REG - Bakkavor Group PLC - Half-year Report
05/09/2024 07:00
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RNS Number : 9676C Bakkavor Group PLC 05 September 2024
5 September 2024
Bakkavor Group plc
A strong first half performance driving upgraded 2024 outlook
Bakkavor Group plc ("Bakkavor" or "the Group"), the leading international
provider of fresh prepared food ("FPF"), today announces its unaudited half
year results for the 26-week period ended 29 June 2024 ("H1 24"). Bakkavor has
also published a separate announcement this morning regarding a change in
Executive Directors.
FINANCIAL HIGHLIGHTS
£ million (unless otherwise stated) H1 24 H1 23 Change
Reported revenue 1,121.2 1,090.4 2.8%
Like-for-like ("LFL") revenue(1) 1,124.2 1,082.9 3.8%
Adjusted operating profit(1) 55.0 43.4 26.7%
Adjusted operating profit margin(1) 4.9% 4.0% 90bps
Operating profit 58.8 46.3 27.0%
Adjusted earnings per share(1) 5.5p 3.9p 41.0%
Basic earnings per share 6.1p 4.4p 38.6%
Free cash flow(1) 53.2 45.2 8.0
Operational net debt(1) (201.8) (268.7) 66.9
Leverage(1) 1.2x 1.8x (0.6)x
ROIC(1) 8.7% 7.1% 160bps
Interim dividend per share 3.20p 2.91p 10.0%
Strong H1 24 performance and improved outlook supports 10% dividend increase
· LFL revenue up 3.8% driven by the UK, with volume improving and
ongoing inflation largely mitigated
· Reported revenue up 2.8% which includes the impact of currency and
the China Bakery up to disposal
· Adjusted operating profit of £55.0m up 26.7%, with margin at 4.9%
· Operational net debt reduced by £27.8m and leverage of 1.2x down
0.3x from December 2023
· Refinanced debt facilities with 25bps margin improvement and
liquidity headroom of c.£180m
· Interim dividend up 10% reflecting strong performance and upgraded
outlook
Clear strategic progress has driven margin improvement
· Good momentum in all regions as we continue to successfully deliver
against our strategic priorities:
o UK: Volume growth and operational efficiency supported margin improvement
o International:
§ US revenue lower, as expected, whilst profitability continued to strengthen
§ China business simplified and losses reduced
o Excellence: Strong operational performance underpinned by the Bakkavor
Operating System fuelling further factory efficiencies
o Trust: Sustainability KPIs are all progressive in the UK, although net
carbon emissions increased internationally
· Combined, this delivered a 90bps improvement to adjusted operating
profit margin in H1 24
Confident in delivering upgraded FY24 outlook
· H2 trading has started well with strengthening volumes increasing
FY24 revenue expectations
· We expect a strong FY24 delivery in all regions:
o UK: Continued volume growth and efficiency will support profit improvement
o US: Further margin progression expected, with revenue growth to return in
H2
o China: Remain cash generative with lean initiative further reducing losses
· Upgrading guidance for full year adjusted operating profit to a new
range of £108m to £112m, ahead of market expectations(2)
· We now have a medium-term target to rebuild adjusted operating profit
margin back to 6% with a continued focus on driving efficiency
Mike Edwards, CEO, commented:
"This has been a strong first half for the Group, with momentum from our 2023
restructuring activity continuing to support our performance in 2024. I would
like to take this opportunity to thank all of our colleagues for their
continued hard work, commitment and loyalty to the business through this
period of significant change.
We are firmly focused on continuing to rebuild margins and we are pleased to
upgrade guidance for 2024 as we look to drive efficiency in every part of our
business.
We are excited about building a stronger Bakkavor as the trading environment
improves and we continue to leverage the benefit of the actions we have taken
over the last couple of years. As such we have good line of sight to deliver
further margin improvement as we move into 2025 and beyond."
1. Alternative performance measures are referred to as
'like-for-like', 'adjusted' and 'underlying', and are applied consistently
throughout this document. These are defined in full and reconciled to the
reported statutory measures in Note 23.
2. Based on company compiled consensus ("Consensus") which includes
all covering analysts. Adjusted operating profit Consensus for FY24 at
£106.2m, with a range of £103.7m to £107.7m. Last updated on 4 September
2024.
Presentation
A copy of these results is available on our website: Bakkavor Group plc - EN -
Investors - Results & presentations
(https://protect.checkpoint.com/v2/___https:/www.bakkavor.com/en/investors/results-and-presentations/default.aspx___.bXQtcHJvZC1jcC1ldXcyLTE6bmV4dDE1OmM6bzo5ZWZiMzQ4MjA2NGI4YWEwNjAxZDcwMDUzYWE1MzFmOTo2OjAzOGI6OWU1NmYwMjU5ZGYyYzk5ZjhmMzcwMDQyYjNjZmY4MzUzYjI5MWQ1MDdlMzhiYTE3Y2U5Yzg1ZGY3YTUyNDYyMDpwOlQ6Tg)
. We will be presenting to analysts in-person and via a webcast at 09.00am on
5 September 2024 through the Investor section of the Group's website at:
https://brrmedia.news/BAKK_HY_24
(https://protect.checkpoint.com/v2/___https:/brrmedia.news/BAKK_HY_24___.bXQtcHJvZC1jcC1ldXcyLTE6bmV4dDE1OmM6bzo5ZWZiMzQ4MjA2NGI4YWEwNjAxZDcwMDUzYWE1MzFmOTo2OjE5ZTQ6Mjc0MzI5NjNkMjJkNTNmOTM4YjY1OTIwOWVkZjEwZTE2ZWVhZjUyMWNhNjFmOTU5YjEwOWZjY2Y0YzgwMjBiMTpwOlQ6Tg)
. A recording of the webcast can also be accessed via the link above shortly
after the presentation has concluded.
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 (mailto:bakkavor@mhpgroup.com)
Katie Hunt, MHP +44 (0) 20 3128 8794
Rachel Farrington, MHP +44 (0) 20 3128 8613
About Bakkavor
We are the leading provider of fresh prepared food 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. Around 18,000 colleagues operate
from 43 sites across our three markets supplying a portfolio of over 3,000
products across meals, pizza & bread, salads and desserts to leading
grocery retailers in the UK and US, and international food brands in China.
Find out more at www.bakkavor.com
(https://protect.checkpoint.com/v2/___http:/www.bakkavor.com___.bXQtcHJvZC1jcC1ldXcyLTE6bmV4dDE1OmM6bzo5ZWZiMzQ4MjA2NGI4YWEwNjAxZDcwMDUzYWE1MzFmOTo2OjY0MDQ6OTRiNzU3YzdlZGU5MDdjNWQwZGNlMzgwNzk5YTc5NTMzMjgwY2IyZGQxMTI2ZDA4ZTg2NzExOGNjOWZlNWZjMjpwOlQ6Tg)
.
LEI number: 213800COL7AD54YU9949
Disclaimer - forward-looking statements
This statement prepared by Bakkavor Group plc (the "Company"), may contain
forward-looking statements about the Group. Forward-looking statements involve
uncertainties because they relate to events, and depend on circumstances, that
will, or may, occur in the future. If the assumptions on which the Company
bases its forward-looking statements change, actual results may differ from
those expressed in such statements. Forward-looking statements speak only as
of the date of they are made and the Company undertakes no obligation to
update these forward-looking statements other than as required by law. Nothing
in this statement should be construed as a profit forecast. Where relevant,
some numbers and period-on-period percentages have been rounded or adjusted in
order to ensure consistency with the financial information for the latest
financial reporting period unless otherwise stated.
CHIEF EXECUTIVE'S OVERVIEW
The Group performed strongly in the first half, as we deliver on our strategy
and continued to focus on the priorities we set out last year. Reported
revenue was up 2.8% to £1,121.2m and adjusted operating profit was up 26.7%
to £55.0m, with a 90 basis point improvement in margin to 4.9%. Debt has also
reduced further, leverage is at the lower end of our target range, and we
successfully completed the refinancing of our debt facilities.
From a macro perspective, positively, the wider trading environment is
gradually improving following two incredibly tough years. Whilst remaining
significant, inflationary pressures have eased, and consumer confidence in the
UK is improving resulting in a return to volume growth. Global supply chains
remain fragile, but by leveraging our scale and agility we have maintained
excellent service and availability for our customers.
Progress on our strategy
Our clear strategy to deliver profitable and sustainable growth is underpinned
by four strategic pillars:
· UK: Drive returns by leveraging our number one market position
· INTERNATIONAL: Accelerate profitable growth in the US and China
· EXCELLENCE: Deliver improved performance through operational
excellence
· TRUST: Be a Trusted Partner for our people, customers and other
stakeholders
This strategy is supported by new tactics launched at the end of 2022, but now
embedded as our ongoing way of working. Our focus remains on ensuring we are
challenging ourselves on having:
· Lean and efficient organisational structures;
· Clear and focused regional priorities; and a
· Well-defined capital allocation policy.
We have made excellent progress as we execute our strategic plans and are in a
strong position in all three of our markets. All of our financial KPIs are
progressive and this has been replicated across our non-financial KPIs as we
continue to make good progress towards our sustainability targets. As ever,
it is the hard work of our people that has been fundamental to our success,
and I would like to thank them for their ongoing commitment.
UK: Leveraging our number one position in an improving market
The market in the UK is gradually improving, with increasing consumer
confidence translating into better-than-expected growth, albeit remains
moderate. We consolidated our share gains from the prior year and delivered
top-line growth ahead of the broader market, underpinned by excellent customer
service, a strong focus on innovation and net business gains.
Inflationary pressures have eased but still remain significant, with increased
labour costs the primary driver, and, whilst customers have been largely
supportive of price increases, we continue to be under-recovered. Our
efficiency activities, however, have closed this gap in inflation recovery and
are now fuelling our profit and margin improvement.
INTERNATIONAL: US profitability restored and simplified China business
We have seen positive momentum in our US business continue, with operational
control and profitability restored. This has been underpinned by strong
factory performance and tight cost control. The continued reshape of the
business has led to an anticipated reduction in revenue, but with performance
stabilised we are now starting to rebuild our revenue growth. This has been
supported by the launch of a new range of ready meals under our 'Fresh &
Simple' brand in H1 24 and we have a strong pipeline of launches in the second
half.
We further simplified our China operations with the disposal of our Bakery
business in April, which brings our total proceeds from disposals in the
region to c.£13m over the last 18 months. Our remaining business is now
wholly focused on the supply of fresh prepared food to our foodservice and
retail customers, and we continue to review our strategic options in the
region.
EXCELLENCE: Bakkavor Operating System delivers enhanced performance
We delivered another period of strong operational performance, with
improvement activities contributing £11m in H1 24. This was driven by the
continued benefit of synergies from our 2023 restructuring plan and our
ongoing focus on excellence that has fuelled further factory efficiencies
across all three regions. Our approach to excellence is underpinned by the
Bakkavor Operating System, with the primary focus on standardising ways of
working and instilling operational discipline at all UK sites. This is
supported by our smart manufacturing system and a continuing pipeline of
return-enhancing investments.
We are more advanced in the UK but are starting to leverage this expertise
internationally. Our smart manufacturing system is starting to be rolled out
in the US and, with the support of the UK team, our China colleagues have
launched a lean initiative to improve performance.
We are excited about the significant opportunity to drive further operational
improvements going forward, both in the UK and internationally, and this will
be fundamental in supporting the Group's future margin ambition.
TRUST: Ongoing Trusted Partner initiatives drive strong non-financial KPI
performance
Our strong financial performance and improvement in operational efficiency is
also reflected in our sustainability KPIs.
UK food waste reduced by 40bps to 6.2% in H1 2024 (FY23: 6.6%) supported by
ongoing operational focus on waste management along with our continued
commitment to increasing redistribution.
Group net carbon emissions were up 3.5% (vs FY23), with a 1.4% reduction in UK
net carbon emissions, driven by our continued focus on refrigeration upgrades
and heat recovery, offset largely by a refrigeration leak at one of our US
sites.
We have cemented the Group's commitment to reach Net Zero, with our targets
for all scopes now validated by the Science Based Targets initiative ("SBTi")
and we are on track for our near-term target of reducing operational emissions
by 42% by 2030, against our 2021 base.
We have made good progress and reached settlement on pay at all but one UK
site where, despite having made an offer significantly ahead of inflation, the
union are balloting for industrial action. There is a risk of disruption, but
we have clear contingency plans in place to minimise the impact.
Despite this, we are more engaged with our colleagues than ever before. We are
continuing to reward them for their hard work with pay increases ahead of
inflation and improved benefits. Over the last three years we have increased
factory rates of pay by 21% and with initiatives, such as our staff shop
transformation and investment in training, we continue to strive to make
Bakkavor a better place to work. On the back of this, we are proud of the
reduction in UK employee turnover which is now at 22.1% (FY 23: 26.2%), with
the US also seeing a marked improvement.
OUTLOOK: Confident in delivering profit ahead of market expectations(1)
The momentum we have built as a Group gives us confidence to upgrade our
guidance for FY24 to a new range of adjusted operating profit of £108m to
£112m, ahead of market expectations(1). This is based on reported revenue
growth strengthening to between 2% and 3% (previously 1% to 2%), the
annualization of our 2023 restructuring activity and our efficiency
improvements continuing to more than offset an under-recovery of inflation
(FY24 inflation expected to be c.£50m). The upper end of our profit range
would be a record delivery for the Group. Furthermore, we now have a
medium-term target to rebuild adjusted operating profit margin to 6%.
In the UK, positively, our volume outlook has improved. Consumer confidence is
expected to continue to steadily build, and we have a strong pipeline that
will see us continue to outperform the market. Our continued focus on driving
efficiency and other strategic actions is expected to fuel further
profitability improvements as we seek to rebuild margins following the erosion
caused by inflationary pressures in recent years.
The stabilisation of the US business is now largely complete and the
improvements we have made will continue to deliver margin improvement in line
with our expectations in the second half. As we start to rebuild our growth
pipeline, we expect to return to revenue growth in the latter part of 2024.
Our existing footprint has sufficient headroom to accommodate growth for
several years.
In China, we expect our lean initiative to support a reduction in operating
losses year-on-year. The business remains cash generative and self-sustaining
as we assess our long-term strategic ambitions in the region.
From a balance sheet perspective, we expect a further reduction in debt
through enhanced profitability and working capital improvements. Our
strengthened financial position, combined with our confidence in delivering
further profit improvement, supports our progressive dividend policy.
1. Based on company compiled consensus ("Consensus") which includes
all covering analysts. Adjusted operating profit Consensus for FY24 at
£106.2m with a range of £103.7m to £107.7m. Last updated on 4 September
2024.
DIVISIONAL REVIEW
United Kingdom: Driving margins through operational excellence in an improving
market
£ million (unless otherwise stated) H1 24 H1 23 Change
Revenue 957.4 913.7 4.8%
Like-for-like revenue(1) 957.4 913.7 4.8%
Adjusted operating profit(1) 52.4 44.8 17.0%
Adjusted operating profit margin(1) 5.5% 4.9% 60bps
Operating profit 52.4 44.8 17.0%
Operating profit margin 5.5% 4.9% 60bps
1. Alternative performance measures are referred to as 'like-for-like',
'adjusted', 'underlying' and are applied consistently throughout this
document. These are defined in full and reconciled to the reported statutory
measures in Note 23.
Trading performance
LFL and reported revenue increased by 4.8% to £957.4m (H1 23: £913.7m).
Volume strengthened through the period, and marginally outpaced the broader
market, which grew at 2.2%. Conversely, the impact of inflation recovery
through price has eased through the first half, albeit price still contributed
meaningfully to LFL growth in H1 24.
Adjusted operating profit increased by 17.0% to £52.4m (H1 23: £44.8m), with
a strong improvement in margin, up 60 basis points to 5.5% (H1 23: 4.9%),
underpinned by our improvement activities.
Encouraging market dynamics support return to volume growth
An improvement in consumer confidence has supported good FPF volume recovery.
The fundamentals of our FPF proposition are more relevant than ever as demand
for convenient, high quality meal solutions at great value has strengthened.
This has been driven by more in-home dining, with premium ranges performing
well. Shoppers are also making more trips to the supermarket, resulting in
frequency returning to growth, and are now more open to new products as
attention starts to shift from price. Value, however, remains important for
shoppers and a return to more normalised levels of promotional activity has
supported volume growth. At a category level, salads and desserts have
recovered well from the previous impact of cost-of-living pressures, meals has
grown steadily supported by an uptick in meal deal activity and pizza and
bread has normalised following high demand in FY23.
Against this encouraging backdrop, we have consolidated our share gains and
outperformed the market with volume up 2.3% in H1 24 (FPF market volume: 2.2%)
underpinned by three key drivers. Firstly, our customer service levels have
remained at over 99% as we have continued to effectively manage volatility in
the supply chain. Secondly, our innovation has performed strongly ensuring
that our core ranges outperform for our customers. Finally, we have onboarded
new business wins, which included a range of over 40 cream cake and hot eat
desserts for a key customer.
Looking ahead, we expect this positive momentum to continue for the remainder
of the year and beyond as consumer confidence continues to build steadily. We
expect our strong growth pipeline to deliver underlying market outperformance
as we continue to provide excellent customer service and deliver new
convenient solutions for consumers.
Margin improvement underpinned by improvement activities
Overall, the UK delivered a strong performance in the first half with margin
up 60 basis points to 5.5%, underpinned by our improvement activities.
Inflationary pressures have eased significantly and whilst we incurred c.£25m
of inflation across our UK cost base, this compares to c.£87m in H1 23.
Labour was the primary driver due to the increase in the National Living Wage,
along with our continued investment in rates of pay and broader benefits.
There also remains pockets of inflation in certain raw materials such as
dairy. Our customers again supported us on price, and whilst not all inflation
was recovered the pricing gap was offset by the benefit of improvement
activities, with strengthening volumes also a helpful dynamic.
The first half benefitted from the annualisation of our 2023 restructuring
actions delivering ahead of plan and strong operational performance. We are
driving efficiency improvements through the continued development of the
Bakkavor Operating System ("BOS"). The BOS defines how we work across our
factories and is supported by the smart manufacturing system that is now in
place at all our UK sites. Our centralised and well-established Operational
Excellence team drives this agenda and includes dedicated Operational
Excellence managers at every site with training programmes to support their
development and further embed best practice.
Our focus in recent years on initiatives to drive labour efficiencies is now
well-embedded in our ways of working. Using the same approach, we have
recently extended our focus to material waste improvement, as part of a
multi-year program to deliver both operational improvement and support our
sustainability commitments.
Our approach to excellence extends to our management of the supply chain.
Whilst the broader supply chain remains fragile, with extreme weather
conditions impacting quality and supply of fresh raw materials, our scale and
agility means we have been able to minimise disruption.
Driving returns through targeted strategic investments
Following a year of restricted spend in 2023, capital investment is starting
to return to more normalised levels. We have a strong pipeline of investments,
with spend weighted to the second half of the year. As growth returns, we are
increasing our investment in new product development with plans approved to
build an enhanced development facility at our Desserts Newark site which will
commence in H2 24. We also continue to implement energy efficient solutions to
support our strategic commitment to achieve Net Zero carbon emissions and
completed the next phase of refrigeration upgrades at both our Desserts Newark
and Meals Sutton Bridge sites in August 2024.
Our program of productivity investments continues with our Operational
Excellence team prioritising projects across the UK as part of a rigorous
appraisal process to maximise returns.
As we seek to further enhance our returns, we have identified that our
Bakkavor Meals Wigan facility is unsustainable with low margin business in a
factory that requires significant investment. This has resulted in the
difficult but necessary decision to announce the potential closure of this
site, with consultation to commence at the end of September 2024. Should the
consultation lead to closure, we would expect to exit c.£80m of business in
H1 25. We appreciate this is a difficult time for affected colleagues and are
committed to supporting them. We plan to offer colleagues alternative roles
within our business wherever possible and will also be working on several
initiatives to help colleagues secure alternative employment opportunities in
their local area.
United States: Profitability restored in line with plan and rebuilding our
growth pipeline
£ million (unless otherwise stated) H1 24 H1 23 Change
Revenue 109.4 117.6 (7.0%)
Like-for-like revenue(1) 112.0 117.6 (4.7%)
Adjusted operating profit(1) 3.6 0.1 3,500%
Adjusted operating profit margin(1) 3.3% 0.1% 320bps
Operating profit 3.0 0.1 2,900%
Operating profit margin 2.7% 0.1% 260bps
1. Alternative performance measures are referred to as 'like-for-like',
'adjusted', 'underlying' and are applied consistently throughout this
document. These are defined in full and reconciled to the reported statutory
measures in Note 23.
Trading performance
LFL revenue reduced by 4.7% to £112.0m (H1 23: £117.6m) in line with
expectations as our strategic shift from focusing on growth to profit
continued. Including the impact of currency, reported revenue was down 7.0% to
£109.4m (H1 23: £117.6m).
Profitability has continued to build, delivering adjusted operating profit of
£3.6m in the first half, up £3.5m on H1 23 and ahead of H2 23 despite this
period benefiting from seasonal Thanksgiving volume. Operating profit of
£3.0m (H1 23: £0.1m) includes £0.6m of exceptional costs (H2 23: £nil)
related to an asset impairment.
Execution of plans drive profitability
The first stage of reshaping our US business is now complete and the new
leadership team, established in the first half of 2023, is well-embedded and
delivering on their refreshed priorities.
The improvement in profit has been driven by our absolute focus on driving
operational performance and tightly managing our overheads. Specific
initiatives include consolidation of shift patterns to maximise labour
efficiency and preventative maintenance plans to help minimise machinery
downtime. Ensuring we get the basics right has remained a priority, with
industry-leading technical KPIs and customer service levels firmly
re-established.
Sales growth has not been our short-term priority and the annualisation of
business exited in 2023 has driven the decline in H1 24. However, with
profitability now restored, we move into the second stage of reshaping our
business with our focus turning to rebuilding our growth pipeline in a
sustainable way. We launched a new range of ready meals under the 'Fresh &
Simple' brand with a new customer in April 2024 and have re-started a more
meaningful pipeline of new product development for our strategic customers,
with the successful launch of a premium range of ready meals for one customer
at the end of the first half. We expect to return to revenue growth in the
second half which, alongside our continued focus on performance, will support
further margin improvement.
Our headroom for growth remains significant, with our existing footprint
providing c.$500m of capacity, and we remain excited about the opportunities
in this region.
China: Self-sustaining simplified business, with good volume growth and
efficiency led profit improvement
£ million (unless otherwise stated) H1 24 H1 23 Change
Revenue 54.4 59.1 (8.0%)
Like-for-like revenue(1) 54.8 51.6 6.3%
Adjusted operating loss(1) (1.0) (1.5) 33.3%
Adjusted operating loss margin(1) (1.8%) (2.5%) 70bps
Operating profit 3.4 1.4 142.9%
Operating profit margin 6.3% 2.4% 390bps
1. Alternative performance measures are referred to as 'like-for-like',
'adjusted', 'underlying' and are applied consistently throughout this
document. These are defined in full and reconciled to the reported statutory
measures in Note 23.
Trading performance
LFL revenue was up 6.3% to £54.8m (H1 23: £51.6m), driven by volume. The
trading environment in mainland China returned to normalised growth through
the period but was partially offset by significantly reduced volumes in Hong
Kong as the market remains depressed. Reported revenue, which includes the
Bakery business up to its disposal at the end of March 2024 and the impact of
currency movements, was down 8.0% to £54.4m (H1 23: £59.1m).
Adjusted operating loss of £1.0m improved by 33.3% on H1 23, driven by our
lean initiative, partially offset by challenges within the Hong Kong market
which is leading to significantly reduced volumes. Operating profit of £3.4m
includes £4.4m of exceptional income which primarily relates to the £3.9m
profit on disposal of our Bakery business in China, as we simplify our
operations in the region.
Profitability improvements driven by focus on operational efficiency
The FPF market in mainland China continues to grow at c.10%, driven by store
openings as consumers develop an increased appetite for western-style FPF
options. Our foodservice customers are performing strongly and, whilst
competitive pressures have intensified as more local players enter the market,
we have maintained our market share. Our retail sales have continued to
deliver strong growth and now comprise 21% of mainland China revenue, as we
continue to roll-out to new stores and increase penetration with existing
customers.
Our profit improvement has been driven by a keen focus on efficiency
improvements across our seven sites in mainland China. Leveraging our UK
expertise, we launched a lean initiative to roll-out operational best
practices, which included factory initiatives such as optimising production
run times through process efficiencies and labour analysis, as well as supply
chain optimisation. The benefit of these initiatives is expected to continue
to drive improvement, through the remainder of the year and beyond, and
support our target to deliver a breakeven adjusted operating profit run rate.
Performance in Hong Kong, however, has remained depressed driven largely by
the reduction in the ex-pat community, which has impacted both sales and
profitability.
As reported previously, our strategic investment in the region is complete,
and we continue to maintain a tight control of capital spend. The actions we
have taken to simplify our business through disposals over the last 18 months
have delivered c.£13m in cash, and our remaining operations are now wholly
focused on serving fresh prepared products to both retail and foodservice
customers from seven factories in mainland China, and one factory in Hong
Kong. The business remains cash generative and self-sustaining as we assess
our strategic options in the region.
FINANCIAL REVIEW
Revenue and operating profit
Group reported revenue increased by 2.8% to £1,121.2m (H1 23: £1,090.4m).
LFL revenue grew 3.8% to £1,124.2m (H1 23: £1,082.9m), of which 2.1% was
price and 1.7% volume. LFL revenue growth adjusts for the disposal of the
Bakery business in China and the impact of currency movements.
Adjusted operating profit increased by £11.6m to £55.0m (H1 23: £43.4m),
with margin up 90 basis points to 4.9% (H1 23: 4.0%).
Of this increase in profit, volume growth contributed £3.9m. This primarily
related to the UK, as consumer confidence has improved, and China, as our
customers continued aggressive store roll-outs and retail customers expanded
their fresh prepared product offering. Whilst inflation has eased, the Group
still faced a meaningful increase in cost, with £25.9m of cost inflation
equivalent to a 2.6% increase on our total cost base primarily driven by
labour. We have continued to receive support from our customers on price, with
our pass-through mechanisms working effectively and additional recovery
secured in traditional negotiations through the first half of the year. The
level of recovery in H1 24, at 87%, equivalent to £22.6m in price, is also
supported by the annualisation of price increases secured in FY23.
The Group's efficiency improvement activities remain fundamental to driving
profit improvement and contributed £11.0m in the first half. This was driven
by the annualisation of the restructuring initiatives implemented in FY23,
along with further factory efficiencies, partially offset by increases in
overhead costs driven by volume growth.
Operating profit was up £12.5m to £58.8m (2023: £46.3m), with margin up 100
basis points to 5.2% (2023: 4.2%). H1 24 operating profit includes £3.8m of
exceptional income, excluded from adjusted operating profit, primarily related
to the £3.9m profit on disposal (pre-tax) of the Bakery business in China.
Further detail is provided in Note 4 of the accounts.
Finance costs
Group profit before tax was £45.2m (H1 23: £32.6m). This was after finance
costs (net) of £13.9m (H1 23: £13.3m), which include £0.6m (H1 23: £nil)
of accelerated amortisation of fees following the Group's refinancing of its
core debt facilities in July 2024. The Group incurred higher interest rates in
H1 24 as our fixed interest rate swaps, totalling £150m at an average rate of
0.37%, rolled off at the end of March 2024. These swaps were replaced with
£130m of fixed interest rate swaps at an average rate of 3.73% and will
remain in place until March 2026. The cost associated with higher interest
rates was, however, offset as the Group now has lower average debt levels
Tax
The Group tax charge for H1 24 was £10.0m (H1 23: £7.5m), representing an
effective tax rate of 22.0% (H1 23: 23.0%). The underlying effective tax rate,
which excludes exceptionals, was 24.0% (H1 23: 25.1%). The reduction in
underlying effective tax rate year-on-year is driven by the benefit of
additional losses brought forward following a review of the Group's taxable
loss position. This will also benefit the second half of the year and means
the forecasted Group underlying effective tax rate for FY24 is c.24% (previous
guidance c.26%).
Earnings per share
Adjusted earnings per share increased to 5.5 pence in H1 24 (H1 23: 3.9 pence)
driven by the improvement in trading performance.
Basic earnings per share also increased, up 1.7 pence to 6.1 pence (H1 23: 4.4
pence), as in addition to the improvement in trading performance it also
benefits from an increase in exceptional income, which is excluded from
adjusted earnings per share.
Cash flow
Free cash generation of £53.2m (H1 23: £45.2m) is primarily driven by the
improvement in operating profit. We have consolidated our very strong
performance in working capital that was delivered last year through a small
inflow in the period. The first half also benefits from lower capital spend as
a combination of longer lead times on capital projects and high levels of
business activity has impacted the timing of spend. We remain absolutely
focused on retaining the rigour in our capital appraisal process and see no
adverse impact of taking more time to execute when it comes to capital spend.
£ million H1 24 H1 23
Operating profit 58.8 46.3
Exceptional items (3.8) (2.9)
Adjusted operating profit 55.0 43.4
Depreciation, amortisation & other 35.1 35.5
Net working capital (excl. exceptional items) 3.5 15.0
Purchases of property, plant and equipment (net) & intangible assets (14.6) (22.8)
Interest and tax paid (19.1) (18.5)
Net retirement benefits charge less contributions (1.1) (1.0)
IFRS 16 lease payments (5.6) (6.4)
Free cash flow 53.2 45.2
Debt and leverage
Continued strong cash generation has led to a further reduction in operational
net debt by £27.8m to £201.8m (FY23: £229.6m). Leverage, the ratio of
operational net debt to adjusted EBITDA, improved by 0.3 times to 1.2 times
(FY23: 1.5 times) and is at the lower end of the Group's target range of 1.0
to 2.0 times. The Group's liquidity position has remained strong, with
headroom of over £250m against our core debt facilities of £462m at June
2024.
Refinancing
On 25 July 2024 the Group refinanced its debt facilities with £350m of new
facilities comprising a £200m revolving credit facility ("RCF") and a £150m
term loan, maturing in July 2028 with the option of two additional one year
extensions. Our new facilities include a 25 basis point improvement in margin
at 1.85%, along with the addition of an acquisition spike to take leverage to
3.5 times, which provides flexibility to support our medium-term strategic
ambitions. The remaining covenants under the new facilities are in line with
our existing facilities, with the exception of the sustainability-linked
covenant which no longer applies. Delivering on our sustainability targets,
however, remains a key priority and these targets are already incorporated in
the Group's bonus schemes. Following this refinancing, we continue to operate
with significant liquidity headroom of c.£180m which provides a strong
platform for future growth.
Dividend
During the period, the Group paid £25.3m in respect of the final dividend for
FY23.
The improved strength of the Group's financial position and continued strong
cash generation support our long-term growth aspirations and commitment to
increasing returns to shareholders. With profit after tax up £10.1m or 40.2%
in the period and an uplift in profit guidance for the full year, the Board
has decided to pay an interim dividend of 3.20 pence per Ordinary share, up
10.0% on the prior period. The interim dividend will be paid on 11 October
2024 to shareholders on the register of members as at 13 September 2024 (the
record date). Going forward, the Board expects to maintain a progressive
dividend policy.
Investment and returns
The Group's ROIC for the 12 months to 29 June 2024 was 8.7%, up significantly
by 120bps versus the year end at 7.5%. The increase is driven by lower average
invested capital, following two years of controlled capital spend, and the
Group's improved profitability. The Group expects further improvement in ROIC
in the medium-term as previous investments deliver an increase in returns.
With capital expenditure down year-on-year in the first half, as outlined
earlier, we have revised our guidance for capital for the full year to £50m
to £60m (previously £60m to £70m).
We are making good progress on our project to replace our legacy UK ERP
systems. Earlier in the year, we indicated that the cash impact of this
project would be c.£10m. Of this, we expect c.£5m to be capital spend in
FY24. In line with accounting standards, certain elements of spend may be
expensed and this will be recognised as exceptional costs. The total project
cost remains unchanged at £35m to £40m which will be incurred over the next
three to four years.
Pensions
Under the IAS 19 valuation principles, the Group recognised a surplus of
£18.7m for the UK defined benefit scheme as at 29 June 2024 (FY23: £12.0m
surplus). This is due to the benefit from lower discount rates on the schemes
defined benefit obligations being more than the slight reduction in the value
of plan assets.
The Group and the Trustee agreed the triennial valuation of the UK defined
benefit pension scheme as at 31 March 2022 in May 2023, resulting in the Group
agreeing to make recovery payments of £2.5m p.a. through to 31 March 2025,
with an extension through to 31 August 2025 if the scheme is in deficit at the
end of December 2024 and the end of January 2025.
Capital allocation
We maintain a disciplined approach to capital allocation, with the overriding
objective to enhance shareholder value. In delivering against this objective,
we have simplified our operations in China resulting in proceeds of c.£13m
over the last two years, and we will continue to seek opportunities to
redeploy our capital in the most effective way. More generally, the allocation
of capital is primarily split across capital investment, debt reduction to
decrease financing costs given base rates remain elevated, and dividends.
Inorganic opportunities are considered where they are a strategic fit for our
business. In the medium-term, we remain committed to investing to enhance
returns and are focused on maintaining leverage within our target range whilst
continuing with a progressive dividend policy.
Principal risks and uncertainties
The principal risks and uncertainties facing the Group are set out on pages 74
to 80 of the 2023 Annual Report and Accounts, published on 15 March 2024. The
principal risks themselves remain unchanged as at 29 June 2024. Developments
through the first half of the year have, however, resulted in the risk profile
of four of our principal risks changing, as outlined below:
Principal risk Severity Description
(likelihood x impact)
Consumer demand and retailer landscape ↓ UK FPF volumes have started to recover in H1 24 as consumer confidence
improves and this trend is expected to continue.
Strategic growth and change programmes ↑ Design and build activities relating to the replacement of our UK ERP system
are now underway, which has led to an increase in this risk.
Food safety and integrity ↓ Our mitigating actions regarding food safety and progress on KPIs in this area
mean we consider the severity of this risk to be lower.
Availability, recruitment and retention of colleagues ↓ Improving labour market in the UK and the US, evidenced by in the reduction of
employee turnover, along with our continued investment in rates of pay,
benefits and engagement, mean we consider the severity of this risk
crystallising to be lower.
Condensed Consolidated Income Statement
26 weeks ended 29 June 2024 (Unaudited) 26 weeks ended 1 July 2023
(Unaudited)
£m Notes Underlying activities Exceptional items(1) Total Underlying activities Exceptional Total
items(1)
(Note 4)
(Note 4)
Continuing operations
Revenue 3 1,121.2 - 1,121.2 1,090.4 - 1,090.4
Cost of sales (808.3) - (808.3) (802.5) - (802.5)
Gross profit 312.9 - 312.9 287.9 - 287.9
Distribution costs (43.4) - (43.4) (42.8) - (42.8)
Other administrative (costs)/income (214.5) 3.8 (210.7) (201.7) 2.9 (198.8)
Operating profit 55.0 3.8 58.8 43.4 2.9 46.3
Finance costs, net 5 (13.3) (0.6) (13.9) (13.3) - (13.3)
Other gains and (losses) 6 0.3 - 0.3 (0.4) - (0.4)
Profit before tax 42.0 3.2 45.2 29.7 2.9 32.6
Tax 7 (10.0) - (10.0) (7.5) - (7.5)
Profit for the period 32.0 3.2 35.2 22.2 2.9 25.1
Earnings per share
Basic 8 6.1p 4.4p
Diluted 8 6.0p 4.3p
(1)The Group presents its Condensed Consolidated Income Statement with three
columns. The Directors consider that the underlying activities are more
representative of the ongoing operations and key metrics of the Group. Details
of exceptional items can be found in Note 4 and include material items that
are non-recurring, significant in nature and are important to users in
understanding the business, including restructuring costs and impairment of
assets. In addition, the Group uses further Alternative Performance Measures
which can be found in Note 23.
Condensed Consolidated Statement of Comprehensive Income
£m 26 weeks ended 26 weeks ended
29 June 2024 (Unaudited) 1 July 2023
(Unaudited)
Profit for the period 35.2 25.1
Other comprehensive income/(expense)
Items that will not be reclassified to the income statement:
Actuarial gain on defined benefit pension schemes 5.6 4.5
Tax relating to components of other comprehensive expense (1.4) (1.1)
Items that may be reclassified to the income statement:
Exchange differences on translation of foreign operations 0.8 (11.9)
Gain/(loss) on cash flow hedges 2.3 (2.5)
Hedging (gains) reclassified to profit or loss (2.0) (3.1)
Tax relating to components of other comprehensive income 0.5 1.6
Total other comprehensive income/(expense) net of tax 5.8 (12.5)
Total comprehensive income 41.0 12.6
Condensed Consolidated Statement of Financial Position
£m Notes 29 June 2024 30 December 2023 (Audited)
(Unaudited)
Non-current assets
Goodwill 10 652.9 652.5
Other intangible assets 12.2 10.5
Property, plant and equipment 11 487.3 507.9
Interests in associates and other investments 0.1 0.1
Deferred tax asset 14.4 14.7
Retirement benefit asset 18.7 12.0
Derivative financial instruments 1.6 0.9
1,187.2 1,198.6
Current assets
Inventories 12 74.2 71.3
Trade and other receivables 13 196.8 171.7
Cash and cash equivalents 15 45.5 36.6
Derivative financial instruments 0.1 2.1
316.6 281.7
Total assets 1,503.8 1,480.3
Current liabilities
Trade and other payables 14 (477.6) (447.6)
Current tax liabilities (1.5) (3.4)
Borrowings 15 (10.4) (25.4)
Lease liabilities 15 (10.0) (11.6)
Provisions (8.9) (10.4)
Derivative financial instruments (1.0) (0.5)
(509.4) (498.9)
Non-current liabilities
Borrowings 15 (237.1) (240.0)
Lease liabilities 15 (76.4) (78.9)
Provisions (16.7) (15.7)
Derivative financial instruments (0.6) (0.8)
Deferred tax liabilities (44.4) (38.4)
(375.2) (373.8)
Total liabilities (884.6) (872.7)
Net assets 619.2 607.6
Equity
Called up share capital 17 11.6 11.6
Own shares held 17 (1.4) (4.4)
Merger reserve (130.9) (130.9)
Hedging reserve 0.3 1.1
Translation reserve 33.6 32.8
Retained earnings 706.0 697.4
Total equity 619.2 607.6
Condensed Consolidated Statement of Changes in Equity
£m Share capital Own shares held Merger reserve Hedging reserve Translation reserve Retained earnings Total
Balance at 31 December 2023 11.6 (4.4) (130.9) 1.1 32.8 697.4 607.6
(Audited)
Profit for the period - - - - - 35.2 35.2
Other comprehensive (expense)/income for the period - - - 0.8 0.8 4.2 5.8
Total comprehensive income for the period - - - 0.8 0.8 39.4 41.0
Reclassification to inventory - - - (1.6) - - (1.6)
Purchase of own shares - (2.8) - - - - (2.8)
(Note 17)
Share-based payments - 5.8 - - - (5.8) -
(Note 17)
Dividends (Note 9) - - - - - (25.3) (25.3)
Cash-settlement of share-based payments - - - - - 0.3 0.3
Balance at 29 June 2024 11.6 (1.4) (130.9) 0.3 33.6 706.0 619.2
(Unaudited)
£m Share capital Own shares held Merger reserve Hedging reserve Translation reserve Retained earnings Total
Balance at 1 January 2023 11.6 (3.1) (130.9) 9.5 44.5 686.2 617.8
(Audited)
Profit for the period - - - - - 25.1 25.1
Other comprehensive (expense)/income for the period - - - (4.0) (11.9) 3.4 (12.5)
Total comprehensive (expense)/income for the period - - - (4.0) (11.9) 28.5 12.6
Reclassification to inventory - - - (1.0) - - (1.0)
Purchase of own shares - (0.1) - - - - (0.1)
(Note 17)
Share-based payments (Note 17) - 0.1 - - - (0.1) -
Dividends (Note 9) - - - - - (24.0) (24.0)
Credit for share-based payments - - - - - 1.0 1.0
Balance at 1 July 2023 11.6 (3.1) (130.9) 4.5 32.6 691.6 606.3
(Unaudited)
Condensed Consolidated Statement of Cash Flows
£m Notes 26 weeks 26 weeks
ended ended
29 June 1 July
2024 2023
(Unaudited) (Unaudited)
Net cash generated from operating activities 20 70.7 63.3
Investing activities
Interest received 0.2 0.3
Dividends received from associates - 1.6
Purchases of property, plant and equipment (13.2) (22.0)
Proceeds on disposal of property, plant and equipment - 1.6
Purchase of intangibles (1.4) (0.9)
Acquisition of subsidiary (1.8) -
Proceeds on disposal of subsidiaries 6.9 -
Proceeds on disposal of associates - 3.2
Net cash used in investing activities (9.3) (16.2)
Financing activities
Dividends paid 9 (25.3) (24.0)
Own shares purchased 17 (2.5) -
Increase in borrowings 15.0 1.3
Repayment of borrowings (33.9) (32.1)
Principal elements of lease payments (5.6) (6.6)
Net cash used in financing activities (52.3) (61.4)
Net increase/(decrease) in cash and cash equivalents 9.1 (14.3)
Cash and cash equivalents at beginning of period 36.6 40.2
Effect of foreign exchange rate changes (0.2) (1.2)
Cash and cash equivalents at end of period 45.5 24.7
Notes to the condensed CONSOLIDATED INTERIM financial statements
1. General information
Bakkavor Group plc is a company limited by shares, incorporated and domiciled
in England, United Kingdom. Its registered office and principal place of
business is Fitzroy Place, 5(th) Floor, 8 Mortimer Street, London, W1T 3JJ, UK
(Company number: 10986940). Its Ordinary shares are listed on the London Stock
Exchange.
The principal activities of the Group comprise the manufacture of fresh
prepared foods and fresh produce. These activities are undertaken in the UK
and US where products are primarily sold through high-street supermarkets and
China where products are primarily sold through foodservice operators.
The Condensed Consolidated Interim Financial Statements ("Interim Report") for
the 26 weeks ended 29 June 2024 ("H1 2024") and 26 weeks ended 1 July 2023
("H1 2023") do not comprise statutory accounts within the meaning of section
434 of the Companies Act 2006. Statutory accounts for the year ended 30
December 2023 were approved by the board of directors on 4 March 2024 and
delivered to the Registrar of Companies. The report of the auditors on those
accounts was unqualified, did not contain an emphasis of matter paragraph and
did not contain any statement under section 498 of the Companies Act 2006.
The Interim Report has been reviewed, not audited.
The Interim Report has been prepared in accordance with the UK-adopted
International Accounting Standard 34, 'Interim Financial Reporting' and the
Disclosure Guidance and Transparency rules of the Financial Conduct Authority.
The Interim Report does not include all of the information and disclosure
required in the Annual Consolidated Financial Statements and should be read in
conjunction with the Bakkavor Group plc (the "Group") Annual Consolidated
Financial Statements for the 52 weeks ended 30 December 2023, which have been
prepared in accordance with UK-adopted International Accounting Standards, and
any public announcements made by the Group during the interim reporting
period.
Controlling parties
Two of the Company's Directors, Agust Gudmundsson and Lydur Gudmundsson, hold
shares in the Company through their beneficial ownership of Carrion
Enterprises Limited (the corporate holding structure of Agust Gudmundsson) and
Umbriel Ventures Limited (the corporate holding structure of Lydur
Gudmundsson). Umbriel Ventures Limited holds 142,303,505 ordinary shares
(representing 24.56% of the issued share capital of the Company) and Carrion
Enterprises Limited holds 142,103,505 ordinary shares (representing 24.52% of
the issued share capital of the Company).
Lixaner Co Limited, a company owned and controlled by Sigurdur Valtysson, who
runs the family office for Agust and Lydur Gudmundsson, holds 6,457,750
ordinary shares (representing 1.11% of the issued share capital of the
Company). Given the close relationship between the parties, Sigurdur Valtysson
is to be considered as acting in concert with Agust and Lydur Gudmundsson for
the purposes of the definition in the Takeover Code and the parties are
controlling shareholders of the Company. The aggregate shareholding in the
Company of Carrion Enterprises Limited and Umbriel Ventures Limited and their
concert party group (Lixaner Co Limited) is 290,864,760 ordinary shares
(representing 50.20% of the issued share capital of the Company).
Seasonality of operations
The Group's cash flows are affected by seasonal variations. Sales of fresh
prepared food have historically tended to be marginally higher during the
summer months and in the weeks leading up to Christmas.
2. Significant accounting policies
Basis of accounting
The financial information has been prepared on the historical cost basis,
except for the revaluation of financial instruments and retirement benefit
plan assets, which are stated at fair value.
Accounting policies
The accounting policies adopted are consistent with those of the previous
Group's Annual Financial Statements for the 52 weeks ended 30 December 2023.
Critical accounting judgements and key sources of estimation uncertainty
There have been no changes in the period to the Group's critical accounting
judgements and key sources of estimation uncertainty as disclosed in the
Group's Annual Financial Statements for the 52 weeks ended 30 December 2023.
Going concern
The Directors have reviewed the historical trading performance of the Group
and the forecasts through to December 2025. This includes the Group's future
revenue projections and cash requirements, which they believe are based on
prudent interpretations of market data and past experience.
The Directors have also considered the Group's level of available liquidity
and covenant compliance under its financing facilities, which were refinanced
on 25 July 2024. Following this refinancing the Group has an aggregate loan
amount of £350m, comprising a £150m term loan and a £200m revolving credit
facility. These new facilities will mature in July 2028 with the option of two
one-year extensions. The Directors have carried out a robust assessment of the
significant risks currently facing the Group. This has included scenario
planning on the implications of further inflation and the potential impact of
lower sales volumes from supply chain issues and reduced consumer demand in
response to increasing retail prices.
Having taken these factors into account under the scenario, which is
considered to be severe but plausible, the Directors consider that adequate
headroom is available based on the forecasted cash requirements of the
business. At the date of this report, the Group has complied in all respects
with the terms of its borrowing agreements, including its financial covenants,
and forecasts to continue to do so in the future.
Consequently, the Directors consider that the Group has adequate resources to
meet its liabilities as they fall due for the foreseeable future. For this
reason, they continue to adopt the going concern basis in preparing the
Interim Report.
3. Segment information
The chief operating decision-maker ("CODM") has been defined as the Senior
Executive Team headed by the Chief Executive Officer. They review the Group's
internal reporting in order to assess performance and allocate resources.
Management has determined the segments based on these reports.
As at the statement of financial position date, the Group is organised into
three regions, the UK, US and China, and manufactures fresh prepared foods and
produce in each region.
The Group manages the performance of its businesses through the use of
'Adjusted operating profit' as defined in Note 23.
The following table provides an analysis of the Group's segment information
for the period from 31 December 2023 to 29 June 2024:
£m Note UK US China
Total
Revenue 957.4 109.4 54.4 1,121.2
Adjusted EBITDA 23 80.7 9.2 2.0 91.9
Depreciation (24.9) (5.5) (3.0) (33.4)
Amortisation (1.5) (0.1) - (1.6)
Share scheme charges (1.9) - - (1.9)
Adjusted operating profit/(loss) 23 52.4 3.6 (1.0) 55.0
Exceptional items 4 - (0.6) 4.4 3.8
Operating profit 52.4 3.0 3.4 58.8
3. Segment information (continued)
The following table provides an analysis of the Group's segment information
for the period 1 January 2023 to 1 July 2023:
£m UK US China
Total
Revenue 913.7 117.6 59.1 1,090.4
Adjusted EBITDA (Note 23) 71.8 5.6 1.5 78.9
Depreciation (25.1) (5.3) (2.9) (33.3)
Amortisation (0.9) (0.2) - (1.1)
Share scheme charges (1.0) - - (1.0)
Loss on disposal of property, plant and equipment - - (0.1) (0.1)
Adjusted operating profit/(loss) (Note 23) 44.8 0.1 (1.5) 43.4
Exceptional items (Note 4) - - 2.9 2.9
Operating profit 44.8 0.1 1.4 46.3
Major customers
For the 26 weeks ended 29 June 2024, the Group's four largest UK customers
accounted for 76.9% (26 weeks ended 1 July 2023: 75.1%) of total Group revenue
from continuing operations. These customers accounted for 90.0% (26 weeks
ended 1 July 2023: 89.7%) of total UK revenue from continuing operations. The
Group does not enter into long-term contracts with its retail customers. The
percentage of Group revenue from these customers is as follows:
26 weeks ended 26 weeks ended
29 June 1 July
2024 2023
Customer A 31.9% 32.4%
Customer B 23.9% 22.7%
Customer C 14.5% 12.9%
Customer D 6.6% 7.1%
4. Exceptional items
The Group's financial performance is analysed in two ways: review of
underlying performance (which does not include exceptional items) and separate
review of exceptional items. The Directors consider that the underlying
performance is more representative of the ongoing operations and key metrics
of the Group.
Exceptional items are those that, in management's judgement, should be
disclosed by virtue of their nature or amount. Exceptional items include items
that are significant or non-recurring in nature, and are important to users in
understanding the business, such as restructuring costs and impairment of
assets.
£m 26 weeks ended 26 weeks ended
29 June 1 July
2024 2023
Net profit on disposal arising from operations in China 4.4 2.9
US asset impairment charge (0.6) -
Total exceptional items included in operating profit 3.8 2.9
Exceptional finance costs (Note 5) (0.6) -
Total before tax 3.2 2.9
Tax on exceptional items - -
Total after tax 3.2 2.9
4. Exceptional items (continued)
H1 2024:
The Group recognised net exceptional income of £3.2m in H1 2024, which
includes:
· £4.4m of profit on disposal arising from our China operations, which
includes £3.9m profit on disposal from the 100% owned subsidiary Bakkavor
(Taicang) Baking Company Limited on 28 March 2024; and a further £0.5m of net
profit arising from the sale of our Hong Kong associate in 2023 (with £1.4m
of exceptional income recognised in FY23);
· £0.6m impairment charge in the US relating to equipment that is no
longer in use; and
· £0.6m charge relating to accelerated amortisation of refinancing
fees, see Note 5 for further details.
H1 2023:
The Group recognised exceptional income of £2.9m in H1 2023, which includes:
· £1.5m profit on disposal of property, plant and equipment following
the sale and leaseback of one of the properties the Group operates from within
the China segment; and
· £1.4m profit on disposal of associates, following the sale of its
45% share in two associate companies, La Rose Noire Limited and Patisserie et
Chocolat Limited, on 8 May 2023.
The total net cash inflow during H1 2024 in respect of H1 2024 exceptional
items was £6.6m, which wholly relates to the proceeds on disposal of the
subsidiary in China net of tax (H1 2023 inflow in respect of H1 2023
exceptional items: £6.1m).
As shown in Note 20, there is £2.2m (H1 2023: £10.6m) net cash outflow
related to a decrease in exceptional provisions. This relates to the cash
impact of exceptional items recognised and provided for on the 31 December
2022 Statement of Financial Position in relation to restructuring costs for
the closure of two of our UK sites and the costs of a corporate restructure.
5. Finance costs
£m 26 weeks ended 26 weeks ended
29 June 1 July
2024 2023
Interest on borrowings 8.1 7.9
Interest on non-recourse receivables financing 3.4 3.4
Interest on lease liabilities 1.5 1.5
Unwind of discount on provisions 0.5 0.5
Total finance costs pre exceptionals 13.5 13.3
Exceptional finance costs 0.6 -
Total finance costs 14.1 13.3
Interest income (0.2) -
Total finance costs, net 13.9 13.3
Exceptional finance costs of £0.6m wholly relate to the accelerated
amortisation of refinancing fees relating to the Group's refinancing of its
core debt facilities which completed on 25 July 2024, with the process having
launched on 7 June 2024. The amortisation of these refinancing fees prior to
the launch of the refinancing were included in 'interest on borrowings'.
6. Other gains and (losses)
£m 26 weeks ended 26 weeks ended
29 June 1 July
2024 2023
Foreign exchange gains/(losses) 0.3 (0.4)
7. Tax
The Group's effective tax rate for the period was 22.0% (H1 2023: 23.0%).
Excluding the impact of net exceptional income (including financing costs) of
£3.2m (H1 2023: £2.9m) the effective tax rate was 24.0% (H1 2023: 25.1%)
which is 1.0% lower than the UK statutory tax rate of 25.0% (H1 2023: 23.5%).
The reduction in underlying effective tax rate year-on-year is driven by the
benefit of additional losses brought forward following a review of the Group's
taxable loss position. The tax charge for the period has been calculated by
applying the effective tax rate which is expected to apply for the year ended
28 December 2024.
On 20 June 2023, legislation in respect of the OECD Pillar Two model rules
were substantively enacted in the UK, Finance (No.2) Act 2023, and came into
effect from 1 January 2024. The Group is within the scope of the Pillar Two
rules and the IAS 12 exception to recognise and disclose information about
deferred tax assets and liabilities related to Pillar Two income taxes has
been applied.
A reconciliation of the expected tax rate to the forecast effective tax rate
is as follows:
£m 26 weeks ended
29 June
2024
Profit before tax 45.2
Expected tax at 25.0% 11.3 25.0%
Impact of:
Overseas losses not recognised 0.3 1.0%
Prior year adjustment (0.8) (2.0)%
Non-taxable income (0.8) (2.0)%
Total tax charge 10.0 22.0%
Deduct: Tax charge on exceptional income - -
Tax charge pre-exceptional items 10.0 24.0%
8. Earnings per share
The calculation of earnings per Ordinary share is based on earnings after tax
and the weighted average number of Ordinary shares in issue during the period.
For diluted earnings per share, the weighted average number of Ordinary shares
in issue is adjusted to assume conversion of all potentially dilutive Ordinary
shares.
The calculation of the basic and diluted earnings per share is based on the
following data:
Earnings
£m 26 weeks ended 26 weeks ended
29 June 1 July
2024 2023
Profit for the period 35.2 25.1
Number of shares
'000 26 weeks ended 26 weeks ended
29 June 1 July
2024 2023
Weighted average number of Ordinary shares 577,790 576,501
Effect of potentially dilutive Ordinary shares 8,423 9,355
Weighted average number of Ordinary shares for diluted earnings per share 586,213 585,856
8. Earnings per share (continued)
26 weeks ended 26 weeks ended
29 June 1 July
2024 2023
Basic earnings per share 6.1p 4.4p
Diluted earnings per share 6.0p 4.3p
9. Dividends
Reporting period Dividend per share Date Approved Date Paid Number of dividend rights waived(1) Amount Paid
28 December 2024
Interim dividend(2) 3.20p September 2024 11 October 2024
30 December 2023
Final dividend 4.37p May 2024 29 May 2024 1,065,145 £25,274,351
Interim dividend 2.91p September 2023 13 October 2023 3,264,816 £16,766,278
31 December 2022
Final dividend 4.16p May 2023 5 June 2023 2,886,522 £23,984,025
Interim dividend 2.77p September 2022 14 October 2022 2,492,273 £15,981,053
(1)Dividend rights waived in relation to Ordinary shares held in the Bakkavor
Group plc Employee Benefit Trust.
(2)Interim dividend in relation to the 52 weeks ended 28 December 2024 is
payable on 11 October 2024 to Ordinary shareholders registered on the record
date at 13 September 2024.
10. Goodwill
£m
At 30 December 2023
Cost 704.6
Accumulated impairment losses (52.1)
Net book amount 652.5
At 31 December 2023 652.5
Exchange rate difference during the period 0.4
At 29 June 2024 652.9
11. Property, plant and equipment
£m
At 30 December 2023
Cost 1,213.5
Accumulated depreciation and impairment (705.6)
Net book amount 507.9
At 31 December 2023 507.9
Additions 15.5
Disposals (2.2)
Depreciation charge for the period (33.4)
Impairment charge (0.6)
Exchange rate difference during the period 0.1
At 29 June 2024 487.3
12. Inventories
£m 29 June 30 December
2024
2023
Raw materials and packaging 58.7 60.1
Work-in-progress 3.3 2.6
Finished goods 12.2 8.6
74.2 71.3
13. Trade and other receivables
£m 29 June 30 December
2024
2023
Amounts receivable from trade customers 154.8 142.6
Expected credit loss (1.3) (1.3)
Net amounts receivable from trade customers 153.5 141.3
Other receivables 19.5 17.0
Prepayments 23.8 13.4
Trade and other receivables due within one year 196.8 171.7
During the period, the Group has continued to operate trade receivable
factoring arrangements. These are non-recourse arrangements and therefore
amounts are de-recognised from trade receivables. At 29 June 2024 £143.1m was
drawn under factoring facilities (30 December 2023: £145.2m) representing
cash collected before it was contractually due from the customer.
As at 29 June 2024, the Group's amounts receivable from trade customers
includes £83.1m (30 December 2023: £72.8m) which could be factored under the
non-recourse trade receivable factoring arrangement.
14. Trade and other payables
£m 29 June 30 December
2024
2023
Trade payables 280.5 262.4
Other taxation 1.7 2.2
Other payables 28.9 26.7
Accruals and deferred income 166.5 156.3
Trade and other payables due within one year 477.6 447.6
During the period, the Group has continued to operate an arrangement which
provides financing for the Group's suppliers. This is a voluntary programme
that potentially gives suppliers earlier access to cash. At 29 June 2024,
trade payables amounting to £43.8m (30 December 2023: £42.7m) were subject
to these arrangements. These balances are classified as trade payables, and
the related payments as cash flows from operating activities since the
original obligation to the supplier remains and has not been replaced with a
new obligation to the bank.
15. Net debt
£m 29 June 30 December
2024
2023
Cash and cash equivalents 45.5 36.6
Borrowings (9.9) (25.5)
Interest accrual (0.5) (0.5)
Unamortised fees - 0.6
Lease liabilities (10.0) (11.6)
Total debt due within one year (20.4) (37.0)
Borrowings (237.3) (240.5)
Unamortised fees 0.2 0.5
Lease liabilities (76.4) (78.9)
Total debt due after one year (313.5) (318.9)
Group net debt (288.4) (319.3)
Group net debt is the sum of cash and cash equivalents, prepaid fees to be
amortised over the term of outstanding borrowings, outstanding borrowings,
interest accrued on borrowings and lease liabilities.
On 25 July 2024, the Group completed a refinancing of its core debt
facilities, with an aggregate loan amount of £350m, comprising a £150m term
loan and a £200m revolving credit facility. These new facilities will mature
in July 2028 with the option of two one-year extensions.
16. Financial instruments
The categories of financial instruments are as follows:
£m 29 June 30 December
2024
2023
Financial assets
Fair value through OCI or profit and loss:
Trade receivables 83.1 72.8
Derivative financial instruments 1.7 3.0
Measured at amortised cost:
Trade receivables 70.5 68.5
Other receivables 8.2 5.4
Cash and cash equivalents 45.5 36.6
209.0 186.3
£m 29 June 30 December
2024
2023
Financial liabilities
Fair value through OCI or profit and loss:
Derivative financial instruments 1.6 1.3
Other financial liabilities at amortised cost:
Trade payables 280.5 262.4
Other payables 15.0 15.0
Accruals 165.5 155.3
Borrowings 247.5 265.4
Lease liabilities 86.4 90.5
796.5 789.9
The fair value of financial assets approximates to their carrying values due
to the short-term nature of the receivables. The fair value of trade
receivables and derivative financial instruments has been determined as level
2 under IFRS 7 Financial Instruments: Disclosures. Quoted prices are not
available for the derivative financial instruments and so valuation models are
used to estimate fair value. The models calculate the expected cash flows
under the terms of each specific contract and then discount these values back
to a present value. These models use as their basis independently sourced
market parameters including, for example, interest rate yield curves and
currency rates.
The fair value of other financial liabilities at amortised cost approximates
to their carrying value. The trade and other payables approximate to their
fair value due to the short-term nature of the payables. The lease liabilities
fair value approximates to the carrying value based on discounted future cash
flows.
The borrowings fair value is £247.2m (30 December 2023: £266.1m).
There have been no changes to fair values as a result of change in credit risk
of the Group or the Group's customers.
17. Share capital and own shares held
Issued share capital as at 29 June 2024 and 30 December 2023 amounted to
£11.6m (579,425,585 Ordinary shares of £0.02 each).
During the prior and current period, the Company has purchased shares through
an Employee Benefit Trust called the Bakkavor Group plc Employee Benefit Trust
(the "Trust"). Own shares purchased are recorded at cost and deducted from
equity.
The own shares held represents the cost of shares in Bakkavor Group plc
purchased in the market and held by the Trust to satisfy share awards under
the Group's share scheme plans. The number of Ordinary shares held by the
Trust at 29 June 2024 was 1,074,600 which represents 0.19% of total called up
share capital (30 December 2023: 4,567,073 and 0.79% respectively).
No own shares held in Bakkavor Group plc were cancelled during the periods
presented.
The table below shows the number of own shares purchased and distributed by
the Trust and the related cost recognised within equity:
Number of shares £000
Balance at 30 December 2023 4,567,073 4,372
Acquisition of shares by the Trust 2,419,593 2,830
Distribution of shares under share scheme plans (5,912,066) (5,835)
Balance at 29 June 2024 1,074,600 1,367
The table below shows amounts included in the Condensed Consolidated Statement
of Cash Flows in relation to own shares purchased for share schemes:
£m 26 weeks ended 26 weeks ended
29 June
1 July
2024
2023
Cash paid to purchase own shares (2.8) (0.1)
Cash received from distribution of shares under share scheme plans 0.3 0.1
Included in financing activities cash flows (2.5) -
18. Acquisition of subsidiary
On 17 May 2024, the Group completed the acquisition of 100% of the issued
share capital of Moorish Limited ("Moorish") for a total cash consideration of
£1.8 million.
The primary reason for the acquisition was to acquire the brand under which
Moorish sell a variety of hummus products.
The provisional amounts recognised in respect of the fair value of the
identifiable assets and liabilities assumed on acquisition are as set out in
the table below:
£m 17 May 2024
Other intangible assets 1.9
Trade and other receivables 0.2
Trade and other payables (0.3)
Net assets acquired 1.8
Goodwill -
Total cash outflow on acquisition 1.8
18. Acquisition of subsidiary (continued)
The net cash outflow arising on acquisition was:
£m 17 May 2024
Cash consideration for share capital 1.8
Cash and cash equivalents acquired on acquisition -
Cash outflow on acquisition of business 1.8
Acquisition-related costs of £0.1m were incurred and are included in Other
administrative costs in the consolidated income statement.
The results of Moorish have been consolidated in the Group's consolidated
income statement from 17 May 2024 and contributed £0.2m of revenue and a
profit of £nil to the Group's profit for the period. If the acquisition of
Moorish had been completed on the first day of the financial year, Group
revenues for the period would have been £1,122.0m and Group profit would have
been £35.2m.
All of the intangible assets acquired relate to the brand. There are no
contingent liabilities to be disclosed in relation to this acquisition
19. Disposal of subsidiary
The Group sold its 100% owned subsidiary Bakkavor (Taicang) Baking Company
Limited on 28 March 2024. The Group recognised a net gain on disposal of
£3.6m (net of tax) and received a net consideration of £6.0m (net of tax).
20. Notes to the Condensed Consolidated Statement of Cash Flows
£m 26 weeks ended 26 weeks ended
29 June
1 July
2024
2023
Operating profit 58.8 46.3
Adjustments for:
Depreciation of property, plant and equipment 33.4 33.3
Amortisation of intangible assets 1.6 1.1
(Profit) on disposal of property, plant and equipment - (1.4)
Impairment of property, plant and equipment 0.6 -
(Profit) on disposal of subsidiary (3.9) -
(Profit) on disposal of associate - (1.4)
Other exceptional items (0.5) -
Share scheme charges 0.1 1.0
Net retirement benefits charge less contributions (1.1) (1.0)
Operating cash flows before movements in working capital 89.0 77.9
(Increase)/decrease in inventories (3.4) 6.8
(Increase) in receivables (26.6) (1.3)
Increase in payables 32.2 9.5
Increase in provisions 1.3 -
(Decrease) in exceptional provisions (2.2) (10.6)
Cash generated by operations 90.3 82.3
Income taxes paid (7.2) (6.3)
Interest paid (12.4) (12.7)
Net cash generated from operating activities 70.7 63.3
21. Contingent liabilities
The Group may from time to time, and in the normal course of business, be
subject to claims from customers and counterparties. The Group regularly
reviews all of these claims to determine any possible financial loss to the
Group. No provision was considered necessary in the Condensed Consolidated
Interim Financial Statements.
22. Events after the Statement of Financial Position date
Refinancing: On 25 July 2024, the Group completed a refinancing of its core
debt facilities, with an aggregate loan amount of £350m, comprising a £150m
term loan and a £200m revolving credit facility. These new facilities have a
four year tenure and will mature in July 2028, with the option of two one-year
extensions.
Defined benefit pension scheme: In June 2023, the UK High Court (Virgin Media
Limited v NTL Pension Trustees II Limited) ruled that certain historical
amendments for contracted out defined benefit schemes were invalid if they
were not accompanied by the correct actuarial confirmation. Following a
hearing in late June 2024, the UK Court of Appeal issued a judgment on 25 July
2024 upholding this ruling. The Company will work with the pension scheme
trustees to review this development and consider the implications, if any, for
the UK defined benefit pension fund and the Group's financial statements.
Site closure: As we seek to further enhance our returns, we have identified
that our Bakkavor Meals Wigan site is unsustainable with low margin business
in a factory that requires significant investment. This has resulted in the
difficult but necessary decision to announce the proposal to close this site,
with consultation due to commence at the end of September 2024. Following this
consultation, should this proposal go ahead, we would expect to exit c.£80m
of business in H1 25.
Change in Executive Directors: As disclosed today, Ben Waldron will be
stepping down from his role as Chief Financial Officer, Asia CEO and Executive
Director of the Group with effect from 31 October 2024. From 1 November 2024,
Lee Miley will assume the role of Chief Financial Officer and Executive
Director.
23. Alternative performance measures
The Group uses various non-IFRS financial measures to evaluate growth trends,
assess operational performance and monitor cash performance. The Directors
consider that these measures enable investors to understand the ongoing
operations of the business. They are used by management to monitor financial
performance as it is considered to aid comparability of the financial
performance of the Group from year to year.
Like-for-like ("LFL") revenue
The Group defines LFL revenue as revenue from continuing operations adjusted
for the revenue generated from businesses closed, sold or acquired in the
current and prior year, and the effect of foreign currency movements and
revenues.
The following table provides the information used to calculate LFL revenue for
the Group and for each segment:
GROUP
£m 26 weeks ended 26 weeks ended Change %
29 June
1 July
2024
2023
Statutory revenue 1,121.2 1,090.4 2.8%
Effect of currency movements 5.8 -
Revenue from sold business (2.8) (7.5)
Like-for-like revenue 1,124.2 1,082.9 3.8%
UK 26 weeks ended 26 weeks ended Change %
29 June
1 July
2024
2023
£m
Statutory and like-for-like revenue 957.4 913.7 4.8%
US 26 weeks ended 26 weeks ended Change %
29 June
1 July
2024
2023
£m
Statutory revenue 109.4 117.6 (7.0)%
Effect of currency movements 2.6 -
Like-for-like revenue 112.0 117.6 (4.7)%
China 26 weeks ended 26 weeks ended Change %
29 June
1 July
2024
2023
£m
Statutory revenue 54.4 59.1 (8.0)%
Effect of currency movements 3.2 -
Revenue from sold business (2.8) (7.5)
Like-for-like revenue 54.8 51.6 6.3%
23. Alternative performance measures (continued)
Adjusted EBITDA and Adjusted operating profit
The Group manages the performance of its businesses through the use of
'adjusted EBITDA' and 'adjusted operating profit', as these measures exclude
the impact of items that hinder comparison of profitability year-on-year. In
calculating adjusted operating profit, we exclude restructuring costs, asset
impairments and those additional charges or credits that are considered
significant or one-off in nature. In addition, for adjusted EBITDA we exclude
depreciation, amortisation and share scheme charges, as these are non-cash
amounts. Adjusted operating profit margin is used as an additional profit
measure that assesses profitability relative to the revenues generated by the
relevant segment. It is calculated by dividing the adjusted operating profit
by the statutory revenue for the relevant segment.
The Group calculates adjusted EBITDA on a pre-IFRS 16 basis for the purposes
of determining covenants under its financing agreements.
The following table provides a reconciliation from the Group's operating
profit to adjusted operating profit and adjusted EBITDA.
£m 26 weeks ended 26 weeks ended
29 June
1 July
2024
2023
Operating profit 58.8 46.3
Exceptional items (Note 4) (3.8) (2.9)
Adjusted operating profit 55.0 43.4
Depreciation 33.4 33.3
Amortisation 1.6 1.1
Share scheme charges 1.9 1.0
Loss on disposal of property, plant and equipment - 0.1
Adjusted EBITDA 91.9 78.9
Less IFRS 16 impact (7.1) (6.9)
Adjusted EBITDA pre IFRS 16(1) 84.8 72.0
(1) Excludes the impact of IFRS 16 as the Group's bank facility agreement
definition of Adjusted EBITDA excludes the impact of this standard.
23. Alternative performance measures (continued)
Operational net debt and leverage
Operational net debt excludes the impact of non-cash items on the Group's net
debt. The Directors use this measure, as it reflects actual net borrowings at
the relevant reporting date and is most comparable with the Group's free cash
flow and aligns with the definition of net debt in the Group's bank facility
agreements which exclude the impact of IFRS 16. The following table provides a
reconciliation from the Group's net debt to the Group's operational net debt:
£m 29 June 30 December
2024
2023
Group net debt (288.4) (319.3)
Unamortised fees (0.2) (1.1)
Interest accrual 0.5 0.5
Lease liabilities recognised under IFRS 16 86.3 90.3
Group operational net debt (201.8) (229.6)
Adjusted EBITDA (last 12 months pre IFRS 16 and including covenant 166.5 154.5
adjustments)
Leverage (Operational net debt/Adjusted EBITDA pre IFRS 16 and including 1.2 1.5
covenant adjustments)
Free cash flow
The Group defines free cash flow as the amount of cash generated by the Group
after meeting all of its obligations for interest, tax and pensions, and after
purchases of property, plant and equipment (excluding development projects)
and intangible assets but before payments of refinancing fees and other
exceptional or significant non-recurring cash flows. The definition of free
cash flow was amended during 2023 to be after IFRS 16 capital lease payments
to simplify our cash reporting. Free cash flow has benefitted from
non-recourse factoring of receivables as set out in Note 13 and the extension
of payment terms for certain suppliers as described in Note 14. The Directors
view free cash flow as a key liquidity measure, and the purpose of presenting
free cash flow is to indicate the underlying cash available to pay dividends,
repay debt or make further investments in the Group. The following table
provides a reconciliation from net cash generated from operating activities to
free cash flow:
£m 26 weeks ended 26 weeks ended
29 June
1 July
2024
2023
Net cash generated from operating activities 70.7 63.3
Interest received 0.2 0.3
Dividends received from associates - 0.2
Purchases of property, plant and equipment (13.2) (22.0)
Proceeds on disposal of property, plant and equipment - 0.1
Purchase of intangible assets (1.4) (0.9)
Impact of IFRS 16 (5.6) (6.4)
Cash impact of exceptional items 2.5 10.6
Free cash flow 53.2 45.2
23. Alternative performance measures (continued)
Adjusted earnings per share
The Group calculates Adjusted basic earnings per share by dividing Adjusted
earnings by the weighted average number of Ordinary shares in issue during the
period. The Group calculates Adjusted diluted earnings per share by dividing
Adjusted earnings by the weighted average number of Ordinary shares (including
dilutive shares) for diluted earnings per share. Adjusted earnings is
calculated as profit for the period adjusted to exclude exceptional items and
the change in value of derivative financial instruments. The Directors use
this measure as it tracks the underlying profitability of the Group and
enables comparison with the Group's peer companies. The following table
reconciles profit for the period to Adjusted earnings:
£m 26 weeks ended 26 weeks ended
29 June
1 July
2024
2023
Profit for the period 35.2 25.1
Exceptional items (Note 4) (3.2) (2.9)
Change in fair value of derivative financial instruments - -
Tax on the above items - -
Adjusted earnings 32.0 22.2
Add back: Tax on adjusted profit before tax 10.0 7.5
Adjusted profit before tax 42.0 29.7
Effective tax rate on underlying activities 24.0% 25.1%
(Tax on Adjusted profit before tax/Adjusted profit before tax)
Number 000's
Weighted average number of Ordinary shares 577,790 576,501
Effect of dilutive Ordinary shares 8,423 9,355
Weighted average number of Ordinary shares for diluted earnings per share 586,213 585,856
Adjusted basic earnings per share 5.5p 3.9p
Adjusted diluted earnings per share 5.5p 3.8p
23. Alternative performance measures (continued)
Return on Invested Capital ("ROIC")
The Group defines ROIC as Adjusted operating profit after tax divided by the
average invested capital for the year. Adjusted operating profit after tax is
defined as operating profit excluding the impact of exceptional items less tax
at the Group's effective tax rate. Invested capital is defined as total assets
less total liabilities excluding; net debt, pension assets and liabilities
(net of deferred tax), and fair values for derivatives not designated in a
hedging relationship, at the period end. The Group utilises ROIC to measure
how effectively it uses its invested capital. Average invested capital is the
simple average of invested capital at the beginning of the period and the end
of the period.
The Directors believe that ROIC is a useful indicator of the amount returned
as a percentage of shareholders' invested capital. The Directors believe that
ROIC can help analysts, investors and stakeholders to evaluate the Group's
profitability and the efficiency with which its invested capital is employed.
The following table sets out the calculations of Adjusted operating profit
after tax and invested capital used in the calculation of ROIC:
£m 52 weeks ended
29 June 52 weeks ended
2024
30 December
2023
Operating profit 109.6 97.1
Exceptional items (3.7) (2.8)
Adjusted operating profit 105.9 94.3
Taxation at the underlying effective rate (25.2) (23.0)
Adjusted operating profit after tax 80.7 71.3
Invested capital
Total assets 1,503.8 1,480.3
Total liabilities (884.6) (872.7)
Net debt at period end 288.4 319.3
Retirement benefit scheme surplus (18.7) (12.0)
Deferred tax liability on retirement benefit scheme 4.7 3.0
Invested capital 893.6 917.9
Average invested capital for ROIC calculation 925.5 952.7
ROIC (%) 8.7% 7.5%
Statement of Directors' responsibilities
The Directors confirm that, to the best of their knowledge, the Condensed
Consolidated Interim Financial Statements has been prepared in accordance with
IAS 34: 'Interim Financial Reporting', with ASB's 2007 Statement Half-Yearly
Reports, as contained in the UK adopted International Accounting Standard 34,
'Interim Financial Reporting', and that the interim management report includes
a fair review of the information required by Disclosure Guidance and
Transparency Rules ("DTR") 4.2.7R and DTR 4.2.8R, namely:
· an indication of important events that have occurred during the first
six months of the financial year and their impact on the Condensed
Consolidated Interim financial statements, and a description of the principal
risks and uncertainties for the remaining six months of the financial year;
and
· material related party transactions that have taken place in the
first six months of the current financial year and any material changes in the
related party transactions described in the last annual report.
The Board of Directors that served during the 26 weeks ended 29 June 2024, and
their respective responsibilities, can be found on pages 88 to 91 of the
Annual Report & Accounts 2023. A list of current directors is maintained
on the Bakkavor Group plc website at:
https://www.bakkavor.com/en/about-us/leadership/group-board/default.aspx
(https://protect.checkpoint.com/v2/___https:/www.bakkavor.com/en/about-us/leadership/group-board/default.aspx___.bXQtcHJvZC1jcC1ldXcyLTE6bmV4dDE1OmM6bzo5ZWZiMzQ4MjA2NGI4YWEwNjAxZDcwMDUzYWE1MzFmOTo2OmQyZGY6M2E4MWNiNjQ2NzcxMDZkYjFmMDVhZjJiODNhMzk2NDA1NDIyZmI4MzdmYTg1YTk2N2M0YzZiOTgzZGI1YjAyMDpwOlQ6Tg)
Approved on behalf of the Group Board by:
Mike
Edwards
Ben Waldron
Chief Executive
Officer
Chief Financial Officer and Asia Chief Executive Officer
4 September 2024
Independent review report to Bakkavor Group plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Bakkavor Group plc's condensed consolidated interim financial
statements (the "interim financial statements") in the Condensed Consolidated
Interim Financial Statements of Bakkavor Group plc for the 26 week period
ended 29 June 2024 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the Condensed Consolidated Statement of Financial Position as at
29 June 2024;
· the Condensed Consolidated Income Statement and the Condensed
Consolidated Statement of Comprehensive Income for the period then ended;
· the Condensed Consolidated Statement of Cash Flows for the period then
ended;
· the Condensed Consolidated Statement of Changes in Equity for the
period then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the Condensed Consolidated
Interim Financial Statements of Bakkavor Group plc have been prepared in
accordance with UK adopted International Accounting Standard 34, 'Interim
Financial Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Condensed Consolidated
Interim Financial Statements and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the interim
financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Condensed Consolidated Interim Financial Statements, including the interim
financial statements, is the responsibility of, and has been approved by the
directors. The directors are responsible for preparing the Condensed
Consolidated Interim Financial Statements in accordance with the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority. In preparing the Condensed Consolidated Interim Financial
Statements, including the interim financial statements, the directors are
responsible for assessing the group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the group or to cease operations, or have no realistic alternative
but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Condensed Consolidated Interim Financial Statements based on
our review. Our conclusion, including our Conclusions relating to going
concern, is based on procedures that are less extensive than audit procedures,
as described in the Basis for conclusion paragraph of this report. This
report, including the conclusion, has been prepared for and only for the
company for the purpose of complying with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority and for no other purpose. We do not, in giving this conclusion,
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