to
support the development of the Group. Within the total facility of
GBP65.0 million, the Group has an invoice discounting facility, the
availability of which depends on the level of trade receivables
available for refinancing and which is subject to a maximum
drawdown of GBP50.0 million. The banking facilities are provided
subject to ongoing compliance with conventional banking covenants
against which the Group has substantial levels of headroom.
Principal risks and uncertainties
As with all businesses, the Group is affected by a number of
risks and uncertainties, some of which are beyond our control. The
principal risks and uncertainties which could have a material
adverse impact on the Group are:
-- Covid-19 pandemic - The global pandemic, Covid-19, presents a
number of different risks to the business. This is particularly the
case if there is a second wave of Covid-19 which results in a
further nationwide lockdown. Firstly, the pandemic poses a risk to
the health and safety of employees. Secondly, the impact of the
pandemic on the UK economy and therefore demand for the Group's
products and services, particularly in the Fuels division, is
uncertain. In addition, the response of the UK Government to the
pandemic may create restrictions on the Group's ability to
operate.
-- Brexit - The uncertainty around the implications of the UK
reaching the end of the transition period without having agreed a
trade deal with the European Union and potential associated
exchange rate volatility creates commodity price risk. There is
also some uncertainty around demand in agriculture given the
trading relationship with Europe and the subsidy support received
by farmers.
-- Commodity prices and volatility in raw material prices - The
Group's Feeds and Fuels divisions operate in sectors which are
vulnerable to volatile commodity prices both for fuel and for raw
materials.
-- Impact of climate on earnings volatility - The demand for
both the Feeds and Fuels divisions is impacted by climatic
conditions and the severity of winter conditions in particular,
which directly affect the demand for heating oil and animal feeds.
The inherent uncertainty regarding climatic conditions represents a
risk of volatility in the profitability of the Fuels and Feeds
divisions.
-- Pension scheme volatility - Increases in the ongoing deficit
associated with the Group's defined benefit pension scheme would
adversely impact on the strength of the Group's balance sheet and
could lead to an increase in cash contributions payable by the
Group.
-- Recruitment, retention and development of key people -
Recruiting and retaining the right people is crucial for the
success of the Group and its development.
-- Infrastructure and IT systems - IT system failures or business interruption events (such as cyber-attacks) could have a material impact on the Group's ability to operate effectively.
-- Non-compliance with legislation and regulations - The Group
operates in diverse markets and each sector has its own regulatory
and compliance frameworks which require ongoing monitoring to
ensure that the Group maintains full compliance with all
legislative and regulatory requirements. Any incident of major
injury or fatality or which results in significant environmental
damage could result in reputational or financial damage to the
Group.
-- Strategic growth and change management - A failure to
identify, execute or integrate acquisitions, change management
programmes or other growth opportunities could impact on the
profitability and strategic development of the Group.
Further information on the Group's mitigating actions against
risks and uncertainties will be detailed in the Annual Report.
Going concern
The Group has an agreement with The NatWest Group for credit
facilities totalling GBP65.0 million. With the exception of the
bank overdraft facility of GBP1.0 million and the GBP4.0 million
bank guarantee facility, which are renewed annually, these
facilities are committed through to 31 October 2023. As at 31 May
2020 the Group had available facilities of GBP49.5 million (based
on actual invoice discounting availability and overdraft
facilities), against which the Group was utilising GBP11.9
million.
The Board has prepared cash flow forecasts for the period to 31
May 2022. Under this base case scenario, the Group is expected to
continue to have significant headroom relative to the funding
available to it and to comply with its banking covenants.
The Board has also considered various other severe downside
scenarios, including the possibility of a second lockdown as a
result of a second wave of Covid-19. These downside scenarios
excluded any mitigating actions that the Board would be able to
take to reduce costs. Under these scenarios, the Group would still
expect to have sufficient headroom in its financing facilities.
Accordingly, the Directors, having made suitable enquiries, and
based on financial performance to date and forecasts along with the
available banking facilities, have a reasonable expectation that
the Group has adequate resources to continue in operational
existence for the foreseeable future. The Group therefore continues
to adopt the going concern basis of accounting in preparing the
annual financial statements.
Share price
The market price per share of the Company's shares at 31 May
2020 was 201.0p (31 May 2019: 169.0p) and the range of market
prices during the year was between 120.0p and 203.0p.
Richard Whiting Chris Belsham
Chief Executive Finance Director
Consolidated income statement
for the year ended 31 May 2020
2020 2019
Note GBPm GBPm
-------------------------------------------------------- ---- ------- -------
Revenue 4 687.5 671.3
Cost of sales (646.2) (640.4)
-------------------------------------------------------- ---- ------- -------
Gross profit 41.3 30.9
Administrative expenses (27.8) (21.3)
-------------------------------------------------------- ---- ------- -------
Headline operating profit(1) 14.3 10.2
Exceptional items 5 (0.5) (0.5)
Amortisation of acquired intangibles (0.3) (0.1)
-------------------------------------------------------- ---- ------- -------
Operating profit(3) 4 13.5 9.6
Finance costs 6 (1.5) (0.9)
-------------------------------------------------------- ---- ------- -------
Headline profit before taxation(1) 13.2 9.7
Net finance cost in respect of the defined benefit
pension scheme (0.4) (0.4)
Exceptional items 5 (0.5) (0.5)
Amortisation of acquired intangibles (0.3) (0.1)
-------------------------------------------------------- ---- ------- -------
Profit before taxation(3) 5 12.0 8.7
Income tax expense(2) 7 (3.1) (1.9)
-------------------------------------------------------- ---- ------- -------
Profit for the year attributable to equity shareholders 8.9 6.8
-------------------------------------------------------- ---- ------- -------
Earnings per share (pence)
Basic 8 18.2 13.9
Diluted 8 18.1 13.9
-------------------------------------------------------- ---- ------- -------
Headline earnings per share (pence)(1)
Basic 8 20.5 15.8
Diluted 8 20.3 15.8
-------------------------------------------------------- ---- ------- -------
1 Headline operating profit is statutory operating profit of
GBP13.5 million (2019: GBP9.6 million) before exceptional items of
GBP0.5 million (2019: GBP0.5 million) and amortisation of acquired
intangibles of GBP0.3 million (2019: GBP0.1 million). Headline
profit before taxation is statutory profit before taxation of
GBP12.0 million (2019: GBP8.7 million) after adding back the net
finance cost in respect of the Group's defined benefit pension
scheme of GBP0.4 million (2019: GBP0.4 million), the exceptional
items and amortisation of acquired intangibles. Headline earnings
per share also take into account the taxation effect thereon.
2 Taxation on exceptional items in the current year has reduced
the charge by GBPNil (2019: GBP0.1 million).
3 During the year ended 31 May 2020, the application of IFRS 16
resulted in an increase in operating profit in the consolidated
income statement of GBP0.2 million in comparison to treatment under
IAS 17, as operating lease payments under IAS 17 were replaced by a
depreciation charge on right of use assets. Profit before taxation
reduced by GBP0.2 million with the inclusion of GBP0.4 million of
finance costs under the new standard.
The results relate to continuing operations.
Consolidated statement of comprehensive income
for the year ended 31 May 2020
2020 2019
GBPm GBPm
-------------------------------------------------------- ----- -----
Profit for the year attributable to equity shareholders 8.9 6.8
--------------------------------------------------------- ----- -----
Items that will never be reclassified to profit
or loss:
Remeasurement loss on defined benefit pension scheme (4.0) (1.2)
Tax on items that will never be reclassified to
profit or loss 1.1 0.2
--------------------------------------------------------- ----- -----
Total other comprehensive expense (2.9) (1.0)
--------------------------------------------------------- ----- -----
Total comprehensive income for the year 6.0 5.8
--------------------------------------------------------- ----- -----
Consolidated balance sheet
as at 31 May 2020
2019
(Restated
2020 [1] )
Note GBPm GBPm
--------------------------------- ---- ------- ----------
Non-current assets
Property, plant and equipment 48.5 45.5
Right of use assets 27.3 -
Intangible assets 31.4 24.7
Deferred income tax assets 4.4 3.1
--------------------------------- ---- ------- ----------
111.6 73.3
--------------------------------- ---- ------- ----------
Current assets
Inventories 4.7 5.6
Trade and other receivables 56.7 67.2
Cash and cash equivalents 12 5.3 2.8
Derivative financial instruments 0.1 0.2
--------------------------------- ---- ------- ----------
66.8 75.8
--------------------------------- ---- ------- ----------
Total assets 178.4 149.1
--------------------------------- ---- ------- ----------
Current liabilities
Trade and other payables (56.6) (66.7)
Current income tax liabilities (0.9) (1.1)
Borrowings 12 (7.2) (10.2)
Lease liabilities (6.4) -
--------------------------------- ---- ------- ----------
(71.1) (78.0)
--------------------------------- ---- ------- ----------
Non-current liabilities
Borrowings 12 (10.0) (3.0)
Lease liabilities (20.3) -
Deferred income tax liabilities (4.9) (3.7)
Retirement benefit obligations 13 (21.0) (17.3)
--------------------------------- ---- ------- ----------
(56.2) (24.0)
--------------------------------- ---- ------- ----------
Total liabilities (127.3) (102.0)
--------------------------------- ---- ------- ----------
Net assets 51.1 47.1
--------------------------------- ---- ------- ----------
Equity
Share capital 10 12.2 12.2
Share premium 0.9 0.9
Retained earnings 38.0 34.0
--------------------------------- ---- ------- ----------
Total equity 51.1 47.1
--------------------------------- ---- ------- ----------
[1] GBP10.0 million of invoice discounting advances, previously
recognised within non-current liabilities, have been corrected and
reclassified to current liabilities in the year ended 31 May 2019.
This restatement arises as the Group does not have an unconditional
right to defer settlement of these liabilities for at least one
year after the balance sheet date. GBP7.2 million of invoice
discounting advances have been recognised within current
liabilities in the year ended 31 May 2020.
Consolidated statement of changes in equity
for the year ended 31 May 2020
Share Share Retained Total
capital premium earnings equity
GBPm GBPm GBPm GBPm
------------------------------------------------ ------- ------- -------- ------
Balance at 1 June 2018 12.2 0.9 31.3 44.4
------------------------------------------------ ------- ------- -------- ------
Profit for the year - - 6.8 6.8
------------------------------------------------ ------- ------- -------- ------
Items that will never be reclassified to profit
or loss:
Actuarial loss on defined benefit pension
scheme - - (1.2) (1.2)
Tax on items that will never be reclassified
to profit or loss - - 0.2 0.2
------------------------------------------------ ------- ------- -------- ------
Total other comprehensive expense - - (1.0) (1.0)
------------------------------------------------ ------- ------- -------- ------
Total comprehensive income for the year - - 5.8 5.8
------------------------------------------------ ------- ------- -------- ------
Transactions with owners:
Dividends paid (note 9) - - (3.1) (3.1)
Value of employee services - - (0.1) (0.1)
Credit to equity for equity-settled share-based
payments - - 0.1 0.1
------------------------------------------------ ------- ------- -------- ------
Total transactions with owners - - (3.1) (3.1)
------------------------------------------------ ------- ------- -------- ------
Balance at 31 May 2019 12.2 0.9 34.0 47.1
------------------------------------------------ ------- ------- -------- ------
Profit for the year - - 8.9 8.9
------------------------------------------------ ------- ------- -------- ------
Items that will never be reclassified to profit
or loss:
Actuarial loss on defined benefit pension
scheme - - (4.0) (4.0)
Tax on items that will never be reclassified
to profit or loss - - 1.1 1.1
------------------------------------------------ ------- ------- -------- ------
Total other comprehensive expense - - (2.9) (2.9)
------------------------------------------------ ------- ------- -------- ------
Total comprehensive income for the year - - 6.0 6.0
------------------------------------------------ ------- ------- -------- ------
Transactions with owners:
Dividends paid (note 9) - - (3.2) (3.2)
Credit to equity for equity-settled share-based
payments - - 1.2 1.2
------------------------------------------------ ------- ------- -------- ------
Total transactions with owners - - (2.0) (2.0)
------------------------------------------------ ------- ------- -------- ------
Balance at 31 May 2020 12.2 0.9 38.0 51.1
------------------------------------------------ ------- ------- -------- ------
Consolidated cash flow statement
for the year ended 31 May 2020
2020 2019
GBPm GBPm
------------------------------------------------------- ------ -----
Cash flows from operating activities
------------------------------------------------------- ------ -----
Operating profit 13.5 9.6
Adjustments for:
Depreciation and amortisation 10.5 4.7
Profit on disposal of fixed assets (0.2) (0.1)
Share-based payment expense 1.2 -
Fair value loss on financial derivatives 0.1 -
Contribution to pensions scheme not recognised in
income statement (1.3) (1.4)
-------------------------------------------------------- ------ -----
Operating cash flows before movements in working
capital and provisions 23.8 12.8
Movements in working capital:
Decrease in inventories 1.9 0.3
Decrease/(increase) in receivables 20.2 (0.9)
Decrease in payables (20.4) (3.3)
Utilisation of provision - (0.1)
-------------------------------------------------------- ------ -----
Net cash generated from operations 25.5 8.8
Interest paid (1.1) (0.5)
Income tax paid (2.7) (1.9)
-------------------------------------------------------- ------ -----
Net cash generated from operating activities 21.7 6.4
-------------------------------------------------------- ------ -----
Cash flows used in investing activities
Purchase of intangible assets (0.4) (0.2)
Purchase of property, plant and equipment (5.7) (2.8)
Acquisition of subsidiaries - cash paid (net of
cash acquired) (6.0) (3.5)
Capitalised legal costs associated with acquired
leases (0.3) -
Payment of contingent deferred consideration - (0.8)
Proceeds on sale of property, plant and equipment 0.4 0.2
-------------------------------------------------------- ------ -----
Net cash used in investing activities (12.0) (7.1)
-------------------------------------------------------- ------ -----
Cash flows from financing activities
Increase in bank borrowings 1.6 6.2
Capital element of finance leases (5.6) (0.1)
Dividends paid (3.2) (3.1)
-------------------------------------------------------- ------ -----
Net cash (used in)/generated from financing activities (7.2) 3.0
-------------------------------------------------------- ------ -----
Net increase in cash and cash equivalents 2.5 2.3
Cash and cash equivalents at beginning of year 2.8 0.5
-------------------------------------------------------- ------ -----
Cash and cash equivalents at end of year 5.3 2.8
-------------------------------------------------------- ------ -----
Notes to the Group financial statements
for the year ended 31 May 2020
1. General information
NWF Group plc ('the Company') is a public limited company
incorporated and domiciled in England, United Kingdom, under the
Companies Act 2006. The principal activities of NWF Group plc and
its subsidiaries (together 'the Group') are the sale and
distribution of fuel oils, the warehousing and distribution of
ambient groceries and the manufacture and sale of animal feeds.
Further information on the nature of the Group's operations and
principal activities is set out in the Group financial
statements.
The address of the Company's registered office is NWF Group plc,
Wardle, Nantwich, Cheshire CW5 6BP. The Company has its primary
listing on AIM, part of the London Stock Exchange.
2. Significant accounting policies
The Group's principal accounting policies are set out below.
IFRS 16 is effective from 1 June 2019.
Basis of preparation
The Group financial statements have been prepared in accordance
with International Financial Reporting Standards as endorsed by the
European Union ('IFRS'), International Financial Reporting
Standards Interpretations Committee ('IFRS IC') interpretations and
those provisions of the Companies Act 2006 applicable to companies
reporting under IFRS. The Group financial statements have been
prepared on the going concern basis and on the historical cost
convention modified for the revaluation of certain financial
instruments.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates, which
are outlined in note 14 below. It also requires management to
exercise its judgement in the process of applying the Group's
accounting policies.
Going concern
Based on financial performance to date and forecasts along with
the available banking facilities, there is a reasonable expectation
that the Group has adequate resources to continue in operational
existence for the foreseeable future. The Group therefore continues
to adopt the going concern basis of accounting in preparing the
annual financial statements.
The Board has prepared cash flow forecasts for the period to 31
May 2022. Under this base case scenario, the Group is expected to
continue to have very significant headroom relative to the funding
available to it and to comply with its banking covenants.
The Board has also considered various other severe downside
scenarios, including the possibility of a second lockdown as a
result of a second wave of Covid-19. These downside scenarios
excluded any mitigating actions that the Board would be able to
take to reduce costs. Under these scenarios, the Group would still
expect to have sufficient headroom in its financing facilities.
The Group therefore continues to adopt the going concern basis
of accounting in preparing the annual financial statements.
Headline operating profit, headline profit before taxation,
headline EBITDA and headline earnings
The Directors consider that headline operating profit, headline
profit before taxation, headline EBITDA and headline earnings per
share measures, referred to in these Group financial statements,
provide useful information for shareholders on underlying trends
and performance.
Headline operating profit is reported operating profit after
adding back exceptional items and amortisation of acquired
intangibles.
Headline profit before taxation is reported profit before
taxation after adding back the net finance cost in respect of the
Group's defined benefit pension scheme, exceptional items and
amortisation of acquired intangibles, to show the underlying
performance of the Group.
Headline EBITDA refers to reported operating profit after adding
back exceptional items and amortisation of acquired intangibles.
The headline EBITDA calculation excludes the impact of IFRS 16
depreciation.
The calculations of basic and diluted headline earnings per
share are shown in note 8.
Exceptional items
The Group's income statement separately identifies exceptional
items. Such items are those that, in the Directors' judgement, are
one-off in nature or non-operating and need to be disclosed
separately by virtue of their size or incidence and may include,
but are not limited to, restructuring costs, acquisition-related
costs, costs of implementing new systems and income from legal
settlements. In determining whether an item should be disclosed as
an exceptional item, the Directors consider quantitative as well as
qualitative factors such as the frequency, predictability of
occurrence and significance. This is consistent with the way
financial performance is measured by management and reported to the
Board. Disclosing exceptional items separately provides additional
understanding of the performance of the Group.
Forward-looking statements
Certain statements in this results announcement are forward
looking. The terms 'expect', 'anticipate', 'should be', 'will be'
and similar expressions identify forward-looking statements.
Although the Board of Directors believes that the expectations
reflected in these forward-looking statements are reasonable, such
statements are subject to a number of risks and uncertainties and
events could differ materially from those expressed or implied by
these forward-looking statements.
Adoption of new and revised standards
The following new standards, amendments to standards or
interpretations are mandatory for the first time for the financial
year beginning 1 June 2019.
The Group has adopted the following new standards, amendments
and interpretations now applicable. Other than the adoption of IFRS
16, these standards did not have a material effect on the Group's
results or net assets.
Applicable for
financial year
Standard or interpretation Content beginning on
-------------------------- -------------------------------------- ---------------
IFRIC 23 Uncertainty over Income Tax Treatments 1 June 2019
Amendment to IFRS
3 Business Combinations 1 June 2019
Amendment to IAS 12 Income Taxes 1 June 2019
Amendment to IAS 23 Borrowing Costs 1 June 2019
Amendment to IAS 19 Employee Benefits 1 June 2019
Amendment to IFRS
9 Financial Instruments 1 June 2019
IFRS 16 Leases 1 June 2019
-------------------------- -------------------------------------- ---------------
The following standards, amendments and interpretations are not
yet effective and have not been adopted early by the Group:
Applicable for
financial year
Standard or interpretation Content beginning on
-------------------------- --------------------- ---------------
Amendment to IFRS
3 Business Combinations 1 June 2020
-------------------------- --------------------- ---------------
As at 1 June 2019 the Group adopted IFRS 16 'Leases' for the
first time. IFRS 16 replaces IAS 17 'Leases'. Under IFRS 16 a right
of use asset and lease liability are recognised for all leases
except 'low value' and 'short-term' leases where lease payments are
recognised on a straight-line basis over the lease term. For the
Group, transition results in the recognition of almost all leases
on the balance sheet as a right of use asset, with a corresponding
lease liability.
The Group currently leases both properties and vehicles under a
series of operating lease contracts which are impacted by the new
standard. These types of leases can no longer be recognised as
operating leases and have been brought onto the Group's balance
sheet from the date of adoption of the new standard. In applying
IFRS 16 for the first time the Group has elected to apply the
following recognition exemptions:
-- Short-term leases (leases of shorter than 12 months and
leases with fewer than 12 months remaining) as at the date of
adoption of the new standard will not be within the scope of IFRS
16.
-- Leases for which the asset is of low value will not be within the scope of IFRS 16.
In applying IFRS 16 for the first time the Group has also
elected to apply the following practical expedients:
-- In determining whether existing contracts meet the definition
of a lease, the Group will not reassess those contracts previously
identified as leases and will not apply the standard to those
contracts not previously identified as leases.
-- The use of a single discount rate applied to portfolios of
leases with similar characteristics.
On adoption of IFRS 16 the Group recognised lease liabilities in
relation to leases previously classified as 'operating leases'
under the principles of IAS 17 'Leases'. These liabilities have
been measured at the present value of the remaining lease payments
at 1 June 2019, discounted using the Group's incremental borrowing
rate on the current facility as of 1 June 2019. The weighted
average incremental borrowing rate applied to the lease liabilities
was 2%.
The associated right of use assets have been measured using the
approach set out in IFRS 16.C8(b)(ii), whereby right of use assets
are equal to the lease liability adjusted for accrued or prepaid
operating lease payments (GBPNil) at 1 June 2019. There were no
onerous lease contracts that would have required an adjustment to
the right of use assets at the date of initial application.
For leases previously classified as finance leases, which relate
to plant and machinery and commercial vehicles, the Group
recognised the carrying amount of the lease asset and lease
liability immediately before transition as the carrying amount of
the right of use asset and the lease liability at the date of
initial application.
The overall impact of the adoption of IFRS 16 on the Group's
opening balance sheet is an increase in net assets of GBP16.2
million and an increase in net liabilities of GBP16.2 million.
The table below shows the split of the total right of use assets
and lease liabilities following the adoption of IFRS 16 (including
the reclassification of assets previously held under finance
leases):
GBPm
--------------------------------------------------- ----
Properties 1.0
Vehicles 15.2
NBV of assets previously held under finance leases 0.4
--------------------------------------------------- ----
Total right of use assets 16.6
--------------------------------------------------- ----
Properties 1.0
Vehicles 15.2
Leases previously held under finance leases 0.2
--------------------------------------------------- ----
Total lease liabilities 16.4
--------------------------------------------------- ----
Differences between the operating lease commitments disclosed at
31 May 2019 under IAS 17 discounted at the incremental borrowing
rate at 1 June 2019 and lease liabilities recognised at 1 June 2019
are explained below:
GBPm
------------------------------------------------------------------ -----
Undiscounted future minimum lease payments under operating leases
at 31 May 2019 24.2
Impact of discounting (8.0)
Add: finance lease liabilities recognised at 31 May 2019 0.2
------------------------------------------------------------------ -----
Lease liabilities recognised at 1 June 2019 16.4
------------------------------------------------------------------ -----
Of which are:
Current lease liabilities 2.0
Non-current lease liabilities 14.4
------------------------------------------------------------------ -----
Lease liabilities recognised at 1 June 2019 16.4
------------------------------------------------------------------ -----
During the year ended 31 May 2020, the application of IFRS 16
resulted in an increase in operating profit in the consolidated
income statement of GBP0.2 million in comparison to treatment under
IAS 17, as operating lease payments under IAS 17 were replaced by a
depreciation charge on right of use assets. Profit before taxation
reduced by GBP0.2 million with the inclusion of GBP0.4 million of
finance costs under the new standard.
The table below shows a reconciliation between profit under IAS
17 and the new standard, IFRS 16.
GBPm
---------------------------------------------------------------- -----
Operating lease costs under IAS 17 6.0
Less: depreciation on right of use assets recognised under IFRS
16 (5.8)
---------------------------------------------------------------- -----
Impact on operating profit for the year ended 31 May 2020 0.2
Less: finance costs associated with lease liabilities under
IFRS 16 (0.4)
---------------------------------------------------------------- -----
Impact on profit before taxation for the year ended 31 May 2020 (0.2)
---------------------------------------------------------------- -----
During the year ended 31 May 2020, the movement on the right of
use asset and lease liabilities was as follows:
GBPm
------------------------------------------------------- -----
Right of use assets
Opening net book value 16.2
NBV of assets held under finance leases at 31 May 2019 0.4
New leases recognised 16.5
Depreciation (5.8)
------------------------------------------------------- -----
Closing net book value 27.3
------------------------------------------------------- -----
Lease liabilities
Opening liabilities 16.2
Finance lease liabilities recognised at 31 May 2019 0.2
New leases recognised 15.9
Lease payments (6.0)
Finance cost 0.4
------------------------------------------------------- -----
Closing net book value 26.7
------------------------------------------------------- -----
3. Group Annual Report and statutory accounts
The financial information set out above does not constitute the
Group's statutory accounts for the years ended 31 May 2020 or 31
May 2019, but is derived from those accounts.
Statutory accounts for 2019 have been delivered to the Registrar
of Companies. The auditors, PricewaterhouseCoopers LLP, have
reported on the 2019 accounts; the report (i) was unqualified, (ii)
did not include a reference to any matters to which the auditors
drew attention by way of emphasis without qualifying their report,
and (iii) did not contain a statement under Section 498(2) or (3)
of the Companies Act 2006.
The statutory accounts for 2020 will be delivered to the
Registrar of Companies following the Annual General Meeting. The
auditors, PricewaterhouseCoopers LLP, have reported on these
accounts and their report is unqualified, does not include a
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying their report, and does not
include a statement under either Section 498(2) or (3) of the
Companies Act 2006.
The Annual Report and full financial statements will be posted
to shareholders during the week commencing 17 August 2020. Further
copies will be available to the public, free of charge, from the
Company's Registered Office at NWF Group plc, Wardle, Cheshire CW5
6BP, or viewed on the Company's website: www.nwf.co.uk.
4. Segment information
The chief operating decision-maker has been identified as the
Board of Directors ('the Board'). The Board reviews the Group's
internal reporting in order to assess performance and allocate
resources. The Board has determined that the operating segments,
based on these reports, are Fuels, Food and Feeds.
The Board considers the business from a products/services
perspective. In the Board's opinion, all of the Group's operations
are carried out in the same geographical segment, namely the
UK.
The nature of the products/services provided by the operating
segments is summarised below:
Fuels - sale and distribution of domestic heating, industrial and road fuels
Food - warehousing and distribution of clients' ambient grocery
and other products to supermarket and
other retail distribution centres
Feeds - manufacture and sale of animal feeds and other agricultural products
Segment information about the above businesses is presented
below.
The Board assesses the performance of the operating segments
based on a measure of operating profit ('headline operating
profit'). Finance income and costs are not included in the segment
result that is assessed by the Board. Other information provided to
the Board is measured in a manner consistent with that in the
financial statements.
Inter-segment transactions are entered into under the normal
commercial terms and conditions that would also be available to
unrelated third parties.
Segment assets exclude deferred income tax assets and cash at
bank and in hand. Segment liabilities exclude taxation, borrowings
and retirement benefit obligations. Excluded items are part of the
reconciliation to consolidated total assets and liabilities.
Fuels Food Feeds Group
2020 GBPm GBPm GBPm GBPm
---------------------------------------------- ----- ----- ----- -----
Revenue
Total revenue 476.0 48.7 169.0 693.7
Inter-segment revenue (5.8) (0.4) - (6.2)
---------------------------------------------- ----- ----- ----- -----
Revenue 470.2 48.3 169.0 687.5
---------------------------------------------- ----- ----- ----- -----
Result
Headline operating profit 11.0 1.4 1.9 14.3
---------------------------------------------- ----- ----- ----- -----
Segment exceptional item (note 5) (0.5) - - (0.5)
Amortisation of acquired intangibles (0.3) - - (0.3)
-----
Operating profit as reported 13.5
Finance costs (note 6) (1.5)
-----
Profit before taxation 12.0
Income tax expense (note 7) (3.1)
---------------------------------------------- ----- ----- ----- -----
Profit for the year 8.9
---------------------------------------------- ----- ----- ----- -----
Other information
Depreciation and amortisation (including IFRS
16) 3.4 4.2 2.9 10.5
Fixed asset additions 0.8 3.1 1.8 5.7
---------------------------------------------- ----- ----- ----- -----
Fuels Food Feeds Group
2020 GBPm GBPm GBPm GBPm
----------------------------------------- ------ ------ ------ -------
Balance sheet
Assets
Segment assets 66.2 48.2 54.3 168.7
----------------------------------------- ------ ------ ------ -------
Deferred income tax assets 4.4
Cash at bank and in hand 5.3
----------------------------------------- ------ ------ ------ -------
Consolidated total assets 178.4
----------------------------------------- ------ ------ ------ -------
Liabilities
Segment liabilities (45.4) (19.3) (18.6) (83.3)
----------------------------------------- ------ ------ ------ -------
Current income tax liabilities (0.9)
Deferred income tax liabilities (4.9)
Borrowings (note 12) (17.2)
Retirement benefit obligations (note 13) (21.0)
----------------------------------------- ------ ------ ------ -------
Consolidated total liabilities (127.3)
----------------------------------------- ------ ------ ------ -------
Fuels Food Feeds Group
2019 GBPm GBPm GBPm GBPm
---------------------------------------------- ----- ----- ----- -----
Revenue
Total revenue 449.5 48.4 180.4 678.3
Inter-segment revenue (6.5) (0.5) - (7.0)
---------------------------------------------- ----- ----- ----- -----
Revenue 443.0 47.9 180.4 671.3
---------------------------------------------- ----- ----- ----- -----
Result
Headline operating profit 5.6 1.8 2.8 10.2
---------------------------------------------- ----- ----- ----- -----
Segment exceptional item (note 5) (0.2) - - (0.2)
Group exceptional item (note 5) (0.3)
Amortisation of acquired intangibles (0.1) - - (0.1)
-----
Operating profit as reported 9.6
Finance costs (note 6) (0.9)
-----
Profit before taxation 8.7
Income tax expense (note 7) (1.9)
---------------------------------------------- ----- ----- ----- -----
Profit for the year 6.8
---------------------------------------------- ----- ----- ----- -----
Other information
Depreciation and amortisation (excluding IFRS
16) 1.4 1.6 1.7 4.7
Fixed asset additions 0.5 0.6 1.7 2.8
---------------------------------------------- ----- ----- ----- -----
Fuels Food Feeds Group
2019 GBPm GBPm GBPm GBPm
----------------------------------------- ------ ----- ------ -------
Balance sheet
Assets
Segment assets 61.2 30.3 51.7 143.2
----------------------------------------- ------ ----- ------ -------
Deferred income tax assets 3.1
Cash at bank and in hand 2.8
----------------------------------------- ------ ----- ------ -------
Consolidated total assets 149.1
----------------------------------------- ------ ----- ------ -------
Liabilities
Segment liabilities (46.4) (5.3) (15.0) (66.7)
----------------------------------------- ------ ----- ------ -------
Current income tax liabilities (1.1)
Deferred income tax liabilities (3.7)
Borrowings (note 12) (13.2)
Retirement benefit obligations (note 13) (17.3)
----------------------------------------- ------ ----- ------ -------
Consolidated total liabilities (102.0)
----------------------------------------- ------ ----- ------ -------
5. Profit before taxation - exceptional items
An exceptional cost of GBP0.5 million (2019: GBP0.5 million) is
included in administrative expenses. Exceptional items by type are
as follows:
2020 2019
GBPm GBPm
-------------------------- ---- ----
GMP equalisation - 0.3
Acquisition-related costs 0.5 0.2
-------------------------- ---- ----
Exceptional cost 0.5 0.5
-------------------------- ---- ----
GMP equalisation - On 26 October 2018, the High Court issued a
judgement involving the Lloyds Banking Group defined benefit
pension schemes. The judgement concluded that the schemes should
equalise pension benefits for men and women in relation to
guaranteed minimum pension ('GMP') benefits. The judgement has
implications for many defined benefit schemes, including the NWF
Group Benefits Scheme.
We have worked with our actuarial advisors to understand the
implications of the High Court judgement for the NWF Group Benefits
Scheme and, as a result, recorded a non-cash GBP0.3 million pre-tax
exceptional expense in the year ended 31 May 2019 to reflect our
best estimate of the effect on our reported pension
liabilities.
The change in pension liabilities recognised in relation to GMP
equalisation involves estimation uncertainty. Whilst the financial
statements reflect the best estimate of the impact on pension
liabilities based on the information currently available, that
estimate includes several assumptions. The Directors will continue
to monitor any further clarifications and consider the impact on
pension liabilities accordingly.
The Directors have made the judgement that the estimated effect
of GMP equalisation on the Group's pension liabilities is a past
service cost that should be reflected through the consolidated
income statement and that any subsequent change in the estimate of
that should be recognised in other comprehensive income. The
judgement is based on the fact that the reported pension
liabilities for the NWF Group Benefits Scheme did not previously
include any amount in respect of GMP equalisation.
Acquisition-related costs - The acquisition-related costs
comprise professional fees and other costs in relation to the three
acquisitions made during the year. Of the total cost, GBP0.5
million impacted cash in the year
6. Finance costs
2020 2019
GBPm GBPm
------------------------------------------------------- ---- ----
Interest on bank loans and overdrafts 0.7 0.5
Finance costs on lease liabilities relating to IFRS 16 0.4 -
------------------------------------------------------- ---- ----
Total interest expense 1.1 0.5
Net finance cost in respect of defined benefit pension
schemes (note 13) 0.4 0.4
------------------------------------------------------- ---- ----
Total finance costs 1.5 0.9
------------------------------------------------------- ---- ----
7. Income tax expense
2020 2019
GBPm GBPm
-------------------------------------------------- ---- -----
Current tax
UK corporation tax on profits for the year 2.6 2.0
Adjustments in respect of prior years - 0.1
-------------------------------------------------- ---- -----
Current tax expense 2.6 2.1
-------------------------------------------------- ---- -----
Deferred tax
Origination and reversal of temporary differences - (0.2)
Effect of increased tax rate on opening balances 0.5 -
-------------------------------------------------- ---- -----
Deferred tax expense/(income) 0.5 (0.2)
-------------------------------------------------- ---- -----
Total income tax expense 3.1 1.9
-------------------------------------------------- ---- -----
During the year ended 31 May 2020, corporation tax has been
calculated at 19% of estimated assessable profits for the year
(2019: 19%).
A reduction in the UK corporation tax rate to 17% with effect
from 1 April 2020 was substantively enacted on 6 September 2016 in
the Finance Act 2016. In the opinion of the Directors, the relevant
timing differences at 31 May 2019 were expected to reverse after 1
April 2020 and therefore deferred tax was provided at a rate of 17%
in the statutory accounts for that period.
In the Spring Budget 2020, the Government announced that from 1
April 2020 the corporation tax rate would remain at 19% (rather
than reducing to 17% as previously enacted). This new law was
substantively enacted under the Provisional Collection of Taxes Act
1968 on 17 March 2020. Deferred tax balances have therefore been
remeasured to 19%. The impact of the change in tax rate has been
recognised in tax expense in profit or loss, except to the extent
that it relates to items previously recognised outside profit or
loss. For the Group, such items include remeasurements of
post-employment benefit liabilities and the expected tax deduction
in excess of the recognised expense for equity-settled share-based
payments.
The tax charge for the year can be reconciled to the profit per
the income statement as follows:
2020 2019
GBPm GBPm
------------------------------------------------------- ---- ----
Profit before taxation 12.0 8.7
------------------------------------------------------- ---- ----
Profit before taxation multiplied by the standard rate
of UK corporation tax of 19% (2019: 19%) 2.2 1.6
Effects of:
- expenses not deductible for tax purposes 0.4 0.2
- impact of increased tax rate on opening balances 0.5 -
- adjustments in respect of prior years - 0.1
------------------------------------------------------- ---- ----
Total income tax expense 3.1 1.9
------------------------------------------------------- ---- ----
The Directors expect that the Group will have a higher than
standard tax charge in the future as a result of the level of the
Group's disallowable expenses, which are largely
acquisition-related costs.
8. Earnings per share
The calculation of basic and diluted earnings per share is based
on the following data:
2020 2019
------------------------------------------------------------ ------ ------
Earnings (GBPm)
Earnings for the purposes of basic and diluted earnings
per share being profit for the year attributable to equity
shareholders 8.9 6.8
------------------------------------------------------------ ------ ------
Number of shares ('000)
Weighted average number of shares for the purposes of
basic earnings per share 48,750 48,735
Weighted average dilutive effect of conditional share
awards 478 15
------------------------------------------------------------ ------ ------
Weighted average number of shares for the purposes of
diluted earnings per share 49,228 48,750
------------------------------------------------------------ ------ ------
Earnings per ordinary share (pence)
Basic earnings per ordinary share 18.2 13.9
Diluted earnings per ordinary share 18.1 13.9
------------------------------------------------------------ ------ ------
Headline earnings per ordinary share (pence)
Basic headline earnings per ordinary share 20.5 15.8
Diluted headline earnings per ordinary share 20.3 15.8
------------------------------------------------------------ ------ ------
The calculation of basic and diluted headline earnings per share
is based on the following data:
2020 2019
GBPm GBPm
-------------------------------------------------------- ----- -----
Profit for the year attributable to equity shareholders 8.9 6.8
Add back/(deduct):
Net finance cost in respect of defined benefit pension
scheme 0.4 0.4
Exceptional items 0.5 0.5
Amortisation of acquired intangibles 0.3 0.1
Tax effect of the above (0.1) (0.1)
-------------------------------------------------------- ----- -----
Headline earnings 10.0 7.7
-------------------------------------------------------- ----- -----
9. Equity dividends
2020 2019
GBPm GBPm
----------------------------------------------------------- ---- ----
Final dividend for the year ended 31 May 2019 of 5.6p
(2018: 5.3p) per share 2.7 2.6
Interim dividend for the year ended 31 May 2020 of 1.0p
(2019: 1.0p) per share 0.5 0.5
----------------------------------------------------------- ---- ----
Amounts recognised as distributions to equity shareholders
in the year 3.2 3.1
----------------------------------------------------------- ---- ----
Proposed final dividend for the year ended 31 May 2020
of 5.9p (2019: 5.6p) per share 2.9 2.7
----------------------------------------------------------- ---- ----
10. Share capital
Number
of shares Total
'000 GBPm
----------------------------------------------------- --------- -----
Allotted and fully paid: ordinary shares of 25p each
Balance at 1 June 2018 48,660 12.2
Issue of shares (see below) 90 -
----------------------------------------------------- --------- -----
Balance at 31 May 2019 48,750 12.2
Issue of shares (see below) - -
----------------------------------------------------- --------- -----
Balance at 31 May 2020 48,750 12.2
----------------------------------------------------- --------- -----
During the year ended 31 May 2020, no shares (2019: 89,920) with
an aggregate nominal value of GBPNil (2019: GBP22,480) were issued
under the Group's conditional Performance Share Plan.
The maximum total number of ordinary shares, which may vest in
the future in respect of conditional Performance Share Plan awards
outstanding at 31 May 2020, amounted to 1,441,604 (31 May 2019:
1,216,945). These shares will only be issued subject to satisfying
certain performance criteria.
11. Business combinations
On 10 July 2019, the Group acquired 100% of the share capital of
David Hermon Hodge Group Limited, trading as Ribble Fuel Oils, a 75
million litre fuel distributor based in the North West of England.
The net consideration for the acquisition was GBP3.0 million before
acquisition costs (being gross consideration of GBP4.5 million
adjusted for normalised working capital, and cash and debt-like
items).
Details of the total consideration and the provisional fair
values of the assets and liabilities acquired are shown below:
Initial
fair Fair
value value
of of
assets assets
acquired Adjustments acquired
GBPm GBPm GBPm
------------------------------------------- --------- ----------- ---------
Intangible assets - goodwill 3.1 (0.6) 2.5
Intangible assets - brand 0.1 - 0.1
Intangible assets - customer relationships 0.1 0.6 0.7
Property, plant and equipment 1.1 - 1.1
Right of use asset - 0.4 0.4
Stock 0.4 - 0.4
Trade and other receivables 7.2 - 7.2
Cash 0.2 - 0.2
Borrowings (2.6) - (2.6)
Trade and other payables (6.0) - (6.0)
Lease liabilities (0.5) (0.4) (0.9)
Deferred tax liability (0.1) - (0.1)
------------------------------------------- --------- ----------- ---------
3.0 - 3.0
------------------------------------------- --------- ----------- ---------
Goodwill of GBP2.5 million arises from the acquisition and is
attributable to the acquired business and the expected economies of
scale from combining the operations of the Group and the
acquisition. None of the goodwill is expected to be deductible for
income tax purposes.
Following finalisation of acquisition accounting, adjustments
have been made to the value attributable to customer relationships
and to recognise right of use assets and lease liabilities under
IFRS 16.
As the acquisition was made in the year, the above amounts are
provisional and subject to adjustment.
Net cash outflow arising on the acquisition:
GBPm
---------------------------------------------- -----
Total consideration - cash paid on completion (3.0)
Cash acquired 0.2
---------------------------------------------- -----
(2.8)
Acquisition-related costs (0.3)
---------------------------------------------- -----
(3.1)
---------------------------------------------- -----
Acquisition-related costs of GBP0.3 million have been charged to
the income statement (included within exceptional costs) in the
year ended 31 May 2020.
The following amounts have been recognised within the
consolidated income statement in respect of the acquisition made in
the year: revenue - GBP43.2 million, profit - GBP0.6 million.
Had the acquisition taken place at the start of the financial
year, the consolidated income statement would show: revenue -
GBP47.7 million, profit - GBP0.6 million.
On 15 October 2019, the Group acquired the trade and specified
assets of Caldo Oils Limited, a 5 million litre fuel distributor
based in the North West of England. The net consideration for the
acquisition was GBP0.4 million before acquisition costs.
Details of the total consideration and the provisional fair
values of the assets and liabilities acquired are shown below:
Fair
value
of
assets
acquired
GBPm
------------------------------------------- --------
Intangible assets - goodwill 0.2
Intangible assets - customer relationships 0.2
------------------------------------------- --------
0.4
------------------------------------------- --------
Provisional goodwill of GBP0.2 million arises from the
acquisition and is attributable to the acquired business and the
expected economies of scale from combining the operations of the
Group and the acquisition. None of the goodwill is expected to be
deductible for income tax purposes.
As the acquisition was made in the year, the above amounts are
provisional and subject to adjustment.
Net cash outflow arising on the acquisition:
GBPm
---------------------------------------------- -----
Total consideration - cash paid on completion (0.4)
Cash and cash equivalents acquired -
---------------------------------------------- -----
(0.4)
---------------------------------------------- -----
The following amounts have been recognised within the
consolidated income statement in respect of the acquisition made in
the year: revenue - GBP1.1 million, profit - GBP0.1 million.
Had the acquisition taken place at the start of the financial
year, the consolidated income statement would show: revenue -
GBP1.9 million, profit - GBP0.1 million.
On 2 December 2019, the Group acquired 100% of the share capital
of Ron Darch & Sons Co Limited, a 35 million litre fuel and
coal distributor based in Somerset. The net consideration for the
acquisition was GBP8.4 million before acquisition costs (being
gross consideration of GBP4.5 million adjusted for normalised
working capital and cash acquired). Net consideration of GBP8.4
million comprises GBP7.3 million of cash paid as at 31 May 2020 and
GBP1.1 million of cash paid following completion on 12 June
2020.
Details of the total consideration and the provisional fair
values of the assets and liabilities acquired are shown below:
Initial
fair
value
of
assets
acquired
GBPm
------------------------------------------- --------
Intangible assets - goodwill 2.2
Intangible assets - brand 0.2
Intangible assets - customer relationships 0.8
Property, plant and equipment 1.4
Stock 0.6
Trade and other receivables 1.5
Cash 4.5
Trade and other payables (2.6)
Corporation tax liability (0.1)
Deferred tax liability (0.1)
------------------------------------------- --------
8.4
------------------------------------------- --------
Provisional goodwill of GBP2.2 million arises from the
acquisition and is attributable to the acquired business and the
expected economies of scale from combining the operations of the
Group and the acquisition. None of the goodwill is expected to be
deductible for income tax purposes.
As the acquisition was made in the year, the above amounts are
provisional and subject to adjustment.
Net cash outflow arising on the acquisition:
GBPm
---------------------------------------------------------- -----
Total consideration - cash paid on completion (7.3)
Cash acquired 4.5
---------------------------------------------------------- -----
(2.8)
Acquisition-related costs (0.2)
---------------------------------------------------------- -----
Net cash flows arising during the year ending 31 May 2020 (3.0)
---------------------------------------------------------- -----
Cash paid post year end (1.1)
---------------------------------------------------------- -----
Net cash flows arising on the acquisition (4.1)
---------------------------------------------------------- -----
Acquisition-related costs of GBP0.2 million have been charged to
the income statement (included within exceptional costs) in the
year ended 31 May 2020.
The following amounts have been recognised within the
consolidated income statement in respect of the acquisition made in
the year: revenue - GBP12.5 million, profit - GBP1.6 million.
Had the acquisition taken place at the start of the financial
year, the consolidated income statement would show: revenue -
GBP22.4 million, profit - GBP1.8 million.
12. Analysis of cash and cash equivalents and reconciliation to
net debt
Other
1 June Cash IFRS16 non-cash 31 May
2019 flow conversion movements 2020
GBPm GBPm GBPm GBPm GBPm
------------------------------------------- ------ ----- ---------- --------- ------
Cash and cash equivalents 2.8 2.5 - - 5.3
Borrowings (13.0) (1.6) - (2.6) (17.2)
Hire purchase obligations(1) (0.2) 0.4 - (0.6) (0.4)
------------------------------------------- ------ ----- ---------- --------- ------
Total Group (excluding lease liabilities) (10.4) 1.3 - (3.2) (12.3)
------------------------------------------- ------ ----- ---------- --------- ------
Lease liabilities (excluding hire purchase
obligations transferred) - 5.2 (16.2) (15.3) (26.3)
------------------------------------------- ------ ----- ---------- --------- ------
Total Group (including lease liabilities) (10.4) 6.5 (16.2) (18.5) (38.6)
------------------------------------------- ------ ----- ---------- --------- ------
1 Following the adoption of IFRS 16 'Leases', hire purchase
obligations are now recognised within lease liabilities, shown here
for comparative purposes only.
13. Retirement benefit schemes
The Group operates a defined benefit pension scheme providing
benefits based on final pensionable earnings, which is closed to
future accrual.
NWF Group Benefits Scheme
The scheme is administered by a fund that is legally separated
from the Group. The trustees of the pension fund are required by
law to act in the interest of the fund and of all relevant
stakeholders in the scheme. The trustees are responsible for the
investment policy with regard to the assets of the fund.
The scheme was closed to new members during the year ended 31
May 2002 and closed to future accrual with effect from April
2016.
The latest full triennial actuarial valuation of this scheme was
completed in the year ended 31 May 2018, with a deficit of GBP19.1
million at the valuation date of 31 December 2016. The present
value of the defined benefit obligation and the related current
service cost were measured using the Projected Unit Credit Method.
In these financial statements this liability has been updated in
order to derive the IAS 19R valuation as of 31 May 2020. The next
full triennial valuation will be completed in the year ending 31
May 2021.
The amounts recognised in the balance sheet in respect of the
defined benefit scheme are as follows:
2020 2019
GBPm GBPm
------------------------------------------------------- ------ ------
Present value of defined benefit obligations (61.1) (55.3)
Fair value of scheme assets 40.1 38.0
------------------------------------------------------- ------ ------
Deficit in the scheme recognised as a liability in the
balance sheet (21.0) (17.3)
Related deferred tax asset 4.0 2.9
------------------------------------------------------- ------ ------
Net pension liability (17.0) (14.4)
------------------------------------------------------- ------ ------
Changes in the present value of the defined benefit obligation
are as follows:
2020 2019
GBPm GBPm
----------------------------------------------------------------- ----- -----
At 1 June 55.3 53.4
Current service cost - 0.1
Interest cost 1.3 1.4
Remeasurement losses:
- actuarial losses arising from changes in financial assumptions 5.5 2.1
Benefits paid (2.1) (2.0)
Past service cost 1.1 0.3
----------------------------------------------------------------- ----- -----
At 31 May 61.1 55.3
----------------------------------------------------------------- ----- -----
Changes in the fair value of scheme assets are as follows:
2020 2019
GBPm GBPm
--------------------------------- ----- -----
At 1 June 38.0 36.3
Interest income 0.9 1.0
Remeasurement gains:
- actuarial gains on plan assets 1.5 0.9
Contributions by employer 2.1 2.1
Expenses (0.3) (0.3)
Benefits paid (2.1) (2.0)
--------------------------------- ----- -----
At 31 May 40.1 38.0
--------------------------------- ----- -----
14. Critical accounting estimates and judgements
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal the related actual results. The assumptions that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year
are discussed below.
Defined benefit pension scheme - valuation assumptions
The balance sheet carrying values of defined benefit pension
scheme surpluses or deficits are calculated using independently
commissioned actuarial valuations. These valuations are based on a
number of assumptions, including the most appropriate mortality
rates to apply to the profile of scheme members and the financial
assumptions regarding discount rates and inflation. All of these
are estimates of future events and are therefore uncertain.
Significant actuarial assumptions for the determination of the
defined benefit liability are discount rate, price inflation and
mortality. The sensitivity analyses shown below have been
determined based on reasonably possible changes of the respective
assumptions occurring at the balance sheet dates, while holding all
other assumptions constant.
Increase Decrease
Impact on defined benefit obligation GBPm GBPm
------------------------------------------------- -------- --------
0.25% change in discount rate (2.7) 2.7
0.25% change in RPI inflation 2.1 (2.1)
One year change in the life expectancy at age 65 2.6 (2.6)
------------------------------------------------- -------- --------
Valuation of acquired intangibles
IFRS 3 requires separately identifiable intangible assets to be
recognised on acquisitions. The principal estimates used in valuing
these intangibles are generally based on the future cash flow
forecast to be generated by these assets, and the selection of
appropriate discount rates to apply to the cash flows.
A 1% increase in the discount rate applied to the future cash
flows would reduce the value attributable to acquired intangibles
by GBP0.1 million.
Assessment of impairment
The Group tests annually for impairment of goodwill and fixed
asset balances, which involves using key judgements including
estimates of future business performance and cash generation,
discount rates and long-term growth rates.
The recoverable amounts of CGUs are determined using value in
use calculations. The value in use calculations use post-tax cash
flow projections based on the Board-approved budget for the year
ending 31 May 2021 and four years of divisional strategic plans
thereafter. Subsequent cash flows are extrapolated using an
estimated growth rate of 2%.
These value in use calculations are subject to a series of
sensitivity analyses using reasonable assumptions concerning the
future performance of the CGUs and assessing the impact of a 1%
increase in the discount rate. None of these reasonable downside
scenarios would result in an impairment.
Carrying value of trade receivables
The Group holds material trade receivable balances, and the
calculations of provisions for impairment are estimates of future
events and therefore uncertain. IFRS 9 requires the Group to
consider forward-looking information and the probability of default
when calculating expected credit losses. The Group considers
reasonable and supportable customer-specific and market information
about past events, current conditions and forecasts of future
economic conditions when measuring expected credit losses.
15. Directors' responsibilities statement
The Directors are responsible for preparing the Annual Report in
accordance with applicable laws and regulations and consider that
the Annual Report, taken as a whole, is fair, balanced and
understandable and that it provides the information necessary for
shareholders to assess the Company's performance, business model
and strategy.
The Company's Annual Report for the year ended 31 May 2020,
which will be posted to shareholders on or before 20 August 2020,
contains the following statement regarding responsibility for the
Strategic Report, the Directors' Report (including the Corporate
Governance Report), the Board Report on Remuneration and the
financial statements included within the Annual Report:
"Each of the Directors confirms that to the best of their
knowledge:
-- the Group financial statements, which have been prepared in
accordance with IFRSs as adopted by the European Union, give a true
and fair view of the assets, liabilities, financial position and
result of the Group;
-- the Strategic Report includes a fair review of the
development and performance of the business and the position of the
Group, together with a description of the principal risks and
uncertainties that it faces;
-- there is no relevant audit information of which the Company's auditors are unaware; and
-- each Director has taken all the steps that they ought to have
taken as a Director to make themselves aware of any relevant audit
information and to establish that the Company's auditors are aware
of that information."
16. Financial calendar
Annual General Meeting 24 September 2020
Dividend:
- Ex-dividend date 5 November 2020
- Record date 6 November 2020
- Payment date 8 December 2020
Announcement of half-year results Early February 2021
Publication of Interim Report Early February 2021
Interim dividend paid May 2021
Financial year end 31 May 2021
Announcement of full-year results Early August 2021
Publication of Annual Report and Accounts Late August 2021
----------------------------------------- -------------------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR BRGDIGDGDGGX
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August 04, 2020 02:00 ET (06:00 GMT)
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