Morrisons’s in-house Rathbones bakery has slumped into the red as speculation continues to intensify around a potential acquisition by Hovis.
Newly filed accounts at Companies House from Rathbone Kear Ltd revealed the own-label supplier increased revenues 13% to £70.5m in the 52 weeks ended 29 October 2023.
However, a £4.5m impairment charge related to fixed assets – with no other details specified – hit the company and dragged the bottom line into the red. Pre-tax losses totalled £3.7m in the year, compared with a £737k profit previously.
Staff costs also jumped by more than £2m to £16.5m in the period, with average number of employees climbing from 417 to 432.
The results come as rumours in the City surrounding a potential sale of the bakery to Hovis continue to circulate.
One dealmaker said Hovis was aiming to get the deal done before the end of November.
Private equity owner Endless, which acquired the supplier in 2020, is keen to diversify the brand away from the challenged traditional sliced bread market.
It is part of an ongoing turnaround at Hovis, which Endless is hoping to whip into shape ahead of a potential exit in 2025.
“Hovis is very much on the acquisition trail,” the dealmaker said. “It is absolutely central to Endless’ plan.
“And buying Rathbones would make sense. It is a better-margin facility than the plants Hovis already owns and could allow the business to consolidate its footprint.”
However, another industry source added there were currently no conversations taking place between Morrisons and Hovis in recent weeks, casting doubt on a deal.
Rathbones makes a 47-strong range of products for Morrisons, including hot cross buns, muffins, crumpets, pancakes, naans and pittas. It also already supplies Hovis with products.
Any deal would likely come with strings attached to continue supplying Morrisons at an advantageous price for the supermarket.
Heavily leveraged Morrisons made firm promises not to sell off any assets, including its manufacturing operations, following the private equity takeover by Clayton Dubilier & Rice in 2021.
News first emerged of a potential sale of Rathbones in The Telegraph back in February.
Morrisons and Hovis both declined to comment.
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