TIDMBAKK
RNS Number : 0375L
Bakkavor Group PLC
08 September 2021
8 September 2021
Bakkavor Group plc
Significant improvement in revenue, margin and profitability,
and a positive outlook for the full year
Bakkavor Group plc ("Bakkavor", or "the Company"), the leading
international provider of multi-category fresh food , today
announces its half year unaudited results for the 26-week period
ended 26 June 2021.
Returned to revenue growth with strong conversion to profits and
cash
-- S trong revenue momentum; Group revenue of GBP915.7m, up
4.0%. Like-for-like revenue of GBP924.9m, up 6.4% on the prior
period and 1.2% ahead of 2019.
-- Profitability improved significantly; operating profit of
GBP47.0m, up 243.1%. Adjusted operating profit of GBP47.0m up 63.8%
on the prior period and 10.8% ahead of 2019
-- Strong cash generation, with free cash flow of GBP39.7m, up
from an outflow of GBP3.3m in the prior period, enabled further
reduction in net debt; leverage close to medium term target of 1.5
to 2.0 times at 2.1 times
-- Basic earnings per share up 3.3p to 4.2p and an interim
dividend per share of 2.64p reflecting confidence in the future
Significantly strengthened the Group's platform for sustainable
growth and enhanced returns
-- Revenue momentum underpinned by exciting new product launches
aligned to the latest consumer trends, as shopping visit frequency
returned to pre-pandemic levels
-- Good progress in driving efficiency and productivity
contributed to a substantial increase in adjusted operating margin,
up 180bps year on year
-- Significant growth in the US underpinned by unlocking
capacity across our existing footprint and a period of a steady
recovery in China
-- Continued to make good progress across our Trusted Partner ESG strategy
A positive outlook, in line with the Board's expectations,
despite industry-wide challenges
-- A strong H1 2021 performance and continued recovery in
volumes at the start of H2 gives confidence in delivering a full
year performance in line with the Board's expectations
-- Despite unprecedented challenges in labour availability and
its impact on the supply chain, as well as raw material inflation,
the Group expects to deliver full year operating profit margin in
line with the first half
-- The Group's financial position remains strong, and we will
continue to invest in capacity and productivity across the Group to
drive growth and enhance our return on invested capital
FINANCIAL SUMMARY H1 2019 Change
GBP million (unless otherwise stated) H1 2021 H1 2020 Change
---------------------------------------- -------- -------- ------- --------- --------
Group revenue 915.7 880.5 4.0% 923.0 (0.8%)
Like-for-like revenue(1) 924.9 869.1 6.4% 913.6 1.2%
Adjusted EBITDA pre IFRS 16(1) 74.1 56.2 31.9% 65.2 13.7%
Adjusted operating profit(1) 47.0 28.7 63.8% 42.4 10.8%
Adjusted operating profit margin(1) 5.1% 3.3% 180bps 4.6% 50bps
Operating profit 47.0 13.7 243.1% 29.3 60.4%
Operating profit margin 5.1% 1.6% 350bps 3.2% 190bps
Profit before tax 34.6 6.8 408.8% 19.5 77.4%
Basic earnings per share 4.2p 0.9p 3.3p 3.0p 1.2p
Adjusted earnings per share(1) 4.8p 2.6p 2.2p 4.9p (0.1p)
Free cash flow(1) 39.7 (3.3) 43.0 15.0 24.7
Operational net debt(1) (324.5) (367.4) 42.9 (356.6) 32.1
Interim dividend per share(2) 2.64p 0.0p 2.64p 2.0p 0.64p
---------------------------------------- -------- -------- ------- --------- --------
1. Alternative performance measures are referred to as
'like-for-like', 'adjusted', 'underlying' and are applied
consistently throughout this document. These are defined in full
and reconciled to the reported statutory measures in Note 21.
2. During the period, the final dividend relating to the period
ended 28 December 2019 was paid, please refer to Note 9 for further
details.
Agust Gudmundsson, CEO
"I am pleased with the overall performance in the period as
like-for-like revenues exceed pre-pandemic levels and profitability
improved considerably with all three regions delivering meaningful
progress. The UK has shown a positive recovery, benefiting from a
return of shopping habits to 2019 levels and a strong pipeline of
innovation, as well as a meaningful pick up in operational gearing
as volumes recover. In the US, we continue to deliver strong top
line growth supported by strategic customer wins and unabated
market demand, and we are building on our solid foundations for
sustainable profitable growth. In China, the steady top line
recovery continues and we are well placed to take advantage of
significant growth opportunities in the region following recent
capacity investments.
We, and the industry, face a unique set of challenges in labour
availability and this is also impacting the entire supply chain,
contributing to raw material price inflation and logistics
disruption. We are continuing to mitigate the impact of these
issues by working collaboratively with our customers and suppliers,
accelerating operational efficiency initiatives, and taking
measures to attract and retain colleagues effectively. Our
performance in the period and the continuation of these mitigating
actions, combined with our track record of delivery through
previous challenging periods over our thirty-five year history,
gives us confidence in our full year outlook. We are pleased to
reinstate an interim dividend which delivers value for shareholders
whilst continuing to reduce the Group's leverage ratio."
Presentation
A copy of these results is available on www.bakkavor.com
We will be presenting to analysts via a webcast at 09.00 am, 8
September 2021, through the Investor section of the Group's website
at: https://streams.eventcdn.net/bakkavor/2021h1/ . 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
Emily Daw, Head of Investor Relations +44 (0) 20 7908 6114
Financial media:
Rachel Farrington, MHP Communications +44 (0) 20 3128 8613
Oliver Hughes, MHP Communications +44 (0) 20 3128 8622
Katie Hunt, MHP Communications +44 (0) 20 3743 8794
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 every major UK grocery retailer,
including Tesco, Marks & Spencer, Sainsbury's and Waitrose, and
some of the world's best-known food brands. 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.
LEI number: 213800COL7AD54YU9949
Disclaimer - forward-looking statements
This half year statement, prepared by Bakkavor Group plc (the
"Company"), may contain forward-looking statements about Bakkavor
Group plc and its subsidiaries (the "Group"). These represent
expectations for the Group's business, and involve known and
unknown risks and uncertainties, many of which are beyond the
Group's control. The Group has based these forward -- looking
statements on current expectations and projections about future
events. These forward-looking statements may generally, but not
always, be identified by the use of words such as 'will', 'aims',
'anticipates', 'continue', 'could', 'should', 'expects', 'is
expected to', 'may', 'estimates', 'believes', 'intends',
'projects', 'targets', or the negative thereof, or similar
expressions.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend on
circumstances that may or may not occur in the future and reflect
the Group's current expectations and assumptions as to such future
events and circumstances that may not prove accurate. A number of
material factors could cause actual results and developments to
differ materially from those expressed or implied by
forward-looking statements. You should not place undue reliance on
any forward looking statements. These forward-looking statements
are made as of the date of this announcement. The Group expressly
disclaims any obligation to publicly update or review these
forward-looking statements other than as required by law. 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
Significant improvement in revenue, margin and profitability,
and a positive outlook for the full year
Our people
We are extremely proud of our colleagues' continued commitment
and determination throughout the pandemic and their health, safety
and wellbeing remains our foremost priority. We have continued to
review and adapt our controls for managing both people and food
safety within our operations as lockdown restrictions have eased
and government guidance has changed, ensuring the health and safety
of all 19,000 colleagues. The results of our recent employee
engagement survey showed further positive progression and our teams
were pleased with the strong safety measures adopted in response to
the COVID-19 outbreak. This feedback will continue to strengthen
our case as an employer of choice within each of our communities.
In turn, this, combined with the variety of measures we have put in
place to mitigate the impact of the current industry wide
challenges in labour availability, will enable us to retain and
attract talent across all our markets.
Trading performance
Whilst COVID-19 significantly impacted our overall performance
during the period, we have seen positive momentum across the Group,
particularly since March as lockdown restrictions have been lifted
and vaccine programmes successfully rolled out. This has resulted
in a return of consumer demand and activity to pre-pandemic
levels.
Our strong and resilient performance through the half year
resulted in a 6.4% increase in like-for-like revenue and adjusted
operating profit up GBP18.3m to GBP47.0m, with all three of our
regions delivering significant progress in profitability in the
period. The Group has not incurred any exceptional costs in H1 2021
and therefore there are no adjustments to operating profit.
Compared to 2019, we delivered a 1.2% increase in like-for-like
revenue, with adjusted operating profit up GBP4.6m to GBP47.0m.
In the UK, COVID-19 continued to impact the business at the
beginning of the year, but we have been strongly encouraged by the
recovery in sales as we lap the beginning of the pandemic and
lockdown restrictions have eased. Importantly, in May we saw a
return in the frequency of shopping visits, a key driver of demand
for our FPF categories, to pre-COVID-19 levels. Despite the
uncertainty over the last 18 months, we have responded with agility
and protected and enhanced our customer relationships. We continue
to work collaboratively with our customers and the first half saw
us driving innovation through on-trend new product launches to
inject growth back into our categories.
We continue to make significant progress in the US, where we are
realising the benefits of the commercial and operational reset that
concluded in June 2020. We have seen an acceleration in sales
momentum from our existing strategic customers in traditional
grocery retail and online channels, and we have recently extended
our West Coast meals proposition to a national offering for a
strategic customer. We continue to see strong demand driven by the
consumer shift towards fresh prepared meals and we have an
established platform in place to deliver profitable growth, with
the US remaining a significant growth opportunity.
O ur China business was the most severely impacted by COVID-19,
however we have the well-established foundations necessary to
capitalise on this nascent but fast-growing food-to-go market.
Volumes continue to recover, with revenues almost back to
pre-pandemic levels. We have continued to invest in capacity and
expect capital expenditure in new sites to complete this year, with
limited further investment required over the next few years.
Despite the challenges in the first half, we have accelerated
implementation of our best practice solutions to optimise labour
productivity, drive operational efficiency and expand capacity to
support profitable growth in future periods, which leaves us well
placed to mitigate the cost headwinds and capitalise on the
significant growth opportunities going forward.
Financial position
Since December 2020, operational net debt has reduced by GBP8.9m
to GBP324.5m at the end of June 2021. Leverage (the ratio of
operational net debt to adjusted EBITDA) improved by 0.2 times to
2.1 times at June 2021, and we continue to target a medium term
range of 1.5 to 2.0 times. We are operating with over GBP200m of
liquidity headroom against our current facilities of GBP530.9m.
The Group maintained a tight control of capital expenditure in
the first quarter of the year due to the uncertainty of lockdown
restrictions, but spend increased towards the end of the period and
we expect capital expenditure for the full year to be approximately
4% of Group revenue. We have a clear pipeline of projects in place
for the second half focused on capacity enhancements, including two
major investments in the US and the completion of the new site in
Xi'an, China, as well as continued investment to upgrade our
refrigeration systems and to support operational improvement plans.
We continue to monitor our portfolio and proactively manage our
sites to ensure the optimal footprint for our business and
subsequent profitability.
Dividend
At the AGM on 20 May 2021, a deferred final dividend of 4 pence
per share for 2019 was declared and approved, with the dividend
being paid on 25 May 2021.
As previously reported, no dividends were awarded in 2020,
however, the Group will be re-instating an interim dividend as the
Board is encouraged by the improvement in trading, reduction in
leverage ratio towards our medium-term target and is satisfied that
the Group has adequate liquidity headroom.
The Board has therefore resolved to pay an interim dividend of
2.64 pence per Ordinary share. The interim dividend will be paid on
15 October 2021 to shareholders registered on the record date at 17
September 2021.
Going forward, the Board expects to maintain a progressive
dividend policy over the medium term and the interim dividend to
comprise approximately 40% of the total annual dividend.
Board changes
Earlier in the year we welcomed Jill Caseberry to the Board of
Bakkavor as Independent Non-executive Director and a member of the
Remuneration Committee. Subsequent to the period end with effect
from 13 August 2021, Jill was appointed as Bakkavor's designated
workforce engagement Non-executive Director and a member of the
Nomination Committee. Jill is an accomplished general manager with
extensive sales, marketing and general management experience across
blue-chip companies including Mars, PepsiCo and Premier Foods. Jill
is currently a Non-Executive Director of Bellway plc, C&C Group
plc, St Austell Brewery and Halfords Group plc.
In addition, we welcomed Sanjeevan Bala to the Board of Bakkavor
on 1 August 2021 as an Independent Non-executive Director and as a
member of the Audit and Risk Committee. Sanjeevan is an experienced
data and analytics professional with exposure to the food and
beverage sector through his time consulting with PwC and with
Dunhumby working with Tesco. He is currently Group Chief Data &
AI Officer at ITV plc and a Non-Executive Director at Scholars'
Education Trust.
ESG progress
In this period, we continued to make good progress across our
Trusted Partner ESG (Environmental, Social, Governance) strategy.
The programme of work has been overseen and steered by Bakkavor's
ESG Executive Committee, which was formalised in H1 2021 and
comprised of senior leaders across the business, ensuring
management accountability and direction of our strategy. The roles
of two of our Independent Non-Executive Directors have also
expanded to take responsibility for ESG, with Umran Beba leading
our ESG strategy at Board level and Jill Caseberry appointed as
designated workforce engagement Non-executive Director, which
ensures employees have a strong voice across the business .
Earlier this year, we set our commitment to become a Net Zero
carbon business in our Group operations by 2040 and we are
continuing to develop a roadmap to achieve this. We have also begun
to understand our climate risk exposure and commenced scenario
analysis to inform our reporting under Task Force on
Climate-Related Financial Disclosures ('TCFD') guidelines.
Operationally, we delivered a step change in supporting our
commitment to the goals of the UK Plastics Pact, and have removed
over 300 tonnes of plastic from the business so far in 2021. We
also continue to focus on increasing the use of recycled plastics
to reduce our exposure to the incoming plastics tax. Further, in
our supply chain, the roll out of our responsible sourcing strategy
has seen the business evaluate over 500 direct suppliers on
environmental, ethical, and integrity issues and we continue to
engage directly to support suppliers in aligning their performance
to our requirements, as set out in our Supplier Code of Conduct
.
The wellbeing of our colleagues remains a central priority and
during the period we developed a comprehensive wellbeing strategy
and programme covering financial, emotional, and physical
wellbeing.
Outlook
The Group's strong performance in the first half of the year,
combined with the encouraging return in volume, gives us confidence
in our outlook for the current financial year which remains in line
with the Board's expectations. While recognising the unprecedented
fast-evolving challenges in labour availability and its subsequent
impact on the supply chain, most significantly in raw material
inflation and logistics disruption, the Group is well placed to
manage these challenges as a result of our continued focus on
people, the strength of our supply chain and our collaborative
approach to customer relationships. The Group expects to deliver
full year operating margin, in line with the first half. We
continue to invest across the Group to underpin capacity and
productivity improvements leaving us well positioned to continue to
drive growth and enhance our return on invested capital going
forward.
BUSINESS REVIEWS
United Kingdom: Positive recovery in the UK as frequency of
shopping visits normalises
GBP million H1 2021 H1 2020 Change
------------------------------------- -------- -------- -------
Revenue 787.5 780.4 0.9%
Like-for-like revenue(1) 787.5 769.0 2.4%
Adjusted operating profit(1) 44.0 41.0 7.3%
Adjusted operating profit margin(1) 5.6% 5.3% 30bps
Operating profit 44.0 26.0 69.2%
Operating profit margin 5.6% 3.3% 230bps
------------------------------------- -------- -------- -------
1. Alternative performance measures are referred to as
'like-for-like', 'adjusted', 'underlying' and are applied
consistently throughout this document. These are defined in full
and reconciled to the reported statutory measures in Note 21.
Revenue growth 2021 v 2020 2021 v 2019
---------------- ------------ ------------
Q1 (6.4%) (2.5%)
Q2 12.0% (1.4%)
----------------- ------------ ------------
The first half of 2021 has continued to be impacted by COVID-19
related constraints on sales and operations, coupled with a
tightening labour market.
We have been reassured by the positive recovery in sales
following the unwind of government restrictions since March and the
return of shopping visit frequency to pre-pandemic levels in May,
with the pace of demand returning faster than expected. Sales
accelerated through this period with all categories, except for
salads, returning to 2019 levels leaving UK like-for-like sales
down only 1.4% in Q2 compared to 2019. For the first half sales
grew by 0.9% or 2.4% on a like-for-like basis to GBP787.5m.
Compared to 2019, reported sales declined 3.2% and like-for-like
sales declined 1.9%.
Profitability improved as volumes returned and operational
gearing kicked in, enhanced by focused operational efficiency
initiatives and prior year overhead reduction, which enabled a 30
basis point increase in adjusted operating profit margin to 5.6%
and a 7.3% increase in adjusted operating profit to GBP44.0m.
Category review
As more normalised shopping habits returned, meals, pizza &
bread and desserts categories rebounded to pre-pandemic levels.
Salads delivered a good year-on-year performance driven by a
recovery in food-to-go in the second quarter combined with a
seasonal summer build, but remained considerably behind 2019 levels
as a result of continued remote working and mixed weather.
We have worked hard to reinvigorate sales across our categories
with an exciting pipeline of new products to meet the evolving
needs of the post-pandemic consumer. We have relaunched a key
customers' full salad range to address consumers increasing focus
on health, developed inspiring new plant-based meals, and brought
exciting global cuisines to UK consumers with a new Middle Eastern
range. We have leveraged our multi-category capability to add a
range of Italian ready meals, bread and desserts to our existing
Pizza Express offer, and we continue to innovate in premium
desserts, including the launch of two of our own brands, The
Delicious Desserts Company and Haydens Bakery.
Strategic and operational actions
The breadth and quality of our customer offering continues to
grow and adapt to consumers' changing needs, and we are well placed
as the UK emerges from the COVID-19 pandemic due to the strength of
our strategic customers' market positions and long-standing
relationships which, through our collaborative and supportive
approach, have strengthened over the last 18 months.
We, and our customers, have adapted to the challenges faced,
however the impact of Brexit combined with the effects of the
pandemic, are now becoming evident; the industry-wide tightness of
the labour market is a notable impact. In anticipation of these
challenges, we have put in place several measures to mitigate the
potential impact from as early as last year. These included
broadening the talent pool for recruitment, accelerating
onboarding, adjusting incentives to attract and retain colleagues,
introducing more flexible shifts, investing in training to support
career development opportunities and a heightened focus on labour
planning to ensure the business can effectively ramp up to meet
demand. Towards the end of the period, the challenges in labour
availability have also impacted our supply chain, contributing to
raw material inflation and logistics disruption. However, we have
been able to mitigate the impact of these issues effectively as a
result of our strategic supplier relationships, procurement
expertise and approach to risk management. We have also managed the
seasonal and geographical balance of volume by switching production
between sites and by working closely with customers to simplify
certain category ranges and supporting them with their own labour
challenges, particularly in distribution.
Additionally, we have successfully managed the Brexit related
changes to importing and exporting goods in the period, and are
well prepared for further administrative changes to come in the
second half of the year.
Optimising our factory performance through management control
and targeted investments remains a priority for the business and
the roll-out of smart technology across our UK sites, provides
'live' factory data, enabling management to react to real time
information to maximise performance. Other projects, focused on
driving further raw materials and labour management control
improvements, as well as labour planning to optimise performance,
are also in place. We have a strong pipeline of future initiatives
and continue to assess potential automation opportunities.
Looking into H2 2021, we expect a good level of growth as we lap
the November 2020 lockdown, and deliver a strong pipeline of new
product launches. We do expect to see some upward pressure on our
cost base in the near term as we navigate the unprecedented
industry-wide challenges in labour availability and its impact on
the supply chain, however pricing models mean we are well insulated
from fluctuations in raw materials, with the ability to pass
through the inflationary impact. We are already actively engaged
with our customers in relation to the recovery of inflation on
packaging, freight and labour, which sit outside of our pricing
models.
United States: Significant momentum continues with the United
States a strong platform for growth
GBP million H1 2021 H1 2020 Change
---------------------------------- -------- -------- ---------
Revenue 81.3 67.6 20.3%
Like-for-like revenue(1) 89.5 67.6 32.4%
Operating profit / (loss) 4.5 (5.5) 181.8%
Operating profit / (loss) margin 5.5% (8.1%) 1,360bps
---------------------------------- -------- -------- ---------
1. Alternative performance measures are referred to as
'like-for-like', 'adjusted', 'underlying' and are applied
consistently throughout this document. These are defined in full
and reconciled to the reported statutory measures in Note 21.
The US continued its positive momentum through a combination of
significant growth with our strategic customers in both traditional
grocery retail and online channels, as well as the easing of
COVID-19 restrictions. Our US business reported sales growth of
20.3% to GBP81.3m and removing the effect of currency movements
increased 32.4% on a like-for-like basis to GBP89.5m.
We continued to build on the success of our commercial and
operational reset that concluded 12 months ago, with a considerable
turnaround in profitability compared to H1 2020. We have invested
to unlock ready meals capacity in our existing sites, and the
simplified portfolio and operational efficiencies have underpinned
operational gearing as volumes have increased, despite margins
being held back by raw material price inflation and labour market
tightness. As a result, operating profit for the first half was
GBP4.5m compared to a loss of GBP5.5m in H1 2020.
Strategic and operational actions
We are reaping the benefits of further developing our strategic
customer partnerships and in the first half were awarded the
national supply of fresh meals to a key customer, having previously
supplied the range to stores on the West Coast.
We are seeing inflationary pressures increase in the second
quarter, primarily in labour, proteins and packaging, but have
plans in place to recover the majority of the inflationary impacts
following a short-term lag, with our mitigation plans expected to
take effect by the end of Q3.
Labour availability remains an industry wide challenge in the
US, and consistent with the UK, we have taken a number of actions
in order to attract and retain people. We expect the situation to
improve in the second half as COVID-19 unemployment relief comes to
an end.
Looking ahead, revenue momentum is expected to continue in the
second half supported by the secured national supply of meals to a
key customer. We remain focused on the successful execution of new
product launches and investment in talent and capacity enhancements
in our existing footprint to support future growth. Margin
pressures will remain at least in the short term, given the
inflationary pressures the industry is currently facing, but
consumer demand for our products in the US remains robust and we
have built a strong platform to leverage for continued profitable
growth.
China: A steady recovery towards pre-pandemic levels in
China
GBP million H1 2021 H1 2020 Change
---------------------------------- -------- -------- ---------
Revenue 46.9 32.5 44.3%
Like-for-like revenue(1) 47.9 32.5 47.4%
Operating profit / (loss) (1.5) (6.8) 77.9%
Operating profit / (loss) margin (3.2%) (21.1%) 1,790bps
---------------------------------- -------- -------- ---------
1. Alternative performance measures are referred to as
'like-for-like', 'adjusted', 'underlying' and are applied
consistently throughout this document. These are defined in full
and reconciled to the reported statutory measures in Note 21.
Whilst our China business has been the most impacted by
COVID-19, a s lockdown measures have eased, volumes have recovered
steadily and our China business has recovered well with
like-for-like sales only down 3.7% compared to the first half of
2019. The significant like-for-like sales growth in the first half
of 47.4% to GBP47.9m, and reported sales growth of 44.3% to
GBP46.9m, reflected significantly lower prior year comparatives
when the region was most impacted by lockdowns and restrictions on
movement.
As volumes increased China's performance improved significantly,
with operating losses reduced by GBP5.3m to GBP1.5m, compared to
the first half of 2020; this is despite not all key customers being
back to pre-COVID levels and some margin pressure from labour
inflation and competition.
Strategic and operational actions
The significantly improved performance in China was driven by a
steady recovery in our foodservice customers in mainland China,
good momentum in the bakery business as it started to benefit from
our recent capacity investment, and a return to growth in Hong Kong
in the second quarter following easing of lockdown
restrictions.
Throughout this period, we have successfully maintained service
levels and we continue to work with our strategic customers to
extend the volumes and ranges we provide and, whilst still a
relatively small part of our overall operations, we are also making
steady progress in developing new channels in retail and office
catering.
Looking ahead, we expect the revenue momentum coming out of the
first half to deliver a return to 2019 levels by early 2022. Whilst
we expect there to continue to be inflationary pressure, we will
maintain a tight control of overheads following actions taken in
2020, and we continue to expect a return to profitability during
2022.
Our investment in new sites across the region is expected to
complete this year, and this increased capacity will ensure we are
well positioned to meet the strong market demand for fresh, healthy
and convenient food in China and consolidate our market leading
position.
Financial review
Revenue
Reported revenue increased by GBP35.2 million, or 4.0%, from
GBP880.5 million in H1 2020 to GBP915.7 million in 2021.
Like-for-like revenue was up 6.4%, from GBP869.1 million in H1
2020 to GBP924.9 million in H1 2021. This increase was due to the
recovery in sales volumes as COVID-19 restrictions were eased
during the period and due to the impact of the pandemic on 2020
sales.
UK
In the UK segment, reported revenue increased by 0.9%, or GBP7.1
million, from GBP780.4 million in H1 2020 to GBP787.5 million in H1
2021.
Like-for-like revenue, which excludes Alresford Salads that was
closed in October 2020, increased by 2.4%, from GBP769.0 million in
H1 2020 to GBP787.5 million in H1 2021. Alresford Salads
contributed revenues of GBP11.4 million in H1 2020. In the UK,
sales in the first quarter were adversely impacted by lockdown
restrictions, however early signs of recovery became apparent in
March as government restrictions began to ease. We then saw this
improvement in sales gather pace throughout the second quarter as
lockdown measures were eased further, and the frequency of shopping
visits returned to pre-COVID-19 levels. As a result of more
normalised shopping habits, we have seen meals, pizza & bread
and desserts return to pre-pandemic levels during quarter two.
Salads delivered a strong year-on-year performance in the second
quarter driven by recovery in food-to-go, however remained behind
2019 levels as a result of the continuation of government guidance
to work from home and mixed weather.
US
In the US segment, reported revenue increased by GBP13.7
million, or 20.3%, to GBP81.3 million in H1 2021 from GBP67.6
million in the prior year. The strengthening of Sterling in the
period lowered reported revenue in H1 2021 by GBP8.2 million.
Like-for-like revenue, which is at constant currency, increased
by 32.4%, from GBP67.6 million in H1 2020 to GBP89.5 million in H1
2021. The growth in the US is due to strong sales momentum from a
combination of restrictions easing and growth with customers in
both traditional grocery retail and online channels.
China
In the China segment, reported revenue increased by GBP14.4
million, or 44.3%, to GBP46.9 million in H1 2021 from GBP32.5
million in the prior year.
Like-for-like revenue, which is at constant currency, increased
by 47.4%, from GBP32.5 million in H1 2020 to GBP47.9 million in H1
2021. The significant growth in China was due to sales volumes
building back to pre-COVID-19 levels albeit still slightly down on
2019. The performance was driven by a steady recovery in our
foodservice customers in mainland China, good momentum in the
bakery business as it benefits from our recent capacity investment
and a return to growth in Hong Kong, following a challenging first
quarter.
Exceptional Items
Included within Other administrative costs 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 separately by virtue of their nature or amount.
Exceptional items comprise the following:
GBP million H1 2021 H1 2020
--------------------------------------------- ------- -------
Restructuring and impairment - 15.0
Accelerated amortisation of refinancing fees - 1.7
- 16.7
--------------------------------------------- ------- -------
(1) Alternative performance measures are referred to as
'like-for-like', 'adjusted', 'underlying' and are applied
consistently throughout this document. These are defined in full
and reconciled to the reported statutory measures in Note 21.
H1 2021
There were no exceptional items to report.
H1 2020
The Group incurred GBP16.7 million of costs presented as
exceptional items in H1 2020 of which GBP3.0 million related to
restructuring costs, with a further GBP8.0 million impairment
charge in respect of tangible fixed assets as a result of the
closure of a salads factory in Spalding. The Group also incurred a
GBP4.0 million asset impairment charge in respect of the closure of
our salads site at Alresford as the relevant assets were no longer
expected to have any future value to the Group. 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.
Operating profit
Operating profit increased by GBP33.3 million, or 243.1%, from
GBP13.7 million in H1 2020 to GBP47.0 million in H1 2021 with
margins increasing by 350 basis points to 5.1%. In the UK,
operating profit has increased from GBP26.0 million in H1 2020 to
GBP44.0 million in H1 2021. In the US, operating profit has
increased by GBP10.0 million from a loss in H1 2020 of GBP5.5
million to a profit of GBP4.5 million in H1 2021. In China, the
operating loss is GBP5.3 million lower than H1 2020 at GBP1.5
million. The increase in profitability across all regions is due to
the benefits from the increase in consumer demand as COVID-19
restrictions ease with the US also benefitting from increased
volumes following site investments in recent years. In addition,
the Group incurred significant costs in the prior year as the
business responded to the COVID-19 outbreak, with enhanced health
and safety and hygiene protocols. Operating profit also includes a
credit of GBP1.0 million (H1 2020: GBP5.6 million) arising from the
reassessment of the need for certain commercial accruals. The
overall increase in operating profit for the period is after
provisions made for short term financial performance bonuses as a
result of the improved trading.
Adjusted operating profit, which excludes exceptional items, was
GBP47.0 million for H1 2021, an increase of 63.8% from GBP28.7
million in H1 2020. Adjusted operating profit margin increased by
180 basis points to 5.1% in H1 2021. The exceptional items in the
prior year all relate to the UK segment with UK adjusted operating
profit increasing from GBP41.0 million in H1 2020 to GBP44.0
million in H1 2021.
Finance costs
Finance costs decreased by GBP2.9 million, or 24.6%, from
GBP11.8 million in H1 2020 to GBP8.9 million in H1 2021. The costs
for H1 2020 include GBP1.7 million for the accelerated amortisation
of refinancing fees following the Group's refinancing of its core
debt facilities during the period. The remaining GBP1.2 million
decrease is due to a decrease in borrowing costs from lower average
debt levels in the period. The Group's cost of debt remains at
circa 3.5% per annum.
Tax
The Group tax charge for the period increased by GBP8.6 million,
from GBP1.4 million in H1 2020 to GBP10.0 million in H1 2021. The
GBP10.0 million charge represents an effective tax rate of 29% on
profit before tax of GBP34.6 million in line with the Group annual
tax rate for 2021 which is forecast to be 29.0% of profit before
tax. Excluding exceptional items and the change in fair value of
derivative financial instruments, the underlying effective tax rate
was 27.7% and exceeds the 19.0% underlying rate for the
corresponding period last year. The main reason for this being that
the UK statutory tax rate increased from 19.0% to 25.0% during the
period. This increase takes effect from 1 April 2023 and does not
impact current taxes in the period, however, UK deferred tax
liabilities that were previously provided for at 19.0% have now
been provided at 25.0%, being the rate at which timing differences
are expected to reverse.
Tax (continued)
A reconciliation of the expected tax rate to the forecast
effective tax rate is as follows:
26 weeks ended
26 June
GBP million 2021
-------------------------------- --------------- -------
Profit before tax 34.6
-------------------------------- --------------- -------
Expected tax at 19.0% 6.6 19.0%
Impact of:
Non-deductible items (0.5) (1.4%)
Overseas losses not recognised 0.5 1.5%
UK rate change 3.2 9.2%
Overseas tax rates 0.2 0.6%
Total tax charge 10.0 29.0%
-------------------------------- --------------- -------
Earnings per share
Basic earnings per share has increased from 0.9 pence for H1
2020 to 4.2 pence in H1 2021, reflecting the benefit from higher
sales volumes across the business as COVID-19 restrictions are
eased and no exceptional costs reported in H1 2021.
Adjusted earnings per share, which is calculated before
exceptional items and the change in fair value of derivative
financial instruments has increased to 4.8 pence for H1 2021 from
2.6 pence in H1 2020 and reflects the improvement in underlying
trading in the period. The weighted average number of shares in
issue during both H1 2021 and H1 2020 was 579,425,585.
Cash Flow
Net cash from operating activities, which is calculated before
capital expenditure but after payments for exceptional items,
increased by GBP43.9 million from GBP13.1 million in H1 2020 to
GBP57.0 million in H1 2021. This was largely due to the improvement
in trading as sales volumes increased as COVID-19 restrictions were
eased which is also delivered an GBP11.0 million year on year
working capital benefit. In addition, tax paid has decreased by
GBP8.6 million following higher payments in 2020 due to changes to
UK legislation that required the estimated tax due for a financial
year to be paid within that period. The Group's interest paid has
also decreased by GBP3.0 million due to 2020 including GBP4.2
million of refinancing fees.
Net cash used in investing activities decreased by GBP2.0
million in the period from GBP20.9 million in H1 2020 to GBP18.9
million in H1 2021. This was primarily due to low capital
expenditure in the first quarter as the Group delayed investment
spend to later in the year to mitigate against the impact of
COVID-19 restrictions.
26 weeks ended 26 weeks ended
26 June 27 June
GBP million 2021 2020
--------------------------------------------------- --------------- ----------------
Operating profit 47.0 13.7
Depreciation and other non-cash items 34.6 46.2
Net retirement benefits charge less contributions (1.0) (0.6)
Working capital movements (11.4) (22.4)
Interest and tax paid (12.2) (23.8)
Net cash generated from operating activities 57.0 13.1
Dividends received from associates - 0.1
Purchases of property, plant and equipment (18.9) (21.0)
Cash impact of exceptional items 0.7 0.3
Refinancing fees 0.9 4.2
Free cash flow 39.7 (3.3)
--------------------------------------------------- --------------- ----------------
Free cash flow for H1 2021, which is the key measure the
Directors use to manage cash flow in the business, was an inflow of
GBP39.7 million, an improvement of GBP43.0 million on the prior
year due to the factors set out above.
Capital, Debt and Leverage
Partly offsetting the free cash inflow in the period was the
payment of the previously suspended 2019 final dividend of GBP23.2
million, GBP0.9 million of financing fees and GBP0.7 million in
respect of exceptional items. Overall, this has resulted in a
decrease of GBP8.9 million in operational net debt from the year
end to GBP324.5 million. Leverage (the ratio of operational net
debt to adjusted EBITDA) was 2.1 times at June 2021.
The Group continues to target a medium-term range of 1.5 - 2.0
times. The Group's liquidity position remains strong with
comfortable headroom against all financial covenants.
From a debt maturity perspective, on 9 March 2021, the Group
extended the maturity date of GBP430 million of its core debt
facilities from March 2024 to March 2025. In April 2021 the Group
voluntarily repaid GBP17.5 million of the Term Loan that matures in
June 2024. The interest margin on this loan is currently
LIBOR+4%.
Pensions
Under the IAS 19 valuation principles that are required to be
used for accounting purposes, the Group recognised a surplus of
GBP28.0 million for the UK defined benefit scheme as at 26 June
2021 (26 December 2020: surplus of GBP11.2 million).The increase in
the surplus is mainly due to the liability hedging in place for the
scheme.
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.
ROIC
The Group's ROIC improved by 100 basis points from 6.6% at the
end of 2020 to 7.6% as at 26 June 2021. This reflects the improved
profitability across the Group driven by the lifting of COVID-19
restrictions combined with benefits from recent capital
investments; particularly in the US.
Principal Risks and Uncertainties
Details of the Principal risks and uncertainties facing the
Group are set out on pages 70 to 83 of the 2020 Annual Report and
Accounts, published on 15 March 2021. These risks include, but are
not limited to, Food safety and integrity, Raw material and input
cost inflation, Reliance on a small number of key customers, Labour
availability and cost, IT systems and cyber risk, Health and
safety, Recruitment and retention of key employees, Strategic
growth and change programmes, Treasury and pensions, Brexit
disruption, Disruption to Group operations, Sustainability,
Consumer behaviour and demand, Competitors, Legal and regulatory
and COVID-19 pandemic.
Condensed consolidated income statement
26 weeks ended 27 June 2020
26 weeks ended 26 June 2021 (Unaudited) (Unaudited)
---------------------------------------------- -------------------------------------------
Exceptional Exceptional
Underlying items Underlying items
GBP million Notes activities (Note 4) Total activities (Note 4) Total
----------------- ------ ----------------- ----------------- -------- ----------------- ------------ --------
Continuing
operations
Revenue 3 915.7 - 915.7 880.5 - 880.5
Cost of sales (645.1) - (645.1) (628.6) - (628.6)
----------------- ------ ----------------- ----------------- -------- ----------------- ------------ --------
Gross profit 270.6 - 270.6 251.9 - 251.9
Distribution
costs (36.8) - (36.8) (35.5) - (35.5)
Other
administrative
costs (186.8) - (186.8) (187.7) (15.0) (202.7)
Operating
profit/(loss) 47.0 - 47.0 28.7 (15.0) 13.7
Finance costs 5 (8.9) - (8.9) (10.1) (1.7) (11.8)
Other gains and
(losses) 6 (3.5) - (3.5) 4.9 - 4.9
----------------- ------ ----------------- ----------------- -------- ----------------- ------------ --------
Profit/(loss)
before tax 34.6 - 34.6 23.5 (16.7) 6.8
Tax 7 (10.0) - (10.0) (4.5) 3.1 (1.4)
----------------- ------ ----------------- ----------------- -------- ----------------- ------------ --------
Profit
attributable to
equity
shareholders of
the Company 24.6 - 24.6 19.0 (13.6) 5.4
----------------- ------ ----------------- ----------------- -------- ----------------- ------------ --------
Earnings per
share
Basic 8 4.2p 0.9p
Diluted 8 4.2p 0.9p
----------------- ------ ----------------- ----------------- -------- ----------------- ------------ --------
Condensed consolidated statement of comprehensive income
26 weeks ended 26 weeks ended
26 June 27 June
2021 2020
GBP million (Unaudited) (Unaudited)
-------------------------------------------------------------- --------------- ---------------
Profit for the period 24.6 5.4
-------------------------------------------------------------- --------------- ---------------
Other comprehensive income/(expense)
Items that may be reclassified to the income statement:
Exchange differences on translation of foreign operations (4.4) 10.6
Gain/(loss) on cash flow hedges 0.2 (0.4)
Tax relating to these items - 0.1
Items that will not be reclassified to the income statement:
Actuarial gain on defined benefit pension schemes 16.0 9.6
Tax relating to these items (4.0) (1.8)
-------------------------------------------------------------- --------------- ---------------
Total other comprehensive income net of tax 7.8 18.1
-------------------------------------------------------------- --------------- ---------------
Total comprehensive income 32.4 23.5
-------------------------------------------------------------- --------------- ---------------
Condensed consolidated statement of financial position
26 June 26 December
GBP million Notes 2021 (Unaudited) 2020 (Audited)
----------------------------------------------- ------ ------------------ ----------------
Non-current assets
Goodwill 10 648.4 649.6
Other intangible assets 2.0 2.2
Property, plant and equipment 11 529.4 535.3
Interests in associates and other investments 11.9 12.2
Deferred tax asset 13.3 13.0
Retirement benefit asset 28.0 11.2
Derivative financial instruments 0.3 -
1,233.3 1,223.5
----------------------------------------------- ------ ------------------ ----------------
Current assets
Inventories 12 57.5 63.8
Trade and other receivables 13 140.9 136.4
Current tax assets 0.6 0.1
Cash and cash equivalents 15 22.5 24.8
Derivative financial instruments 0.1 0.6
221.6 225.7
----------------------------------------------- ------ ------------------ ----------------
Total assets 1,454.9 1,449.2
----------------------------------------------- ------ ------------------ ----------------
Current liabilities
Trade and other payables 14 (356.1) (367.6)
Borrowings 15 (26.1) (23.2)
Lease liabilities 15 (11.2) (11.1)
Provisions (9.3) (11.0)
Derivative financial instruments (3.0) (0.9)
(405.7) (413.8)
----------------------------------------------- ------ ------------------ ----------------
Non-current liabilities
Borrowings 15 (317.5) (331.4)
Lease liabilities 15 (74.7) (70.9)
Provisions (16.5) (14.4)
Derivative financial instruments (0.1) (0.9)
Deferred tax liabilities (32.0) (19.7)
(440.8) (437.3)
----------------------------------------------- ------ ------------------ ----------------
Total liabilities (846.5) (851.1)
----------------------------------------------- ------ ------------------ ----------------
Net assets 608.4 598.1
----------------------------------------------- ------ ------------------ ----------------
Equity
Share capital 17 11.6 11.6
Merger reserve (130.9) (130.9)
Hedging reserve (0.5) (0.7)
Translation reserve 20.4 24.8
Retained earnings 707.8 693.3
----------------------------------------------- ------ ------------------ ----------------
Total equity 608.4 598.1
----------------------------------------------- ------ ------------------ ----------------
Condensed consolidated statement of changes in equity
Merger Hedging Translation Retained
GBP million Share capital reserve reserve reserve earnings Total
------------------------------ -------------- -------------- -------------- -------------- -------------- ------
Balance at 29 December 2019 (
Audited) as previously
reported 11.6 (130.9) - 27.0 665.9 573.6
Restatement (Note 2) - - - 0.2 (8.1) (7.9)
------------------------------ -------------- -------------- -------------- -------------- -------------- ------
Balance at 29 December 2019 11.6 (130.9) - 27.2 657.8 565.7
(Audited)
Profit for the period - - - - 5.4 5.4
Other comprehensive income
for the period - - (0.3) 10.6 7.8 18.1
------------------------------ -------------- -------------- -------------- -------------- -------------- ------
Total comprehensive income
for the period - - (0.3) 10.6 13.2 23.5
------------------------------ -------------- -------------- -------------- -------------- -------------- ------
Credit for share-based
payments - - - - 0.9 0.9
Balance at 27 June 2020
(Unaudited) as restated 11.6 (130.9) (0.3) 37.8 671.9 590.1
------------------------------ -------------- -------------- -------------- -------------- -------------- ------
Merger Hedging Translation Retained
GBP million Share capital reserve reserve reserve earnings Total
------------------------------ -------------- -------------- -------------- ------------- -------------- -------
Balance at 27 December 2020 11.6 (130.9) (0.7) 24.8 693.3 598.1
(Audited)
Profit for the period - - - - 24.6 24.6
Other comprehensive income
for the period - - 0.2 (4.4) 12.0 7.8
------------------------------ -------------- -------------- -------------- ------------- -------------- -------
Total comprehensive income
for the period - - 0.2 (4.4) 36.6 32.4
------------------------------ -------------- -------------- -------------- ------------- -------------- -------
Dividends paid (Note 9) - - - - (23.2) (23.2)
Credit for share-based
payments - - - - 1.1 1.1
Balance at 26 June 2021 11.6 (130.9) (0.5) 20.4 707.8 608.4
(Unaudited)
------------------------------ -------------- -------------- -------------- ------------- -------------- -------
Condensed consolidated statement of cash flows
26 weeks 26 weeks
ended ended
26 June 27 June
2021 2020
GBP million Notes (Unaudited) (Unaudited)
-------------------------------------------------------- ------ -------------- --------------
Net cash generated from operating activities 18 57.0 13.1
--------------------------------------------------------
Investing activities
Dividends received from associates - 0.1
Purchases of property, plant and equipment (18.9) (21.0)
Net cash used in investing activities (18.9) (20.9)
Financing activities
Dividends paid 9 (23.2) -
Increase in borrowings 13.1 375.9
Repayment of borrowings (23.8) (330.0)
Payment of lease liabilities (6.1) (6.0)
-------------------------------------------------------- ------ -------------- --------------
Net cash (used in)/generated from financing activities (40.0) 39.9
Net (decrease)/increase in cash and cash equivalents (1.9) 32.1
Cash and cash equivalents at beginning of period 24.8 25.9
Effect of foreign exchange rate changes (0.4) 0.8
Cash and cash equivalents at end of period 22.5 58.8
-------------------------------------------------------- ------ -------------- --------------
Notes to the condensed financial statements
1. General Information
The information for the 26 weeks ended 26 June 2021 and 26 weeks
ended 27 June 2020 is unaudited and does not constitute statutory
accounts within the meaning of s435 (1) and (2) of the Companies
Act 2006. These condensed consolidated interim financial statements
have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the Disclosure Guidance and Transparency rules
of the Financial Conduct Authority. The condensed consolidated
statement of financial position as at 26 December 2020 has been
derived from the consolidated statement of financial position
included in the Group's financial statements for the 52 weeks ended
26 December 2020, a copy of which has been delivered to the
Registrar of Companies. The auditor's report on those accounts was
not qualified, did not include any reference to any matters to
which the auditors drew attention by way of emphasis without
qualifying the report and did not contain statements under section
498 (2) or (3) of the Companies Act 2006.
This financial information does not include all of the
information and disclosure required in the annual consolidated
financial statements and should be read in conjunction with the
Bakkavor Group plc (the "Group") annual consolidated financial
statements for the 52 weeks ended 26 December 2020, 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.
Controlling parties
Two of the Company's Directors, Agust Gudmundsson and Lydur
Gudmundsson, hold shares in the Company through their beneficial
ownership of Carrion Enterprises Limited and Umbriel Ventures
Limited. On 23 May 2019, Carrion Enterprises Limited and Umbriel
Ventures Limited each sold 3,229,625 ordinary shares to Lixaner Co
Limited, a company owned and controlled by Sigurdur Valtysson, who
runs the family office for Agust and Lydur Gudmundsson. On 21 April
2021, Lixaner Co Limited sold 1,500 shares. Following these
transactions, Lixaner Co Limited holds 6,457,750 ordinary shares
(representing 1.11% of the issued share capital of the company) and
Carrion Enterprises Limited and Umbriel Ventures Limited each hold
142,103,505 ordinary shares (representing 24.52% of the issued
share capital of the Company).
Given the close relationship between the parties, Sigurdur
Valtysson is to be considered as acting in concert with Agust and
Lydur Gudmundsson for the purposes of the definition in the
Takeover Code and the parties are controlling shareholders of the
Company. The aggregate shareholding in the Company of Carrion
Enterprises Limited and Umbriel Ventures Limited and their concert
party group (Lixaner Co Limited) is 290,664,760 ordinary shares
(representing 50.16% of the issued share capital of the
Company).
Principal activities and seasonality
The principal activities of the Group comprise the preparation
and marketing of fresh prepared foods and the marketing and
distribution of fresh produce. These activities are undertaken in
the UK, US and China and products are primarily sold through high
street supermarkets. The Group's cash flows are affected by
seasonal variations. Sales of fresh prepared food have historically
tended to be marginally higher during the summer months and in the
weeks leading up to Christmas. The Group generally has higher gross
profit margins during the summer months because the Group is able
to source locally produced raw materials during that period, which
reduces costs.
2. Significant accounting policies
Basis of accounting
The financial information has been prepared on the historical
cost basis, except for the revaluation of financial instruments and
defined benefit pension scheme assets and liabilities (which are
stated at fair value or actuarial valuation).
Restatement
For details of the restatement please refer to page 158 of the
2020 Annual Report & Accounts.
Accounting policies
The accounting policies adopted are consistent with those of the
previous financial statements except as described below:
From 27 December 2020, all new forward foreign exchange
contracts are designated and documented as hedges, for which hedge
accounting is applied. This documentation identifies the hedging
instrument, the hedged item or transaction, the nature of the risk
being hedged and how hedge effectiveness will be measured
throughout their duration. These hedges have been designated as
cash flow hedges and are expected at inception to be highly
effective in offsetting changes in the cash flows of hedged
items.
Where a derivative financial instrument is designated as a hedge
of the variability in cash flows of a recognised asset or
liability, or a highly probable forecast transaction, the effective
part of any gain or loss on the derivative financial instrument is
recognised within equity in the hedging reserve, with the
ineffective portion being reported in the income statement. When a
highly probable forecast transaction results in the recognition of
a non-financial asset or liability, the cumulative gain or loss is
removed from the hedging reserve in equity and included in the
initial measurement of the non-financial asset or liability.
Otherwise, the associated gains and losses that had previously been
recognised within equity in the hedging reserve are transferred to
the income statement as the cash flows of the hedged item impact
the profit or loss.
Hedge accounting is discontinued when the hedging instrument
expires or is sold, terminated, exercised or no longer qualifies
for hedge accounting. At that point in time, any cumulative gain or
loss on the hedging instrument recognised within equity in the
hedging reserve is kept in the hedging reserve until the forecast
transaction occurs. If a hedged transaction is no longer
anticipated to occur, the net cumulative gain or loss recognised
within equity in the hedging reserve is transferred immediately to
the income statement.
Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to the expected total annual profit
or loss.
There have been no changes in the period to the Group's critical
accounting judgements and key sources of estimation uncertainty as
disclosed in the Group's annual financial statements for the 52
weeks ended 26 December 2020.
Going concern
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. The Directors continue to monitor the
impact of the ongoing COVID-19 outbreak on the business and have
prepared 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. Having taken
these factors into account under the scenario, which is considered
to be severe but plausible , the Directors consider that adequate
headroom is available based on the forecasted cash requirements of
the business. At the date of this report, the Group has complied in
all respects with the terms of its borrowing agreements, including
its financial covenants, and forecasts to continue to do so in the
future.
Consequently, the Directors consider that the Group has adequate
resources to meet its liabilities as they fall due for the
foreseeable future. For this reason, they continue to adopt the
going concern basis in preparing the financial statements.
3. Segment 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 into three regions, the UK, US and China and prepares and
markets fresh prepared foods and produce in each region.
During the previous 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 Group manages the performance of its businesses through the
use of 'Adjusted operating profit' as defined in Note 21.
The following table provides an analysis of the Group's segment
information for the period 27 December 2020 to 26 June 2021:
GBP million UK US China Total
-------------------------------------------- ------- ------ ------ --------
Revenue 787.5 81.3 46.9 915.7
-------------------------------------------- ------- ------ ------ --------
Adjusted EBITDA (Note 21) 71.0 7.9 1.4 80.3
Depreciation (25.9) (3.2) (2.9) (32.0)
Amortisation - (0.2) - (0.2)
Share scheme charges (1.1) - - (1.1)
Adjusted operating profit/(loss) (Note 21) 44.0 4.5 (1.5) 47.0
Exceptional items (Note 4) - - - -
Operating profit/(loss) 44.0 4.5 (1.5) 47.0
Finance costs (8.9)
Other gains and (losses) (3.5)
-------------------------------------------- ------- ------ ------ --------
Profit before tax 34.6
Tax (10.0)
-------------------------------------------- ------- ------ ------ --------
Profit for the period 24.6
-------------------------------------------- ------- ------ ------ --------
3. Segment information (continued)
The following table provides an analysis of the Group's segment
information for the period 29 December 2019 to 27 June 2020:
GBP million UK US China Total
--------------------------------------------------- ------- ------ ------ --------
Revenue 780.4 67.6 32.5 880.5
--------------------------------------------------- ------- ------ ------ --------
Adjusted EBITDA (Note 21) 68.1 (1.9) (3.3) 62.9
Depreciation (25.8) (3.4) (3.2) (32.4)
Amortisation (0.1) (0.2) - (0.3)
Share scheme charges (0.9) - - (0.9)
Loss on disposal of property, plant and equipment (0.3) - (0.3) (0.6)
Adjusted operating profit/(loss) (Note 21) 41.0 (5.5) (6.8) 28.7
Exceptional items (Note 4) (15.0) - - (15.0)
Operating profit/(loss) 26.0 (5.5) (6.8) 13.7
Finance costs (11.8)
Other gains and (losses) 4.9
--------------------------------------------------- ------- ------ ------ --------
Profit before tax 6.8
Tax (1.4)
--------------------------------------------------- ------- ------ ------ --------
Profit for the period 5.4
--------------------------------------------------- ------- ------ ------ --------
Major customers
For the 26 weeks ended 26 June 2021, the Group's four largest
customers accounted for 76.4% (26 weeks ended 27 June 2020: 77.4%)
of total Group revenue from continuing operations. These customers
accounted for 88.6% (26 weeks ended 27 June 2020: 87.4%) of total
UK 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:
26 weeks ended 26 weeks ended
26 June 27 June
2021 2020
------------ --------------- ---------------
Customer A 34.0% 37.0%
Customer B 21.8% 19.6%
Customer C 11.6% 11.2%
Customer D 9.0% 9.6%
------------ --------------- ---------------
All of the Group's revenue is from the sale of goods.
4. 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 activities
results better represent the ongoing operations and key metrics of
the Group.
Exceptional items includes items that are non-recurring,
significant in nature and are important to users in understanding
the business, including restructuring costs, disruption costs,
pre-commissioning and start-up costs for new manufacturing
facilities, impairment of assets, disposals of subsidiaries and
associates and fair value adjustments:
26 weeks ended 26 weeks ended
26 June 27 June
GBP million 2021 2020
------------------------------ ---------------- ---------------
Restructuring and impairment - 15.0
------------------------------ ---------------- ---------------
Operating profit - 15.0
Finance costs (Note 5) - 1.7
------------------------------ ---------------- ---------------
Total before tax - 16.7
Tax on exceptional items - (3.1)
------------------------------ ---------------- ---------------
Total after tax - 13.6
------------------------------ ---------------- ---------------
H1 2021
The Group has not incurred any costs presented as exceptional in
H1 2021.
H1 2020
The Group incurred GBP16.7 million of costs presented as
exceptional items in H1 2020 of which GBP3.0 million related to
restructuring costs, with a further GBP8.0 million impairment
charge in respect of tangible fixed assets as a result of the
closure of a salads factory in Spalding. The Group also incurred a
GBP4.0 million asset impairment charge in respect of the closure of
our salads site at Alresford as the relevant assets were no longer
expected to have any future value to the Group. 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.
5. Finance costs
26 weeks ended 26 weeks ended
26 June 27 June
GBP million 2021 2020
---------------------------------- --------------- ---------------
Interest on borrowings 7.5 10.3
Interest on lease liabilities 1.3 1.4
Unwind of discount on provisions 0.1 0.1
---------------------------------- --------------- ---------------
8.9 11.8
---------------------------------- --------------- ---------------
The interest on borrowings figure for the 26 weeks ended 27 June
2020 includes GBP1.7 million of accelerated amortisation of
refinancing fees relating to the Group's refinancing of its core
debt facilities on 18 March 2020. This amount has been classed as
an exceptional item in the condensed consolidated income
statement.
6. Other gains and (losses)
26 weeks ended 26 weeks ended
26 June 27 June
GBP million 2021 2020
---------------------------------------------------------- --------------- ---------------
Foreign exchange gains/(losses) 0.1 (0.2)
Change in fair value of derivative financial instruments (3.6) 5.1
(3.5) 4.9
---------------------------------------------------------- --------------- ---------------
7. Tax
The Group's effective tax rate for the period was 29.0% (2019:
20.6%). The main reason for the increase being that the UK
statutory tax rate increased from 19.0% to 25.0% during the period.
This increase takes effect from 1 April 2023 and does not impact
current taxes in the period, however, UK deferred tax liabilities
that were previously provided for at 19.0% have now been provided
at 25.0%, being the rate at which timing differences are expected
to reverse.
For a detailed reconciliation of the Group's tax rate please
refer to the Tax section of the Financial Review above.
For details of the Group's underlying effective tax rate please
refer to Note 21.
8. Earnings per share
The calculation of earnings per Ordinary share is based on
earnings after tax and the weighted average number of Ordinary
shares in issue during the period.
For diluted earnings per share, the weighted average number of
Ordinary shares in issue is adjusted to assume conversion of all
potentially dilutive Ordinary shares.
The calculation of the basic and diluted earnings per share is
based on the following data:
Earnings
26 weeks ended 26 weeks ended
26 June 27 June
GBP million 2021 2020
------------------------------------------------------------ --------------- ---------------
Profit attributable to equity shareholders of the Company 24.6 5.4
------------------------------------------------------------ --------------- ---------------
8. Earnings per share (continued)
Number of shares
26 weeks ended 26 weeks ended
26 June 27 June
'000 2021 2020
--------------------------------------------------------------------------- --------------- ---------------
Weighted average number of Ordinary shares 579,426 579,426
Effect of potentially dilutive Ordinary shares 8,746 3,575
--------------------------------------------------------------------------- --------------- ---------------
Weighted average number of Ordinary shares for diluted earnings per share 588,172 583,001
--------------------------------------------------------------------------- --------------- ---------------
26 weeks ended 26 weeks ended
26 June 27 June
2021 2020
---------------------------- --------------- ---------------
Basic earnings per share 4.2p 0.9p
Diluted earnings per share 4.2p 0.9p
---------------------------- --------------- ---------------
9. Dividends
As a result of the COVID-19 pandemic and its impact on the
business during 2020 the Board did not declare any dividends for
the financial year ended 26 December 2020.
At the AGM on 20 May 2021, a deferred final dividend of 4 pence
per Ordinary share for the financial year ended 28 December 2019
was declared. The total amount of GBP23,177,023 was paid to
Ordinary shareholders on 25 May 2021.
An interim dividend of 2.64 pence per Ordinary share has been
declared and is payable on 15 October 2021 to shareholders
registered on the record date at 17 September 2021.
10. Goodwill
GBP million
-------------------------------------------- ------
At 29 December 2019 651.2
Exchange rate difference during the period 2.9
At 27 June 2020 654.1
-------------------------------------------- ------
At 27 December 2020 649.6
Exchange rate difference during the period (1.2)
-------------------------------------------- ------
At 26 June 2021 648.4
-------------------------------------------- ------
11. Property, plant and equipment
GBP million
-------------------------------------------- -------
At 29 December 2019 553.7
Additions 20.2
Disposals (0.3)
Depreciation charge for the period (32.4)
Impairment (12.0)
Exchange rate difference during the period 6.8
-------------------------------------------- -------
At 27 June 2020 536.0
-------------------------------------------- -------
At 27 December 2020 535.3
Additions 29.8
Depreciation charge for the period (32.0)
Impairment of right of use asset (1.3)
Exchange rate difference during the period (2.4)
At 26 June 2021 529.4
-------------------------------------------- -------
12. Inventories
26 June 26 December
GBP million 2021 2020
----------------------------- -------- ------------
Raw materials and packaging 48.2 54.3
Work-in-progress 2.0 2.3
Finished goods 7.3 7.2
----------------------------- -------- ------------
57.5 63.8
----------------------------- -------- ------------
13. Trade and other receivables
26 June 26 December
GBP million 2021 2020
------------------------------------------------- -------- ------------
Amounts receivable from trade customers 116.6 115.2
Expected credit loss (2.9) (1.6)
Net amounts receivable from trade customers 113.7 113.6
Other receivables 14.2 14.9
Prepayments 13.0 7.9
------------------------------------------------- -------- ------------
Trade and other receivables due within one year 140.9 136.4
------------------------------------------------- -------- ------------
During the period, the Group has continued to operate trade
receivable factoring arrangements. These are non-recourse
arrangements and therefore amounts are de-recognised from trade
receivables. At 26 June 2021 GBP114 million was drawn under
factoring facilities, an increase of GBP8 million compared to 26
December 2020 representing cash collected before it was
contractually due from the customer.
As at 26 June 2021, the Group's amounts receivable from trade
customers includes GBP48.8 million (26 December 2020: GBP56.6
million) which could be factored under the non-recourse trade
receivable factoring arrangement.
14. Trade and other payables
26 June 26 December
GBP million 2021 2020
---------------------------------------------- -------- ------------
Trade payables 207.1 227.9
Other taxation 2.3 1.9
Other payables 22.8 20.9
Accruals and deferred income 123.9 116.9
---------------------------------------------- -------- ------------
Trade and other payables due within one year 356.1 367.6
---------------------------------------------- -------- ------------
During the period, the Group has continued to operate an
arrangement which provides financing for the Group's suppliers.
This is a voluntary programme that potentially gives suppliers
earlier access to cash. At 26 June 2021, trade payables amounting
to GBP29.6 million (26 December 2020: GBP27.9 million) were subject
to these arrangements. These balances are classified as trade
payables, and the related payments as cash flows from operating
activities since the original obligation to the supplier remains
and has not been replaced with a new obligation to the bank.
15. Net debt
26 June 26 December
GBP million 2021 2020
-------------------------------- -------- ------------
Cash and cash equivalents 22.5 24.8
-------------------------------- -------- ------------
Borrowings (26.1) (23.2)
Lease liabilities (11.2) (11.1)
-------------------------------- -------- ------------
Total debt due within one year (37.3) (34.3)
Borrowings (317.5) (331.4)
Lease liabilities (74.7) (70.9)
-------------------------------- -------- ------------
Total debt due after one year (392.2) (402.3)
Group net debt (407.0) (411.8)
-------------------------------- -------- ------------
Group net debt is the sum of cash and cash equivalents, prepaid
fees to be amortised over the term of outstanding borrowings,
outstanding borrowings, interest accrued on borrowings and lease
liabilities.
On 9 March 2021 the Group extended the maturity date of GBP430
million of its core debt facilities from March 2024 to March
2025.
16. Financial Instruments
The categories of financial instruments are as follows:
26 June 26 December
GBP million 2021 2020
-------------------------------------------- -------- ------------
Financial assets
Fair value through OCI or profit and loss:
Trade receivables 48.8 56.6
Derivative financial instruments 0.4 0.6
Loans and receivables at amortised cost:
Trade receivables 64.9 57.0
Other receivables 14.2 14.9
Cash and cash equivalents 22.5 24.8
-------------------------------------------- -------- ------------
150.8 153.9
-------------------------------------------- -------- ------------
26 June 26 December
GBP million 2021 2020
------------------------------------------------ -------- ------------
Financial liabilities
Fair value through OCI or profit and loss:
Derivative financial instruments 3.1 1.8
------------------------------------------------ -------- ------------
Other financial liabilities at amortised cost:
Trade payables 207.1 227.9
Other payables 22.8 20.9
Accruals 122.7 115.7
Borrowings 343.6 354.6
Lease liabilities 85.9 82.0
------------------------------------------------ -------- ------------
785.2 802.9
------------------------------------------------ -------- ------------
Trade receivables have been determined as level 2 under IFRS 7
Financial Instruments: Disclosures. The fair value of loans and
receivables approximates to their carrying values due to the
short-term nature of the receivables. The fair values for the
derivative financial instruments have been determined as level 2
under IFRS 7 Financial Instruments: Disclosures. Quoted prices are
not available for the derivative financial instruments and so
valuation models are used to estimate fair value. The models
calculate the expected cash flows under the terms of each specific
contract and then discount these values back to a present value.
These models use as their basis independently sourced market
parameters including, for example, interest rate yield curves and
currency rates.
The fair value of other financial liabilities at amortised cost
approximates to their carrying value. The trade and other payables
approximate to their fair value due to the short-term nature of the
payables. The lease liabilities fair value approximates to the
carrying value based on discounted future cash flows.
17. Share capital and share premium
Issued share capital as at 26 June 2021 amounted to GBP11.6
million (579,425,585 Ordinary shares of GBP0.02 each) (26 December
2020: GBP11.6 million (579,425,585 Ordinary shares of GBP0.02
each)).
18. Notes to the condensed consolidated statement of cash
flows
26 weeks ended 26 weeks ended
26 June 27 June
GBP million 2021 2020
---------------------------------------------------------- --------------- ---------------
Operating profit 47.0 13.7
Adjustments for:
Depreciation of property, plant and equipment 32.0 32.4
Amortisation of intangible assets 0.2 0.3
Loss on disposal of property, plant and equipment - 0.6
Impairment of assets 1.3 12.0
Share scheme charges 1.1 0.9
Net retirement benefits charge less contributions (1.0) (0.6)
---------------------------------------------------------- --------------- ---------------
Operating cash flows before movements in working capital 80.6 59.3
Decrease in inventories 6.3 7.3
(Increase)/decrease in receivables (4.3) 18.9
Decrease in payables (13.8) (57.4)
Increase in provisions 0.4 8.8
Cash generated by operations 69.2 36.9
Income taxes paid (3.1) (11.7)
Interest paid (9.1) (12.1)
---------------------------------------------------------- --------------- ---------------
Net cash generated from operating activities 57.0 13.1
---------------------------------------------------------- --------------- ---------------
19. Contingent liabilities
The Group may from time to time, and in the normal course of
business, be subject to claims from customers and counterparties.
The Group regularly reviews all of these claims to determine any
possible financial loss to the Group. No provision was considered
necessary in the Consolidated Financial Statements.
20. Events after the statement of financial position date
There are no events to report.
21. Alternative performance measures
The Group uses various non-IFRS financial measures to evaluate
growth trends, assess operational performance and monitor cash
performance. The Directors consider that these measures enable
investors to understand the ongoing operations of the business.
They are used by management to monitor financial performance as it
is considered to aid comparability of the financial performance of
the Group from year to year.
Like-for-like (LFL) revenue
The Group defines LFL revenue as revenue from continuing
operations adjusted for the revenue generated from businesses
closed or sold or acquired in the current and prior year 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:
26 weeks ended 26 weeks ended
26 June 27 June
GBP million 2021 2020 % change
-------------------------------- --------------- --------------- ---------
Statutory revenue 915.7 880.5 4.0%
Revenue from closed businesses - (11.4)
Effect of currency movements 9.2 -
-------------------------------- --------------- --------------- ---------
Like-for-like revenue 924.9 869.1 6.4%
-------------------------------- --------------- --------------- ---------
The following tables provides the information used to calculate
LFL revenue for each segment:
UK
26 weeks ended 26 weeks ended
26 June 27 June
GBP million 2021 2020 % change
-------------------------------- --------------- --------------- ---------
Statutory revenue 787.5 780.4 0.9%
Revenue from closed businesses - (11.4)
-------------------------------- --------------- --------------- ---------
Like-for-like revenue 787.5 769.0 2.4%
-------------------------------- --------------- --------------- ---------
US
26 weeks ended 26 weeks ended
26 June 27 June
GBP million 2021 2020 % change
------------------------------ --------------- --------------- ---------
Statutory revenue 81.3 67.6 20.3%
Effect of currency movements 8.2 -
------------------------------ --------------- --------------- ---------
Like-for-like revenue 89.5 67.6 32.4%
------------------------------ --------------- --------------- ---------
China
26 weeks ended 26 weeks ended
26 June 27 June
GBP million 2021 2020 % change
------------------------------ --------------- --------------- ---------
Statutory revenue 46.9 32.5 44.3%
Effect of currency movements 1.0 -
------------------------------ --------------- --------------- ---------
Like-for-like revenue 47.9 32.5 47.4%
------------------------------ --------------- --------------- ---------
21. Alternative performance measures (continued)
Adjusted EBITDA and Adjusted operating profit
The Group manages the performance of its businesses through the
use of 'Adjusted EBITDA' and 'Adjusted operating profit', as these
measures exclude the impact of items that hinder comparison of
profitability year-on-year. In calculating Adjusted operating
profit, we exclude restructuring costs, asset impairments, and
those additional charges or credits that are considered significant
or one-off in nature. In addition, for Adjusted EBITDA we exclude
depreciation, amortisation, 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 following table provides a reconciliation from the Group's
operating profit to Adjusted operating profit and Adjusted
EBITDA.
26 weeks ended 26 weeks ended
26 June 27 June
GBP million 2021 2020
--------------------------------------------------- --------------- -----------------
Operating profit 47.0 13.7
Exceptional items (Note 4) - 15.0
--------------------------------------------------- --------------- -----------------
Adjusted operating profit 47.0 28.7
Depreciation 32.0 32.4
Amortisation 0.2 0.3
Share scheme charges 1.1 0.9
Loss on disposal of property, plant and equipment - 0.6
Adjusted EBITDA 80.3 62.9
Less IFRS 16 impact (6.2) (6.7)
--------------------------------------------------- --------------- -----------------
Adjusted EBITDA pre IFRS 16 (1) 74.1 56.2
--------------------------------------------------- --------------- -----------------
(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 are
reconciled to operating profit in Note 3.
Operational net debt and leverage
Operational net debt excludes the impact of non-cash items on
the Group's net debt. The Directors use this measure, as it
reflects actual net borrowings at the relevant reporting date and
is most comparable with the Group's free cash flow and aligns with
the definition of net debt in the Group's bank facility agreements
which exclude the impact of IFRS 16. The following table provides a
reconciliation from the Group's net debt to the Group's operational
net debt.
26 June 26 December
GBP million 2021 2020
--------------------------------------------------------------------------------- -------- ------------
Group net debt (407.0) (411.8)
Unamortised fees (4.2) (4.3)
Interest accrual 2.0 2.3
Lease liabilities recognised under IFRS 16 84.7 80.4
--------------------------------------------------------------------------------- -------- ------------
Group operational net debt (324.5) (333.4)
--------------------------------------------------------------------------------- -------- ------------
Adjusted EBITDA (last 12 months pre IFRS 16 and including covenant adjustments) 157.8 145.8
Leverage (Operational net debt/Adjusted EBITDA(1) ) 2.1 2.3
--------------------------------------------------------------------------------- -------- ------------
(1) For the last 12 months pre IFRS 16 and including covenant
adjustments
21. Alternative performance measures (continued)
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
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 as set out in Note 13
and the extension of payment terms for certain suppliers as
described in Note 14. The Directors view free cash flow as a key
liquidity measure, and the purpose of presenting free cash flow is
to indicate the underlying cash available to pay dividends, repay
debt or make further investments in the Group. The following table
provides a reconciliation from net cash generated from operating
activities to free cash flow.
26 weeks ended 26 weeks ended
26 June 27 June
GBP million 2021 2020
---------------------------------------------- --------------- -----------------
Net cash generated from operating activities 57.0 13.1
Dividends received from associates - 0.1
Purchases of property, plant and equipment (18.9) (21.0)
Cash impact of exceptional items 0.7 0.3
Refinancing fees 0.9 4.2
Free cash flow 39.7 (3.3)
---------------------------------------------- --------------- -----------------
Adjusted earnings per share
The Group calculates Adjusted basic earnings per share by
dividing Adjusted earnings by the weighted average number of
Ordinary shares in issue during the period. The Group calculates
Adjusted diluted earnings per share by dividing Adjusted earnings
by the weighted average number of Ordinary shares for diluted
earnings per share. Adjusted earnings is calculated as profit
attributable to equity holders of the Company adjusted to exclude
exceptional items as presented in the condensed 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.
26 weeks ended 26 weeks ended
26 June 27 June
GBP million 2021 2020
--------------------------------------------------------------------------- --------------- -----------------
Profit attributable to equity shareholders of the Company 24.6 5.4
Exceptional items (Note 4) - 16.7
Change in fair value of derivative financial instruments 3.6 (5.1)
Tax on the above items (0.6) (2.1)
--------------------------------------------------------------------------- --------------- -----------------
Adjusted earnings 27.6 14.9
Add back: Tax on adjusted profit before tax 10.6 3.5
Adjusted profit before tax 38.2 18.4
--------------------------------------------------------------------------- --------------- -----------------
Effective tax rate on underlying activities
(Tax on Adjusted profit before tax/Adjusted profit before tax) 27.7% 19.0%
--------------------------------------------------------------------------- --------------- -----------------
Number 000's
--------------------------------------------------------------------------- --------------- -----------------
Weighted average number of Ordinary shares 579,426 579,426
Effect of dilutive Ordinary shares 8,746 3,575
--------------------------------------------------------------------------- --------------- -----------------
Weighted average number of Ordinary shares for diluted earnings per share 588,172 583,001
Adjusted basic earnings per share 4.8p 2.6p
Adjusted diluted earnings per share 4.7p 2.6p
--------------------------------------------------------------------------- --------------- -----------------
21. Alternative performance measures (continued)
Return on Invested Capital ("ROIC")
The Group defines ROIC as Adjusted operating profit after tax
divided by the average invested capital for the rolling 52 week
period. Adjusted operating profit after tax is defined as operating
profit excluding the impact of exceptional items 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.
52 weeks ended
26 June 26 December
GBP million 2021 2020
----------------------------------------------------- --------------- --------------
Operating profit 95.3 62.0
Exceptional items 6.6 21.6
----------------------------------------------------- --------------- --------------
Adjusted operating profit 101.9 83.6
Taxation at the underlying effective rate (25.0) (18.1)
----------------------------------------------------- --------------- --------------
Adjusted operating profit after tax 76.9 65.5
----------------------------------------------------- --------------- --------------
Invested capital
Total assets 1,454.9 1,449.2
Total liabilities (846.5) (851.1)
Net debt at period end 407.0 411.8
Derivatives not designated as hedges (2.2) 0.3
Retirement benefit scheme surplus (28.0) (11.2)
Deferred tax liability on retirement benefit scheme 7.0 2.1
----------------------------------------------------- --------------- --------------
Invested capital 992.2 1,001.1
----------------------------------------------------- --------------- --------------
Average invested capital for ROIC calculation 1,005.3 997.3
ROIC (%) 7.6% 6.6%
----------------------------------------------------- --------------- --------------
Statement of Directors' responsibilities
The directors confirm that, to the best of their knowledge, the
condensed set of financial statements has been prepared in
accordance with IAS 34: 'Interim Financial Reporting' as contained
in the EU-adopted International Financial Reporting Standards, and
that the interim management report includes a fair review of the
information required by Disclosure Guidance and Transparency Rules
("DTR") 4.2.7R and DTR 4.2.8R, namely:
-- an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements, and a description of the
principal risks and uncertainties for the remaining six months of
the financial year; and
-- material related party transactions that have taken place in
the first six months of the current financial year and any material
changes in the related party transactions described in the last
annual report.
The Board of Directors that served during the six months ended
26 June 2021, and their respective responsibilities, can be found
on pages 88 and 89 of the 2020 Annual Report & Accounts. As
announced on 6 July 2021, Sanjeevan Bala joined the Group Board as
an independent Non-executive Director on 1 August 2021. A list of
current directors is maintained on the Bakkavor Group plc website
at:
https://www.bakkavor.com/about-us/leadership/group-board/default.aspx
Approved on behalf of the Group Board by:
Agust Gudmundsson Ben Waldron
CEO CFO
7 September 2021
Independent review report to Bakkavor Group plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Bakkavor Group plc's condensed consolidated
interim financial statements (the "interim financial statements")
in the half-yearly financial report of Bakkavor Group plc for the
26 week period ended 26 June 2021 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the Condensed consolidated statement of financial position as at 26 June 2021;
-- the Condensed consolidated income statement and Condensed
consolidated statement of comprehensive income for the period then
ended;
-- the Condensed consolidated statement of cash flows for the period then ended;
-- the Condensed consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the half-yearly
financial report of Bakkavor Group plc have been prepared in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
As disclosed in Note 1 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the group is
applicable law and 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.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the Directors
The half-yearly financial report, including the interim
financial statements, is the responsibility of, and has been
approved by the directors. The directors are responsible for
preparing the half-yearly financial report in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the half-yearly financial report based on
our review. This report, including the conclusion, has been
prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other
purpose. We do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
Birmingham
7 September 2021
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END
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