The fresh prepared foods (FPF) manufacturer reported a 4.6% rise in sales for the 52 weeks ended December 30 2017. This was up from 2.9% for the same period in 2016.
The results reflected continued progress across all parts of the business, claimed Bakkavor, with its full-year results forecasted to be in line with the company’s expectations. Bakkavor’s full-year results will be announced on February 28.
Prior to the pre-close trading statement, market analyst HSBC Global Research said Bakkavor was well positioned to ride the wave of the growing FPF market.
FPF has grown at an annualised rate of 4.4%, compared with overall grocery at 0.4%. HSBC expected this outperformance to continue, with FPF growing 4.7% a year over the next three years, versus 2.8% for the overall grocery market.
‘Relationships with all key players’
“In the UK Bakkavor has relationships with all key players and a market share of 30% across its categories with a leading position in each,” said HSBC.
“Bakkavor’s continued success is therefore determined by the strength of its relationships with its core customers and its superior operating capabilities.”
HSBC forecast Bakkavor’s sales for the 2017 financial year to be worth £1.84bn, up from £1.76bn in the previous year. It expected the manufacturer’s earnings before interest, taxes, depreciation and amortisation to be £156M.
However, inflation and any Brexit-related labour disruption still posed a risk to Bakkavor, claimed the analyst.
‘Mitigate a margin squeeze’
“Bakkavor has historically done well mitigating cost inflation but, when costs are rising, the business has to work harder to mitigate a margin squeeze. In addition, the UK food industry relies heavily on non-UK EU labour and any disruption related to this is a risk,” said HSBC.
Bakkavor’s stock was issued a buy rating by HSBC, noting the manufacturer would be attractive to investors as a market leader in a structurally growing market.
Meanwhile, Associated British Foods posted a 4% rise in group sales in its first-quarter trading update, as its sugar revenues continued to be hit by lower prices in the EU.