Bakkavor sees international sales boost

By John Wood

- Last updated on GMT

Bakkavor recently sold its remaining Italian pizza business
Bakkavor recently sold its remaining Italian pizza business

Related tags: Revenue

Bakkavor has boosted turnover and profits for the half-year to June 27, with its international business making up for a decline in UK sales in the second quarter.

Turnover for the first half was up 3% to £866.4M, compared with £842.1M for the same period in 2014, and pre-tax profit was £65.4M versus £57.2M a year ago.

But the company revealed that UK sales had fallen by 2% in the second quarter compared with a year ago, when it achieved £394.2M, although for the half year they were marginally ahead at £760.0M compared with £758.3M the previous year.

It stated: “Revenues in our UK business totalled £387.8M in the second quarter, reflecting the slowdown in growth seen by major customers, the ongoing impact of deflation and our exit from low-margin business such as the recent closure of our Yorkshire fresh prepared fruit facility.

Continue to see pressure

“We have passed on price reductions from raw material deflation, but we continue to see pressure on labour costs across our operations and this is likely to accelerate with the introduction of the national living wage in April 2016.”

In spite of the decline in UK sales, Bakkavor achieved a 60 basis point improvement in adjusted earnings before interest, taxes, depreciation and amortisation margin over the quarter to 8.8%. It said this reflected its focus on cost control, driving efficiency and a disciplined approach to low-margin business.

In contrast to the UK arm, the international division increased sales 33% (like-for-like 20%) in the second quarter to £53.1M, versus £40.0M a year ago, and for the half-year sales were up 27% (like-for-like 17%) to £106.4M. compared with £83.8M in 2014.

Referring to the second quarter it said: “Our US business enjoyed strong revenue growth with our key customers as the US market for short shelf-life products continued to develop. We also benefitted from the ongoing good performance of our recent acquisition in North Carolina.”

Highly competitive

Commenting on the results, ceo Agust Gudmundsson said: “It has been another quarter of good progress but we expect the trading environment to continue to be challenging due to a combination of price deflation and a highly competitive grocery market.

“We remain focused on our core strategic objectives of close partnering with our customers and selective investment to drive growth, technical excellence and product innovation.

“This strategy, combined with our leading market position and improved financial strength is a strong platform and gives us confidence for the period ahead.”

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