Proactive Investors - NWF Group PLC (LON:NWF), the food, fuel and feeds distributor, sunk close to 6% on Wednesday after issuing a profit warning for the 2024 financial year.
Pre-tax profits are expected to be £1.7 million than first predicted due to the group’s investment in its new £8.5 million Lymedale warehouse, which will be used for its food distribution.
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 November 30 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 come from its food distribution, while fuels and feeds account for £0.7 million and £0.4 million respectively.
Despite the profit warning, 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 financial 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.