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Bakkavor has reported a “robust” annual performance as like-for-like revenues exceeded £2bn but profits were weighed down by inflationary headwinds totalling more than £200m.
The group’s new CEO Mike Edwards said he had never experienced such high levels of inflation during his 20 years with Bakkavor. The company said inflation totalled £230m for the 53 weeks ended 31 December 2022 and was equivalent to a 14% increase in costs year on year.
Bakkavor attempted to offset the surging cost by ramping up prices by 9.2%, leaning on operational efficiency improvements, leveraging scale and putting tight cost control measures in place.
However, adjusted operating profits fell by £12.6m (or 12.4%) to £89.4m in the year.
Like-for-like revenues increased 10.6% to exceed £2bn thanks to the price hikes and volume growth in the US business. Total reported revenues jumped 14.3% to £2.1bn when the benefit of the additional 53-week and currency translations were included.
Volumes in the UK were broadly flat year on year, but the prepared food group, which supplies all the big supermarkets, gained market share to offset the soft underlying demand.
Bakkavor said it continued to outperform the market in the UK, driven by “strong service, breadth of product range and targeted innovation”.
It added that it “remained in good shape” operationally despite disruption from ongoing supply chain challenges.
Volume momentum continued to be “strong” in the US, with price increases coming through in the second half, while Covid restrictions in China continued to hurt volumes.
“2022 has been a year of challenge and disruption,” Edwards said. “Despite this difficult environment, I am pleased with the robust financial performance, strong operational delivery and the agile response demonstrated by our teams, which has underpinned this delivery.
“The decisive action we have taken to protect profits – to restructure our operations, re-focus our regional priorities and be more targeted in our investment – combined with our strong balance sheet, provide us with a stronger platform to move forward with purpose and confidence.”
Early trading in 2023 was “encouraging, with UK volumes in line with expectations, despite recent fresh produce availability challenges”, the group added.
Shares in the group fell 1.9% to 105p as markets opened.
Morning update
Hotel Chocolat is “cautious” about its prospects over the important gifting season of Easter and Mother’s Day as consumers rein in spending.
The warning came as the group reported a slump in profits in its first half as costs soared and sales declined following the retreat from international markets.
Revenues fell 9.2% to £129.8m in the six months ended 25 December, with sales in the UK and Ireland down 5% year on year to £127.4m, while business in the US and Japan declined by 90% from £2m and £5m respectively to just £100k and £500k as the group rethought its international strategy.
The group highlighted a 7% like-for-like rise in the UK in the half and said sales were 25% higher than pre-pandemic.
However, online revenues fell as customers returned to shopping in stores.
Underlying EBITDA fell 35% to £22m, while underlying pre-tax profits slumped 60% to £10.2m.
CEO and co-founder Angus Thirlwell remained upbeat and said “the strong sales performance” from Hotel Chocolat stores was a result of ongoing “hefty investments” into the brand.
The business is also planning to opened a further 50 stores over the next three to five years, with the first wave set for the autumn.
“Having grown sales by 66% since the start of the last pre-pandemic year, as previously announced, we are taking this year, over FY23, to sharpen up our operating model before we embark on the next stage of growth,” Thirlwell added.
“I am really pleased with the determination I have seen across our teams to get back to running a tight ship again.
“Our adapted plan for international growth – to pursue the proven brand appeal with low risk-low capex operating models – is making sound progress.”
However, he sounded a warning about potentially damp trading over the coming weeks.
“The group continues to trade in line with market expectations for sales though, as previously guided, we remain cautious about consumer sentiment over the upcoming seasonal events of Mother’s Day, Easter, Eid and Father’s Day. Depending on the Easter performance, there is a range of PBT outcomes between £4m and £7m for the full year.”
Shares in the retailer fell 1% to 205p on the interims.
The FTSE 100 is down 0.3% to 7,894.46pts this morning.
Early fallers included Nichols, down 4.7% to 1,020p, THG, down 3.7% to 66.8p, and HelloFresh, down another 3% to €19.97.
Haleon, Heineken and Danone were among the early gainers, up 1.1% to 323.5p, 0.9% to €98.32 and 0.5% to €54.27 respectively.
Yesterday in the City
The FTSE 100 dipped into the red at the end of the day’s trading, falling 0.1% to 7,924.49pts.
Premier Foods shares soared 11.7% to 128.4p thanks to the surprise profits upgrade issued by the branded grocery supplier.
Other risers included Finsbury Food Group, McBride, Fever-Tree and Science in Sport, up 4.1% to 102p, 3.7% to 28p, 2.2% to 1,093p and 1.9% t0 13.5p respectively.
HelloFresh was the day’s bigger faller, tumbling 10.2% to €20.42 following weak sales and profits guidance for 2023.
Greggs fell back 2.3% to 2,686p despite sales growth of as investors worried about the pressure on profits from stubbornly high prices.
Virgin Wines UK and THG also came under pressure, falling 5.8% to 49p and 5.2% to 69.1p respectively.
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