Bakkavor Group PLC: Announces Q1-2022 Trading Update

Reykjavik / IS. (bkg) Island’s Bakkavör Group, the leading international provider of fresh prepared food, announces its trading update for the 13 weeks to 26 March 2022.

Q1-2022 financial summary

(GBP in million)	Reported revenue	Growth	Like-for-like revenue	LFL growth
Group	485.4	11.5%	483.1	11.0%
UK	407.4	8.7%	407.4	8.7%
US	55.1	40.9%	53.8	37.4%
China	22.9	5.5%	21.9	1.4%

Resilient Q1 trading performance

• Reported revenue up 11.5 percent to GBP 485.4m. Like-for-like (LFL) revenue up 11.0 percent on 2021 and up 8.0 percent on 2020
• UK LFL sales growth driven by price and good volumes against a period impacted by lockdown
• Strong sales momentum in the US, driven by continued volume growth with strategic customers, particularly in fresh meals
• In China, regional restrictions have significantly impacted performance from March onwards, with Q1 LFL sales marginally up
• Whilst inflationary headwinds have intensified in the period, successful price recovery, strict focus on cost control and continued efficiency improvements have helped to offset the impact
• Leverage maintained at 1.9x, with over GBP 180m of liquidity headroom on debt facilities of GBP 487.8m

Continued strategic and operational progress

• Our UK business remains in a strong position, and our scale, category leadership and strong customer relationships underpin the resilience of our business model
• The Delicious Dessert Company, our new brand launched in the UK in April 2021, has delivered ahead of expectations and is now in over 900 stores, successfully attracting new consumers to the category
• Productivity improvements from our new automated ‘smart’ manufacturing system are being realised, and the remaining seven UK sites are on-track to have this system implemented by the end of 2022
• To support continued strong growth in the US, planned capacity investment in our existing sites is underway
• Continued focus on initiatives to support recruitment and retention which have included out-of-cycle pay increases, training programmes and launching our new values
• Development of our ‘roadmap’ to reach Net Zero by 2040, and initiatives to drive energy efficiency and reduce food waste, are progressing well; Bakkavor received a rating of A in the recent MSCI ESG Ratings assessment2

FY22 in line with management expectations

• While the operating environment remains challenging, we are working in partnership with our customers to mitigate the impact of inflationary headwinds, alongside maintaining strict cost control and enhancing productivity
• In the UK, further price increases in the market may have some impact on volumes, however, our category breadth and strong pipeline of innovation mean we are well placed to underpin growth
• Strong volume growth is expected to continue in the US, and whilst a lag on inflation recovery is expected to hold back margin in the short-term, we remain positive about the margin potential for our US business
• The near-term outlook in China remains uncertain while the government’s zero-tolerance Covid-19 policy remains in place
• We currently anticipate the full year outturn to be in line with management expectations

Chief Executive’s Statement

CEO Agust Gudmundsson: «The Group has had a positive start to the year; successful price recovery has helped offset the impact of inflation in the period, and our teams have worked hard to deliver excellent service levels for our customers.

«We expect the trading environment to remain challenging and for input costs to continue to escalate. However, we remain well placed to navigate the ongoing headwinds as our price recovery to date, combined with our continued drive for efficiency improvements and disciplined approach to cost control will help to mitigate the impact. Despite further recent increasing pressure on household budgets, we are highly focused on driving volumes across our categories and further strengthening our customer relationships by bringing innovation to our product ranges. We remain confident in our medium-term growth opportunity, both in the UK and internationally.»