Bakkavor Group PLC: Announces H1-2022 Trading Update

Reykjavik / IS. (bkg) Island’s Bakkavör Group, the leading international provider of fresh prepared food, announces its trading update for the first half 2022. According to the Group the company watches a robust first half performance, the full year outlook is in line expectations.

Robust trading performance and in a position of financial strength

  • Strong revenue momentum; reported revenue up 10.3 percent to GBP 1,010.2m, like-for-like revenue up 9.2 percent on a constant currency basis to GBP 1,000.2m
  • Adjusted operating profit of GBP 42.5m, down 9.5 percent, (H1 2021 GBP 47.0m); UK performance broadly in line with the prior period, while our international performance has been impacted by Covid-19 restrictions and inflation
  • Leverage maintained at 1.9 times within target range
  • Basic earnings per share up 4.8 percent to 4.4p
  • Free cash flow of GBP 91.2m, up GBP 51.1m
  • Interim dividend per share of 2.77p, up 5.0 percent on the prior period

Continuing progress, focused on successfully navigating uncertainties

  • UK revenue up by 7.9 percent, primarily led by price increases, with volume growth outperforming the FPF market
  • Successfully executed pricing and cost actions, along with productivity improvements, to mitigate significant levels of inflation and largely protected profitability in the UK
  • Strong demand driving significant momentum in the US with like-for-like revenue up 34.6 percent, albeit a lag in inflation recovery and operational disruption from onboarding new business has held back margin
  • China was severely impacted by Covid-19 restrictions from March, and whilst the environment remains uncertain, we are encouraged by the early signs of volume recovery
  • Meaningful progress made within our Trusted Partner strategy; focus on building data to measure performance effectively and developing our roadmap to reach net zero by 2040

Full year outlook remains in line with market expectations

  • Revenue momentum has continued through July and August, with full year revenue expected to be in line with the upper end of market expectations
  • In the UK, our broad portfolio of products across categories and competitive price points positions us well to cater to consumers changing needs. We are confident of ongoing gains in our share of the FPF market, underpinned by a strong pipeline of launches
  • In the US, sustained demand supports the continuation of our strong growth trajectory. We expect to see some margin improvement in H2 2022 as price recovery and efficiency improvements take effect
  • In China, the government’s zero-tolerance Covid-19 policy means the near-term outlook remains uncertain, but we are working closely with customers to drive growth in our categories as the market recovers
  • We remain confident in delivering adjusted operating profit within the range of market expectations for 2022, as we continue to focus on managing costs, price recovery and driving performance
  • While significant levels of inflation and consumer spending headwinds are expected to persist in 2023, we remain well-placed to capitalise on our attractive, medium to long term opportunity

Financial Summary

GBP in million (unless otherwise stated) H1 2022 H1 2021 Change
Group revenue 1010.2 915.7 10.3%
Like-for-like revenue 1,000.2 915.7 9.2%
Adjusted EBITDA pre IFRS 16 70.3 74.1 (5.1)%
Adjusted operating profit 42.5 47.0 (9.5)%
Adjusted operating profit margin 4.2% 5.1% (90)bps
Operating profit 41.1 47.0 (12.5)%
Operating profit margin 4.1% 5.1% (100)bps
Profit before tax 32.5 34.6 (6.1)%
Basic earnings per share 4.4p 4.2p 0.2p
Adjusted earnings per share 4.6p 4.8p (0.2)p
Free cash flow 36.6 39.7 (3.1)
Operational net debt (290.1) (324.5) 34.4
Interim dividend per share 2.77p 2.64p 0.13p

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Chief Executive’s Statement

CEO Agust Gudmundsson: «Against a backdrop of macro uncertainties and inflationary headwinds, our operational delivery has been strong and we have continued to deliver for our customers. This, once again, demonstrates the continuing resilience of the Group, underpinned by the strength of our customer partnerships, supply chain management, scale and category leadership.

«We remain confident in our ability to deliver a full year performance in line with the range of market expectations as we continue to focus on managing costs, price recovery, and driving demand in our categories. The current geo-political uncertainty, however, will result in significant levels of inflation and consumer spending headwinds persisting through 2023.

«We remain well-placed to capitalise on our attractive, medium to long term opportunity, with strong foundations, an experienced team and the financial strength to enable targeted strategic investment to support growth, drive efficiency and deliver returns to shareholders.»

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