Iceland announces record profits

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The Independent Online

Frozen foods retailer Iceland today reported record sales and profits - heaping pressure on potential buyers to pay more for the company.

Iceland, which owns 796 stores, said underlying profits rose 14.8% to £155.5 million in the year to March 2011, with like-for-like sales growth of 2.1%.

The company, which also owns the Cooltrader discount food chain, said sales increased 5.9% to £2.4 billion, helped by opening 20 new stores.

The strong figures will drive up the price that potential bidders are considering paying for the company, with supermarket rivals Asda and Morrisons reported to be thinking about a bid.

The company was effectively put up for sale after collapsed Icelandic bank Landsbanki said it will offload its 67% stake this year.

However, founder and chief executive Malcolm Walker, who along with other members of the senior management team owns a 23% stake in the company, is also understood to be considering a bid.

If Mr Walker regains ownership of the company he founded in Oswestry, Shropshire, in 1970, it would be a remarkable comeback.

He lost his job at the company in 2001 but was brought back in 2005 to revive its fortunes and sales have grown every year since.

While Mr Walker is interested in buying back the company, it is understood to be attracting interest from other supermarkets who are keen to grow their share of the small supermarket sector and could fetch bids of £1.5 billion.

Iceland has boomed since the economic downturn as sales of frozen food grew because consumers consider it to be good value for money.

Iceland also credits its strong performance to its policy of selling its products at rounded-up prices such as £1 or £2, which makes it easy for customers to calculate their shopping bill.

Like-for-like sales slowed from 4.3% the previous year as a result of a slowdown in the final quarter of 2010, but have picked up again since, added Mr Walker.

He said: "Sales slowed a little between autumn and Christmas - I don't know why - but have been strong since. This is our sixth year of sales growth but we can't always beat the market."

The company plans to open a further 15 stores over the next year.

Iceland recently signed up the winner of I'm A Celebrity ... Get Me Out Of Here!, Stacey Solomon, to front a new TV advertising campaign.

The previous face of Iceland, Kerry Katona, was dropped following allegations about her private life.