Hovis Limited, a prominent player in the UK bread market, has released its annual report for the 52 weeks ending 28th September 2024. The report highlights a significant decline in revenue amounting to £38 million. Specifically, the company’s total revenue dropped to £439.6 million, compared to £477.6 million in the previous year, reflecting an ongoing challenge in the market.
Additionally, Hovis Limited reported earnings before interest, taxes, depreciation, and amortisation (EBITDA) of £18.7 million. This figure represents a decrease from last year’s EBITDA of £20.9 million. The company attributed this decline to a combination of “lower revenues and higher distribution expenses,” emphasizing the pressures that financial dynamics have placed on its operations.
In terms of gross profit, Hovis experienced a decrease of £7.3 million, bringing this metric down to £82.2 million. The financial landscape has clearly shifted for the company, as it also reported an operating loss of £3.5 million in 2023, which nearly doubled to £6.9 million in 2024. These figures underscore the growing operational challenges Hovis faces in a competitive environment.
The company has recognized the “risk” posed by decreasing demand for pre-packaged bread. To address this concern, Hovis has committed to implementing various strategies, including “continued strategic partnerships, product innovation, and cost management.” These initiatives aim to mitigate the potential impact on EBITDA and enhance overall financial stability.
Moreover, Hovis has acknowledged the “level of volatility” associated with wheat and energy costs, pointing out that “timely cost recovery remains important.” This highlights the ongoing uncertainties in these crucial areas, which can significantly affect production costs and profitability.
In another notable point from the report, Hovis revealed that discussions are currently taking place with Endless LLP regarding a possible transaction involving a merger between the Kingsmill and Hovis brands. While the company confirmed that these discussions are ongoing, it also noted that no formal Sale and Purchase agreement has been signed as of yet.
Looking ahead, Hovis indicated that it is unlikely that the transaction will be completed within the current going concern period. Even if the merger proceeds, the directors are of the opinion that the group’s structure and the Hovis legal entities will be maintained for tax and operational purposes throughout this period. This underscores the company’s commitment to maintaining stability while navigating transitional changes in ownership and structure.
