 In my view a very positive trading update.
Bakkavor Group PLC
18 January 2024
Full year 2023 trading update
2023 profits, net debt and leverage ahead of market expectations with encouraging outlook for 2024
Bakkavor Group plc ("Bakkavor" or the "Group"), the leading international provider of fresh prepared food ("FPF"), today updates on trading for the 52 weeks to 30 December 2023 ("FY23"), ahead of the publication of its full year results on 5 March 2024.
Like-for-like
Reported (1) ('LFL')
GBP million revenue Growth revenue LFL growth
------------ -------- ------- ------------- ----------
Group 2,203.8 3.0% 2,214.2 5.3%
UK 1,852.7 3.9% 1,852.7 5.7%
US 229.4 (10.1%) 230.6 (8.4%)
China 121.7 20.7% 130.9 32.0%
------------ -------- ------- ------------- ----------
2023 profits, net debt and leverage all expected to be ahead of market expectations
-- LFL revenue up 5.3% driven by price, as well as volume recovery in China
-- UK: Continued to win market share, driven by strong service, targeted innovation and net business gains
-- US: As previously guided, focus shifted from revenue growth to profit, with a return to profitability in H2 after a break-even H1
-- China: Seamlessly built back volumes and continued to diversify into the retail channel, importantly the business is now cash generative and self-sustaining
-- Our Group-wide plan to protect profitability, which we enacted in November 2022, has delivered synergies and efficiencies ahead of our expectations
-- The Group anticipates FY23 Group adjusted operating profit to be at least in line with the upper end of the range of market expectations(2)
-- Our focus on working capital improvement, combined with a targeted approach to capital expenditure, delivered a further reduction in operational net debt in the second half, with the full year outturn significantly ahead of market expectations(3) , at c. GBP230m. As a result, leverage is also ahead of expectations
Encouraging outlook for 2024
-- Momentum is building in all three regions, with refreshed priorities providing clear direction to our local teams, which will underpin delivery in 2024
-- 2024 revenue to be slightly ahead of 2023, as we expect volumes to remain subdued given the continued challenging consumer environment in the UK and the reshaping of our US business
-- Despite this, we are confident 2024 will be another year of increased profitability as we continue to effectively mitigate inflation and drive internal improvements
-- We will continue our focus on leverage reduction, despite increasing capital investment, through sustaining working capital improvements and increasing profitability
Development in the Group's ownership structure
-- As announced on 15 January 2024, Baupost, who previously held a significant shareholding (20.1%) in the Group, have now sold this entire stake to LongRange Capital
-- Bob Berlin, who leads LongRange, will join the Board as Patrick Cook (Baupost's representative) steps down
-- Bob previously held a position on our Board, between January 2016 and July 2018. He has a wide range of experience holding a number of strategic roles in the consumer goods, food, technology and financial sectors
Mike Edwards, CEO, commented:
"2023 required us to develop a decisive and dynamic plan to successfully manage another year of external challenges. We executed this plan at pace and as a result we expect to deliver improved profitability and reduced leverage for the full year.
As we enter 2024, momentum is building in all three regions, which gives us confidence to deliver further financial improvements in the year ahead. This is clearly important as unprecedented levels of inflation have impacted profit margins over the last two years.
I would like to take this opportunity to thank everyone at Bakkavor for their continued commitment and energy during a year of significant change, which saw the Group exceed expectations and set a clear path for delivery in 2024.
Finally, I would like to extend a warm welcome to Bob Berlin, who rejoins our Board representing LongRange capital. He has a deep understanding of our business as well as our markets and his experience will be invaluable as we continue to build positive momentum and deliver our strategic ambition."
1. LFL revenue adjusts reported revenue to exclude the additional 53(rd) trading week in FY22 and adjusts for the effect of foreign currency movements.
2. Based on company compiled consensus ("Consensus") which includes; Citi, Goodbody, HSBC, Investec, Kepler, Numis and Peel Hunt. Adjusted operating profit Consensus for 2023 of GBP90.2m, with a range of GBP89.7m to GBP91.1m.
3. Based on company compiled consensus ("Consensus") which includes; Citi, Goodbody, HSBC, Investec, Kepler, Numis and Peel Hunt. Operational net debt Consensus for 2023 of GBP273.6m, with a range of GBP256.4m to GBP298.2m. |
 https://www.fool.co.uk/2022/03/16/6-dividend-yields-2-cheap-uk-shares-to-buy-for-a-winning-portfolio/Good enough to eatThe ready-made food industry was growing rapidly prior to the pandemic, a reflection of the increasingly-busy lifestyles people lead. Now that we are all now getting out and about again in large numbers the sector is tipped for more scintillating growth too. It's why I'm thinking of buying Bakkavor Group (LSE: BAKK) shares for my portfolio today.Bakkavor makes freshly-prepared foods like salads, pizzas and desserts which it sells to major supermarkets such as Tesco, Sainsbury's and fast-growing discounter Lidl. The business sources around 90% of revenues from the UK, though it also has a growing presence in the US and China. This geographical diversification gives it added stability as well as exposure to exciting growth markets.It's important to note that Bakkavor counts on a limited number of customers across its markets to drive revenues. The retailers which sell its goods might be major players in the grocery and hospitality industries. However, a loss of one or more of these key contracts could have a catastrophic impact upon profits.That said, I believe this risk is baked into this 'nearly' penny stock's low valuation. At current prices of 106p per share, the foodie trades on a forward price-to-earnings (P/E) ratio of 9.5 times. This is inside the widely-regarded bargain benchmark of 10 times and below.I also like Bakkavor because of its market-beating 6.5% dividend yield for 2022. In terms of value, I think this UK share is quite hard to beat. |
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