Shares in Bakkavor have plunged as the prepared foods group warned annual profits would be at the lower end of forecasts as volumes took a hit from the squeeze on consumer spending power.
The group said volumes had held up through the summer but took a downward turn in September as soaring energy bills and rising food prices put household budgets under increasing pressure.
Price hikes helped Bakkavor grow revenues 15.3% to £542.5m in the 13 weeks to 25 September, with like-for-like sales up 12.7% to £530.5m.
UK like-for-like sales rose 11.9% to £445.3m in the third quarter, while sustained demand and further price increases helped the US business grow revenues 46.3% to £67.5m, a 26.3% like-for-like jump.
Despite the boost to revenues, Bakkavor warned adjusted operating profits for the year would now come in at the lower end of its forecast range as a result of volume pressure in the UK and a reduction of volumes in the US where it is in a contractual dispute with a customer.
Bakkavor also flagged steps it had taken to protect long-term profits, including the proposed closure of two UK factories, a leaner organisation structure, with a new management board, and an enhanced focus on managing cash.
The moves would deliver expected savings of £15m in the 2023 financial year and £25m on an annualised basis. However, it would cost Bakkavor £20m to implement the plans, taken as an exceptional cost in the current financial year.
CEO Mike Edwards, who took over from Agust Gudmundsson in October, said the group continued to operate in “an incredibly challenging environment”.
“Bakkavor has proven itself to be a resilient business effectively navigating the turbulence of recent years. We are now taking further decisive action to ensure we deal with the ongoing headwinds and protect future profits.”
Earlier this week, Unite suspended a planned strike by more than 700 workers at Bakkavor’s Spalding factory following a revised pay offer, which the union recommended to the workforce. Strike action scheduled to begin on 25 November is postponed to allow workers to be balloted on the new offer.
In this morning’s trading update, Bakkavor said it continued to trade in line with market expectations and preparations for Christmas were progressing as planned.
Bakkavor’s share price is down 5.6% to 89.2p at the time of publishing. The stock has lost more than 30% of its value so far in 2022.
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