Hovis has made big strides in its turnaround as significant price hikes helped boost revenues and profitability.
Sales at the wrapped bread supplier jumped £179.2m to £489m in the 53 weeks to 30 September 2023, according to its latest accounts, which are the first to be published under the new management team led by CEO Jon Jenkins.
Hovis pushed through hefty price rises for its products to combat soaring input cost inflation for commodity prices, distribution costs and energy bills in the wake of the war in Ukraine. The latest figures were also elevated by a change to the business’ financial year end, with the prior accounts covering 38 weeks to 24 September 2022.
However, higher prices (up 15% on average per pack in 2023) resulted in shoppers trading down, with the new edition of The Grocer’s Britain’s Biggest Brands revealing Hovis suffered a 10.5% drop in volumes in 2023 as it sold 29 million fewer loaves.
Alongside the rise in revenues, gross profits almost doubled to £102.6m in the 53 weeks to 30 September, while EBITDA moved from a £6.7m loss to a £26.8m profit. The company – owned by UK private equity firm Endless – also turned an operating loss of £24.5m to a £3.2m profit.
Hovis attributed the improvements to cost savings made after a drive to step up overall efficiency and customer service.
The company remained in the red at a pre-tax level, with an overall loss of £3.6m, compared with £28.6m in the previous period, as a result of higher finance expenses of £6.8m linked to interest on debts.
“We have made good progress in the last 12 months, with much improved financial results, stronger relationships with major customers and more substantive growth platforms in place for the future,” said Jenkins, who joined as CEO at the end of 2022.
“This is a testimony to the hard work and dedication of our colleagues across our bakeries and distribution centres to lead the market on quality and service whilst always looking to improve the business week in, week out. Whilst the cost of living crisis and recessionary economic backdrop remain challenging our business remains well funded with strong shareholder support and we are looking forward to delivering sustainable growth for years to come.”
Hovis added that having “moved the business back into a sustainable financial position” it was now focused on strengthening its competitive position in the market. A £2m advertising campaign, voiced by actor Christopher Eccleston, is set to be launched this week reintroducing the famous tagline ‘as good today as it’s always been’, which the group hoped would support volume growth in the core bread business.
The business is also investing to strengthen its logistics capability and said that by the end of 2024 all the national delivery fleet would be less than 12 months old and use the latest technologies to drive lower emissions and greater fuel efficiencies. On the back of this investment, Hovis is expanding its third-party logistics business to carry other bakery products to stores on behalf of its customers. “This helps to reduce food miles and waste in the supply chain, as well as strengthening relationships and revenue with key retailers,” Hovis said.
Additionally, Hovis recently signed an exclusive manufacturing and distribution agreement with gut health bread brand Modern Baker to target further growth in the health and nutrition space, with the expansion of their SuperLoaf and SuperBakery franchise across the UK and Ireland.
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