Bakkavor: trading conditions to ‘remain challenging’

By Michelle Perrett

- Last updated on GMT

Bakkavor founders Lydur (left) and Agust Gudmundsson
Bakkavor founders Lydur (left) and Agust Gudmundsson
Bakkavor expects trading conditions to remain “challenging” in the coming months, as it reported revenues up 1.4% to £415.8M for the first quarter ended March 26, 2016.

The prepared foods manufacturer said it had made an “encouraging start”​ to the year in both revenue and margin growth. It cited limited market growth, rising labour costs and uncertainty around the upcoming EU referendum as having a challenging impact on the business.

Despite these concerns, it said: “We remain confident that we are well placed to manage these challenges and drive continued improvements across our business.”

Revenues increased

The group reported revenues from continuing operations of £415.8M for the 13 weeks to March 26, 2016. On a like-for-like basis, excluding acquisitions, sold and closed businesses and at constant currency, revenues increased by 1.8%.

Reported revenues in its UK business totalled £373.8M in the first quarter, representing growth of 1.6% on a like-for-like basis. This was slightly behind the market, it admitted, but said it had continued to reshape the business and focus on margin.

Efficiency investments

Adjusted earnings before interest, tax, depreciation and amortisation increased to 7.7%. This was said to reflect ongoing priorities of cost control, productivity and efficiency investments.

It said this approach would remain a key focus going forward as labour costs continued to rise, with further pressure expected following the introduction of the National Living Wage in April.

“As a result of recent business losses at one of our London sites, we incurred restructuring costs of £1.3M in the quarter to protect our ongoing profitability,”​ it said.

Agust Gudmundsson, chief executive officer, said: “I am pleased to report a good start to the group’s 30th year of trading, with both revenue and margin growth.

​We continue to make significant progress in our core markets which gives us the confidence to accelerate our capital investment programme, supporting our customers and driving future growth.”

 

Bakkavor’s year so far

  • April 2016 – Welcomed upgrade in its rating by Standard & Poor
  • March 2016 – Pledged to recruit 45 apprentices across the UK this year
  • Feb 2016 – Posts 2% like-for-like growth revenue for the financial year ended December 26, 2016. Results boosted by strong performance in UK fresh prepared foods
  • Jan 2016 – Founders Lydur and Agust Gudmundsson team up with one of the world’s largest hedge fund firms to buy out Icelandic institutions in a deal worth £165M
  • Jan 2016 – More than 300 jobs at risk as the chilled food manufacturer lost a Tesco contract

Related topics: Business News, Chilled foods

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