Kitwave points to impact of wet weather on hospitality as profits slip

Food and drink wholesaler Kitwave says wet weather has hampered trading in the early part of the year, but investments will yield long term benefits.

New unaudited, first half results for the North Shields-based business show revenue grew to £297m, up from £275m in the first half of 2023. But operating profits fell to £9.3m, compared with £10.2m previously, as operating margins fell to 3.1% from 3.7%.

The 37-year-old firm has grown its network across the six months to the end of April, including buying Oldham drinks supplier Wilds in November and Huddersfield-based Total Foodservice, in a £21m deal in March. Together the additions helped Kitwave boost revenue across its foodservice division by more than 15% to £93m though adjusted operating profits fell to £6.2m, compared with £7.3m in 2023, thanks to reduced demand from its high margin hospitality customers during the wet weather in the first part of the year.

Read more: Smiffy's fancy dress retailer is saved by US group after falling into administration

Read more: Evidence of improving North East economy as confidence beats regional peers

Meanwhile the group's retail and wholesale division saw revenues rise to £204m, compared with £194m and adjusted operating profits move up to £7.3m from £6.9m.

Investments across the group included £150,000 spent on voice-activated picking technology in its northern distribution hub, which bosses said would boost efficiency. And a new 80,000 sqft distribution site in the South West is nearly complete, meaning three existing sites can be rolled into one, offering the group's full food service range, fresh produce, ice cream and drinks, all of which is hoped to drive organic growth.

Kitwave chief financial officer David Brind told BusinessLive the business is on target to meet full expectations, despite the wet weather impact in the early part of the year. He said: "Let's face it, May and June hasn't been phenomenal weather wise, until perhaps the last two weeks of June but particularly in May we saw a pick-up as the wet weather ceded a bit. It's not customer numbers, our customer numbers have held up very strongly all the way through the period - it's just the level of ordering from those customers because their footfall has struggled."

Ben Maxted, chief executive officer of Kitwave, said the acquisitions of Wilds and Total Foodservice had gone well and that investment across distribution capabilities would add capacity and efficiencies. He added: "As noted in the pre-close trading update, operating profit for H1 2024 is slightly behind the prior year due to investment and lower levels of demand in the group's Foodservice hospitality customer base. This, alongside the benefits of the increased investment in infrastructure and the inclusion of trade from Total Foodservice in H2 2024 will lead to the company's annual financial performance having an increased second-half weighting."

Kitwave announced an increased interim dividend of 3.85p per share for the six month period, to be paid on August 2.