REG - Bakkavor Group PLC - Post-close FY21 trading update

BakkavorAnnouncement

13/01/2022 07:05

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RNS Number : 2799Y  Bakkavor Group PLC  13 January 2022

13 January 2022

Bakkavor Group plc

Post-close FY21 trading update

Growth and strategic progress despite industry-wide challenges

Bakkavor Group plc and its subsidiaries ("Bakkavor" or "the Group"), the
leading international provider of fresh prepared food, today issues an update
on its trading performance for the 52 weeks to 25 December 2021, in advance of
its full year results to be announced on 8 March 2022.

FY21 financial performance(1,2)

Robust revenue growth, with margins ahead of expectations despite persisting
industry challenges

We have delivered a robust financial performance across all our regions during
2021, despite unprecedented challenges in the form of supply chain
constraints, labour shortages and cost inflation.

Reported revenue for the year is up 4.4% compared to 2020. On a like for like
basis, revenue increased by 6.2% compared to 2020 and by 1.2% compared to
2019. Operating margin is expected to be ahead of previous guidance and at the
top end of the range of current market expectations of 5.0% - 5.2%(3). This
reflects the Group's scale and category leadership, strong relationships and
strict focus on cost control, all of which helped to mitigate cost inflation
and labour shortages, as well as drive year-on-year efficiency improvements.
Whilst the industry-wide challenges intensified in the last quarter of 2021
and are remaining into 2022, we continue to work closely with customers and
suppliers to mitigate the ongoing impact.

Positive recovery in UK driven by strong demand

We have seen strong sales momentum in the UK as lockdown restrictions eased
and frequency of shopping visits returned. We have delivered an exciting range
of innovative new products for our customers to support the reinvigoration of
our categories and this will continue to drive growth. All categories, except
for salads, were in growth compared to 2019, driven by strong underlying
performance, new product launches and seasonal events. Whilst salads volumes
were more severely impacted by lockdown restrictions and subsequently
constrained by labour availability through the summer peak, we have seen the
category recovery improve through the year. Overall the UK saw like-for-like
sales increase by 2.9% compared to 2020 and was down only 2.3% compared to
2019.

 

Operationally, our key focus is on managing the ongoing industry-wide
challenges, and mitigating the consequential inflationary headwinds, which
intensified in the fourth quarter of 2021.  Existing raw material
pass-through mechanisms are working effectively, and we have received support
from our customers in dealing with inflationary pressures outside of these
models. This, combined with our relentless focus on efficiency improvement and
cost control, means we have largely mitigated the impact of inflation in 2021.

US continues to enhance strategic partnerships and deliver strong growth

In the US, we have continued to see positive momentum through the period,
supported by growth with our strategic grocery retail and online customers.
Revenue increased 31.8% on a like-for-like basis compared to 2020 and 48.4%
compared to 2019. We have invested in increased capacity across our existing
footprint to accommodate new business and we remain focused on maximising
operational leverage as volumes increase. However, inflationary pressures,
first felt acutely in the second quarter of the year, have persisted, and
while we have been successful in securing price increases across our customers
latterly to help mitigate the impact, margins have been held back. We expect
operating margin to be broadly in line with the Group in 2021. Consumer demand
for fresh, convenient meals and fresh prepared food continues to accelerate;
as a leading supplier we are continuing to drive growth in this market and are
well placed to further benefit from these trends.

Steady recovery in China with strategic investments largely complete

Our China business continues to deliver steady progress despite ongoing
regional restrictions impacting volumes, particularly in the second half.
Like-for-like revenue increased 24.6% compared to 2020 and was down only 2.4%
compared to 2019, an improved trend compared to the first half of the year. We
have continued to support our strategic foodservice customers through this
challenging period and have made good progress in developing our presence in
new channels, including retail and office catering. With the strategic
investment across our China footprint largely complete, we have significant
headroom for growth.

Further reduction in net debt brings leverage within target range

Our improved trading performance has supported a reduction in net debt and
brought leverage within our medium-term target range at 1.9 times. The Group's
liquidity position remains strong, with significant headroom of over £190m
against our debt facilities of £489m, of which the majority mature in 2025.

 

AGUST GUDMUNDSSON, CEO, COMMENTED:

"We are pleased to see continued growth and strategic progress across the
Group, despite unprecedented industry-wide challenges. The Group's strong
performance and ongoing commitment to delivering for our customers is
testament to the resilience of our business model and the dedication of our
colleagues. We have continued to leverage our scale, category leadership and
expertise - together with our strengthened financial position - enabling us to
successfully navigate these challenges and emerge in a position of strength.

"We have confidence in our ability to continue to build on the positive
revenue momentum through 2022 as demand for our fresh, convenient, and
innovative products remains strong. The significant challenges facing our
industry are, however, persisting; we remain focused on mitigating the impact,
as well as managing the current heightened uncertainty associated with the
Omicron COVID-19 variant. Looking forward, we remain positive about the
medium-term growth opportunity and believe the Group is well placed to deliver
enhanced returns for shareholders."

 

 

1.     Unaudited.

2.     Like-for-like and adjusted references throughout this Trading
Update refer to non-IFRS measures or Alternative Performance Measures.
Reported revenue is the IFRS measure of revenue generated during the period.
Like-for-like revenue is revenue from continuing operations adjusted for the
revenue generated from businesses closed or sold or acquired in the current
and prior year and the effect of foreign currency movements.

3.     Bloomberg consensus for FY21 operating profit margin of 5.1%, with
a range of 5.0% to 5.2%. Last updated on 6 January 2022.

 

 

ENQUIRIES

Institutional investors and analysts:

Ben Waldron, Chief Financial Officer

Emily Daw, Head of Investor
Relations
+44 (0) 20 7908 6114

Media

Katie Hunt, MHP
Communications
+44 (0) 20 3743 8794

Rachel Farrington, MHP
Communications
+44 (0) 20 3128 8613

 

ABOUT BAKKAVOR

Bakkavor is the leading provider of fresh prepared food ("FPF") in the UK,
with a growing international presence in the US and China. The Group is the
number one by market share in the UK in the four FPF product categories of
meals, salads, desserts and pizza & bread, providing high-quality, fresh,
healthy and convenient food. Its customers include some of the UK's leading
grocery retailers, including Tesco, Marks & Spencer, Sainsbury's and
Waitrose. The Group's International segment operates in the US and China.
Bakkavor was founded in 1986 and has its headquarters in London. The Group has
over 19,000 employees and operates 23 factories in the UK, 5 in the US and 9
in China. For more information go to: www.bakkavor.com
(http://www.bakkavor.com)

LEI number: 213800COL7AD54YU9949

Disclaimer - forward-looking statements

This trading update statement, prepared by Bakkavor, may contain
forward-looking statements about Bakkavor. These represent expectations for
the Group's business, and involve known and unknown risks and uncertainties,
many of which are beyond the Group's control. The Group has based these
forward‐looking statements on current expectations and projections about
future events. These forward-looking statements may generally, but not always,
be identified by the use of words such as 'will', 'aims', 'anticipates',
'continue', 'could', 'develop', 'should', 'expects', 'is expected to', 'may',
'maintain', 'grow', 'estimates', 'believes', 'intends', 'projects', 'sustain',
'targets', or the negative thereof, or similar expressions.

By their nature, forward-looking statements involve risk and uncertainty
because they relate to events and depend on circumstances that may or may not
occur in the future and reflect the Group's current expectations and
assumptions as to such future events and circumstances that may not prove
accurate. A number of material factors could cause actual results and
developments to differ materially from those expressed or implied by
forward-looking statements. There may be risks and uncertainties that the
Group is unable to predict at this time or that the Group currently does not
expect to have a material adverse effect on its business. You should not place
undue reliance on any forward-looking statements. These forward-looking
statements are made as of the date of this announcement. The Group expressly
disclaims any obligation to publicly update or review these forward-looking
statements other than as required by law. Some numbers and period on period
percentages in this statement have been rounded or adjusted in order to ensure
consistency with the financial information.

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