Risk management

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.

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.

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.

We monitor theCovid-19 situation closely so that we are able to respond to changes in health and safety guidance or changes in customer demand.


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.

We continue to monitor and plan contingencies with customers and suppliers.

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.

Reductions in commodity prices in both Fuels and Feeds have been successfully managed through the year.

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.

Remains a principal risk in Fuels and Feeds

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.

Remains a principal risk.

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. 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.

Remains a principal risk.

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. 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.

Remains a principal risk.

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. 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. The Group employs appropriately qualified and experienced health and safety personnel and retains health and safety specialists to ensure compliance.

Remains a principal risk.

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. 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.

Remains a principal risk.

20202019 2018
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
The Group has set an internal covenant limit of 2.0x net debt/EBITDA.