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Tue 3rd Jul 2018 - Krispy Kreme UK results, foodservice inflation
Krispy Kreme UK reports turnover up 13.8% to £76m: Krispy Kreme UK has reported turnover increased 13.8% to £75,908,000 for the year ending 31 December 2017, compared with £66,689,000 the previous year. At the end of the period, the company operated 113 retail locations across the UK (prior period: 90). Adjusted Ebitda fell to £13,208,000 compared with £14,620,000 the year before as a result of the new openings and increased operating costs. Pre-tax profit was down to £8,823,000 compared with £10,292,000 the previous year, according to accounts filed at Companies House. In their report accompanying the accounts, the directors stated: “The company also continues to develop its off-premises business with new and long-standing partners. The directors are pleased with the trading performance of the company and the gross profit margin of 56.6% (prior period: 58.7%) reflects the expansion in the store portfolio and increased operating costs of the business. Net exceptional costs totalling £311,000 have been incurred in the year (prior period: £435,000), mainly as a result of leases classified as onerous. This has resulted in an adjusted Ebitda of £13,208,000 (17.4% of sales) compared with £14,620,000 (21.9% of sales) in the previous 11-month period, reflecting the expansion in the store portfolio and increased operating costs. This provides a stable and cash-generative base on which the directors intend to continue building a sustained and measured roll-out over the coming years as suitable retail and off-premise sites become available, together with reinvestment in the existing portfolio as the directors consider it appropriate. The number of transactions has increased significantly year-on-year as we increased our availability over the UK and average transaction value in our comparable stores also increased year-on-year.” Krispy Kreme was launched in the late 1930s in Winston-Salem in North Carolina when Vernon Rudolph bought a secret yeast-raised doughnut recipe from a New Orleans chef and began selling to local stores. The UK business, which now employs almost 1,500 people, was bought by its US parent Krispy Kreme Group in 2016 from private equity group Alcuin Capital.

Volatility in soft drinks and fish is fuelling foodservice inflation: Volatility in key food and drink categories including soft drinks and fish are fuelling inflation in the foodservice supply chain, according to the latest CGA Prestige Foodservice Price Index. The report revealed soft drinks prices were 11.1% higher in May 2018 than 12 months previously. Inflation has been triggered by the introduction of the government’s sugar tax and a shortage of food-standard carbon dioxide, a key component of carbonated drinks. The index, which provides subscribers with both overall and category-level inflation numbers, also revealed fish prices to be at record highs, with year-on-year inflation hitting 23.8% in May. The upward trend has been fuelled by spiralling salmon prices in particular and by uncertainty over future fishing quotas. The index also highlighted concerns over future inflation in meat prices in the wake of rising tariffs in key territories and significant supply problems in Brazil, the world’s largest poultry exporter. Several other areas of food and drink recorded negative inflation in May but the high prices in some categories are evidence of the ongoing turbulence in the foodservice sector. Prestige Purchasing chief executive Shaun Allen said: “The upward movement in inflation to its highest level so far this year will not be welcome news for operators. The industry has experienced a continuous stream of supply issues this year that is contributing to the rise in inflation within the foodservice sector and the recent shortage of CO2 is only likely to add further pressure over the coming months. With more turbulent times expected as we head towards Brexit, it will be more important than ever that businesses take a proactive approach to managing the risks of inflation.” Fiona Speakman, CGA client director – food, added: “Our new report is a reminder that inflation in the industry remains unpredictable. While some areas of food and drink have seen some welcome price stability in recent months, other categories are vulnerable to supply shocks. For all businesses it is crucial to properly understand inflation trends and adapt purchasing and pricing strategies accordingly.” The CGA Prestige Foodservice Price Index is jointly produced by Prestige Purchasing and CGA using data drawn from more than 50% of the foodservice market and about 7.8 million transactions per month.

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