Reykjavik / IS. (bkg) Islandic Bakkavor Group, the United Kingdom’s leading fresh prepared foods manufacturer, announced its third quarter results for the 39 weeks ended 26 September 2015. Highlights: Revenue growth underpinned by a strong performance from our International business. Further improvement in adjusted Ebitda margin this quarter reflecting strict cost control and efficiency benefits. Leverage ratio down to 3.3 times following strong cash conversion through excellent working capital management. Sale of Italian pizza business completed.
| million GBP |
Q3/2015
|
Q3/2014
|
Change
|
YTD 2015
|
YTD 2014
|
Change
|
| Revenue |
419.9
|
408.7
|
3 %
|
1’255.2
|
1’221.1
|
3 %
|
| Like-for-like Revenue |
418.2
|
409.1
|
2 %
|
1’242.8
|
1’221.8
|
2 %
|
| Adjusted Ebitda |
35.9
|
30.9
|
16 %
|
95.7
|
85.8
|
12 %
|
| Adjusted Ebitda margin |
8.5 %
|
7.6 %
|
90 bps
|
7.6 %
|
7.0 %
|
60 bps
|
| Free cash flow |
34.9
|
22.3
|
12.6
|
65.4
|
31.0
|
34.4
|
Commenting on the results, Agust Gudmundsson, Chief Executive Officer said: «The Group has reported an excellent set of results with revenue growth, margin improvement and strong cash conversion. We expect trading conditions to remain challenging, particularly due to intense retailer competition, however we approach the Christmas period with good momentum and we remain confident in our strategy for the future».
Business Performance
The Group reported revenues from continuing operations of 419.9 million GBP for the 13 weeks to 26 September 2015, an increase of 2.7 percent on the prior year. On a like-for-like basis, excluding acquisitions, sold and closed businesses and at constant currency, revenues increased by 2.2 percent as our International operations reported another quarter of strong growth.
United Kingdom: Against a challenging market backdrop, like-for-like revenues increased slightly, underpinned by particularly good performances in our salads and bread categories. This growth was volume driven and we continue to pass on the benefit of raw material deflation to our customers. Reported revenues in our UK business totalled 379.8 million GBP in the third quarter, with revenues compared to the prior year impacted by the closure of our fresh prepared fruit facility in June. Adjusted Ebitda margin increased to 9.0 percent in the quarter, impacted by our ongoing focus on controlling costs and our decision to exit certain low margin business over the past year. We continue to see pressure on labour costs across our operations and the introduction of the National Living Wage from April 2016 will represent a further challenge. We are assessing the impact of this increase and working with all our stakeholders to mitigate costs where possible.
International: On a like-for-like basis, revenues from our International operations grew 23 percent in the quarter. Reported revenues increased by 48 percent following the acquisition of B. Roberts in January this year. Adjusted Ebitda margin improved significantly to 4.0 percent for the quarter, with volume gains across the regions driving efficiency benefits. In the US, the market for fresh prepared foods continues to grow and our business there reported another encouraging performance in the third quarter with further product roll outs to both new and existing customers. In Asia, our businesses reported another quarter of good revenue growth and progressive margins, underpinned by both increased volume demand and improved pricing from core customers.
Cash flow, net debt and leverage
Free cash generation improved by 12.6 million GBP in the quarter compared to the same period in 2014 as we benefited from increased profitability, continued focus on working capital management and lower interest payments following the refinancing in April. The completion of the sale of our Italian pizza operation in July of this year gave rise to a 28.2 million GBP reduction in net debt. Offsetting this, there was a further payment of 2.7 million GBP in the quarter to settle historic UK tax liabilities. Overall, net debt reduced by 55.7 million GBP in the quarter to 430.4 million GBP at 26 September 2015, with leverage now down to 3.3 times compared to 4.2 times in September 2014. The Group continues to operate with good headroom against all financial covenants and our liquidity position remains strong.
Outlook
Against a background of challenging market conditions, the Group has reported an excellent set of results. We expect the trading environment to remain challenging over the coming months due to pressures from intense retailer competition and the introduction of the National Living Wage. Despite this, we remain focused on working closely with our customers and investing across the Group to drive growth, technical excellence and product innovation (Image: pixabay.com).
