REG - Bakkavor Group PLC - Q3 2022 trading update

BakkavorAnnouncement

23/11/2022 07:00

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RNS Number : 2656H  Bakkavor Group PLC  23 November 2022

23 November 2022

 

Bakkavor Group plc

Q3 2022 trading update

 

Robust Q3 performance; full year within expectations

Bakkavor Group plc (the "Company") and its subsidiaries ("Bakkavor" or "the
Group"), the leading international provider of fresh prepared food ("FPF"),
today updates on trading for the 13 weeks to 25 September 2022 ("Q3 2022") and
guidance for the full year.

 

               Q3 2022                                                                             9 months 2022
 £ million     Reported revenue    Growth    Like-for-like(1) ('LFL') revenue    LFL growth        Reported revenue    Growth    LFL revenue    LFL growth
 Group         542.5               15.3%     530.5                               12.7%             1,552.7             12.0%     1,530.7        10.4%
 UK            445.3               11.9%     445.3                               11.9%             1,294.8             9.2%      1,294.8        9.2%
 US            67.5                46.3%     58.3                                26.3%             184.1               44.5%     167.6          31.6%
 China         29.7                12.9%     26.9                                1.5%              73.8                0.7%      68.3           (7.1%)

 

Robust Q3 revenue growth in line with expectations; continue to navigate a
challenging trading environment

·      Robust growth in reported revenue, up 15.3% to £542.5m, with LFL
revenue up 12.7%.

·      UK LFL revenue growth largely driven by price. Volumes held up
through the Summer and, although pressure on household budgets impacted
volumes in September, we outperformed the FPF market and gained market
share.

·      Strong US revenue momentum reflects sustained demand and price
increases also taking effect. Operational performance has, however, remained
challenging due to disruption as significant volumes were onboarded.

·      Volumes in China have continued to recover, with LFL revenue
ahead of FY21, and this has supported some margin improvement.

·      Ongoing Group-wide mitigation of inflationary headwinds through
price recovery, productivity improvements and tight cost control.

·      Retained significant liquidity headroom against core debt
facilities. Interest rate swaps provide a good level of protection against
rate increases through to March 2024.

FY22 outlook within the range of market expectations(2)

·      The Group has continued to trade in line with market
expectations, and preparations for the Christmas period are progressing in
line with our plan.

·      There has been a recent threat of industrial action at one of our
UK sites, and we have now reached an agreement with the offer being
recommended by the union to the workforce.

·      In the US, a reduction in volume due to a contractual dispute
with a customer is expected to impact profits in the remaining weeks of the
year.

·      As a result, we expect Group adjusted operating profit for FY22
to remain within, but at the lower end of the range of market expectations(2).

Clear plans in place to protect profits against sustained headwinds into 2023

·      Macro-headwinds will persist through 2023, we are therefore
taking decisive action to protect future profits. Our plan is focused on three
areas:

1.   Leaner organisation structure: new Management Board and leadership
structure with renewed focus and purpose; operationally align UK business to
two sectors driving further synergies.

2.   Clear and focused regional priorities:

UK - leveraging operational scale through footprint rationalisation, with two
proposed site closures; collaborating with customers on inflation recovery and
value optimisation.

US - a renewed focus on operational performance to support margin improvement.

China - rebuilding volume to leverage our well invested platform for growth.

3.   Enhanced focus on managing cash: Reviewing capital plans to target
efficiency improvements; remain committed to strategic investments; driving
working capital benefits.

·   Our plan to protect future profits is expected to deliver savings of
£15m in FY23, and £25m on an annualised basis(3). Cash costs of
implementation are estimated at £20m.  These costs, together with asset
impairment charges, will be recognised as exceptional costs in FY22, whilst
most of the cash outflow will be in FY23.

 

Mike Edwards, CEO, commented:

"We continue to operate in an incredibly challenging environment. Bakkavor has
proven itself to be a resilient business effectively navigating the turbulence
of recent years. We are now taking further decisive action to ensure we deal
with the ongoing headwinds and protect future profits.

"These actions, combined with our strong balance sheet, breadth of capability
and products, customer relationships and growing market share, means we are
well-placed to deal with the short-term challenges, and deliver our
longer-term ambitions for colleagues and stakeholders."

 

1.     The Group defines 'like-for-like revenue' as revenue from
continuing operations adjusted for the revenue generated from businesses
closed or sold in the current and prior year, revenue generated from
businesses acquired in the current and prior period, and the effect of foreign
currency movements.

2.     Based on company compiled consensus ("Consensus") which includes
the following institutions; Berenberg, Citi, Goodbody, HSBC, Investec, Kepler,
Numis and Peel Hunt. Group adjusted operating profit consensus range for 2022
of £88.6m to £91.7m, with consensus at £90.3m. Last updated on 22 November
2022.

3.     Our plan includes the proposal to close two sites, as previously
reported on our website on 9 November 2022. Consultations at both sites are
underway and therefore no final decisions have been made.

 

ENQUIRIES

Institutional investors and analysts:

Ben Waldron, Chief Financial Officer

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

Financial media:
 
     bakkavor@mhpgroup.com

Katie Hunt,
MHP
            +44 (0) 20 3128 8794

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

Oliver Hughes, MHP
                        +44 (0) 20 3128 8622

 

 

About Bakkavor

We are the leading provider of fresh prepared food ("FPF") in the UK, and our
presence in the US and China positions the Group well in these, high-growth
markets. We leverage our consumer insight and scale to provide innovative food
that offers quality, choice, convenience, and freshness. Over 19,000
colleagues operate from 46 sites across our three markets supplying a
portfolio of over 3,200 products across meals, pizza & bread, salads and
desserts to leading grocery retailers in the UK and US, and international food
brands in China.

LEI number: 213800COL7AD54YU9949

Disclaimer - forward-looking statements

This 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',
'should', 'expects', 'is expected to', 'may', 'estimates', 'believes',
'intends', 'projects', '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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