Bakkavor Group: Announces H1-2021 Financial Results

Reykjavik / IS. (bkg) Island’s Bakkavör Group, the leading international provider of fresh prepared food (FPF), announces its half year unaudited results for the 26-week period ended 26 June 2021.

Returned to revenue growth with strong conversion to profits and cash

  • Strong revenue momentum; Group revenue of GBP 915.7m, up 4.0 percent. Like-for-like revenue of GBP 924.9m, up 6.4 percent on the prior period and 1.2 percent ahead of 2019.
  • Profitability improved significantly; operating profit of GBP 47.0m, up 243.1 percent. Adjusted operating profit of GBP 47.0m up 63.8 percent on the prior period and 10.8 percent ahead of 2019
  • Strong cash generation, with free cash flow of GBP 39.7m, up from an outflow of GBP 3.3m in the prior period, enabled further reduction in net debt; leverage close to medium term target of 1.5 to 2.0 times at 2.1 times
  • Basic earnings per share up 3.3p to 4.2p and an interim dividend per share of 2.64p reflecting confidence in the future

Significantly strengthened platform for sustainable growth and enhanced returns

  • Revenue momentum underpinned by exciting new product launches aligned to the latest consumer trends, as shopping visit frequency returned to pre-pandemic levels
  • Good progress in driving efficiency and productivity contributed to a substantial increase in adjusted operating margin, up 180bps year on year
  • Significant growth in the US underpinned by unlocking capacity across our existing footprint and a period of a steady recovery in China
  • Continued to make good progress across our Trusted Partner ESG strategy

A positive outlook, in line with the Board’s expectations, despite industry-wide challenges

  • A strong H1 2021 performance and continued recovery in volumes at the start of H2 gives confidence in delivering a full year performance in line with the Board’s expectations
  • Despite unprecedented challenges in labour availability and its impact on the supply chain, as well as raw material inflation, the Group expects to deliver full year operating profit margin in line with the first half
  • The Group’s financial position remains strong, and we will continue to invest in capacity and productivity across the Group to drive growth and enhance our return on invested capital

Financial Summary

GBP million (unless otherwise stated) H1 2021 H1 2020 Change H1 2019 Change
Group revenue 915.7 880.5 4.0% 923.0 (0.8%)
Like-for-like revenue[1] 924.9 869.1 6.4% 913.6 1.2%
Adjusted Ebitda pre IFRS 161 74.1 56.2 31.9% 65.2 13.7%
Adjusted operating profit[1] 47.0 28.7 63.8% 42.4 10.8%
Adjusted operating profit margin[1] 5.1% 3.3% 180bps 4.6% 50bps
Operating profit 47.0 13.7 243.1% 29.3 60.4%
Operating profit margin 5.1% 1.6% 350bps 3.2% 190bps
Profit before tax 34.6 6.8 408.8% 19.5 77.4%
Basic earnings per share 4.2p 0.9p 3.3p 3.0p 1.2p
Adjusted earnings per share[1] 4.8p 2.6p 2.2p 4.9p (0.1p)
Free cash flow[1] 39.7 (3.3) 43.0 15.0 24.7
Operational net debt[1] (324.5) (367.4) 42.9 (356.6) 32.1
Interim dividend per share[2] 2.64p 0.0p 2.64p 2.0p 0.64p

Alternative performance measures are referred to as «like-for-like», «adjusted», «underlying» and are applied consistently throughout this news release. These are defined in full and reconciled to the reported statutory measures in Note 21 of this document on Bakkavör’s website. During the period, the final dividend relating to the period ended 28 December 2019 was paid.

Chief Executive’s Commentary

CEO Agust Gudmundsson: «I am pleased with the overall performance in the period as like-for-like revenues exceed pre-pandemic levels and profitability improved considerably with all three regions delivering meaningful progress. The UK has shown a positive recovery, benefiting from a return of shopping habits to 2019 levels and a strong pipeline of innovation, as well as a meaningful pick up in operational gearing as volumes recover. In the US, we continue to deliver strong top line growth supported by strategic customer wins and unabated market demand, and we are building on our solid foundations for sustainable profitable growth. In China, the steady top line recovery continues and we are well placed to take advantage of significant growth opportunities in the region following recent capacity investments.

«We, and the industry, face a unique set of challenges in labour availability and this is also impacting the entire supply chain, contributing to raw material price inflation and logistics disruption. We are continuing to mitigate the impact of these issues by working collaboratively with our customers and suppliers, accelerating operational efficiency initiatives, and taking measures to attract and retain colleagues effectively. Our performance in the period and the continuation of these mitigating actions, combined with our track record of delivery through previous challenging periods over our thirty-five year history, gives us confidence in our full year outlook. We are pleased to reinstate an interim dividend which delivers value for shareholders whilst continuing to reduce the Group’s leverage ratio.»