After years of dwindling market share, an often less-than-focused business strategy and a succession of profit warnings, the restructuring measures implemented in March last year at the Big Food Group (BFG) appear to be showing the first signs of fruit.
The company, whose fascias include Iceland and Booker, said that total sales in the first half of 2003 were up slightly at €2.39 billion, helped by a sharp upturn in sales from its refitted Iceland outlets, and that pre-exceptional operating profits were 50.5 per cent higher at £27.4 million. Pre-tax profits were up 14.2 per cent at £5.6 million after exceptional items.
Turnover at the retail business, essentially Iceland, was up 0.4 per cent to £678 million during the half, while the Booker wholesale business posted a 0.1 per cent improvement to £1.66 billion. The foodservice unit showed the biggest improvement, however, with sales up 17.8 per cent to £54.2 million.
The half was noticeable primarily for a return to profitability at the Iceland chain, with operating losses of £6.9 million in the first half of 2002 becoming profits of £3 million in the first half of 2003. This was helped by a 1.4 per cent improvement in like-for-like sales in the second quarter, driven by a higher footfall at its 89 new format outlets during the half and by an increased focus on frozen ready meals, tapping into the growing convenience trend.
Some 48 stores were converted during the half, and already have sales well above the average for the Iceland chain as a whole. A further 60 stores will be converted this year and the programme will be accelerated to 200 stores in the next financial year.
Booker, the cash & carry business, saw its total sales improve year-on-year, with non-tobacco sales ahead by 1.6 per cent on a like-for-like basis and tobacco sales recovering strongly with 0.7 per cent increase on a like for like basis as a result of a new Spend and Save discount scheme. Operating profits were up slightly at £26.6 million during the half.
The Woodward Foodservice business benefited from a 19 per cent increase in like-for-like sales, helped by the expansion of the division's sales team. But this increased investment - and the opening of two new distribution centres - took its toll on operating profits, which dropped £2.2 million into the red.
"The food retail environment served directly by Iceland and indirectly by Booker and Woodward remains as competitive as ever," said Bill Grimsey, chief executive of BFG. "It is possible that further industry consolidation following the report in September by the Competition Commission will see further price competitiveness over the coming months.
"Growth in sales coupled with cost efficiencies remain the key to success. The company will continue to implement its strategic initiatives to achieve those aims. In the meantime, the important Christmas period lies ahead in the third quarter and our business units have developed their plans, in conjunction with suppliers, for a successful value for money campaign."