Kitwave says fragile confidence, higher labour costs to impact profit

(Alliance News) - Kitwave Group PLC on Tuesday warned lower sales and higher employment costs would mean lower than expected profit in the coming financial year.

In response, shares in the North Shields, England-based food wholesaler plunged 22% to 250.00 pence each in London on Tuesday. They had earlier traded as low as 230p each.

Kitwave said volatility in the macroeconomic backdrop has caused a "more pronounced fragility" in consumer confidence hitting volumes in the leisure sector.

"Whilst footfall is up from the prior year, consumption is down in certain areas. This impact has been particularly visible in our higher margin tourism-based depots," it added.

In addition, Kitwave no longer believes it will be able to offset increases in employer national insurance.

The combined effect means the company has revised expectations during the current financial year and beyond.

Kitwave now expects to report full-year adjusted operating profit in the range of GBP38.0 million to GB40.5 million.

This would still be growth of as much as 19% from GBP34.0 million in the financial year to October 31, 2024, but is below the GBP43.6 million forecast by broker Stifel.

The warning came as Kitwave said pretax profit fell 23% to GBP5.6 million in the six months to April 30 from GBP6.9 million a year prior.

Revenue rose 27%, or by 3.1% on a like-for-like basis, to GBP376.2 million from GBP297.0 million a year ago.

Adjusted operating profit increased 22% to GBP13.2 million from GBP10.8 million.

Kitwave said the Retail and Wholesale division slightly outperformed expectations with like-for-like revenue up 3.1%.

The Creed Foodservice integration is ahead of timetable, with full benefits to be realised over the next two years, the firm added.

In addition, the operational integration of Total Foodservice with Miller Foodservice is "on track and expected to be completed by the end of the financial year", Kitwave said.

The company increased the interim dividend by 3.9% to 4.00 pence per share from 3.85p.

By Jeremy Cutler, Alliance News reporter

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