The chief executive of North East wholesale group Kitwave says it is prepared for the pressures of inflation on its business, as the firm hikes up full year expectations.
The North Shields company listed on the Stock Exchange last year, realising a 20-year ambition for CEO Paul Young to harness the power of its AIM market profile to drive forward growth.
The firm, which was launched as a single site confectionery wholesaler in 1987 years ago, has now shrugged off the effects of the pandemic to returned to half-year profit after a significant increase in revenues.
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Unaudited interim results for the six months ended April 30 show a 51% increase in revenue to £223.3m, helping the firm to report a profit after tax of £4.4m, bouncing back from a £3.4m loss last year. The company also reported cash generation from operating activities of £17.1m.
As a result of the strong trading, Kitwave’s board has revised its full-year expectations upwards and indicated it will pay a dividend of 2.50p per share for the financial year ending October 31.
Mr Young said: “We’re very much back now to familiar trading. We’ve done this for 35 years – we are very aware that we are in an inflationary market and there are cost pressures, from a wages point of view and a fuel point of view, but this is an area Kitwave has played in for years. We know how to deal with inflation and pressures on our customers. This is our bread and butter.
“If you look at Kitwave, we sell impulse products. You only buy a can of coke or Mars bar because you’re moving around, and people are moving around again, so this strength of impulse products is coupled with the customer base we’ve got - 39,000 independent customers that are robust and resilient.
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“Suppliers everywhere, like us, are suffering wage and fuel costs. That increase we have to pass on unfortunately to our customer but that allows us to mitigate the increased costs that we’ve got. A wholesaler is quite often in that fortunate position.
“May, June, July and August are critical months for Kitwave, and we know what May and June looks like and it’s just as good as our half year so we’re very confident about using the word ‘significant’ in our results.”
The company’s 430 vehicles make 3,300 deliveries every day, with numbers set to rise on the back of the launch of its new online trading platform, which started with its Eden Farm offering. Eden Farm has seen online orders grow from 14% to 30% of their total sales.
Mr Young said: “The Eden Farm website really has gone from strength to strength. The biggest positive is that people order more. As a consequence we’ve rolled that out across our Miller’s and MJ Baker business and will roll it out across the remainder of the business over the next six months or so.”
The company, which has 1,150 employees, now has 27 depots after opening a new a 60,000 sqft distribution centre in Wakefield, Yorkshire. It said its February deal to acquire South West foodservice supplier M.J. Baker had been an “excellent addition” and more acquisitions will also follow, but only if the time is right and they make a good fit.
Mr Young said: “We work in 30 mile radiuses and you see where our depots are, you see where there’s blank areas. There might be a few more in the South West, you could go into Scotland – we’ve got lots of places we could continue to expand into. But it will be through M&A, organic growth comes from building on top of our M&A. There’s lots of opportunities but we’ll only do it as and when it’s right for Kitwave.”
He added: “I think the first time I looked at flotation was 20 years ago. The business has changed substantially since then and I think we now trade in one day what we used to trade in a year. It’s always been an ambition to take the business to a Plc status and it’s the right place to be.
“You look at our market and see ourselves as a £500m business, we see a £10bn market place, serviced by fragmented wholesalers. We know that there’s room for significant growth, and being a Plc business has lifted our profile, and allowed us to have those conversations in an easier fashion.”