Stock up on food firm building its reserves

NWF – originally known as the Cheshire Farmers Supply Association – can trace its roots back to the Victorian age.

Nearly 150 years later, the company still sells feedstock from Wardle in Cheshire. But today, it is number two in the country, supplying 4,500 farming customers with food, fertiliser and dietary tips for cattle and sheep.

NWF has moved into two other avenues as well. The group stores and distributes goods such as Typhoo tea, Bart spices and Applaws pet food to all the major supermarket chains, and it supplies fuel and heating oil to hauliers, small businesses and rural homes nationwide.

Midas recommended the shares 18 months ago, when the stock was £1.59. The price rose to £1.84, before interim figures were released last week. However, the shares then slipped to £1.69, as some investors took profits.

Their reaction seems premature. The results were strong, chief executive Richard Whiting is confident about the future and there is real momentum in the business.

Whiting is particularly optimistic about the fuels division, which supplies around 110 million gallons of fuel a year from 20 depots across the UK. NWF is the third largest supplier in Britain but the industry is extremely fragmented, with some 150 individual operators dotted around the country. Whiting is keen to snap up some of these businesses – one Solihull-based firm was acquired before Christmas – and more such deals are likely to follow.

Whiting has also invested in the animal feed business, upgrading mills in Carlisle and Cheshire, improving logistics to drive efficiency and employing more nutritionists to advise farmers on how best to feed their herds. As food is the biggest cost for most farms, specialist advice is highly welcome and helps to increase sales.

The grocery division is busier than ever, as manufacturers stockpile goods ahead of Brexit. From an 800,000 square foot warehouse in Cheshire, NWF stores products on behalf of these corporations and transports them round the country. The firm has recently moved into ecommerce too, packing goods, such as MaxiMuscle sport bars and protein powder and delivering them directly to consumers. This is higher margin than NWF’s traditional distribution business and Whiting hopes to do more of it.

Brokers forecast steady growth in sales and profits with a decent dividend too, expected to rise from 6.3p to 6.6p in the year to May 31, putting the stock on a yield of almost 4 per cent.