Kitwave hikes first-half dividend despite weaker earnings

Kitwave Group reported an 8% increase in first-half revenue on Tuesday, to £297m for the six months ended 30 April, compared to £275m for the same period last year.

The AIM-traded company said its consolidated gross margin remained stable at 21.5%, slightly down from 21.6% in the first half of 2023.

Adjusted EBITDA was £15.9m, marginally lower than the £16m reported a year ago, while adjusted operating profit also saw a slight decrease, coming in at £10.8m compared to £11.7m year-on-year.

Cash generation from operating activities improved to £12.4m, up from £11.7m, resulting in a pre-tax operating cash conversion rate of 93%, an increase from 87%.

The company said it continued to invest in its business to capitalise on future growth opportunities, with expected operational and financial benefits anticipated from the second half of 2024 onwards.

During the period, Kitwave successfully integrated two acquisitions into its foodservice division - WLG Holdings, a composite family-run drinks business based in Oldham, and Total Foodservice Solutions, a leading independent food wholesaler in the north of England.

The board said the acquisitions were expected to enhance the company's market position and contribute to its growth strategy.

In leadership changes, Paul Young retired as CEO at the company's annual general meeting, with Ben Maxted, formerly chief operating officer, taking over the chief executive position.

Reflecting its confidence in future prospects, Kitwave's board declared an increased interim dividend of 3.85p per share, up from 3.75p per share for the first half of 2023.

The dividend would be paid on 2 August to shareholders registered by the close of business on 12 July, with the ex-dividend date set for 11 July.

“The group has made positive progress towards its strategic targets during the first half, with a series of important investments that will benefit the Group in the long term,” said chief executive officer Ben Maxted.

“The continuation of our acquisition strategy saw Wilds and Total Foodservice brought into the group, growing our presence in the foodservice sector in the North.

“Their integration into the group has gone well and work streams to further integrate the enlarged northern foodservice operation have commenced.”

Maxted said the construction of the company’s new foodservice distribution site in the south west was close to completion, which would both add capacity and further efficiencies as it consolidated three existing depots.

“Ahead of the completion of the new site, WestCountry has successfully migrated onto the group's ERP system to enable a smooth integration of the businesses.

“As noted in the pre-close trading update, operating profit for the first half is slightly behind the prior year due to investment and lower levels of demand in the group's foodservice hospitality customer base.”

That, alongside the benefits of the increased investment in infrastructure and the inclusion of trade from Total Foodservice in the second half, would lead to the company's annual financial performance having an increased second-half weighting, Ben Maxted explained.

“Despite the slight shortfall in operating profit in the first half and the continued wet weather in May and early June, we expect to be in line with market expectations for the full year ending 31 October.”

At 1234 BST, shares in Kitwave Group were down 6.95% at 312.64p.

Reporting by Josh White for Sharecast.com.