Resilience
and growth
NWF Group plc
Annual Report and Accounts 2020
NWF Group is a specialist
distributor of fuel, food
and feed across the UK
Fuels
Accelerating
development
NWF Fuels is a leading distributor
of fuel oil and fuel cards delivering
over 665 million litres across the
UK to 116,000 customers.
FoodMajor
investment
Boughey Distribution is a leading
consolidator of ambient grocery
products to UK supermarkets with
over one million ft² of warehousing
and significant distribution assets.
Feeds
Growing
talent
NWF Agriculture has grown to be a
leading national supplier of ruminant
animal feed to 4,750 customers in
the UK, feeding one in six dairy cows
in Britain.
Find out more about NWF and watch
our latest video at www.nwf.co.uk
Highlights
Divisional highlights
Fuels
Headline operating profit
£11.0m
+96.4%
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.
Read more on pages 6–9
Food
Headline operating profit
Feeds
Headline operating profit
£1.4m
-22.2%
The underlying performance from the
business was in line with expectations. The
business incurred one-off start-up costs of
£0.5 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.
£1.9m-32.1%
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.
Read more on pages 10–11
Read more on pages 12–13
Financial highlights
Revenue
£687.5m
+2.4%
20
19
18
687.5
671.3
611.0
Total dividend per share
Fully diluted headline EPS¹
6.9p
+4.5%
20
19
18
6.9
6.6
6.3
20.3p
+28.5%
20
19
18
20.3
15.8
16.7
Headline profit before tax¹, ²
Headline operating profit¹, ²
Net debt to headline EBITDA³
£13.2m
+36.1%
20
19
18
13.2
9.7
10.2
£14.3m
+40.2%
20
19
18
14.3
10.2
10.6
0.7x
20
19
18
0.4
0.7
0.7
1
2
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.
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
£0.2 million. Profit before taxation and headline profit before taxation are reduced by £0.2 million with the inclusion of £0.4 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.
Contents
Overview
1 Highlights
2 Chair’s statement
Strategic report
4 Chief Executive’s review
6 Divisional review: Fuels
10 Divisional review: Food
12 Divisional review: Feeds
14 Business model
16 Group financial review
20 Principal risks and uncertainties
ESG framework
22 Sustainability
26 Board of Directors and Company Secretary
28 Senior management
28 Advisors
29 Corporate governance statement
35 Audit Committee report
37 Directors’ remuneration report
40 Directors’ report
42 Statement of Directors’ responsibilities
Financial statements
43 Independent auditors’ report
47 Consolidated income statement
48 Consolidated statement of
comprehensive income
49 Consolidated balance sheet
50 Consolidated statement of changes in equity
51 Consolidated cash flow statement
52 Notes to the Group financial statements
83 Parent Company balance sheet
84 Parent Company statement
of comprehensive income
84 Parent Company statement
of changes in equity
85 Notes to the Parent Company
financial statements
Shareholder information
94 Annual General Meeting –
Covid-19 arrangements
95 Notice of Annual General Meeting
97 Notes to the Notice of Annual
General Meeting
99 Explanatory notes to the Notice
of Annual General Meeting
101 Financial calendar
101 Divisional contacts
NWF Group plc
nwf.co.uk
1
Overview Chair’s statement
A great response
from all our people
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
Food
Feeds
NWF Fuels (including a number of local
sub-brands)
Boughey
NWF Agriculture, SC Feeds, New Breed
and Jim Peet
Read more about our divisions on pages 6–13
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
Summary
• Sustained delivery throughout the year, revenue growth with
increased activity levels in all divisions.
• 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.
• 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.
2
NWF Group plc
Annual Report and Accounts 2020
Overview New Crewe warehouse
The Group has invested £1.9 million into a new
35,000 pallet space warehouse in Crewe for our
Food division, which increases capacity by 35%.
Read more about this investment on pages 10–11
Watch the construction timelapse in
our latest video at nwf.co.uk
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 240,000ft² 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.
Read more about our Sustainability Policy on pages 22–25
Read our s.172 statement on page 34
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
Total dividend per share
6.9p
(2019: 6.6p)
NWF Group plc
nwf.co.uk
3
Overview Chief Executive’s review
Demonstrating
resilience and growth
Overview
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 240,000ft² 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 £14.3 million
(2019: £10.2 million) and headline profit before tax was 36.1%
higher at £13.2 million (2019: £9.7 million). Operating profit
increased by 40.6% to £13.5 million (2019: £9.6 million).
Diluted headline earnings per share were 28.5% higher
at 20.3p (2019: 15.8p).
“A very strong set of results and fully
operational throughout the year.”
Summary
• 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 240,000ft² 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.
4
NWF Group plc
Annual Report and Accounts 2020
Strategic report Feeds Sales
Academy
NWF is committed
to developing future
nutritionists.
Read more on
pages 12–13
See this year’s
Academy intake in
our latest video
at nwf.co.uk
NWF Group plc
nwf.co.uk
5
Cash management remains strong with net debt
of £12.3 million (2019: £10.4 million) excluding lease
liabilities, representing 0.7x EBITDA, after £7.9 million
of development expenditure and £3.8 million of normal
net capital expenditure. Development expenditure was
£6.0 million on Fuels acquisitions and £1.9 million capital
investment in the new Food Crewe warehouse.
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.
Richard Whiting
Chief Executive
4 August 2020
Q&AWhat were the key highlights from the last twelve months?
In the first nine months of the financial year the Group
traded positively with three Fuels acquisitions completed
and successfully integrated, the commencement of a
significant expansion of the Food division and the launch of
the Feeds Sales Academy all achieved before March 2020.
As the nation went into lockdown during the last
three months of our financial year, and with a great
response from our teams, we remained fully operational,
and met the significant increased demand for food from
the supermarkets and fuel from domestic customers.
What is NWF's ESG policy?
The key aspects of our ESG framework are covered
in the Group’s corporate governance report and our
sustainability strategy. We continue to adopt the Quoted
Companies Alliance’s ten principles of good governance
and our sustainability strategy focuses on four pillars:
creating a culture of safety, investing in our people,
building strong partnerships and respecting
the environment.
How has NWF managed through the Covid-19 crisis?
Covid-19 has clearly demonstrated the Group’s resilience
in supplying fuel, food and feed across the country and
demand for these essential supplies has remained robust.
We met the increased demand for food from the supermarkets
and homeowners' needs for additional fuel as a consequence
of staying at home. All our employees were designated as
key workers and I am very proud of everyone’s outstanding
efforts and that as a Group we did not utilise any Government
support or furlough any employees.
Stay up to date at nwf.co.uk
“We will continue to consider
development opportunities.”
Development capital expenditure
£7.9m
(2019: £4.5m)
Strategic report
Strategic report
Divisional review: Fuels
Accelerating
development
With 116,000 customers being supplied
across 25 fuel depots, Fuels operates in
markets that are large and robust and, as a
business, it has consistently proved it can
effectively manage the volatility in oil prices.
The industry remains highly fragmented,
with many small operators, which we
continue to believe provides an opportunity
for NWF to further increase market share.
Customers
116,000
(2019: 63,000)
Litres of fuel delivered
665m
(2019: 552m)
Fuel depots owned
Acquisitions
25(2019: 19)
3(2019: 2)
Richard Huxley
Managing Director,
Fuels
“A great team performance,
acquisitions successfully
integrated, and we serviced
the increased demand from
our customers during the
lockdown period.”
6
NWF Group plc
Annual Report and Accounts 2020
Review of the year
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 £470.2 million
(2019: £443.0 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 £11.0 million (2019: £5.6 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.
Division KPIs
Revenue
£470.2m
+6.1%
20
19
18
470.2
443.0
400.7
Headline operating profit
Volume (litres)
£11.0m
+96.4%
11.0
20
19
18
5.6
6.9
665m
+20.5%
20
19
18
665
552
543
Market trends and our responses
Increased domestic demand
during lockdown
As people were asked to stay at home there was
a significant increase in demand for heating
oil to keep homes warm during this period.
The demand increased dramatically and we
were able to focus our fleet of 154 tankers
to deliver this fuel to homes across the
country. NWF operates a depot focused
model which was critical in enabling our
25 depot teams to respond to the needs of
customers in their local area. In the period
March to May 2020, 37% more deliveries
were completed compared to the prior year.
Added value services
The Fuels division introduced the supply
of AdBlue as a value-added service to our
customer base during the year. AdBlue is
required in all new diesel vehicles and we
were able to offer both bulk and small storage
units for AdBlue on our customers’ premises.
Improving our environmental impact
The business has made a significant investment
in new fuel-efficient Euro 6 tankers which have
an improved fuel efficiency and lower emission
levels. As we have acquired new businesses,
new tankers are being ordered for these
depots. Environmental due diligence is
performed on all acquired businesses
with a programme of environmental
improvement implemented as required.
NWF Group plc
nwf.co.uk
7
Three Fuels acquisitions
These increase volumes by over 20% and
expand our geographic reach and penetration.
Read more about our acquisition
strategy on pages 8–9
“We will continue to
consider acquisition
opportunities.”
Strategic report Divisional review: Fuels continued
Our acquisition
strategy
Our strategy
• Consolidate a highly fragmented market.
• Expand existing geographical area.
•
Increase business density in
existing territories.
• Enhance product and customer mix
in both new and existing territories.
• Realise efficiencies from increased scale.
How we delivered
• Acquired three businesses across the
UK during FY19/20.
• Over 120 million litres of business added.
• £9.4 million consideration paid.
Recent acquisitions
December 2018
• Midland Oil Supplies
April 2019
• Consols Oils
July 2019
• Ribble Fuel Oils
October 2019
• Caldo
December 2019
• Darch Oil
Acquisition process
The Group has a clear established process
for the identification, valuation, acquisition
and integration of complementary oil
distribution businesses.
8
NWF Group plc
Annual Report and Accounts 2020
Capacity
Consideration paid
+20%
(2019: +30%)
£9.4m
(2019: £5.0m)
Proactive target
identification
Clear valuation
and pricing strategy
NWF continues to develop a pipeline of
acquisition opportunities focused on UK
oil distribution businesses. Opportunities
are sourced from a combination of pro-active
approaches by NWF, off-market approaches
to NWF by sellers and participation in
formal sales processes. NWF targets
those businesses whose business model
and geography will combine with NWF
most effectively to create additional
shareholder value.
The Group has a standardised process for
assessing the value of a target business
to NWF and pricing the transaction
accordingly. The Group operates within
this process and quickly rejects
opportunities that do not meet its
valuation and pricing parameters.
Strategic report Key
Existing depot
New depots acquired
in last twelve months
Kirkby Lonsdale
Preston
Burnley
Southport
Wardle
Bangor
Dyserth
Immingham
Mansfield
Babbinswood
Stoke
Staffordshire Fuels
Boston
Droitwich
Kenilworth
Long Marston
Great Yarmouth
Burwell
Ammanford
Yate
Glastonbury
Yeovil
Home Counties
Redruth
Fishers Pond
Effective transaction
process
Integration and
value delivery
NWF has an established legal,
environmental and financial due diligence
process and advisory team which combines
with in-house operational and commercial
due diligence and integration planning.
This enables the Group to conclude
transactions in an effective, cost efficient
and timely manner.
The Group has a clear post-acquisition
integration strategy and plan to ensure
that shareholder value is delivered. The
integration model is based on retaining
the brand and customer-facing aspects of
the acquired business whilst centralising
finance, IT and credit control to create
efficiencies and to bring processes in line
with the wider Group.
NWF Group plc
nwf.co.uk
9
Strategic report Strategic report
Divisional review: Food
Major
investment
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.
Pallets stored
103,000
(2019: 100,000)
People
682
(2019: 612)
Trucks
118(2019:127)
Trailers
266(2019: 252)
Keith Forster
Managing Director,
Food
“Delivering critical food
supplies across the UK and
investing in a significant
expansion of the business.”
10 NWF Group plc
Annual Report and Accounts 2020
Review of the year
This has been a year of significant development with the
planning and investment in a new 240,000ft² 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 £48.3 million (2019:
£47.9 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 £1.4 million (2019: £1.8 million),
reflecting the solid underlying business performance offset
by £0.5 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.
“The outlook for most product categories
handled by the business is resilient.”
In February 2020 the Group commenced operations
in an additional leased 240,000ft² 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.
Division KPIs
Revenue
£48.3m
+0.8%
20
19
18
48.3
47.9
40.4
Headline operating profit
Pallets stored
£1.4m
-22.2%
20
19
18 0.7
1.4
1.8
103,000
+3.0%
20
19
18
103,000
100,000
90,000
Market trends and our responses
Significant increase in demand from the
supermarkets during the Covid-19 crisis
From February 2020 onwards there was
an unprecedented, significant increase
in demand for ambient groceries from
all supermarkets. We worked with all our
customers and supermarkets to meet
this increased demand, utilised overtime
and subcontractors and have recruited
additional staff to support this demand,
whilst implementing safe methods of
working to ensure our employees are safe.
Impact of Brexit
We store food produced in the UK and from
customers who import ambient grocery
products from around the world. With the
previous Brexit deadlines customers did
work with us and some wanted to increase
stockholding to ensure they maintained
service levels. As we near the end of the
transition period we will again work with
customers to meet their needs. We have
some additional capacity with our new
warehouse in Crewe fully operational.
The demand for ambient groceries in the
UK is linked to the size of the UK population
which is slowly increasing and therefore
our future market demand levels are robust.
Growth of online and home delivery
In Food we deliver our customers' products
to all their delivery points which includes all
the home delivery food operators. The
increase in online shopping does not
negatively impact our business, it simply
changes the mix of delivery destinations
as we deliver to retailers’ warehouses. The
growth of online has caused an increase
in the demand from our e-fulfilment operation
which has increased both the number of
customers and throughput.
NWF Group plc
nwf.co.uk
11
Crewe warehouse
Investing £1.9 million in a new 240,000ft²
warehouse in Crewe has created
55 additional, permanent local jobs.
“Our new 240,000ft²
warehouse was fully racked
out during lockdown thanks
to the support of a number
of contractors and is now
fully operational.”
Strategic report Strategic report
Divisional review: Feeds
Growing
talent
NWF provides nutritional advice to farmers
across the country with over 60 trained
nutritional advisors analysing forage and
farmers’ objectives to deliver feed to
optimise performance. Feed is then
produced from mills across the UK and
delivered directly to farmers with the
majority of the business being dairy, but
also supporting beef and sheep farmers.
Tonnes
625,000
(2019: 591,000)
People
228(2019: 203)
Trucks
40(2019: 38)
Trailers
14(2019: 13)
Andrew Downie
Managing Director,
Feeds
“We are pleased to have
grown the business to a record
625,000 tonnes of ruminant
feed and launched the Feeds
Sales Academy which delivers
an 18-month structured training
programme to develop the
nutritionists of the future.”
12
NWF Group plc
Annual Report and Accounts 2020
Review of the year
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 £169.0 million (2019: £180.4 million)
reflecting the lower average feed and commodity
prices in 2020. Headline operating profit was £1.9 million
(2019: £2.8 million). Higher energy costs and increases in
commodity prices impacted margins and offset the
volume benefits.
“Providing nutritional advice to ruminant
farmers across the country backed by a
very well invested operational platform.”
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.
Division KPIs
Revenue
£169.0m
-6.3%
20
19
18
169.0
180.4
169.9
Headline operating profit
Volume (tonnes)
£1.9m-32.1%
1.9
20
19
18
2.8
3.0
625,000
+5.8%
20
19
18
625,000
591,000
589,000
Agriculture Academy
The Feeds Sales Academy was launched in
September 2019 and has 18 trainees engaged
on an 18-month structured programme to
become future NWF nutritionists.
Market trends and our responses
Ruminant market 6% lower in 2020
The ruminant market is reasonably stable
and resilient. The reduction in 2020 was a
result of high levels of forage stocks and
some farmers experiencing lower milk
prices in the year. At NWF we were able
to increase volumes and therefore grow
our market share with deliveries direct
to farm, through merchants and to other
compounders. There was some indication
of short-term dairy demand reduction for
food service outlets during lockdown, but
this did not significantly impact feed demand.
Environmental impact of dairy farming
With increasing concerns with regards
to the environmental impact of the food
supply chain, NWF is well placed to advise
on optimum nutrition to maximise yield
and therefore minimise the environmental
impact of a dairy farm. We work closely with
our farming customers to meet the needs
and specifications set out by retailers and
dairies to support a good environmental
approach. Our skilled technical team
continues to look for new solutions and
diets which can optimise production and
reduce environmental impacts. Many of the
raw materials used in feed production are
by-products of the human food supply
chain which therefore utilises what are,
in effect, waste products.
Consolidation of dairy farmers
Over the last 20 years there has been a
significant reduction in the number of dairy
farmers which has been equally offset by
a growth in average herd size. This trend,
which has slowed in recent years owing to
a lack of land availability and some planning
constraints, supports the need for high quality
nutritional advice and not a generalist sales
resource. This plays to our strength of a
nationwide team of trained nutritionists
and underpins our investment in the
NWF Academy.
NWF Group plc
nwf.co.uk
13
Strategic report Business model
Focused on
value creation
Industry insight
Excellence in customer service
Customer service is the number one priority, whether it is
reaching nine out of ten callers who have run out of fuel
on the same day, delivering excellent service levels in food
or delivering to farm within 24 hours when needed by farmers.
Building on a solid platform
The Group has established a solid platform with strong
profit development and cash conversion. Competitive
banking facilities support the Group’s development.
Understanding our markets
Established in 1871, the Group adds value to our customers
through an in depth knowledge of the oil, food distribution
and agricultural markets.
Strategic direction
Capital investment
Our strategy is to maintain a position of financial strength
whilst growing the business through considered
investment in people, plant and equipment.
Acquisitions
The Group’s strategy is to make key acquisitions to increase
penetration, scale or geographic reach within its divisions.
Organic growth
Organic growth continues to be driven through our
diversified and service led divisions.
e in custom er s e r v i c
c
n
e
l
l
e
c
x
E
e
a p i t a l investment
C
B
uildin
g
o
n
a
s
o
l
i
d
p
l
a
t
f
o
r
m
Creating
shareholder
value
O
r
g
a
n
i
c
g
r
o
w
t
h
s
n
Acquisitio
Understanding o u r m a r
s
t
e
k
Investment case
Strong
management team
Growth
opportunities
Asset backing
Solid track record with ambition
Consolidate and optimise
Strong balance sheet
3completed Fuels acquisitions
1clear strategy
£178.4m
total assets
14 NWF Group plc
Annual Report and Accounts 2020
Strategic report
“The Covid-19 crisis highlighted the
fundamental resilience of the NWF
business model with all divisions fully
operational during lockdown.”
Richard Whiting
Chief Executive
Three strong divisions
Value creation
Fuels
Industry leading customer service from 25 depots across the UK
•
• Scale delivers efficiency and value for commercial and
domestic customers
• Delivery flexibility focusing on delivering to oil users who have
experienced a run-out
• Supply agreements with major oil companies for security of supply
and competitive pricing
Food
• Market leading national ambient grocery consolidation service
• High service levels
• Award winning IT team and industry leading systems with
customers utilising live stock and delivery data
• Efficient warehousing and transport delivering a value proposition
for food manufacturers and importers
• High warehouse and vehicle asset utilisation
Feeds
• Key nutritional advisor to over 4,750 ruminant farmers across the UK
• Technical support for farmers to improve yields and
farm profitability
• Class leading customer service
• Manufacture of high quality products
• High asset utilisation of mills and blend sheds delivering value
to customers
• Efficient transport fleet delivering direct to farm
Customers
Excellent service provided to over
120,000 customers across the
Group, the number one priority.
Employees and community
Year on year increase of
203 employees, investing
in the local community and
the future of NWF.
Total customers
120k
(2019: 68k)
New jobs created
203(2019: 105)
Shareholders
Total shareholder return
by the continued profitable
development of our businesses
through a combination of organic
growth, capital investment and
selective acquisitions.
Total dividend per share
6.9p
(2019: 6.6p)
Find our ESG policies at nwf.co.uk
Focus on returns
Good cash
generation
Growing dividend
Return on capital employed
is a key metric
£16.1 million of cash generated from
operating activities
Increased dividend in nine
out of the last ten years
16.7%
Group ROCE
112.6%
cash conversion
6.9p
total dividend per share
NWF Group plc
nwf.co.uk
15
Strategic report Group financial review
Excellent profitability
and cash generation
Summary
• Headline profit before tax of £13.2 million
(2019: £9.7 million).
• Profit before tax of £12.0 million
(2019: £8.7 million).
• Diluted headline EPS of 20.3p (2019: 15.8p).
• Net debt of £12.3 million (2019: £10.4 million).
• Balance sheet remains in a strong position
with leverage at 0.7x, after having invested
£7.9m in acquisitions and expansion.
Group results
Group revenue increased by 2.4% to £687.5 million (2019:
£671.3 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 £14.3 million, an increase of 40.2%
(2019: £10.2 million). Operating profit increased 40.6%
to £13.5 million (2019: £9.6 million).
Financing costs (excluding those in respect of the defined
benefit pension scheme) increased by £0.6 million to
£1.1 million, with the addition of £0.4 million of interest
on IFRS 16 lease liabilities. The interest on bank debt was
£0.7 million (2019: £0.5 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
£13.2 million (2019: £9.7 million). Profit before taxation
increased by £3.3 million to £12.0 million (2019: £8.7 million).
There were exceptional items in the year of £0.5 million
relating to acquisition costs (2019: £0.5 million).
The tax charge for the year was £3.1 million (2019: £1.9 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 £0.5 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
£8.9 million (2019: £6.8 million).
“The Group has completed three
acquisitions in the year with a total
consideration of £9.4 million. The closing
net debt of £12.3 million represents a net
debt to EBITDA ratio of 0.7x.”
Group revenue
£687.5m
(2019: £671.3m)
16
NWF Group plc
Annual Report and Accounts 2020
Strategic report Group results for the year ended 31 May
Revenue
2020
£m
2019
£m
Derivative financial instruments
Net debt (excluding lease liabilities)
687.5
671.3
Lease liabilities
The headline basic 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
£0.4 million (2019: £0.4 million).
Cost of sales and administrative
expenses
(674.0)
(661.7)
Headline operating profit¹
Exceptional items
Amortisation of acquired intangibles
Operating profit³
Financing costs
Headline profit before tax¹
Exceptional items
Amortisation of acquired intangibles
Net finance cost in respect of
defined benefit pension scheme
Profit before taxation³
Income tax expense²
Profit for the year
14.3
(0.5)
(0.3)
13.5
(1.5)
13.2
(0.5)
(0.3)
(0.4)
12.0
(3.1)
8.9
10.2
(0.5)
(0.1)
9.6
(0.9)
9.7
(0.5)
(0.1)
(0.4)
8.7
(1.9)
6.8
Headline EPS¹
20.5p
15.8p
Diluted headline EPS¹
20.3p
15.8p
Dividend per share
Headline dividend cover¹
Headline interest cover
6.9p
2.9
20.4
6.6p
2.4
20.4
1
2
3
Headline operating profit is statutory operating profit of £13.5 million
(2019: £9.6 million) before exceptional items of £0.5 million (2019: £0.5 million)
and amortisation of acquired intangibles of £0.3 million (2019: £0.1 million).
Headline profit before taxation is statutory profit before taxation of
£12.0 million (2019: £8.7 million) after adding back the net finance cost
in respect of the Group’s defined benefit pension scheme of £0.4 million
(2019: £0.4 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.
Taxation on exceptional items in the current period has reduced the
charge by £Nil (2019: £0.1 million).
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
£0.2 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 £0.2 million with the
inclusion of £0.4 million of finance costs under the new standard.
“The Group increased net assets
by £4.0 million to £51.1 million
(31 May 2019: £47.1 million).”
Balance sheet as at 31 May
Tangible and intangible fixed assets
Right of use assets
Net working capital
Current tax liabilities
Deferred tax liabilities (net)
Retirement benefit obligations
2020
£m
79.9
27.3
4.8
0.1
(12.3)
(26.3)
(0.9)
(0.5)
(21.0)
2019
£m
70.2
—
6.1
0.2
(10.4)
—
(1.1)
(0.6)
(17.3)
Net assets
51.1
47.1
Balance sheet summary
The Group increased net assets by £4.0 million to £51.1 million
(31 May 2019: £47.1 million). This reflects the robust trading
performance during the year with a retained profit for the year
of £5.7 million (2019: £3.7 million) partially offset by an
increase in the accounting valuation of the pension deficit.
Tangible and intangible fixed assets increased by £9.7 million
to £79.9 million as at 31 May 2020 (31 May 2019: £70.2 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 £4.1 million and £0.6 million respectively
(2019: £3.9 million and £0.8 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 £1.3 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 £0.9 million to £4.7 million
(31 May 2019: £5.6 million) with trade and other receivables
decreasing to £56.7 million (31 May 2019: £67.2 million)
and a decrease in trade and other payables to £56.6 million
(31 May 2019: £66.7 million).
Net debt increased by £1.9 million to £12.3 million
(31 May 2019: £10.4 million), reflecting the combined impact
of the acquisitions in the year, the investment in Crewe 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 £3.7 million to £21.0 million
(31 May 2019: £17.3 million). The value of pension
scheme assets increased by £2.1 million to £40.1 million
(31 May 2019: £38.0 million) predominantly as a result
of employer contributions, and the value of the scheme
liabilities increased by £5.8 million to £61.1 million
(31 May 2019: £55.3 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%).
NWF Group plc
nwf.co.uk
17
Strategic report Group financial review continued
Cash flow and banking facilities
The Group has completed three acquisitions in the year with
a total consideration (net of cash acquired) of £6.0 million.
The closing net debt (excluding IFRS 16 lease liabilities) of
£12.3 million represents a net debt to EBITDA ratio of 0.7x.
The cash impact of working capital movements was
£1.7 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 £0.4 million
Cash flow and banking facilities for the year ended 31 May
within working capital. Net cash generated from operating
activities and after IFRS 16 lease payments was £16.1 million
(2019: £6.4 million) representing a cash conversion ratio
of 112.6% of headline operating profit (2019: 62.7%).
Net capital expenditure in the year at £5.7 million (2019:
£2.8 million) exceeded the annual depreciation charge,
excluding IFRS 16 depreciation, of £4.1 million (2019:
£3.9 million) reflecting the investment in Crewe.
Operating cash flows before movements in working capital and provisions
Working capital movements
Utilisation of provision
Interest paid
Tax paid
Net cash generated from operating activities
Capital expenditure (net of receipts from disposals)
Acquisition of subsidiaries – cash paid (net of cash acquired)
Capitalised legal costs associated with leases
Payment of contingent deferred consideration
Net cash absorbed by investing activities
Net increase in bank borrowings
Capital element of leases
Dividends paid
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
2020
£m
23.8
1.7
—
(1.1)
(2.7)
21.7
(5.7)
(6.0)
(0.3)
—
(12.0)
1.6
(5.6)
(3.2)
2.5
2.8
5.3
2019
£m
12.8
(3.9)
(0.1)
(0.5)
(1.9)
6.4
(2.8)
(3.5)
—
(0.8)
(7.1)
6.2
(0.1)
(3.1)
2.3
0.5
2.8
Crewe
warehouse
The Group has
invested £1.9 million
into a new warehouse
in Crewe for our
Food division, which
increases storage
capacity by 35%
Read more about
this investment
on pages 10–11
18 NWF Group plc
Annual Report and Accounts 2020
Strategic report Fuels acquisitions
are the centrepiece
of our strategy
The Group has completed
three acquisitions in the year
with a total consideration
of £9.4 million.
Read more about this investment
on pages 8–9
The Group’s banking facilities, totalling £65.0 million,
were renewed in June 2018 and are committed through to
31 October 2023 with the exception of the bank overdraft
facility of £1.0 million and the £4.0 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
£65.0 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 £50.0 million.
The banking facilities are provided subject to ongoing
compliance with conventional banking covenants against
which the Group has substantial levels of headroom.
Going concern
The Group has an agreement with The NatWest Group
for credit facilities totalling £65.0 million. With the
exception of the bank overdraft facility of £1.0 million
and the £4.0 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 £49.5 million (based on actual
invoice discounting availability and overdraft facilities),
against which the Group was utilising £11.9 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.
Chris Belsham
Finance Director
4 August 2020
NWF Group plc
nwf.co.uk
19
Strategic report Principal risks and uncertainties
Focusing on
mitigating risk
Given the size of the Group, the Directors
have not established a sub-committee
of the Board to monitor financial risk
management, but have established
policies that are implemented and
monitored by the Executive Directors.
Effective risk management aids decision making, underpins the delivery
of the Group’s strategy and objectives and helps to ensure that the risks
the Group takes are adequately assessed and actively managed. The
Group regularly monitors its key risks and reviews its management
processes and systems to ensure that they are effective and consistent
with good practice. The Board is ultimately responsible for the Group’s
risk management. The risk management process involves the
identification and prioritisation of key risks, together with appropriate
controls and plans for mitigation, which are then reported to the Board.
As with all businesses, the Group is affected by a number of risks and
uncertainties, some of which are beyond our control. The table below
shows the principal risks and uncertainties which could have a material
adverse impact on the Group. This is not an exhaustive list and there may
be risks and uncertainties of which the Board is not aware, or which are
believed to be immaterial, which could have an adverse effect on the Group.
Risk management framework
Board
Responsible for risk management
Audit
Committee
Remuneration
Committee
Disclosure
Committee
Non-Executive Directors
Principal risks and uncertainties
Risk description and impact
1. 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.
Mitigating actions
Change
The health and safety of employees is the Group’s first priority
and the Group has taken actions to ensure it complies with
Government guidance in respect of safe working. The Group
will continue to adapt its operations as new Government
guidance is issued. The Group operates in key industries and
continued to operate profitably through the Covid-19 lockdown
which commenced in March 2020. Demand in the Food and
Feeds divisions remained consistent throughout this period.
The Fuels division saw a reduction in demand from commercial
customers, but an increase in demand from domestic
customers. The availability of funding is closely monitored by
the Group through short and long-term cash flow forecasting.
The Group has significant headroom in its funding facilities.
New principal risk
We monitor the
Covid-19 situation
closely so that we
are able to respond
to changes in health
and safety guidance
or changes in
customer demand.
2. 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.
We are a UK business, with three divisions which all performed
well in the global financial crisis as they supply basic products
to meet the country’s needs for fuels, food and feeds.
No change
We continue to
monitor and plan
contingencies with
customers and
suppliers.
20 NWF Group plc
Annual Report and Accounts 2020
Strategic report Risk description and impact
Mitigating actions
Change
3. 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.
The Group maintains close relationships with key suppliers,
enabling optimal negotiated prices, and where appropriate
implements purchasing framework agreements. The Feeds
business utilises forward contracts for key raw materials to
ensure that impact of volatility can be partially mitigated
through committed prices and volumes.
Multiple sources of supply are maintained for all key raw materials.
4. 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.
Whilst the Fuels division seeks to mitigate this risk through the
provision of a range of fuels including commercial fuels, there
will always be volatility in the profitability of the Fuels division
related to climate. The Feeds division seeks to mitigate the
extent of climatic conditions on the profitability of the business
through its concentration on the key dairy sector where there
is a strong underlying demand.
No change
Reductions in
commodity prices
in both Fuels and
Feeds have been
successfully
managed through
the year.
No change
Remains a
principal risk in
Fuels and Feeds.
5. 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.
The defined benefit pension scheme has been closed to new
entrants since 2002 and from April 2016, closed to future
accrual. Regular meetings are held with both the scheme’s
trustees and professional advisors to monitor and review the
investment policy, the Group’s funding requirements and any
other available opportunities to mitigate this risk.
No change
Remains a
principal risk.
6. Recruitment, retention and development of our key people
Recruiting and retaining the right people is crucial for the
success of the Group and its development.
7. 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.
8. 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.
9. 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.
Remuneration policies are regularly reviewed to ensure
employees are appropriately incentivised. Succession planning
and development of key employees are also considered by the
Board. The Remuneration Committee also ensures that it
receives appropriate benchmark data which is used in the
monitoring and formulation of remuneration policy for key
employees and Executives.
No change
Remains a
principal risk.
The Group has internal IT support teams together with close
relationships with key software vendors and consultants.
Significant investment has been made by the Group in
upgrading and maintaining its core IT systems in each of the
three operating divisions.
No change
Remains a
principal risk.
Expertise within the operating divisions is supplemented by
ongoing advice from professional advisors and the involvement
of the Head Office function which closely monitors existing
business practices and any anticipated changes in regulatory
practices or requirements.
No change
Remains a
principal risk.
The Group employs appropriately qualified and experienced
health and safety personnel and retains health and safety
specialists to ensure compliance.
The Group management team is engaged in ongoing review of
competitor activity, development and acquisition opportunities.
All potential acquisitions are subject to a review of their ability
to generate a return on capital employed and their strategic
fit with the Group. The Group conducts appropriate internal
and external due diligence prior to completing any acquisition.
No change
Remains a
principal risk.
NWF Group plc
nwf.co.uk
21
Strategic report Sustainability
A proactive and
responsible approach
Together, we are working to deliver
long-term sustainable value.
NWF Group is committed to delivering long-term sustainable value
across each of our divisions. Our sustainability strategy has been
developed and is being shared with all our key stakeholders with the
aim of promoting responsible practices.
At NWF Group we focus on creating value with an ongoing and increasing
sense of responsibility towards the wider society, environment and
communities around us. The development of our sustainability
strategy underpins our commitment to think differently and recognise
our progress in this area. Across each of our divisions we have many
examples, from small improvements in working practices to major
investment in clean, modern and efficient fleet and facilities.
NWF Group employs over 1,200 members of staff across our divisions
and throughout the UK. We recognise that embedding sustainable
values at the core of our business is critical to attracting, developing
and retaining the best talent.
Responsibility for the implementation and future development of our
sustainability strategy rests with the Board of Directors, which is
responsible for:
• reviewing, endorsing and achieving the sustainability policy’s aims;
• ensuring each of the divisions are working towards achieving the
Group’s long-term sustainability objectives;
• communicating the policy and promoting the strategy to
key stakeholders;
• driving continual improvement performance across the organisation; and
• developing and rolling out the supporting strategies.
In order to deliver on our sustainability ambitions, we rely on the support
of our customers, suppliers, employees and other key stakeholders.
Sustainability framework
Our strategy consists of four strategic objectives that reflect our values and are designed
to ensure that we take a proactive and responsible approach to the way we operate.
Strategic objectives
Priority objective
Our ambitions
Create a culture
of safety
Create a culture of safety to protect our
employees and the wider community.
• Champion road safety
•
Implement a safety first approach
Invest in
our people
Build a workforce for the future where
our people are healthy, happy and can
fulfil their potential.
Build strong
partnerships
Collaborate and innovate with our
customers and suppliers to deliver
long-term sustainable solutions.
Respect the
environment
Reduce carbon, emissions and waste
across our value chain and champion
environmental stewardship.
• Promote personal and
professional development
• Empower future generations
Improve employee wellbeing
•
• Understand our customers’ needs
• Work together with our suppliers
• Collaborate and innovate for more
sustainable products
Invest in clean fleet
•
• Mitigate our carbon emissions
• Drive efficiencies across our operations
• Responsible use and protection
of the natural environment
22 NWF Group plc
Annual Report and Accounts 2020
ESG framework Create a culture
of safety
What this means to us
The health, safety and welfare of our employees and
the wider community are a top priority in our operations
across all of our divisions. Our safety practices are
overseen by Health and Safety Officers and are assisted
by the engagement of specialist external advisors. Regular
audits are undertaken as well as internal monthly and
external annual reporting to the Board.
Implement a safety-first approach
We implement a safety-first approach in all activities
with the ultimate aim of having no accidents or injuries.
In particular, road safety for our employees and the
general public is of significant importance, due to the
number of miles completed by our fleet. We investigate
thoroughly any incidents involving our fleet and seek to
continually improve our safety processes with our distribution
centres, depots, manufacturing sites and offices.
The following initiatives are examples of the progress we
have made in championing safety across the Group:
• safe driver monitoring initiatives in Food, in-house
driver CPC accreditation, new driver induction and
awards programme using MPG and compliance as
key factors;
• health, safety and environmental defined protocols;
• regular health and safety audits of key locations by
both internal and external parties; and
• monthly reporting to the Board with an annual review
by external advisors.
The Group monitors accidents and injuries in line with the
Reporting of Injuries, Diseases and Dangerous Occurrences
Regulations 2013, and the number of reportable incidents
across the Group in the year ended 31 May 2020 was 17
(31 May 2019: 9).
Safe driver training hours
completed in Food
Number of reportable incidents
1,517
(2019: 3,306)
17(2019: 9)
Creating a centre of excellence at Crewe
During the year the Group has invested £1.9 million into a newly constructed
240,000ft² warehouse in Crewe, which will become a centre of excellence for
Food. This will become a centre of best practice health and safety and will be what
we measure our existing Food safety standards against.
NWF Group plc
nwf.co.uk
23
ESG framework Sustainability continued
Invest in
our people
What this means to us
Our long-term success is dependent on our employees.
We are committed to building a workforce for the future
where our people are healthy and happy and can fulfil
their potential. We recognise that engaged employees,
who feel valued, are crucial to our business, and it also
means they continue to be motivated and deliver the best
possible service to our customers.
Promoting personal and professional development
We achieve this by promoting a range of personal and
professional development, and invest in people. We want
to empower future generations by providing them with a
place where they can learn and grow; this is essential to
securing our talent pipeline.
To ensure our employees have all the tools to reach
their potential, we have invested in a number of
wellbeing initiatives.
The following initiatives demonstrate the commitment
we have made towards investing in our employees across
the Group:
• During the year the Feeds division launched a
Sales Training Academy to recruit and train the next
generation of nutritionists. This year’s intake consisted
of 18 trainees, with a further group planned to join the
division next year. Each individual receives a structured
programme of training across all aspects of the Feeds
business, both classroom based and on farm, alongside
mentoring from our existing sales specialists.
• We have appointed HR business partners across each of
our three businesses, to ensure that we are providing the
appropriate level of support for the recruitment, training
and ongoing development of employees at all levels.
• Employees at our main site in Wardle have access to a
regular weekly timetable of free fitness classes which take
place in our on-site studio. In recent months, these classes
were continued via video conferencing to ensure colleagues
working from home could still access the service.
• The Group takes a proactive approach to addressing
mental health issues and during the year a first aid
mental health course was offered to employees on
a voluntary basis and six people completed the
three-day training course.
• A driver from the Food division won the
nomination-based category of ‘Most Improved Driver’
in the Microlise Driver of the Year Awards 2020.
Feeds Academy
trainees
Staff completing the first
aid mental health course
18
24 NWF Group plc
6
Annual Report and Accounts 2020
Training the next generation
of nutritional advisors
In Feeds we believe that the highest level of advice,
delivered in an applied and practical manner, is key to
helping achieve a sustainable and profitable business
for Britain’s farmers of the future.
Our trainees follow a programme monitored by our Academy
co-ordinator and work with an established on-farm advisor
as their mentor. They are supported by our own highly trained
technical support team, with links to educational institutes
and a comprehensive network of specialist suppliers.
Training topics include: diet formulation, animal nutrition
and physiology, forage management, youngstock
management, farm business profitability, Cow Signals,
product application, sales training, IT and finance.
Our ambition is that our trainees graduate from the Academy
with all the skills required to support our customers and
develop a successful future career within the business.
Build strong
partnerships
What this means to us
The strength of our partnerships is at the heart of every
decision we make. We continue to seek new ways to
collaborate and innovate with our customers and
suppliers to deliver long-term sustainable value.
We want to gain a deeper understanding of our customers’
needs so we can continue to offer them more choice, better
quality and improved standards, as well as great value.
To achieve this, we must focus on the way we interact with
customers and continually monitor and improve performance.
Our partnerships with our suppliers are also vital; we
expect our suppliers to conduct their business in an
ethical and sustainable manner.
ESG framework Respect the
environment
What this means to us
We strive for continual improvement when it comes
to our environmental performance, monitoring carbon
emissions and waste across our supply chain and
promoting a healthy environment.
We recognise that we operate in industries that can have
a significant impact on the environment and that we have
a responsibility to minimise it. Across all divisions we promote
sustainable logistics, investing in clean fleet and energy
initiatives to achieve this. In addition, our strategy to maximise
fleet capacity to ensure no empty running miles provides the
best environmental solution, across all our divisions.
Mitigating our carbon emissions
We are challenging ourselves to think differently, and by driving
efficiencies across our operations we aim to minimise the
amount of waste and plastics we produce, use resources more
responsibly, and ultimately protect the natural environment.
Our current environmental initiatives include:
• Crewe warehouse – efficient LED lighting;
• Fuels acquisitions – environmental surveys and clean
up of acquired sites to NWF standards;
investment in clean, modern fleets;
• optimisation of fleet capacity;
•
• driver training programmes; in Food, MPG has
improved from 8.7 in 2007 to 10.3 in 2020; and
installation of electrical charging points at Wardle
site, available for all employees.
•
Streamlined Energy and Carbon Reporting ('SECR')
Carbon emissions (tCO2e)*
Transport (scope 1)
Transport (scope 3)
Purchased electricity and gas (scope 2)
Other fuels (scope 1)
Total emissions
Carbon intensity ratio 1 (tCO2e/£’000)
Carbon intensity ratio 2 (tCO2e/avg. headcount)
2019/20
22,417
29
5,970
3,117
31,533
27.16
0.05
SECR statement
We measure and report our energy and carbon data across the entire Group
(Food, Fuels and Feed), providing comprehensive data to substantiate our overall
environmental impact. Our SECR statement includes all emission sources
required under the 2019 regulations for the financial year ended 30 May 2020.
This is our first year of reporting and we will be using the 2019/20 reporting
year as our benchmark for 2020/2021.
NWF Group used 31,533 carbon dioxide equivalent tonnes (tCO2e) of energy
during the year. 70% of this energy is consumed by making deliveries to
customers using our transport fleet. Our transport fleet efficiency is a key part
of our energy saving initiatives, looking for savings through more efficient
driving, investment in clean modern vehicles and optimum routing.
We have chosen two carbon intensity ratios that reflect our business performance.
Our carbon intensity ratio for the year ended 31 May 2020 was 0.05 tCO2e per
average employee headcount, and 27.16 tCO2e per £’000 of revenue. Moving
forward, we will set both absolute and percentage reduction targets for carbon
emissions, so we can begin to measure energy efficiency performance alongside
business performance.
In order to calculate the carbon emissions, we have used the emission factors
from the UK Government’s GHG Conversion Factors for Company Reporting 2019.
One of the requirements of the new SECR regulations is to report our total UK
energy use in kilowatt hours (kWh); for this we have used the 2019 conversion
factors, except for any mileage data we had available, for which we have used
the 2020 conversion factors. The Scope 1 and 2 emissions reported are for
all facilities across the Group under our operational control. This includes all
distribution centres, manufacturing sites, oil depots and offices, plus fleet
under our ownership.
Optimising vehicle utilisation
Across the Group this year we delivered
665million litres
of fuel
625k
tonnes of ruminant
animal feed
135k
pallet spaces provided
to customers
Total UK energy usage (kWh)
119,092,791
* tCO2e/year defined as tonnes of CO2 equivalent per year.
Our sustainability policy can be found at nwf.co.uk
Optimising vehicle utilisation and maximising capacity is
at the forefront of our daily operations.
The total NWF Group fleet comprises
154fuel tankers
40feed trucks
14trailers
118food trucks
266trailers
During the year we recognised an additional investment of £8.0 million in leased
assets as part of our ongoing programme to maintain a modern, efficient fleet.
NWF Group plc
nwf.co.uk
25
ESG framework Board of Directors and Company Secretary
An experienced
and capable Board
Philip Acton
Chair
Richard Whiting
Chief Executive
Chris Belsham
Group Finance Director
Experience
Joined the Board in 2013
and became Chair in 2017.
Worked for 17 years in agriculture
as chief operating officer for
Genus Europe and Asia and group
finance director of Genus plc.
Prior to that spent ten years in
the electrical engineering sector
as group finance director of
Scholes Group plc.
Key skills
• Sector experience
• Finance
• Mergers and acquisitions
Key development
A B C D E
F G H
Committee membership
• Audit
• Remuneration
• Disclosure
Experience
Joined in 2007. Previously group
finance director of Heywood
Williams Group plc, after joining
as business development
director from Brand-Rex Ltd,
where he was managing director
of the datacom division.
Key skills
• Strategy and leadership
• Sales and marketing
• Operations
• Finance
• Mergers and acquisitions
Key development
A B C D E
F G H
Committee membership
• Disclosure
Experience
Joined as Finance Director
in 2017. Previously an equity
partner and head of corporate
finance at Irwin Mitchell LLP
having joined the business in
2014 from KPMG Corporate
Finance. Qualified as a Chartered
Accountant with PwC in 1999.
Key skills
• Finance
• Mergers and acquisitions
• Strategy and leadership
Key development
A B C D E
F G H
Committee membership
• Disclosure (Chair)
Yvonne Monaghan
Senior Independent
Non‑Executive Director
Experience
Joined the Board in 2013.
Currently chief financial officer
of Johnson Service Group plc.
A Chartered Accountant,
qualifying with Deloitte Haskins
& Sells in 1982.
Yvonne has informed the
Board of her wish to stand
down at this year’s AGM to be
held on 24 September 2020
after seven years’ service.
Key skills
• Finance
• Mergers and acquisitions
• Current PLC board experience
• Strategy and leadership
Key development
A B C D E
F G H
Committee membership
• Audit (Chair)
• Remuneration
26 NWF Group plc
Annual Report and Accounts 2020
ESG framework David Downie
Independent Non‑Executive
Director
Richard Armitage
Independent Non‑Executive
Director
Rob Andrew
Company Secretary
Experience
Joined the Board in 2018. Holds a
BSc in agriculture and spent over
15 years as a senior executive at
ASDA. Currently non-executive
chair of a vacant property
service company which trades
as VPS Group.
Experience
Joined the Board in July 2020.
Currently chief financial officer
at Victrex plc, a Fellow of the
Chartered Institute of Management
Accountants. Wide strategic and
M&A experience in a number of
senior finance roles.
Key skills
• Sector experience
• Mergers and acquisitions
• Strategy and leadership
Key development
A B C D E
F G H
Committee membership
• Audit
• Remuneration (Chair)
Key skills
• Finance
• Mergers and acquisitions
• Current PLC board experience
• Strategy and leadership
Key development
• A B C D E
F G H
Committee membership
• Audit
• Remuneration
Experience
Joined as Company Secretary in
2004. An experienced chartered
secretary, previously assistant
company secretary of Iceland
Frozen Foods plc.
Key skills
• Health and safety
• Human resources
• Company secretarial
• Property
Key development
A B C D E
Board diversity
Gender diversity
Male (6)
Female (1)
86+
28+
Skills
Mergers and acquisitions (6)
Finance (5)
Strategy and leadership (5)
PLC board experience (2)
F G H
Sector experience (2)
Sales and marketing (1)
Operations (1)
Key development
A
B
C
D
E
F
G
H
External advisor updates
Professional network
Institute updates
Investor forums
Self study
Industry bodies
Other Non-Executive roles
Member of Institute of Directors
NWF Group plc
nwf.co.uk
27
ESG framework14
+
L
22
+
22
+
9
+
9
+
5
+
5
+
L
Senior management
Richard Huxley
Managing Director, Fuels
Keith Forster
Managing Director, Food
Andrew Downie
Managing Director, Feeds
Experience
Joined the Fuels division in May 2018. Richard
has held significant commercial leadership
roles in complex distribution businesses
including Brammer and RS Components (part
of Electrocomponents plc).
Key skills
• Leadership
• Operations
• Sales and marketing
Experience
Appointed Managing Director of the Food
division in November 2004, having joined the
Group in 2001. Previously held senior positions
in a number of distribution businesses.
Key skills
• Leadership
• Operations
• Sales and marketing
• Finance
Experience
Appointed Managing Director of the Feeds
division in February 2015. Previously held the
position of head of operations at ABF plc and
senior positions at AB World Foods and
Patak’s Foods Limited.
Key skills
• Leadership
• Operations
• Sales and marketing
Key development
A B C D E
F G H
Key development
A B C D E
F G H
Key development
A B C D E
F G H
Key development
A
B
External advisor updates
Professional network
C
D
Institute updates
Investor forums
E
F
Self study
Industry bodies
G
H
Other Non-Executive roles
Member of Institute
of Directors
Independent auditors
PricewaterhouseCoopers LLP
No. 1 Spinningfields
1 Hardman Square
Manchester M3 3EB
Bankers
NatWest Group
Corporate Banking
2nd Floor
1 Spinningfields Square
Manchester M3 3AP
Nominated advisor and broker
Peel Hunt LLP
Moor House
120 London Wall
London EC2Y 5ET
Financial PR
MHP Communications
6-22 Agar Street
Covent Garden
London WC2N 4HN
Registered office
NWF Group plc
Wardle
Nantwich
Cheshire CW5 6BP
Registered number
02264971
Advisors
Registrars
Link Asset Services
34 Beckenham Road
Beckenham
Kent BR3 4TU
Solicitors
Brabners LLP
Horton House
Exchange Flags
Exchange Street E
Liverpool L2 3YL
28 NWF Group plc
Annual Report and Accounts 2020
ESG framework
Corporate governance statement
Strong governance
“NWF recognises the importance of good
corporate governance and in many areas
goes beyond the principles of the QCA Code
as it continues to develop and maintain
governance standards.”
Dear shareholder,
The Board has adopted the QCA Code and continues
to follow the ten principles as set out on page 30. NWF
recognises the importance of good corporate governance
and in many areas goes beyond the principles of the
QCA Code as it continues to develop and maintain
governance standards.
In my role as Chair, I am responsible for the Board
including its effective leadership and composition,
assessing and improving its performance, and leading the
Company’s corporate governance culture. The corporate
governance culture will be measured against the QCA Code
fundamentals and regularly reviewed with developments
and changes communicated to shareholders.
In the disclosure that follows we share details of our
current governance structures and practices including
where and why we differ from any of the expectations
set by the QCA Code.
The Company continues to comply with the QCA Code
but given the Group’s size and plans for the future,
it also endeavours to have regard to the provisions of
the UK Corporate Governance Code to the extent that
we believe is appropriate. As an example of how we
have supplemented the QCA Code with provisions of
the UK Corporate Governance Code, we now require each
and every Director on the Board to be annually re-elected
and have implemented an independence policy that
Non-Executive Directors are not able to serve for
more than nine years.
Philip Acton
Chair
4 August 2020
NWF Group plc
nwf.co.uk
29
ESG framework Corporate governance statement continued
The QCA Code is built on the three fundamentals of delivering growth, maintaining a dynamic management
framework and building trust, each of which the Board is committed to, as it believes these will support the
Company’s medium to long-term success.
The ten QCA principles are:
Deliver growth
Principle 1: Establish a strategy and business model which promote long-term value for shareholders.
Principle 2: Seek to understand and meet shareholder needs and expectations.
Principle 3: Take into account wider stakeholder and social responsibilities and their implications for
long-term success.
Principle 4: Embed effective risk management, considering both opportunities and threats,
throughout the organisation.
Maintain a dynamic management framework
Principle 5: Maintain the Board as a well-functioning, balanced team led by the Chair.
Principle 6: Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities.
Principle 7: Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement.
Principle 8: Promote a corporate culture that is based on ethical values and behaviours.
Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision
making by the Board.
Build trust
Principle 10: Communicate how the Company is governed and is performing by maintaining a dialogue with
shareholders and other relevant stakeholders.
Deliver growth
Principle 1: Establish a strategy and business model
which promote long-term value for shareholders
The Group’s business model is set out on pages 14 and 15
and on the business model page of our website,
www.nwf.co.uk/about-us/business-model.
The Board has a proactive approach to shareholder
liaison, led by the Chief Executive, and feedback is
provided regularly to the Board. This approach includes
our AGM (where votes in favour are consistently over
75%), open days, biannual investor roadshows and annual
meetings with significant shareholders.
The challenges, including the principal risks and
uncertainties affecting our businesses and which may
prevent the Group from delivering its strategy, are
explained on pages 20 and 21.
Principle 2: Seek to understand and meet shareholder
needs and expectations
Whilst the Company has a diverse range of shareholders,
they can be broadly categorised as follows:
1.
three independent pension funds registered in
Iceland (each holding c. 5% of the issued share
capital) as set out on page 41;
2. other institutional investors;
3. private individuals; and
4. employees and ex-employees.
The Board continuously seeks to engage with and
understand shareholders’ views and meet their needs
and expectations.
Principle 3: Take into account wider stakeholder and
social responsibilities and their implications for
long-term success
The Group creates value through a focus on shareholders,
customers, suppliers, employees and the local community.
Investor feedback is sought after each final and half-year
results announcement and the AGM offers a good
opportunity for all shareholders to express their views
directly to the Board. This feedback has resulted in
changes to investor presentations.
Feedback from customers is regularly obtained through
account managers and sales representatives, surveys
and service metrics.
Feedback from suppliers is regularly obtained through
relationships with both account managers and
senior management.
Employee feedback is obtained in a number of ways including
team meetings and forums across the Group’s divisions.
30 NWF Group plc
Annual Report and Accounts 2020
ESG framework Building on feedback methods already in place, the
Board receives an annual corporate governance review
from the Nominated Advisor.
The business model, on pages 14 and 15, sets out how
these relationships shape the focus of the Group.
Principle 4: Embed effective risk management,
considering both opportunities and threats, throughout
the organisation
An explanation of the Group’s strategy is set out on
pages 14 and 15 including a risk analysis on pages 20 and 21.
The annual report from the Audit Committee, which
discusses internal control and risk management, is set
out on pages 35 and 36.
Divisional management teams produce detailed monthly
financial and commercial reports for the Board. Divisional
management meetings are held monthly and are attended
by the Executive Directors, where existing and potential
risks to the business and their management are reviewed.
A rolling programme of risk and controls testing is
undertaken across the Group with a focus on various key
areas of risk identified. This programme is undertaken
through a combination of internal and external resource.
A cyber risk workshop was held in the year with a crisis
management workshop concentrating on the Wardle site
planned for later in the year.
The risks faced by the Group are formally documented
in risk registers which are discussed at the biannual
Audit Committee meetings.
Maintain a dynamic management framework
Principle 5: Maintain the Board as a well-functioning,
balanced team led by the Chair
The Board currently comprises two Executive and three
Non-Executive Directors. The names of the Directors
together with their roles and biographical details are set out
on pages 26 and 27. The roles of Chair and Chief Executive
are separated, are clearly understood and have been
agreed by the Board. The Chair is responsible for the
Board. The Chief Executive is responsible for the
operating performance of the Group. A formal schedule
of matters requiring Group Board approval is maintained
and regularly reviewed, covering such areas as Group
strategy, approval of budgets, financial results, Board
appointments and dividend policy, which is available to
view at www.nwf.co.uk/about-us/governance/board-
responsibilities. The Board normally meets once a month
with additional meetings which are called when required.
Comprehensive briefing papers are sent to all Directors
prior to each scheduled Board meeting. Directors are
able, if necessary, to take independent professional advice
in the furtherance of their duties at the Company’s expense.
Board composition
20+
Chair (1)
Executive Directors (2)
Senior Independent
Non-Executive Director (1)
Independent
Non-Executive Director (1)
Due to the infrequency of senior appointments, the Board
does not maintain a standing Nomination Committee but
forms one when required. The current Chief Executive’s
and Group Finance Director’s appointments were
approved by the Board, after receiving a recommendation
from a Committee of the Board, consisting of the
Non-Executive Directors, that was formed specifically for
that purpose. The Committee undertook a comprehensive
recruitment process and was assisted by independent
external recruitment consultants. Terms of reference for
the Audit, Remuneration and Disclosure Committees are
included on our website, www.nwf.co.uk/about-us/
governance/corporate-governance-statement.
The Board annually conducts an appraisal of its own
performance and that of each Director consisting of
individual assessments using prescribed questionnaires
that are completed by all Directors. The results are
reviewed, and individual feedback is given, by the Senior
Independent Non-Executive Director in respect of
assessments of the Chair, and by the Chair in respect of
assessments of each of the other Directors and of the Board
as a whole. This has now been expanded to include appraisals
of the Audit and Remuneration Committees.
The service contracts of Executive Directors require one
year’s notice or less.
The Board has approved an Independence Policy which
ensures that no Director is able to sit on the Board for
more than nine years mirroring the provision in the UK
Corporate Governance Code.
Non-Executive Directors’ time commitment is reviewed
to ensure it is sufficient to fulfil their roles.
Attendance of Directors at meetings is set out below:
Board
Disclosure
Committee
Audit
Committee
Remuneration
Committee
T P Acton
C J Belsham
D S Downie
Y M Monaghan
R A Whiting
Principle 6: Ensure that between them the Directors
have the necessary up-to-date experience, skills
and capabilities
The biographical details of the Directors, including their
skills and experience, are set out on pages 26 and 27.
The biographical details of the senior Group management
team are set out on page 28.
The Board is satisfied that it has an appropriate mix
of skills, personal qualities and capabilities and is not
dominated by one person or a group of people.
The Board and the Committees to the Board are
supported by external advisors on a regular basis.
All Directors are subject to re-election each year and
the service agreements for Non-Executive Directors
are renewed annually.
A record of education and training the Directors have
undertaken has been created. This will help to track and
ensure the Directors are all keeping up to date with the
latest experience, skills and capabilities.
Attended
Not required
to attend
Absent
NWF Group plc
nwf.co.uk
31
ESG framework40
+
20
+
20
+
L
Corporate governance statement continued
Maintain a dynamic management framework continued
Principle 7: Evaluate Board performance based on clear
and relevant objectives, seeking continuous improvement
The Board conducts an annual appraisal of its own
performance and that of each Executive Director. External
facilitation has not been used to date but does include an
external view from the Company’s Nominated Advisor.
The Board has agreed to use an evaluation tool going
forward and conducted its first review in February 2020.
This was successfully undertaken with some
recommendations which will be implemented. The
evaluation tool will be further utilised to include the
workforce in due course.
Individual feedback is given by the Chair to the Board and
to the Chair by the Senior Independent Non-Executive
Director. There is a dedicated Board session for feedback.
The Board sets annual objectives for the Executive
Directors, reviews and approves annual objectives for
the senior Group management team and measures
performance against them.
The Group continuously monitors succession planning,
assessing the structure of the Board and its performance
to ensure appropriate development and mentoring needs
are identified.
Principle 8: Promote a corporate culture that is based on
ethical values and behaviours
The business model section, on pages 14 and 15, sets out
the values of the Group.
Our values are centred around our customers, employees,
community and shareholders. Our values are upheld
through policies and corporate discipline with regular
employee engagement, customer and shareholder
feedback which is used to confirm that these behaviours
are recognised and respected.
The Group seeks to provide excellent customer service to
its 120,000 customers and develop its workforce, creating
new jobs each year, and has a progressive dividend policy
rewarding shareholders over the long term.
Excellent customer service underpins each of the
divisions, providing a competitive advantage.
The Group is striving to continue this excellent customer
service with the creation of the Academy in agriculture
to train the future generation of nutritionists.
The Group embraces an equal opportunities culture,
from new starters to internal promotions, and supports
continuous professional development.
Principle 9: Maintain governance structures and
processes that are fit for purpose and support good
decision making by the Board
The governance structure for the Group is as follows:
Board of Directors
The Chair is responsible for the Board including its
effective leadership and composition, assessing and
improving its performance, and leading the Company’s
corporate governance culture.
32 NWF Group plc
Annual Report and Accounts 2020
Terms of reference and a schedule of matters reserved
for the Board can be found in the Governance section of
our website, www.nwf.co.uk/about-us/governance/
corporate-governance-statement.
The Board is satisfied that the current structure is
appropriate and it continuously reviews the governance
framework in line with the Group’s plans for growth.
Directors
Each of the Directors is subject to election by the
shareholders at the first AGM after their appointment
and all Directors are subject to annual re-election.
Biographical details of all Directors are set out on
pages 26 and 27.
The Non-Executive Directors have received
appointment letters setting out their terms of
appointment. All Non-Executive Directors are appointed
for one year with renewal for further one year terms if
performance is satisfactory. The terms and conditions of
appointment of the Non-Executive Directors are available
for inspection at the Company’s registered office.
The appointment of new Non-Executive Directors to the
Board is considered by the whole Board.
Internal control
The Board has overall responsibility for ensuring that the
Group maintains a system of internal control, to provide
it with reasonable assurance regarding the reliability of
financial information that is used within the business and
for the publication and safeguarding of assets. There are
inherent limitations in any system of internal control and
accordingly even the most effective system can provide
only reasonable, and not absolute, assurance against
material misstatement or loss.
The Group’s organisational structure has clear lines
of responsibility. Operating and financial responsibility
for subsidiary companies is delegated to
operational management.
The Group’s risk management programme, which
assesses key risks and the required internal controls that
are delegated to Directors and managers at all levels in
the Group, is reviewed regularly in order to ensure that it
continues to meet the Board’s requirements.
Membership as at 31 May 2020:
See the Board of Directors section on pages 26 and 27.
Meetings held in the financial year:
Ten
Audit Committee
The Audit Committee consists of the Chair and
two Non-Executive Directors and is chaired by
Yvonne Monaghan, an independent Non-Executive
Director. The Audit Committee met on two occasions
during the year ended 31 May 2020. The operations of
the Audit Committee are set out in the separate Audit
Committee Report on pages 35 and 36. Its terms
of reference will be made available at the AGM and
are on the Company’s website.
Membership as at 31 May 2020:
• Y M Monaghan (Chair)
• T P Acton
• D S Downie
Meetings held in the financial year:
Two
ESG framework Share capital structures
Details of the Company’s share capital can be found
in the ‘Takeover Directive requirements’ section of
the Directors’ Report and in note 23 of the Group
financial statements.
Going concern basis
The Group’s business activities, together with the factors
likely to affect its future development, performance and
position, are set out in the Group Financial Review. The
financial position of the Group and its cash flows, liquidity
position and borrowing facilities are also described in the
Group Financial Review. In addition, note 21 of the Group
financial statements includes the Group’s objectives, policies
and processes for managing its capital, its financial risk
management objectives, details of financial instruments and
hedging activities and its exposure to price, interest rate,
credit and liquidity risk. Accordingly, the Directors have a
reasonable expectation that the Company and the Group
have adequate resources to continue in operational
existence for the foreseeable future based on the
following factors:
• The Group’s banking facilities totalling £65.0 million
with The NatWest Group were renewed on 29 June 2018
and are committed through to October 2023. There
is significant headroom both in terms of covenant
compliance and funding availability. Undrawn facilities
at 31 May 2020 were £37.6 million (2019: £45.2 million).
• The Group has prepared financial projections to
31 May 2021 which project positive earnings and
demonstrate covenant compliance at all quarterly
covenant test dates.
• Calculations to support covenant compliance are
prepared and reviewed on a quarterly basis.
• The Group monitors capital risk on the basis of net
debt/EBITDA ratio, which at 31 May 2020 was 0.7x
(2019: 0.7x).
On the basis of the above, the Directors continue to
adopt the going concern basis of accounting in preparing
the annual financial statements.
Forward-looking statements
The Annual Report and Accounts include certain
statements that are forward-looking statements. These
statements appear in a number of places throughout
the Strategic Report and include statements regarding
the Group’s intentions, beliefs or current expectations
and those of its officers, Directors and employees
concerning, amongst other things, the results of
operations, financial condition, liquidity, prospects,
growth and strategies of the Group’s businesses.
By their nature, these statements involve uncertainty
since future events and circumstances can cause
results and developments to differ materially from
those anticipated.
Remuneration Committee
The Remuneration Committee consists of the Chair
and two Non-Executive Directors and is chaired by
David Downie, an independent Non-Executive Director.
The Remuneration Committee met on five occasions
during the year. Its remit is to determine, on behalf of
the Board, appropriate short and long-term total reward
packages for the Executive Directors and to also satisfy
itself that good practices apply to all Group employees
through the relevant management structures. Its terms
of reference will be made available at the AGM and are
on the Company’s website.
Membership as at 31 May 2020:
• D S Downie (Chair)
• T P Acton
• Y M Monaghan
Meetings held in the financial year:
Five
Disclosure Committee
The Board has established a Disclosure Committee,
the principal role of which is to consider whether
announcements are required to be made or not in
relation to inside information.
Membership as at 31 May 2020:
• C J Belsham (Chair)
• T P Acton
• R A Whiting
Meetings held in the financial year:
Two
Build trust
Principle 10: Communicate how the Company is
governed and is performing by maintaining a dialogue
with shareholders and other relevant stakeholders
The governance structure for the Group is set out on
page 32. The Audit Committee and Remuneration
Committee Reports are set out on pages 35 to 39.
Shareholders
The Chair and the Non-Executive Directors will always
make themselves available to meet with shareholders.
Each AGM is a particular opportunity for this. Normal
relationships with shareholders are maintained by the
Executive Directors, who brief the Board on shareholder
issues and who relay the views of the Group’s advisors
to the Board.
The Board believes that the disclosures set out on
pages 1 to 25 of the Annual Report provide the information
necessary for shareholders to assess the Company’s
performance, business model and strategy.
In addition, Peel Hunt, in its capacity as the Company’s
nominated advisor and broker, is engaged to liaise with
investors and report back to the Board. Going forward,
it will provide an external viewpoint of the Company to
the Board with any recommendations it may have to
help assist communication. Shareholders’ views are also
received during the AGM through the opportunity to ask
questions of the Board and less formally after the AGM.
The Investors section of our website, www.nwf.co.uk/
investors, includes historical Annual Reports, Notices
of AGMs and voting history (where there have been no
significant votes against) for a minimum of five years.
NWF Group plc
nwf.co.uk
33
ESG framework Corporate governance statement continued
Section 172(1) Statement
NWF Group plc depends on the trust and confidence
of all its stakeholders to operate sustainably in the long
term. The Group seeks to build strong partnerships,
create a culture of safety, invest in its people, respect
the environment in which it operates and strives to
generate sustainable value for shareholders.
The Directors of NWF Group plc, both individually and
together, have acted in accordance with their duties
codified in law, which include their duty to act in the way
in which they consider, in good faith, would be most likely
to promote the success of the Company for the benefit
of its members as a whole, having regard to the
stakeholders and matters set out in Section 172(1)
of the Companies Act 2006, set out below:
• likely consequences of any decisions in the long term;
• interests of the Company’s employees;
• need to foster the Company’s business relationships
with suppliers, customers and others;
• impact of the Company’s operations on the community
and environment;
• desirability of the Company maintaining a reputation
for high standards of business conduct; and
• need to act fairly as between members of the Company.
Section 172 considerations are embedded in decision
making at Board level and throughout the Group.
• Our strategy is designed to have a long-term beneficial
impact on the Company and to contribute to its success;
further details can be found in our business model and
acquisition strategy.
• Our employees are fundamental to our business. We
aim to be a responsible employer in our approach to
our employees. The health, safety and wellbeing of our
employees is one of our primary considerations in the
way we do business; further details can be found in our
sustainability strategy.
• We also aim to act responsibly and fairly in how we
engage with our customers, suppliers and investors
and co-operate with any regulators, all of whom are
integral to the success of the Group.
• Our sustainability policy takes into account the impact
of the Group’s operations on the community and
environment and our wider societal responsibilities,
and in particular how we impact the areas we serve.
We have taken steps to start to minimise our impact
on these. Our sustainability policy can be found at
www.nwf.co.uk.
• As the Board of Directors, our intention is to behave
responsibly and ensure that management operates
the business in a responsible manner, operating within
the high standards of business conduct and good
governance expected for a business such as ours.
• As the Board of Directors, our intention is to behave
responsibly toward our shareholders and treat them
fairly and equally, so they too may benefit from the
successful delivery of our strategy.
Additionally, the size and spread of both our stakeholders
and the Group as a collective mean that generally our
stakeholder engagement takes place at an operational
and Group level. We find that as well as being a more
efficient and effective approach, this also helps us
achieve a greater positive impact on environmental,
social and other issues than by working alone as
individual companies.
Further information and examples of the Group’s
engagement with stakeholders can be found in our
sustainability strategy.
34 NWF Group plc
Annual Report and Accounts 2020
ESG framework Audit Committee report
Monitoring all aspects
of reporting and risk
Experience of the Audit Committee
The Audit Committee comprises the Chair and two
Non-Executive Directors, two of whom are qualified
Chartered Accountants and have extensive experience
in senior finance roles.
External audit
The Audit Committee also approves the appointment
and remuneration of the Group’s external auditors and
satisfies itself that they maintain their independence
regardless of any non-audit work performed by them.
The Group adopts the following policy governing the
performance of non-audit work by the auditors. The
auditors are permitted to provide non-audit services
which are not, and are not perceived to be, in conflict
with auditor independence, providing they have the skill,
competence and integrity to carry out the work, and
are considered to be the most appropriate advisors to
undertake such work in the best interests of the Group.
All assignments are monitored by the Committee.
The respective responsibilities of the Directors and
external auditors in connection with the financial
statements are explained in the Statement of Directors’
Responsibilities on page 42 and the Auditors’ Report on
pages 43 to 46. Details of services provided by, and fees
payable to, the auditors are shown in note 5 of the Group
financial statements.
Whilst the Audit Committee has not adopted a formal
policy in respect of the rotation of the external auditors,
one of its principal duties is to make recommendations
to the Board in relation to the appointment of the
external auditors. Various factors are taken into account
by the Committee in this respect, including the quality
of the reports provided to the Committee, the level of
service provided and the level of understanding of the
Group’s business.
PricewaterhouseCoopers LLP have been the Company’s
external auditors for many years. The Audit Committee
considers that the relationship with the auditors is
working well and remains satisfied with their
effectiveness and independence. Accordingly, it has not
considered it necessary to date to require the firm to
re-tender for the audit work. The auditors are required
to rotate the audit partner responsible for the Group and
subsidiary audits every five years. The current audit partner
is in the first year of his term as audit partner. There are
no contractual obligations restricting the Company’s
choice of auditors. As an AIM-listed company, the Group
does not have a requirement to put the audit out to tender
every ten years, however this is kept under review by the
Audit Committee to decide if tendering is appropriate.
NWF Group plc
nwf.co.uk
35
“The Audit Committee consists of the Chair
and two Non-Executive Directors, two of
whom are qualified Chartered Accountants.”
Meetings in 2020
2(2019: 2)
Dear shareholder,
I am pleased to present the Audit Committee Report for
the year ended 31 May 2020.
Composition
The Audit Committee consists of the Chair and
two Non-Executive Directors and is chaired by myself
as an independent Non-Executive Director. The Audit
Committee met on two occasions during the year.
Y M Monaghan (Chair)
T P Acton
D S Downie
Attended
Not required to attend
Absent
Responsibilities
The Audit Committee has terms of reference in place which
have been formally approved by the Board and are made
available at the AGM and on the Company’s website. Its
primary responsibilities include reviewing the effectiveness
of the Group’s internal control systems and monitoring the
integrity of the Group’s financial statements and external
announcements of the Group’s results. The Committee
reports to the Board on all these matters. The Committee
defers to the wider Board on the matters of bribery,
whistleblowing and modern slavery and the Group policies
concerning these matters can be found at www.nwf.co.uk.
ESG framework
Audit Committee report continued
Internal audit
The Group does not have a formal internal audit function
but performs targeted reviews and visits to operations
by the Head Office team and professional advisors. The
results of these reviews are communicated back to the
Audit Committee. This approach is considered appropriate
and proportionate for the size of the organisation.
Internal control and risk management
An internal control update is provided to the Audit Committee
at each meeting. The principal risks are also reviewed and
any changes in risk ratings are discussed to ensure that
appropriate risk mitigations are in place where relevant.
Going concern
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.
Significant issues considered in relation to the
financial statements
The Audit Committee assesses whether suitable
accounting policies have been adopted and whether
management has made appropriate estimates and
judgements. The Committee reviews accounting papers
prepared by management which provide details on the
main financial reporting judgements. The Committee also
reviews reports by the external auditors on the half-year
and full-year results which highlight any issues arising from
their work undertaken in respect of the half-year review
and year end audit. The specific areas of risk in relation to
the financial statements reviewed by the Committee were:
1. Acquisition accounting
During the year, the Group acquired 100% of the share
capital of both David Hermon Hodge Group Limited and
Ron Darch & Sons Limited. The Group also acquired
the trade and assets of the fuel distribution business of
Caldo Oils Limited. The Audit Committee considered the
methodology used by management in determining the fair
value of the customer relationships and brands acquired
and the disclosures within the financial statements. The
Committee is comfortable with management’s approach.
2. The carrying value of goodwill and fixed assets
The Group’s goodwill and fixed assets are material
balances. Annual impairment reviews are performed which
use key judgements including estimates of future business
performance and cash generation, discount rates and
long-term growth rates. The Committee is comfortable
with the key assumptions applied and management’s
conclusion that no impairment has occurred.
3. The 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. The Committee
has reviewed the current year provisions against trade
receivables, including an assessment of the adequacy of the
36 NWF Group plc
Annual Report and Accounts 2020
prior year provisions, and is satisfied with management’s
conclusions that the provisioning levels are appropriate.
4. Pensions including obligations and assumptions
The Group’s defined benefit pension scheme is material
to its financial position. The amounts shown in the balance
sheet are highly sensitive to changes in key actuarial
assumptions which are set by reference to advice from
professional advisors. Full disclosure of the pension
scheme is provided in note 24 to the financial statements.
5. Exceptional items
The Committee has considered the presentation of
the Group financial statements and, in particular, the
presentation of exceptional items. The Committee
has discussed these items with management and agreed
that the presentation is consistent with the Group’s
accounting policy and provides more meaningful
information to shareholders about the underlying
performance of the Group.
6. Alternative performance measures ('APMs')
The Group refers to a number of APMs throughout the
Annual Report and Accounts. APMs are used by the Group
to provide further clarity and transparency on the Group’s
financial performance. The APMs are used internally by
management to monitor business performance,
budgeting and for determining Directors’ remuneration.
The Committee is aware that the APMs are non-IFRS
measures. APMs used by the Group are as follows:
• Headline operating profit, which refers to reported
operating profit after adding back exceptional items
and amortisation of acquired intangibles.
• Headline profit before tax, which refers to reported
profit before tax after adding back the net finance cost
in respect of the Group’s defined benefit pension
scheme, exceptional items and amortisation of
acquired intangibles.
• Headline EBITDA, which 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.
• Headline earnings, which refers to profit for the year
after adding back the net finance cost in respect of the
Group’s defined benefit pension scheme, exceptional
items and amortisation of acquired intangibles, and
taking into account the tax effect thereon.
• Headline EPS, which refers to the reported EPS
calculation based on headline earnings.
• Net debt, which is adjusted to exclude the impact of
the adoption of IFRS 16.
The Committee considers that the APMs, all of
which exclude the impact of non-recurring items or
non-operating events, provide useful information for
shareholders on the underlying trends and performance
of the Group. Furthermore, the Committee is satisfied
that where APMs are stated, they are presented with
equal prominence to the statutory figures.
Yvonne Monaghan
Chair of the Audit Committee
4 August 2020
ESG framework Directors’ remuneration report
Rewarding
performance
“Our remuneration structure supports
the strategy of the Company.”
Meetings in 2020
3(2019: 3)
Dear shareholder,
I am pleased to present the Directors’ Remuneration
Report for the year ended 31 May 2020.
The aim of our report is to provide shareholders with
information to understand our remuneration strategy
and its linkage to the Group’s financial performance. The
following Directors were members of the Remuneration
Committee when matters relating to the Executive
Directors’ remuneration were being considered:
Members of the Remuneration Committee
D S Downie (Chair)
T P Acton
Y M Monaghan
Attended
Not required to attend
Absent
Our performance in 2019/20
NWF Group plc has delivered a very strong set of results
demonstrating both resilience and growth.
Key pay out-turns for 2019/20
For 2019/20, the performance achieved against financial
and operational targets resulted in 97.8% of the maximum
annual bonus being paid.
Given our headline earnings per share (‘EPS’) performance
of 20.5p at 31 May 2020, 100% of the LTIP awards granted
at the start of 2016/17 will vest in August 2020.
Looking forward to 2020/21
We have undertaken a review in conjunction with Deloitte LLP,
our professional advisors, to ensure our remuneration
structure supports the evolving strategy of the Company
and our growth ambitions over the coming years and is at
the appropriate levels in the current marketplace. The
key reward schemes can be summarised as follows:
• Annual bonus – an annual bonus with performance criteria
based upon a mixture of profit-based and personal
objectives as set by the Remuneration Committee.
• Long-term Incentive Plan (‘LTIP’) – three-year share-based
payments with the performance criteria being based
upon EPS growth over the term of the award. A two year
holding period upon vesting has been introduced for all
awards granted from 2020 following review and in line
with market practice.
We have therefore maintained, with appropriate
amendments following the external review and guidance,
a mixture of short and longer-term remuneration
structures which underpin our business growth strategy.
David Downie
Chair of the Remuneration Committee
4 August 2020
NWF Group plc
nwf.co.uk
37
ESG framework
Directors’ remuneration report continued
Remuneration policy
As an AIM-listed entity, the Company is not required to fully apply the Listing Rules of the Financial Conduct Authority or the BIS Directors’
Remuneration Reporting Regulations and hence is not required to present a Board Report on Remuneration in accordance with those rules.
Nevertheless, the Board considers it appropriate for the Company to provide shareholders with information with respect to Executive
remuneration. The report is unaudited, unless otherwise stated.
The Company’s remuneration principles are as follows:
• remuneration structures should be appropriate to the business, efficient and cost effective in delivery;
• complexity is discouraged in favour of simple and understandable remuneration structures;
• remuneration structures should seek to align Executive and shareholder interests including through a meaningful level of personal shareholding;
• remuneration structures should promote long-term focus through features such as deferral and measuring performance over the long term;
• structures should include performance adjustments (malus) and/or clawback provisions;
• pay should be aligned to the long-term sustainable success and the desired corporate culture throughout the organisation with increases
in base salary of Executives being aligned to those of the wider workforce; and
• the Remuneration Committee ensures that rewards properly reflect business performance.
Directors’ emoluments – audited information
Name of Director
C J Belsham
R A Whiting
Non-Executive
T P Acton
D S Downie
Y M Monaghan
Aggregate emoluments
Fees/basic
salary
£’000
Benefits
£’000
179
297
79
42
42
639
15
29
—
—
—
44
Bonus
£’000
170
296
—
—
—
466
LTIP ¹
£’000
194
323
—
—
—
517
Pension
£’000
24
78
—
—
—
2020
Total
£’000
582
1,023
79
42
42
2019
Total
£’000
332
605
75
40
40
102
1,768
1,092
1
Calculated as an LTIP award for the three years ended 31 May 2020. C J Belsham and R A Whiting will be awarded 115,254 and 191,864 shares respectively, at the three-month
average price of £168.38. This award has vested, but has not been exercised as at the date of this report.
2020/21 remuneration policy
The principles of our approved remuneration policy are as follows:
Element
Base salary
Annual bonus
Policy
• Positioned competitively in line with the market.
• For 2020/21, Directors’ salaries will be as follows:
• Chief Executive: £303,250; and
• Group Finance Director: £182,250.
• Maximum opportunity for Executive Directors is 100% of base salary.
• Performance is measured over one financial year.
• Weightings and targets are reviewed and set at the start of each financial year.
• For 2020/21, 75% of the bonus will be based on headline profit before tax performance with
the remaining 25% based on the achievement of personal objectives.
• Profit bonus has a minimum threshold set at 95% achievement of budget.
• Malus and clawback provisions will be applied in a number of cases, including, but not limited to:
• a gross misstatement of the performance of the business;
• gross misconduct; or
• a miscalculation of the extent to which targets have been met.
38 NWF Group plc
Annual Report and Accounts 2020
ESG framework
Element
Long-term Incentive Plan
Pension
Policy
• Maximum opportunity for Executive Directors is 100% of base salary at the time of the award.
• Awards are made annually.
• Performance is measured over three years.
• For 2020/21, the awards will be subject to EPS performance as follows:
• 30% will vest for performance of RPI + 2% per annum; and
• up to a maximum of 100% will vest for performance of RPI + 2% to 8% per annum.
• Malus and clawback provisions will be applied in a number of cases, including, but not limited to:
• a gross misstatement of the performance of the business;
• gross misconduct; or
• a miscalculation of the extent to which targets have been met.
• A holding period of two years will apply to all awards made after 2020 upon vesting.
• Executive Directors are expected to hold shares of value equivalent to 100% of their salary by
the fifth anniversary of their appointment.
• R A Whiting is entitled to receive pension contributions from the Company totalling 30% of base
salary. He can elect for those contributions to be paid in the form of taxable pension allowance
or direct payments into a defined contribution pension scheme.
• C J Belsham is entitled to receive pension contributions from the Company totalling 15% of
base salary. He can elect for those contributions to be paid in the form of taxable pension
allowance or direct payments into a defined contribution pension scheme.
Benefits
• The Executives are entitled to a standard Director benefits package, including a company car
and private medical cover.
Terms and conditions for Non-Executive Directors
Non-Executive Directors do not have service contracts but appointment letters setting out their terms of appointment. All Non-Executive
Directors are appointed for one year with renewal for further one year terms if performance is satisfactory, normally renewable on a similar
basis subject to re-election at the Company’s AGM.
Long-term Incentive Plan
The table below summarises the outstanding Performance Share Plan awards. 2017 awards are based on absolute EPS performance in the year
ended 31 May 2020. 2018 awards are based on absolute EPS performance in the year ending 31 May 2021. 2019 awards are based on absolute
EPS performance in the year ending 31 May 2022.
C J Belsham
R A Whiting
Share price
at date of
grant
No. of
shares
vesting at
maximum
Face value
of shares
vesting
at maximum
EPS for
maximum
vesting ¹
No. of shares
vesting at
threshold
(30%)
EPS for
threshold
vesting ¹
147.5p
197.5p
166.0p
147.5p
197.5p
166.0p
115,254
£170,000
88,228
£174,250
107,590
£178,600
191,864
£283,000
146,835
£290,000
179,066
£297,250
19.9p
22.5p
21.1p
19.9p
22.5p
21.1p
34,576
26,468
32,277
57,559
44,051
53,720
16.4p
19.0p
17.9p
16.4p
19.0p
17.9p
Performance
period ending
31 May 2020
31 May 2021
31 May 2022
31 May 2020
31 May 2021
31 May 2022
Award date
1 August 2017
1 August 2018
1 August 2019
1 August 2017
1 August 2018
1 August 2019
1
EPS targets based on headline EPS – year ended 31 May 2020 for the 2017 award, year ending 31 May 2021 for the 2018 award and year ending 31 May 2022 for the 2019 award.
EPS targets for maximum and threshold vesting are based on the forecast RPI as at 31 May 2020.
NWF Group plc
nwf.co.uk
39
ESG framework
Directors and their interests
The Directors of the Company who were in office during
the year and up to the date of signing the financial
statements were:
• Philip Acton
• Richard Armitage
• Chris Belsham
• David Downie
• Yvonne Monaghan
• Richard Whiting
The Directors who held office during the year and as at
31 May 2020 had the following interests in the ordinary
shares of the Company:
Name of Director
T P Acton
C J Belsham
D S Downie
Y M Monaghan
R A Whiting
31 May
2020
Number
30,000
19,625
10,000
10,000
310,767
In addition to the interests in ordinary shares shown
above, the Group operates a Performance Share Plan (‘the
LTIP’) for senior executives, under which certain Directors
have been granted conditional share awards. Subject to
achieving performance targets, the maximum number of
ordinary shares which could be issued to Directors in the
future under such awards is shown below:
C J Belsham
R A Whiting
31 May
2020
Number
195,818
325,901
Further information on the Directors’ interests in the LTIP
conditional share awards can be found in the Directors’
Remuneration Report.
The market price of the Company’s shares at the end of
the financial year was 201.0p (31 May 2019: 169.0p) and the
range of market prices during the year was between
120.0p and 203.0p.
No changes took place in the interests of Directors
between 31 May 2020 and the date of signing the
financial statements.
Further details on related party transactions with Directors
are provided in note 29 of the Group financial statements.
Directors’ indemnities
The Company has made qualifying third party indemnity
provisions for the benefit of the Directors, which were in
force during the year and up to the date of this report.
Directors’ report
for the year ended 31 May 2020
The Directors present their report together with the
audited financial statements of the Parent Company (‘the
Company’) and the Group for the year ended 31 May 2020.
Business review and future developments
A review of the performance of the Group during the
year, including principal risks and uncertainties, key
performance indicators and comments on future
developments, is included in the Strategic Report
and is included in this report by cross-reference.
The Strategic Report has been reviewed and approved
by the Board of Directors.
Results and dividends
The Group recorded revenue in the year of £687.5 million
(2019: £671.3 million) and profit after tax of £8.9 million
(2019: £6.8 million).
The Directors recommend a final dividend for the year
of 5.9p per share (2019: 5.6p) which, if approved at the
AGM, will be payable on 8 December 2020. Together
with the interim dividend paid during the year of 1.0p
per share (2019: 1.0p), this will result in a total dividend
of 6.9p per share (2019: 6.6p) amounting to £3.4 million
(2019: £3.2 million).
Financial risk management
Information relating to the principal risks and
uncertainties of the Group has been included within
the Strategic Report and is included in this report by
cross-reference. Further information relating to the
financial risks of the Group has been included within
note 21, Financial instruments and risk management.
Going concern
The Group has an agreement with The NatWest Group
for credit facilities totalling £65.0 million. With the
exception of the bank overdraft facility of £1.0 million
and the £4.0 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 £49.5 million (based on actual
invoice discounting availability and overdraft facilities),
against which the Group was utilising £11.9 million
(excluding hire purchase obligations).
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.
40 NWF Group plc
Annual Report and Accounts 2020
ESG framework
Major shareholdings as at 15 July 2020
Name of shareholder
Number
%
Festa Lífeyrissjóður
Sameinaði Lífeyrisjóðurinn
Lífeyrissjóður Vestmannaeyja
Canaccord Genuity Wealth
Management (Inst)
Interactive Investor
Cazenove Capital Management
Fidelity Mgt & Research
Ruffer
2,382,389
2,382,389
2,382,389
2,255,000
2,113,217
1,623,378
1,618,657
1,537,601
4.89
4.89
4.89
4.63
4.33
3.33
3.32
3.15
Employee engagement
The Group systematically provides employees with
information on matters of concern to them, consulting
them or their representatives regularly, so that their
views can be taken into account when making decisions
that are likely to affect their interests. Employee
involvement in the Group is encouraged, as achieving
a common awareness on the part of all employees of the
financial and economic factors affecting the Group plays
a major role in its performance.
The Group is committed to an active equal opportunities
policy from recruitment and selection, through training
and development, performance reviews and promotion
to retirement. The Group’s policy is to promote an
environment free from discrimination, harassment
and victimisation, where all employees receive equal
treatment regardless of gender, colour, ethnic or
national origin, health condition, age, marital or civil
partner status, sexual orientation or religion. All
decisions relating to employment practices will be
objective, free from bias and based solely upon work
criteria and individual merit.
Further information and examples of the Group’s
engagement with employees can be found in our s.172
statement on page 34 and sustainability strategy on
pages 22 to 25.
Business relationships
The Group recognises its responsibility to act fairly in our
engagements with customers, suppliers, investors and
any regulators, all of whom are integral to the success of
the Group. The strength of the Group’s business
relationships is vital and the Group aims to collaborate
with customers and suppliers to deliver long-term
sustainable solutions.
Further information and examples of the Group’s
engagement with customers, suppliers and others can be
found in our s.172 statement on page 34 and sustainability
strategy on pages 22 to 25.
Takeover Directive requirements
The Company has one class of equity share, namely 25p
ordinary shares. The shares have equal voting rights and
there are no special rights or restrictions attaching to any
of them or their transfer to other persons.
Rules governing the appointment and replacement of
Directors, and those relating to the amendment of the
Company’s Articles of Association, are contained within
those Articles of Association, a copy of which is located
on the Company’s website (www.nwf.co.uk).
Notice of AGM
A Notice of AGM, with explanatory notes, accompanies
these financial statements.
Corporate governance
The Group’s statement on corporate governance can be
found in the Statement on Corporate Governance which
is incorporated by reference and forms part of this
Directors’ Report.
Disclosure of information to independent auditors
The Directors of the Company at the date of approval
of this report confirm that:
• so far as each Director is aware, 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.
This confirmation is given and should be interpreted
in accordance with the provisions of Section 418 of the
Companies Act 2006.
Independent auditors
The auditors, PricewaterhouseCoopers LLP, have
indicated their willingness to continue in office and
a resolution concerning their reappointment will be
proposed at the AGM.
By order of the Board
Rob Andrew
Company Secretary
Wardle
Nantwich
Cheshire
CW5 6BP
Registered number: 02264971
4 August 2020
NWF Group plc
nwf.co.uk
41
ESG framework Statement of Directors’ responsibilities
for the year ended 31 May 2020
The Directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable law and regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have prepared the Group financial statements
in accordance with International Financial Reporting
Standards (‘IFRSs’) as adopted by the European Union and
Parent Company financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards, comprising
FRS 101 ‘Reduced Disclosure Framework’, and applicable
law). Under company law the Directors must not approve
the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of
the Group and Parent Company and of the profit or loss
of the Group for that period. In preparing the financial
statements, the Directors are required to:
• select suitable accounting policies and then apply
them consistently;
• state whether applicable IFRSs as adopted by the
European Union have been followed for the Group
financial statements and United Kingdom Accounting
Standards, comprising FRS 101, have been followed for
the Company financial statements, subject to any
material departures disclosed and explained in the
financial statements;
• make judgements and accounting estimates that are
reasonable and prudent; and
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Group and Parent Company will continue in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Group and Parent Company’s transactions
and disclose with reasonable accuracy at any time the
financial position of the Group and Parent Company and
enable them to ensure that the financial statements
comply with the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
The Directors are also responsible for safeguarding the
assets of the Group and Parent Company and hence for
taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are responsible for the maintenance and
integrity of the Parent Company’s website. Legislation
in the United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
The Directors consider that the Annual Report and
Accounts, taken as a whole, are fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Group and Parent
Company’s performance, business model and strategy.
Each of the Directors, whose names and functions are
listed in the Directors’ Report, confirm that, to the best
of their knowledge:
• the Parent Company financial statements, which have
been prepared in accordance with United Kingdom
Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising FRS 101
‘Reduced Disclosure Framework’, and applicable law),
give a true and fair view of the assets, liabilities,
financial position and profit of the Company;
• 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 profit of the Group; and
• the Strategic Report includes a fair review of the
development and performance of the business and the
position of the Group and Parent Company, together
with a description of the principal risks and
uncertainties that they face.
By order of the Board
Rob Andrew
Company Secretary
Wardle
Nantwich
Cheshire
CW5 6BP
Registered number: 02264971
4 August 2020
42 NWF Group plc
Annual Report and Accounts 2020
ESG framework Independent auditors’ report
to the members of NWF Group plc
Report on the audit of the financial statements
Opinion
In our opinion:
• NWF Group plc’s Group financial statements and Parent Company financial statements (the “financial statements”) give a true and fair view
of the state of the Group’s and of the Parent Company’s affairs as at 31 May 2020 and of the Group’s profit and cash flows for the year then ended;
• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as
adopted by the European Union;
• the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosure Framework”, and applicable law); and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Accounts (the “Annual Report”), which comprise: the Consolidated
and Parent Company Balance Sheets as at 31 May 2020; the Consolidated Income Statement; the Consolidated and Parent Company Statements
of Comprehensive Income; the Consolidated and Parent Company Statements of Changes in Equity; and the Consolidated Cash Flow Statement
for the year then ended; and the notes to the financial statements, which include a description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under
ISAs (UK) are further described in the auditors’ responsibilities for the audit of the financial statements section of our report. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements
in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Our audit approach
Overview
Materiality
Audit scope
Key audit
matters
• Overall Group materiality: £600,000 (2019: £436,000), based on 5% of profit before tax.
• Overall Parent Company materiality: £400,000 (2019: £350,000), based on 0.6% of total assets.
• The Group consists of seven trading entities, alongside its head office company and other holding companies.
Our audit focused on those entities with the most significant contribution to the Group’s results, being NWF
Agriculture Limited, NWF Fuels Limited, David Hermon Hodge Group Limited, Ron Darch & Sons Limited and
Boughey Distribution Limited; along with the head office company. We have also performed procedures in
relation to cash balances within Consols Oils Limited and in relation to debtor and cash balances in New
Breed (UK) Limited.
• The components within the scope of our work accounted for 96% of Group revenue and 89% of Group profit
before tax.
• Defined benefit pension plan liabilities (Group and Parent Company).
• Impact of Covid-19 (Group and Parent Company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
In particular, we looked at where the Directors made subjective judgements, for example in respect of significant accounting estimates that
involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk
of management override of internal controls, including evaluating whether there was evidence of bias by the Directors that represented
a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were
addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters. This is not a complete list of all risks identified by our audit.
NWF Group plc
nwf.co.uk
43
Financial statements
Independent auditors’ report continued
to the members of NWF Group plc
Report on the audit of the financial statements continued
Our audit approach continued
Key audit matters continued
Key audit matter
How our audit addressed the key audit matter
Defined benefit pension plan liabilities (Group and Parent Company)
Refer to page 36 (ACR) note 2 (accounting policies) pages 57 to 58
(critical accounting estimates and judgments) and note 24. The Group
has a defined benefit pension plan net liability of £21.0m (2019: £17.3m),
which is significant in the context of both the overall balance sheet,
the results of the Group and the market capitalisation of the Group.
A major constituent of this net liability is the value attributed to the gross
liabilities of the pension scheme. The valuation of these gross liabilities
of £61.1m (2019: £55.3m) requires significant judgment and expertise
primarily in respect of the key assumptions used. These assumptions
include both financial assumptions e.g. the discount rate and inflation,
but also key demographic assumptions e.g. mortality rates.
Modest changes in a number of these key assumptions can have a
material impact on the calculation of the liability. We therefore focused
our work on this area.
We obtained the external actuary’s report used in valuing the
scheme’s liabilities and determined, using our experience of the
valuation of similar schemes, and our own pension specialists, that
the methodologies adopted by the actuary in forming the valuation
were consistent with industry practice and our expectations.
We also agreed the key financial assumptions used within the
valuation of the scheme’s liabilities, including the discount and
inflation rates, to our internally developed benchmarks.
Further we considered the appropriateness of the approach
taken to setting the mortality assumptions and we found them
to be reasonable.
We read the disclosures within the financial statements in respect of
the defined benefit scheme and, based on our work, determined that
they are consistent with accounting standards.
Impact of Covid-19 (Group and Parent Company)
The ongoing and evolving Covid-19 pandemic, and the related
government response to this crisis, is having a significant impact on the
economies of those countries in which the Group operates. There is a
high level of uncertainty as to the duration of the pandemic and what its
lasting impact will be on those economies.
The Directors have considered the potential impact to the Group of the
ongoing Covid-19 pandemic in several areas, including the assessment
of going concern, the carrying value of the Group’s assets and
disclosures to be included in the financial statements.
In relation to the Group’s going concern assessment, the Directors
adjusted the cash flow forecasts to reflect a number of severe but
plausible downside scenarios resulting from the direct and indirect
consequences of Covid-19, including, for example, a reduction in
revenue caused by second lockdown. Management has concluded that
the Group and Company expect to trade solvently under these scenarios
for at least twelve months from the date of this report and cash flow
forecasts support going concern status. The Directors have therefore
prepared the Group and Company financial statements on a going
concern basis, and believe this assumption remains appropriate.
Management concluded that there was no material impact on the
financial statements, including in respect of the impairment of certain
assets, or on provisions or estimates made.
In assessing management’s considerations of the potential impact of
Covid-19, we have undertaken the following procedures:
• we obtained management’s assessment that supports the Board’s
conclusions with respect to the disclosures provided around going
concern;
• we discussed with management the impact assessments applied in
the going concern review so we could understand the rationale for
those assumptions;
• we challenged the rationale for those assumptions, using our
knowledge of the business, the sector and wider commentary
available from key customers;
• we reviewed trading results after the 2020 year end date and
compared this to management’s revised forecast, and considered
the impact of these actual results on the future forecast period;
• we reviewed management sensitivity scenarios which also included
further potential mitigating actions available to confirm they are
within management control. We challenged management to run a
further downside scenario in order to assess the possible impact;
• we assess the availability of liquid resources under different
scenarios modelled by management, and the associated covenant
test applied; and
• we have considered the potential impact of Covid-19 on other
areas of the balance sheet, specifically around impairment of
goodwill and intangible assets and concluded that there were no
indicators of a material impact on amounts included in the Group or
Company financial statements.
Our conclusion is in the going concern section noted below.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the Group and the Parent Company, the accounting processes and controls, and the industry in
which they operate.
The Group is managed on an entity basis with seven trading entities, along with a head office company and three holding companies. The
Group’s trading entities are all based in the UK and operate their own accounting function, which report to the Group finance team. Consistent
with the Group’s operations, we scoped our audit at an entity level, performing a full scope audit in respect of five of the seven trading entities
and the head office company, with procedures performed in relation to trade receivables in relation to one additional entity, and in relation to
cash for the two trading entities not in full scope, ensuring significant coverage of all balances across the Group. Audit work across the Group,
including the trading entities and head office company, was performed by the same audit team.
44 NWF Group plc
Annual Report and Accounts 2020
Financial statements Report on the audit of the financial statements continued
Our audit approach continued
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the
individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on
the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
£600,000 (2019: £436,000).
£400,000 (2019: £350,000).
How we determined it
5% of profit before tax.
0.6% of total assets.
Group financial statements
Parent Company financial statements
Rationale for benchmark applied
Profit before tax is the primary measure used
by the shareholders in assessing the
performance of the Group, and is a generally
accepted auditing benchmark.
Total assets is considered to be appropriate as
the Parent Company is not profit oriented. The
Parent Company acts as a holding company,
holding investments in subsidiaries along with
investment property which is utilised by the
Group's trading entities.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of
materiality allocated across components was between £68,000 and £486,000. Certain components were audited to a local statutory audit
materiality that was also less than our overall Group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £30,000 (Group audit)
(2019: £22,000) and £20,000 (Parent Company audit) (2019: £22,000) as well as misstatements below those amounts that, in our view, warranted
reporting for qualitative reasons.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us to report to you where:
• the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
• the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the
Group’s and Parent Company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from
the date when the financial statements are authorised for issue.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s and Parent Company’s
ability to continue as a going concern.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon.
The Directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based
on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that
fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006
have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) require us also to report certain
opinions and matters as described below.
NWF Group plc
nwf.co.uk
45
Financial statements Independent auditors’ report continued
to the members of NWF Group plc
Report on the audit of the financial statements continued
Reporting on other information continued
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report for
the year ended 31 May 2020 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the Group and Parent Company and their environment obtained in the course of the audit, we did
not identify any material misstatements in the Strategic Report and Directors’ Report.
Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities, the Directors are responsible for the preparation of the financial
statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The Directors are also
responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Parent Company’s members as a body in accordance with Chapter 3
of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior
consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from
branches not visited by us; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• the Parent Company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Jonathan Studholme (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Manchester
4 August 2020
46 NWF Group plc
Annual Report and Accounts 2020
Financial statements Consolidated income statement
for the year ended 31 May 2020
Revenue
Cost of sales
Gross profit
Administrative expenses
Headline operating profit¹
Exceptional items
Amortisation of acquired intangibles
Operating profit³
Finance costs
Headline profit before taxation¹
Net finance cost in respect of the defined benefit pension scheme
Exceptional items
Amortisation of acquired intangibles
Profit before taxation³
Income tax expense²
Profit for the year attributable to equity shareholders
Earnings per share (pence)
Basic
Diluted
Headline earnings per share (pence)¹
Basic
Diluted
Note
3,4
5
14
4
7
5
14
5
8
10
10
10
10
2020
£m
687.5
(646.2)
41.3
(27.8)
14.3
(0.5)
(0.3)
13.5
(1.5)
13.2
(0.4)
(0.5)
(0.3)
12.0
(3.1)
8.9
18.2
18.1
20.5
20.3
2019
£m
671.3
(640.4)
30.9
(21.3)
10.2
(0.5)
(0.1)
9.6
(0.9)
9.7
(0.4)
(0.5)
(0.1)
8.7
(1.9)
6.8
13.9
13.9
15.8
15.8
1
Headline operating profit is statutory operating profit of £13.5 million (2019: £9.6 million) before exceptional items of £0.5 million (2019: £0.5 million) and amortisation of
acquired intangibles of £0.3 million (2019: £0.1 million). Headline profit before taxation is statutory profit before taxation of £12.0 million (2019: £8.7 million) after adding back
the net finance cost in respect of the Group’s defined benefit pension scheme of £0.4 million (2019: £0.4 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 £Nil (2019: £0.1 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 £0.2 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 £0.2 million
with the inclusion of £0.4 million of finance costs under the new standard.
The results relate to continuing operations.
The notes on pages 52 to 82 form part of these Group financial statements.
NWF Group plc
nwf.co.uk
47
Financial statements
Consolidated statement of comprehensive income
for the year ended 31 May 2020
Profit for the year attributable to equity shareholders
Items that will never be reclassified to profit or loss:
Remeasurement loss on defined benefit pension scheme
Tax on items that will never be reclassified to profit or loss
Total other comprehensive expense
Total comprehensive income for the year
The notes on pages 52 to 82 form part of these Group financial statements.
Note
24
22
2020
£m
8.9
(4.0)
1.1
(2.9)
6.0
2019
£m
6.8
(1.2)
0.2
(1.0)
5.8
48 NWF Group plc
Annual Report and Accounts 2020
Financial statements
Consolidated balance sheet
as at 31 May 2020
Non-current assets
Property, plant and equipment
Right of use assets
Intangible assets
Deferred income tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Derivative financial instruments
Total assets
Current liabilities
Trade and other payables
Current income tax liabilities
Borrowings¹
Lease liabilities
Non-current liabilities
Borrowings¹
Lease liabilities
Deferred income tax liabilities
Retirement benefit obligations
Total liabilities
Net assets
Equity
Share capital
Share premium
Retained earnings
Total equity
Note
12
13
14
22
15
16
17
21
18
19
20
19
20
22
24
23
2020
£m
48.5
27.3
31.4
4.4
111.6
4.7
56.7
5.3
0.1
66.8
2019
(Restated¹)
£m
45.5
—
24.7
3.1
73.3
5.6
67.2
2.8
0.2
75.8
178.4
149.1
(56.6)
(0.9)
(7.2)
(6.4)
(71.1)
(10.0)
(20.3)
(4.9)
(21.0)
(56.2)
(66.7)
(1.1)
(10.2)
—
(78.0)
(3.0)
—
(3.7)
(17.3)
(24.0)
(127.3)
(102.0)
51.1
47.1
12.2
0.9
38.0
51.1
12.2
0.9
34.0
47.1
1
£10.0 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. £7.2 million of invoice discounting advances have been recognised within current liabilities in the year ended 31 May 2020 (see note 19).
The Group financial statements on pages 47 to 51 were approved by the Board of Directors on 4 August 2020 and were signed on its behalf by:
R A Whiting
Director
C J Belsham
Director
The notes on pages 52 to 82 form part of these Group financial statements.
NWF Group plc
nwf.co.uk
49
Financial statements
Consolidated statement of changes in equity
for the year ended 31 May 2020
Balance at 1 June 2018
Profit for the year
Items that will never be reclassified to profit or loss:
Actuarial loss on defined benefit pension scheme (note 24)
Tax on items that will never be reclassified to profit or loss (note 22)
Total other comprehensive expense
Total comprehensive income for the year
Transactions with owners:
Dividends paid (note 9)
Value of employee services
Credit to equity for equity-settled share-based payments
Total transactions with owners
Balance at 31 May 2019
Profit for the year
Items that will never be reclassified to profit or loss:
Actuarial loss on defined benefit pension scheme (note 24)
Tax on items that will never be reclassified to profit or loss (note 22)
Total other comprehensive expense
Total comprehensive income for the year
Transactions with owners:
Dividends paid (note 9)
Credit to equity for equity-settled share-based payments
Total transactions with owners
Balance at 31 May 2020
The notes on pages 52 to 82 form part of these Group financial statements.
Share
capital
£m
12.2
Share
premium
£m
0.9
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
12.2
0.9
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Retained
earnings
£m
31.3
6.8
(1.2)
0.2
(1.0)
5.8
(3.1)
(0.1)
0.1
(3.1)
34.0
8.9
(4.0)
1.1
(2.9)
6.0
(3.2)
1.2
(2.0)
12.2
0.9
38.0
Total
equity
£m
44.4
6.8
(1.2)
0.2
(1.0)
5.8
(3.1)
(0.1)
0.1
(3.1)
47.1
8.9
(4.0)
1.1
(2.9)
6.0
(3.2)
1.2
(2.0)
51.1
50 NWF Group plc
Annual Report and Accounts 2020
Financial statements
Consolidated cash flow statement
for the year ended 31 May 2020
Net cash generated from operating activities
Cash flows used in investing activities
Purchase of intangible assets
Purchase of property, plant and equipment
Acquisition of subsidiaries – cash paid (net of cash acquired)
Capitalised legal costs associated with acquired leases
Payment of contingent deferred consideration
Proceeds on sale of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Increase in bank borrowings
Capital element of finance leases
Dividends paid
Net cash (used in)/generated from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
The notes on pages 52 to 82 form part of these Group financial statements.
Note
26
14
12
11
9
27
27
27
2020
£m
21.7
(0.4)
(5.7)
(6.0)
(0.3)
—
0.4
(12.0)
1.6
(5.6)
(3.2)
(7.2)
2.5
2.8
5.3
2019
£m
6.4
(0.2)
(2.8)
(3.5)
—
(0.8)
0.2
(7.1)
6.2
(0.1)
(3.1)
3.0
2.3
0.5
2.8
NWF Group plc
nwf.co.uk
51
Financial statements
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 note 4 of 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.
The Group financial statements were authorised for issue by the Board of Directors on 4 August 2020.
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’), IFRS 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
the critical accounting estimates and judgements section of these accounting policies. 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 10 of the Group financial 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,
detailed in note 32, these standards did not have a material effect on the Group’s results or net assets.
Standard or interpretation
Content
IFRIC 23
Amendment to IFRS 3
Amendment to IAS 12
Amendment to IAS 23
Amendment to IAS 19
Amendment to IFRS 9
IFRS 16
Uncertainty over Income Tax Treatments
Business Combinations
Income Taxes
Borrowing Costs
Employee Benefits
Financial Instruments
Leases
Applicable for financial year
beginning on
1 June 2019
1 June 2019
1 June 2019
1 June 2019
1 June 2019
1 June 2019
1 June 2019
The following standards, amendments and interpretations are not yet effective and have not been adopted early by the Group:
Standard or interpretation
Content
Amendment to IFRS 3
Business Combinations
52 NWF Group plc
Annual Report and Accounts 2020
Applicable for financial year
beginning on
1 June 2020
Financial statements 2. Significant accounting policies continued
Consolidation
The Group financial statements incorporate the financial statements of NWF Group plc (‘the Company’) and entities controlled by the Company
(its ‘subsidiaries’) made up to 31 May each year. Control is achieved where the Company has the power to govern the financial and operating
policies of an investee entity so as to obtain benefits from its activities.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that
control ceases.
The acquisition of subsidiaries is accounted for using the acquisition method. The consideration transferred for the acquisition of a subsidiary
is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Company. The consideration transferred
includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed
as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at
their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the
acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value
of any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired is recorded as
goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is
recognised directly in the income statement.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are
also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by
the Group.
If the initial accounting for a business combination is incomplete by the end of the first reporting period in which the combination occurs,
the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during
the measurement period (see below), or additional assets or liabilities are recognised, to reflect new information obtained about facts and
circumstances that existed at the date of acquisition that, if known, would have affected the amounts recognised as of that date.
The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and
circumstances that existed at the date of acquisition, and is subject to a maximum of one year.
Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the
Group’s activities. Revenue is shown net of value added tax, estimated returns, rebates and discounts, and after eliminating sales within the
Group. Accumulated experience is used to estimate and provide for these items, using the expected value method, and revenue is only
recognised to the extent that it is highly probable that a significant reversal will not occur.
The Group does not expect to have any contracts where the period between transfer of the promised goods or services to the customer and
payment by the customer exceeds one year. As a consequence, the Group does not adjust any of the transaction prices for the time value of money.
Specific types of revenue are recognised as follows:
Fuels and Feeds
Revenue from the sale of goods in each of these segments is recognised when they are delivered to the customer and the performance
obligations have been met; that is, the products are delivered to the specific location, the risk of loss has been transferred and the Group has
objective evidence that all criteria for acceptance have been satisfied.
A receivable is recognised when the goods are delivered, since this is the point in time that the consideration is unconditional because only
the passage of time is required before the payment is due. Revenue from sale of fuels includes fuel duty.
Food
Revenue from storage, handling and re-packaging of customers’ products is recognised when the relevant service has been performed and
the performance obligations have been met. For distribution revenue performance obligations are met when the customers’ products arrive
at the destination.
Revenue is recognised in the amount to which the Group has a right to invoice. Customers are invoiced on a daily, weekly or monthly basis and
consideration is payable when invoiced. A receivable is recognised when the services are provided, since this is the point in time that the
consideration is unconditional because only the passage of time is required before the payment is due.
Interest income
Interest income is recognised on a time proportion basis using the effective interest rate method.
Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are
different from those of other business segments. A geographical segment is engaged in providing products and services within a particular
economic environment that are subject to risks and returns which are different from those of segments operating in other economic
environments. Segment reporting information is shown in note 4 of the Group financial statements.
NWF Group plc
nwf.co.uk
53
Financial statements Notes to the Group financial statements continued
for the year ended 31 May 2020
2. Significant accounting policies continued
Taxation
The income tax expense represents the sum of current and deferred income tax. Tax is recognised in the income statement, except to the
extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other
comprehensive income or directly in equity, respectively.
Current income tax is based on taxable profits for the year. Taxable profit differs from profit as reported in the income statement because it excludes
items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.
The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the Group financial statements. However, deferred income tax is not accounted for if it arises from
initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither
accounting nor taxable profits or losses.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are
expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the
temporary differences can be utilised.
Borrowing costs
Borrowing costs that are directly attributable to the construction of qualifying assets, which are assets that necessarily take a substantial period
of time to get ready for their intended use, are added to the cost of those assets, until such time as the assets are substantially ready for their
intended use.
All other borrowing costs are recognised in the income statement in the period in which they are incurred.
Dividend distribution
The distribution of a dividend to the Company’s shareholders is recognised in the Group’s financial statements in the period in which it is
approved by the Company’s shareholders.
Property, plant and equipment
All property, plant and equipment is stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly
related to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount, or recognised as a separate asset, as appropriate, only when it is probable that
future economic benefits associated with the asset will flow to the Group, and the cost of the asset can be measured reliably. All other repairs
and maintenance expenditure is charged to the income statement during the financial period in which it is incurred.
Land is not depreciated. Depreciation on other assets is calculated, using the straight-line method, to reduce their cost to their residual values
over their useful economic lives, as follows:
Freehold and long leasehold buildings
10 – 50 years
Plant and machinery
Cars and commercial vehicles
3 – 10 years
4 – 8 years
Residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written
down immediately to its estimated recoverable amount, if the asset’s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposal are determined by comparing the proceeds of disposal with the carrying value and are recognised in the
income statement.
Right of use assets and lease liabilities
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.
At the inception of a contract, the Group performs an assessment to determine whether the contract is, or contains, a lease. Key aspects of
this determination are the specific identification of an asset that is subject to the lease, and that the lease conveys the right to direct and
control the use of the identified asset for a period of time.
Where a contract is determined to contain a lease, the lease liability is recognised from the commencement date of the lease, the
commencement date being defined as the date at which the lessor makes the underlying asset available for use. The lease liability is
recognised at an amount equal to the present value of the future lease payments during the lease term.
Lease payments are discounted using the Group’s incremental borrowing rate, since the interest rate implicit in the Group’s leases is not
readily determinable.
After the commencement date, lease payments are allocated between the outstanding lease liability on the balance sheet and finance costs.
Finance costs are charged to the income statement over the lease period using the effective interest method.
A right of use asset is initially recognised at the commencement date and measured at cost, which comprises the amount of the initial
measurement of the lease liability, any lease payments made at or before the commencement date, any initial direct costs incurred by the
Group and an estimate of any cost for dismantling or restoring the asset at the end of the lease term.
54 NWF Group plc
Annual Report and Accounts 2020
Financial statements
2. Significant accounting policies continued
Right of use assets and lease liabilities continued
The right of use asset is subsequently depreciated in accordance with the depreciation requirements in IAS 16 ‘Property, Plant and Equipment’
which results in depreciation on a straight-line basis over the shorter of the asset’s useful life and the lease term. The Group also applies IAS 36
‘Impairment of Assets’ to determine whether the right of use asset is impaired and to account for any impairment loss identified.
Remeasurement of the lease liability occurs if, after the commencement date, there is a change in future lease payments or a change in the
lease term. Any remeasurement of the lease liability results in a corresponding adjustment of the right of use asset. If the carrying amount
of the right of use asset has already been reduced to zero, the remaining remeasurement is recognised in the income statement. The Group
remeasures the lease liability to reflect those revised lease payments only when there is a change in the cash flows, using an unchanged
discount rate.Reassessment of leases in the Group occurs where lease consideration changes due to a market rent review clause or where
there are changes to variable lease payments dependent on an index or rate.
A lease modification arises where there is a change in scope of the lease, or the consideration for the lease, which was not part of the original
terms and conditions of the lease. In the event of a lease modification, the Group accounts for this as a separate lease, providing the modification
increases the scope of the lease by adding the right to use one or more underlying assets and the consideration for the lease increases by an
amount commensurate with the stand-alone price for the increase in scope and any appropriate adjustments to that stand-alone price, to
reflect the circumstances of the particular contract.
The Group elected to apply the simplified transition approach and as such the comparative information for the year ended 31 May 2019 has not
been restated and is presented as previously reported, under IAS 17.
Under IAS 17 ‘Leases’ a significant proportion of the risks and rewards of ownership are retained by the lessor and are classified as operating
leases. Payments made under operating leases (net of any incentive received from the lessor) are charged to the income statement on a
straight-line basis over the period of the lease.
Assets and liabilities under finance leases and hire purchase agreements are recognised in the balance sheet at the inception of the agreement
at amounts equal to their fair value or, if lower, the net present value of the minimum payments under the agreement. Depreciation on hire
purchase and leased assets is provided at rates consistent with that for similar assets that are owned by the Group or over the term of the
lease, where shorter than the useful economic life.
Subsequent to initial recognition, payments made are apportioned between the finance charge element and the reduction in the capital value
of the outstanding liability. The finance charge is allocated to each period so as to produce a constant periodic rate of interest on the remaining
balance of the liability.
Obligations under finance lease arrangements have been transferred from borrowings to be disclosed within lease liabilities following the
adoption of IFRS 16.
Assets financed by leasing or hire purchase arrangements, and which have an outstanding liability, have been transferred from property,
plant and equipment to be disclosed within right of use assets following the adoption of IFRS 16.
Note 32 details on the impact of IFRS 16 ‘Leases’ on the consolidated balance sheet at 1 June 2019.
Intangible assets
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the identifiable net assets of the
acquired subsidiary at the date of acquisition.
Goodwill on acquisitions of subsidiaries is included within intangible assets. Goodwill is tested annually for impairment and carried at cost
less accumulated impairment losses. Impairment losses on goodwill are recognised immediately in the income statement and are not
subsequently reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to each of the Group’s cash-generating units for the purpose of impairment testing. The allocation is made to those
cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which they arose,
identified according to operating segment.
Brands
Separately acquired brands are shown at historical cost less accumulated amortisation. Brands acquired in a business combination are
recognised at fair value at the date of acquisition. Brands have a finite useful life and are carried at cost less accumulated amortisation and
represent an acquired intangible asset. Amortisation is calculated, using the straight-line method, to allocate the cost of brands over their
estimated useful lives of ten years.
Customer relationships
Separately acquired customer relationships are shown at historical cost less accumulated amortisation. Customer relationships acquired in
a business combination are recognised at fair value at the date of acquisition. Customer relationships have a finite useful life and are carried
at cost less accumulated amortisation and represent an acquired intangible asset. Amortisation is calculated, using the straight-line method,
to allocate the cost of these assets over their estimated useful lives of ten years.
Computer software
Costs associated with maintaining computer software programs are recognised as an expense as incurred. Costs incurred to acquire computer
software licences and directly attributable costs incurred to bring the software into use are capitalised. Directly attributable costs include
software development employee costs. Capitalised computer software costs are amortised over their estimated useful lives on a straight-line
basis (three to seven years).
NWF Group plc
nwf.co.uk
55
Financial statements Notes to the Group financial statements continued
for the year ended 31 May 2020
2. Significant accounting policies continued
Impairment of non-financial assets
Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets
that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised as the amount by which the asset’s carrying amount exceeds the
recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and its value in use. Non-financial assets,
other than goodwill, that suffer an impairment are reviewed for possible reversal of the impairment at each reporting date.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first in, first out (‘FIFO’) method. The cost
of raw materials, consumables, finished goods and goods for resale comprises purchase cost and, in the case of finished goods, the cost
of transporting the goods to their stock location.
Net realisable value comprises the estimated selling price in the ordinary course of business less applicable variable selling expenses. Provision
is made for obsolete, slow-moving or defective items where appropriate.
Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less
provision for impairment. Under IFRS 9, the Group elected to use the simplified approach to measure the loss allowance at an amount equal
to lifetime expected credit losses for trade receivables. Under the accounting standard, the Group continues to establish a provision for
impairment of trade receivables when there is objective evidence that the Group will not be able to collect all amounts due according to the
original terms of the receivables. Significant financial difficulties of the counterparty, probability that the counterparty will enter bankruptcy
or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired.
In addition, IFRS 9 requires the Group to consider forward-looking information and the probability of default when calculating expected credit
losses. The measurement of expected credit losses reflects an unbiased and probability weighted amount that is determined by evaluating the
range of possible outcomes as well as incorporating the time value of money. 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.
The amount of the provision is the difference between the carrying amount and the present value of estimated future cash flows of the asset,
discounted, where material, at the original effective interest rate. The carrying amount of the asset is reduced through the use of a provision
for receivables impairment, and the amount of the loss is recognised in the income statement within administrative expenses. When a trade
receivable is uncollectable, it is written off against the provision for receivables impairment. Subsequent recoveries of amounts previously
written off are credited against administrative expenses in the income statement.
Derivative financial instruments and hedging activities
A derivative is initially recognised at fair value on the date that the associated contract is entered into and then is remeasured at fair value
at each subsequent balance sheet date.
The method of recognising the resulting gain or loss depends on whether or not the derivative is designated as a hedging instrument and,
if so, the nature of the item being hedged. During the current and prior year, none of the Group’s derivative financial instruments have been
designated as effective hedges. Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are
recognised in the income statement as they arise.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks and bank overdrafts. The Group recognises cash when it is
within in its control. Cash in transit between Group companies at a period end is recognised within the receiving company’s balance sheet. Cash
in transit to or from external entities at a period end is not recognised where the Group does not exercise control over it. Bank overdrafts are
shown within borrowings in current liabilities on the balance sheet.
Trade and other payables
Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method.
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.
Bank borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost.
Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the
period of the borrowings, using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least one
year after the balance sheet date.
56 NWF Group plc
Annual Report and Accounts 2020
Financial statements 2. Significant accounting policies continued
Retirement benefit costs
The Group operates various pension schemes, including defined contribution and defined benefit schemes.
For defined contribution schemes, the Group pays contributions to publicly or privately administered pension insurance schemes on
a mandatory, contractual or voluntary basis. The contributions are recognised as an employee benefit expense in the income statement
when they are due. The assets of the schemes are held separately from those of the Group in funds under the control of trustees.
The liability recognised in the balance sheet in respect of defined benefit schemes is the present value of the defined benefit obligation at the balance
sheet date less the fair value of scheme assets, together with adjustments for unrecognised actuarial gains or losses and past service costs. The defined
benefit obligation is calculated annually by independent actuaries using the Projected Unit Credit Method. The present value of the defined benefit
obligation is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that are denominated
in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension liability.
The net pension finance cost is determined by applying the discount rate, used to measure the defined benefit pension obligation at the
beginning of the accounting period, to the net pension obligation at the beginning of the accounting period taking into account any changes
in the net pension obligation during the period as a result of cash contributions and benefit payments.
Pension scheme expenses are charged to the income statement within administrative expenses.
Actuarial gains and losses are recognised immediately in the statement of comprehensive income. Net defined benefit pension scheme
deficits before tax relief are presented separately on the balance sheet within non-current liabilities. The attributable deferred income tax
asset is included within the deferred income tax asset in the balance sheet and is subject to the recognition criteria as set out in the accounting
policy on deferred income tax.
Share-based payments
In the year ended 31 May 2020, the Group operated one (2019: one) equity-settled share-based payment plan, details of which can be found
in note 25 of the Group financial statements.
The fair value of the employee services received in exchange for the grant of share awards is recognised as an expense. Equity-settled
share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant. The fair
value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period,
based on the Group’s estimate of shares that will eventually vest and adjusted for the effect of non-market-based vesting conditions.
Fair value is measured by the use of a Black Scholes model. The expected life used in the model has been adjusted, based on management’s
best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
Employer social security contributions payable in connection with the grant of share awards is considered an integral part of the grant itself
and the charge is treated as a cash-settled transaction.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of
resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction,
net of tax, from the proceeds of issue.
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, including the impact of GMP, 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. Further details can be found in note 24 of the Group financial statements.
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 £0.1 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.
NWF Group plc
nwf.co.uk
57
Financial statements Notes to the Group financial statements continued
for the year ended 31 May 2020
2. Significant accounting policies continued
Critical accounting estimates and judgements continued
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.
3. Revenue
An analysis of the Group’s revenue is as follows:
Sale of goods
Rendering of services
2020
£m
639.2
48.3
687.5
2019
£m
623.4
47.9
671.3
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.
2020
Revenue
Total revenue
Inter-segment revenue
Revenue
Result
Headline operating profit
Segment exceptional item (note 5)
Amortisation of acquired intangibles
Operating profit as reported
Finance costs (note 7)
Profit before taxation
Income tax expense (note 8)
Profit for the year
Other information
Depreciation and amortisation
Fixed asset additions
58 NWF Group plc
Annual Report and Accounts 2020
Fuels
£m
476.0
(5.8)
470.2
11.0
(0.5)
(0.3)
Food
£m
48.7
(0.4)
48.3
1.4
—
—
Feeds
£m
169.0
—
169.0
1.9
—
—
3.4
0.8
4.2
3.1
2.9
1.8
Group
£m
693.7
(6.2)
687.5
14.3
(0.5)
(0.3)
13.5
(1.5)
12.0
(3.1)
8.9
10.5
5.7
Financial statements
4. Segment information continued
2020
Balance sheet
Assets
Segment assets
Deferred income tax assets (note 22)
Cash at bank and in hand (note 17)
Consolidated total assets
Liabilities
Segment liabilities
Current income tax liabilities
Deferred income tax liabilities (note 22)
Borrowings (note 19)
Retirement benefit obligations (note 24)
Consolidated total liabilities
2019
Revenue
Total revenue
Inter-segment revenue
Revenue
Result
Headline operating profit
Segment exceptional item (note 5)
Group exceptional item (note 5)
Amortisation of acquired intangibles
Operating profit as reported
Finance costs (note 7)
Profit before taxation
Income tax expense (note 8)
Profit for the year
Other information
Depreciation and amortisation
Fixed asset additions
Fuels
£m
Food
£m
Feeds
£m
Group
£m
66.2
48.2
54.3
168.7
4.4
5.3
178.4
(45.4)
(19.3)
(18.6)
(83.3)
Fuels
£m
449.5
(6.5)
443.0
5.6
(0.2)
(0.1)
Food
£m
48.4
(0.5)
47.9
1.8
—
—
1.4
0.5
1.6
0.6
1.7
1.7
(0.9)
(4.9)
(17.2)
(21.0)
(127.3)
Group
£m
678.3
(7.0)
671.3
Feeds
£m
180.4
—
180.4
2.8
10.2
—
—
(0.2)
(0.3)
(0.1)
9.6
(0.9)
8.7
(1.9)
6.8
4.7
2.8
NWF Group plc
nwf.co.uk
59
Financial statements
Notes to the Group financial statements continued
for the year ended 31 May 2020
4. Segment information continued
2019
Balance sheet
Assets
Segment assets
Deferred income tax assets (note 22)
Cash at bank and in hand (note 17)
Consolidated total assets
Liabilities
Segment liabilities
Current income tax liabilities
Deferred income tax liabilities (note 22)
Borrowings (note 19)
Retirement benefit obligations (note 24)
Consolidated total liabilities
5. Profit before taxation
Profit before taxation is stated after charging/(crediting):
Cost of inventories recognised as an expense (included in cost of sales)
Depreciation of property, plant and equipment (note 12)
Depreciation of right of use assets (note 13)
Amortisation of other intangible assets (note 14)
Profit on disposal of property, plant and equipment
Operating lease charges – land and buildings
Operating lease charges – other
Staff costs (note 6)
Exceptional items
Fuels
£m
Food
£m
Feeds
£m
Group
£m
61.2
30.3
51.7
143.2
3.1
2.8
149.1
(46.4)
(5.3)
(15.0)
(66.7)
(1.1)
(3.7)
(13.2)
(17.3)
(102.0)
2020
£m
2019
£m
586.7
589.9
4.1
5.8
0.6
(0.2)
—
—
48.2
0.5
3.9
—
0.8
(0.1)
0.3
4.2
40.1
0.5
Following the adoption of IFRS 16 at 1 June 2019, the majority of operating lease costs are no longer recognised within the consolidated income
statement having been replaced by depreciation on right of use assets. Any remaining costs within the consolidated income statement relate
to low value and short-term leases which are excluded from IFRS 16.
An exceptional cost of £0.5 million (2019: £0.5 million) is included in administrative expenses. Exceptional items by type are as follows:
GMP equalisation
Acquisition-related costs
Exceptional cost
2020
£m
—
0.5
0.5
2019
£m
0.3
0.2
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 £0.3 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.
60 NWF Group plc
Annual Report and Accounts 2020
Financial statements
5. Profit before taxation continued
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, £0.5 million impacted cash in the year.
Services provided by the Company’s auditors
During the year, the Group obtained the following services from the Company’s auditors:
Fees payable to the Company’s auditors for the audit of the Company and consolidated annual financial statements
Fees payable to the Company’s auditors for other services:
– audit of the financial statements of the Company’s subsidiaries pursuant to legislation
– non-audit assurance services
– tax compliance services
Total auditors’ remuneration
6. Staff costs
The average monthly number of persons (including Directors) employed in the Group during the year was:
Fuels
Food
Feeds
Head office
2020
£’000
43
219
1
103
366
2019
£’000
31
123
3
59
216
2020
Number
2019
Number
302
621
223
15
1,161
217
580
217
14
1,028
Staff costs (including Directors) are outlined below. Directors’ remuneration is also set out in the Remuneration Report, within the table entitled
Directors’ emoluments – audited information, on page 38.
Wages and salaries
Social security costs
Share-based payments (note 25)
Other pension costs (note 24)
2020
£m
41.0
4.3
1.2
1.7
48.2
2019
£m
35.2
3.7
0.1
1.1
40.1
In addition to the above staff costs, the Group incurred no termination costs (2019: £Nil), and £4.2 million (2019: £4.7 million) in respect of costs
of agency workers.
Other pension costs above are amounts charged to operating profit in respect of defined contribution and defined benefit pension schemes,
including £0.4 million of past service costs.
7. Finance costs
Interest on bank loans and overdrafts
Finance costs on lease liabilities relating to IFRS 16
Total interest expense
Net finance cost in respect of defined benefit pension schemes (note 24)
Total finance costs
Borrowing costs of £Nil were capitalised in the year ended 31 May 2020 (2019: £0.2 million).
2020
£m
0.7
0.4
1.1
0.4
1.5
2019
£m
0.5
—
0.5
0.4
0.9
NWF Group plc
nwf.co.uk
61
Financial statements
Notes to the Group financial statements continued
for the year ended 31 May 2020
8. Income tax expense
Current tax
UK corporation tax on profits for the year
Adjustments in respect of prior years
Current tax expense
Deferred tax
Origination and reversal of temporary differences
Effect of increased tax rate on opening balances
Deferred tax expense/(income) (note 22)
Total income tax expense
2020
£m
2.6
—
2.6
—
0.5
0.5
3.1
2019
£m
2.0
0.1
2.1
(0.2)
—
(0.2)
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:
Profit before taxation
Profit before taxation multiplied by the standard rate of UK corporation tax of 19% (2019: 19%)
Effects of:
– expenses not deductible for tax purposes
– impact of increased tax rate on opening balances
– adjustments in respect of prior years
Total income tax expense
2020
£m
12.0
2.2
0.4
0.5
—
3.1
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.
9. Equity dividends
Final dividend for the year ended 31 May 2019 of 5.6p (2018: 5.3p) per share
Interim dividend for the year ended 31 May 2020 of 1.0p (2019: 1.0p) per share
Amounts recognised as distributions to equity shareholders in the year
Proposed final dividend for the year ended 31 May 2020 of 5.9p (2019: 5.6p) per share
2020
£m
2.7
0.5
3.2
2.9
The proposed final dividend is subject to approval at the AGM on 24 September 2020 and has not been included as a liability in these Group
financial statements.
2019
£m
8.7
1.6
0.2
—
0.1
1.9
2019
£m
2.6
0.5
3.1
2.7
62 NWF Group plc
Annual Report and Accounts 2020
Financial statements
10. Earnings per share
The calculation of basic and diluted earnings per share is based on the following data:
Earnings (£m)
Earnings for the purposes of basic and diluted earnings per share being profit for the year attributable to equity
shareholders
Number of shares (‘000)
Weighted average number of shares for the purposes of basic earnings per share
Weighted average dilutive effect of conditional share awards
Weighted average number of shares for the purposes of diluted earnings per share
Earnings per ordinary share (pence)
Basic earnings per ordinary share
Diluted earnings per ordinary share
Headline earnings per ordinary share (pence)
Basic headline earnings per ordinary share
Diluted headline earnings per ordinary share
The calculation of basic and diluted headline earnings per share is based on the following data:
Profit for the year attributable to equity shareholders
Add back/(deduct):
Net finance cost in respect of defined benefit pension scheme
Exceptional items
Amortisation of acquired intangibles
Tax effect of the above
Headline earnings
2020
2019
8.9
6.8
48,750
48,735
478
15
49,228
48,750
18.2
18.1
20.5
20.3
2020
£m
8.9
0.4
0.5
0.3
(0.1)
10.0
13.9
13.9
15.8
15.8
2019
£m
6.8
0.4
0.5
0.1
(0.1)
7.7
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 £3.0 million before acquisition costs
(being gross consideration of £4.5 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:
Intangible assets – goodwill
Intangible assets – brand
Intangible assets – customer relationships
Property, plant and equipment
Right of use asset
Stock
Trade and other receivables
Cash
Borrowings
Trade and other payables
Lease liabilities
Deferred tax liability
Initial fair
value of
assets
acquired
£m
Adjustments
£m
Fair
value of
assets
acquired
£m
3.1
0.1
0.1
1.1
—
0.4
7.2
0.2
(2.6)
(6.0)
(0.5)
(0.1)
3.0
(0.6)
—
0.6
—
0.4
—
—
—
—
—
(0.4)
—
—
2.5
0.1
0.7
1.1
0.4
0.4
7.2
0.2
(2.6)
(6.0)
(0.9)
(0.1)
3.0
Goodwill of £2.5 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.
NWF Group plc
nwf.co.uk
63
Financial statements
Notes to the Group financial statements continued
for the year ended 31 May 2020
11. Business combinations continued
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:
Total consideration – cash paid on completion
Cash acquired
Acquisition-related costs
£m
(3.0)
0.2
(2.8)
(0.3)
(3.1)
Acquisition-related costs of £0.3 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
– £43.2 million, profit – £0.6 million.
Had the acquisition taken place at the start of the financial year, the consolidated income statement would show: revenue – £47.7 million, profit
– £0.6 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 £0.4 million before acquisition costs.
Details of the total consideration and the provisional fair values of the assets and liabilities acquired are shown below:
Intangible assets – goodwill
Intangible assets – customer relationships
Fair
value of
assets
acquired
£m
0.2
0.2
0.4
Provisional goodwill of £0.2 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:
Total consideration – cash paid on completion
Cash and cash equivalents acquired
£m
(0.4)
—
(0.4)
The following amounts have been recognised within the consolidated income statement in respect of the acquisition made in the year:
revenue – £1.1 million, profit – £0.1 million.
Had the acquisition taken place at the start of the financial year, the consolidated income statement would show: revenue – £1.9 million,
profit – £0.1 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 £8.4 million before acquisition costs (being gross consideration of £4.5 million
adjusted for normalised working capital and cash acquired). Net consideration of £8.4 million comprises £7.3 million of cash paid as at 31 May 2020
and £1.1 million of cash paid following completion on 12 June 2020.
64 NWF Group plc
Annual Report and Accounts 2020
Financial statements
11. Business combinations continued
Details of the total consideration and the provisional fair values of the assets and liabilities acquired are shown below:
Intangible assets – goodwill
Intangible assets – brand
Intangible assets – customer relationships
Property, plant and equipment
Stock
Trade and other receivables
Cash
Trade and other payables
Corporation tax liability
Deferred tax liability
Initial fair
value of
assets
acquired
£m
2.2
0.2
0.8
1.4
0.6
1.5
4.5
(2.6)
(0.1)
(0.1)
8.4
Provisional goodwill of £2.2 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:
Total consideration – cash paid on completion
Cash acquired
Acquisition-related costs
Net cash flows arising during the year ending 31 May 2020
Cash paid post year end
Net cash flows arising on the acquisition
£m
(7.3)
4.5
(2.8)
(0.2)
(3.0)
(1.1)
(4.1)
Acquisition-related costs of £0.2 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 – £12.5 million, profit – £1.6 million.
Had the acquisition taken place at the start of the financial year, the consolidated income statement would show: revenue – £22.4 million,
profit – £1.8 million.
NWF Group plc
nwf.co.uk
65
Financial statements
Notes to the Group financial statements continued
for the year ended 31 May 2020
12. Property, plant and equipment
Cost
At 1 June 2018
Additions
Acquired
Disposals
At 1 June 2019
Additions
Acquired
Transfers out to right of use asset
Disposals
At 31 May 2020
Accumulated depreciation
At 1 June 2018
Charge for the year
Disposals
At 1 June 2019
Charge for the year
Transfers out to right of use asset
Disposals
At 31 May 2020
Carrying amount
At 31 May 2020
At 31 May 2019
Freehold
land and
buildings
£m
Long
leasehold
land and
buildings
£m
Plant and
machinery
£m
Cars and
commercial
vehicles
£m
37.0
0.2
—
—
37.2
—
0.7
—
—
37.9
10.0
0.9
—
10.9
0.9
—
—
11.8
26.1
26.3
1.5
—
—
—
1.5
1.1
0.1
—
—
2.7
0.3
—
—
0.3
—
—
—
0.3
2.4
1.2
24.2
2.4
—
(0.3)
26.3
4.3
0.4
—
—
31.0
11.3
1.8
(0.3)
12.8
2.0
—
—
14.8
16.2
13.5
10.1
0.2
1.0
(1.4)
9.9
0.3
1.3
(1.3)
(3.6)
6.6
5.5
1.2
(1.3)
5.4
1.2
(0.4)
(3.4)
2.8
3.8
4.5
Total
£m
72.8
2.8
1.0
(1.7)
74.9
5.7
2.5
(1.3)
(3.6)
78.2
27.1
3.9
(1.6)
29.4
4.1
(0.4)
(3.4)
29.7
48.5
45.5
The Group has pledged certain freehold land and buildings with a carrying value of £22.0 million (31 May 2019: £22.6 million) to secure banking
facilities granted to the Group.
Following the adoption of IFRS 16 on 1 June 2019, the net book value of plant and equipment held under finance leases is no longer recognised
within property, plant and equipment and is instead recognised within right of use assets (note 13).
66 NWF Group plc
Annual Report and Accounts 2020
Financial statements
13. Right of use assets
Cost
At 31 May 2019
Recognition of right of use assets
Transfers in from property, plant and equipment on transition
Right of use assets recognised at 1 June 2019
Additions
Acquired
Transfers in from property, plant and equipment
At 31 May 2020
Accumulated depreciation
At 31 May 2019
Transfers in from property, plant and equipment
At 1 June 2019
Charge for the year
Transfers in from property, plant and equipment
At 31 May 2020
Carrying amount
At 31 May 2020
At 1 June 2019
At 31 May 2019
24.5
33.5
Properties
£m
Commercial
vehicles
£m
—
1.0
—
1.0
7.6
0.4
—
9.0
—
—
—
0.6
—
0.6
8.4
1.0
—
—
15.2
0.5
15.7
8.0
—
0.8
—
0.1
0.1
5.2
0.3
5.6
18.9
15.6
—
Total
£m
—
16.2
0.5
16.7
15.6
0.4
0.8
—
0.1
0.1
5.8
0.3
6.2
27.3
16.6
—
Total
£m
27.8
3.3
31.1
7.3
38.4
5.6
0.8
6.4
0.6
7.0
31.4
24.7
Depreciation charges are recognised in administrative costs.
Following the adoption of IFRS 16, the transfer of assets in from property, plant and equipment represents the reclassification of the cost
and associated depreciation of finance lease assets at 1 June 2019 to right of use assets.
14. Intangible assets
Cost
At 1 June 2018
Additions
At 1 June 2019
Additions
At 31 May 2020
Accumulated amortisation
At 1 June 2018
Charge for the year
At 1 June 2019
Charge for the year
At 31 May 2020
Carrying amount
At 31 May 2020
At 31 May 2019
Goodwill
£m
Computer
software
£m
Customer
relationships
£m
Brands
£m
20.7
2.5
23.2
4.9
28.1
0.6
—
0.6
—
0.6
27.5
22.6
6.1
0.2
6.3
0.4
6.7
4.6
0.7
5.3
0.3
5.6
1.1
1.0
—
0.5
0.5
1.7
2.2
—
—
—
0.2
0.2
2.0
0.5
1.0
0.1
1.1
0.3
1.4
0.4
0.1
0.5
0.1
0.6
0.8
0.6
Amortisation or impairment charges have been charged to administrative expenses in the consolidated income statement.
NWF Group plc
nwf.co.uk
67
Financial statements
Notes to the Group financial statements continued
for the year ended 31 May 2020
14. Intangible assets continued
Customer relationships
Customer relationships are allocated as follows:
Fuels
Brands
Brands are allocated as follows:
Feeds
Fuels
2020
£m
2.0
2020
£m
0.2
0.6
0.8
2019
£m
0.5
2019
£m
0.3
0.3
0.6
Goodwill
Goodwill acquired is allocated, at acquisition, to cash-generating units (‘CGUs’) that are expected to benefit from that business combination.
The carrying value of goodwill is allocated as follows:
Feeds
Fuels
2020
£m
11.9
15.6
27.5
2019
£m
11.9
10.7
22.6
The Group tests annually for impairment of goodwill. 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%.
The rate used to discount the projected cash flows, being a pre-tax discount rate based on comparative businesses, is 8.35% (2019: 10.3%) for
all business segments. The same discount rate has been used for each CGU as the principal risks associated with the Group, as highlighted
on pages 20 and 21, would also impact each CGU in a similar manner.
The value in use calculations described above, together with sensitivity analysis using reasonable assumptions, indicate ample headroom
and therefore do not give rise to impairment concerns. Having completed the 2020 impairment reviews of both the Feeds and Fuels divisions,
no impairments have been identified. Management does not consider that there is any reasonable downside scenario which would result in
an impairment.
15. Inventories
Raw materials and consumables
Finished goods and goods for resale
16. Trade and other receivables
Trade receivables
Less: provision for impairment
Trade receivables – net
VAT recoverable
Other receivables
Prepayments and accrued income
2020
£m
2.4
2.3
4.7
2020
£m
54.5
(1.8)
52.7
—
0.2
3.8
56.7
2019
£m
3.0
2.6
5.6
2019
£m
64.9
(1.2)
63.7
0.7
0.3
2.5
67.2
Prepayments and accrued income includes £0.7 million (2019: £Nil) relating to a reimbursement settlement which has been offset against the
past service costs of the defined benefit pension scheme in the income statement.
68 NWF Group plc
Annual Report and Accounts 2020
Financial statements
16. Trade and other receivables continued
The fair value of trade and other receivables is equivalent to their carrying amount. Trade and other receivables are non-interest bearing and
are substantially denominated in Sterling. Under IFRS 9, the Group is required to utilise objective evidence as well as consider forward-looking
information and the probability of default when calculating expected credit losses. The maturity of financial assets and history of write-offs is
therefore used as an indicator as to the probability of default. Trade receivables are written off when they have been overdue for a number of
years, or if a customer has entered into insolvency and there is no expectation of recovery.
The loss allowance as at 31 May 2020 and 31 May 2019 was determined as follows for trade receivables:
31 May 2020
Expected loss rate
Gross carrying amount (£m)
Loss allowance (£m)
31 May 2019
Expected loss rate
Gross carrying amount (£m)
Loss allowance (£m)
Current
0.10%
40.9
—
Current
0.05%
59.2
0.1
<30 days
past due
30 to
60 days
past due
>60 days
past due
0.21%
2.06%
71.11%
9.5
—
1.7
—
2.4
1.8
<30 days
past due
30 to
60 days
past due
>60 days
past due
0.31%
0.84%
60.63%
2.7
—
1.2
—
Movements on the Group provision for impairment of trade receivables are as follows:
At 1 June
Provision for receivables impairment
Receivables written off in the year
At 31 May
The other classes of receivables do not contain impaired assets.
The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivable.
17. Cash and cash equivalents
Cash at bank and in hand
The fair value of cash and cash equivalents is equivalent to their carrying amount. Cash at bank and in hand includes £0.8 million of cash in
transit between Group companies at the year end.
18. Trade and other payables
Current
Trade payables
Social security and other taxes
Accruals and deferred income
The fair value of trade and other payables is equivalent to their carrying amount.
2020
£m
44.9
1.3
10.4
56.6
1.8
1.1
2020
£m
1.2
0.8
(0.2)
1.8
2020
£m
5.3
Total
54.5
1.8
Total
64.9
1.2
2019
£m
1.1
0.2
(0.1)
1.2
2019
£m
2.8
2019
£m
58.8
1.0
6.9
66.7
NWF Group plc
nwf.co.uk
69
Financial statements
Notes to the Group financial statements continued
for the year ended 31 May 2020
19. Borrowings
Current
Obligations under hire purchase agreements
Invoice discounting advances
Non-current
Revolving credit facility
Total borrowings
2020
£m
—
7.2
7.2
10.0
10.0
17.2
2019
(Restated¹)
£m
0.2
10.0
10.2
3.0
3.0
13.2
1
£10.0 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. £7.2 million of invoice discounting advances have been recognised within current liabilities in the year ended 31 May 2020.
The Group’s banking facilities, provided by The NatWest Group, were renewed on 29 June 2018 and are committed until 31 October 2023.
Further information on the renewed facilities, which total £65.0 million (2019: £65.0 million), is outlined below.
Invoice discounting advances
Invoice discounting advances at 31 May 2020 were drawn under a committed facility with an expiry date of 31 October 2023 (2019: 31 October
2023). The availability of invoice discounting facilities is dependent on the level of current trade receivables available for refinancing and is
subject to a maximum drawdown of £50.0 million (2019: £50.0 million).
The facility is secured by way of a fixed and floating charge against the Group’s trade receivables. Interest is charged at 1.25% (2019: 1.25%)
per annum above the bank’s base rate.
Invoice discounting advances have been classified within current liabilities as the Group does not have an unconditional right to defer settlement
of the liabilities for at least one year after the balance sheet date. Accordingly, all of the invoice discounting advances at 31 May 2020 totalling
£7.2 million (2019: £10.0 million) are presented within current liabilities.
The Group incurred non-utilisation fees on its committed invoice discounting facility. The Group will incur non-utilisation fees only in respect
of committed and undrawn facilities of up to £20.0 million (2019: £20.0 million).
Revolving credit facility
The Group has a revolving credit facility of £10.0 million (2019: £10.0 million) with an expiry date of 31 October 2023 (2019: 31 October 2023).
Interest is charged on amounts drawn down at 1.60 – 1.85% per annum above LIBOR (2019: 1.60 – 1.85% above LIBOR) depending on the ratio
of net debt to EBITDA.
The amount drawn down under the revolving credit facility at 31 May 2020 is £10.0 million (2019: £3.0 million).
The Group incurs non-utilisation fees on its committed revolving credit facility.
Bank overdrafts
The Group’s net bank overdraft facility at 31 May 2020 is repayable on demand and is subject to a maximum limit of £1.0 million (2019: £1.0 million).
None of the facility was utilised at 31 May 2020 (2019: £Nil). Interest is charged at 1.5% per annum over the bank’s base rate (2019: 1.5% per
annum over the bank’s base rate).
Bank guarantee
The Group has a bank guarantee agreement with The NatWest Group, under which the bank provides a facility which allows the Group to
request that the bank issues guarantees to third party suppliers for general business purposes. The maximum total facility value is £4.0 million
but this was not utilised in the year.
The above facilities are subject to quarterly covenant tests on interest cover and net debt to EBITDA ratios. The covenants have been set at
levels that provide sufficient headroom and flexibility for the Group until maturity of the facilities in October 2023.
Bank borrowings amounting to £17.2 million (2019: £13.0 million) are secured by way of unscheduled mortgage debentures provided by the
Company and certain subsidiaries within the Group to The NatWest Group which incorporate a fixed charge over their book debts and floating
charges over all their other assets.
All bank borrowings are denominated in Sterling and are repayable as follows:
Within one year
Between two and five years
70 NWF Group plc
Annual Report and Accounts 2020
2019
(Restated¹)
£m
10.0
3.0
13.0
2020
£m
7.2
10.0
17.2
Financial statements
19. Borrowings continued
Bank borrowing facilities by expiry date
The Group has a number of bank borrowing facilities which were partly drawn down at 31 May 2020. The Group is in compliance with all covenants.
Facilities expiring:
Within one year
Between two and five years
2020
2019 (Restated¹)
Facility
£m
44.8
10.0
54.8
Amount
drawn
£m
7.2
10.0
17.2
Facility
£m
48.2
10.0
58.2
Amount
drawn
£m
10.0
3.0
13.0
1
£10.0 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. £7.2 million of invoice discounting advances have been recognised within current liabilities in the year ended 31 May 2020.
The availability of invoice discounting facilities included above, amounting to £43.8 million (31 May 2019: £47.2 million), is dependent on the level
of trade receivables available for refinancing.
The facilities above do not include the £4.0 million bank guarantee agreement facility.
Obligations under hire purchase agreements
Obligations under hire purchase agreements are repayable as follows:
Within one year
Between two and five years
Present value of obligations
Analysed as:
Amounts due for settlement within 12 months (shown as current liabilities)
Amounts due for settlement after 12 months
Minimum payments
Present value of payments
2020
£m
—
—
—
2019
£m
0.2
—
0.2
2020
£m
—
—
—
—
—
—
2019
£m
0.2
—
0.2
0.2
—
0.2
All hire purchase obligations are denominated in Sterling.
Following the adoption of IFRS 16 at 1 June 2019, all remaining hire purchase obligations have been recognised as lease liabilities and are shown in note 20.
20. Lease liabilities
Cost
At 31 May 2019
Recognition of lease liability under IFRS 16
Previously recognised as finance lease obligations in borrowings
Opening lease liabilities recognised at 1 June 2019
Additions
Business combinations (note 11)
Lease liability payments (including finance costs)
Finance costs
At 31 May 2020
Lease liabilities are comprised of the following balance sheet amounts:
Current
Amounts due within one year
Non-current
Amounts due after more than one year
Total
Properties
£m
Commercial
vehicles
£m
—
1.0
—
1.0
7.0
0.4
(0.3)
—
8.1
—
15.2
0.2
15.4
8.0
0.5
(5.7)
0.4
18.6
2020
£m
6.4
20.3
26.7
Total
£m
—
16.2
0.2
16.4
15.0
0.9
(6.0)
0.4
26.7
2019
£m
—
—
—
NWF Group plc
nwf.co.uk
71
Financial statements
Notes to the Group financial statements continued
for the year ended 31 May 2020
20. Lease liabilities continued
Lease liabilities are as follows:
Not more than one year
Minimum lease payments
Interest element
Present value of minimum lease payments
Between one and five years
Minimum lease payments
Interest element
Present value of minimum lease payments
More than five years
Minimum lease payments
Interest element
Present value of minimum lease payments
2020
£m
2019
£m
6.9
(0.5)
6.4
18.9
(0.7)
18.2
2.2
(0.1)
2.1
—
—
—
—
—
—
—
—
—
21. Financial instruments and risk management
The Group’s financial instruments comprise cash, bank overdrafts, invoice discounting advances, rolling credit facility, obligations under hire
purchase agreements, commodity derivatives and various items such as receivables and payables, which arise from its operations. All financial
instruments in 2020 and 2019 were denominated in Sterling. There is no material foreign exchange risk in respect of these instruments.
The carrying amounts of all of the Group’s financial instruments are measured at amortised cost in the financial statements, with the exception
of derivative financial instruments. Derivative financial instruments are measured subsequent to initial recognition at fair value.
IFRS 13 (amended) ‘Financial Instruments: Disclosures’ requires disclosure of financial instruments measured at fair value, grouped into Levels 1
to 3 below, based on the degree to which fair value is observable:
• Level 1 fair value measurements are those derived from unadjusted quoted prices in active markets for identical assets or liabilities;
• Level 2 fair value measurements are those derived from inputs, other than quoted prices included within Level 1 above, that are observable
for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
All of the Group’s derivative financial instruments as described on page 73 (forward supply contracts) were classified as Level 2 in the current
and prior year. There were no transfers between levels in either the current or prior year.
Financial liabilities
The book value, fair value and interest rate profile of the Group’s financial liabilities were as follows:
At 31 May 2020
Financial liabilities carried at amortised cost:
Trade and other payables
Floating rate invoice discounting advances
Lease liabilities repayable within one year
Revolving credit facility
Lease liabilities repayable after one year
Total
72 NWF Group plc
Annual Report and Accounts 2020
Total book and
fair value
£m
56.6
7.2
6.4
70.2
10.0
20.3
30.3
100.5
Financial statements
21. Financial instruments and risk management continued
Financial liabilities continued
At 31 May 2019
Financial liabilities carried at amortised cost:
Trade and other payables
Floating rate invoice discounting advances
Hire purchase obligations repayable within one year
Revolving credit facility
Hire purchase obligations repayable after one year
Total
Total book and
fair value (Restated¹)
£m
66.7
10.0
0.2
76.9
3.0
—
3.0
79.9
1
£10.0 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. £7.2 million of invoice discounting advances have been recognised within current liabilities in the year ended 31 May 2020.
Financial assets
The book value, fair value and interest rate profile of the Group’s financial assets were as follows:
At 31 May 2020
Trade and other receivables
Financial assets carried at amortised cost: cash and cash equivalents
Financial assets carried at fair value: derivatives
At 31 May 2019
Trade and other receivables
Financial assets carried at amortised cost: cash and cash equivalents
Financial assets carried at fair value: derivatives
Total book and
fair value
£m
56.7
5.3
0.1
62.1
Total book and
fair value
£m
64.7
2.8
0.2
67.7
Financial risk management
The Group’s operations expose it to a variety of financial risks: price risk; interest rate risk; credit risk; and liquidity risk. Given the size of the
Group, the Directors have not established a sub-committee of the Board to monitor financial risk management, but have established policies
that are implemented and monitored by the Executive Directors.
Price risk
The Group is exposed to commodity price risk principally in respect of certain raw materials in the Feeds business and oil-related products
in the Fuels business.
The Feeds business enters into forward supply contracts in order to manage the impact of price movements on its gross margin. At 31 May 2020,
the Group had open forward supply contracts with a principal value of £26.6 million (31 May 2019: £27.1 million). The fair value of forward supply
contracts recognised on the balance sheet is £0.1 million (31 May 2019: £0.2 million).
The fair value of forward supply contracts is based on generally accepted valuation techniques using inputs from observable market data
on equivalent instruments at the balance sheet date. The contracts are settled on a gross cash basis and are classified as current assets
or liabilities, as all contractual cash flows fall due to be settled in less than one year.
The Group has not designated any of these contracts as hedging instruments during the period under review. As a result, changes in the
fair value of non-hedging forward supply contracts amounting to £Nil have been credited to the income statement in the year (2019: £Nil).
The Fuels business’ oil-related products are subject to changes in the world commodity price for crude oil. However, the relatively low
stockholding maintained and daily price monitoring systems used to determine selling prices enable the business to effectively manage
the risk of gross margin erosion. Forward supply contracts are not utilised by this business.
The extent of these risks is regularly reviewed and assessed by the Executive Directors and reported back to the Board. This process is
considered to be effective given the size and nature of the risks involved, but will be reviewed in the future should circumstances change.
NWF Group plc
nwf.co.uk
73
Financial statements
Notes to the Group financial statements continued
for the year ended 31 May 2020
21. Financial instruments and risk management continued
Financial risk management continued
Interest rate risk
The Group is exposed to interest rate risk due to its floating rate borrowings.
The Directors review the interest rate hedging policy on at least an annual basis. The Group monitors its exposure to interest rate risk primarily
through sensitivity analysis. On the basis of the Group’s analysis, it is estimated that a rise of one percentage point in interest rates on floating
rate borrowings would have reduced 2020 profit before taxation by approximately £0.3 million (2019: £0.2 million).
Credit risk
Where appropriate, relevant credit checks are performed on potential customers before sales are made. The amount of exposure to any
individual customer is controlled by means of a credit limit that is monitored regularly by management and, in the case of a financially material
value, by the Executive Directors. In addition, the Fuels business maintains credit insurance for certain higher value accounts in order to
manage the potential financial loss incurred on certain bad debts.
Liquidity risk
The Group actively maintains a mixture of medium-term and short-term debt finance, which is designed to ensure that it has access to
sufficient available funds for ongoing working capital needs as well as planned capital investment and expansion generally. The amount
of debt finance required is reviewed at least annually by the Directors.
All of the Group’s financial instruments, with the exception of certain borrowings (see note 19), have a contractual maturity of less than one year,
based on the earliest date on which the contractual cash flows are required to be settled.
Capital risk
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns to
shareholders and benefits to other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain
or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new
shares or sell assets to reduce debt.
The Group monitors capital risk on the basis of the net debt/EBITDA ratio. This ratio is calculated as net debt (excluding lease liabilities) divided
by headline operating profit before interest, depreciation and amortisation as shown below:
Borrowings (£m) (note 19)
Obligations under hire purchase agreements now recognised in lease liabilities (£m)
Less: cash at bank and in hand (£m)
Net debt (£m) (excluding lease liabilities)
Headline EBITDA (£m)
Net debt/EBITDA ratio
2020
17.2
0.4
(5.3)
12.3
18.7
0.7x
2019
13.2
—
(2.8)
10.4
14.8
0.7x
The Group has set an internal covenant limit of 2.0x net debt/EBITDA.
22. Deferred taxation
The following are the principal categories of deferred tax assets and liabilities recognised by the Group and the movements thereon during the
current and prior year:
At 1 June 2018
Debit/(credit) to income statement (note 8)
Debit to equity
Arising on intangibles on acquisition
Acquired
Prior year adjustment
At 31 May 2019
Debit/(credit) to income statement (note 8)
Credit to equity
Arising on intangibles on acquisition
Acquired
At 31 May 2020
3.6
(0.3)
—
0.1
0.1
0.2
3.7
0.7
—
0.3
0.2
4.9
The majority of the deferred taxation balance is expected to reverse after more than twelve months.
74 NWF Group plc
Annual Report and Accounts 2020
Accelerated
tax
depreciation
£m
Retirement
benefit
obligations
£m
Other
£m
(0.2)
0.2
—
—
—
(0.2)
(0.2)
(0.2)
—
—
—
(2.9)
(0.1)
0.1
—
—
—
(2.9)
—
(1.1)
—
—
(4.0)
(0.4)
Total
£m
0.5
(0.2)
0.1
0.1
0.1
—
0.6
0.5
(1.1)
0.3
0.2
0.5
Financial statements
23. Share capital
Allotted and fully paid: ordinary shares of 25p each
Balance at 1 June 2018
Issue of shares (see below)
Balance at 31 May 2019
Issue of shares (see below)
Balance at 31 May 2020
Number
of shares
‘000
48,660
90
48,750
—
48,750
Total
£m
12.2
—
12.2
—
12.2
During the year ended 31 May 2020, no shares (2019: 89,920) with an aggregate nominal value of £Nil (2019: £22,480) 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 (see the Directors’ Remuneration Report and note 24).
24. Retirement benefit schemes
Defined contribution schemes
The Group operates several defined contribution pension schemes for qualifying employees. The assets of the schemes are held separately
from those of the Group in funds under the control of trustees. The total cost charged to the income statement of £1.3 million (2019: £1.1 million)
represents the contributions payable to these schemes by the Group at the rates specified in the scheme rules.
There were no outstanding or prepaid contributions at the balance sheet date (31 May 2019: £Nil).
Defined benefit scheme
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 £19.1 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 average duration of the benefit obligation at the balance sheet date is 19 years. The defined benefit obligation includes benefits for current
employees, former employees and current pensioners. Approximately 49% of the liabilities are attributable to current and former employees
and 51% to current pensioners.
The Group expects to make total contributions of £2.8 million (including a contribution to scheme expenses) in the year ending 31 May 2021.
The scheme typically exposes the Group to actuarial risks such as investment risk, interest rate risk and longevity risk, as described below:
• Investment risk: The present value of the defined benefit scheme liability is calculated using a discount rate determined by reference to high
quality corporate bond yields. If the return on plan assets is below this rate, it will create a scheme deficit. Currently, the scheme has a
relatively balanced investment in equities, bonds, property funds and alternatives, cash and diversified growth funds. Due to the long-term
nature of scheme liabilities, the trustees of the pension fund consider it appropriate that a reasonable portion of the scheme assets should
be invested in equities, property funds and diversified growth funds to leverage the return generated by the fund.
• Interest risk: A decrease in the bond interest rate will increase the scheme liability but this will be partially offset by an increase in the return
on the scheme’s bond investments.
• Longevity risk: The present value of the defined benefit scheme liability is calculated by reference to the best estimate of the mortality of the
scheme participants both during and after their employment. An increase in the life expectancy of the scheme participants will increase the
scheme’s liability.
The principal actuarial assumptions as at the balance sheet date, used for the purposes of the actuarial valuations, were as follows:
Discount rate
Future salary increases
RPI inflation
CPI inflation
Pension increases in payment (LPI 5%)
2020
%
1.65
n/a
2.65
1.85
2.63
NWF Group plc
nwf.co.uk
2019
%
2.50
n/a
3.20
2.20
3.05
75
Financial statements
Notes to the Group financial statements continued
for the year ended 31 May 2020
24. Retirement benefit schemes continued
Defined benefit scheme continued
NWF Group Benefits Scheme continued
The mortality assumptions adopted imply the following life expectancies:
Current pensioners – male life expectancy at age 65
Future pensioners currently aged 45 – male life expectancy at age 65
2020
Years
21.6
22.9
The 2020 mortality assumptions above are based on S2PXA tables with CMI 2019 improvements and a long-term trend rate of 1.25%
(2019: S2PXA tables with CMI 2018 improvements and a long-term trend rate of 1.25%).
The amounts recognised in the balance sheet in respect of the defined benefit scheme are as follows:
Present value of defined benefit obligations
Fair value of scheme assets
Deficit in the scheme recognised as a liability in the balance sheet
Related deferred tax asset (note 22)
Net pension liability
Amounts recognised in the income statement in respect of the defined benefit scheme are as follows:
Current service cost
Past service cost
Administrative expenses
Interest on the net defined benefit liability
Total cost recognised in the income statement
2020
£m
(61.1)
40.1
(21.0)
4.0
(17.0)
2020
£m
—
0.4
0.3
0.4
1.1
2019
Years
21.5
22.8
2019
£m
(55.3)
38.0
(17.3)
2.9
(14.4)
2019
£m
0.1
0.3
0.3
0.4
1.1
Past service costs of £1.1 million are shown net of a £0.7 million reimbursement settlement recognised within the income statement. The
reimbursement settlement was received on 4 June 2020 and is therefore recognised as a reimbursement asset within prepayments and
accrued income as at 31 May 2020.
Gains and losses arising from the remeasurement of the net defined benefit liability have been reported in the statement of comprehensive
income, as shown below:
Actuarial gain on plan assets
Actuarial loss arising from changes in financial assumptions
Remeasurement loss
Changes in the present value of the defined benefit obligation are as follows:
At 1 June
Current service cost
Interest cost
Remeasurement losses:
– actuarial losses arising from changes in financial and demographic assumptions
Benefits paid
Past service cost
At 31 May
76 NWF Group plc
Annual Report and Accounts 2020
2020
£m
1.5
(5.5)
(4.0)
2020
£m
55.3
—
1.3
5.5
(2.1)
1.1
61.1
2019
£m
0.9
(2.1)
(1.2)
2019
£m
53.4
0.1
1.4
2.1
(2.0)
0.3
55.3
Financial statements
24. Retirement benefit schemes continued
Defined benefit scheme continued
NWF Group Benefits Scheme continued
Changes in the fair value of scheme assets are as follows:
At 1 June
Interest income
Remeasurement gains:
– actuarial gains on plan assets
Contributions by employer
Expenses
Benefits paid
At 31 May
The major categories and fair values of scheme assets at the balance sheet date are as follows:
Equities
Equity-linked bonds
Bond funds
Credit fund
Property fund
Diversified growth fund
Cash
Annuity policies
Total
2020
£m
38.0
0.9
1.5
2.1
(0.3)
(2.1)
40.1
2019
£m
36.3
1.0
0.9
2.1
(0.3)
(2.0)
38.0
Fair value of assets
2020
£m
—
8.6
7.9
6.6
0.1
16.3
0.2
0.4
40.1
2019
£m
7.9
—
7.1
7.9
0.1
13.0
1.6
0.4
38.0
None of the fair values of the assets shown above include any of the Group’s own financial instruments or any property used by the Group
at the balance sheet date.
The actual return on scheme assets was a gain of £2.4 million (2019: £1.9 million gain).
Asset-liability matching reviews of the NWF Group Benefits Scheme are performed regularly. The results of reviews are used to assist the
trustees and the Group to determine the optimal long-term asset allocation with regard to the structure of the liabilities of the scheme.
They are also used to assist the trustees in managing the underlying volatility inherent in investment performance and the risk of a significant
increase in the scheme deficit, by providing information used to determine the scheme’s investment strategy.
The main strategic choices that are formulated in an actuarial and technical policy document of the fund are described below:
• asset mix is based on 40% diversified growth fund, 22% equity investments, 15% credit funds, 21% liability-driven investment (‘LDI’) funds and
2% property funds and alternative assets;
• it is the policy of the fund to cover its exposure to the interest rate risk of the defined benefit liability by the use of LDI funds. LDI funds are
derivative-based investments that give leveraged exposures to the bond markets;
• inflation risk is mitigated by the use of LDI funds. LDI funds are derivative-based investments that give leveraged exposures to the bond markets;
• the fund does not have a material foreign exchange exposure and does not, therefore, use foreign exchange derivatives to hedge its foreign
exchange risk;
• active management is within the diversified growth fund, bond investments, property funds and equity-linked investments; and
• there are 17 pensioner members with annuity policies held in the name of the pension scheme trustee. The arrangements are held with Aviva
plc and Scottish Widows Limited. These policies fully match the pension obligations of those pensioners insured and are therefore set equal
to the present value of the related obligations.
Virtually all equity and bonds have quoted prices in active markets.
There has been no change in the processes used by the Group to manage its risks from the prior year.
NWF Group plc
nwf.co.uk
77
Financial statements
Notes to the Group financial statements continued
for the year ended 31 May 2020
24. Retirement benefit schemes continued
Defined benefit scheme continued
NWF Group Benefits Scheme continued
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.
Impact on defined benefit obligation
0.25% change in discount rate
0.25% change in RPI inflation
One year change in the life expectancy at age 65
Increase
£m
Decrease
£m
(2.7)
2.1
2.6
2.7
(2.1)
(2.6)
25. Share-based payments
In the year ended 31 May 2020, the Group operated one (2019: one) equity-settled share-based payment plan as described below.
The Group recognised total expenses of £1.2 million in respect of equity-settled share-based payment transactions in the year ended 31 May 2020
(2019: £0.1 million).
Long-term Incentive Plan (‘the Plan’)
The Group operates a Performance Share Plan for senior executives, further details of which can be found in the Directors’ Remuneration
Report in the Group financial statements. Under the Plan, the Group has made awards of conditional shares, which have yet to be exercised,
to certain Directors on 1 August 2017 (vesting date: August 2020) and 1 August 2018 (vesting date: August 2021) and 1 August 2019 (vesting date:
August 2022). The vesting of these conditional share awards is subject to the Group achieving absolute earnings per share targets.
Details of the maximum total number of ordinary shares, which may be issued in future periods in respect of conditional share awards
outstanding at 31 May 2020, 31 May 2019, 31 May 2018 and 31 May 2017, are as shown below.
At 1 June
Granted in the year
Exercised in the year
Lapsed/forfeited in the year
At 31 May
2020
Number of
conditional
shares
1,216,945
529,080
—
(304,421)
1,441,604
2019
Number of
conditional
shares
1,096,487
434,178
(169,660)
(144,060)
1,216,945
2018
Number of
conditional
shares
867,014
478,347
—
(248,874)
1,096,487
2017
Number of
conditional
shares
1,164,392
304,421
(219,130)
(382,669)
867,014
The estimate of the fair value of the services received in return for the conditional share awards is measured based on a Black Scholes model.
The aggregate of the estimated fair values of the awards at 31 May 2020 shown above is £2.2 million (31 May 2019: £1.9 million), before taking
into account the likelihood of achieving non-market-based performance conditions.
For awards granted in the current and prior years, the inputs into the Black Scholes model are as follows:
Share price at grant date
Black Scholes fair value
Exercise price
Expected volatility
Expected life
Expected dividend yield
Risk-free interest rate
2020
£1.66
£1.49
£Nil
25.13%
2.84 years
3.91%
0.38%
2019
£1.97
£1.72
£Nil
23.48%
2.83 years
3.61%
0.85%
2018
£1.48
£1.32
£Nil
21.42%
2.83 years
3.89%
0.27%
2017
£1.73
£1.56
£Nil
20.99%
2.81 years
3.47%
0.03%
Expected volatility was determined by calculating the historical volatility of the Group’s share price over the previous three years. The expected
life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and
behavioural considerations.
78 NWF Group plc
Annual Report and Accounts 2020
Financial statements
26. Net cash generated from operating activities
Operating profit
Adjustments for:
Depreciation of property, plant and equipment
Depreciation of right of use assets
Amortisation of other intangible assets
Profit on disposal of fixed assets
Fair value loss on financial derivative
Share-based payment expense
Contribution to pension scheme not recognised in income statement
Operating cash flows before movements in working capital and provisions
Movements in working capital:
Decrease in inventories
Decrease/(increase) in receivables
Decrease in payables
Utilisation of provision
Net cash generated from operations
Interest paid
Income tax paid
Net cash generated from operating activities
27. Analysis of cash and cash equivalents and reconciliation to net debt
Cash and cash equivalents (note 17)
Borrowings (note 19)
Hire purchase obligations¹
Total Group (excluding lease liabilities)
Lease liabilities (excluding hire purchase obligations transferred)
Total Group (including lease liabilities)
2020
£m
13.5
4.1
5.8
0.6
(0.2)
0.1
1.2
(1.3)
23.8
1.9
20.2
(20.4)
—
25.5
(1.1)
(2.7)
21.7
1 June
2019
£m
2.8
(13.0)
(0.2)
(10.4)
—
(10.4)
Cash
flow
£m
IFRS16
conversion
£m
Other
non-cash
movements
£m
2.5
(1.6)
0.4
1.3
5.2
6.5
—
—
—
—
(16.2)
(16.2)
—
(2.6)
(0.6)
(3.2)
(15.3)
(18.5)
2019
£m
9.6
3.9
—
0.8
(0.1)
—
—
(1.4)
12.8
0.3
(0.9)
(3.3)
(0.1)
8.8
(0.5)
(1.9)
6.4
31 May
2020
£m
5.3
(17.2)
(0.4)
(12.3)
(26.3)
(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.
28. Operating lease commitments
At the balance sheet date, the Group has commitments for future minimum lease payments under non-cancellable operating leases, which fall
due as follows:
Within one year
Between one and five years inclusive
After more than five years
Land and
buildings
2020
£m
Land and
buildings
2019
£m
—
—
—
—
0.2
0.4
0.6
1.2
Other
2020
£m
—
—
—
—
Other
2019
£m
5.6
16.5
0.9
23.0
Following the adoption of IFRS 16 at 1 June 2019, operating lease commitments have been recognised as lease liabilities, and as such, minimum
lease payments are disclosed within note 20.
NWF Group plc
nwf.co.uk
79
Financial statements
Notes to the Group financial statements continued
for the year ended 31 May 2020
29. Related party transactions
Key management compensation
The remuneration of key management personnel of the Group, who are the Executive and Non-Executive Directors of the Company, the
Executive Directors of its subsidiaries and certain key managers of the Group, is set out below in aggregate for each of the categories specified
in IAS 24 ‘Related Party Disclosures’:
Short-term employee benefits (salary and bonus)
Post-employment benefits
Share-based payments
2020
£m
3.8
0.3
0.8
4.9
2019
£m
3.6
0.3
—
3.9
Further information on remuneration of Directors can be found in the Directors’ Remuneration Report.
Directors’ transactions
T P Acton purchased, in the normal course of business and under normal terms and conditions, goods to the value of £1,693 as a customer of
the Group in the year ended 31 May 2020 (31 May 2019: £2,655). At 31 May 2020, the amount outstanding was £Nil (31 May 2019: £Nil). During the
year, the highest amount outstanding totalled £724 (2019: £904).
R A Whiting purchased, in the normal course of business and under normal terms and conditions, goods to the value of £2,277 as a customer
of the Group in the year ended 31 May 2020 (2019: £2,104). At 31 May 2020, the amount outstanding was a credit balance of £345 (31 May 2019:
£641 credit). During the year, the balance remained in credit (2019: the balance remained in credit).
S R Andrew purchased, in the normal course of business and under normal terms and conditions, goods to the value of £1,230 as a customer
of the Group in the year ended 31 May 2020 (2019: £1,573). At 31 May 2020, the amount outstanding was £310 (31 May 2019: £345). During the year,
the highest amount outstanding totalled £540 (2019: £575).
30. Commitments for capital expenditure
Authorised and contracted but not provided for
2020
£m
6.6
2019
£m
0.1
31. Contingent liabilities
The Group’s bank facilities are provided under an arrangement with The NatWest Group. The Group has pledged security in favour of the bank
over certain freehold land and buildings with a carrying value at 31 May 2020 of £22.0 million (31 May 2019: £22.6 million). Unscheduled mortgage
debentures have also been provided by the Company and certain subsidiaries to the bank which incorporate a fixed charge over trade
receivables and floating charges over all other assets.
The Group has an arrangement with the bank under which cash balances are offset against borrowings. The Company has given a guarantee in
respect of the net bank borrowings within the Group under this arrangement amounting to £17.2 million at 31 May 2020 (31 May 2019: £13.0 million).
The Group has a bank guarantee agreement with The NatWest Group, under which the bank provides a facility which allows the Group to
request that the bank issues guarantees to third party suppliers for general business purposes. The maximum total facility value is £4.0 million
but this was not utilised in the current or prior year.
The Company and certain subsidiaries have granted a fixed and floating charge in favour of the trustees of a defined benefit pension scheme
(‘the NWF Group Benefits Scheme’). This security, which is subordinated to the bank, creates a fixed charge over certain freehold land and
buildings, subject to a maximum value of £5.0 million (31 May 2019: £5.0 million), and a floating charge over all other assets.
The Company has also given certain guarantees to third parties in respect of operating lease and supply agreement commitments due from
various subsidiary companies.
No loss is expected to result from these arrangements.
Under Section 479A of the Companies Act 2006, exemption from an audit of the financial statements for the financial year ended 31 May 2020
has been taken by Midland Fuel Oil Supplies Limited (02299179) and Caldo Fuel Oil Limited (0312715). As required, the Company guarantees all
outstanding liabilities to which the subsidiary companies listed above are subject at the end of the financial year, until they are satisfied in full
and the guarantee is enforceable against the parent undertaking by any person to whom the subsidiary companies listed above is liable in
respect of those liabilities.
80 NWF Group plc
Annual Report and Accounts 2020
Financial statements
32. Changes in accounting standards
IFRS 16 ‘Leases’
The Group has adopted this new standard from 1 June 2019, applying the simplified transition approach with the cumulative effect of initially
applying this standard as an adjustment to the opening balance of retained earnings as at 1 June 2019. The comparative information for the
year ended 31 May 2019 has not been restated and is presented as previously reported, under IAS 17.
For the Group, this results in the recognition of almost all leases on the balance sheet as a right of use asset, with a corresponding lease
liability, as from a lessee perspective the distinction between operating and finance leases is removed.
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 (£Nil) 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 £16.2 million and an increase
in net liabilities of £16.2 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):
Properties
Vehicles
NBV of assets previously held under finance leases
Total right of use assets
Properties
Vehicles
Leases previously held under finance leases
Total lease liabilities
£m
1.0
15.2
0.4
16.6
1.0
15.2
0.2
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:
Undiscounted future minimum lease payments under operating leases at 31 May 2019
Impact of discounting
Add: finance lease liabilities recognised at 31 May 2019
Lease liabilities recognised at 1 June 2019
Of which are:
Current lease liabilities
Non-current lease liabilities
Lease liabilities recognised at 1 June 2019
£m
24.2
(8.0)
0.2
16.4
2.0
14.4
16.4
NWF Group plc
nwf.co.uk
81
Financial statements Notes to the Group financial statements continued
for the year ended 31 May 2020
32. Changes in accounting standards continued
IFRS 16 ‘Leases’ continued
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 £0.2 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 £0.2 million with the inclusion of £0.4 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.
Operating lease costs under IAS 17
Less: depreciation on right of use assets recognised under IFRS 16
Impact on operating profit for the year ended 31 May 2020
Less: finance costs associated with lease liabilities under IFRS 16
Impact on profit before taxation for the year ended 31 May 2020
During the year ended 31 May 2020, the movement on the right of use asset and lease liabilities was as follows:
Right of use assets
Opening net book value
NBV of assets held under finance leases at 31 May 2019
New leases recognised
Depreciation
Closing net book value
Lease liabilities
Opening liabilities
Finance lease liabilities recognised at 31 May 2019
New leases recognised
Lease payments
Finance cost
Closing net book value
£m
6.0
(5.8)
0.2
(0.4)
(0.2)
£m
16.2
0.4
16.5
(5.8)
27.3
16.2
0.2
15.9
(6.0)
0.4
26.7
82 NWF Group plc
Annual Report and Accounts 2020
Financial statements Parent Company balance sheet
as at 31 May 2020
Non-current assets
Property, plant and equipment
Investment property
Investments
Finance lease receivables
Reimbursement asset
Deferred tax asset
Current assets
Trade and other receivables
Finance lease receivables
Cash and cash equivalents
Current liabilities
Trade and other payables
Lease liabilities
Net current assets
Total assets less current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Deferred income tax liabilities
Retirement benefit obligations
Net assets
Capital and reserves
Share capital
Share premium
Retained earnings
Total shareholders’ funds
Note
3
4
5
8
6
7
8
9
10
10
6
11
2020
£m
0.4
23.1
15.3
5.6
0.3
4.2
48.9
10.6
1.0
7.3
18.9
(4.0)
(0.5)
14.4
63.3
(10.0)
(6.3)
(2.6)
(21.0)
23.4
12.2
0.9
10.3
23.4
2019
£m
0.2
22.7
15.3
—
—
3.1
41.3
10.9
—
0.1
11.0
(4.5)
—
6.5
47.8
(3.0)
—
(2.6)
(17.3)
24.9
12.2
0.9
11.8
24.9
The Company’s profit for the year was £3.6 million including dividends received (2019: £9.1 million).
The Parent Company financial statements on pages 83 and 84 were approved by the Board of Directors on 4 August 2020 and were signed on its
behalf by:
R A Whiting
Director
C J Belsham
Director
The notes on pages 85 to 93 form part of these Parent Company financial statements.
NWF Group plc
nwf.co.uk
83
Financial statements
Parent Company statement of comprehensive income
for the year ended 31 May 2020
Profit for the year attributable to equity shareholders
Items that will never be reclassified to profit or loss:
Actuarial loss on defined benefit pension scheme
Tax on items that will never be reclassified to profit or loss
Total other comprehensive expense
Total comprehensive income for the year
The notes on pages 85 to 93 form part of these Parent Company financial statements.
Parent Company statement of changes in equity
for the year ended 31 May 2020
Note
6
2020
£m
3.6
(4.0)
1.1
(2.9)
0.7
2019
£m
9.1
(1.2)
0.2
(1.0)
8.1
Called up
share
capital
£m
Share
premium
account
£m
Retained
earnings
£m
Total
shareholders’
funds
£m
12.2
0.9
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
12.2
0.9
—
—
—
—
—
—
—
—
—
—
—
—
—
—
12.2
0.9
7.1
9.1
(1.2)
0.2
8.1
(3.1)
—
(0.1)
0.1
(0.3)
(3.4)
11.8
3.6
20.2
9.1
(1.2)
0.2
8.1
(3.1)
—
(0.1)
0.1
(0.3)
(3.4)
24.9
3.6
(4.0)
(4.0)
1.1
0.7
(3.2)
1.0
(2.2)
10.3
1.1
0.7
(3.2)
1.0
(2.2)
23.4
Balance at 1 June 2018
Profit for the year
Items that will never be reclassified to profit or loss:
Actuarial loss on defined benefit pension scheme
Tax on items that will never be reclassified to profit or loss
Total comprehensive income for the year
Transactions with owners:
Dividends paid
Issue of shares
Value of employee services
Credit to equity for equity-settled share-based payments
Discounting of intercompany loan receivable
Total transactions with owners
Balance at 31 May 2019
Profit for the year
Items that will never be reclassified to profit or loss:
Actuarial loss on defined benefit pension scheme
Tax on items that will never be reclassified to profit or loss
Total comprehensive income for the year
Transactions with owners:
Dividends paid
Credit to equity for equity-settled share-based payments
Total transactions with owners
Balance at 31 May 2020
The notes on pages 85 to 93 form part of these Parent Company financial statements.
84 NWF Group plc
Annual Report and Accounts 2020
Financial statements
Notes to the Parent Company financial statements
for the year ended 31 May 2020
1. Significant accounting policies
Basis of preparation
The separate financial statements of the Company have been prepared in accordance with Financial Reporting Standard 101 ‘Reduced
Disclosure Framework’ (‘FRS 101’), on the going concern basis and under the historical cost convention, and in accordance with the Companies
Act 2006 (as applicable to companies using FRS 101) and applicable accounting standards in the UK. Effective 1 June 2014 the Company
transitioned from previously applicable UK Generally Accepted Accounting Principles to FRS 101. The principal accounting policies, which
have been applied consistently to all the years presented, are set out below.
These financial statements and accompanying notes have been prepared in accordance with the reduced disclosure framework for all years presented.
The following exemptions from the requirements of IFRS have been applied in the preparation of these financial statements, in accordance with FRS 101:
• the following paragraphs of IAS 1 ‘Presentation of Financial Statements’:
• 10(d) (statement of cash flows);
• 16 (statement of compliance with all IFRS);
• 11 (cash flow statement information); and
• 134 – 136 (capital management disclosures);
• IFRS 7 ‘Financial Instruments: Disclosures’;
• IAS 7 ‘Statement of Cash Flows’;
• IAS 24 (paragraphs 17 and 18a) ‘Related Party Disclosures’ (key management compensation); and
• IAS 24 ‘Related Party Disclosures’ – the requirement to disclose related party transactions between two or more members of a group.
As the Group financial statements include the equivalent disclosures, the Company has taken the exemptions available under FRS 101
in respect of the following disclosures:
• IFRS 2 ‘Share-based Payments’ in respect of Group equity-settled share-based payments; and
• certain disclosures required by IFRS 13 ‘Fair Value Measurement’ and disclosures required by IFRS 7 ‘Financial Instruments: Disclosures’.
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 Company 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 Company’s results or net assets.
Standard or interpretation
Content
IFRIC 23
Amendment to IFRS 3
Amendment to IAS 12
Amendment to IAS 23
Amendment to IAS 19
Amendment to IFRS 9
IFRS 16
Uncertainty over Income Tax Treatments
Business Combinations
Income Taxes
Borrowing Costs
Employee Benefits
Financial Instruments
Leases
Applicable for financial year
beginning on
1 June 2019
1 June 2019
1 June 2019
1 June 2019
1 June 2019
1 June 2019
1 June 2019
The following standards, amendments and interpretations are not yet effective and have not been adopted early by the Company:
Standard or interpretation
Content
Amendment to IFRS 3
Business Combinations
Applicable for financial year
beginning on
1 June 2020
None of these standards and interpretations are expected to have a material effect on the Company’s results or net assets.
Parent Company profit and loss account
The Company has not presented its own profit and loss account as permitted by Section 408 of the Companies Act 2006. The Company’s profit
for the year was £3.6 million including dividends received (2019: £9.1 million). The profit for the year is shown in the statement of changes in
equity and on the face of the balance sheet. There are no material differences between the profit for the year in the current and prior year and
its historical cost equivalent. Accordingly, no note of historical cost profits and losses has been presented.
Going concern
Based on financial performance to date and forecasts along with the available banking facilities, there is a reasonable expectation that the
Company has adequate resources to continue in operational existence for the foreseeable future.
The Board has prepared cash flow forecasts for the period to 31 May 2022. Under this base case scenario, the Company 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 Company would still expect to have sufficient headroom in its financing facilities.
The Company therefore continues to adopt the going concern basis of accounting in preparing the annual financial statements.
NWF Group plc
nwf.co.uk
85
Financial statements Notes to the Parent Company financial statements continued
for the year ended 31 May 2020
1. Significant accounting policies continued
Dividend distribution
The distribution of a dividend to the Company’s shareholders is recognised as a liability in the Company’s financial statements in the period
in which it is approved by the Company’s shareholders (please refer to note 9 of the Group financial statements).
Property, plant and equipment
Property, plant and equipment are stated at cost. Cost includes the original purchase price of the asset and the costs attributable to bringing
the asset to its working condition for its intended use. Depreciation is calculated to write off the cost of property, plant and equipment over
their useful economic life on a straight-line basis as follows:
Plant and machinery 3 – 10 years
Assets under construction are not depreciated until they are put into use.
Borrowing costs that are directly attributable to the construction of qualifying assets are capitalised.
Investment properties
Owner-occupied land and buildings owned by the Company and which are rented to subsidiary companies are treated as investment properties in
accordance with IAS 40 ‘Investment Property’. Investment properties are valued using the cost model. Investment properties are stated at cost,
which includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use.
Depreciation is calculated to write off the cost of the investment property over its useful economic life on a straight-line basis over 10 – 50 years.
Investment in subsidiary undertakings
Investments in Group undertakings are stated at cost, unless their value has been impaired in which case they are valued at the lower of their
realisable value or value in use.
Finance lease receivables and lease liabilities
The Company holds the head lease on a property which is occupied by a subsidiary company under a sub-lease arrangement. The Company
recognises both a finance lease receivable and a lease liability in respect of this arrangement.
The finance lease receivable is measured initially at the amount of the net investment in the lease, which is the gross investment in the lease
discounted using the implicit interest rate in the lease, in accordance with IFRS 16. The gross investment in the lease is the aggregate of the
lease payments receivable. Each lease payment received is allocated between the receivable and finance income. The finance income is
credited to the income statement over the lease period so as to produce a constant periodic recognition of interest on the remaining balance
of the asset for each period.
At the inception of a contract, the Company performs an assessment to determine whether the contract is, or contains, a lease. Key aspects of
this determination are the specific identification of an asset that is subject to the lease, and that the lease conveys the right to direct and
control the use of the identified asset for a period of time.
Where a contract is determined to contain a lease, the lease liability is recognised from the commencement date of the lease, the
commencement date being defined as the date at which the lessor makes the underlying asset available for use. The lease liability is
recognised at an amount equal to the present value of the future lease payments during the lease term.
Lease payments are discounted using the Company’s incremental borrowing rate, which is 2%.
Deferred taxation
Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where
transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the
balance sheet date.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and
are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are regarded as recoverable and recognised in the financial statements when, on the basis of available evidence,
it is more likely than not that there will be suitable taxable profits from which the future reversal of the timing differences can be deducted.
The recoverability of tax losses is assessed by reference to forecasts which have been prepared and approved by the Board. The deferred tax
assets and liabilities are not discounted.
Provisions
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an
outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for
future operating losses.
86 NWF Group plc
Annual Report and Accounts 2020
Financial statements 1. Significant accounting policies continued
Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method,
less provision for impairment. Under IFRS 9, effective from 1 June 2018, the Group elected to use the simplified approach to measure the
loss allowance at an amount equal to lifetime expected credit losses for trade receivables. Under the new accounting standard, the Group
continues to establish a provision for impairment of trade receivables when there is objective evidence that the Group will not be able to
collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the counterparty, probability that
the counterparty will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the
trade receivable is impaired. In addition, IFRS 9 requires the Group to consider forward-looking information and the probability of default when
calculating expected credit losses. The measurement of expected credit losses reflects an unbiased and probability weighted amount that is
determined by evaluating the range of possible outcomes as well as incorporating the time value of money. 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. The amount of the provision is the difference between the carrying amount and the present value of
estimated future cash flows of the asset, discounted, where material, at the original effective interest rate. The carrying amount of the asset
is reduced through the use of a provision for receivables impairment, and the amount of the loss is recognised in the income statement
within administrative expenses. When a trade receivable is uncollectable, it is written off against the provision for receivables impairment.
Subsequent recoveries of amounts previously written off are credited against administrative expenses in the income statement.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks and bank overdrafts. Bank overdrafts are shown within
borrowings in current liabilities on the balance sheet.
Trade and other payables
Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Retirement benefit costs
The Company operates various pension schemes, including defined contribution and defined benefit schemes.
Defined contribution schemes
For defined contribution schemes, the Group pays contributions to publicly or privately administered pension insurance schemes on a
mandatory, contractual or voluntary basis. The contributions are recognised as an employee benefit expense in the income statement when
they are due. The assets of the schemes are held separately from those of the Group in funds under the control of trustees.
Defined benefit scheme
The Company is the sponsoring employer in a funded Group-operated defined benefit pension scheme, the NWF Group Benefits Scheme,
and has therefore recognised the defined liability, in full, on the Company balance sheet.
The liability recognised in the balance sheet in respect of defined benefit schemes is the present value of the defined benefit obligation at the
balance sheet date less the fair value of scheme assets, together with adjustments for unrecognised actuarial gains or losses and past service
costs. The defined benefit obligation is calculated annually by independent actuaries using the Projected Unit Credit Method. The present value
of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high quality corporate
bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the
related pension liability.
The net pension finance cost is determined by applying the discount rate, used to measure the defined benefit pension obligation at the
beginning of the accounting period, to the net pension obligation at the beginning of the accounting period taking into account any changes
in the net pension obligation during the period as a result of cash contributions and benefit payments.
Pension scheme expenses are charged to the income statement within administrative expenses.
Actuarial gains and losses are recognised immediately in the statement of comprehensive income. Net defined benefit pension scheme
deficits before tax relief are presented separately on the balance sheet within non-current liabilities. The attributable deferred income tax
asset is included within the deferred income tax asset in the balance sheet and is subject to the recognition criteria as set out in the accounting
policy on deferred income tax.
Share-based payments
In the year ended 31 May 2020, the Company operated one (2019: one) equity-settled share-based payment plan. Equity-settled share-based
payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant.
The fair value determined at the grant date of equity-settled share-based payments issued to the Company’s employees is expensed on a
straight-line basis over the vesting period, based on the Company’s estimate of shares that will eventually vest and adjusted for the effect
of non-market-based vesting conditions.
The fair value determined at the grant date of equity-settled share-based payments issued to employees of subsidiary undertakings is
recognised as an addition to the cost of investment in subsidiary undertakings on a straight-line basis over the vesting period, based on the
Company’s estimate of shares that will eventually vest and adjusted for the effect of non-market-based vesting conditions.
Fair value is measured by the use of a Black Scholes model. The expected life used in the model has been adjusted, based on management’s
best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
Employer social security contributions payable in connection with the grant of share awards are considered an integral part of the grant itself
and the charge is treated as a cash-settled transaction.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction,
net of tax, from the proceeds of issue.
NWF Group plc
nwf.co.uk
87
Financial statements Notes to the Parent Company financial statements continued
for the year ended 31 May 2020
1. Significant accounting policies continued
Critical accounting estimates
With the exception of ‘Valuation of acquired intangibles’, the critical accounting estimates set out in the Group financial statements also
apply to the Company.
2. Remuneration of Directors and auditors
Details of Directors’ remuneration are shown in the Directors’ Remuneration Report on page 38. Details of auditors’ remuneration are shown
in note 5 of the Group financial statements.
3. Property, plant and equipment
Cost
At 1 June 2019
Additions
At 31 May 2020
Accumulated depreciation
At 1 June 2019
Charge for the year
At 31 May 2020
Carrying amount
At 31 May 2020
At 31 May 2019
4. Investment property
Cost
At 1 June 2019
Additions
At 31 May 2020
Accumulated depreciation
At 1 June 2019
Charge for the year
At 31 May 2020
Carrying amount
At 31 May 2020
At 31 May 2019
Plant and
machinery
£m
0.7
0.2
0.9
0.5
—
0.5
0.4
0.2
Investment
property
£m
33.0
1.1
34.1
10.3
0.7
11.0
23.1
22.7
Total
£m
0.7
0.2
0.9
0.5
—
0.5
0.4
0.2
Total
£m
33.0
1.1
34.1
10.3
0.7
11.0
23.1
22.7
The fair value of the investment property at 31 May 2020 was £33.9 million (31 May 2019: £30.4 million). The valuation is based on a market
valuation by an independent RICS valuer with recent experience in the location and category of the asset being valued. Rental income of
£2.7 million (2019: £2.7 million) and direct operating expenses of £2.2 million (2019: £2.0 million) arising from investment property have been
recognised in the income statement.
5. Investments
Cost and carrying amount
At 1 June 2019
At 31 May 2020
88 NWF Group plc
Annual Report and Accounts 2020
£m
15.3
15.3
Financial statements
5. Investments continued
The Directors believe that the carrying value of the investments is supported by their underlying net assets.
The Company directly owns the whole of the issued ordinary shares of the following subsidiary undertakings:
Company
NWF Agriculture Holdings Limited
NWF Distribution Holdings Limited
NWF Fuels Holdings Limited
Home Counties Fuels Limited
Dragon Petroleum Limited
Lincolnshire Fuels Limited
North Western Farmers Limited
NWF Limited
Business activity
Holding company – Feeds operations
Holding company – Food operations
Holding company – Fuels operations
Dormant
Dormant
Dormant
Dormant
Dormant
All of the above companies are registered and operate in England and Wales. The registered office for all directly owned subsidiary
undertakings is Wardle, Nantwich, Cheshire CW5 6BP.
The Company also indirectly owns all of the issued ordinary shares of the following subsidiary undertakings:
Company
NWF Agriculture Limited
New Breed (UK) Limited
Boughey Distribution Limited
NWF Fuels Limited
Consols Oils Limited
Caldo Fuel Oil Limited (formerly Figaro Number Two Limited)
David Hermon Hodge Group Limited
David Hermon Hodge Limited
Hermon Hodge Limited
Preston Fuels Limited
Ron Darch & Sons Co Limited
Midland Fuel Oil Supplies Limited
S.C. Feeds Limited
Jim Peet (Agriculture) Limited
Staffordshire Fuels Limited
Evesons Fuels Limited
Swan Petroleum Limited
Evesons (Worcestershire) Limited
Nutrition Express Limited
Browns of Burwell Limited
Broadland Fuels Limited
Martlet Fuels Limited
J G W Thomas & Son Limited
Fuel Oil Supply Co Limited
Knutsford Domestic Fuel Oil Company Limited
Figaro Number One Limited
Business activity
Supplier of animal feedstuffs and seeds
Supplier of animal feedstuffs and seeds
Warehousing and food distribution
Fuel distribution
Fuel distribution
Fuel distribution
Fuel distribution
Fuel distribution
Fuel distribution
Fuel distribution
Fuel distribution
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
All of the above companies are registered and operate in England and Wales. The registered office for all indirectly owned subsidiary
undertakings is Wardle, Nantwich, Cheshire CW5 6BP.
Under Section 479A of the Companies Act 2006, exemption from an audit of the financial statements for the financial year ended 31 May 2020 has
been taken by Midland Fuel Oil Supplies Limited (02299179) and Caldo Fuel Oil Limited (0312715). As required, the Company guarantees all outstanding
liabilities to which the subsidiary companies listed above are subject at the end of the financial year, until they are satisfied in full and the guarantee
is enforceable against the parent undertaking by any person to whom the subsidiary companies listed above is liable in respect of those liabilities.
NWF Group plc
nwf.co.uk
89
Financial statements Notes to the Parent Company financial statements continued
for the year ended 31 May 2020
6. Deferred taxation
The following are the principal categories of deferred tax assets and liabilities recognised by the Company and the movements thereon:
At 1 June 2019
Credit to equity
At 31 May 2020
7. Trade and other receivables
Amounts owed by Group undertakings
Prepayments and accrued income
Corporation tax recoverable
VAT recoverable
Accelerated
tax
depreciation
£m
Retirement
benefit
obligations
£m
2.6
—
2.6
(3.1)
(1.1)
(4.2)
2020
£m
7.5
1.1
1.9
0.1
10.6
Total
£m
(0.5)
(1.1)
(1.6)
2019
£m
9.5
0.4
0.9
0.1
10.9
All of the amounts owed by Group undertakings shown above are repayable on demand. Interest has been charged on these Group loans in the
year at 2.0% (2019: 2.0%) per annum. A provision of £0.2 million (2019: £0.3 million) against amounts owed by Group undertakings has been
recognised in accordance with IFRS 9.
8. Finance lease receivables
Finance lease receivables are comprised of the following balance sheet amounts:
Current
Amounts receivable within one year
Non-current
Amounts receivable after more than one year
Total
Lease receivables are as follows:
Not more than one year
Minimum lease receivables
Interest element
Present value of minimum lease receivables
Between one and five years
Minimum lease receivables
Interest element
Present value of minimum lease receivables
More than five years
Minimum lease receivables
Interest element
Present value of minimum lease receivables
90 NWF Group plc
Annual Report and Accounts 2020
2020
£m
2019
£m
1.0
5.6
6.6
2020
£m
1.2
(0.2)
1.0
5.1
(0.5)
4.6
1.0
—
1.0
—
—
—
2019
£m
—
—
—
—
—
—
—
—
—
Financial statements
9. Trade and other payables
Trade payables
Amounts owed to Group undertakings
Accruals and deferred income
Other taxation and social security
2020
£m
0.3
0.6
3.0
0.1
4.0
2019
£m
0.5
1.8
2.1
0.1
4.5
The Group has a net bank overdraft facility amounting to £1.0 million, none of which has been utilised by the Company at 31 May 2020
(31 May 2019: £1.0 million). This facility is secured by way of unscheduled mortgage debentures provided by the Company and certain subsidiaries
within the Group to The NatWest Group which incorporate a fixed charge over trade receivables and floating charges over all their other assets.
All of the amounts owed to Group undertakings shown above are repayable on demand. Included in these amounts is £0.6 million (31 May 2019:
£1.8 million) which represents loans from Group undertakings. Interest has been charged on these Group loans in the year at 2.0% (2019: 2.0%)
per annum. Any remaining amounts are non-interest-bearing trade balances.
10. Lease liabilities
Cost
At 31 May 2019
Recognition of lease liability under IFRS 16
Opening lease liabilities recognised at 1 June 2019
Additions
Lease liability payments (including finance costs)
Finance costs
At 31 May 2020
Lease liabilities are comprised of the following balance sheet amounts:
Current
Amounts due within one year
Non-current
Amounts due after more than one year
Total
Lease liabilities are as follows:
Not more than one year
Minimum lease payments
Interest element
Present value of minimum lease payments
Between one and five years
Minimum lease payments
Interest element
Present value of minimum lease payments
More than five years
Minimum lease payments
Interest element
Present value of minimum lease payments
Property
£m
Total
£m
—
—
—
6.9
(0.1)
—
6.8
2020
£m
0.5
6.3
6.8
2020
£m
0.6
(0.1)
0.5
5.5
(0.3)
5.2
1.1
—
1.1
—
—
—
6.9
(0.1)
—
6.8
2019
£m
—
—
—
2019
£m
—
—
—
—
—
—
—
—
—
NWF Group plc
nwf.co.uk
91
Financial statements
Total
£m
12.2
—
12.2
—
12.2
2019
£m
1.6
0.2
0.1
0.1
2.0
Notes to the Parent Company financial statements continued
for the year ended 31 May 2020
11. Called up share capital
Authorised: ordinary shares of 25p each
Balance at 1 June 2018, 31 May 2019 and 31 May 2020
Allotted and fully paid: ordinary shares of 25p each
Balance at 1 June 2018
Issue of shares
Balance at 31 May 2019
Issue of shares
Balance at 31 May 2020
Number
of shares
‘000
Total
£m
80,000
20.0
Number
of shares
‘000
48,660
90
48,750
—
48,750
During the year ended 31 May 2020, no shares (2019: 89,920) with an aggregate nominal value of £Nil (2019: £22,480) were issued under the
Group’s conditional Performance Share Plan and SAYE share option scheme.
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 (see the Directors’ Remuneration Report and note 25 of the Group financial statements).
12. Employee benefit expense
Wages and salaries
Social security costs
Share-based payments
Other pension costs
2020
£m
1.8
0.2
1.1
0.1
3.2
The average monthly number of persons (including Directors) employed in the Company during the year was 15 (2019: 14).
13. Related party transactions
The Company has taken advantage of the exemption included in IAS 24 ‘Related Party Disclosures’ to not disclose details of transactions with
Group undertakings, on the grounds that it is the parent company of a group whose financial statements are publicly available.
Directors’ transactions
T P Acton purchased, in the normal course of business and under normal terms and conditions, goods to the value of £1,693 as a customer
of the Group in the year ended 31 May 2020 (31 May 2019: £2,655). At 31 May 2020, the amount outstanding was £Nil (31 May 2019: £Nil).
During the year, the highest amount outstanding totalled £724 (2019: £904).
R A Whiting purchased, in the normal course of business and under normal terms and conditions, goods to the value of £2,277 as a
customer of the Group in the year ended 31 May 2020 (2019: £2,104). At 31 May 2020, the amount outstanding was a credit balance of
£345 (31 May 2019: £641 credit). During the year, the balance remained in credit (2019: the balance remained in credit).
S R Andrew purchased, in the normal course of business and under normal terms and conditions, goods to the value of £1,230 as a customer of
the Group in the year ended 31 May 2020 (2019: £1,573). At 31 May 2020, the amount outstanding was £310 (31 May 2019: £345). During the year,
the highest amount outstanding totalled £540 (2019: £575).
Details of the Directors’ interests in the ordinary share capital of the Company are provided in the Directors’ Report.
14. Share-based payments
The Performance Share Plan (‘the LTIP’)
The Company operates a Performance Share Plan for senior executives, further details of which can be found in the Directors’ Remuneration
Report in the Group financial statements.
Under the LTIP, the Company has made awards of conditional shares to certain Directors and employees, details of which can be found
in note 25 of the Group financial statements.
The Company recognised total expenses of £1.1 million in respect of the LTIP’s equity-settled share-based payment transactions in the year
ended 31 May 2020 (2019: £0.1 million).
92 NWF Group plc
Annual Report and Accounts 2020
Financial statements
15. Pensions
The Company is the sponsoring employer in the NWF Group Benefits Scheme, a pension arrangement providing benefits based on final
pensionable pay. Details of the NWF Group Benefits Scheme, its liabilities and assets, together with the principal assumptions used in the
valuation of its liabilities, are given in note 24 to the Group financial statements.
Contributions into the scheme and amounts charged to the profit and loss account during the year were £2.1 million (2019: £2.1 million).
There were no outstanding or prepaid contributions at the balance sheet date (31 May 2019: £Nil).
The Company also operated a money purchase scheme during the year and contributions during the year amounted to £23.1 million
(2019: £0.1 million). There were no outstanding or prepaid contributions at the balance sheet date (31 May 2019: £Nil).
16. Contingent liabilities
The Company’s bank facilities are provided under an arrangement with The NatWest Group. The Company has pledged security in favour of
the bank over certain freehold land and buildings with a carrying value at 31 May 2020 of £22.0 million (31 May 2019: £22.6 million). Unscheduled
mortgage debentures have also been provided by the Company and certain subsidiaries to the bank which incorporate a fixed charge over trade
receivables and floating charges over all other assets.
The Company has an arrangement with the bank under which cash balances are offset against borrowings. The Company has given a guarantee
in respect of the net bank borrowings within the Group under this arrangement amounting to £17.2 million at 31 May 2020 (31 May 2019: £13.0 million).
The Company has a bank guarantee agreement with The NatWest Group, under which the bank provides a facility which allows the Company to
request that the bank issues guarantees to third party suppliers for general business purposes. The maximum total facility value is £4.0 million
but this was not utilised in the current or prior year.
The Company and certain subsidiaries have granted a fixed and floating charge in favour of the trustees of a defined benefit pension scheme
(‘the NWF Group Benefits Scheme’). This security, which is subordinated to the bank, creates a fixed charge over certain freehold land and
buildings, subject to a maximum value of £5.0 million (31 May 2019: £5.0 million), and a floating charge over all other assets.
The Company has also given certain guarantees to third parties in respect of operating lease and supply agreement commitments due from
various subsidiary companies.
No loss is expected to result from these arrangements.
NWF Group plc
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Financial statements Annual General Meeting – Covid-19 arrangements
As you are aware Covid-19 has brought some unprecedented challenges and tragic consequences with it. It has meant a rethink around how
companies operate. Inevitably, this has had an impact on our ability to run this year’s AGM in the manner in which our shareholders are accustomed.
The 2020 AGM will be broadcast from NWF’s Head Office in Wardle at 10.30a.m. on 24 September 2020. However, Government guidance relating
to Covid-19 restricts public gatherings, and as such shareholders will not be permitted to attend this meeting in person.
Although physical attendance will not be permitted, we have worked hard to be able to bring the AGM to our shareholders electronically.
Shareholders will be able to watch the meeting remotely.
Shareholders are invited to watch the AGM via a live webcast which you can access by logging on to https://webcasting.brrmedia.co.uk/broadca
st/5f1edbd4864c395ee4bb2eb9. We would strongly encourage shareholders to submit questions in advance of the meeting by emailing
investor.relations@nwf.co.uk with the heading ‘AGM 2020’ by close of play on 17 September 2020. The webcast does not enable live questions
during the AGM.
If you cannot join the AGM electronically on the day, we would still like to understand the themes and issues of concern to you, as shareholders.
You may send your comments to the above email address provided.
Sadly, we must insist on non-attendance not only for legal reasons, but because it is the right thing to do for the safety of our colleagues and
shareholders. We therefore encourage shareholders not to travel to the venue on the day, as those who do will, regrettably, be turned away.
The formal Notice of Meeting follows this letter.
Your vote
Your vote is important to us. You can:
• Submit a form of proxy electronically by accessing the shareholder portal at www.signalshares.com. You can vote online by registering first,
using your surname, investor code and your postcode – click on ‘vote online’ on the home page and follow the instructions.
• Use the service offered by Euroclear UK & Ireland Limited for members of CREST.
• Complete and return a paper form of proxy (enclosed with this Notice).
Voting before the AGM
Your vote counts and all shareholders are encouraged to vote in advance. The deadlines for using CREST, online or the paper forms of proxy can
be found in the Notes to the Notice of the AGM below.
Joining the AGM on the day
Please use the link supplied: https://webcasting.brrmedia.co.uk/broadcast/5f1edbd4864c395ee4bb2eb9.
Any questions must be submitted in advance by close of play on 17 September 2020.
94 NWF Group plc
Annual Report and Accounts 2020
Shareholder information Notice of Annual General Meeting
Notice is hereby given that the AGM (‘the Meeting’) of NWF Group plc (‘the Company’) will be held at NWF Group Head Office, Wardle, Nantwich,
Cheshire CW5 6BP, on 24 September 2020 at 10.30a.m. to transact the business as specified below.
Following the Government’s Stay at Home measures, and in compliance with official guidance, we draw your immediate attention to the
information contained on page 97, ‘Notes to the Notice of AGM’.
Ordinary Business
1.
To receive, adopt and approve the Company’s annual accounts for the financial year ended 31 May 2020 together with the Directors’ Report
and Auditors’ Report on those accounts.
2. To declare a final dividend of 5.9p per share for the year ended 31 May 2020 payable to shareholders on the register on 6 November 2020.
3. To re-elect Philip Acton as a Director of the Company.
4. To re-elect David Downie as a Director of the Company.
5. To re-elect Richard Whiting as a Director of the Company.
6. To re-elect Christopher Belsham as a Director of the Company.
7.
8.
To elect Richard Armitage as a Director of the Company who, having been appointed since the last AGM, is to be proposed for election
in accordance with the Articles of Association of the Company.
To reappoint PricewaterhouseCoopers LLP as auditors to hold office from the conclusion of the Meeting to the conclusion of the next
Meeting at which accounts are laid before the Company and that the Directors be authorised to set the auditors’ remuneration.
Special Business
Directors’ authority to allot shares
9.
That the Board of Directors of the Company (‘the Board’) be generally and unconditionally authorised to allot Relevant Securities (as
hereinafter defined):
9.1
up to an aggregate nominal amount of £4,062,537 (the equivalent of 16,250,147 ordinary shares); and
9.2 comprising equity securities (as defined by Section 560 of the Companies Act 2006 (‘the Act’)) up to an aggregate nominal amount of
£8,125,074 (the equivalent of 32,500,294 ordinary shares) (such amount to be reduced by the nominal amount of any Relevant
Securities allotted under paragraph 9.1 above) in connection with an offer by way of a rights issue:
(a) to holders of ordinary shares in proportion (as nearly as may be practicable) to their respective existing holdings; and
(b) to holders of other equity securities as required by the rights of those securities,
but subject to such limits, exclusions or other arrangements as the Board may deem necessary or expedient in relation to treasury shares,
fractional entitlements, record dates, legal, regulatory or practical problems in or under the laws of any territory or the requirements of any
regulatory body or stock exchange,
provided that this authority shall, unless renewed, varied or revoked by the Company, expire on the date which is 15 months after the date
of this AGM or, if earlier, the date of the next AGM of the Company save that the Company may, before such expiry, make offers or agreements
which would or might require Relevant Securities to be allotted and the Board may allot Relevant Securities in pursuance of such offer
or agreement notwithstanding that the authority conferred by this resolution has expired.
This Resolution 9 revokes and replaces all unexercised authorities previously granted to the Board to allot Relevant Securities but without
prejudice to any allotment of shares or grant of rights already made, offered or agreed to be made pursuant to such authorities.
For the purposes of this Resolution 9, ‘Relevant Securities’ means:
• shares in the Company other than shares allotted pursuant to:
• an employee share scheme (as defined by Section 1166 of the Act);
• a right to subscribe for shares in the Company where the grant of the right itself constituted a Relevant Security; or
• a right to convert securities into shares in the Company where the grant of the right itself constituted a Relevant Security; or
any right to subscribe for or to convert any security into shares in the Company other than rights to subscribe for or convert any security
into shares allotted pursuant to an employee share scheme (as defined by Section 1166 of the Act). References to the allotment of
Relevant Securities in this Resolution 9 include the grant of such rights.
•
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95
Shareholder information
Notice of Annual General Meeting continued
Special Business continued
General disapplication of pre-emption rights
10. That, subject to the passing of Resolution 9 on page 95, the Board be and it is hereby empowered, pursuant to Section 570 of the Act, to
allot equity securities (as defined in Section 560 of the Act) for cash pursuant to the authority conferred by Resolution 9 on page 95 or to sell
treasury shares as if Section 561 of the Act did not apply to any such allotment or sale, provided that this power shall be limited to:
10.1 the allotment of equity securities in connection with a rights issue or other pro rata offer in favour of holders of equity securities (but in
the case of the authority granted under paragraph 9.2 of Resolution 9 on page 95, by way of a rights issue only) where the equity
securities respectively attributable to the interests of all those persons at such record dates as the Board may determine are
proportionate (as nearly as may be) to the respective numbers of equity securities then held by them subject to such limits, exclusions
or other arrangements as the Board may consider necessary or expedient to deal with treasury shares, fractional entitlements, record
dates, practical or legal difficulties under the laws of any territory or the requirements of any regulatory body or stock exchange or by
virtue of equity securities being represented by depositary receipts or any other matter whatsoever; and
10.2 the allotment (otherwise than pursuant to paragraph 10.1 above) of equity securities up to an aggregate nominal amount of £609,381,
and in each case such power shall expire upon the expiry of the general authority conferred by Resolution 9 on page 95, except that the
Company may before such expiry make offers or agreements which would or might require equity securities to be allotted and/or
shares held by the Company in treasury to be sold or transferred after such expiry and the Board may allot equity securities and/or sell
or transfer shares held by the Company in treasury in pursuance of such offers or agreements as if the power conferred by this
resolution had not expired.
All previous unutilised authorities under Sections 570 and 573 of the Act shall cease to have effect (save to the extent that they are
exercisable by reason of any offer or agreement made prior to the date of this Resolution 10 which would or might require shares to be
allotted on or after that date.
11. Additional disapplication of pre-emption rights
To resolve as a special resolution that, subject to the passing of Resolution 9, the Directors be empowered in addition to any authority
granted under Resolution 10 to allot equity securities (as defined by the Companies Act 2006) for cash under the authority given by that
Resolution 9 (set out in this Notice of Meeting) and/or to sell ordinary shares held by the Company as treasury shares for cash as if Section
561 of the Companies Act 2006 did not apply to any such allotment or sale, provided that such authority be:
limited to the allotment of equity securities or sale of treasury shares up to a nominal amount of £609,381; and
•
• used only for the purpose of financing (or refinancing, if the authority is to be used within six months after the original transaction) which
the Directors of the Company determine to be an acquisition or other capital investments of a kind contemplated by the Statement of
Principles on Disapplying Pre-Emption Rights most recently published by the Pre-Emption Group prior to the date of this Notice of Meeting,
and shall expire upon the expiry of the general authority conferred by Resolution 9 on page 95 (unless previously revoked or varied by the
Company in a general meeting), provided that the Company may before that date make offers and enter into agreement which would, or
might, require equity securities to be allotted after the authority ends and the Directors may allot equity securities under any such offer or
agreement as if the authority has not ended.
96 NWF Group plc
Annual Report and Accounts 2020
Shareholder information
Notes to the Notice of Annual General Meeting
These notes are important and require your immediate attention.
1.
2.
3.
4.
5.
6.
7.
Shareholders are not entitled to participate in the AGM (‘the Meeting’) in any way other than as is provided for in these notes.
Shareholders are not entitled to attend the Meeting in person and will be refused entry. Attendants in person will be restricted to those
shareholders’ names on the form of proxy, whose attendance is required to form a quorum and subsequently falls within the ‘essential for
work purposes’ exception to the Government’s Stay at Home restrictions.
The Meeting will be live streamed online. Shareholders entitled to attend may only do so virtually by accessing the following link:
https://webcasting.brrmedia.co.uk/broadcast/5f1edbd4864c395ee4bb2eb9.
Shareholders may submit questions to be addressed during the Meeting by emailing their question(s) to investor.relations@nwf.co.uk no
later than close of play on 17 September 2020. Questions received after this date will not be addressed in the Meeting or in writing afterwards.
A shareholder entitled to vote at the Meeting is entitled to appoint another person of his/her choice as that shareholder’s proxy to exercise
all or any of that shareholder’s rights to attend and to speak and vote at the Meeting on his/her behalf. A shareholder may appoint more than
one proxy in relation to the Meeting, provided that each proxy is appointed to exercise the rights attached to a different share or shares held by
that shareholder.
A form of proxy for use in connection with the Meeting is enclosed with the document of which this Notice forms part. Addresses (including
electronic addresses) in this document are included strictly for the purposes specified and not for any other purpose.
To appoint a proxy or proxies, shareholders must complete a form of proxy, sign it and return it, together with the power of attorney or any
other authority under which it is signed, or a notarially certified copy of such authority, to the Company’s registrars, Link Asset Services,
PXS, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, so that it is received no later than 10.30a.m. on 22 September 2020.
Only those members entered on the register of members of the Company at the close of business on 22 September 2020 or, in the event
that this Meeting is adjourned, in the register of members as at the close of business on the day two days before the date of any adjourned
Meeting, shall be entitled to attend and vote at the Meeting in respect of the number of ordinary shares registered in their names at that
time. Changes to the entries on the register of members after the close of business on 22 September 2020 or, in the event that this
Meeting is adjourned, in the register of members after the close of business on the day two days before the date of the adjourned meeting,
shall be disregarded in determining the rights of any person to attend or vote at the Meeting.
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the AGM
to be held at 10.30a.m. on 24 September 2020 and any adjournment(s) thereof by using the procedures described in the CREST Manual. CREST
personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider, should
refer to their CREST sponsors or voting service provider(s), who will be able to take the appropriate action on their behalf.
In order for a proxy appointment or instruction made by means of CREST to be valid, the appropriate CREST message (‘a CREST Proxy
Instruction’) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s specifications and must contain the
information required for such instructions, as described in the CREST Manual. The message must be transmitted so as to be received by
the Company’s agent, Link Asset Services (CREST Participant ID: RA10), no later than 48 hours before the time appointed for the Meeting.
For this purpose, the time of receipt will be taken to be the time (as determined by the time stamp applied to the message by the CREST
Application Host) from which the Company’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST.
CREST members and, where applicable, their CREST sponsor or voting service provider should note that Euroclear UK & Ireland Limited
does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore
apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST
member is a CREST personal member or sponsored member or has appointed a voting service provider, to procure that his CREST sponsor
or voting service provider takes) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system
by any particular time. In this connection, CREST members and, where applicable, their CREST sponsor or voting service provider are
referred in particular to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.
NWF Group plc
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97
Shareholder information
Notes to the Notice of Annual General Meeting continued
8.
9.
In the event of a conflict between a blank form of proxy and a form of proxy which states the number of shares to which it applies, the
specific form of proxy shall be counted first, regardless of whether it was sent or received before or after the blank form of proxy, and any
remaining shares in respect of which you are the registered holder will be apportioned to the blank form of proxy. You may not appoint more
than one proxy to exercise rights attached to any one share. To appoint more than one proxy, you should contact Link Asset Services, PXS,
The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU.
You will require your username and password to access the portal. If you have not previously registered to use the shareholder portal then
this can be done using your investor code (‘IVC’) which can be found on a share certificate or old tax voucher or by contacting the registrars,
along with your surname and postcode – click on ‘vote online’ on the home page and follow the instructions. If you have forgotten your login
details, then you can request a reminder via the portal. If you change your mind you can place your vote again any time up until voting
closes, which will be 48 hours prior to the Meeting.
10. Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a
member provided that they do not do so in relation to the same shares.
11. Shareholders are not entitled to vote by any means other than as are provided for in these notes.
12.
Copies of the following documents will be available for inspection at the Company’s registered office during normal working hours on any
weekday (Saturdays, Sundays and public holidays excepted) from the date of this Notice until the date of the AGM and at the place of the
AGM for 15 minutes prior to and during the Meeting:
•
copies of all service agreements or letters of appointment under which the Directors of the Company are employed by the Company.
13.
Except as provided above, members who have general queries about the Meeting should use the following means of communication (no
other methods of communication will be accepted):
calling Link Asset Services: +44 (0)371 664 0300 Calls are charged at our standard geographic rate and will vary by provider. Calls outside
the United Kingdom will be charged at the applicable international rate. Lines are open between 9.00a.m. and 5.30p.m. Monday to Friday
excluding public holidays in England and Wales.
98 NWF Group plc
Annual Report and Accounts 2020
Shareholder information
Explanatory notes to the Notice of Annual General Meeting
Ordinary Business
Each resolution will be proposed as an Ordinary Resolution. This means that, for each of the resolutions to be passed, more than half of the
votes cast must be in favour of the resolution.
The Ordinary Resolutions are entirely routine and deal with the presentation of the Annual Report and Accounts for the financial year ended
31 May 2020, the declaration of a final dividend, the reappointment of each of Philip Acton, David Downie, Richard Whiting and Christopher Belsham
as a Director of the Company, the election of Richard Armitage as a Director of the Company and the reappointment of PricewaterhouseCoopers LLP
as auditors and the authorisation of the Directors to set the auditors’ remuneration.
Special Business
Resolution 9 will be proposed as an Ordinary Resolution and Resolution 10 will be proposed as a Special Resolution. In order for a Special Resolution
to be passed, at least three-quarters of the votes cast must be in favour of the resolution.
Resolution 9 – authority to allot shares (Ordinary Resolution)
The authority conferred on the Directors at last year’s AGM to allot the share capital of the Company expires at the conclusion of the forthcoming
AGM. The Board recommends that this authority be renewed.
Paragraph 9.1 of Resolution 9 will, if passed, authorise the Directors to allot the Company’s unissued shares up to a maximum nominal amount
of £4,062,537, which represents an amount which is equal to one-third of the aggregate nominal value of the issued and unconditionally allotted
ordinary share capital of the Company (excluding treasury shares) as it was at close of business on 31 July 2020. As at close of business on
31 July 2020 the Company did not hold any treasury shares.
Paragraph 9.2 of Resolution 9 will, if passed, authorise the Directors to allot unissued shares in connection with a rights or other issue in favour
of holders of equity securities (which would include ordinary shareholders) as required by the rights of those securities, up to a maximum
aggregate nominal amount of £8,125,074, which represents an amount which is equal to two-thirds of the aggregate nominal value of the issued
and unconditionally allotted ordinary share capital of the Company as it was at close of business on 5 August 2020 (such amount to be reduced
by the nominal amount of any Relevant Securities issued under the authority conferred by paragraph 9.1 of Resolution 9).
The authorities sought in Resolution 9 are in substitution for all existing authorities, granted in the Company’s Articles of Association or
otherwise, and without prejudice to previous allotments made under such existing authorities. The authorities will each expire 15 months after
the date of the AGM or, if earlier, at the conclusion of the next AGM of the Company. The Directors have no present intention of exercising these
authorities but believe that it is in the best interests of the Company to have the authorities available so that the Board has the flexibility to take
advantage of business opportunities as they arise.
Resolution 10 – disapplication of pre-emption rights (Special Resolution)
Resolution 10, which will be proposed as a Special Resolution, seeks to renew the authority conferred on the Directors at last year’s AGM to
issue equity securities of the Company for cash without application of the pre-emption rights provided by Section 561 of the Act. The authority
being sought provides for non-pre-emptive allotments of equity securities: (i) to ordinary shareholders in proportion to their shareholdings then
existing; (ii) to holders of other equity securities as required by, or subject to (as the Directors consider necessary), the rights of those securities,
and to deal with treasury shares, fractional entitlements and legal and practical problems in any territory, for example on a rights issue or other
similar share issue; and (iii) for cash up to an aggregate nominal value of £609,381 which represents 5% of the issued ordinary share capital of
the Company as it was at close of business on 5 August 2020. The authority being sought is in substitution for all existing authorities, granted
in the Company’s Articles of Association or otherwise, and without prejudice to previous allotments made under such authorities, and will expire
15 months after the date of the AGM or, if earlier, at the conclusion of the next AGM of the Company. The Directors have no present intention of
exercising these authorities but believe that it is in the best interests of the Company to have the authorities available so that the Board has
the flexibility to take advantage of business opportunities as they arise.
The authority sought and the limits set by this resolution will also disapply the application of Section 561 of the Act from a sale of treasury
shares to the extent also specified in this resolution.
NWF Group plc
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99
Shareholder information Explanatory notes to the Notice of Annual General Meeting continued
Special Business continued
Resolution 11 – additional disapplication of pre-emption rights
Resolution 11, which will be proposed as a Special Resolution, if the Directors wish to allot new shares or other equity securities for cash, company
law requires that these shares are first offered to shareholders in proportion to their existing holdings. Resolution 10 disapplies this law for up
to 5% of the share capital (exclusive of treasury shares).
The Pre-Emption Group’s Statement of Principles also supports the annual disapplication of pre-emption rights in respect of allotments of
shares and other equity securities for cash where these represent no more than an additional 5% of the issued ordinary share capital and are
used only in connection with an acquisition of specified capital investment. The Pre-Emption Group’s Statement of Principles defines ‘specified
capital investment’ as meaning one or more specific capital investments or related uses for the proceeds of an issue of equity securities.
Accordingly, the purpose of Resolution 11 is to authorise the Directors to allot new shares and other equity securities pursuant to the allotment
authority given by Resolution 9 or sell treasury shares for cash, without first being required to offer such securities to existing shareholders, up
to a further nominal amount of £609,381 (representing 2,437,522 shares), being approximately 5% of the issued ordinary share capital of the
Company as at 5 August 2020, the latest practicable date before the publication of this Notice. The authority granted by this resolution, if passed,
will only be used in connection with an acquisition or specified capital investment which is announced contemporaneously with the allotment,
or which has taken place in the preceding six-month period and is disclosed in the announcement of the issue. If the authority given in
Resolution 11 is used, the Company will publish details of its use in its next Annual Report.
The authority granted by Resolution 11 would be in addition to the general authority to disapply pre-emption rights under Resolution 10. The
maximum nominal value of equity securities which could be allotted if both authorities were used would be £4,875,044, which represents
approximately 10% of the issued ordinary share capital of the Company as at 5 August 2020, being the latest practicable date before the
publication of this Notice.
The Directors intend to adhere to the provisions in the Pre-Emption Group’s Statement of Principles and not to allot shares or other equity securities
or sell treasury shares for cash on a non-pre-emptive basis pursuant to the authority in Resolution 10 in excess of an amount equal to 7.5% of
the total issued ordinary share capital of the Company, excluding treasury shares, within a rolling three-year period, other than:
• with prior consultation with shareholders; or
• in connection with an acquisition or specified capital investment which is announced contemporaneously with the allotment or which has
taken place in the preceding six-month period and is disclosed in the announcement of the allotment.
The Directors have no current intention to allot shares. These authorities will expire at the conclusion of the AGM in 2021 or 15 months after the
date of the AGM.
100 NWF Group plc
Annual Report and Accounts 2020
Shareholder information Financial calendar
Annual General Meeting
Dividend:
– Ex-dividend date
– Record date
– Payment date
Announcement of half-year results
Publication of Interim Report
Interim dividend paid
Financial year end
Announcement of full-year results
Publication of Annual Report and Accounts
Divisional contacts
Fuels
Food
Feeds
24 September 2020
5 November 2020
6 November 2020
8 December 2020
Early February 2021
Early February 2021
May 2021
31 May 2021
Early August 2021
Late August 2021
Tel: 01829 260900
www.nwffuels.co.uk
Tel: 01829 260704
www.boughey.co.uk
Tel: 0800 262397
www.nwfagriculture.co.uk
Discover more online
CBP003955
www.nwf.co.uk
NWF Group plc
nwf.co.uk
101
Shareholder information
NWF Group plc
Wardle
Nantwich
Cheshire
CW5 6BP
Telephone: 01829 260260
Fax: 01829 261042
www.nwf.co.uk