13.03.2025
Since Tuesday 4th March when the Kitwave Group (LON;KITW) announced its Final Results for its year to end-October 2024, its shares have put in something of a lacklustre performance.
Upon the results they were went up 4p to 280.28p, before closing that night at 255p.
Since then, they have wavered between 248p and 268.50p – but are now trading at around the 258p level.
In my view that is far too low a price for the group’s shares, especially considering that brokers have Target Prices of up to 495p.
The Business
Established way back in 1987, following the acquisition of a single-site confectionery wholesale business based in North Shields, Kitwave is a delivered wholesale business, specialising in selling and delivering impulse products, frozen, chilled and fresh foods, alcohol, groceries and tobacco to approximately 46,000, mainly independent, customers.
The enlarged group has a network of 37 depots, enabling it to support delivery throughout the UK to its diverse customer base, which includes independent convenience retailers, leisure outlets, vending machine operators, foodservice providers and other wholesalers, as well as leading national retailers.
The company specialises in selling impulse products, frozen, chilled, and fresh foods, alcohol, and groceries.
Its segments include Ambient, Frozen, and chilled, and Foodservice.
The Ambient segment provides delivered wholesale of ambient food, drink, and tobacco products.
The Frozen and chilled segment provides delivered wholesale of frozen and chilled food products.
The Foodservice segment provides delivered wholesale of alcohol, frozen, chilled, and fresh food to trade customers.
Its product range includes branded lines, branded drinks, crisps and snacks, beers and wines, bottled waters, weigh outs, and tobacco.
It also offers wholesale commercial catering supplies.
It specialises in in the supply of ice cream, ice lollies, and convenience frozen food.
It also carries a core range of branded beers and wines.
The group's growth to date has been achieved both organically and through a strategy of acquiring smaller, predominantly family-owned, complementary businesses in the fragmented UK grocery and foodservice wholesale market.
The 2024 Finals
The year to end-October 2024 saw a 10.2% increase in revenues to £663.7m (£602.2m), with its adjusted operating profit of £34.0m (£32.0m), but dropping its underlying earnings to 30.0p (30.3p) per share.
In an overview comment the group stated that it had been a year of investment for the group, in the form of internal investment through infrastructure spend on IT, vehicles and warehousing, and external investment with the completion of three acquisitions.
Management Comment
CEO Ben Maxted stated that:
"Kitwave has delivered another strong full-year performance.
We have met full-year market expectations, achieved organic growth and expanded our operations, particularly in our Foodservice division.
The Group had a clear plan for FY24 to invest for growth in three key areas: IT, delivery infrastructure and strategic M&A opportunities.
The successful execution of this plan saw new warehouse technology enhancing operational efficiencies, a new state-of-the-art storage and delivery facility in the South-West and three acquisitions completed, which have significantly increased the scale of the Group's UK network.
Importantly, the Group continued to deliver growth and maintain its high levels of customer service, resulting in achieving over 98% satisfaction in customer service excellence levels.
This is testament to our operations model and the commitment of our team.
Looking ahead, the Group has started the new financial year well, and the Board is already working towards its goals for FY25.
We believe this will generate value for our stakeholders."
The Equity
There are some 80.44m shares in issue, some 63.6% held by institutional investors.
The larger holders include Threadneedle Asset Managers (9.28%), Liontrust Investment Partners (6.88%), Ninety One UK (4.35%), BlackRock Investment Management (4.34%), Premier Fund Managers (4.33%), Canaccord Genuity Wealth (4.04%), Norges Bank Investment Management (2.87%), Close Asset Management (2.59%), and Harwood Capital (1.87%).
Broker’s Views
There are at least 5 analysts following the company, all of whom rate the group’s shares as a Buy.
The consensus average Target Price is 468p, with the Highest going for 500p, and the Lowest at 425p.
Analyst Mark Photiades at Canaccord Genuity Capital Markets has a Buy note out on the group, following the results, aiming at 495p a share as his Target Price.
For the current year, to end-October 2025, he is estimating group sales to have risen from £663.7m to £843.8m, lifting adjusted pre-tax profits to £35.5m (£27.8m), raising its earnings to 32.5p (28.6p) and its dividend fractionally better at 11.6p (11.3p) per share.
For the coming year he goes for £867.4m turnover, £37.6m profits, 34.5p earnings and a dividend of 12.4p per share.
The year to end-October 2027 estimates are for sales of £889.0m, £39.4m profits, earnings of 36.1p and a 13.0p a share dividend.
He notes that with 15 successful acquisitions since 2011, earnings-enhancing mergers and acquisitions remains a significant opportunity for the group, given the large, fragmented wholesale market in which it operates.
In My View
I am now looking forward to some good comments from the group’s AGM on Friday 28th March.
These shares should be trading well over the 300p mark, heading up to around the 350p level.
Even then, I would consider that they would still be priced below proper market value.
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