Commenting on the investment in results for the year to 31 May 2021, the poultry processor stated: “Following a collaborative long-term development project with suppliers and customers and a £12m capital investment, Avara launched a new range of fresh poultry products which are easier for consumers to handle at home, reduced plastic usage by 50% and increased factory productivity.
“This key automation project will complete in 2021-2022, upskilling operational roles and future proofing supply amidst an increasingly competitive labour market.”
Avara significantly boosted operating profit and pre-tax profit, despite reporting a hit from the continued pan-industry labour crisis and investing £5m in COVID-19-related operating expenditure and £2.5m in Brexit-related export costs.
Turkey sales had been affected by the shutdown of the foodservice sector, with Avara stating: “The long pipeline for turkey means this sector is unlikely to fully recover until 2022.”
On how the labour crisis would play out across the 2021-2022 financial year, the company stated: “… We anticipate greater demand for key skills, both unique to our sector and those that are more generic, such as drivers, will impact our ability to operate. As far as is possible, we will mitigate by adjusting our supply chain, but most interventions are likely to be inflationary.
Higher operating costs
“… It seems inevitable that pay inflation will lead to higher operating costs, squeezing margins, with a downstream impact on product pricing and investment.”
Avara Foods reported operating profit for the 2020-2021 financial year of £22.95m, up from £16.1m in the previous year. Pre-tax profit rose from £15.7m to £22.7m. Sales fell slightly from £1.21bn to 1.19bn, excluding discontinued operations – the business ceased duck processing in July 2020.
Chief executive officer Andy Dawkins said: “To deliver financial performance that is consistent with the year before, against a backdrop of such change, is a testimony to the focus and drive of the whole team at Avara.
‘Significant investment in pay’
“The next 12 months are proving far more challenging, however, and the pressure we began to see in the last quarter of our 2020/21 financial year on labour has continued, resulting in a significant investment in pay last autumn.
“Added to labour, cost inflation, rising energy prices, the ongoing disruption of COVID-19 and seasonal Avian Influenza in the UK all hitting at the same time, have created a perfect storm for our sector.”
Successfully navigating short-term challenges would entail keeping focused on what was most important, said Dawkins. “For us, that means protecting the health and wellbeing of everyone at Avara, carrying out our business ethically and responsibly, running efficient supply chains focused on our customers and making targeted investments to automate our operations.
“Doing all of these things well will enable us to tackle the ongoing unprecedented challenges we face and set us up for future success.”