Iceland warms to 20% rise in net profit

Malcolm Walker’s £1.5bn management buyout of Iceland Foods appears to be paying off, after full year net profits jumped almost 20 per cent at the frozen food retailer.

The privately owned supermarket chain, which was bought out in March by a consortium headed by Mr Walker, Iceland chief executive and chairman, on Friday said net profits in the 53 weeks to March 30 rose from £155.5m to £184.3m year on year.

The net profit figure excluded £17.6m of exceptional costs stemming from the management-led takeover, and a £2.7m gain from Iceland’s property portfolio.

Mr Walker, who founded the frozen food specialist in 1970, said the performance was Iceland’s seventh consecutive record profit since he returned to head the business in 2005.

“I am particularly pleased that we have achieved this not by chasing short-term profit targets, but by doing the right things for our staff and customers for the longer term,” he said.

Like-for-like sales rose 6 per cent during the year, bolstered by a move by cash-strapped consumers to favour cheaper frozen goods in an effort to cut down on food wastage.

Earnings before interest, tax, depreciation and amortisation rose 22.5 per cent to £230.2m, from total sales up 9.4 per cent to £2.6bn.

Iceland opened 18 net new stores during the year – down from 20 opened the previous year – bringing the group’s total number of outlets to 814 at the year end.

The expansion, which included stores trading under the Iceland and Cooltraders brands, targeted locations such as Glasgow, Scunthorpe, Wigan and Sheffield.

An additional 30 store openings were planned for this year, the group said.

During the year Iceland launched 230 new items and signed a product partnership with Greggs, the bakery chain.

In March, Mr Walker and the management of Iceland Foods saw off competition from private equity groups BC Partners and Bain Capital to acquire the 77 per cent stake in the retailer held by Landsbanki and Glitnir, the two failed Icelandic banks.

Supermarkets Wm Morrison and Asda submitted first-round bids for the frozen food group, but neither proceeded with initial interest.

The successful bid from Mr Walker – valuing Iceland’s enterprise value at £1.4bn plus about £150m of surplus cash in the business – was backed by the Landmark Group investment firm, Lord Kirkham, founder of furniture chain DFS, and Brait, the South African private equity group.

Mr Walker and Iceland’s management own about 43 per cent of the retailer’s equity, while the other investors control the remaining 57 per cent.