A profits warning at Kitwave has overshadowed the wholesaler’s record first-half results, sending shares tumbling by more than 20% today.
Profits at the group will suffer in the second half from low spending in tourist destinations, Kitwave warned, with key high-margin depots hit particularly hard by low consumer confidence.
A £1.8m jump in National Insurance contributions, following the hike announced in 2024’s Labour budget, will also hit the company this year, pushing up costs in FY25 and beyond. Kitwave had initially expected to be able to mitigate the changes through efficiencies and other savings. However, in this morning’s results, the group revealed it would no longer be able to offset the tax increase.
Combined with the pressure on the topline from the slump in foodservice consumption and continued investment in the south west of the UK, as the group transitions from three separate locations into a single 80,000 sq ft distribution centre, the additional costs led the group to lower full-year profit expectations.
Adjusted operating profit for the year is now forecast to be in the range of £38m-£40.5m, down from the £44.5m previously expected.
Shares in Kitwave sank as markets reacted to the news, falling 22% to 249.7p so far today.
The profits warning came despite a surge in revenues of 26.7% to £376.2m in the six months to 30 April as the group benefitted from the increased scale following the acquisition of Creed Foodservice last year. Like-for-like growth in the half stood at 3.1%.
Adjusted operating profits also rose 21.9% to £13.2m, while pre-tax profits slipped from £6.9m this time last year to £5.6m.
“This period has seen record revenue and operating profits for Kitwave, underpinned by our continued strategic transformation and supported by the acquisition of Creed Foodservice, which has proven to be an excellent addition to the group,” said CEO Ben Maxted.
“Whilst we have navigated some operational changes, particularly the transition to a new, larger depot in the south west and the integration of multiple businesses, we are pleased with the solid progress made and the underlying strength of our group.”
He added the board “remained confident” in its ability to deliver for stakeholders, praising the company’s “solid progress” made despite operational challenges.
“The fundamentals of our business remain strong, our strategy is clear, and we continue to execute with discipline and ambition.”
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