Part of the feed unit's outperformance reflects the fact that last year's comparable period was so weak after a long and mild autumn cut demand for animal feed. But the wet weather that followed has meant poor quality silage, forcing farmers to buy more feed - that coincided with rising crop prices and regular NWF price increases. Accordingly, fed unit revenue jumped 10.1 per cent and the operating profit soared by £1m to £1.6m.
It's a less robust story elsewhere, though. Food business revenue slumped 17.5 per cent to £18.9m, with operating profit falling £1m to £0.8m - the uptake of new customers has been slower than anticipated after AB Food was lost as a client. Meanwhile, the fuels business saw revenue fall 5.1 per cent to £171.4m, reflecting lower crude oil prices, although operating profit reached £0.5m from break-even in the previous period.
Still, the net debt burden more than halved in the period and broker Peel Hunt forecasts full-year adjusted pre-tax profit of £6m, giving EPS of 9.5p (8p in 2012).
|ORD PRICE:||120p||MARKET VALUE:||£56.8m|
|TOUCH:||118-122p||12-MONTH HIGH:||130p||LOW: 84p|
|DIVIDEND YIELD:||3.8%||PE RATIO:||13|
|NET ASSET VALUE:||58p*||NET DEBT:||50%|
The dividend yield looks attractive, but there's no guarantee that the feed unit's performance can be maintained and NWF's other operations are hardly booming amidst less than ideal economic conditions. The shares have risen 36 per cent since early October and now trade on a punchy 13 times forecast earnings - that looks up with events. Hold.
Last IC view: Hold, 100p, 14 Aug 2012