Strong Progress By Bakkavor
Bakkavor has once again outperformed the UK fresh prepared food market with revenue growth of 4% to £1.649 billion for 2013. Adjusted EBITDA improved by 1% to £111.6 million, however, EBITDA margin slipped from7.0% to 6.8%.
The food group’s margin was impacted by raw material inflation, although partly offset by the efficiencies generated from further growth in volumes. Strong cash generation reduced net debt by £44 million, supporting further investment in capacity and productivity enhancements
Agust Gudmundsson, chief executive of Bakkavor, comments: “The group made excellent progress delivering on our key strategic objectives in 2013. We completed a successful refinancing, exited a number of overseas operations and restructured certain low margin businesses. This was achieved whilst still growing our revenues ahead of the market, protecting our margin from significant raw material inflation and delivering double digit growth in free cash generation.”
He adds: “We expect trading conditions to remain challenging, particularly due to inflationary pressures, however we enter the new financial year with good momentum in our business and we remain confident in our strategy for the future.”
Bakkavor’s UK division generated revenue of £1.46 billion in 2013, an increase of 4.0% on the prior year. This growth was predominantly volume-driven despite promotional support remaining at similar levels to 2012. Underlying UK consumer spending on food also remained subdued, further compounded by a sharp downturn in demand for ready meals following the horsemeat scandal earlier in the year.
Despite these factors Bakkavor continued to invest in its customer relationships and innovation, and managed to secure a number of new business wins. These included exclusive supply arrangements for a second major retailer at the pizza business, material wins in both the leaf and dressed salads categories and continued success in the desserts business.
The second half of 2013 saw the return of significant inflation to the raw material cost base. Poor weather earlier in the year, combined with greater emphasis on local sourcing, particularly affected prices for dairy, flour, produce and meats. However, Bakkavor was able to limit the impact on Adjusted EBITDA margin to just 20 basis points – down from 7.4% to 7.2% – helped by efficiency benefits from higher volumes through its factories and cost savings from ongoing productivity investments. Adjusted EBITDA rose by 2% to £106.0 million during the year.
Bakkavor remains focused on strengthening its core UK operations and targeting long-term growth opportunities in the United States and Asia. In line with this strategy, the group exited several non-core markets in 2013, disposing of its French, Spanish and Czech companies and closing the loss-making Canadian facility. Bakkavor has continued with this strategy in early 2014 with the restructuring of its UK operations and the sale of Spring Valley Foods, an South African fruit business.
