Trading Statement

RNS Number : 4945I

Bakkavor Group PLC

02 April 2020

 

2 April 2020

Bakkavor Group plc

COVID-19 and Trading Update

Bakkavor Group plc, the UK's leading provider of fresh prepared foods ("FPF"), today issues a trading update in response to recent market developments as a result of the COVID-19 pandemic.

Against the backdrop of these extraordinary and uncertain times, Bakkavor has an essential role to play. Our 20,000 colleagues across 45 locations in the UK, the US and China are doing everything they can to ensure continued supply of our products to the UK's leading grocery retailers and some of the world's best-known brands.

Colleagues

We are extremely proud of our colleagues' effort, commitment and determination during this difficult period and, understandably, make their health, safety and wellbeing our foremost priority. As a large FPF manufacturer, our established controls for managing both people and food safety within our operations are industry-leading. They provide a very strong base to build our COVID-19 controls on.

While our regular handwashing procedures and high levels of good manufacturing practice (GMP) and hygiene ensure a safe working environment, we have also implemented a number of additional controls. In the UK, these include restricted visitor access, a more rigorous return to work procedure, more frequent cleaning regimes at touchpoints and additional handwashing protocols. All our colleagues are self-certified as fit to work, and we are adhering to PHE guidelines for social distancing in our offices, rest, changing and ancillary areas, as well as following the specific PHE guidance for distancing in food manufacturing businesses. We continue to audit ourselves against both our standard controls as well as our enhanced COVID-19 protocols on both an announced and unannounced basis.

Trading

Following an encouraging start to the new financial year, the COVID-19 outbreak has created significant operational challenges, initially in China and more recently in the UK and US. The impact of this has led to increased volatility in daily order levels, and some disruption to labour availability. While our colleagues and infrastructure have responded well in ensuring excellent service levels for customers, trading has been impacted and overall sales are below expectations:

· In the UK, which represents around 90% of Group Adjusted EBITDA, the impact of COVID-19 has resulted in a reduction in orders across all of our categories, most notably in our salads and food-to-go products

· In the US, orders have reduced and, together with our customers, we are taking appropriate actions to limit complexity in our ranges, adapt our shift systems and review resourcing requirements.

· In China, as we reported at our full year results on 27 February 2020, the outbreak had a significant effect on our business in the early months of this year. After a challenging period, this situation has now stabilised, our customers have reopened most of their stores, and our sites are resuming service as orders gradually rebuild.

Guidance and mitigating actions

Given that market conditions are likely to remain highly uncertain for the foreseeable future, Bakkavor is withdrawing its guidance for 2020, issued on 27 February 2020, and committing to a number of important actions to preserve liquidity:

· A tight control on costs will be maintained, and all non-essential capital investment and discretionary expenditure has been placed on hold.

· We are reviewing capacity across our facilities to better match the current levels of demand and, wherever possible, we will be supporting any impacted colleagues by making use of the Job Retention Scheme (Furlough) introduced by the Government in the UK.

· In addition to the pro-active steps we are taking around cash and investment, the Board has decided to suspend the proposed final dividend. We will review our dividend policy in due course.

· Members of the Board and Management Board have also agreed voluntary reductions in remuneration for the coming three months: the Chairman and Non-executive Directors' have agreed to a 50% reduction in base salaries and fees, while the Group's founders (CEO, Agust Gudmundsson and Non-executive Director, Lydur Gudmundsson) have volunteered not to take a salary in the period. The wider Management Board have also agreed to a voluntary 20% reduction in base salaries.

In addition, in light of recent guidance from the FCA/FRC regarding approval timetables for annual reports, and the suspension of the proposed final dividend as mentioned above, Bakkavor has taken the decision to delay the publication of its Annual Report & Accounts and its Annual General Meeting, due to have been held on 21 May 2020. Further details on revised timings for both will be provided at the earliest opportunity.

Financial position

Bakkavor is a resilient and cash generative business with a robust balance sheet, which has market leading positions in each of the categories it operates; we are responding to the impact of COVID-19 from a position of strength. We have a strong and supportive relationship with all our lending banks and the Group has significant liquidity headroom, particularly as we recently completed a planned refinancing of our core bank arrangements, extending them until 2024.  Together with a number of bilateral facilities, the Group currently has facilities in place of £562m. As at December 2019, the Group had operational net debt of £355m and leverage of 2.3 times against a covenant of 3.0 times.

While uncertainty related to COVID-19 remains, we will continue to prioritise our employees in their roles as key workers and support our customers in every way we can to ensure the continued supply of fresh prepared food. Looking further ahead, we remain confident that the strength of our business and strategy leaves us well positioned to achieve long-term sustainable growth within the attractive FPF sector.

This announcement contains inside information for the purposes of article 7 of EU Regulation 596/2014. This announcement will also be available on the group's website at www.bakkavor.com/investors. The person responsible for making this notification is Peter Gates, CFO.

ENQUIRIES

Institutional investors and analysts:
Peter Gates, Chief Financial Officer
Sally Barrett-Jolley, Head of Corporate Affairs	[phone]
Media
Tulchan Communications	[phone]
Will Smith, Michelle Clarke

ABOUT BAKKAVOR

Bakkavor is the leading provider of fresh prepared food ("FPF") in the UK, with a growing international presence in the US and China. The Group is the number one by market share in the UK in the four FPF product categories of meals, salads, desserts and pizza & bread, providing high-quality, fresh, healthy and convenient food. Its customers include some of the UK's leading grocery retailers, including Tesco, Marks & Spencer, Sainsbury's and Waitrose. The Group's International segment operates in the US and China. Bakkavor was founded in 1986 and has its headquarters in London. The Group has over 20,000 employees and operates 25 factories in the UK, 5 in the US and 9 in China.

DISCLAIMER - forward-LOOKING STATEMENTS

This statement, prepared by Bakkavor Group plc (the "Company"), may contain forward-looking statements about Bakkavor Group plc and its subsidiaries (the "Group"). Forward-looking statements involve uncertainties because they relate to events, and depend on circumstances, that will, or may, occur in the future. If the assumptions on which the Group bases its forward-looking statements change, actual results may differ from those expressed in such statements. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update these forward-looking statements. Nothing in this statement should be construed as a profit forecast. Some numbers and period on period percentages in this statement have been rounded or adjusted in order to ensure consistency with the financial information.

LEI number: 213800COL7AD54YU9949

 

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