- Record first-half performance
- Full-year profit guidance downgraded
- Debt levels coming down
Kitwave (KITW:AIM) shares slumped 22% to 250p after the food and drink wholesaler delivered a profit warning driven by falling consumer confidence and the uplift in employers’ national insurance contributions (NICs) which the North Shields-based company no longer believes it can offset.
The downgrade overshadowed news of record first-half revenues and operating profits from the company, which is growing organically whilst executing on its successful buy-and-build strategy.
FEELING THE CHILL
Kitwave, which sells tobacco, drinks, snacks as well as frozen and chilled food to convenience stores, pubs and foodservice providers, generated a 26.7% rise in revenues to a record £376.2 million in the half ended 30 April 2025 and a 21.9% jump in adjusted operating profit to £13.2 million.
Unfortunately, a combination of recent softer trading due to weaker consumer confidence and the macro impact of NIC increases on the group’s customers, continued investment into the South West to support a depot transition and the direct impact of NIC increases, led to a lowering of full-year 2025 adjusted operating profit expectations to the £38 million to £40.5 million range.
Kitwave had initially expected to be able to mitigate the NIC increases announced in Rachel Reeves’ Budget, but these tax increases will now no longer be offset.
The company explained that since its pre-close trading update in early May, volatility in the macroeconomic backdrop has ‘caused a more pronounced fragility in consumer confidence which is adversely affecting volumes in the destination 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.’
WHAT DID THE CEO SAY?
CEO Ben Maxted stressed that Kitwave has a strong balance sheet with a highly cash generative business model. ‘This is expected to lead to a reduction in absolute debt and continued reduction in leverage that will create capacity to reinvest in service-led growth initiatives,’ said Maxted.
‘This financial strength provides the flexibility and resilience to continue pursuing our buy-and-build strategy, which we believe remains the right path forward in the current market landscape, albeit currently no acquisitions are expected during the remainder of the financial year.’
THE CANACCORD VIEW
Following the update, Canaccord Genuity maintained its ‘buy’ rating on Kitwave but slashed its price target from 495p to 420p. The broker cut its full-year 2025 adjusted operating profit forecast by 14% to £38.1 million and trimmed its full-year 2026 and 2027 estimates by 8% and 6% respectively.
‘The consumer environment remains challenging, as evidenced by the recent May retail sales data, with consumer confidence also fragile,’ commented the broker.
‘Whilst today’s news is clearly disappointing, especially in the context of Kitwave’s strong track record of delivery and outperformance post IPO, we believe the medium-term growth opportunities remain undiminished. Balance sheet strength remains and recent acquisition integrations are progressing well and provide Kitwave with the building blocks and national footprint for further profitable growth in what remains a largely fragmented wholesale market.’
