Fuels

Review of the year

Fuels experienced more challenging market conditions than recent years, as customer concerns regarding the security of supply, which had commenced in the pandemic and continued through the start of the conflict in Ukraine, came to an end and the market experienced a year of stable supply and low volatility in the oil price. As expected, this led to a normalisation of market pricing and therefore margins. The second mild winter in a row reduced demand for heating oil which increased competition for commercial diesel and gas oil volumes with a corresponding further impact on market price and therefore margin. We responded to these market dynamics through targeting additional commercial volume whilst actively managing our cost base to optimise our sales team and size of our tanker fleet.

Volumes increased by 3.6% to 659 million litres (2023: 636 million litres). Revenue decreased by 10.5% to £677.8 million (2023: £757.2 million) as a consequence of lower oil prices. The average Brent Crude oil price in the year was $83 per barrel compared to $90 per barrel in the prior year. The volatility during the year was low with a high of $92 per barrel in September 2023 and a low of $75 per barrel in June 2023.

Headline operating profit was £7.9 million (2023: £12.9 million) as a consequence of a normalisation in the market and a stronger mix towards commercial volumes which results in a net profit of 1.2 pence per litre.

One trade and asset acquisition was completed in the last financial year: Geoff Boorman Fuels LLP (Kent) for £2.6 million in July 2023. This accretive acquisition adds 19 million litres of fuel to our business in a full year. The acquisition pipeline of active opportunities has significantly improved in recent months and this remains a focus for our development activity. Whilst we have a proven post-acquisition integration plan we are undertaking further improvement initiatives to drive more efficiency and value from acquisitions.

The Fuels business operates a network of 27 depots which service domestic and mainly SME commercial customers in the local area. We believe there is significant opportunity to grow this network and improve its efficiency by reducing the distance travelled for each delivery as we increase the depot density in a given region. The depot network also provides the opportunity to supply larger, more complex, commercial customers who require reliable service in multiple locations. As such, we continue to invest in enhancing the capabilities for the Fuels business, including investment in the tanker fleet, which we believe will improve efficiencies and provide a strong platform for continued growth through both acquisitions and organic volume growth.

With nearly 107,000 customers (2023: 100,000) being supplied across 27 fuel depots in the year (2023: 27), 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 its market share. We continue to closely monitor developments in biofuels such as HVO to ensure the business is well placed to participate in the energy transition of the UK economy.