NWF Group PLC (AIM:NWF), the food, fuel and feeds distributor, sank close to 6% on Wednesday after its profit and sales dropped and a new site investment dampened forecasts.
Pre-tax profits for the 2024 financial year are expected to see a £1.7 million impact from the group’s investment in its new £8.5 million Lymedale warehouse, which will be used for its food distribution, NWF revealed earlier this month.
Once Lymedale achieves its first full year of operation, which is targeted for the 2026 financial year, it is expected to generate £2.8 million in operating profits per annum.
However, ramp-up costs are expected to be required in both the 2024 and 2025 financial years, although in the second year, the costs will be offset by revenue.
Revenues dropped close to 13% to £472.9 million in the six months to 30 November 2023, with pre-tax profits tumbling by 45% to £3.4 million.
Close to three-quarters of the group’s £4 million in operating profits came from its food distribution operation, while fuels and feeds accounted for £0.7 million and £0.4 million respectively.
Despite the slowdown, analysts are confident the company has room to grow and could even look at fuel mergers or acquisitions once profits normalise.
Shore Capital experts believe the group will have to wait until 2025 until its financials normalise, and therefore see its current market valuation as “fair”.
“We believe NWF is a resilient/robust business, in a very good position despite the macro-economic challenges following prior and continued investment and a strong management team. We retain our HOLD recommendation,” the UK broker added.