NWF Group plc (NYY.F) Earnings Call Transcript & Summary

Good afternoon and well to the NWF Group plc investor presentation. [Operator Instructions]. And I'd now like to hand you over to Chris Belshams, CEO. Good afternoon, sir.

Thank you very much, and good afternoon, everyone, and welcome to the NWF results presentation for the year ended 31 of May 2024. I'm Chris Belsham, the Group Chief Executive, and I'm joined today by Katie Shortland, who is our Chief Financial Officer. We will take questions at the end at the end of the presentation, but please do submit those as we go along as well, that'd be very helpful. And those of you who attended the last one of these, we did as a group, which is a few years ago now, may remember that my 6-year-old daughter gate crushed the presentation and then my broadband gave out. So hopefully, we'll be more successful today, but we'll see how we get on. So that's a fact. Now to move on to talking a little bit about us. I'm very conscious that some of the people on the meeting will know a bit about us and been invested in us for a while and some of you may be new to the group. So it's probably worth giving a brief overview of the group, as a refresher for those of those of you who know it well, and it's an introduction for those who don't. So NWF Group is a specialist distributor operating across the U.K. and our purpose, our mission is to be a vital link in the supply chain, connecting essential suppliers with their customers. And that's particularly the case where those suppliers and customers are not able to trade directly with each other that need it. We're currently operate in 3 market segments. And in each of those, we benefit from scale and capability barriers to entry. So if I start with our fuel business first, in fuels were the third largest bulk liquid fuel distributor in the U.K., and we've got over 100,000 customers who were a combination of SME commercial businesses and domestic customers, people who use oil to heat their homes. And in all those cases, we're helping people power their businesses and heat their homes. And what we're really doing there is acting as a link between the fuel majors and their end-use customers who are too small individually to go and pick fuel up from a fuel terminal or from a refinery. The need to buy fuel in too much bulk that they can't get to a petrol station to get there. And then move on to our food business. And in food, we're a leading ambient grocery consolidator. We're enabling 125 customers to supply U.K. retailers effectively and efficiently. So here, we're acting for customers who are individually too small to be able to help direct distribution into supermarkets like Tesco or Aldi. So they need to come through a consolidation business like ourselves to be able to access those retailers. Similarly, the retailers need a consolidator like us to enable those type of suppliers to integrate into their supply chain. And last but not least, our feeds business is the second largest ruminant feed distributor in the U.K., and we're servicing a 4,000 farming customers helping them feed their birds and optimize the yields that they're getting from their livestock. Now the success of all 3 of our businesses is built on our strategic enablers, and there's 4 of those. So people and culture, clearly were very dependent on skills and capability of the people across our group and in each of our businesses. Being our best is about having a really detailed understanding of our operating model in each of our businesses and our processes that underpin that operating model and looking for ways to improve those processes. Change management is an essential skill for us to have as we look to deliver step change projects, whether that's M&A activity or new warehouses, and we'll be talking about both of those a little bit later on. And then data and IT is really important because we're a data-heavy business and using that data effectively is really important in terms of managing our margins and providing an efficient and effective service to our customers. So if I then move on to the financial results for the year. And so firstly, if we look at -- so overall, a very solid financial performance in line with market expectations. Then looking back at some of the detail. So firstly, revenue. Now revenue for those of us who don't know as well is not a particularly useful metric in terms of NWF Group because over 90% of the revenue in our fuels and feeds businesses is a commodity or duty pass-through. So therefore, it's not to guide to our underlying activity. So whilst it looks like revenue has gone down and it has, that's all because of the oil price. In effect, our overall activity increased in the year. So we saw greater volumes in our fuel business and higher turnover and activity in our food business. In terms of headline operating profit and headline PBT, that was down on the prior year as expected. That was due to a normalization of the fuels and feeds market, partly offset by a very strong performance in our food business. But that was all expected at the time of -- at the start of the year was built into analyst forecast, hence, by our results met market expectations. In the year, we acquired the fuels business, and we also invested in a new warehouse at Lyondell, which we'll talk about. But despite all of that, we still have a positive cash balance at the end of the year with GBP 10 million on the balance sheet. And along with our funding facilities, that gives us significant firepower to continue our growth plans. And as a result of that, the Board has significant confidence in the prospects of the group and therefore for the 13th year in a row, we've increased our dividend. This year, it will be 8.4p per share, and that's still 2.4x covered. Then delve into the individual businesses and what happened in the year. So in our fuels business, what we're looking to do is make an absolute pound note profit for the service we're providing, which is buying the fuel from a fuel major and delivering it to the end-use customer. So we are largely indifferent to the price of fuel itself, all we're looking to do is make a little bit of margin on top of that. And what we find is that our margins are higher when our customers become concerned about supply and therefore, are less concerned about being too price conscious. And that happens when there's either significant volatility in price or these events which lead people to be a bit concerned, there might not be a stable supply. And over the last few years, we've seen a number of those type of events on a big scale. So firstly, we have the pandemic. And then secondly, we have to the Ukraine crisis. And in both of those cases, our customers were worried about getting supply. Therefore, they became less price conscious, Therefore, our margins increased as market pricing went up. Now we didn't expect that to last. We knew that would normalize at some point. And our expectation was as that would normalize in FY '24, and that proved to be the case. In addition, that was compounded by the fact we have our second mildest -- second mild winds through in a row, and that led to low demand for domestic heating oil, which keeps the sector very busy across the winter. That meant that ourselves and our competitors were competing more fiercely for commercial business. And again, that tends to push down market pricing and looking back. Against that backdrop, I was very pleased that we actually increased our commercial volumes while our domestic volumes stayed flat. Also, I was very pleased that how we actively managed our cost base by optimizing our sales team and our tanker fleet to make sure it was matching the level of activity and margins that we're achieving. Our growth strategy for this business is very heavily built around M&A. So you'll seen that we did an acquisition last summer, which was a business called Jet born Fuels, which we acquired in cans. But we then found the M&A pipeline became quite quiet over the winter, and that makes sense really because if you're a business owner in a normalizing market, it wasn't a sensible time to be considering some of the business. I'm pleased to say that the pipeline has really picked up over the last 2 or 3 months, and we've got a number of active discussions taking place. So we will be looking to deploy capital into fuels M&A in the current financial year. Then moving on to our food business. Very strong first half performance, which continued into the second half. So here, our business model is to charge our customers for storing, handling and distributing their stock. Therefore, the key KPIs are how many pallets are we storing and what's the throughput of pallets through our warehouse facilities. So in the year, we actually peaked with a storage of 146,000 pallets. Now that's 20,000 above our optimal operating capacity and 11,000 pallets above maximum capacity. But we knew that was going to happen. So we planned for use of third-party off-site storage, and we use that early and managed it really effectively. In the past, when we've had to do this, we probably waited and looking a bit too long to actually start using that off-site storage in an attempt to save money, but then we've ended up spending lots of money through inefficiency. Here, we were very disciplined. We got to our optimal capacity, which is about 92% of maximum and started using the off-site storage. Now why would we do that? We'll be doing that because we're building up a pipeline of new customer business because we wanted to open a new warehouse. And we did -- we announced in January that we were opening a new warehouse at Lindale in New Castle underlying, which is about 20 minutes drive from our existing warehouses. We commenced the fit-out of that immediately, and that completed at the end of June. We were actually storing stock in there from April onwards. And as we speak, we're operating about 70% capacity at that site, and we'll look to be at optimal capacity in the early autumn, in line with our original business plan. The other key action in the year in our food business was B Corp Certification. So a number of the customers are becoming increasingly focused on the sustainability of that supply chain, and therefore, they want to work with a logistics partner that has very strong ESG capability. So we applied for B Corp accreditation, that's a very rigorous ESG metric. So we spent a number of months actually doing the work to ensure we could comply with that. And I'm pleased to say we achieved that in the year. And that does give us a competitive advantage with those customers and those retailers who are really now focused on that sustainable supply chain. And then moving on to fees. Now if I'd been sat here this time last year, I would have been talking about the summer of 2022. And what happened in that summer was there was incredible spike in feed commodities as a result of the Ukraine war. And following that, the dairies significantly increased milk price that our farming customers were receiving. But the cost we forward buy materials, our costs haven't gone up in line with those 2 factors. Therefore, we were able to generate about GBP 1 million plus of super profit in FY '23 as a result of that. We didn't expect that to happen in FY '24 and it didn't. So again, similar to fuels, we tend to make more money here where commodities are quite volatile and the milk price is higher. What we saw in FY '24 was a very stable commodity market and the milk price has reduced from its FY '23 levels. Having said that, it's still at a very profitable level and we've really just reduced in line with farms costs. So our farming customers are still making a decent profit on the current milk price. Our volume in FY '24 was a sort of a bit of gain of 2 halves really. So in the summer and autumn of 2023, we have alternating hot and wet weather. That's absolutely fantastic for growing grabs. And as a result, farmers went into the winter with plentiful forage stores to feed that herd over the winter. But we then have a very wet miserable winter and spring, which delayed herds being turned out into the field. And therefore, we had increased demand towards the back end of the year. So overall, there was a flat market for ruminant animal feed. NWF volumes were down a little bit, but the gap was a low value buying group business, which we've actually won back for the summer. So I'm pleased with how we managed that volume margin arbitrage. We're also very focussed on our cost base. So really good management of the gross margin and operational cost base by our team. And that's particularly the case as our electricity costs doubled in the year as we came off of fixed year contracts that we have in place for 2 years, which enabled us to mix the big price spike in electricity prices at the back end of 2022. But we still have to pass on a double in the electricity costs. I'm pleased to say the team were able to successfully do that. Our growth in this business will be driven by winning market share, and we're doing that through investing in new sales people, younger salespeople, salespeople in the future because this is an industry that's typified by an aging sales force. And therefore, as those people retire, we want to have the people in the market who can take their business from them as they step away. And we've been investing in our Academy for a number of years now, and it's proven to be very successful with former academy members now accounting for about 15% of the volume in our feed business sells. I'll now hand over to Katie to talk through the financial results in a bit more detail.

Thank you, Chris. Okay. So over the next few pages, I will just give you an overview of the financial performance for full year '24, but I'll also draw out some of the key performance indicators and areas that we believe are relevant for our future growth and development of the business. Okay. So if I start with the top half of the income statement first. So as Chris mentioned earlier, the 2 of our businesses, revenue isn't necessarily a relevant indicator of growth or performance for us. So that's in fuels and food in particular. But just to summarize the numbers. So total revenue in the year was just over GBP 950 million, which is 9.8% down from the prior year. And you may be aware from some of the previous communications, and as Chris has said, we saw a normalization of commodity prices in 2 of those markets, and that's what's driven a lot of that revenue reduction. From a headline operating profit point of view, we reported GBP 14.2 million in the year. That was broadly in line with where consensus had us. So although a drop from last year was exactly where we were expecting it to be across the 3 businesses. If I look at each one in turn and I'd say from a fuel point of view, we reported GBP 7.9 million of operating profit. And that reflects the normalization that I've talked about in market prices as oil prices and concerns over supply stabilized in the year. The key indicator for us for fuels is the PPL, so the profit pence per liter that we achieve for every liter that we sell. So in the year, we achieved a PPL of 1.2%. And that's slightly lower than the last couple of years for those points that we've talked about, but actually is broadly in line with where our long-term performance has been. In terms of our food business, so we delivered GBP 3.7 million of operating profit there. And as Chris said, we had a strong half 1 trading position with Food, which continued into the second half. The performance in the year looks to be deflated slightly because of the investment in Lyndal. So the underlying business performance would have been GBP 1.2 million higher than that. But obviously, we've taken on some first year costs associated with the warehouse lease and associated business rates and charges. So they had a good strong underlying business performance. A key indicator for them, as Chris has mentioned, is around pallets, so pellet stored and throughput, and we achieved a strong palette stored of 137,000 across the year, which is a good performance for the business. And then from a feeds point of view, we reported operating profit of GBP 2.6 million in the year. So again, that reflects the normalization across the commodity prices and milk prices in the feeds business, and they've managed to achieve profit per tonne of GBP 5.21. So that's an indicator for us of the feeds business. So again, slightly lower than last year for the reasons we've talked about already, but actually a really strong performance against the 5-year average for that business. And then just one point to note before I move on to next page, you'll see there is an exceptional number in here, which is a credit. That's actually due to the fact that we received income in the first half of the year associated with a legacy level legal claim that goes back several years, and that just got settled in the year. And that's been offset slightly by some costs we've incurred in the year to support the development of a new ERP solution across our businesses. So that latter project will be multiyear, but those are just the cost incurred in this year associated with that. Moving on to the bottom half of the income statement then. So just a few points to pull out here. Our finance costs in the year look to have increased year-on-year. So within those finance costs, we have 2 particular categories. The first is around bank interest costs. So this has actually improved year-on-year. So we went from GBP 0.8 million to GBP 0.4 million here. That just reflects the active cash management across the business and our ability to just move cash and avoid interest charges on some of our facilities. That's been offset by higher interest costs associated with our IFRS 16 and lease charges. So that's where we have obviously taken on the lease for the Lyondell warehouse in the year, and that incurred an extra interest cost associated with that. In terms of other aspects in there, our pension scheme in here remains broadly unchanged year-on-year. And our effective tax rate is 25.4%. So just a little bit over the corporation tax rate, but that just relates to some business-related nondeductibles. So nothing important to pull out from there. And as Chris has already mentioned, our dividend has increased again this year to 8.1p. So 13th year in a row with a 3.8% increase year-on-year and has good dividend cover as well as good interest cover for us across our facilities as well. Okay. Moving on to the balance sheet then. So I think the key point to put out here is just the strong asset position we find ourselves in, which will support as we look to grow and develop the business. So you can see we have total assets of GBP 237.7 million. Within there, we do have an increase on our right-of-use assets and liabilities in the year, again related to Lyondell warehouse. You'll see them coming through here. And we also have vehicles that go through there as well, and that's likely to increase year-on-year for us as we look to renew some of the rollover programs of some of our vehicles across our businesses. Working capital for us is in a strong place here. So we have a good working capital position across our businesses with our fuels business, in particular, having a negative working capital cycle. So because of the nature of some of our customers, particularly around domestic customers, we do get cash in relatively quickly. So we have a good strong working capital cycle with the fuels business, which is the larger of our businesses. And then in terms of our net cash position in here, I'll talk about it a little bit later, but you can see we're in a positive net cash balance position at the end of the year. Okay. Just moving on to our pension then. So for those not aware, so we have a DB scheme which was closed to new members in 2002. There's around about 400 members in there at the moment, and we have been actively working to reduce that deficit over the last few years. So we make a company contribution of GBP 2.1 million per annum, which increases in line with our dividend increase. And alongside that, we've also conducted a triennial valuation, which was conducted for the 31 December 2022. And that shows that, that deficit on an accounting basis is reduced from GBP 9.5 million to GBP 4.5 million. So a good positive reduction of GBP 5.1 million there. The majority of which relates to that company contribution as well as a positive investment strategy that we've got across our assets. In terms of the current cash position, continuing that contribution, we don't see as a constraint to group development. I guess it's also worth pointed out that based on that, we think the recovery of the deficit will be where we need it to be in the next 3 to 4 years. Okay. Moving on to cash flow then. So as a group overall, we are very cash generative. So actually, our cash conversion -- our underlying cash conversion is around about 100%. It looks to be a little bit lower in the year here at 77.5%, but that's just related to a working capital movement from the end of the prior year where a supplier payment just slipped into the current financial year. If you normalize that, our cash conversion is strong at 100%. And we've obviously used that cash generation to invest in the business. So our development spend in the year relates to the acquisition of Jeff Borman that Chris has already talked about and our Lyondell CapEx. I'll come to the details a little bit later, but broadly speaking, we were going to spend about GBP 8.5 million on Lyondell and around about 6% in full year '24. And as I mentioned earlier, our working capital is generally in a strong position based on the business cycles that we have. Okay. Final financial slide before I hand back to Christopher. So this is just to reiterate the facilities we have around us to support the current business but also the future growth and development for us. So we have 61 million of facilities with accordion access against those. We do touch on the facilities and dip into the points through the month in the year, depending on our working capital cycle and also the seasonality of 2 of our businesses. But we do still have a lot of firepower here to support us for future growth and development, something of which the Board is supportive of. And so they're happy to support a 2x net debt-to-EBITDA position for us for future development and growth. Okay. With that, I will hand back to Chris.

Thanks, Kate. As a new group leadership team, we have considered and reviewed our strategy. And as part of that, we talked about our purpose, why does the group exists, our vision, what is the group going to be and our values, which is really how do we go about achieving the vision. So I've already mentioned the purpose, but it's worth repeating, which is our purpose is to act as a vital link in supply chain, connecting essential suppliers with their customers, particularly where they don't have the ability to trade directly with each other. And all 3 of our businesses, as I've already articulated, fulfill that role. Our vision then is to be an innovator in specialist distribution delivering value sustainably. So what does that actually mean? It means being the best at what we do in each of our chosen markets and innovating to ensure we stay the best through improving to ensure that we provide the market-leading service in the long term, is sustainable. And our values will be -- will help us achieve our vision through the 4Cs. I'll not run through each of these in detail. But our overall aim is to drive our strategy by developing challenging and keeping our colleagues safe whilst collaborating to make use of our scale and expertise across the group. And an example of that would be where experts of fleet efficiency in our food business, we're now collaborating more effectively and to ensure those skills are deployed into our fuels business. Similarly, [indiscernible] our fuels business is very experienced in terms of direct sales, and therefore, we're using his skills not only to improve direct selling in our fuels business, but also in our feeds business. Our strategy also continues to be underpinned by our ESG framework, and this is based on 4 pillars: safety, people, partnerships with customers and suppliers and respect for the environment. And key developments in the year here have been the B Corp accreditation which I've already talked about. An enormous amount of work we've been doing around voice of customer in our fuels and feeds businesses, which we then built into the growth plan and strategy for each of those 2 businesses and further development of our TCFD assessment and disclosure, which you'll see in the report and accounts when those come out. But moving on to the strategy itself. So each of our businesses has its own plan for growth. And in addition, as a group, our strategy is to deploy our capital into step-change opportunities which give a good return on capital employed. Our other job as a group is to ensure that we're deploying our strategic enablers as effectively as possible to help the businesses achieve their own growth plan and to deliver those step change projects. So that could be things around governance, coordinating collaboration and allocating specialist resource. So we then look at fuels, our inorganic strategy here is around M&A, and I'll talk about that in more detail in a moment. Our organic strategy has focused at the moment around improving our sales model. So we've taken what we've learned from our voice of customer, and we're doing a significant amount of work around both our domestic customer base and our commercial customer base. So just give an example of that. In our domestic customer base, we run a pilot in one of our depots over the last winter, about the best way to interact with our domestic customers to make sure that we have a model that we're deploying in all of our demos. So that if you as a customer in our [indiscernible] depot, you'll have exactly the same customer experience as you would do if you run our bagging wood data. So that's being rolled out across the rest of the depots at the moment. And then on the commercial side, our customer base has typically been SMEs. And plasma we've not really leveraged our depot network to serve larger customers who require a multi-site offering. And that's really attractive business for us because actually there's less competition because a few people have our scale and are able to offer a comparative service. So we've just started to dip our toe into the world of doing that. We have won contracts that we won in the year that we started to operate very successfully. And we're looking to add to that with additional customers in the current financial year. And then the other key area of focus in fuels business is around fleet efficiency. So fuel tankers are increasingly expensive. We need to be really disciplined around how much we use those to ensure that we were providing lease cost to serve to our customer base. And therefore, we've instigated a program of extra discipline around where we locate our vehicles, how we read them and having very strict delivery zones, so we're minimizing the kilometers traveled for each delivery. If I then move on to our food business. Here, the strategy will always come off growing our customer pipeline because if you grow your customer pipeline, you can have the optimal customers in your optimal customer mix in your existing facilities and it gives you additional customer demand that you can look to service, whether through a new warehouse or through some targeted M&A and Katie will talk about those in a little bit more detail shortly. And lastly, but not least, in terms of our feed business, we're looking to grow market share, as [indiscernible] explained through our academy, but also through direct selling and starting to extend our product range that we're selling to our existing farming customer base. And that's really leveraging our existing national operating platform, which means we have production facilities in all the right locations transporting all the right locations. So if we can gain our market share, we can service it really effectively. So if I talk in a bit more detail around fuels M&A. So fuels were #3 in the market, but we've got just under 5% market share. #1 in the market is Serta, that's part of DCC. That's got north of 20% market share. #2 is a business called Watson that's owned by U.S. corporate, and that's less than 10% market share. And then below us, there are 10 to 15 large regional players who probably got 1% to 2% market share each, and then there's a long tail on mom-and-pop businesses. So we have a dual approach to M&A. Firstly, we're focused on the top 2 to #15, who all know that we'd be interested in buying that business and have the funding and capability to do it. We keep knocking on the doors. We keep telling them that's the situation. We just need when to be in a position where they want to sell. We have had active conversations in the past. So at some point, we'll move on to obtain that transaction. If we can do that at the right price, then that clearly would be a great way of growing our business in one step. Until Synovis in a position where they want to sell it to price, we would want to do it. Then we'll continue to do the second strand of our M&A strategy, which is smaller bolt-on acquisitions. And here, I'm talking probably deal size of about GBP 3 million up to around GBP 10 million. And what we have in the fuels market is lots of businesses that -- where the owners are near retirement age and therefore, looking to make an exit with a capital gain. And therefore, we've got a track record of buying those type of businesses over the last few years, and we'll continue to do that. Once it gets to the actual transaction, we've got a very established deal process and functional integration model. And then we're looking to drive value from that transaction in a number of ways. So firstly, if it's near our existing geography, there are cost synergies. Secondly, we're looking to build up depot density. So if you can do that, it means we can service the customers by traveling less distance from each depot and therefore, we improve our fleet efficiency. Thirdly, we find where our market share exceeds about 10% in any given region. Our margins are significantly higher because we become a market leader on price rather than a market follower. So by doing M&A, we start to build our market share up to that level and we can benefit from those higher margins. And lastly, the bigger our national footprint, the more we're going to be able to support those multi-site national account type customers that we're now targeting. As I talked about earlier, our pipeline was a little bit quiet over the winter, but it's now really peaked obviously lots of activity. And hopefully, we'll be converting some of those into transactions over the coming months. The other thing I should just pick up on when I'll talk about fields are also the opportunities around energy transition and isolate these into 2, there's an opportunity around domestic and there's an opportunity around commercial customers. So on the domestic side, the right solution in the transition period, reduced emissions from home heating would be HetroBlend, which lending in HVO, a biofuel with the existing carostene that people used to heat their homes. And we've done a lot of work as an industry to get the previous government to agree to make consultation. Unfortunately, that was delayed by the election. However, there was cross-party support for that consultation. And we're now undertaking a big exercise as an industry in contacting all that new crop of NPEs to educate them and get them behind supporting this initiative. And we are -- I'm pleased to say those letters went out to NPs last week, and we're already getting some interaction with those new men's apartments. So that's very positive. But it will take time to rake its way through. And then on the commercial side, again, HBO is an opportunity. So it can act as a straight diesel replacement. The challenge is, at the moment, there's a bit of a supply-demand price do loop. So there is a price differential of about 15% to 20%. Therefore, customers don't want to buy it. Therefore, suppliers are not to growing very much of it, therefore, there's a price differential of 15% to 20%. So I think there's an opportunity there for a government to interact with the market to just break that doing loop a bit, and that will be a good position for us because we'll be well placed to provide that HBO to our customers. I'll now hand over to Katie to talk about some of the activity we're doing around food expansion.

Thank you, Chris. Okay. We'll start with the warehouse expansion first. So just as a reminder, our investment in live debt is actually our second investment in warehouse growth beyond our Wardell head office site. So our first investment was in our crude facility in 2020. So prior to that, we had 100,000 pallet space, broadly speaking, at Wardell. When we invested in crew that added another 35,000 pallets and the addition of Lyondell has another 52,000 pellet spaces for us. So that increases our capacity by 39% to a term 187,000 pallets. With regards to where we are on the project, as I mentioned earlier, we have a CapEx investment of around about GBP 8.5 million of which we will come in just below that. So we'll probably spend around about GBP 8.2 million to GBP 8.3 million in total, of which a good chunk of that was in full year '24. So our fit-out is tracked in line with plan, and we have all of our racking and sprinters and various safety equipment in place now. and that was in place by the end of June 2024. And our warehouses, as Chris mentioned earlier, is now 70% full and is expected to be at operational capacity by early altered you'll hear us mention operational capacity a few times, and this is where we won't ever look for the warehouses to be 100% full because that makes inefficient in terms of moving some of the various pallets around. So we'll go for around about 92% for when we're looking at an optimum operational capacity. And the other big thing for us is to keep focusing on our customer pipeline to support the full filling of the Lyondell warehouse and to help us look for future growth initiatives. So moving on to other growth initiatives that we're looking at then. So from an M&A point of view, we are starting to look at what a targeted M&A pipeline might look for us. So we've grown organically in this business so far to date. And as Chris has mentioned, the geography of those are all quite close together. So they're all based in the Northwest and very close to the 6. So that means we can support our customers nationally because as long as we're near a meta network, that's absolutely fine. But if we were to look to expand beyond the geography actually looking at M&A, it's probably going to be more helpful for us because it will help establish an existing warehouse with an existing customer group and just allows for that maturity to kind of get us to the then we need it to be at a more remote location. So there's not a long list of potential M&A targets for us in this area. It's something that we're looking at just developing what that looks like at the moment. So we've had 1 or 2 conversations, but that's something they're going to continue to mature over the next 12 months. I don't see that it's going to be as active as the fuels world that Chris has just talked about, but it's one for us to look at exploring. And one of the other key benefits for us of looking for a warehouse that would be based somewhere else in the country. So potentially kind of Midland to Southeast, it will enable us to drive better efficiencies in our fleet. So whilst we can support our customers naturally at the moment, we do have periods of time where those -- where our fleet is effectively idle because we have a driver that needs to take a rest break. And so those vehicles are effectively not moving and not transporting things around for us. If we can move to get a warehouse in a different part of the country, and we effectively have 2 hook, which allows us to use our vehicles much more efficiently around those hubs and support our customers as well as driving efficiencies for ourselves. So those are some of the key areas as why M&A is an interesting area for us to look at from a food point of view, but we are early days in how we're looking at approaching that. Okay. Just looking back to Lyondell then in terms of some of the more accounting side and the numbers. So some of the facts and figures here. So Lyondell ended a 15-year lease with a 12-year break clause within there. I've already talked about our investment forecast of GBP 8.5 million, which will be slightly less once we've finished -- paid our final few bills. In terms of the expected return here, so we're expecting it to deliver an annualized operating profit of around about GBP 2.8 million, whether it's steady state, so that's kind of full year 2026. As I mentioned earlier, in full year '24, we did see an outflow as you would expect, associated with that investment. So headline operating profit level, that was GBP 1.2 million. And at PBT, it was $1.7 million. In full year '25, we will see an improvement on that. So there will be a GBP 1.5 million addition to headline operating profit. But by the time we get to PBT, that interest, lease cost makes that PBT neutral in year. So full year '26 is the first year where we start to see those returns at a mature level. So as I said, that's GBP 2.8 million at operating profit. And then from a PBT point of view, our interest charge effectively looks like on a decreasing balance basis is the way IFRS 16 tends to calculate it. So it will be GBP 1.2 million of PBT and full year '26, but that will grow to be GBP 2.5 million by the end of the lease as that kind of interest charge effectively who mines for us. I talked a little bit about right-of-use assets. So you saw that there was an increase on those in the full year results for full year 2024. In totality for Lyondell, we will have a right-of-use asset of GBP 27.2 million and a right-of-use asset of GBP 25.4 million. So the bulk of that will be the warehouse, but we'll also have vehicle and plant leases that will also support the kicking out of the warehouse. And overall, for us, our business case remains in place, and we expect this to deliver a 20% IRR for the business.

Okay. Thanks, Katie. So you can see our strategy features both organic and inorganic growth opportunities, and that gives us our investment case. So NWF is focused on delivering strong return on capital employed, as shown with our recent Lyondell investments and our fuels M&A track record. We have a very strong balance sheet, and that reflects the scale and capability of our asset base. And it also means the Board is very confident to invest in future development. We have cash-generative businesses and the development we've undertaken also returned cash. So those 2 things together enables us to increase our dividends, which enables us to give shareholders that return, and we've managed to do that for 13 years in a row. So that's the investment proposition. If I then just summarize because we can see some really good questions picking up on the right-hand side of our screen. So in summary, solid financial performance in 2024. Fuels was falling to a normalizing market. Food, very strong performance, supporting Lyondell investment and successful fit out of that new warehouse. Feed really effectively managing gross margin and cost base to give a resilient performance. We remain cash positive with long-term funding in place for development. We've also been through a period of board succession, 2 people here are part of that. But that concluded in July with our recent [indiscernible] director appointees. So the Board has now settled going forward. And from a current outlook perspective, it's very early in our financial year and it's the quiet time of our year, but trading to date is consistent with board's expectations and the Board continues to be confident in our future development opportunities and outlook for the group. That concludes the presentation. As I said I can see some interesting questions lining up. So I look forward to answering those now.

[Operator Instructions] Just while the company take a few moments to review those questions submitted today, I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can be accessed by our investor dashboard. As you can see, we've received a number of questions throughout today's presentation, I please ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end.

Okay. So I think we'll just take these in order that have come in, if that works. So the first question we have is, is M&A a possibility in the feeds division in the Southwest region, there are a number of small number of family-owned agricultural feed companies? It's quite a long question, so I won't do all of it. To answer the question, I think it's not something we're actively looking at. And the reason for that is this is a market where there's probably overcapacity. So if we were to undertake M&A, I think we would almost be doing the rest of an industry a favor by taking capacity out for them, and we probably wouldn't benefit from that ourselves. There is an opportunity in this market for some of the large players to be put together to take capacity out and there would be significant synergies around both production and transport, but it's not something we are looking to do at the moment and nor are any of the other market participants looking to do that. The second question is in the fuels division, I believe you only operate from 2 depots in the Southwest, hence, very underrepresented in an area with plenty of rural households requiring heating, rural and agricultural businesses. That's absolutely right. It is a region we have looked to take M&A activity, and we will continue to do so. So you're right. It's a gap that we're very keen to fill, there are a number of potential targets in that area, and we continue to target those. The third question we have says, [indiscernible] was mini conglomerates, is it possible that divesting 2 of the businesses and focusing on the remaining businesses would deliver that to shareholder value? I view this business as a mini conglomerate. So that's probably a Step 1. I don't like conglomerate. We are a specialist distributor. And all 3 of our businesses actually have quite a lot in common with each of them. They just operate in quite different end markets. However, to deal with the underlying point of that, if we were to focus just on one now, it would just make the group smaller, which I don't think would be the interest of shareholders. Our aim is to grow all 3 of our businesses. As we've articulated, we see more opportunity for step change growth in our fuels and food business currently. And clearly, at some future point in time as we grow -- I'm sorry, the third point to make around that is we actually have plenty of funding firepower at the moment for anything we want to do. So I don't have a desperate need for capital. However, as we grow and as we use those funding sources, there might be a point in time where we need to use one of our existing businesses as a funding chip to support the growth of 1 or 2 of the other businesses. And that's something we will always consider and is always on the table. Similarly, we're a PLC. So as a Board, if someone comes in and makes an offer for 1, 2 or 3 or the group as a whole, we are obliged to consider that seriously if it's in the interest of shareholders to do so and we will always look at that seriously. Sorry, where we're next? Yes, so next question is volumes in the feed business seem to have trended lower generally since 2018. Can you provide more detail on this and indicate how your market share has changed in the same period? So I'll deal with the second part of that first. So the feed market is generally flat. There is the same amount of milk produced roughly the same every year. That means roughly the same amount of feed is produced every year to produce the same amount of milk. We have had a reduction in volume, but you'll note over the same time period, our profitability has improved. So that has reflected really us choosing to give up some pretty low margin volume, which we weren't making very much money from. And quite a lot of that, we could win back if we wanted to, but we still wouldn't make very much money from it. So there's a reason why we have lost that. We also lost some salespeople over that period who, again, were quite high volume, but we found once they left, they weren't really making huge amounts of contribution to the bottom line. So therefore, I'm actually more comfortable with where we are now, which is that we have volume that is profitable and that we should start to build backlog from that base rather than being busy fuels and chasing unprofitable volume. Okay. Next question. With reduced volatility in raw material prices, how do you foresee the margin dynamics evolving in the Feeds division over the next few quarters? Yes. So I'm quite pleased with where our feeds business is that they managed that transition back to a normal market last year very effectively. The feeds commodities market has been the least volatile I've seen it in the 7.5 years I've been with the group. I'm not sure that will last, but even so, actually, we're managing the position very effectively. So if it continues to like volatility, then that final they're okay. I don't see an issue for us in that respect. Do you want to answer that Katie?