UK: Big Food Group hit by weak Iceland sales
The UK's Big Food Group has reported disappointing first-half results for its Iceland frozen food chain and said there was no certainty that Baugur would make an offer for the company.
The group reported profit before amortisation of goodwill, exceptional items and tax of £13.4m (US$24.7m) for the 24 weeks to 17 September, compared to £12.8m a year earlier. However, the company also posted a loss before tax of £9.0m, versus a profit before tax of £2.8m in the year-ago period. Total net sales for the period were £2.29bn, compared to £2.39bn a year earlier.
First-half profitability at Iceland was lower due to a 2.7% fall in sales compared to the same period of 2003. The roll out of the new format stores has been increased this year, with a total of 78 stores converted into convenience, core plus and core formats. Four new stores were opened during the period bringing the total stores trading in the new format to 224. Sales of frozen goods were weaker than last year due to competitor promotional activity. Seasonal products were also impacted by the weather with year-on-year sales of ice cream down 15% and barbecue products also down 15%, the combined impact of both categories accounting for half of the overall sales decline.
In the five weeks to 5 November 2004, Big Food Group said its like-for-like sales fell 3.1%. Iceland's like-for-like sales slid 1.7% in the first quarter, 3.9% in the second quarter, and 3.4% in the five weeks to 5 November.
"The UK food retailing market has undergone significant changes over the last two years with the large supermarkets entering the convenience and neighbourhood markets and consolidation driving prices down. The group has responded robustly to these challenges with the accelerated roll out of its strategic initiatives and further cost efficiency measures. Due diligence with Baugur is progressing and, importantly, the pensions issues have been resolved in principle," said chief executive Bill Grimsey.
The company said it is continuing to cooperate with Baugur and its investment partners as they conduct due diligence in relation to their possible offer for the company. This process is expected to be completed in the next few weeks.
"Whilst good progress has been made, including reaching agreement in principle with the pension scheme trustees in relation to the ongoing funding of the deficit in the event of a change of control, other matters remain the subject of discussion between the company and Baugur. These discussions are continuing; however, there can be no certainty at this stage that agreement will be reached at a price which is acceptable to both parties," the company said.
Sectors: Ice cream
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