The NWF Group has reported a higher half year profit from its Feeds division, despite lower revenues as feed ingredient values continue to deflate. Feed volumes are up following the acquisition of the New Breed UK dairy consultancy.
The Group has reported a pre-tax profit of £2.6m on revenues of £224.6m across its three divisions – Feeds, Food and Fuels ̶ in the six months to November 30th 2015, compared to £2.5m and £247.1m at the same stage of the previous year. Net debt at the period end was £10.4m, down from £12.4m a year before.
The Feeds division, trading as NWF Agriculture, made an operating profit of £300,000 on sales of £62.1m, from the £100,000 and £68m in H1 2014. Manufactured feed volumes rose 2.3% to 264,000 tonnes from the 258,000 tonnes a year earlier, despite the mild autumn weather suppressing overall ruminant feed demand. Underlying volumes are described as ‘robust’.
Feed values have fallen in line with global commodity values and pressure from farmers seeking to cut costs. The company notes a year-on-year average milk price fall of 5p/litre to 24.6 in November 2015, in the period, with further falls since. With no respite from low milk prices, the company says it is working with customers to help optimise dairy diets to mitigate the tough market conditions. It is also continuing to deliver operational effectiveness.
The New Breed business, acquired in July 2015 for £4.6m (of which £1.5m is deferred subject to performance), has performed “as planned” in the five months under its new owner. Following the deal, the Group has allocated a provisional goodwill of £3.9m to its intangible assets, reflecting the value of the acquired customer base and expected economies of scale.
The Group is looking to ruminant agriculture to lead its future growth. NWF Feeds has increased its share of the national ruminant feed market from 10% - 12% over the last four years, and the Group says it continues to look for innovative businesses in the sector that represent consolidation opportunities. It is targeting companies that have a synergy with its present feed operations, proven management and the capacity for development.
”NWF Group has achieved a solid performance in the first half of the year, despite difficult market conditions,” says chief executive Richard Whiting. “The Group made two acquisitions in Feeds and Fuels and was still able to report reduced debt as a result of its strong cash generative capabilities and effective working capital management. Current trading in is line with the board’s full year expectations.”