Wholesaler Kitwave (KITW:AIM) warned operating profit for the quarter to January 2026 was ‘materially behind’ expectations. This reflected margin pressure and amid weaker-than-expected hospitality sector demand.
| Share price: 292p (-1.5%) | PE: 14.6x |
| Market cap: £245.5m | Yield: 3.9% |
The company cautioned investors this margin squeeze will likely persist throughout the remainder of 2026.
Despite the disappointing news, Kitwave shares didn’t get crushed, shedding a mere 1.5% to 292p.
This is because the company has already recommended a takeover by private equity firm OEP Capital Advisers at 295p which put a floor under the share price.
Unhelpful mix
While quarterly revenue was flat year-on-year, lower-than-expected hospitality demand resulted in an ‘unfavourable revenue mix’ that compressed margins.
Kitwave said profitability was further hit by continued investment in its South West depot and employment-related costs.
This left adjusted operating profit ‘materially’ below the board’s expectations and management cautious on the outlook.
Still thrilled?
North Shields-based Kitwave sells and delivers impulse products, frozen, chilled and fresh foods, alcohol, groceries and tobacco to thousands of mainly independent customers.
On 22 January, the company said it had agreed a £251 million takeover by OEP at 295p. This was a 33% premium to the last undisturbed share price of 221p.
Commenting on the acquisition, OEP partner Ori Birnboim said: ‘We are thrilled to be announcing this recommended cash acquisition of Kitwave, a high-quality national distribution platform within the attractive UK grocery and foodservice wholesale market.’
Despite its attractive organic and acquisitive growth potential in the fragmented UK wholesale distribution market, Kitwave’s stock had drifted for almost two years from a February 2024 high point of 384p.
OEP won’t be happy with today’s earnings alert, which suggests Kitwave isn’t as resilient a business as its suitor thought.
Kitwave is one of the most recent examples of interest from private equity and trade buyers in the UK consumer sector over the past three years.
Broader de-equitisation of the UK market is a factor, but the sheer number of takeovers in the consumer space suggests public markets are undervaluing many of these companies.
We would expect more bids for consumer names to arrive this year.
Read the press release here: https://www.kitwave.co.uk/investors/regulatory-news-alerts/
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