Bakkavor international sales surge

Bakkavor has increased revenues 3% to £1.67bn thanks to a double-digit growth surge in its international business.

CEO Agust Gudmundsson said the group was in a strong position and the deal to regain control of the ready meals supplier last month marked a turning point for Bakkavor. The Gudmundsson brothers, in partnership with US hedge fund The Baupost Group, bought out Icelandic banking shareholders to hold 89% of the group.

International sales soared 37% to £155.5m in the year ended 26 December 2015 – and 25% to £40.1m in the final quarter – thanks to the acquisition of US fresh prepared foods business B Robert’s Foods.

The business, which Bakkavor bought to broaden its presence in the US, has contributed £22.3m of revenues since the deal in January 2015. Excluding the transaction, Bakkavor still managed like-for-like growth of 14% in the year, supported by stronger performances in the US and Asia where new products were rolled out.

UK revenues were broadly flat at £1.52bn – and £380m in Q4 – as growth was limited because of the deflationary environment, with volume gains in core categories offset by price decreases as Bakkavor passed on lower input costs to customers.

Revenues were also hit by the closure of the Prepared Fruit business in June, which also led to an exceptional charge of £1.1m.

Since the year end, Bakkavor has also suffered from Tesco’s Project Reset as it lost a £32m contract to supply instant mash and other potato products, putting more than 300 jobs at risk.

Adjusted EBITDA climbed 14% in 2015 to £113.3m as margins improved as a result of increased volumes and productivity investments, as well as the restructuring of the UK business.

“I am very pleased that as we celebrate Bakkavor’s 30th anniversary in 2016 we can report that the group is in a very strong position, with revenue growth, margin improvement and excellent cash conversion,” Agust Gudmundsson said.

“In January this year we also announced the strengthening of the group’s ownership structure and I am delighted to welcome The Baupost Group to the group. This marks a turning point for Bakkavor and we look forward to working with Baupost to deliver on our long-term strategic objectives.”

Bakkavor added trading conditions were expected to remain challenging over the coming months as the supermarkets struggled to compete with the discounters and the national living wage was introduced.