Profits and sales margins at Hovis have been hit by significant increases in ingredients and utilities costs.
The 137-year-old bakery business reported a £28.6m loss before tax for the 38 weeks to the end of September 2022 – a significant drop from the £20.2m profit reported the year prior.
However, Hovis has changed its reporting period to follow wheat harvest patterns. As such the current results, uploaded to Companies House, only cover a nine-month period versus the 52 weeks to the end of December 2021, making a true like-for-like comparison difficult.
Revenue during the nine-month period was £309.8m versus £367.9m in the full 2021 financial year, and EBITDA fell to a £6.7m loss from £12.7m profit.
The market for bread and baked goods remains highly competitive, it noted, with cost pressures compounded by global volatility in wheat, ingredients, and utility costs following the war in Ukraine. Hovis absorbed a delay in full cost recovery following a period of intense inflationary pressure coupled with changes in the grocery sector and the cost-of-living crisis. As such, its gross margins reduced from 22.8% to 16.8%.
Despite this, Hovis expects to return to profitability with a much-improved performance for the current financial year, which closes in September 2023.
“Significant cost inflation has had an impact on profitability in the nine months period ending September 2022 as we worked hard to minimise the impact on consumers and customers during a year of unprecedented price volatility,” a Hovis spokesperson said.
“As we close the full year to end September 2023, we are confident that we will be able to report a return to strong profitability and with materially improved EBITDA performance. The business is well funded with strong shareholder support and under our strengthened leadership team the business is looking forward to deliver sustainable growth for the years to come.”
Hovis focused on retaining its value share of the market in 2022 and claims to be the most successful of the top three brands in achieving this. The Bakers Since 1886 range, which was launched in early 2021, continued to grow through repeat sales and new product launches. Just last month the range was extended again with a duo of premium bloomer loaves.
Other major developments at the business included the appointment of Jon Jenkins as CEO. He joined Hovis in September 2022, having previously held roles at Allied Bakeries and Müller Milk & Ingredients.