NWF Fuels is the third largest distributor of fuel oil and fuel cards delivering over 695 million litres across the UK to 127,000 customers in FY20.
With 127,000 customers being supplied across 25 fuel depots, Fuels operates in markets that are large and robust and, as a business, it has consistently proved it can effectively manage the volatility in oil prices. The industry remains highly fragmented, with many small operators, which we continue to believe provides an opportunity for NWF to further increase market share.
- Consolidate a highly fragmented market.
- Expand existing geographical area.
- Increase business density in existing territories.
- Invest in a clean fleet.
- Active acquisition pipeline.
"A strong performance across our 25-depot network servicing solid demand from a cold winter and increased home working.”
Richard Huxley Managing Director
Fuels’ strong performance was as a consequence of a commercial focus on gas oil and solid demand for heating oil across all depots as a result of a cold winter and increased home working during lockdowns by domestic customers. The extended winter period supported margins stronger than anticipated which more than offset any lower commercial activity from the impact of Covid-19.
Volumes rose 4.5% to 695 million litres (2020: 665 million litres); however, revenue decreased by 4.8% to £447.8 million (2020: £470.2 million) due to a change in sales mix and lower average oil prices offsetting the volume growth. On a like-for-like basis (excluding the impact of acquisitions) volumes were stable. The average Brent Crude oil price in the year was $52 per barrel compared to $54 per barrel in the prior year. Oil started the year at $38 per barrel and ended the year at $70 per barrel with periods of slow increase the most challenging and where volatility supports performance.
Headline operating profit was £9.3 million (2020: £11.0 million) benefitting from increased volumes, positive product mix and improved margins across the year. Net profits of 1.4 pence per litre are higher than the long-term average of 1.0 pence per litre highlighting some one-off gains but also the improved product mix with robust demand for heating oil and gas oil sales. The record prior year benefitted from a dramatic fall in the price of oil and a significant demand increase at the start of the pandemic, delivering a net profit of 1.6 pence per litre.
Acquisition activity was paused at the start of the pandemic with the Board agreeing to restart activity in the autumn. Whilst good progress has been made in developing the pipeline, no acquisitions were completed in the year and the physical restrictions in place through lockdowns reduced progress. There are still significant opportunities to consolidate the fuels market and the business is continuing to build its pipeline and assess potential targets across the country.
The Fuels division operates on a de-centralised model with depot management teams focused on optimising performance for the specific conditions of their local market. This model supported our ability to respond swiftly and effectively to the increased consumer demand and significant commodity price volatility experienced during lockdown. We continue to believe that our model is the most effective way to maximise performance, given the industry structure, but we also believe there are opportunities to leverage benefits from the breadth of our growing network. As such we continue to invest in enhancing systems and capabilities for the Fuels division which we believe will improve efficiencies and provide a strong platform for continued growth.
With over 127,000 customers (2020: 116,000) being supplied across 25 fuel depots in the year (2020: 25), Fuels operates in large and robust markets and, as a business, it has consistently proved it can effectively manage the impact of volatility in oil prices. The industry remains highly fragmented, with many small operators, which provides NWF with further opportunities to consolidate the market and increase share.