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Bakkavor maintains strong cash position as revenue, earnings fall

Tue 16 March 2021 07:43 | A A A

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(Sharecast News) - Fresh prepared food producer Bakkavor reported a 4.9% fall in group revenue in its full-year results on Tuesday, to £1.79bn, with demand returning to its fresh, convenient foods outside of Covid-19n lockdown restrictions.

The London-listed company said UK revenues were down 5.2% for the year ended 26 December, at £1.57bn, due to lower consumer demand, particularly across its 'food-to-go' range.

It said the United States delivered strong growth of 12.2% to £146.5m, benefitting from the growing demand for fresh meals, while China revenues were 21.8% lower at £80.4m, reflecting a steady recovery following a 60% downturn in February 2020.

Operating profit was 10.7% lower year-on-year at £62m, with margins decreasing 20 basis points to 3.5%, although the board noted that operating margins improved to 5.3% in the second half through more stabilised trading, a strong US performance and strategic restructurings across all of the firm's regions.

The US business underwent a "commercial and operational reset" during the year, delivering profitable growth in the second half and a positive trajectory.

Bakkavor said it took "decisive actions" to preserve cash, lower its cost base and protect its profitability in response to the pandemic, including a reduction in non-essential capital expenditure, temporary and permanent closures of food-to-go and salads production sites, and a "simplification" of its ranges in response to lower consumer demand.

Operational net debt narrowed by £21.4m to £333.4m, with the company's leverage maintained at 2.3x.

The board said the company was in a "strong" financial position, supported by more than £200m of liquidity headroom, with funding maturities now extended to 2025.

No dividend would be paid for 2020, the directors confirmed, given the impact of Covid-19 throughout the year.

"Despite the UK government's roadmap, with lockdown restrictions in the UK continuing into the spring, the short-term trading environment remains uncertain, but we are encouraged by the way consumers have returned to our fresher, healthier and more convenient foods each time these restrictions have lifted," said chief executive officer Agust Gudmundsson.

"Our unique position of scale, expertise and strong customer relationships have served us well during this extraordinary period, and they remain key as we continue to grow our market share and further strengthen our leadership position."

Gudmundsson said the actions taken in 2020 to preserve cash and protect profitability across the business, combined with the turnaround of its US business and the strength of its financial position, left the group "well-placed" to deliver further growth.

"The way that Bakkavor has been able to rapidly adapt, find new ways of working, and drive the business forward through the Covid-19 crisis provides us with additional confidence for the future."

At 0936 GMT, shares in Bakkavor Group were down 3.41% at 102p.

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