Group revenue declined 4.6% to £880.5m, while operating profit fell 53.2% to £13.7m for the 26-week period ended 27 June 2020.
The manufacturer reported a strong start to the year for its operation in the UK until the impact of the coronavirus pandemic. The hospitality and foodservice sectors had largely lain dormant since March due to the lockdown instigated in response – two major markets for Bakkavor.
As a result, the business was forced to rapidly adapt to the new normal, with mitigating actions taken to lower cost base and preserve cash. This included international restructuring.
Restructuring the business
In June, Bakkavor confirmed that more than 500 jobs could be under threat at its salad factory in Spalding, Lincolnshire, amid plans to cease operations at its ‘Factory 1’ site and changing shift patterns.
Chief executive Agust Gudmundsson noted that while the first half of 2020 had been extremely challenging for the business, the group had still managed to deliver a strong performance regardless.
“The scale and strength of our operations, coupled with our ability to react at speed, has proved a clear advantage to our customers during this period,” he added. “But more than this, our performance is testament to the hard work and commitment of everyone at Bakkavor.
“We have taken many difficult yet necessary decisions this year to protect the long-term success of our business. While there will be further challenges ahead, we remain a robust, balanced and well capitalised group and the steps we have already taken to protect our business, combined with the recent improvement in trading, gives us confidence for the future.”
Despite the recovery in June, macroeconomic uncertainty caused by COVID-19 and continued uncertainty about Brexit meant Bakkavor’s outlook remained cautious for the second half of its financial year.
However, the manufacturer was confident in the categories it operated in, aiming to capitalise on the long-term trends of fresh, healthy and convenience foods.
Commenting on the results, Peel Hunt analyst Charles Hall said: “Bakkavor turned in a resilient H1 performance in the circumstances, with like-for-like sales -5.2% and adjusted EBIT -32% to £28.7m. Trends continue to improve steadily across all regions, with the US back in growth and moderating declines in the UK and China.
“The company is actively taking out costs, with ongoing saving of c£10m, which increases confidence in our unchanged forecasts.”
Meanwhile, coronavirus panic buying helped boost sales for Associated British Foods’s (ABF’s) Grocery, Sugar and Ingredients divisions during the tail end of its past financial year.
Bakkavor results at a glance
£ million (unless otherwise stated)
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Operational net debt