Rising costs contributed to a sharp drop in earnings for bread giant Hovis in 2021, according to the company’s latest annual accounts.
While revenue edged up slightly from 2020’s £360.7m to £361.2m, EBITDA dropped 73% from £13.8m to £3.7m. Gross profit was down from £97.7m in 2020 to £80.2m in 2021, and annual gross profit margin also decreased from 27.1% to 23.2%.
Hovis said sales margins were put under pressure in the second half of 2021 by significant increases in ingredient and utility costs as well as the ongoing risk of delay between inflation and recovery.
The manufacturer also said the situation had been compounded by changes in the supermarket grocery sector and the continuation of challenges relating to the Covid-19 pandemic.
While the company added that the market for bread and bakery products remains highly competitive, it insisted that challenges in 2021 were met by recovering commodity inflation where possible and delivering efficiency initiatives.
The accounts also reveal the company’s finances were boosted by an exception gain of £31.4m from the sale and leaseback of its sites in Glasgow, Bradford and Nottingham.
Looking ahead, Hovis said it remained exposed to commodity markets, principally wheat and energy, that are experiencing significant volatility. Given the current challenges in the consumer environment, timely cost recovery remains important, the company added, but the directors believe processes are in place for managing risks.
During 2021, Hovis NPD included a range of cob loaves, premium buns and rolls under the sub-brand of Bakers Since 1886. Other significant developments during the year included strike action at the company’s Belfast site, which was resolved in May 2021.
With a raft of executive and board level appointments made in October 2021, a further change to the Hovis senior team was revealed last month when it was announced Nish Kankiwala is to step down as CEO at the end of September, with current non-executive director Robert Higginson lined up as interim CEO.
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