Yahoo Finance Village Bakery: Price rises too late to save Tesco and Five Guys favourite from slipping further into the red
Village Bakery, which supplies baked goods to retailers including Tesco, Aldi and Five Guys, said a recent string of price rises came too late to save it from slipping further into the red, according to newly-filed accounts.
The group, which is made up of four Wrexham-based bakeries that produce packaged bread, rolls and pies for UK retailers, had another loss-making year despite a surge in sales.
Village Bakery hit a turnover of almost £98m in the 12 months ended September 30, 2023, up from just over £69m in the year before.
But this rise wasn’t enough to return the group to profit, as it made a pre-tax loss of just under £22m, an increase of £5m from £17.4m in the year before.
Village Bakery said that despite raising customer prices on “several occasions”, a delay in implementing the changes had “impacted EBITDA accordingly”.
The company grew its EBITDA to £13m over the 12 months, up significantly from £5.6m in the year before.
‘Unprecedented’ cost rises ‘squeeze’ bakery
In a report filed to Companies House, Village Bakery said: “The main risks facing the group are ingredient, packaging and energy inflation, customer retention, and sufficient manufacturing capacity in core lines.
“To mitigate the effects of ingredients and packaging inflation, the group endeavours to buy forward and use futures markets where available.
“After the unprecedented and rapid increases in the previous financial year, a degree of stability has returned to the markets for flour, butter, and vegetable oils. Whilst prices have stabilised they have not fallen.
“Before the Ukraine crisis, the group covered energy at fixed prices for varying contract periods ranging from 12-18 months, which had all expired by October 2022. New contracts were secured at much higher costs.
“The company has raised customer prices on several occasions but margins have been squeezed due to the delay in implementing price rises while costs have risen rapidly. The delay has impacted EBITDA accordingly.
“The group keeps in continual contact with its major customers to ensure complete customer satisfaction, and is developing new products and ideas to broaden its product base and appeal.
“It also reviews manufacturing capacity on a regular basis to ensure it has sufficient capacity for both the present and future plans.”
Is Village Bakery up for sale?
In March Village Bakery revealed it was seeking new owners as its private equity backer, Limerston Capital, instructed banks to run an auction for the private-label bread maker.
Although still in early stages, reports suggest the company is looking for an offer in the region of £160m.
London-headquartered Limerston Capital bought a majority stake in the company in early 2021, with the Jones family, who founded the business, retaining an interest. The family also continued to run the business, headed by MD Robin Jones.
The buyout by Limerston followed a devastating fire at Village Bakery’s flagship factory which destroyed its £12m production facility, which has since been rebuilt.
