12 June 2020
Bakkavor Group plc
Bakkavor Group plc, the UK's leading provider of fresh prepared food, issues a trading update ahead of its Annual General Meeting later today, reporting:
· Exceptional response by colleagues to unprecedented challenges
· Demand for fresh, healthy and convenient food steadily improving from a lower base
· Sales volumes have stabilised and showing early signs of recovery in all markets
· Significant liquidity headroom maintained
As previously outlined in our update on 2 April 2020, the COVID-19 outbreak has created significant operational challenges across our business. Although our colleagues, supply chain and infrastructure have responded exceptionally well to the crisis and ensured that we maintained excellent service levels for customers, our business in China was severely impacted towards the end of January and, our UK and US businesses, which started the year very well, experienced a sharp reduction in sales volumes in the last week of March and into April.
Since that time, sales volumes in all three regions have stabilised and are showing early signs of recovery, with Group like-for-like revenue for the five months to the end of May down around 5% compared to the same period last year.
In the UK, the market remains volatile, frequency of shopping visits has reached historically low levels and consumer shopping habits continue to adjust and evolve. UK like-for-like revenues were down 19% in April and 13% in May compared with the same period last year. Performance across our meals, pizza & bread, and desserts categories has steadily improved, however our salads category and 'food to go' products continue to be impacted, with significantly lower volumes year on year. Although there remains significant uncertainty around trading levels for the second half of the year, we are seeing overall demand for fresh, healthy and convenient food steadily increase, albeit from a lower base.
Relationships with our UK customers remain very strong; we have increased our market share and are working closely together to drive growth back into our categories and to expand ranges that were simplified at the start of the outbreak.
In the US, together with our customers, we have taken appropriate actions to review our products and adjust our capacity to adapt to the current lower demand. These prompt actions have limited the financial impact to the business and we are encouraged by recent performance across our sites.
In China, the external environment has improved in recent weeks as restrictions on movement are lifted and consumer confidence slowly returns. Our foodservice customers have reopened the majority of their restaurants and stores and we are supporting them as they resume service and broaden their product offering.
The Group has taken a number of prompt and decisive actions since the start of the outbreak to lower its cost base and preserve cash, with all discretionary expenditure and non-essential capital investment currently on hold. In addition, we have adjusted our capacity across individual sites in response to both current and anticipated demand. We are restarting production at the two factories we temporarily closed in March and have recently entered into a consultation process at one of our UK salads sites.
The Group continues to operate with significant headroom against available facilities of £562.5 million and therefore we have not seen any requirement to access government supported debt funding. We also believe that the Group will continue to operate comfortably within its existing financial covenants.
The Group expects to announce its interim results on 8 September 2020.
Agust Gudmundsson, Chief Executive, said:
"I would once again like to express my thanks to all of my Bakkavor colleagues, who are working tirelessly to help keep supermarket shelves well stocked. I am hugely grateful for their support and extremely proud of their commitment and determination during these difficult times. We continue to make their health, safety and wellbeing our foremost priority, and have been working in close cooperation with the various regulatory bodies, our colleague representatives and the unions to maintain a safe working environment for all our stakeholders.
"In the UK, consumer behaviours continue to adjust, and while it will take time for sales to return, I have been encouraged by the recent increase in volumes. Current events have also reinforced my confidence in the vital role we play in partnering with our customers to deliver the fresh, healthy and convenient food that consumers look for every day.
"In the US and China, both businesses have managed incredibly well through the turmoil, and we continue to support our customers as they reopen their stores and restaurants.
"We are a robust, balanced and well capitalised Group and the steps we are taking to protect our business, combined with the current improvement in trading, gives us every confidence for the future."
Institutional investors and analysts:
Peter Gates, Chief Financial Officer
Sally Barrett-Jolley, Head of Corporate Affairs
+44 (0) 20 7908 6143
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Will Smith, Michelle Clarke
Bakkavor is the leading provider of fresh prepared food ("FPF") in the UK, with a growing international presence in the US and China. The Group is the number one by market share in the UK in the four FPF product categories of meals, salads, desserts and pizza & bread, providing high-quality, fresh, healthy and convenient food. Its customers include some of the UK's leading grocery retailers, including Tesco, Marks & Spencer, Sainsbury's and Waitrose. The Group's International segment operates in the US and China. Bakkavor was founded in 1986 and has its headquarters in London. The Group has over 20,000 employees and operates 25 factories in the UK, 5 in the US and 9 in China.
DISCLAIMER - forward-LOOKING STATEMENTS
This statement, prepared by Bakkavor Group plc (the "Company"), may contain forward-looking statements about Bakkavor Group plc and its subsidiaries (the "Group"). Forward-looking statements involve uncertainties because they relate to events, and depend on circumstances, that will, or may, occur in the future. If the assumptions on which the Group bases its forward-looking statements change, actual results may differ from those expressed in such statements. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update these forward-looking statements. Nothing in this statement should be construed as a profit forecast. Some numbers and period on period percentages in this statement have been rounded or adjusted in order to ensure consistency with the financial information.
LEI number: 213800COL7AD54YU9949