Bakkavor Group PLC: Announces H1-2023 Trading Update

Reykjavik / IS. (bkg) Island’s Bakkavör Group, the leading international provider of fresh prepared food, announces its unaudited half year results for the 26-week period ended 01 July 2023 (H1-2023).

Strong financial performance and balance sheet strengthened further

• Like-for-like (LFL) revenue up 7.4 percent, driven by price, as well as volume recovery in China
• Reported revenue up 7.9 percent, which includes the impact of currency
• Adjusted operating profit up 2.1 percent to GBP 43.4m
• Operating profit up 12.7 percent to GBP 46.3m, including GBP 2.9m of exceptional income related to China
• Strong free cash generation of GBP 51.6m, up GBP 15.0m
• Leverage improved by 0.1x to 1.8x (31 December 2022: 1.9x)
• Operational net debt reduced by GBP 16.2m (31 December 2022: GBP 284.9m)
• Basic earnings per share of 4.4p (H1 2022: 4.4p)
• Interim dividend of 2.91p, up 5.0 percent on the prior period

Restructuring plans driving performance ahead of management expectations

1. Leaner organisational structure realising synergies and efficiencies ahead of expectations

2. Clear and focused regional priorities had meaningful positive impact on H1 2023 performance

• UK: Volume outperformed the market and inflation mitigated through price recovery and internal levers;
• US: Business stabilised and operational improvement plans starting to deliver
• China: Volume recovery leads to reduced operating losses; simplified operations with associate disposal

3. Enhanced focus on cash management, with capital spend targeted at productivity investments and working capital improvement, resulting in reduction in debt and leverage

• Actions set to deliver GBP 17m savings in FY-2023, ahead of initial GBP 15m forecast, and GBP 25m annualised

Confident in a strong full year performance, Group outlook upgraded

• With positive momentum expected to continue, the Group anticipates FY-2023 adjusted operating profit at least in line with prior year of GBP 89.4m, c.GBP 4m ahead of current consensus
• Revised outlook underpinned by restructuring savings, strong pipeline to support UK share gains albeit volumes remain under pressure, delivery of embedded changes in the US and ongoing volume recovery in China
• Strong cash generation expected to deliver further improvement in net debt

Financial Summary

(GBP in millions unless otherwise stated)	H1-2023	H1-2022	Change
Group revenue	1,090.4	1,010.2	7.9%
Like-for-like revenue	1,085.0	1,010.2	7.4%
Adjusted EBITDA pre IFRS 16	72.0	70.3	2.4%
Adjusted operating profit	43.4	42.5	2.1%
Adjusted operating profit margin	4.0%	4.2%	(20bps)
Operating profit	46.3	41.1	12.7%
Operating profit margin	4.2%	4.2%	10bps
Profit before tax	32.6	32.5	0.3%
Basic earnings per share	4.4p	4.4p	–
Adjusted earnings per share	3.9p	4.6p	(0.7p)
Free cash flow	51.6	36.6	15.0
Operational net debt	(268.7)	(290.1)	21.4
Interim dividend per share	2.91p	2.77p	0.14p

Chief Executive’s Statement

CEO Mike Edwards: «I am pleased with the strong performance the Group has delivered in the first half, and the momentum this has created as we move through the rest of the year. As ever, the great people we have in the business have been fundamental to our success and I would like to thank them for their relentless hard work and commitment.

«Our continued market share gains in the UK reflects our consistent delivery for customers and demonstrates that our broad product range continues to meet the needs of shoppers during the cost-of-living crisis.

«Internationally we have seen good progress too, with operational improvement plans now starting to fuel enhanced profitability in the US. In China, post-Covid volume recovery is underpinning much reduced operating losses.

«We are confident in delivering an upgraded full year performance, with adjusted operating profit now anticipated to be at least in line with last year and ahead of current market expectations. This is underpinned by the execution of our restructuring, which is driving performance and synergies across the business ahead of our expectations. I am also pleased that we now have momentum building in all three regions, which is positive as we look forward.

«This, coupled with an improved balance sheet, mean the Group is in a strong position to capitalise on its opportunities through the remainder of this year and beyond.»