Hovis results: refocus on bakery operation paying off

Hovis says it is benefitting from exiting the milling industry and focusing on its bakery operations.

Turnover and profits from the bakery side of the business rose in 2018 despite the challenging wrapped bread market.

Bakery revenue increased 2.8% to £336m while gross profit rose 3.6% to £93.1m in the year to 31 December 2018. EBITDA increased more than 80%, from £8.1 m in 2017 to £14.6m in 2018.

Revenue from the milling business was £193.5m. The business was divested last year, and did not trade for the full financial year. At group level – including baking and milling – Hovis reduced losses before tax from £11.7m in 2017 to £3.5m.

Hovis reported that it had continued to grow its bread market share in a number of large national retailers as well as in independents, pointing out that it had increased share in both the North East and Yorkshire.

Citing Nielsen data for the 52 weeks to 10 August 2019, it said this had strengthened its position as the number one or two bread brand in every region of the UK.

The performance, described as “solid and sustainable” by Hovis, follows the business effectively exiting the milling industry last October. It sold two of its flour mills to Whitworth Bros, closed another and retained one to supply the Hovis bakery operation.

Earlier last year, Hovis had sold its Holgran and Fleming Howden ingredients businesses to AB Mauri.

“Hovis’ results reflect the group’s corporate strategy to focus on further improving the quality and range of Hovis products via a leaner, more efficient operating model,” said a spokesman for the business.

“Building on the positive momentum from the prior year, the group successfully delivered on its long-term plan to divest of non-core, third-party milling operations to strengthen Hovis’ position as a leading, integrated bakery business.”

Hovis added that the market is highly competitive, and that it expects this to remain the case going forward. “However, with the actions we have taken to date, the board remains confident of future positive progress.”