David Wood Baking has relieved significant inflationary pressures by sourcing new funding and pushing through price hikes to recover soaring input costs.
Surging ingredients, transport and energy costs pushed the Leeds-based own-label bakery, which employs more than 1,600 staff across eight sites, to a loss in 2022 and stretched its working capital, according to new accounts.
The Grocer has learned the group completed a successful refinancing this year from investment bank Leumi and Fresh Thinking Capital after working with KPMG to ensure its survival.
However, uncertainty remains as auditors of long overdue accounts filed this week at Companies House for the year ended 30 November 2021 expressed worries over future trading.
“A material uncertainty exists that may cast significant doubt on the group and company’s ability to continue as a going concern,” accountancy firm RSM UK wrote in the accounts.
The accounts for the year ended 30 November 2021 - the first filed by the group since August 2021 - showed sales increased 11% to £137m but operating profits more than halved, falling from £4.7m to £2.1m.
Investment
The drop in profit was driven mostly by heavy investment in bringing a new bread production site in Spalding into operation, while it was also hit with a £858k fine from the Health & Safety Executive after a worker lost an arm in an industrial food mixer at one of the factories.
CEO and founder David Wood highlighted positive momentum, pointing out that while DWB made a loss in the new financial year (ended November 2022), it has since negotiated several rounds of price increases with retail customers and returned to profit by the end of the 2022 calendar year.
“The business will continue to flourish and is able to meet its liabilities as they fall due for the foreseeable future and will operate within its agreed banking facilities,” Wood said.
He added he was “really pleased” with the positive trading pattern from November 2022 to February 2023, with profit levels at or above forecasts. DWB expected to have sales of £200m on an annualised basis, with gross margins at levels delivered prior to 2022.
“Whilst the directors consider it unlikely, if margin levels were to fall significantly as they did between May and October 2022 or forecast sales are materially below forecast, it could impact the group’s ability to operate within their agreed facilities and to achieve covenant compliance, which may result in facilities being recalled,” the accounts said.
Uncertainties
“These events mean material uncertainties exist that may cast significant doubt on the group’s ability to continue as a going concern.
“However, the group has a good relationship with its lenders who have been very supportive during the recent challenging times. Accordingly, if the group were to face any liquidity challenges during the forecast period, whilst not contracted, the board is confident its lenders would continue to be supportive, especially now the business has returned to profitability.”
DWB expected to see further improvements in profits driven by a series of investment across its factories to reduce labour costs, increase capacity and widen product range.
The group supplies all the main supermarkets and discounters with bread, cakes, biscuits and pies and pastries, as well as food-to-go, such as pizza and toasties, and ready meals.
David Wood Baking could not be reached for comment.
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