Despite a big dip in half-year profit and a troubled client base of dairy farmers, NWF (NWF) chief executive Richard Whiting is comfortable with forecasts for an 8 per cent increase in the agricultural group's full-year dividend. That's because the group's structure provides something of a natural hedge against commodity price swings. In the first half, problems in the feeds business were partly offset by profit growth within the fuels and foods divisions.
As trailed in a December trading update, feed profit was hit by lower commodity prices. The company forward buys soya and wheat, but came under pressure from its dairy farmer clients - who are themselves battling deflation in a saturated milk market - to cut its prices. That decimated operating profit, which fell from £1.4m to £0.1m. Management nonetheless expects this trend to reverse.
Meanwhile, a milder autumn and the oil price slump depressed sales by 7 per cent in the fuels business. However, NWF still managed to boost divisional profits by £0.1m to £1.2m by focusing on gas oil and premium products. The food division was NWF's standout performer, as efficiency savings increased operating profit by more than a third, despite flat revenue.
Broker Peel Hunt expects full-year adjusted EPS of 12.3p, growing to 13.1p in 2015-16 (from 12.4p in 2013-14).
| NWF (NWF) | ||||
|---|---|---|---|---|
| ORD PRICE: | 128p | MARKET VALUE: | £62m | |
| TOUCH: | 126-130p | 12-MONTH HIGH: | 162p | LOW: 120p |
| DIVIDEND YIELD: | 4.0% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 69p* | NET DEBT: | 37% | |
| Half-year to 30 Nov | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 259.1 | 2.9 | 4.6 | 1.0 |
| 2014 | 247.1 | 2.1 | 3.4 | 1.0 |
| % change | -5 | -28 | -26 | - |
Ex-div: 19 Mar Payment: 1 May *Includes £16.4m of intangible assets, or 34p a share | ||||
