TIDMBAKK
RNS Number : 3302S
Bakkavor Group PLC
16 March 2021
16 March 2021
Bakkavor Group plc
A resilient trading and operational performance during an
unprecedented year
Bakkavor Group plc ("Bakkavor", "the Group" or "the Company"),
the leading international provider of fresh prepared food ("FPF"),
today announces its full year audited results for the 52-week
period ended 26 December 2020.
HIGHLIGHTS
-- Group revenue 4.9% lower at GBP1,793.5m, with demand
returning to our fresh, convenient foods outside of COVID-19
lockdown restrictions:
- UK revenues decreased by 5.2% to GBP1,566.6m, due to lower
consumer demand, particularly across our food-to-go range
- US delivered strong growth of 12.2% to GBP146.5m, benefitting
from the growing demand for fresh meals
- China revenues were 21.8% lower at GBP80.4m, reflecting a
steady recovery following a 60% downturn in February 2020
-- Operating profit decreased 10.7% to GBP62.0m, with margins
decreasing by 20 basis points to 3.5%, albeit operating margins
improved to 5.3% in H2, through more stabilised trading, a strong
US performance and strategic restructurings across all regions
-- US business underwent commercial and operational reset,
delivering profitable growth in H2 and positive trajectory
-- Decisive actions taken to preserve cash, lower cost base and
protect profitability in response to pandemic, including a
reduction in non-essential capex, temporary and permanent closures
of food-to-go and Salads sites, and simplification of ranges in
response to lower consumer demand
-- Operational net debt decreased by GBP21.4m to GBP333.4m with
leverage maintained at 2.3 times
-- Strong financial position supported by over GBP200m of
liquidity headroom with funding maturities now extended to 2025
-- No dividend payable for 2020 given COVID-19 impact throughout year
FINANCIAL SUMMARY
GBP million (unless otherwise
stated) FY 2020 FY 2019 Change
------------------------------- --------- --------- ---------
Revenue 1,793.5 1,885.9 (4.9%)
Like-for-like revenue(1) 1,721.9 1,810.6 (4.9%)
Adjusted EBITDA pre IFRS
16(1) 139.2 138.0 0.9%
Adjusted operating profit(1) 83.6 89.7 (6.8%)
Adjusted operating profit
margin(1) 4.7% 4.8% (10bps)
Operating profit 62.0 69.4 (10.7%)
Operating profit margin 3.5% 3.7% (20bps)
Basic EPS 5.9p 6.4p (0.5p)
Adjusted EPS(1) 8.7p 10.3p (1.6p)
Free cash flow (1) 40.1 46.9 (6.8)
Operational net debt(1) (333.4) (354.8) 21.4
(1) Alternative Performance Measures ("APMs"), including
'like-for-like', 'adjusted' and 'underlying' are applied
consistently throughout. The APMs are defined in full and
reconciled to the reported statutory measure in the Consolidated
Financial Statements in Note 11 of this results statement and in
Note 37 of the Annual Report and Accounts 2020.
AGUST GUDMUNDSSON, CEO, COMMENTED:
"In what was a year like no other, the external environment was
the most challenging it has ever been. I am extremely proud of the
resilience our business has shown and I would like to thank all our
colleagues for their hard work and dedication.
Despite the UK Government's roadmap, with lockdown restrictions
in the UK continuing into the spring, the short-term trading
environment remains uncertain, but we are encouraged by the way
consumers have returned to our fresher, healthier and more
convenient foods each time these restrictions have lifted. Our
unique position of scale, expertise and strong customer
relationships have served us well during this extraordinary period,
and they remain key as we continue to grow our market share and
further strengthen our leadership position.
The actions taken in 2020 to preserve cash and protect
profitability across the business, combined with the successful
turnaround of our US business, and the strength of our financial
position, leave the Group well placed to deliver further growth.
The way that Bakkavor has been able to rapidly adapt, find new ways
of working, and drive the business forward through the COVID-19
crisis provides us with additional confidence for the future.
We will continue to play an essential role in supporting our
customers and communities and we are in great shape to deliver for
all stakeholders in 2021 and beyond."
PRESENTATION
A copy of these results is available on www.bakkavor.com
We will be presenting to analysts via a webcast at 10.00 am, 16
March 2021, through the Investor section of the Group's website
at:
https://event.on24.com/wcc/r/3022922/DA860DB30CFB1D6A51030A3B0180757F
The presentation can also be accessed via a replay service
shortly after the presentation has concluded.
ENQUIRIES
Institutional investors and analysts:
Ben Waldron, Chief Financial Officer
Sally Barrett-Jolley, Head of Corporate
Affairs +44 (0) 20 7908 6143
Media
Will Palfreyman, Tulchan Communications +44 (0) 20 7353 4200
ABOUT BAKKAVOR
Bakkavor is the leading provider of fresh prepared food ("FPF")
in the UK, with a growing international presence in the US and
China. The Group is the number one by market share in the UK in the
four FPF product categories of meals, salads, desserts and pizza
& bread, providing high-quality, fresh, healthy and convenient
food. Its customers include some of the UK's leading grocery
retailers, including Tesco, Marks & Spencer, Sainsbury's and
Waitrose. The Group's International segment operates in the US and
China. Bakkavor was founded in 1986 and has its headquarters in
London. The Group has over 19,000 employees and operates 23
factories in the UK, 5 in the US and 9 in China.
DISCLAIMER - FORWARD-LOOKING STATEMENTS
This statement, prepared by Bakkavor Group plc (the "Company"),
may contain forward-looking statements about Bakkavor Group plc and
its subsidiaries (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 Group 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
they are made, and the Company undertakes no obligation to update
these forward-looking statements. Nothing in this statement should
be construed as a profit forecast. Some numbers and period on
period percentages in this statement have been rounded or adjusted
in order to ensure consistency with the financial information.
GROUP CHIEF EXECUTIVE'S OVERVIEW
covid-19 AND PROTECTING OUR COLLEAGUES
In what has been an extraordinary year, I would like to begin by
thanking each and every one of my 19,000 Bakkavor colleagues for
their outstanding efforts in response to COVID-19. We have
prioritised colleague health and safety and, in extremely
challenging circumstances, we have minimised disruption by keeping
the food supply chain moving, maintaining excellent service levels
for all our customers.
Over the past 12 months, the wellbeing of our colleagues has
continued to be our primary focus. Since the onset of COVID-19, we
acted at speed to build on our stringent health and safety
controls, aligning with government guidelines across each territory
in which we operate.
Across the Group, we quickly introduced social distancing
measures, along with enhanced hygiene and cleaning protocols. We
pushed our high factory standards even further, with thermal
imaging cameras installed for temperature checking and the
introduction of COVID-19 marshals. We worked alongside local
authorities, communities, councils and governments to promote the
importance of staying safe across our entire workforce and, where
possible, we made sure that all colleagues who were able to do so
could work from home.
Where we did have cases of COVID-19 reported at sites, and as
government guidance evolved, we acted quickly and put in place
further mitigating actions, including employee car sharing
protocols and compulsory mask wearing policies. In response to
local outbreaks in the UK, we introduced our own internal track and
trace process and testing programmes for our colleagues at
Tilmanstone, Newark and Leicester to help protect them and contain
the spread of the virus. In addition, we continued to support our
colleagues through our employee wellbeing programme, providing
emotional, physical and financial support to those in need.
STRATEGY IN ACTION
Our business in China was the first to be severely impacted by
COVID-19 towards the end of January, and, after starting the year
very well, our UK and US businesses became affected. All three
regions experienced a sharp reduction in sales volumes as a result
of lower customer footfall and changes in consumer shopping
behaviour. Our strategy and values were fundamental to how we
responded to the pandemic.
When COVID-19 impacted the UK, we responded to lower consumer
demand by working closely with our customers to simplify our
ranges, switching production between sites when required and
temporarily closing sites where necessary. The breadth of our UK
portfolio, which includes over 1,700 products, offered us great
diversification and as demand for food-to-go items dropped
significantly, other products such as our pizza and bread ranges
benefitted. Close collaboration with our strategic customers
continued as leveraged the expertise of our procurement and
in-bound logistics teams to source and transport ingredients as
restrictions moved across the globe.
As the year progressed, we worked closely with our customers to
drive growth back into our categories by re-extending our ranges
and launching a number of new propositions. This included a range
of 38 Heat & Enjoy products for a significant UK customer,
aimed at creating the ultimate in-home dining experience.
In the US, we accelerated our growth and delivered a profitable
turnaround of the business, reducing the complexity of our products
and building on our core capabilities. This included a focus on
select customers and online retailers to help grow sales. We also
continued to innovate and launched a chef-inspired meals range for
a key strategic partner that specialises in home delivery, a trend
that has become more pronounced since the onset of the
pandemic.
Our China strategy focused on building capacity and scale in
foodservice. For example, we completed our new replacement factory
in Wuhan, commenced works at a new site in Xi'an and expanded
capacity at our Shanghai bakery operation to satisfy growing
demand. More recently, we successfully leveraged our capability to
build customer relationships for online and new retail
propositions.
Finally, improving operational efficiencies across the Group
continued to be a strategic priority and the pandemic prompted us
to make several difficult yet necessary decisions to protect our
profitability. This included the closure of two salads sites at
Spalding and Alresford in the UK. We also identified new and more
efficient ways of working with our customers, leading to the
fundamental restructure of several key functions, and streamlining
our customer facing roles across the UK and US. We also continued
with a number of efficiency projects that developed our digital
capabilities, including the roll-out of factory automation and we
continued with our ongoing refrigeration replacement project.
A RESILIENT trading AND OPERATIONAL PERFORMANCe
Despite the challenges presented by COVID-19, we delivered a
strong and resilient performance across the Group. Reported revenue
decreased by 4.9% to GBP1,793.5 million primarily due to the impact
of lockdown restrictions on trading volumes across the business.
Our US business, however, delivered a standout performance, which
helped to offset the decline in revenues in China and the UK.
Decisive mitigating actions were taken at an early stage of the
pandemic to protect the overall business, preserve cash and lower
our cost base. All discretionary expenditure and non-essential
capital investment remained on hold during the first half of the
year, while individual site capacity was adjusted in line with
fluctuating demand. In addition, we made the decision to
temporarily suspend the 2019 dividend and did not declare an
interim dividend for 2020.
These cost saving measures, combined with strategic
restructurings, and actions to simplify ranges, helped protect
profitability, resulting in adjusted operating profit of GBP83.6
million, 6.8% lower than the prior year, and operating profit of
GBP62.0 million, 10.7% lower than the prior year.
Despite the impact of COVID-19, our focus on cash management
meant we generated GBP40.1 million of free cash, with year-end
leverage in line with the 2.3x reported at the end of 2019 and
reducing this further remains a key focus for us in 2021.
BREXIT
The free trade agreement negotiated between the EU and the UK
took effect on 1 January 2021. To date, the operational impact has
been modest, as we completed extensive Brexit planning and remain
well prepared for any near-term volatility in the supply chain.
We are continuing to work through changes to the administrative
process of importing and exporting goods as many more protocols are
being implemented during 2021. While there has been disruption in
the export of our goods to both the Republic of Ireland and
Northern Ireland, the sales impact represents less than 3% of our
UK revenue. We continue to leverage our scale, strong customer
relationships and our cross-border expertise to return to normal
levels of service going forward.
As part of our Brexit retention programme, we have supported our
colleagues throughout the year with regular communication relating
to Brexit developments and held a series of workshops to assist our
European colleagues in achieving settled or pre-settled status in
the UK. We will continue to support these initiatives in 2021.
PROGRESSING OUR ESG COMMITMENTS
Despite the considerable challenges and pressures on the
business, upholding our environmental, social and governance
responsibilities remained a focus for the Group, and we were able
to roll out and embed our Trusted Partner strategy. In our UK
business, we completed a supplier risk mapping programme across all
of our 500+ suppliers and conducted an environmental and human
rights risk assessment, as well as communicating a new Supplier
Code of Conduct setting out our expectations on a wide range of
sustainability and ethical business issues.
During the year, we made progress in our goal to halve UK food
waste by 2030, reducing our food waste by 4.7%, equivalent to more
than 2,000 tonnes. We also continued to support our customers in
delivering the goals of the UK Plastics Pact by eliminating 54
tonnes of unnecessary plastics during the year.
Importantly, we prioritised reviewing our climate change goal
and conducted a project to assess carbon emissions across our
sites. Following this, at the beginning of 2021, we confirmed a
commitment to become a Net Zero carbon business in our Group
operations by 2040.
DEVELOPING OUR SENIOR LEADERSHIP
The business has undergone a number of Board and Management
Board changes this year. After over a decade with Bakkavor, Peter
Gates retired as Chief Financial Officer in late December 2020.
Peter played a major part in the Group's growth and success and I
would like to sincerely thank him for his contribution to the
Group. Peter has been replaced by Ben Waldron, the former President
of Bakkavor USA, who will also lead Strategy as part of his remit.
Along with having a deep understanding of our International
business and the opportunities for growth markets moving forward,
Ben has been immersed in finance and investor relations through his
previous roles.
Replacing Ben as President of Bakkavor USA is Pete Laport, who
is new to Bakkavor and I am very much looking forward to working
with him as he continues to build on the success achieved across
our US business.
I am also delighted to announce that our Chief Operating
Officer, UK, Mike Edwards has been appointed as an Executive
Director to the Group Board. Mike joined Bakkavor in 2001, becoming
Chief Operating Officer, UK in 2014. His record in this role has
been and continues to be exceptional. This appointment reflects his
success and the significant contribution he has made to the Group.
Einar Gustafsson, Managing Director Bakkavor Asia, who was
instrumental in supporting the development of our business in
China, left the business after 15 years and I have since taken on
the responsibilities for Bakkavor China, working closely alongside
the strong local management team there.
Additionally, Donna-Maria Lee's role was extended to Chief
People Officer on 1 January 2021, with Corporate Responsibility now
a part of her remit. Donna-Maria's expertise will continue to drive
our HR strategy and push our people agenda forward, particularly in
the areas of inclusion & diversity and colleague wellbeing.
DIVID
As a result of the COVID-19 pandemic and its impact on the
business during the year, the Board will not be declaring a
dividend for the full year 2020.
At the outset of the pandemic, the Board made the prudent
decision to suspend the 2019 final dividend as a precautionary
measure until the impact of COVID-19 became clearer. The Board is
however mindful of the importance of income to shareholders and
this payment will remain under review until we have clearer
visibility on future trading.
OUTLOOK
The strength of the Bakkavor business model has enabled us to
act at speed over the past twelve months in protecting colleagues,
supporting customers, and responding to changes in consumer demand.
With lockdown restrictions in the UK continuing into spring, the
short-term trading environment remains uncertain, but we are
encouraged by the way consumers have returned to our fresher,
healthier and more convenient foods each time these restrictions
have been lifted and with our scale and expertise we consider that
we are well placed to benefit from future increases in consumer
demand.
The demand for our fresh foods in the US continues unabated and
the successful turnaround of our operations means we are confident
in sustainable profitable growth for the future. In China, we
remain focused on our continued recovery in the foodservice space,
but we are also excited about extending our routes to market.
We have taken many difficult yet necessary decisions this year
to protect the long-term success of the business. The way we have
been able to rapidly restructure our operations and find new ways
of working has delivered permanent benefits to the Group. These
benefits can already be seen in our margin progression in the
second half of the year.
The business is in good shape, even after the events of the past
12 months, and we look forward to building on this momentum into
2021 and beyond.
OPERATIONAL REVIEW
UNITED KINGDOM
OVERVIEW
The UK is Bakkavor's largest market, representing 87% of overall
Group revenue.
While COVID-19 had a significant impact on our business and the
wider market, it is against this backdrop that our scale and track
record in managing complexity gave us a unique competitive
advantage. We rapidly put in place additional health and safety
measures to protect our colleagues, adhering closely to government
guidelines, and we worked quickly to minimise disruption across our
supply chain. This fast action and decision making ensured we
delivered industry leading service and quality for our customers,
whilst protecting the health and wellbeing of almost 16,500
colleagues.
trading Performance
GBP million (unless otherwise
stated) FY 2020 FY 2019 Change
------------------------------- -------- -------- ----------
Revenue 1,566.6 1,652.5 (5.2%)
Like-for-like revenue(1) 1,494.2 1,577.2 (5.3%)
Adjusted operating profit(1) 90.7 107.1 (15.3%)
Adjusted operating profit
margin(1) 5.8% 6.5% (70bps)
Operating profit 69.1 89.6 (22.9%)
Operating profit margin 4.4% 5.4% (100bps)
(1) Alternative Performance Measures ("APMs"), including
'like-for-like', 'adjusted' and 'underlying' are applied
consistently throughout. The APMs are defined in full and
reconciled to the reported statutory measure in the Consolidated
Financial Statements in Note 11 of this results statement and in
Note 37 of the Annual Report and Accounts 2020.
Following a strong start to the year, from late March, sales in
our UK business were significantly impacted. In response to
lockdown restrictions, we saw a shift in shopping behaviours, with
consumers doing bigger, but less frequent food shops and buying
food that had a longer shelf life. We also experienced a
significant decline in food-to-go volumes as meal occasions moved
to the home due to government advice to work from home.
As the first lockdown was lifted, we were reassured by a prompt
recovery in sales, however volumes were again impacted in the final
quarter by further restrictions. Forward planning and preparation
for the Christmas period enabled us to maintain high customer
service levels and we were pleased to deliver Christmas volumes in
line with the prior year. Overall, UK like-for-like sales for the
full year were GBP1,494.2 million, 5.3% lower than last year.
In light of the challenges, we focused on protecting the
business by undertaking a number of cost saving actions, reducing
our capital expenditure to essential site maintenance, plus a small
number of committed projects. We also acted at pace to respond to
lower volumes by reducing our factory footprint. As a result,
adjusted operating profit for the full year was GBP90.7m, compared
to GBP107.1 million for 2019.
CATEGORY RESILIENCE ACROSS FPF
The breadth of our category portfolio, which covers a wide range
of meal occasions, has helped us to weather a volatile year in
which both consumer shopping habits and demand shifted
significantly due to COVID-19 and periods of lockdown. Promotional
activity decreased, shoppers made fewer trips to stores and
increasingly bought online, and more consumers chose to cook from
scratch.
In our meals category, although initial lockdown measures had an
adverse impact on sales, we delivered a solid performance, gained
market share, and extended our market leadership throughout the
period. Our Italian ranges proved particularly popular and our
Indian and Oriental ranges also performed well, with consumers
seeking to replicate the takeaway experience at home. While our
healthy and vegetarian meal ranges were initially impacted, we saw
consumers gradually return to these nutritious and healthy meal
options as the year progressed.
Our salads business was heavily impacted due to its exposure to
the food-to-go market, which represents around 40 percent of the
total salads category, or around 10 percent of total UK revenues.
The sector was also impacted by the loss of bagged leaf volume from
one customer, which led to the closure of our Alresford facility.
While warmer weather and the easing of lockdown restrictions
subsequently supported the category in the summer, we did
experience a significant decline in our salads business during the
period.
We saw a strong performance in pizza & bread, as consumers
looked for familiar and convenient options in light of more family
meal occasions in the home. Pizza was our most resilient category
throughout the period as it provided two important meal solutions,
both as an easy midweek meal which benefitted our core ranges, and
as a treat for the weekend which benefitted our premium and
takeaway style products.
Our desserts category also proved resilient, despite sales being
impacted by the initial appeal of home baking. Sales continued to
improve through the second half, as we worked with customers to
extend ranges, introduce popular new products such as the 'Yumnut'
and deliver innovation in Christmas desserts, which resulted in us
achieving our strongest ever Christmas performance in desserts.
Whilst most of our products are purchased in-store, we did
benefit from an uplift in online shopping. In particular, one of
our key strategic customers, took a significant step forward in
offering home delivery for its food and grocery business through
its new partnership with Ocado. This online offer includes a wide
range of fresh prepared food across our four FPF categories and
creates a significant opportunity for us as the trend for online
grocery shopping continues to grow.
Looking ahead, we will continue to maintain our leadership
position in these categories by leveraging our strong customer
relationships and track record of delivery. Through this, we will
also look to increase our share in underpenetrated categories,
explore inorganic growth opportunities within our industry, broaden
our capabilities and bolster our proposition to customers.
STRATEGIC AND OPERATIONAL ACTIONS
To protect our number one position in the UK, we made a number
of essential decisions to support our strategy.
When COVID-19 began to impact consumer habits, we delayed
non-essential new product development and worked closely with our
customers to ensure that delivery of our core ranges was not
compromised and our popular lines were fully stocked. As consumer
behaviours normalised, and demand began to return, we worked
alongside our customers to drive growth back into their categories
in the second half of the year, with a return to a full product
catalogue.
The drop in demand for food-to-go products was much more
dramatic and our view is that volumes will not return to
pre-pandemic levels given the likely dynamic of people continuing
to work from home more often. This has created more competitive
pricing in the salads sector and as a result, we have taken the
opportunity to permanently rationalise our footprint and realign
our capacity.
Closing sites is never desired and where possible, we have
transferred certain volumes to alternative sites. Our focus on
scale and long-term strategic customer relationships meant we were
able to maintain our service levels for a key customer, while
successfully undertaking our biggest product transfer in the
UK.
Despite the difficulties of the year, we also implemented
several operational improvement projects, including the
introduction of additional automation on production lines to manage
efficiency. More specifically, we installed smart technology at
some of our sites to improve our management control and review
processes. This allows us to have 'live' factory data that we can
use to swiftly rectify any issues and improve performance within
the production area. We have also continued to invest in upgrading
our refrigeration systems, which is a significant project that
impacts all our UK sites, and will deliver positive environmental
impact longer term.
While the pandemic was impacting the business, we also finalised
our preparations for the potential consequences of Brexit. For
example, we invested in our in-house capabilities for customs
clearance, strengthening our information systems to clear EU
imports, and helping our colleagues achieve settled status. So far,
as a result of this thorough planning, the operational impact has
been modest and we remain well prepared for any near-term
volatility in the supply chain.
Finally, in response to the initial drop in demand, we also took
proactive steps to protect our colleagues jobs by making use of the
Job Retention Scheme (Furlough). As the markets recovered, we
brought colleagues back into the business and at the end of year
around 200 colleagues (out of the 1,600 colleagues we had
originally furloughed) remained on furlough due to being in the
vulnerable or highly vulnerable categories. We continue to support
colleagues across the business through various people initiatives
to increase engagement and better position Bakkavor as an employer
of choice across the industry. This includes wellbeing initiatives
to support colleagues through COVID-19 and beyond, stronger
training, and more career development opportunities. All of which
is helping create a strong Group culture and a more inclusive
workforce centred around our values.
UNITED STATES
overview
Bakkavor's strategy to invest and accelerate its performance in
the US is borne from over 10 years of operating in the region,
during which time we have developed a strong understanding of the
market and its growth potential. The US represents 8% of our
overall Group revenue and will continue to play an important part
in our growth in the years ahead.
We currently produce over 300 different short shelf-life
products, for a variety of well-known US retailers. This is a
reduction from the previous year and follows a review in 2019 of
our product portfolio and customer relationships to increase
margins and profitability. However, we plan to increase this number
by building strategic relationships with our customers that will
allow us to launch innovative new products and enhance our already
excellent customer service levels.
While the ongoing pandemic will remain challenging in the year
ahead, we are confident that we have built a resilient strategy
that will help to continue our growth as we focus on the right
categories with the right strategic customer partnerships.
trading performance
GBP million (unless otherwise
stated) FY 2020 FY 2019 Change
------------------------------------- --------- -------- ---------
Revenue 146.5 130.6 12.2%
Like-for-like revenue(1) 147.1 130.6 12.7%
Adjusted operating profit/(loss)(1) 0.6 (15.2) -
Adjusted operating profit
margin(1) 0.4% (11.6%) 1,200bps
Operating profit/(loss) 0.6 (18.0) -
Operating profit margin 0.4% (13.8%) 1,420bps
(1) Alternative Performance Measures ("APMs"), including
'like-for-like', 'adjusted' and 'underlying' are applied
consistently throughout. The APMs are defined in full and
reconciled to the reported statutory measure in the Consolidated
Financial Statements in Note 11 of this results statement and in
Note 37 of the Annual Report and Accounts 2020.
Our US business increased revenue by GBP15.9 million to GBP146.5
million and delivered strong like-for-like revenue growth of 12.7%
as we benefited from the growing trend for FPF. The business
started the year well, however, trading was significantly affected
by the impact of COVID-19, particularly in April and May. In the
second half of the year, as lockdown restrictions eased, the
business saw an improvement in sales volumes supporting the
region's return to profitability.
strategic and operational actions
In the 18 months through to June 2020, the US business underwent
a commercial and operational reset to turnaround the profitability
and sustainability of the business. This transformation covered
three principal areas. First, we resigned from all foodservice and
contract manufacturing business to simplify operations and focus on
building long-term relationships with the most successful US
retailers. As part of the simplification process, we resigned from
around 50 percent of our customers and reduced our product
portfolio by one third. Given the change in consumer purchasing
habits, we also established strategic relationships with several
established online retailers to capitalise on the growing trend of
direct-to-consumer delivery.
Secondly, we used the commercial reset to simplify our
operations and invest all innovation and process improvements
behind our three super categories of fresh prepared meals, dips,
and heavily topped breads. All three categories address the growing
US trends for fresher, healthier and more convenient foods. Four of
our five sites in the US now cook and assemble multiple ranges of
fresh prepared meals for national distribution. This is a unique
competitive advantage to Bakkavor and has supported numerous
commercial wins. Hummus and dips represent our second biggest
category, with an established centre of excellence on the West
Coast. This category has seen a small decline in sales as COVID-19
reduced the number of social eating occasions for these sharing
items. Much like the UK, our heavily topped breads have benefited
from consumers wishing to replicate dining experiences in-home.
Thirdly, we made several structural changes and new appointments
to our senior leadership teams to drive through the transformation.
All of this was underpinned by seconding experienced operational
leaders from the UK to train and coach our local teams. This third
pillar was fundamental to our success as we were able to leverage
30 years of experience from the well-established UK market.
This restructure enabled the business to deliver sustainable and
profitable growth in the second half of the year with a record
performance for our business thanks to successful new product
launches, the biggest ever holiday programme, and core sales
continuing to strengthen.
Despite the ongoing pandemic, the US business exits 2020 with a
positive outlook for 2021, supported by strong customer engagement,
innovation, and operational discipline under the new stewardship of
Pete Laport. Pete joined us as the new President of Bakkavor USA at
the end of October 2020. He brings a wealth of experience to the
position, having worked in the food industry for much of his
career.
China
overview
Our China business represents 5% of our overall Group revenue.
Although it has experienced a difficult year, we still see a
significant opportunity for growth in the region, as we continue to
leverage our strong understanding of the market and our UK
operational expertise.
We primarily operate within the food service sector in China,
with over 600 products across our portfolio. In 2020, the China
business was the region that was most impacted by the pandemic as
the various lockdown restrictions caused many of our customers to
temporarily close for prolonged periods of time. Despite this, we
continued to successfully maintain service levels and provide our
customers with innovative products that reflected market
trends.
trading performance
GBP million (unless otherwise
stated) FY 2020 FY 2019 Change
------------------------------- -------- -------- ---------
Revenue 80.4 102.8 (21.8%)
Like-for-like revenue(1) 80.6 102.8 (21.6%)
Operating loss (7.7) (2.2) (250%)
Operating profit margin (9.6%) (2.1%) (750bps)
(1) Alternative Performance Measures ("APMs"), including
'like-for-like', 'adjusted' and 'underlying' are applied
consistently throughout. The APMs are defined in full and
reconciled to the reported statutory measure in the Consolidated
Financial Statements in Note 11 of this results statement and in
Note 37 of the Annual Report and Accounts 2020.
Our China business was severely impacted by the COVID-19
pandemic and ongoing civil unrest in Hong Kong, with reported
revenue declining by GBP22.4 million in 2020 to GBP80.4 million.
Whilst we continued to see reduced demand in Hong Kong during the
second half of the year, we saw a steady improvement in sales in
mainland China. Despite this, recovery has been slower than
initially expected and revenues remain significantly down year on
year.
strategic and operational actions
From the end of January, due to the COVID-19 outbreak, we saw a
significant reduction in demand. Production was impacted at all
nine of our sites in China, especially during February, when it
became necessary due to city wide restrictions to temporarily close
our sites in Wuhan and Taicang. However, we made sure that this did
not impact our customers, maintaining service levels by
transferring production across our remaining locations, including
our new site at Haimen. The ability of our team to maintain supply,
despite the very challenging situation, was commended by our
customers, government officials and local media outlets.
In Q2, we worked closely with customers as they reopened their
sites and re-established their offers. Our sales in the retail
channels held up well but, whilst still growing, this represents a
relatively small proportion of our business. In addition, we
continue to see reduced demand in Hong Kong due to the ongoing
civil unrest.
Given the challenging nature of the operating environment, we
have taken several essential actions to control costs. As in other
parts of the Group, these have included temporary salary cuts and
recruitment freezes, as well as the streamlining of our operating
structure in Hong Kong.
Despite the challenges of COVID-19, we have continued to focus
on innovation with our current customers, including the successful
launch of a range of plant-based and dairy-free fruit parfaits. Due
to the growing shift in shopping behaviour to online, we expanded
our E-commerce presence with a key retail customer by launching a
range of sandwiches, protein pots, breakfast pots, ready meals,
salads and more. In Hong Kong, we capitalised on the need for more
meal experiences at home by launching a range of deliverable
in-home meal solutions for a foodservice customer.
The Bakery facility we established in Taicang, near Shanghai, in
2018 has continued to develop its customer base and reported
impressive growth in 2020. Our new facility in Wuhan is now
complete, with full production expected from Q2 2021. Due to
COVID-19, we delayed the development of our new plant in Xi'an,
which recommenced at the end of 2020 and is projected to be
completed in 2021. These new sites will deliver significant
improvements in capacity, operational efficiency, and production
capability. They will also allow for our continued growth in the
Central China region, as we maintain our market leading position
and broaden our supply capabilities. In addition to these
investments, we have continued to focus on improving the
sustainability of our production, with further enhancements to
water treatment processes at our sites.
Despite a very challenging 2020, China remains a highly
attractive growth market. Our key food service customers continue
to build their store and restaurant portfolios, and we continue to
position ourselves as the partner of choice for western fresh food
providers seeking to expand in the region.
FINANCIAL REVIEW
Revenue
Reported revenue decreased by GBP92.4 million, or 4.9%, from
GBP1,885.9 million in 2019 to GBP1,793.5 million in 2020.
Like-for-like revenue(1) was down 4.9%, from GBP1,810.6 million in
2019 to GBP1,721.9 million in 2020. This decrease was primarily due
to the impact of COVID-19 restrictions on trading volumes across
the business.
Segmental breakdown
- United Kingdom
In the UK segment, reported revenue decreased by 5.2%, or
GBP85.9 million, from GBP1,652.5 million in 2019 to GBP1,566.6
million in 2020. Like-for-like revenue(1) , which excludes
Alresford Salads and Freshcook that were closed in October 2020 and
April 2019 respectively and Blueberry Foods that was acquired in
June 2019, decreased by 5.3%, from GBP1,577.2 million in 2019 to
GBP1,494.2 million in 2020. Alresford Salads generated revenues of
GBP18.4 million in 2020 up to the date of its closure and GBP22.0
million in 2019. Freshcook contributed revenues of GBP21.4 million
in 2019 for the period up to its closure and Blueberry Foods
contributed GBP31.0 million to reported revenue in the six-month
period in 2019 following its acquisition.
This like-for-like revenue(1) decrease for the year was due to
volume decreases of 5.0% and price decreases of 0.3% due to a low
level of raw material deflation in 2020. Whilst the business
benefitted this year from the full year effect of a significant
business win in our meals category from September 2019, underlying
volumes are lower year on year due to the impact of COVID-19
restrictions on consumer demand which significantly impacted our
salads category and particularly food-to-go products. In April,
following the first lockdown, revenues were down 19.1% compared to
the prior year. Trading steadily improved thereafter across our
meals, pizza & bread, and desserts categories until the second
lockdown in November when volumes were again impacted, albeit at a
lower level, with revenues down by 9.4%.
- United States
In the US, reported revenue increased by GBP15.9 million, or
12.2%, to GBP146.5 million in 2020 from GBP130.6 million in 2019.
Like-for-like revenue(1) , which is at constant currency, increased
by 12.7%, from GBP130.6 million in 2019 to GBP147.1 million in
2020. Whilst the business was impacted by COVID-19 from the end of
March, year on year revenues were only down in April and May, with
the rest of the year reporting strong growth as sales volumes
increased at all of our new sites in Texas, North Carolina and
California following the launch of a number of new products.
- China
In China, reported revenue decreased GBP22.4 million, or 21.8%,
to GBP80.4 million in 2020 from GBP102.8 million in 2019.
Like-for-like revenue(1) , which is at constant currency, decreased
by 21.6%, from GBP102.8 million in 2019 to GBP80.6 million in 2020.
The decrease was primarily due to the impact of COVID-19
restrictions on volumes particularly in the first half of the year.
Trading improved in the second half of the year but the recovery in
China has been slower than initially expected and our business in
Hong Kong continues to be adversely impacted through ongoing civil
unrest.
Operating profit
Operating profit decreased by GBP7.4 million, or 10.7%, from
GBP69.4 million in 2019 to GBP62.0 million in 2020 with margins
decreasing by 20 basis points to 3.5%. In the UK, operating profit
has decreased from GBP89.6 million in 2019 to GBP69.1 million in
2020. In China, the operating loss in the year has increased from
GBP2.2 million in 2019 to GBP7.7 million in 2020. The decreases in
the UK and China are primarily due to the impact
of lower year on year revenues across these businesses. For the
US there has been a significant improvement in performance despite
the pandemic, with an operating profit of GBP0.6 million compared
to an operating loss of GBP18.0 million in 2019.
In line with prior years, the UK business continued to incur
significant labour inflation driven by further increases in the
National Living Wage. In addition, all regions incurred significant
costs amounting to GBP9.3 million as the business responded to the
COVID-19 outbreak, with enhanced health and safety, and hygiene
protocols. To address the lower sales volume across our business,
we rapidly adapted factory operations and completed strategic
restructurings in all regions. This included the temporary closure
of sites in the UK and the US, and the permanent closure of two of
our salads factories. We also accessed GBP12.8 million from the
Government's Job Retention Scheme to support our furloughed
colleagues.
Separately, we have increased our property provisions based on
potential future payments that are required under the terms of our
leases. In addition, operating profit includes a net credit of
GBP5.7 million (2019: GBP10.6 million) arising from the
reassessment of the need for certain commercial accruals and the
requirement for provisions under the Group's short-term bonus
scheme.
Adjusted operating profit(1) for the year, which is before
exceptional items, was GBP83.6 million compared to GBP89.7 million
for 2019. At an adjusted level, operating margins were 10 basis
points lower than the prior year at 4.7%.
Exceptional items
Included within other administrative costs, cost of sales and
finance costs are exceptional items which are adjusted for when
determining the Group's APMs, as management consider that when
determining the underlying performance of the business these items
should be disclosed by virtue of their nature or amount.
Exceptional items comprise the following:
GBP million 2020 2019
----------------------------------------- ----- -----
Disruption - 6.6
Restructuring, impairment and onerous
lease provision 21.6 13.7
Accelerated amortisation of refinancing
fees 1.7 -
23.3 20.3
----------------------------------------- ----- -----
- 2020
The Group incurred GBP23.3 million of costs presented as
exceptional items in 2020. The closure of two salads factories in
Alresford and Spalding led to restructuring charges of which GBP4.9
million related to cash restructuring costs, with a further GBP8.2
million impairment charge in respect of their tangible fixed
assets. Following a review of assets, the Group also incurred a
further impairment charge of GBP8.5 million in the UK business for
assets that are now either redundant or related to products that
have been discontinued in the year. In addition, the Group incurred
GBP1.7 million of accelerated amortisation of refinancing fees
following the Group's refinancing of its core debt facilities on 18
March 2020.
- 2019
The Group incurred GBP20.3 million of net costs presented as
exceptional items in 2019 of which GBP6.6 million related to
disruption costs; GBP2.8 million as our factory in California was
repurposed for ready meal manufacturing and changes made to the
hummus production process; and GBP3.8 million in the UK as the
business prepared for the launch of significant new products in Q3
2019. In addition, the Group incurred GBP13.7 million of
restructuring and impairment costs in the UK. Of this, GBP7.7
million related to the closure of a meals business in Lincolnshire,
comprising cash closure costs of GBP4.2 million and plant and
equipment asset impairments of GBP3.5 million. A further charge of
GBP4.3 million has been recognised for the closure of the Group's
non-core UK fast casual restaurant business. The remaining GBP1.7
million is primarily for redundancy costs following changes to our
commercial and marketing structure.
Finance costs
Finance costs increased by GBP2.3 million, or 12.3%, from
GBP18.7 million in 2019 to GBP21.0 million in 2020. The costs for
2020 include a charge of GBP1.7 million for an acceleration of
amortisation of refinancing fees following the Group's refinancing
of its core debt facilities in March 2020. The remaining GBP0.6
million increase is mainly due to GBP1.1 million of borrowing costs
relating to capital projects being capitalised in 2019, offset by a
marginal increase in IFRS 16 interest costs to GBP2.6 million and
the benefit from marginally lower average debt levels across the
year. The Group's cost of debt remains at circa 3.5% per annum.
Tax
The Group tax charge for the year was GBP10.1 million, which was
an increase of GBP3.2 million over last year. The GBP10.1 million
charge represents an effective tax rate of 22.9% on profit before
tax of GBP44.2 million. Most of the Group's profits were earned in
the UK where the statutory tax rate was 19% for 2020. The main
reason for the effective rate being higher than the statutory rate
was due to the 2020 statutory tax rate remaining at 19% rather than
being lowered to the 17% stated in the 2016 Finance Act. Therefore,
at the end of last year, the Group's net deferred tax liability was
expected to reverse at 17% and the UK deferred tax provision was
made at this rate. However, as the 2020 statutory rate was
maintained at 19%, the deferred tax provision had to be increased
accordingly in 2020. Excluding exceptional items and other
adjusting items the effective tax rate was 21.7%.
Earnings per share
As a result of the above, profit for the period decreased by
GBP2.8 million, or 7.6%, from GBP36.9 million in 2019 to GBP34.1
million in 2020. Basic earnings per share decreased from 6.4 pence
for 2019 to 5.9 pence in 2020, reflecting the decline in operating
profits driven by reduced demand for our products from the
pandemic. This was partly offset by year-on-year mark-to-market
gains on derivatives of GBP10.7 million.
Adjusted earnings per share(1) , which is calculated before
exceptional items and the change in fair value of derivative
financial instruments, has decreased from 10.3 pence for 2019 to
8.7 pence, reflecting the effects of the pandemic on the Group's
profitability. The weighted average number of shares in issue
during both 2019 and 2020 was 579,425,585.
Cash flow
Net cash from operating activities, which is calculated before
capital expenditure, but after payments for exceptional items,
decreased by GBP25.5 million from GBP114.0 million in 2019 to
GBP88.5 million. This was largely due to the impact of a year on
year working capital outflow of GBP33.5 million combined with a
GBP5.9 million increase in interest and tax paid more than
offsetting the GBP13.9 million improvement in cash generated at an
operating level.
Net cash used in investing activities decreased by GBP58.2
million in the year from GBP114.4 million in 2019 to GBP56.2
million in 2020. This was primarily due to a GBP42.5 million
decrease in capital expenditure as there was a temporary reduction
on all non-essential projects in the second quarter of the year in
response to COVID-19. Cash outflow was also lower year on year as
the Group's key development projects in Shanghai and Newark were
completed during 2019 and the prior year included GBP16.8 million
for the acquisition of Blueberry Foods.
Free cash flow(1) for the year, which is the key measure the
Directors use to manage cash flow in the business, was GBP6.8
million lower than the previous year at GBP40.1 million. A year on
year working capital outflow of GBP33.5 million was largely due to
the impact of lower revenues on the Group's negative working
capital cycle. This was offset by a reduction to expenditure on
core capital (excluding development projects) which was GBP25.0
million lower than 2019 as the Group took mitigating action to
preserve cash in response to the pandemic. In addition, tax
payments increased by GBP2.5 million in the year due to changes in
the UK payments on account process.
Capital, debt and leverage
At 26 December 2020, following the refinancing earlier in the
year, the Group had committed debt facilities of GBP537.5 million
including a revolving credit facility of GBP230 million maturing in
March 2024. The Group incurred fees of GBP4.2 million in respect of
the refinancing. In addition, the Group has an asset financing
facility of GBP25m maturing in August 2027 and term loans totalling
GBP282.5 million, of which GBP20 million matures in November 2021.
Of the remaining debt facilities of GBP262.5 million, GBP225
million matures in March 2024, and GBP37.5 million in June 2024. On
9 March 2021 the Group extended the maturity date of GBP430 million
of its core debt facilities from March 2024 to March 2025.
Operational net debt decreased by GBP21.4 million to GBP333.4
million driven by continued free cash generation. As a result,
leverage (the ratio of operational net debt to adjusted EBITDA pre
IFRS 16) remained at 2.3 times. This is in line with the leverage
reported for December 2019. The Group continues to target a
medium-term range of 1.5 - 2.0 times. The Group's liquidity
position remains strong with good headroom against all financial
covenants.
IFRS 16 lease liabilities at 26 December 2020 amounted to
GBP80.4 million (2019: GBP78.8 million) and combined with other
debt adjustments resulted in total net debt of GBP411.8 million at
the end of the year (2019: GBP432.4 million).
Return on invested capital(1)
The increase in invested capital in 2020 combined with lower
operating profits as a result of the pandemic has resulted in a
short-term decrease in the Group's Return on Invested Capital(1)
("ROIC") from 8.0% in 2019 to 6.6% in 2020. Over the medium term,
the Group expects to see an improvement in ROIC as recent
investments including the key development projects deliver an
increase in returns. The Group also plans to continue to spend
circa 4.5% per annum of revenues on capital investment going
forward with a focus on return enhancing projects.
Pensions
Under the IAS 19 valuation principles that are required to be
used for accounting purposes, the Group recognised a surplus of
GBP11.2 million for the UK defined benefit scheme as at 26 December
2020 (2019: surplus of GBP9.7 million). The movement is due to an
increase in the value of assets combined with the benefits from
liability hedging.
The Group and the Trustee agreed in November 2020 the triennial
valuation of the UK defined benefit pension scheme as at 31 March
2019. This resulted in a funding shortfall of GBP11.7 million,
which will be paid over an agreed recovery period ending on 31
March 2024 with payments of GBP2.5 million per annum.
Pri ncipal Risks and Uncertainties
There are a number of potential risks and uncertainties which
could have a material impact on future Group performance and could
cause actual results to differ materially from expected and
historical results. During the year, the Group added COVID-19
impact as a principal risk. The risk and uncertainties are
described in detail in the Risk Management and Principal Risks and
Uncertainties sections of the Annual Report and Accounts for the
year ended 26 December 2020, available on 29 March 2021 on the
company website.
Related Party Transactions
During the period, Group companies only entered into
transactions with related parties who are members of the Group.
(1) Alternative Performance Measures ("APMs"), including
'like-for-like', 'adjusted' and 'underlying' are applied
consistently throughout. The APMs are defined in full and
reconciled to the reported statutory measure in the Consolidated
Financial Statements in Note 11 of this results statement and in
Note 37 of the Annual Report and Accounts 2020.
CONSOLIDATED INCOME STATEMENT
52 WEEKSED 26 DECEMBER 2020
52 weeks ended 26 52 weeks ended 28
December 2020 December 2019
----------------------------------- --------------------------------------- ----------------------------------------
Underlying Exceptional Underlying Exceptional
activities items Total activities items Total
GBP million Note 1 1
----------------------------------- --------------- ----------- --------- ---------------- ----------- ---------
Continuing operations
Revenue 2 1,793.5 - 1,793.5 1,885.9 - 1,885.9
Cost of sales (1,279.4) - (1,279.4) (1,375.0) (1.6) (1,376.6)
----------------------------------- --------------- ----------- --------- ---------------- ----------- ---------
Gross profit 514.1 - 514.1 510.9 (1.6) 509.3
Distribution costs (70.5) - (70.5) (77.1) - (77.1)
Other administrative costs (360.1) (21.6) (381.7) (344.6) (18.7) (363.3)
Share of results of associates
after tax 0.1 - 0.1 0.5 - 0.5
----------------------------------- --------------- ----------- --------- ---------------- ----------- ---------
Operating profit/(loss) 83.6 (21.6) 62.0 89.7 (20.3) 69.4
Finance costs 4 (19.3) (1.7) (21.0) (18.7) - (18.7)
Other gains and (losses) 3.2 - 3.2 (6.9) - (6.9)
----------------------------------- --------------- ----------- --------- ---------------- ----------- ---------
Profit/(loss) before tax 67.5 (23.3) 44.2 64.1 (20.3) 43.8
Tax (charge)/credit (14.5) 4.4 (10.1) (10.9) 4.0 (6.9)
----------------------------------- --------------- ----------- --------- ---------------- ----------- ---------
Profit/(loss) for the period
attributable
to equity
holder of the Parent Company 53.0 (18.9) 34.1 53.2 (16.3) 36.9
----------------------------------- --------------- ----------- --------- ---------------- ----------- ---------
Earnings per share
Basic 5 5.9p 6.4p
Diluted 5 5.8p 6.3p
----------------------------------- --------------------------------------- ----------------------------------------
1 The Group presents its income statement with three columns.
The Directors consider that the underlying activities results
better represent the ongoing operations and key metrics of the
Group. Details of exceptional items can be found in Note 3 and
include material items that are non-recurring, significant in
nature and are important to users in understanding the
business,
including restructuring costs, disruption costs, accelerated
amortisation of financing fees and impairment of assets. In
addition, the Group uses further alternative performance
measures
which can be found in Note 11.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
52 WEEKSED 26 DECEMBER 2020
52 weeks 52 weeks
ended ended
GBP million 26 December 28 December
2020 2019
-------------------------------------------------------------------- ------------ ------------
Profit for the period 34.1 36.9
-------------------------------------------------------------------- ------------ ------------
Other comprehensive income/(expense)
Items that will not be reclassified subsequently to profit
or loss:
Actuarial gain on defined benefit pension schemes 0.4 8.3
Tax relating to components of other comprehensive income/(expense) (0.1) (1.4)
-------------------------------------------------------------------- ------------ ------------
0.3 6.9
Items that may be reclassified subsequently to profit or
loss:
Exchange differences on translation of foreign operations (2.6) (6.8)
Loss on cash flow hedges (1.1) -
Hedging gains reclassified to profit or loss 0.2 -
Tax relating to components of other comprehensive income/(expense) 0.2 -
-------------------------------------------------------------------- ------------ ------------
(3.3) (6.8)
-------------------------------------------------------------------- ------------ ------------
Total other comprehensive (expense)/income (3.0) 0.1
-------------------------------------------------------------------- ------------ ------------
Total comprehensive income 31.1 37.0
-------------------------------------------------------------------- ------------ ------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 26 DECEMBER 2020
28 December
26 December 2019
GBP million Note 2020 As restated
1
---------------------------------------------- ------------- ------------
Non-current assets
Goodwill 649.6 651.2
Other intangible assets 2.2 2.7
Property, plant and equipment 535.3 553.7
Interests in associates and other investments 12.2 12.6
Deferred tax asset 7 13.0 11.2
Retirement benefit asset 11.2 9.7
---------------------------------------------- ------------- ------------
1,223.5 1,241.1
---------------------------------------------- ------------- ------------
Current assets
Inventories 63.8 64.4
Trade and other receivables 136.4 131.7
Cash and cash equivalents 24.8 25.9
Current tax asset 0.1 -
Derivative financial instruments 0.6 -
---------------------------------------------- ------------- ------------
225.7 222.0
---------------------------------------------- ------------- ------------
Total assets 1,449.2 1,463.1
---------------------------------------------- ------------- ------------
Current liabilities
Trade and other payables (367.6) (390.4)
Current tax liabilities - (3.9)
Borrowings 6 (23.2) (36.7)
Lease liabilities (11.1) (11.8)
Provisions (11.0) (5.9)
Derivative financial instruments (0.9) (3.3)
---------------------------------------------- ------------- ------------
(413.8) (452.0)
---------------------------------------------- ------------- ------------
Non-current liabilities
Trade and other payables - (0.6)
Borrowings 6 (331.4) (340.5)
Lease liabilities (70.9) (69.3)
Provisions (14.4) (14.4)
Derivative financial instruments (0.9) (0.2)
Deferred tax liabilities 7 (19.7) (20.4)
---------------------------------------------- ------------- ------------
(437.3) (445.4)
---------------------------------------------- ------------- ------------
Total liabilities (851.1) (897.4)
---------------------------------------------- ------------- ------------
Net assets 598.1 565.7
---------------------------------------------- ------------- ------------
Equity
Share capital 11.6 11.6
Merger reserve (130.9) (130.9)
Hedging reserve (0.7) -
Translation reserve 24.8 27.2
Retained earnings 693.3 657.8
---------------------------------------------- ------------- ------------
Total equity 598.1 565.7
---------------------------------------------- ------------- ------------
(1 For details of the restatement and a reconciliation to
previously stated amounts please refer to Note 1.)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
52 WEEKSED 26 DECEMBER 2020
Share Merger Hedging Translation Retained
GBP million capital reserve reserve reserve earnings Total
equity
Balance at 30 December 2018
(as reported) 11.6 (130.9) - 33.8 654.9 569.4
Restatement(1) - - - - (8.1) (8.1)
------------------------------------- ------------ ------------ ----------- ------------- ------------ --------
Balance at 30 December 2018
(restated) (1) 11.6 (130.9) - 33.8 646.8 561.3
Profit for the period - - - - 36.9 36.9
Other comprehensive (expense)/income
for the period - - - (6.8) 6.9 0.1
------------------------------------- ------------ ------------ ----------- ------------- ------------ --------
Total comprehensive (expense)/income
for the period - - - (6.8) 43.8 37.0
------------------------------------- ------------ ------------ ----------- ------------- ------------ --------
Dividends paid (Note 8) - - - - (34.8) (34.8)
Credit for share-based payments - - - - 1.9 1.9
Deferred tax on share schemes - - - 0.2 0.1 0.3
------------------------------------- ------------ ------------ ----------- ------------- ------------ --------
Balance at 28 December 2019
(restated) (1) 11.6 (130.9) - 27.2 657.8 565.7
Profit for the period - - - - 34.1 34.1
Other comprehensive (expense)/income
for the period - - (0.7) (2.6) 0.3 (3.0)
------------------------------------- ------------ ------------ ----------- ------------- ------------ --------
Total comprehensive (expense)/income
for the period - - (0.7) (2.6) 34.4 31.1
------------------------------------- ------------ ------------ ----------- ------------- ------------ --------
Credit for share-based payments - - - - 1.2 1.2
Deferred tax on share schemes - - - 0.2 (0.1) 0.1
------------------------------------- ------------ ------------ ----------- ------------- ------------ --------
Balance at 26 December 2020 11.6 (130.9) (0.7) 24.8 693.3 598.1
------------------------------------- ------------ ------------ ----------- ------------- ------------ --------
(1 For details of the restatement and a reconciliation to
previously stated amounts please refer to Note 1.)
CONSOLIDATED STATEMENT OF CASH FLOWS
52 WEEKSED 26 DECEMBER 2020
52 weeks 52 weeks
ended ended
GBP million Note 26 December 28 December
2020 2019
------------------------------------------------------- ------------ ------------
Net cash generated from operating activities 9 88.5 114.0
------------------------------------------------------- ------------ ------------
Investing activities:
Dividends received from associates 0.1 0.2
Purchases of property, plant and equipment (56.4) (98.9)
Proceeds on disposal of property, plant and equipment 0.1 1.1
Acquisition of subsidiary - (16.8)
------------------------------------------------------- ------------ ------------
Net cash used in investing activities (56.2) (114.4)
------------------------------------------------------- ------------ ------------
Financing activities:
Dividends paid 8 - (34.8)
Increase in borrowings 334.1 62.2
Repayment of borrowings (355.9) -
Payment of lease liabilities (11.4) (12.9)
------------------------------------------------------- ------------ ------------
Net cash (used in)/generated from financing activities (33.2) 14.5
------------------------------------------------------- ------------ ------------
Net (decrease)/increase in cash and cash equivalents (0.9) 14.1
Cash and cash equivalents at beginning of period 25.9 12.4
Effect of foreign exchange rate changes (0.2) (0.6)
------------------------------------------------------- ------------ ------------
Cash and cash equivalents at end of period 24.8 25.9
------------------------------------------------------- ------------ ------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Significant accounting policies
Basis of accounting
The financial information set out in this document does not
constitute statutory accounts for Bakkavor Group plc for the period
ended 26 December 2020 but is extracted from the Annual Report and
Accounts 2020. The Annual Report and Accounts 2020 will be
delivered to the Registrar of Companies in due course. The
auditors' report on those accounts was unqualified and neither drew
attention to any matters by way of emphasis nor contained a
statement under either Section 498(2) of Companies Act 2006
(accounting records or returns inadequate or accounts not agreeing
with records and returns), or section 498(3) of Companies Act 2006
(failure to obtain necessary information and explanations).
The Annual Reports & Accounts 2020 have been prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and international
financial reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union.
Where the fiscal year 2020 is quoted in these Financial
Statements this relates to the 52-week period ended 26 December
2020. The fiscal year 2019 relates to the 52-week period ended 28
December 2019. The fiscal year 2018 relates to the 52-week period
ended 29 December 2018. The Group Financial Statements comprise the
Financial Statements of the parent undertaking and its subsidiary
undertakings, together with the Group's share of the results of
associated undertakings comprising a 52 or 53-week period ending on
the Saturday nearest to 31 December.
These Financial Statements are presented in Pounds Sterling
because that is the currency of the primary economic environment in
which the Group operates. The Financial Statements have 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 and new standards
The accounting policies applied by the Group are consistent with
those disclosed in the Group's Annual Report. These policies are
consistent with the Accounts for the 52 weeks ended 28 December
2019, except for new standards and interpretations effective for
the first time for the reporting period.
The group adopted the following new pronouncements during 2020,
which did not have a material impact on the group financial
statements:
-- IFRIC 23 - Uncertainty over Income Tax'; and
-- Amendments to IFRS 9 and IFRS 7 - Interest Rate Benchmark Reform - Phase 1.
Derivative financial instruments
The Group designates interest rate swap derivatives as hedging
instruments in respect of interest rate risk in cash flow hedges.
At the inception of the hedge relationship, the Group documents the
relationship between the hedging instrument and the hedged item,
along with its risk management objectives and its strategy for
undertaking various hedge transactions. Furthermore, at the
inception of the hedge and on an ongoing basis, the Group documents
whether the hedging instrument is highly effective in offsetting
changes in cash flows of the hedged item attributable to the hedged
risk.
The effective portion of changes in the fair value of
derivatives and other qualifying hedging instruments that are
designated and qualify as cash flow hedges is recognised in other
comprehensive income and accumulated under the heading of hedging
reserve, limited to the cumulative change in fair value of the
hedged item from inception of the hedge. The gain or loss relating
to the ineffective portion is recognised immediately in profit or
loss, and is included in the 'other gains and losses' line
item.
Amounts previously recognised in other comprehensive income and
accumulated in equity are reclassified to profit or loss in the
periods when the hedged item affects profit or loss, in the same
line as the recognised hedged item.
The Group discontinues hedge accounting only when the hedging
relationship (or a part thereof) ceases to meet the qualifying
criteria. This includes instances when the hedging instrument
expires or is sold, terminated or exercised. The discontinuation is
accounted for prospectively. Any gain or loss recognised in other
comprehensive income and accumulated in the hedge reserve at that
time remains in equity and is reclassified to profit or loss when
the forecast transaction occurs. When a forecast transaction is no
longer expected to occur, the gain or loss accumulated in the cash
flow hedge reserve is reclassified immediately to profit or
loss.
Government grants
Grants from the government are recognised at their fair value
where there is a reasonable assurance that the grant will be
received and the Group will comply with all attached
conditions.
Restatement
During 2020 the Group identified that its deferred tax liability
was materially understated as deferred tax had not been provided
for as required under IAS 12 for the difference between the
accounting and tax base values for the goodwill recognised on the
acquisition of its US businesses. The deferred tax liability
amounted to GBP7.9 million as at the end of 2019 (2018: GBP8.1
million) and therefore the financial statements for that year have
been restated to reflect the cumulative adjustments required since
the relevant businesses were acquired. In addition, the Group
previously presented the deferred tax assets on US losses and
deferred tax liabilities on US accelerated capital allowances on a
gross basis. A right of offset exists between these items and, as
such, they should be presented net; as a result the financial
statements have been restated. The amount of offset as at the end
of 2019 was GBP8.1 million (2018: GBP6.0 million). The restatement
does not impact basic or diluted earnings per share for 2019 and
have no cash impact on the business. The adjustments to the
relevant financial statement line items are as follows:
30 December 30 December 28 December (Decrease)/ 28 December
GBP million 2018 (Decrease)/ 2018 (Restated) 2019 increase 2019 (Restated)
increase
--------------- ----------- ------------- --------------- ----------- ----------- ---------------
Deferred
tax asset 19.6 (14.1) 5.5 27.2 (16.0) 11.2
Deferred
tax liability (24.3) 6.0 (18.3) (28.5) 8.1 (20.4)
--------------- ----------- ------------- --------------- ----------- ----------- ---------------
Net assets 569.4 (8.1) 561.3 573.6 (7.9) 565.7
--------------- ----------- ------------- --------------- ----------- ----------- ---------------
Translation
reserve 33.8 - 33.8 27.0 0.2 27.2
Retained
earnings 654.9 (8.1) 646.8 665.9 (8.1) 657.8
--------------- ----------- ------------- --------------- ----------- ----------- ---------------
Total equity 569.4 (8.1) 561.3 573.6 (7.9) 565.7
--------------- ----------- ------------- --------------- ----------- ----------- ---------------
Going concern
The Directors have reviewed the historical trading performance
of the Group and the forecasts through to March 2022. The
Directors, in their detailed consideration of going concern, have
reviewed 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 under
its financing facilities which were renewed on 18 March 2020 for a
four-year period. The Directors have carried out a robust
assessment of the potential implications from both the current
COVID-19 outbreak and the terms of the UK's exit from the European
Union at the end of 2020. This has included updated scenario
planning on the implications of further waves of COVID-19 and the
potential for further lockdown restrictions which may impact
consumer demand for the Group's products. The Group has also
modelled the potential impact of further disruption on sales
volumes and an increase in operating costs as from the start of
2021 the business now operates under the terms of the trade deal
agreed by the UK and the EU at the end of 2020. Having taken these
factors into account, under either scenario, which are 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 Company and the
Group have adequate resources to meet their liabilities as they
fall due for the foreseeable future. For this reason, they continue
to adopt the going concern basis in preparing the Financial
Statements.
2. Segmental information
The chief operating decision-maker ("CODM") has been defined as
the Management Board 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 as follows:
-- UK: The preparation and marketing of fresh prepared foods and
fresh produce for distribution in the UK.
-- US: The preparation and marketing of fresh prepared foods and
fresh produce in the US.
-- China: The preparation and marketing of fresh prepared foods
and fresh produce in China
The Group manages the performance of its businesses through the
use of 'Adjusted operating profit', as defined in Note 11. Measures
of total assets are provided to the Management Board; however, cash
and cash equivalents, short-term deposits and some other central
assets are not allocated to individual segments. Measures of
segment liabilities are not provided to the Management Board.
During the year the Group made the decision to consider the US
and China business as two separate operating segments, where they
had previously been considered a single operating segment. The
Group's management accounts, which show the information on which
the CODM bases strategic decisions, now highlight the disaggregated
figures for all the key lines of information. Given the now
differing economic situations of the two international businesses,
key decisions on allocating resources, such as capital expenditure,
are now made on a UK/US/China basis.
The following table provides an analysis of the Group's
segmental information for the period to 26 December 2020:
GBP million UK US China Un-allocated Total
------------------------------------- ------- ---------- ----- ------------ -------
Revenue 1,566.6 146.5 80.4 - 1,793.5
------------------------------------- ------- ---------- ----- ------------ -------
Adjusted EBITDA (Note 11) 145.3 8.0 (1.1) - 152.2
Depreciation (53.0) (6.8) (6.3) - (66.1)
Amortisation (0.1) (0.4) - - (0.5)
Share scheme charges (1.2) - - - (1.2)
Loss on disposal of property, plant
and equipment (0.3) (0.2) (0.4) - (0.9)
Share of results of associates - - 0.1 - 0.1
------------------------------------- ------- ---------- ----- ------------ -------
Adjusted operating profit/(loss)
(Note 11) 90.7 0.6 (7.7) - 83.6
Exceptional items - Impairment (Note
3) (16.7) - - - (16.7)
Exceptional items - Other (Note 3) (4.9) - - - (4.9)
------------------------------------- ------- ---------- ----- ------------ -------
Operating profit 69.1 0.6 (7.7) - 62.0
Finance costs (21.0)
Other gains and (losses) 3.2
------------------------------------- ------- ---------- ----- ------------ -------
Profit before tax 44.2
Tax (10.1)
------------------------------------- -------------------------------------------------
Profit for the period 34.1
------------------------------------- -------------------------------------------------
Other segment information
Capital additions 58.8 3.0 6.6 - 68.4
Interests in associates - - 12.1 - 12.1
Total assets 1,204.0 136.9 82.9 25.4 1,449.2
Non-current assets (excluding deferred
tax and retirement benefit asset) 1,023.6 109.8 65.9 - 1,199.3
--------------------------------------- ------- ----- ---- ---- -------
The following table provides an analysis of the Group's
segmental information for the period to 28 December 2019:
GBP million UK US China Un-allocated Total
--------------------------------------- ------- ------ ----- ------------ -------
Revenue 1,652.5 130.6 102.8 - 1,885.9
--------------------------------------- ------- ------ ----- ------------ -------
Adjusted EBITDA as previously reported
(Note 11) 147.1 2.0 4.4 - 153.5
Restatement (Note 11) 10.2 (10.9) (1.9) - (2.6)
--------------------------------------- ------- ------ ----- ------------ -------
Adjusted EBITDA restated (Note
11) 157.3 (8.9) 2.5 - 150.9
Depreciation (48.8) (5.9) (5.0) - (59.7)
Amortisation (0.1) (0.4) - - (0.5)
Share scheme charges (1.9) - - - (1.9)
Profit/(loss) on disposal of property,
plant and equipment 0.6 - (0.2) - 0.4
Share of results of associates - - 0.5 - 0.5
--------------------------------------- ------- ------ ----- ------------ -------
Adjusted operating profit/(loss)
(Note 11) 107.1 (15.2) (2.2) - 89.7
Exceptional items - Impairment
(Note 3) (6.0) (2.8) - - (8.8)
Exceptional items - Other (Note
3) (11.5) (11.5)
--------------------------------------- ------- ------ ----- ------------ -------
Operating profit 89.6 (18.0) (2.2) - 69.4
Finance costs (18.7)
Other gains and (losses) (6.9)
--------------------------------------- ------- ------ ----- ------------ -------
Profit before tax 43.8
Tax (6.9)
--------------------------------------- ------- ------ ----- ------------ -------
Profit for the period 36.9
--------------------------------------- ------- ------ ----- ------------ -------
Other segment information
Capital additions 77.2 7.8 14.7 - 99.7
Interests in associates - - 12.5 - 12.5
Total assets 1,213.2 141.4 82.6 25.9 1,463.1
Non-current assets (excluding deferred
tax) 1,038.2 117.8 64.2 - 1,220.2
--------------------------------------- ------- ----- ---- ---- -------
Major customers
In 2020, the Group's four largest customers accounted for 75.2%
(2019: 76.0%) of total revenue from continuing operations. The
Group does not enter into long-term contracts with its retail
customers.
Each of these four customers accounts for a significant amount
of the Group's revenue and are all in the UK segment. The
percentage of Group revenue from these customers is as follows:
2020 2019
----------- ----- -----
Customer A 35.7% 32.3%
Customer B 20.0% 22.7%
Customer C 11.1% 10.9%
Customer D 8.4% 10.1%
----------- ----- -----
3. Exceptional items
The Group's financial performance is analysed in two ways;
underlying performance (which does not include exceptional items)
and exceptional items that are material and not expected to
reoccur. The Directors consider that the underlying performance
results better represent the ongoing operations and key metrics of
the Group.
Exceptional items includes material items that are non-recurring
or significant in nature and are important to users in
understanding the business, including restructuring costs,
disruption costs, impairment of assets and one-off finance costs
relating to refinancing activities:
GBP million 2020 2019
----------------------------------------------------- ----- -----
Disruption costs - 6.6
Restructuring costs, impairment and onerous contract
provision 21.6 13.7
----------------------------------------------------- ----- -----
Operating profit 21.6 20.3
----------------------------------------------------- ----- -----
Finance costs 1.7 -
----------------------------------------------------- ----- -----
Loss before tax 23.3 20.3
Tax on exceptional items (4.4) (4.0)
----------------------------------------------------- ----- -----
Loss after tax 18.9 16.3
----------------------------------------------------- ----- -----
2020
The Group incurred GBP23.3 million of costs presented as
exceptional items in 2020, and an after tax charge of GBP18.9
million. The closure of two salads factories in Alresford and
Spalding led to cash restructuring charges of GBP4.9 million, with
a further GBP8.2 million impairment charge in respect of their
tangible fixed assets. Following a review of assets, the Group also
incurred a further impairment charge of GBP8.5 million in the UK
business for assets that are now either redundant or related to
products that have been discontinued in the year. In addition, the
Group incurred GBP1.7 million of accelerated amortisation of
refinancing fees following the Group's refinancing of its core debt
facilities on 18 March 2020.
2019
The Group incurred GBP20.3 million of net costs, GBP16.3 million
after tax, presented as exceptional items in 2019 of which GBP6.6
million related to disruption costs; GBP2.8 million as our factory
in California was repurposed for ready meal manufacturing and
changes to the hummus production process; and GBP3.8 million in the
UK, as the business prepared for the launch of significant new
products later in Q3 2019. In addition, the Group incurred GBP13.7
million of restructuring and impairment costs in the UK. Of this,
GBP7.7 million related to the closure of a meals business in
Lincolnshire, comprising cash closure costs of GBP4.2 million and
plant and equipment asset impairments of GBP3.5 million. A further
charge of GBP4.3 million was recognised for the closure of the
Group's non-core UK fast casual restaurant business. The remaining
GBP1.7 million was primarily for redundancy costs following changes
to our commercial and marketing structure.
4. Finance costs
GBP million 2020 2019
--------------------------------------------------------- ----- ------
Interest on borrowings Interest on lease liabilities 18.2 16.6
Unwinding of discount on provisions 2.7 3.0
0.1 0.2
--------------------------------------------------------- ----- ------
Total interest expense 21.0 19.8
Less: amounts included in the cost of qualifying assets - (1.1)
--------------------------------------------------------- ----- ------
21.0 18.7
--------------------------------------------------------- ----- ------
There were no borrowing costs included in the cost of qualifying
assets during the year. Borrowing costs included in the cost of
qualifying assets during the prior year arose within the general
borrowing pool and were calculated by applying a capitalisation
rate of 3.0% to expenditure on such assets.
Amounts included in the cost of qualifying assets have been
capitalised under IAS 23 and are therefore subject to deferred tax;
the deferred tax charge to income was GBP0.1 million (2019: GBP0.1
million).
Interest on borrowings for 2020 includes GBP1.7 million of
exceptional costs (2019: GBPnil) in respect of the accelerated
amortisation of previous financing fees following the Group's
refinancing of its debt facilities on 18 March 2020.
5. 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
GBP million 2020 2019
---------------------------------------------------------- ---- ----
Profit attributable to equity shareholders of the Company 34.1 36.9
---------------------------------------------------------- ---- ----
Number of shares
'000 2020 2019
----------------------------------------------------- ------- -------
Weighted average number of Ordinary shares 579,426 579,426
Effect of potentially dilutive Ordinary shares 4,193 3,922
----------------------------------------------------- ------- -------
Weighted average number of Ordinary shares including
dilution 583,619 583,348
----------------------------------------------------- ------- -------
2020 2019
--------------------------------------------------- ---------------- -----
Basic earnings per share Diluted earnings per share 5.9p 6.4p
5.8p 6.3p
--------------------------------------------------- ---------------- -----
The Group calculates Adjusted basic earnings per Ordinary share
and details of this can be found in Note 11, Alternative
Performance Measures.
6. Borrowings
The interest rates and currency profile of the Group's
borrowings at 26 December 2020 were as follows:
Amount
Facility drawn Non-utilisation
GBP million Currency amount down at Interest rate fee Maturity
GBP million year end date
GBP million
------------------ ------------- ------------- ----------------- ------------------ ----------------- ----------
Libor plus a
margin
Term Loan B GBP 37.5 37.5 of 4.25% N/A June 2024
Libor plus a
margin
Term Loan GBP 20.0 20.0 of 1.90% N/A Nov 2021
Libor plus a
margin
Term Loan GBP 225.0 225.0 of 2.50% N/A Mar 2024
Libor plus a
Revolving Credit margin
Facility ("RCF") GBP 230.0 50.0 of 2.50% 0.875% Mar 2024
Asset Finance Fixed interest
Facility GBP 25.0 24.0 (1) rate N/A Aug 2027
------------------ ------------- ------------- ----------------- ------------------ ----------------- ----------
Total 537.5 356.5
--------------------------------- ------------- ----------------- ------------------ ----------------- ----------
1 Asset Finance Facility amount drawn down of GBP24.0 million is
the outstanding liability at 26 December 2020.
Excluding the Asset Finance Facility, the above borrowings are
subject to covenant agreements including the Group maintaining a
minimum interest cover of 4.0x and not exceeding an adjusted
leverage of 3.0x.
On 18 March 2020, the Group completed a refinancing of its core
debt facilities amounting to GBP410 million through a new term loan
and Revolving Credit Facility totalling GBP455 million. The
refinancing resulted in the addition of new lenders to the Group.
The new facilities are due to mature in March 2024, with an option
to extend the tenure by a further two years subject to lender
approval.
The Group's total banking facilities amount to GBP512.5 million
(2019: GBP492.5 million) comprising (i) GBP282.5 million in term
loans (2019: GBP267.5 million term loan), split GBP37.5 million
maturing in June 2024, GBP20.0 million maturing in November 2021
and GBP225.0 million maturing in March 2024 and (ii) GBP230.0
million Revolving Credit Facilities ("RCF") (2019: GBP225.0 million
RCF), which includes an overdraft and money market facility of
GBP20.0 million (2019: GBP16.5 million) and further ancillary
facilities ofGBP13.3 million (2019: GBP6.3 million). The bank
facilities are unsecured.
The Asset Finance Facility is a GBP25.0 million facility which
could be drawn against up to August 2020, of which the Group drew
down GBP24.9 million. No further draw down can be made against this
facility. The facility has been drawn in tranches, with each
tranche being repaid on a quarterly basis over a period of seven
years, the weighted average interest rate for the facility at the
26 December 2020 is 2.41% (2019: 2.74%). The interest rate is fixed
at the prevailing rate on commencement of the loan tranche.
26 December 28 December
GBP million 2020 2019
--------------------------------------------------------- ----------- -----------
Bank loans 354.6 377.2
--------------------------------------------------------- ----------- -----------
354.6 377.2
--------------------------------------------------------- ----------- -----------
Borrowings repayable as follows:
On demand or within one year 23.2 36.7
In the second year 1.2 303.1
In the third to fifth years inclusive 318.5 37.0
Over five years 11.7 0.4
--------------------------------------------------------- ----------- -----------
354.6 377.2
--------------------------------------------------------- ----------- -----------
Analysed as:
Amount due for settlement within 12 months (shown within
current liabilities) 23.2 36.7
Amount due for settlement after 12 months 331.4 340.5
--------------------------------------------------------- ----------- -----------
354.6 377.2
--------------------------------------------------------- ----------- -----------
As at 26 December 2020 and 28 December 2019, all of the Group's
borrowings were denominated in Sterling.
26 December 28 December
2020 2019
% %
---------------------------------------------------------- ----------------- -----------
The weighted average interest rates paid were as follows:
Bank loans and overdrafts 2.68 3.16
---------------------------------------------------------- ----------------- -----------
Apart from the Asset Finance Facility, interest on the Group's
term loan and other borrowings are at floating rates, thus exposing
the Group to cash flow interest rate risk. This risk is mitigated
using interest rate swaps.
The fair value of the Group's borrowings is as follows:
26 December 28 December
GBP million 2020 2019
------------------------------------- --------------- ---------------
Fair value of the Group's borrowings 356.6 378.4
------------------------------------- --------------- ---------------
Net debt is the net 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 and is as follows:
26 December 28 December
GBP million 2020 2019
--------------------------- ----------- -----------
Analysis of net debt
Cash and cash equivalents 24.8 25.9
--------------------------- ----------- -----------
Borrowings (22.3) (35.1)
Interest accrual (2.3) (1.6)
Unamortised fees 1.4 -
Lease liabilities (11.1) (11.8)
--------------------------- ----------- -----------
Debt due within one year (34.3) (48.5)
--------------------------- ----------- -----------
Borrowings (334.3) (343.3)
Unamortised fees 2.9 2.8
Lease liabilities (70.9) (69.3)
=========================== =========== ===========
Debt due after one year (402.3) (409.8)
--------------------------- ----------- -----------
Group net debt (411.8) (432.4)
--------------------------- ----------- -----------
7. Deferred tax
The following are the major deferred tax liabilities and assets
recognised by the Group and movements thereon during the current
and prior reporting period.
Overseas
Accelerated IAS 23 Fair Retirement Share tax
GBP million tax capitalised value Intangibles Provisions benefit scheme losses US Total
depreciation interest gains obligations and Goodwill
accrued
interest
-------------- ------------------------ -------------- ------- ------------ ----------- ---------------- ---------- -------- --------- ---------
At 30 December
2018 (23.5) (0.3) (0.4) (0.1) 1.0 0.1 0.4 18.1 - (4.7)
-------------- ------------------------ -------------- ------- ------------ ----------- ---------------- ---------- -------- --------- ---------
Adjustment
to opening
reserves
(Note
1) - - - - - - - - (8.1) (8.1)
-------------- ------------------------ -------------- ------- ------------ ----------- ---------------- ---------- -------- --------- ---------
Credit to
income (3.1) (0.1) 1.1 - (0.6) (0.3) 0.3 8.1 - 5.4
Exchange
differences 0.2 - - - - - - (0.9) 0.2 (0.5)
Charge to
equity - - - - - (1.4) 0.1 - - (1.3)
-------------- ------------------------ -------------- ------- ------------ ----------- ---------------- ---------- -------- --------- ---------
At 28 December
2019 (as
restated) (26.4) (0.4) 0.7 (0.1) 0.4 (1.6) 0.8 25.3 (7.9) (9.2)
Credit to
income 1.1 (0.1 (0.7) - 0.1 (0.4) (0.5) 2.3 (0.9) 0.9
Exchange
differences - - 0.2 - - - - 1.3 0.3 1.8
Charge to
equity - - - - - (0.1) (0.1) - - (0.2)
-------------- ------------------------ -------------- ------- ------------ ----------- ---------------- ---------- -------- --------- ---------
At 26 December
2020 (25.3) (0.5) 0.2 (0.1) 0.5 (2.1) 0.2 28.9 (8.5) (6.7)
-------------- ------------------------ -------------- ------- ------------ ----------- ---------------- ---------- -------- --------- ---------
For details relating to the restatement of deferred tax see Note
1.
Certain deferred tax assets and liabilities have been offset
where the Group has a legally enforceable right to do so. The
following is the analysis of the deferred tax balances (after
offset) for financial reporting purposes:
28 December
26 December 2019
GBP million 2020 As restated
-------------------------------------------- ------------------ ------------
Deferred tax asset Deferred tax liabilities 13.0 11.2
(19.7) (20.4)
-------------------------------------------- ------------------ ------------
(6.7) (9.2)
-------------------------------------------- ------------------ ------------
At the statement of financial position date, the Group had
unrecognised tax losses of GBP13.9 million (2019: GBP8.5 million)
available for offset against future taxable profits. All GBP13.9
million will expire after five years if unused. Deferred tax assets
are only recognised on the losses carried forward to the extent
that it is probable that the losses will be utilised.
None of the temporary differences are expected to reverse in the
next 12 months.
The Group is not aware of any temporary differences associated
with undistributed earnings of subsidiaries due to the availability
of tax credits against such liabilities. The Group is in a position
to control the timing of the reversal of any such temporary
differences should they arise.
Temporary differences arising in connection with interests in
associates are insignificant.
8. Dividends
On 29 May 2019 a final dividend of 4 pence per share for the
period ended 29 December 2018 was paid and amounted to
GBP23,177,023.
On 11 October 2019 the Company paid an interim dividend for the
period ended 28 December 2019 of 2 pence per share amounting to
GBP11,588,512. The final dividend for the period ended 28 December
2019 of 4 pence per share was suspended in April 2020.
9. Notes to the statement of cash flows
GBP million 2020 2019
----------------------------------------------------------- ------ ------
Operating profit 62.0 69.4
Adjustments for:
Share of results of associates after tax (0.1) (0.5)
Depreciation of property, plant and equipment 66.1 59.7
Amortisation of intangible assets 0.5 0.5
Loss/(profit) on disposal of property, plant and equipment 0.9 (0.4)
Impairment of assets 19.1 6.0
Share scheme charges 1.2 1.9
Net retirement benefits charge less contributions (1.1) (1.9)
----------------------------------------------------------- ------ ------
Operating cash flows before movements in working capital 148.6 134.7
Decrease/(increase) in inventories 0.7 (0.6)
(Increase)/decrease in receivables (5.1) 15.5
Decrease in payables (22.6) (6.9)
Increase in provisions 4.9 3.4
----------------------------------------------------------- ------ ------
Cash generated by operations 126.5 146.1
Income taxes paid (16.5) (14.0)
Interest paid (21.5) (18.1)
----------------------------------------------------------- ------ ------
Net cash generated from operating activities 88.5 114.0
----------------------------------------------------------- ------ ------
Analysis of changes in net debt
29 December Exchange Other 26 December
GBP million 2019 Cash Lease additions movements non-cash 2020
flow movements
-------------------------- ----------- ------ ------------------ ------------- ----------- -----------
Borrowings (377.2) 21.8 - - 0.8 (354.6)
Lease liabilities (81.1) 11.4 (12.6) 0.3 - (82.0)
-------------------------- ----------- ------ ------------------ ------------- ----------- -----------
Total liabilities from
financing activities (458.3) 33.2 (12.6) 0.3 0.8 (436.6)
Cash and cash equivalents 25.9 (0.9) - (0.2) - 24.8
-------------------------- ----------- ------ ------------------ ------------- ----------- -----------
Net debt* (432.4) 32.3 (12.6) 0.1 0.8 (411.8)
-------------------------- ----------- ------ ------------------ ------------- ----------- -----------
* Includes accrued interest at 26 December 2020 of GBP2.3
million (2019: GBP1.6 million) and prepaid bank fees of GBP4.3
million (2019: GBP2.8 million). The movement in these balances in
the period of GBP0.8 million is shown in the table above as 'Other
non-cash movements' in Borrowings.
10. Events after the statement of financial position date
On 9 March 2021 the Group extended the maturity date of GBP430
million of its core debt facilities from March 2024 to March
2025.
The Spring Budget 2021 announced that the UK corporation tax
rate will increase to 25% from 1 April 2023. The deferred tax
assets and liabilities of UK companies within the Group have been
calculated at 19% as this rate has been substantively enacted at
the Balance Sheet date. Had the 25% rate been substantively enacted
on or before 26 December 2020 it would have had the effect of
increasing the deferred tax asset by GBP0.3m and increasing the
deferred tax liability by GBP7.5m.
11. 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.
Change in alternative performance measures
Some of the Group's key metrics have been restated for the 52
weeks ended 28 December 2019, to include start-up losses for new
sites and the impact of IFRS 16, which were both excluded in 2019.
The changes have been made to simplify the reporting of alternative
performance measures and improve comparability of year on year
metrics. This has impacted Adjusted EBITDA, Adjusted operating
profit, Adjusted profit before tax, free cash flow and Adjusted
earnings and hence Adjusted basic and diluted earnings per share.
The following table provides details of the changes:
Adjusted Adjusted Adjusted Adjusted Free
GBP million EBITDA operating profit earnings cash
profit before flow
tax
------------------------------ ------------------------------------- ---------- -------- ------------- ------
As previously reported 153.5 105.2 89.1 73.5 51.1
Start-up losses for new sites (15.5) (15.5) (15.5) (15.5) (15.5)
IFRS 16 impact 12.9 _ (2.2) (2.2) 11.3
Tax on the above items - - - 3.6 -
------------------------------ ------------------------------------- ---------- -------- ------------- ------
As restated 150.9 89.7 71.4 59.4 46.9
------------------------------ ------------------------------------- ---------- -------- ------------- ------
Like-for-like ("LFL") revenue
The Group defines LFL revenue as revenue from continuing
operations adjusted for the revenue generated from businesses
closed or sold in the current and prior year, revenue generated
from businesses acquired in the current and prior period and the
effect of foreign currency movements. The Directors believe LFL
revenue is a key metric of the Group's revenue growth trend, as it
allows for a more meaningful comparison of trends from period to
period.
The following table provides the information used to calculate
LFL revenue for the Group.
GBP million 2020 2019 Change %
---------------------------------------- ------- ----------------
Statutory revenue 1,793.5 1,885.9 (4.9%)
Revenue from acquisitions (54.0) (31.0)
Revenue from closed and sold businesses (18.4) (44.3)
Effect of currency movements 0.8 -
---------------------------------------- ------- ----------------
Like-for-like revenue 1,721.9 1,810.6 (4.9%)
---------------------------------------- ------- ----------------
The following table provides the information used to calculate
LFL revenue for the UK segment.
GBP million 2020 2019 Change
%
---------------------------------------- ------- ---------------- ----------
Statutory revenue 1,566.6 1,652.5 (5.2%)
Revenue from acquisitions (54.0) (31.0)
Revenue from closed and sold businesses (18.4) (44.3)
---------------------------------------- ------- ----------------------------
Like-for-like revenue 1,494.2 1,577.2 (5.3%)
---------------------------------------- ------- ----------------------------
The following table provides the information used to calculate
LFL revenue for the US segment.
GBP million 2020 2019 Change %
----------------------------- ----- --------------------
Statutory revenue 146.5 130.6 12.2%
Effect of currency movements 0.6 -
----------------------------- ----- --------------------
Like-for-like revenue 147.1 130.6 12.7%
----------------------------- ----- --------------------
The following table provides the information used to calculate
LFL revenue for the China segment.
GBP million 2020 2019 Change %
----------------------------- ---- -----------------------
Statutory revenue 80.4 102.8 (21.8%)
Effect of currency movements 0.2 -
----------------------------- ---- -----------------------
Like-for-like revenue 80.6 102.8 (21.6%)
----------------------------- ---- -----------------------
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. EBITDA is generally defined as
operating profit/(loss) before depreciation and amortisation. In
calculating Adjusted EBITDA and 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 the
share of results of associates after tax and share scheme charges,
as this is a non-cash amount. 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 sets out a reconciliation from the Group's
Operating profit to Adjusted EBITDA.
2019
GBP million 2020 As restated
----------------------------------------------------------------- ------- ------------
Operating profit 62.0 69.4
Depreciation 66.1 59.7
Amortisation 0.5 0.5
----------------------------------------------------------------- ------- ------------
EBITDA 128.6 129.6
Exceptional items (Note 3) 21.6 20.3
Share scheme charges 1.2 1.9
Loss/(profit) on disposal of property, plant and equipment 0.9 (0.4)
Share of results of associates after tax (0.1) (0.5)
----------------------------------------------------------------- ------- ------------
Adjusted EBITDA post IFRS 16 152.2 150.9
Less IFRS 16 impact (13.0) (12.9)
----------------------------------------------------------------- ------- ------------
Adjusted EBITDA pre IFRS 16 1 139.2 138.0
----------------------------------------------------------------- ------- ------------
Covenant Adjustments 6.6 18.1
----------------------------------------------------------------- ------- ------------
Adjusted EBITDA (pre IFRS 16 and including covenant adjustments) 145.8 156.1
----------------------------------------------------------------- ------- ------------
1 Excludes the impact of IFRS 16 as the Group's bank facility
agreement definition of Adjusted EBITDA excludes the impact of this
standard.
Adjusted EBITDA and Adjusting Operating profit by segment is
reconciled to Operating profit in Note 2.
The following table provides a reconciliation from Operating
profit to Adjusted Operating profit.
GBP million 2020 2019
--------------------------------- ----- -------------------
Operating profit 62.0 69.4 20.3
Exceptional items (Note 3) 21.6
--------------------------------- ----- -------------------
Adjusted Operating Profit 83.6 89.7
--------------------------------- ----- -------------------
Adjusted Operating profit margin 4.7% 4.8%
--------------------------------- ----- -------------------
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 sets out
the reconciliation from the Group's net debt to the Group's
operational net debt.
26 December 28 December
GBP million 2020 2019
----------------------------------------------------------------- ----------- -----------
Group net debt (Note 6) (411.8) (432.4)
Unamortised fees (4.3) (2.8)
Interest accrual 2.3 1.6
Lease liabilities recognised under IFRS 16 80.4 78.8
----------------------------------------------------------------- ----------- -----------
Group operational net debt (333.4) (354.8)
----------------------------------------------------------------- ----------- -----------
Adjusted EBITDA (pre IFRS 16 and including covenant adjustments) 145.8 156.1
Leverage (Operational net debt/Adjusted EBITDA pre IFRS
16 and including covenant adjustments) 2.3 2.3
----------------------------------------------------------------- ----------- -----------
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), but before payments of
refinancing fees and other exceptional or significant non-recurring
cash flows. Free cash flow has benefitted from non- recourse
factoring of receivables and the extension of payment terms for
certain suppliers. 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.
2019
GBP million 2020 As restated
------------------------------------------------------- ------ ------------
Net cash generated from operating activities 88.5 114.0
Dividends received from associates 0.1 0.2
Purchases of property, plant and equipment (56.4) (98.9)
Purchases of property, plant and equipment relating to
development projects - 17.5
Proceeds on disposal of property, plant and equipment 0.1 1.1
Cash impact of exceptional items 3.6 13.0
Refinancing fees 4.2 -
------------------------------------------------------- ------ ------------
Free cash flow 40.1 46.9
------------------------------------------------------- ------ ------------
Adjusted earnings per share
The Group calculates Adjusted basic earnings per Ordinary share
by dividing Adjusted earnings by the weighted average number of
Ordinary shares in issue during the year. Adjusted earnings is
calculated as profit attributable to equity holders of the Company
adjusted to exclude exceptional items as presented in the
consolidated income statement 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 attributable to equity shareholders of the Company to
Adjusted earnings.
2019
GBP million 2020 As adjusted
----------------------------------------------------------- ------- ------------
Profit attributable to equity shareholders of the Company 34.1 36.9
Exceptional items (Note 3) 21.6 20.3
Accelerated finance costs 1.7 -
Change in fair value of derivative financial instruments (3.4) 7.3
Tax on the above items (3.8) (5.1)
----------------------------------------------------------- ------- ------------
Adjusted earnings used for the adjusted earnings per
share calculation 50.2 59.4
Add back: Tax on adjusted profit before tax 13.9 12.0
----------------------------------------------------------- ------- ------------
Adjusted profit before tax 64.1 71.4
----------------------------------------------------------- ------- ------------
Effective tax rate on underlying activities
(Tax on Adjusted profit before tax/Adjusted profit before
tax) 21.7% 16.8%
----------------------------------------------------------- ------- ------------
Number of shares
'000 2020 2019
--------------------------------------------------- ------- -------
Weighted average number of Ordinary shares 579,426 579,426
Effect of dilutive Ordinary shares 4,193 3,922
--------------------------------------------------- ------- -------
Weighted average number of diluted Ordinary shares 583,619 583,348
--------------------------------------------------- ------- -------
2020 2019
------------------------------------- ----------------- -----------------
Adjusted basic earnings per share 8.7p 10.3p
Adjusted diluted earnings per share 8.6p 10.2p
------------------------------------- ----------------- -----------------
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, impairment of assets and profit on
disposal of subsidiaries less tax at the Group's effective tax
rate. Invested capital is defined as total assets less total
liabilities excluding net debt at the period end, pension assets
and liabilities (net of deferred tax) and fair values for
derivatives not designated in a hedging relationship. The Group
utilises ROIC to measure how effectively it uses 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.
2019
GBP million 2020 As restated
---------------------------------------------------- ------- ------------
Operating profit 62.0 69.4
Exceptional items (Note 3) 21.6 20.3
---------------------------------------------------- ------- ------------
Adjusted operating profit 83.6 89.7
Taxation at the underlying effective rate (18.1) (15.1)
---------------------------------------------------- ------- ------------
Adjusted operating profit after tax 65.5 74.6
---------------------------------------------------- ------- ------------
Invested capital
Total assets 1,449.2 1,463.1
Total liabilities (851.1) (897.4)
Net debt at period end 411.8 432.4
Derivatives not designated as hedges 0.3 3.5
Retirement benefit scheme surplus (11.2) (9.7)
Deferred tax liability on retirement benefit scheme 2.1 1.6
---------------------------------------------------- ------- ------------
Invested capital 1,001.1 993.5
---------------------------------------------------- ------- ------------
Average invested capital for ROIC calculation 997.3 933.9
---------------------------------------------------- ------- ------------
ROIC (%) 6.6% 8.0%
---------------------------------------------------- ------- ------------
ROIC excluding development projects
The Group's development projects were completed during 2019 and
all sites are now fully operational. Therefore ROIC excluding
development projects is no longer a relevant returns metric for the
business.
12. Statement of Directors' responsibilities
We confirm that to the best of our knowledge
-- the Group financial statements, which have been prepared in
accordance with International accounting standards in conformity
with the requirements of the Companies Act 2006 and international
financial reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union, give a true and
fair view of the assets, liabilities, financial position and profit
of the Group; and
-- the announcement includes a fair review of the development
and performance of the business and the position of the Group and
company, together with a description of the principal risks and
uncertainties that it faces
Approved on behalf of the Board by:
A Gudmundsson B Waldron
Chief Executive Officer Chief Financial Officer
15 March 2021
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR JAMMTMTBBTBB
(END) Dow Jones Newswires
March 16, 2021 03:00 ET (07:00 GMT)
Bakkavor (LSE:BAKK)
Historical Stock Chart
From Mar 2024 to Apr 2024
Bakkavor (LSE:BAKK)
Historical Stock Chart
From Apr 2023 to Apr 2024
