TIDMBAKK
RNS Number : 7306L
Bakkavor Group PLC
10 September 2019
10 September 2019
Bakkavor Group plc
First half trading in line with expectations
Bakkavor Group plc ("Bakkavor", "the Group" or "the Company"),
the leading provider of fresh prepared food,
today announces its half year unaudited results for the 26-week
period ended 29 June 2019.
Financial highlights
-- Group revenue up 1.4% to GBP923.0m
-- Group like-for-like revenue(1) up 2.0% to GBP877.9m
o UK performance held in very challenging market, with 0.7%
increase to GBP772.2m
o International growth accelerated, with growth of 12.7% to
GBP105.7m
-- Adjusted EBITDA(1) pre IFRS 16 down 6.5% to GBP73.5m with margins down 60bps as expected
-- Operating profit impacted by GBP13.1m of exceptional costs
and GBP8.3m of start-up losses for new sites
-- Basic earnings per share of 3.0p and adjusted earnings per share of 5.9p
-- Operational net debt increased to GBP356.6m following a
period of planned capital investment
-- Interim dividend of 2.0p per share payable on 11 October 2019
operational highlights
-- Acquisition of Blueberry Foods strengthens market leading desserts capability
-- Integration of Haydens already delivering synergy benefits
-- Closure of meals site in Lincolnshire protects profitability
-- UK meals business set to benefit from launch of significant business gain in H2 2019
-- Production ramping up at new meals site in Texas
-- Consistent strong growth in China through existing customer
partnerships and innovative new customers
GBP million (unless otherwise stated) H1 2019 H1 2018 Change
------------------------------------------------ -------- -------- --------
Group revenue 923.0 909.9 1.4%
Like-for-like revenue(1) 877.9 860.9 2.0%
Adjusted EBITDA pre IFRS 16(1) 73.5 78.6 (6.5%)
Adjusted EBITDA(1) margin pre IFRS 16 8.0% 8.6% (60bps)
Adjusted operating profit(1) 50.7 57.3 (11.5%)
Operating profit 29.3 54.1 (45.8%)
Basic EPS 3.0p 7.0p (4.0p)
Adjusted EPS(1) 5.9p 7.4p (1.5p)
Free cash flow(1) 17.6 32.4 (14.8)
Net debt (excluding IFRS 16 lease liabilities) 356.6 269.8 86.8
Interim dividend per share 2p 2p -
------------------------------------------------ -------- -------- --------
1. Alternative performance measures are referred to as
'like-for-like', 'adjusted', 'underlying' and are applied
consistently throughout this document. These are defined in full
and reconciled to the reported statutory measures in Note 21.
Agust Gudmundsson, CEO, said:
"During a challenging period, I'm pleased by the resilience
we've shown across the business to deliver a solid first half
performance. While the trading environment in the UK is still
uncertain, we remain positive of our long-term prospects and the
demand for fresh prepared food.
"Our UK operations have never been stronger and we're the clear
market leader across all four of our core categories. I'm
encouraged by developments made across our US business; improving
efficiencies, streamlining our customer proposition and building
sales across new sites. Our business in China continues to go from
strength to strength, expanding both our customer base and product
offering.
"Despite a subdued start to the second half, we currently expect
an uplift in performance, boosted in the UK by the impact of new
business and an easing of raw material inflation. Our International
business is making further progress and therefore the Group remains
confident in delivering full-year performance broadly in line with
2018.
"Looking further ahead, we believe that our strategy, combined
with our scale and expertise, leaves us well placed to capitalise
on future growth opportunities."
key statutory financial information
GBP million H1 2019 H1 2018 Change
------------------- -------- -------- --------
Group revenue 923.0 909.9 1.4%
Operating profit 29.3 54.1 (45.8%)
Profit before tax 19.5 47.1 (58.6%)
Profit after tax 17.2 40.5 (57.5%)
Basic EPS 3.0p 7.0p (4.0p)
------------------- -------- -------- --------
Presentation
A presentation of the half year results to analysts will take
place at 10.30am today, 10 September 2019, at Bakkavor's offices at
8 Mortimer Street, London W1T 3JJ.
A live webcast of the presentation can also be accessed through
the Investors section of the Group's website at
https://bakkavor.eventcdn.net/20190910.
ENQUIRIES
Institutional investors and analysts:
Peter Gates, Chief Financial Officer
Sally Barrett-Jolley, Head of Corporate Affairs +44 (0) 20 7908 6143
Media:
Tulchan Communications
Will Smith, Will Palfreyman +44 (0) 20 7353 4200
About Bakkavor
Bakkavor is the leading provider of fresh prepared food ("FPF")
in the UK, with a growing international presence in the United
States 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. As these FPF markets continue to
grow, Bakkavor seeks to leverage its UK expertise in order to build
its presence in these territories. Bakkavor was founded in 1986 and
has its headquarters in London. The Group has over 19,000 employees
and operates 25 factories in the UK, 5 in the US and 9 in
China.
LEI number: 213800COL7AD54YU9949
DISCLAIMER - forward-LOOKING STATEMENTS
This interim 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.
SUMMARY
Bakkavor is the leading provider of FPF in the UK, with a
growing international presence in the US and China. Our customers
include all the well-known UK grocery retailers as well as some of
the world's best-known food brands.
Group overview
GBP million H1 2019 H1 2018 Change
------------------------------------ -------- -------- ---------
Group revenue 923.0 909.9 1.4%
Like-for-like revenue 877.9 860.9 2.0%
Adjusted EBITDA pre IFRS 16 73.5 78.6 (6.5%)
Adjusted EBITDA margin pre IFRS 16 8.0% 8.6% (60bps)
Operating profit 29.3 54.1 (45.8%)
Operating profit margin 3.2% 5.9% (270bps)
------------------------------------ -------- -------- ---------
Group revenue was up 1.4% at GBP923.0 million, with
like-for-like revenue up 2.0%. Whilst trading in the UK remained
challenging, especially against a tough comparative, the
International business performed well. As expected, our trading
this year in the UK will be weighted towards the second half as new
business comes on stream and raw material pricing eases.
Group adjusted EBITDA pre IFRS 16 for the first half was GBP73.5
million, down 6.5% with a margin of 8.0%, impacted by lower volumes
and the losses recorded prior to closure of a UK meals site in
April 2019. Operating profit for the period was GBP29.3 million
compared to GBP54.1 million in the prior period. In addition to the
lower trading performance, GBP8.3 million of ongoing start-up
losses for new sites was incurred and also exceptional items
increased by GBP9.9 million to GBP13.1 million due to disruption
and restructuring costs.
Dividend
At the AGM on 23 May 2019 a final dividend of 4.0p per share to
each of the Ordinary shareholders for the period ended 29 December
2018 was approved. The total amount of GBP23.2 million was paid on
29 May 2019.
The Board has declared an interim dividend of 2p per share
payable on 11 October 2019 to shareholders registered on the record
date 20 September 2019.
Brexit
Looking forward, there continues to be a very high level of
uncertainty surrounding the outcome of Brexit negotiations and we
have continued to review any potential impacts on our UK business.
Our senior management are regularly reviewing and where necessary
updating our operational plans to minimise possible risks and limit
the impact of any cost increases that may arise from tariffs and
duties following the UK's exit from the European Union. In
addition, we continue to focus on the implementation of an enhanced
employee retention programme, as well as working actively with
suppliers and logistics providers to limit any disruption to our
supply chain.
Outlook
Despite a subdued start to the second half, we currently expect
an uplift in performance, boosted in the UK by the impact of new
business and an easing of raw material inflation. Our International
business is making further progress and therefore we remain
confident in delivering full-year Group performance broadly in line
with 2018. Looking ahead, we believe that our strategy, combined
with our scale and expertise, leaves us well placed to capitalise
on future growth opportunities.
BUSINESS REVIEW
United Kingdom
GBP million H1 2019 H1 2018 Change
------------------------------------ -------- -------- ---------
Revenue 813.5 816.1 (0.3%)
Like-for-like revenue 772.2 767.1 0.7%
Adjusted EBITDA pre IFRS 16 70.6 74.5 (5.2%)
Adjusted EBITDA margin pre IFRS 16 8.7% 9.1% (40bps)
Operating profit 39.8 55.6 (28.4%)
Operating profit margin 4.9% 6.8% (190bps)
------------------------------------ -------- -------- ---------
The UK is Bakkavor's largest market, representing around 90% of
Group revenue. We have successfully leveraged our scale, expertise
and relationships with key customers in the period to maintain our
market leading positions in each of the four FPF categories.
Trading performance
As widely reported, this has been a difficult trading period
across the UK grocery sector, characterised by retail price
inflation and continued weak consumer sentiment against a backdrop
of underlying economic uncertainty. Achieving volume growth has
consequently been an ongoing challenge.
The FPF categories have been impacted through a combination of
these underlying issues and comparison against a strong period last
year that included a number of major events and prolonged good
weather. However, the key fundamentals of the FPF market, being the
demand for fresh, healthy and convenient food remains strong and
give us confidence in our long-term strategy and future
success.
Given the challenging trading environment, it was reassuring to
report like-for-like sales of GBP772.2 million, 0.7% up on the
prior year, especially as volumes in the period were impacted by
our decision to exit from a number of product lines to protect
overall margins. As ever, the business continued to work closely
with customers to maintain industry leading standards for service,
innovation and technical delivery. This included further investment
in marketing insight to gain a greater understanding of shopper
behaviours to drive growth across our categories.
As expected, there has been further inflation in our raw
material cost base, although more recently there have been welcome
signs of this slowing after a period of price increases going back
to the summer of 2016. In particular, dairy ingredients including
butter, have seen a fall from the dramatic peaks of recent years.
During this period of Brexit related uncertainty, our experienced
procurement team continue to work closely with more than 750
suppliers to ensure we have plans in place to minimise any
potential risk of disruption.
The cost of labour continues to rise, fuelled by further
increases in the national living wage and a significant step-up in
employer contributions to auto-enrolment pension schemes. We expect
high national employment and increased labour inflation to continue
and are therefore focused on increasing automation and lowering
employee turnover rates, which both minimise the cost of
recruitment and the associated operational disruption.
In April, we completed the closure of a loss-making meals site
at Holbeach, Lincolnshire. Whilst this was a difficult decision, we
were pleased to offer alternative roles to more than 350 skilled
employees across our other nearby sites. Overall a combination of
subdued volumes, ongoing cost pressures and trading losses up to
the closure of our meals site resulted in adjusted EBITDA (pre IFRS
16) of GBP70.6 million, with a margin of 8.7%. At an operating
profit level, after disruption and restructuring costs of GBP11.5
million, profits were GBP39.8 million in the period.
Strategic progress
Current market conditions continue to provide us with
opportunities to consolidate and strengthen our market leading
position in our core categories. In a highly competitive retailer
environment, our scale and experience in the industry, combined
with our high technical standards positions us well to benefit from
future growth.
In the desserts category we have made significant progress. In
June, we completed the acquisition of Blueberry Foods, a key
supplier to two of our existing customers. This business provides
additional capacity across many of our existing product ranges and
extends our capabilities in hot desserts. As a well invested site,
it will also bring operational synergies over the medium-term as we
incorporate Blueberry into our existing business.
This acquisition complements last year's purchase of the Haydens
Bakery business, which is integrating well into the Group and is
already exceeding our initial expectations. In addition, the major
investment in further capacity at our desserts site in Newark
remains on track and allows us to benefit from ongoing
consolidation in the category.
Our meals businesses have been working hard to prepare for the
launch of more than 150 products for our largest customer this
autumn. Whilst this significant new business is a natural fit with
our existing skill set, we took the decision to invest across four
of our sites to provide the capacity and efficiencies to ensure we
maximise the benefits. A transfer of business of this scale
naturally brings complexities but through clear planning and by
working closely with our customer we have ensured a successful
transition.
In addition to the major capacity investments, our capital
programme continues at pace. Our sites, whilst well invested, are
operational 364 days of the year and naturally require continued
maintenance. Increasingly our focus has been to ensure that these
projects also deliver efficiencies. Recent examples include an
ongoing upgrade to our refrigeration capacity and improved lighting
across our estate, which also bring environmental benefits and help
offset rising energy costs.
People
As previously reported, at the start of the year we introduced a
simplified organisational structure in the UK. This has now been
embedded across the business and included a reorganisation of our
commercial and development teams to better align our day to day
engagement with our customers. These changes are already bringing
benefits and have undoubtedly strengthened our customer
partnerships.
In an environment of rising labour costs, high employment and an
uncertain outcome from the Brexit negotiations, our focus on
attracting and retaining a skilled workforce is essential. In April
we rolled out the first phase of a two-year plan to introduce an HR
shared service centre which will provide streamlined recruitment
and administration processes and drive down costs. We have also
continued to invest in upgrading changing rooms, canteens and
offices to improve the working environment for our colleagues and
will shortly be launching an updated careers website to attract the
best talent into the business.
Sustainability
During the period, we continued to review ways that we can
improve our environmental performance through sustainability
initiatives. Alongside our commitment in the UK to adopt the United
Nations Sustainable Development Goal 12.3 to halve food waste
across the supply chain by 2020, during the period we were pleased
to lend further support by pledging our support to the
government-led campaign 'Step up to the plate' to help invoke
change.
In addition, we continued to actively support our customers'
sustainability programmes and targets through our technical,
commercial and category teams; be that environmental targets around
waste, packaging and plastics, or through ensuring that our
approach to responsible sourcing and evaluating our own supply
chain remains progressive and part of everyday working
practices.
International
GBP million H1 2019 H1 2018 Change
------------------------------------ -------- -------- ---------
Revenue 109.5 93.8 16.7%
Like-for-like revenue 105.7 93.8 12.7%
Adjusted EBITDA pre IFRS 16 2.9 4.1 (29.3%)
Adjusted EBITDA margin pre IFRS 16 2.6% 4.4% (180bps)
Operating loss (10.5) (1.5) -
Operating profit margin (9.6%) (1.6%) (800bps)
------------------------------------ -------- -------- ---------
Our International business is focused on the two largest food
markets in the world, the US and China. While the markets for fresh
prepared food in both regions are currently less developed than the
UK, the potential for growth is significant and our expertise in
the UK is proving invaluable in developing our international
presence.
Both businesses reported good growth in the period and continued
to grow in line with our expectations. Like-for-like revenues
increased by 12.7% to GBP105.7 million, driven by increased volumes
across our largest customers, and a consistently strong performance
by our business in China. On a reported basis, revenues grew by
16.7% to GBP109.5 million, benefitting from the relative weakness
of sterling compared to the prior year.
Adjusted EBITDA pre IFRS 16 was GBP2.9 million for the period
and GBP1.2 million lower than 2018 due to continued investment in
the infrastructure of both businesses to support future anticipated
growth. At an operating level there was a loss of GBP10.5 million
in H1 2019 which is GBP9.0 million higher than the prior period
largely due to start-up losses and pre commissioning costs for new
sites in both countries and disruption costs as we repurposed an
existing US site.
United States
The US food market continues to show good growth as consumer
demand for convenient, fresh and healthy chilled products
increases. To meet this demand retailers are expanding their FPF
offering, removing instore kitchens and outsourcing production to
specialist manufacturers. With our strong track record in the
production of short shelf life chilled food at the highest
technical standards, we are well placed to capitalise on this
opportunity.
Last year, we refocused our business and simplified our offer by
exiting certain low margin business, freeing up resource to ensure
'fewer, better products' and improve business performance and
longer-term returns. To support this shift, in 2018, we started two
major projects at our site in Carson, California in order to
repurpose part of the factory for ready meals production and to
introduce a significant new manufacturing process for the
production of hummus. These projects, which we referred to at the
full year, were complex and impacted the whole site, and
consequently we incurred a degree of disruption as we continued to
provide a full service to our customers. The new ready meals
facility is nearing completion and we expect to be in production by
the end of the year with a range of exciting products for a new
customer. The hummus project, which will deliver an improved
product to the highest food safety standards using state of the art
thermal food processing technology is on track, and we expect to
start commissioning the equipment early next year.
Our partnership with a significant customer in Texas continues
to progress well and is very encouraging. Our joint plans are clear
and our expertise in FPF manufacturing, consumer insight and our
stringent approach to food safety is helping ensure we remain on
track and successful. The dedicated site in San Antonio is now in
production and is steadily building volumes through the year under
an agreed rollout plan. We are pleased to see that the meals
launched to date have been well received by both customer and
consumers alike.
Our new bakery in Charlotte has now started limited production
of high-quality artisan breads. Whilst there is undoubted customer
interest in these new products, it will take time to build
meaningful scale, but we remain confident that this project will be
a success.
At an operational level, we continue to focus on bringing in the
relevant skilled resource across our US sites. During the period, a
number of our UK production staff have been seconded to the US to
leverage our expertise and build local knowledge and skills in
chilled food production. We also continued an active recruitment
programme to ensure we have the expertise in place to meet
increasing demand across all our sites and customer base.
China
In China, we further strengthened and invested in our operations
during the period in order to capitalise on the significant
long-term market opportunity in the region. We continued to see
strong growth in the western chained foodservice market through our
existing customers further expanding their store and restaurant
portfolios but also from a number of innovative new entrants to the
market.
In support of this growth, we have started to benefit from
recent investments in new factories in Shanghai, Taicang and
Chengdu with increased volumes across all three. Our new
state-of-the-art site in Shanghai has been in operation since
January, with production successfully transferred over from the old
site with minimal impact to customer service.
We continued to invest in a range of capital projects across the
business during the period. These included starting work on a
replacement site in Wuhan, which when complete, will enhance our
capability and increase capacity to supply the Central China
region.
During the period, we saw particularly strong growth in our
'food to go' offer, which now accounts for almost 50% of our
business and included a complete relaunch of a key customer's whole
range. In addition, our new bakery is performing well, and we have
seen a significant upside as a result of bringing supply of a key
raw material in-house, which gives us greater control of product
integrity, quality and consistency.
While we expect general inflation to put pressure on our cost
base in the region, we remain confident in the overall attractive
Chinese market dynamics and continued demand from consumers for our
products to deliver future profitability.
financial review
Revenue
Revenue increased by GBP13.1 million, or 1.4% from GBP909.9
million in H1 2018, to GBP923.0 million in H1 2019 due to the net
impact of acquisitions and businesses closed or sold, and the
relative weakening of Sterling partly offsetting the like-for-like
growth in the period. Like-for-like revenue increased by 2.0%, from
GBP860.9 million in H1 2018, to GBP877.9 million in H1 2019. This
increase was due to growth in the Group's operating segments, as
described below.
UK
In the UK segment, revenue decreased by GBP2.6 million, from
GBP816.1 million in H1 2018 to GBP813.5 million in H1 2019.
Like-for-like revenue for H1 2019, which excludes the Anglia Crown
business that was sold in July 2018 and a meals business in
Lincolnshire that was closed in April 2019, and the acquisition of
Haydens Bakery and Blueberry Foods in September 2018 and June 2019
respectively, increased by GBP5.1 million to GBP772.2 million,
which represents modest underlying volume growth in a difficult
trading environment.
International
In the International segment, revenue increased by GBP15.7
million, or 16.7%, to GBP109.5 million in H1 2019 from GBP93.8
million in H1 2018 as reported revenues benefitted from the
relative weakening of Sterling in the period. Like-for-like revenue
increased by 12.7%, from GBP93.8 million in H1 2018, to GBP105.7
million in H1 2019. The increase was due to good growth in both the
US and China, where both businesses benefitted from increased sales
volumes with new and existing key customers following new sites
moving into production.
Adjusted EBITDA
Adjusted EBITDA pre IFRS 16 decreased by GBP5.1 million, or
6.5%, from GBP78.6 million in H1 2018 to GBP73.5 million in H1 2019
with the margin decreasing to 8.0% from 8.6% in the prior period.
Of this decrease, GBP3.5 million relates to the year on year impact
from the meals business in Lincolnshire that was closed in April
2019. The remaining decrease is primarily due to low volume growth
combined with further labour inflation.
Exceptional items
Included within operating costs are exceptional items as
follows:
GBP million H1 2019 H1 2018
------------------------------ -------- --------
New sites - 3.2
Disruption 2.9 -
Restructuring and impairment 10.2 -
------------------------------ -------- --------
13.1 3.2
------------------------------ -------- --------
H1 2019
The Group incurred GBP13.1 million of costs presented as
exceptional items in H1 2019 of which GBP2.9 million related to
disruption costs; GBP1.6 million as our existing factory in
California was repurposed for ready meal manufacturing and GBP1.3
million in the UK as the business prepared for the launch of
significant new products later in Q3 2019. In addition, the Group
incurred GBP10.2 million of restructuring and impairment costs in
the UK. Of this, GBP7.7 million related to the closure of a meals
business in Lincolnshire comprising cash closure costs of GBP4.2
million and plant and equipment asset impairments of GBP3.5
million. The remaining GBP2.5 million is for redundancy costs
following changes to our commercial and marketing structure.
H1 2018
The Group incurred costs of GBP3.2 million in the prior period
relating to the initial start-up costs for the opening of new sites
in the US and China.
Operating profit
Operating profit decreased by GBP24.8 million, from GBP54.1
million in H1 2018 to GBP29.3 million in H1 2019 with margins
decreasing by 2.7%. This decrease was largely due to an increase in
exceptional items from GBP3.2 million in H1 2018 to GBP13.1 million
in the period and also due to incurring GBP8.3 million of ongoing
start-up losses for new sites. Operating profit before exceptional
items and start-up losses for new sites was GBP50.7 million in the
period and GBP6.6 million lower than the prior year at a margin of
5.5%. This decrease was due to the start-up losses for the new
sites, a lower trading performance and an increase in depreciation
following the completion of a number of significant capital
projects.
Finance costs
Finance costs increased by GBP2.4 million, from GBP6.7 million
in H1 2018 to GBP9.1 million in H1 2019. The increase is due to the
recognition of GBP1.4 million of lease liability costs following
the transition to IFRS 16 from the start of the period and an
increase in borrowing costs from higher average debt levels in the
period following further capital investment.
Tax
The tax charge for the period decreased by GBP4.3 million, from
GBP6.6 million in H1 2018 to GBP2.3 million in H1 2019. Excluding
the impact of exceptional items and start-up losses for new sites
in the period, the tax charge on underlying activities for H1 2019
is GBP6.5 million, marginally lower than the GBP7.2 million
incurred in H1 2018 due to lower trading profits in the period.
The effective tax rate on underlying activities is 15.9% for H1
2019 compared to 14.3% for H1 2018 and is in line with previous
guidance for the year of between 15% and 16%. The increase in the
rate compared to the prior period is due to a reduction in overseas
losses this year.
Earnings per share
Profit for the period decreased by GBP23.3 million, from GBP40.5
million in H1 2018 to GBP17.2 million in H1 2019 with basic
earnings per share decreasing from 7.0p for H1 2018 to 3.0p in H1
2019 based on 579.4 million shares. The decrease was largely due to
the increase in exceptional items after tax to GBP10.2 million in
the period and the GBP7.0 million of start-up losses for new sites
after tax incurred in the period.
Excluding the impact of exceptional items and the start-up
losses for new sites, adjusted earnings for the period have
decreased by GBP8.7 million to GBP34.4 million. Adjusted earnings
per share has decreased to 5.9p in H1 2019 from 7.4p in H1 2018
with 0.2p of the decrease due to the transition to IFRS 16 in the
period. The remainder of the decrease reflects the lower trading
performance and higher borrowing costs in H1 2019.
Cash flow and debt
Free cash flow for H1 2019 of GBP17.6 million was GBP14.8
million lower than H1 2018 largely due to a GBP12.2 million
increase in core capex in line with the plans for the year. There
was a GBP6.8 million reduction in year on year working capital
outflows to GBP5.7 million for H1 2019, with the outflow in the
period mainly due to closure of the meals business in April 2019.
In addition, during the period the Group paid GBP17.4 million for
the acquisition of Blueberry Foods, GBP23.2 million for the final
dividend for 2018, GBP9.7 million for development investments,
GBP8.3 million in new site start-up losses and exceptional items of
GBP6.0 million.
Overall this has resulted in operational net debt increasing to
GBP356.6 million at the end of H1 2019. Leverage (the ratio of
operational net debt to Adjusted EBITDA pre IFRS 16 for a rolling
twelve-month period) was 2.4 times at the end of June 2019. This is
as expected outside of the Group's target range of 1.5 - 2.0 times
as a result of our planned capital investment program for the
year.
The Group's liquidity position remains strong with good headroom
against all financial covenants.
IFRS 16 impact
The Group transitioned to IFRS 16 'Leases' with effect from the
30 December 2018 by using the modified retrospective, asset equals
liability approach with no restatement of the comparative
information. The impact of the change in accounting treatment on
the consolidated income statement for the period has been to
increase operating profit by GBP0.3 million but to reduce earnings
by GBP0.9 million. In terms of borrowings the Group recognised
GBP84.0 million of lease liabilities at 29 June 2019 which resulted
in statutory net debt of GBP438.7 million at the end of the
period.
Pensions
Under the IAS 19 valuation principles that are required to be
used for accounting purposes the Group recognised a surplus of
GBP8.9 million for the UK defined benefit scheme as at 29 June 2018
(29 December 2018: deficit GBP0.5 million). The increase in the
surplus is largely due to an increase in asset values in the
period.
The Group and the Trustee agreed in April 2017 the triennial
valuation of the UK defined benefit pension scheme as at 31 March
2016. This resulted in a funding shortfall which continues to be
paid over an agreed eight-year recovery period ending on 31 March
2024. The recovery contributions over that period amount to GBP22.5
million with GBP3.5 million payable for the year ended 31 March
2019 and GBP2.5 million for the year ending 31 March 2020.
Principal risks and uncertainties
The Group operates a structured risk management process, which
identifies and evaluates risks that could impact its performance,
as well as reviewing mitigation activity.
The key areas of potential risk identified in the Group's 2018
Annual Report and Accounts are:
-- Food safety and integrity;
-- Raw material and input cost inflation;
-- Reliance on small number of customers
-- Manpower scarcity and costs;
-- IT systems and cyber risk;
-- Health and safety:
-- Recruitment and retention of key employees;
-- Investment and development;
-- Liquidity, interest rates, exchange rates and covenant compliance;
-- Brexit disruption
-- Disruption to Group operations
-- Sustainability
-- Consumer behaviour and demand
-- Competitors
No new key risks have been identified by the Board since the
Annual Report was published.
These risks are carefully monitored and managed, and further
details are set out on pages 27 to 29 of the 2018 Annual Report and
Accounts which is available on the Bakkavor Group plc website:
https://www.bakkavor.com/
Related party transactions
During the period, Group companies only entered into
transactions with related parties who are members of the Group.
Condensed consolidated income statement
Restated*
26 weeks ended 30 June 2018
26 weeks ended 29 June 2019 (Unaudited) (Unaudited)
---------------------------------------------- -------------------------------------------
Exceptional Exceptional
Underlying items Underlying items
GBP million Notes activities (note 4) Total activities (note 4) Total
----------------- ------ ----------------- ----------------- -------- ----------------- ------------ --------
Continuing
operations
Revenue 3 923.0 - 923.0 909.9 - 909.9
Cost of sales (678.0) (1.1) (679.1) (664.3) - (664.3)
----------------- ------ ----------------- ----------------- -------- ----------------- ------------ --------
Gross profit 245.0 (1.1) 243.9 245.6 - 245.6
Distribution
costs (36.8) - (36.8) (37.7) - (37.7)
Other
administrative
costs (166.2) (12.0) (178.2) (150.9) (3.2) (154.1)
Share of results
of associates
after tax 0.4 - 0.4 0.3 - 0.3
----------------- ------ ----------------- ----------------- -------- ----------------- ------------ --------
Operating
profit/(loss) 42.4 (13.1) 29.3 57.3 (3.2) 54.1
Finance costs 5 (9.1) - (9.1) (6.7) - (6.7)
Other gains and
(losses) 6 (0.7) - (0.7) (0.3) - (0.3)
----------------- ------ ----------------- ----------------- -------- ----------------- ------------ --------
Profit/(loss)
before tax 32.6 (13.1) 19.5 50.3 (3.2) 47.1
Tax (5.2) 2.9 (2.3) (7.2) 0.6 (6.6)
----------------- ------ ----------------- ----------------- -------- ----------------- ------------ --------
Profit/(loss)
for the period
attributable to
equity holders
of the parent
company 27.4 (10.2) 17.2 43.1 (2.6) 40.5
----------------- ------ ----------------- ----------------- -------- ----------------- ------------ --------
Earnings per
share
Basic 7 3.0p 7.0p
Diluted 7 3.0p 6.9p
----------------- ------ ----------------- ----------------- -------- ----------------- ------------ --------
* See Note 2 for details of the restatement.
Condensed consolidated statement of comprehensive income
26 weeks ended 26 weeks ended
29 June 30 June
2019 2018
GBP million (Unaudited) (Unaudited)
---------------------------------------------------------------------- --------------- ---------------
Profit for the period 17.2 40.5
---------------------------------------------------------------------- --------------- ---------------
Other comprehensive income/(expense)
Items that will not be reclassified to the income statement:
Actuarial gain on defined benefit pension schemes 8.3 5.0
Tax relating to components of other comprehensive income (1.4) (0.9)
---------------------------------------------------------------------- --------------- ---------------
6.9 4.1
Items that may subsequently be reclassified to the income statement:
Exchange differences on translation of foreign operations (0.1) 3.7
Total other comprehensive income net of tax 6.8 7.8
---------------------------------------------------------------------- --------------- ---------------
Total comprehensive income 24.0 48.3
---------------------------------------------------------------------- --------------- ---------------
Condensed consolidated statement of financial position
29 June 29 December
2019 2018
GBP million Notes (Unaudited) (Audited)
----------------------------------------------- ------ ------------- ------------
Non-current assets
Goodwill 9 653.0 650.2
Other intangible assets 3.1 3.0
Property, plant and equipment 10 542.0 426.9
Interests in associates and other investments 13.0 12.6
Deferred tax asset 22.3 19.6
Retirement benefit asset 8.9 -
Derivative financial instruments - 0.2
----------------------------------------------- ------ ------------- ------------
1,242.3 1,112.5
----------------------------------------------- ------ ------------- ------------
Current assets
Inventories 11 58.5 62.8
Trade and other receivables 12 139.0 142.7
Cash and cash equivalents 14 28.4 12.4
Derivative financial instruments 1.2 1.9
----------------------------------------------- ------ ------------- ------------
227.1 219.8
----------------------------------------------- ------ ------------- ------------
Total assets 1,469.4 1,332.3
----------------------------------------------- ------ ------------- ------------
Current liabilities
Trade and other payables 13 (384.9) (392.0)
Current tax liabilities (3.8) (6.5)
Borrowings 14 (16.7) (6.6)
Provisions (2.8) (3.3)
(408.2) (408.4)
----------------------------------------------- ------ ------------- ------------
Non-current liabilities
Trade and other payables 13 (1.1) (2.3)
Borrowings 14 (450.4) (312.4)
Provisions (13.4) (15.0)
Deferred tax liabilities (24.9) (24.3)
Retirement benefit obligation - (0.5)
(489.8) (354.5)
----------------------------------------------- ------ ------------- ------------
Total liabilities (898.0) (762.9)
----------------------------------------------- ------ ------------- ------------
Net assets 571.4 569.4
----------------------------------------------- ------ ------------- ------------
Equity
Share capital 16 11.6 11.6
Merger reserve (130.9) (130.9)
Translation reserve 33.7 33.8
Retained earnings 657.0 654.9
--------------------- --- -------- --------
Total equity 571.4 569.4
--------------------- --- -------- --------
Condensed consolidated statement of changes in equity
Merger Translation Retained
GBP million Share capital Share premium reserve reserve earnings Total
----------------------------- -------------- -------------- -------------- ------------- ------------- -------
Balance at 31 December 2017 11.6 366.1 (130.9) 26.1 237.2 510.1
(Audited)
Profit for the period - - - - 40.5 40.5
Other comprehensive income/
(expense) for the period - - - 3.7 4.1 7.8
----------------------------- -------------- -------------- -------------- ------------- ------------- -------
Total comprehensive
income for the period - - - 3.7 44.6 48.3
----------------------------- -------------- -------------- -------------- ------------- ------------- -------
Cancellation of share
premium - (366.1) - - 366.1 -
Credit for share-based
payments - - - - 1.2 1.2
Balance at 30 June 2018 11.6 - (130.9) 29.8 649.1 559.6
(Unaudited)
----------------------------- -------------- -------------- -------------- ------------- ------------- -------
Balance at 30 December 2018 11.6 - (130.9) 33.8 654.9 569.4
(Audited)
Profit for the period - - - - 17.2 17.2
Other comprehensive income/
(expense) for the period - - - (0.1) 6.9 6.8
----------------------------- -------------- -------------- -------------- ------------- ------------- -------
Total comprehensive
income/(expense) for the
period - - - (0.1) 24.1 24.0
----------------------------- -------------- -------------- -------------- ------------- ------------- -------
Dividends paid (Note 8) - - - - (23.2) (23.2)
Credit for share-based
payments - - - - 1.2 1.2
Balance at 29 June 2019 11.6 - (130.9) 33.7 657.0 571.4
(Unaudited)
----------------------------- -------------- -------------- -------------- ------------- ------------- -------
Condensed consolidated statement of cash flows
26 weeks
26 weeks ended ended
29 June 30 June
2019 2018
GBP million Notes (Unaudited) (Unaudited)
--------------------------------------------------------------------------- ------ --------------- --------------
Net cash generated from operating activities 18 42.5 50.0
---------------------------------------------------------------------------
Investing activities
Dividends received from associates - 0.6
Purchases of property, plant and equipment (44.4) (51.6)
Proceeds on disposal of property, plant and equipment 1.2 -
Acquisition of subsidiary 17 (17.4) -
Net cash used in investing activities (60.6) (51.0)
Financing activities
Dividends paid 8 (23.2) -
Increase in borrowings 63.6 -
Payment of lease liabilities (2018: Payment of finance lease liabilities) (6.4) (0.3)
--------------------------------------------------------------------------- ------ --------------- --------------
Net cash generated from/(used in) financing activities 34.0 (0.3)
Net increase/(decrease) in cash and cash equivalents 15.9 (1.3)
Cash and cash equivalents at beginning of period 12.4 20.9
Effect of foreign exchange rate changes 0.1 0.1
Cash and cash equivalents at end of period 28.4 19.7
--------------------------------------------------------------------------- ------ --------------- --------------
Notes to the condensed financial statements
1. General Information
The information for the 26 weeks ended 29 June 2019 and 26 weeks
ended 30 June 2018 is unaudited and does not constitute statutory
accounts within the meaning of s435 (1) and (2) of the Companies
Act 2006. These condensed consolidated interim financial statements
have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the Disclosure Guidance and Transparency rules
of the Financial Conduct Authority. The condensed consolidated
interim statement of financial position as at 29 December 2018 has
been derived from the consolidated statement of financial position
included in the Group's financial statements for the 52 weeks ended
29 December 2018, a copy of which has been delivered to the
Registrar of Companies. The auditor's report on those accounts was
not qualified, did not include any reference to any matters to
which the auditors drew attention by way of emphasis without
qualifying the report and did not contain statements under section
498 (2) or (3) of the Companies Act 2006.
This financial information does not include all of the
information and disclosure required in the annual consolidated
financial statements and should be read in conjunction with the
Bakkavor Group plc (the "Group") annual financial statements for
the 52 weeks ended 29 December 2018, which have been prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union.
Controlling parties
Two of the Company's Directors, Agust Gudmundsson and Lydur
Gudmundsson, hold shares in the company through their beneficial
ownership of Carrion Enterprises Limited and Umbriel Ventures
Limited. On 23 May 2019, Carrion Enterprises Limited and Umbriel
Ventures Limited each sold 3,229,625 ordinary shares to Lixaner Co
Limited, a company owned and controlled by Sigurdur Valtysson, who
runs the family office for Agust and Lydur Gudmundsson. Following
the transaction, Lixaner Co Limited holds 6,459,250 ordinary shares
(representing 1.11% of the issued share capital of the company) and
Carrion Enterprises Limited and Umbriel Ventures Limited each hold
142,103,505 ordinary shares (representing 24.52% of the issued
share capital of the Company).
Given the close relationship between the parties, Sigurdur
Valtysson is to be considered as acting in concert with Agust and
Lydur Gudmundsson for the purposes of the definition in the
Takeover Code and the parties are controlling shareholders of the
company. The aggregate shareholding in the company of Carrion
Enterprises Limited and Umbriel Ventures Limited and their concert
party group following the sale of shares to Lixaner Co Limited
remained unchanged at 290,666,260 ordinary shares (representing
50.16% of the issued shares capital of the company).
Principal activities and seasonality
The principal activities of the Group comprise the preparation
and marketing of fresh prepared foods and the marketing and
distribution of fresh produce. These activities are undertaken in
the UK, US and China and products are primarily sold through high
street supermarkets. The Group's cash flows are affected by
seasonal variations. Sales of fresh prepared food have historically
tended to be marginally higher during the summer months and in the
weeks leading up to Christmas. The Group generally has higher gross
profit margins during the summer months because the Group is able
to source locally produced raw materials during that period, which
reduces costs.
2. Significant accounting policies
Basis of accounting
The financial information has been prepared on the historical
cost basis, except for the revaluation of financial instruments and
defined benefit pension scheme assets and liabilities (which are
stated at fair value or actuarial valuation).
Certain costs for the procurement business have been
reclassified and offset against revenue for the 26 weeks ended 30
June 2018 to conform with the current year presentation. This has
the impact of reducing revenue and cost of sales by GBP2.7 million
for the 26 weeks ended 30 June 2018. In addition, revenue has been
restated to correctly present the impact of the finalisation of
certain commercial arrangements. This resulted in a restatement to
increase revenue and cost of sales by GBP2.2 million in the 26
weeks ended 30 June 2018. There is no impact to profit, cash flows
or the statement of financial position as a result of these
restatements.
Accounting policies
The accounting policies adopted are consistent with those of the
previous financial statements except as described below:
Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to the expected total annual profit
or loss.
There have been no changes in the period to the Group's critical
accounting judgements and key sources of estimation uncertainty as
disclosed in the Group's annual financial statements for the 52
weeks ended 29 December 2018.
New standards and interpretations
The IFRS 16 Leases, IFRS 9 Financial Instruments and IFRS 15
Revenue from Contracts with Customers standards have been applied
from the beginning of the current period.
IFRS 16 Leases
IFRS 16 Leases introduces new or amended requirements with
respect to lease accounting. It introduces significant changes to
the lessee accounting by removing the distinction between operating
and finance leases and requiring the recognition of a right-of-use
asset and a lease liability at the lease commencement for all
leases, except for short-term leases and leases of low-value
assets. IFRS 16 has been applied by the Group from the start of the
period by measuring the right of use asset at an amount equal to
the lease liability, adjusted by the amount of any prepaid or
accrued lease payments relating to that lease recognised in the
statement of financial position immediately before the date of
initial application. The Group has not restated comparatives for
the 26 weeks ended 30 June 2018 as permitted under the specific
transitional provisions in the standard.
The Group has made use of the practical expedient available on
transition to IFRS 16 not to reassess whether a contract is or
contains a lease. Accordingly, the definition of a lease in
accordance with IAS 17 and IFRIC 4 will continue to be applied to
leases entered or modified before 30 December 2018.
The change in definition of a lease mainly relates to the
concept of control. IFRS 16 determines whether a contract contains
a lease on the basis of whether the customer has the right to
control the use of an identified asset for a period of time in
exchange for consideration. The Group has applied the definition of
a lease and related guidance set out in IFRS 16 to all lease
contracts entered into or modified on or after 30 December
2018.
IFRS 16 changes how the Group accounts for leases previously
classified as operating leases under IAS 17, which were
off-balance-sheet. Applying IFRS 16, for all leases (except as
noted below), the Group will:
a) recognise right-of-use assets and lease liabilities in the
consolidated statement of financial position, initially measured at
the present value of future lease payments;
b) recognise depreciation of right-of-use assets and interest on
lease liabilities in the consolidated income statement; and
c) separate the total amount of cash paid into a principal
portion (presented within financing activities) and interest
(presented within operating activities) in the consolidated
statement of cash flows.
Lease incentives (e.g. rent-free period) are recognised as part
of the measurement of the right-of-use assets and lease liabilities
whereas under IAS 17 they resulted in the recognition of a lease
incentive liability, amortised as a reduction of rental expense on
a straight-line-basis.
2. Significant accounting policies (continued)
IFRS 16 Leases (continued)
Under IFRS 16, right-of-use assets are tested for impairment in
accordance with IAS 36 Impairment of Assets and any impairment is
provided for by writing down the asset value. This replaces the
previous requirement to recognise a provision for onerous lease
contracts. In applying IFRS 16 for the first time the Group used
the practical expedient permitted by the standard to rely on
previous assessments on whether leases are onerous as an
alternative to performing an impairment review. The onerous leases
amounted to GBP2.4 million at 30 December 2018.
For short-term leases (lease term of 12 months or less) and
leases of low-value assets (such as personal computers and office
furniture), the Group has opted to recognise a lease expense on a
straight-line basis over the lease term as permitted by IFRS 16.
This expense is presented within other expenses in the consolidated
income statement.
In the statement of cash flows, the Group as a lessee will
classify:
a) cash payments for the principal portion of the lease liability within financing activities;
b) cash payments for the interest portion of the lease liability
applying the requirements in IAS 7 Statement of Cash Flows for
interest paid; and
c) short-term lease payments, payments for leases of low-value
assets and variable lease payments not included in the measurement
of the lease liability within operating activities.
Former Finance Leases
The main difference between IFRS 16 and IAS 17 with respect to
assets formerly held under a finance lease is the measurement of
residual value guarantees provided by a lessee to a lessor. IFRS 16
requires that the Group recognises as part of its lease liability
only the amount expected to be payable under a residual value
guarantee, rather than the maximum amount guaranteed as required by
IAS 17. This change does not have a material effect on the Group's
Consolidated Financial Statements.
Impact on the Financial Statements
The following tables summarise the impact of adopting IFRS 16 on
the condensed consolidated income statement for the period ended 29
June 2019, the condensed consolidated statement of financial
position as at 29 June 2019 and the condensed consolidated
statement of cash flows for the period ended 29 June 2019.
Condensed consolidated income statement
GBP million Excluding
IFRS 16 IFRS 16
adjustments adjustments As reported
---------------------------------------------- ------------- ------------- ------------
Continuing operations
Revenue 923.0 - 923.0
Cost of sales (679.1) - (679.1)
---------------------------------------------- ------------- ------------- ------------
Gross profit 243.9 - 243.9
Distribution costs (36.8) - (36.8)
Other administrative costs (178.5) 0.3 (178.2)
Share of results of associates after tax 0.4 - 0.4
---------------------------------------------- ------------- ------------- ------------
Operating profit 29.0 0.3 29.3
Finance costs (7.7) (1.4) (9.1)
Other gains and (losses) (0.7) - (0.7)
---------------------------------------------- ------------- ------------- ------------
Profit/(loss) before tax 20.6 (1.1) 19.5
Tax (2.5) 0.2 (2.3)
---------------------------------------------- ------------- ------------- ------------
Profit/(loss) for the period attributable to
equity holders of the parent company 18.1 (0.9) 17.2
---------------------------------------------- ------------- ------------- ------------
Earnings per share (basic and diluted) 3.1p (0.1p) 3.0p
---------------------------------------------- ------------- ------------- ------------
2. Significant accounting policies (continued)
IFRS 16 Leases (continued)
Condensed consolidated statement of financial
position
GBP million Excluding
IFRS 16 IFRS 16
adjustments adjustments As reported
------------------------------------------------ ------------- ------------- ------------
Non-current assets
Property, plant and equipment 460.8 81.2 542.0
All other non-current assets 700.3 - 700.3
------------------------------------------------ ------------- ------------- ------------
1,161.1 81.2 1,242.3
------------------------------------------------ ------------- ------------- ------------
Current assets
Trade and other receivables 139.7 (0.7) 139.0
All other current assets 88.1 - 88.1
------------------------------------------------ ------------- ------------- ------------
227.8 (0.7) 227.1
------------------------------------------------ ------------- ------------- ------------
Total assets 1,388.9 80.5 1,469.4
------------------------------------------------ ------------- ------------- ------------
Current liabilities
Trade and other payables (385.6) 0.7 (384.9)
Current tax liabilities (4.0) 0.2 (3.8)
Borrowings (5.9) (10.8) (16.7)
Provisions (3.6) 0.8 (2.8)
(399.1) (9.1) (408.2)
------------------------------------------------ ------------- ------------- ------------
Non-current liabilities
Trade and other payables (1.5) 0.4 (1.1)
Borrowings (377.2) (73.2) (450.4)
Provisions (13.9) 0.5 (13.4)
Deferred tax liabilities (24.9) - (24.9)
------------------------------------------------ ------------- ------------- ------------
(417.5) (72.3) (489.8)
Total liabilities (816.6) (81.4) (898.0)
------------------------------------------------ ------------- ------------- ------------
Net assets 572.3 (0.9) 571.4
------------------------------------------------ ------------- ------------- ------------
2. Significant accounting policies (continued)
IFRS 16 Leases (continued)
Condensed consolidated statement of cash flows
GBP million Excluding
IFRS 16 IFRS 16
adjustments adjustments As reported
-------------------------------------------------- ------------- ------------- ------------
Operating profit 29.0 0.3 29.3
Depreciation of property, plant and equipment 22.7 6.1 28.8
Net impact of all other operating cash flows
before movements in working capital 2.5 - 2.5
Operating cash flows before movements in working
capital 54.2 6.4 60.6
Movements in working capital (2.1) 0.7 (1.4)
Cash generated by operations 52.1 7.1 59.2
Income taxes paid (8.0) - (8.0)
Interest paid (7.3) (1.4) (8.7)
-------------------------------------------------- ------------- ------------- ------------
Net cash generated from operating activities 36.8 5.7 42.5
-------------------------------------------------- ------------- ------------- ------------
Investing activities
-------------------------------------------------- ------------- ------------- ------------
Net cash used in investing activities (60.6) - (60.6)
-------------------------------------------------- ------------- ------------- ------------
Financing activities
Payment of lease liabilities (0.7) (5.7) (6.4)
Net impact of all other financing activities 40.4 - 40.4
-------------------------------------------------- ------------- ------------- ------------
Net cash generated from financing activities 39.7 (5.7) 34.0
-------------------------------------------------- ------------- ------------- ------------
Net increase in cash 15.9 - 15.9
-------------------------------------------------- ------------- ------------- ------------
At the transition date of 30 December 2018, the impact of IFRS16
was:
GBP million IFRS 16 adjustments
----------------------------------------------- --------------------
Total assets increase at transition date 80.2
Total liabilities increase at transition date (80.2)
----------------------------------------------- --------------------
The following table reconciles the operating lease commitments
as at 29 December 2018 as shown in Note 34 of the Group's annual
report to the lease liability at the transition date:
GBP million
---------------------------------------------------------------------- ------
Operating lease commitments disclosed at 29 December
2018 96.5
---------------------------------------------------------------------- ------
Discounted using the incremental borrowing rate
at 30 December 2018 85.6
Add: finance lease liabilities recognised at 29
December 2018 5.5
Less: low-value and short-term leases not recognised
as a liability (2.9)
---------------------------------------------------------------------- ------
Lease liability recognised as at 30 December 2018 88.2
---------------------------------------------------------------------- ------
Of which are:
Current lease liabilities 12.5
Non-current lease liabilities 75.7
---------------------------------------------------------------------- ------
88.2
---------------------------------------------------------------------- ------
The weighted average incremental borrowing rate applied to the lease
liabilities at transition was 3.5%.
2. Significant accounting policies (continued)
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments addresses the classification,
measurement and recognition of financial assets and liabilities.
The standard replaces IAS 39 Financial Instruments: Recognition and
Measurement and has been completed in a number of stages with the
final version issued by the IASB in July 2014. IFRS 9 introduces
new rules for hedge accounting and a new impairment model for
financial assets. A complete review and assessment of IFRS 9 has
been conducted with the conclusion that there is no material impact
on net assets or retained earnings.
The new impairment model requires the recognition of impairment
provisions based on expected credit losses rather than only
incurred credit losses. The standard provides a simplified approach
as a practical expedient in assessing impairment of trade
receivables, which the Group has adopted on transition. The Group's
assessment was that no adjustment was required to its trade
receivables impairment provision as at 29 December 2018.
The hedge accounting requirements under IFRS 9 are optional. The
Group did not apply the hedge accounting rules of IAS 39 and will
also not apply those of IFRS 9. There is therefore no impact on the
reported figures.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 Revenue from Contracts with Customers specifies how and
when an IFRS reporter recognises revenue as well as requiring such
entities to provide users of financial statements with more
informative, relevant disclosures. The application of this Standard
did not have any impact on the Group's accounting policies and did
not require retrospective adjustments.
Under IFRS 15, an entity recognises revenue when, or as a
performance obligation is satisfied i.e. when control of the goods
or services underlying the performance obligation is transferred to
the customer. The Group's revenue contracts typically include one
performance obligation (delivery of the goods) with the performance
obligation satisfied at a point in time when the control passes to
the customer, which is deemed to be when the goods are received by
the customer.
Many of the Group's revenue contracts include an element of
variable consideration, such as customer deductions for rebate
arrangements or other incentives to customers. The arrangements can
take the form of volume rebates, marketing fund contributions or
promotional fund contributions. The Group recognises revenue net of
such customer deductions. Volume based rebates are calculated on
the Group's estimate of rebates expected to be paid to customers
using the 'most likely amount' in line with IFRS 15 requirements,
whereas fixed rebates are accounted for as a reduction in revenue
over the life of the contract.
Going concern
The Directors, in their detailed consideration of going concern,
have reviewed the Group's future revenue projections and cash
requirements, which they believe are based on prudent
interpretations of market data and past experience. In addition,
the Directors have carried out a robust assessment of the potential
implications of Brexit. The Directors have also considered the
Group's level of available liquidity under its financing
arrangements and consider that adequate headroom is available based
on the forecasted cash requirements of the business.
Consequently, the Directors consider that the Group has adequate
resources to meet its liabilities as they fall due for the
foreseeable future. For this reason, they continue to adopt the
going concern basis in preparing the financial statements.
3. Segment information
The chief operating decision-maker has been defined as the
Management Board headed by the Chief Executive Officer. They review
the Group's internal reporting in order to assess performance and
allocate resources. Management has determined the segments based on
these reports.
As at the statement of financial position date, the Group is
organised as follows:
The preparation and marketing of fresh prepared
* UK: foods and fresh produce for distribution
in the UK.
The preparation and marketing of fresh prepared
* International: foods and fresh produce outside of the UK.
The Group manages the performance of its businesses through the
use of 'Adjusted EBITDA' as defined in Note 21.
The following table provides an analysis of the Group's segment
information for the period 30 December 2018 to 29 June 2019:
GBP million UK International Total
----------------------------------------------------- ------- -------------- --------
Revenue 813.5 109.5 923.0
----------------------------------------------------- ------- -------------- --------
Adjusted EBITDA pre IFRS 16 (Note 21) 70.6 2.9 73.5
IFRS 16 impact 5.1 1.3 6.4
----------------------------------------------------- ------- -------------- --------
Adjusted EBITDA post IFRS 16 (Note 21) 75.7 4.2 79.9
Depreciation (23.9) (4.9) (28.8)
Amortisation - (0.2) (0.2)
Exceptional items (Note 4) (11.5) (1.6) (13.1)
Start-up losses for new sites - (8.3) (8.3)
Share scheme charges (1.2) - (1.2)
Profit on disposal of property, plant and equipment 0.7 (0.1) 0.6
Share of results of associates after tax - 0.4 0.4
Operating profit/(loss) 39.8 (10.5) 29.3
Finance costs (9.1)
Other gains and (losses) (0.7)
----------------------------------------------------- ------- -------------- --------
Profit before tax 19.5
Tax (2.3)
----------------------------------------------------- ------- -------------- --------
Profit for the period 17.2
----------------------------------------------------- ------- -------------- --------
3. Segment information (continued)
The following table provides an analysis of the Group's segment
information for the period from 31 December 2017 to 30 June
2018:
GBP million UK International Total
--------------------------------------------------- ------- -------------- -------
Revenue as previously reported 816.6 93.8 910.4
Restatement (Note 2) (0.5) - (0.5)
--------------------------------------------------- ------- -------------- -------
Revenue restated 816.1 93.8 909.9
--------------------------------------------------- ------- -------------- -------
Adjusted EBITDA (Note 21) 74.5 4.1 78.6
Depreciation (17.7) (2.3) (20.0)
Amortisation - (0.2) (0.2)
Exceptional items (Note 4) - (3.2) (3.2)
Share scheme charges (1.2) - (1.2)
Loss on disposal of property, plant and equipment - (0.2) (0.2)
Share of results of associates after tax - 0.3 0.3
--------------------------------------------------- ------- -------------- -------
Operating profit 55.6 (1.5) 54.1
Finance costs (6.7)
Other gains and (losses) (0.3)
--------------------------------------------------- ------- -------------- -------
Profit before tax 47.1
Tax (6.6)
--------------------------------------------------- ------- -------------- -------
Profit for the period 40.5
--------------------------------------------------- ------- -------------- -------
Major customers
For the 26 weeks ended 29 June 2019, the Group's four largest
customers accounted for 75.7% (26 weeks ended 30 June 2018: 76.7%)
of total revenue from continuing operations. The Group does not
enter into long-term contracts with its retail customers.
Each of these four customers accounts for a significant amount
of the Group's revenue and are all in the UK segment. The
percentage of Group revenue from these customers is as follows:
26 weeks ended 26 weeks ended
29 June 30 June
2019 2018
------------ --------------- ---------------
Customer A 30.2% 30.2%
Customer B 23.9% 25.1%
Customer C 10.9% 11.6%
Customer D 10.7% 9.8%
------------ --------------- ---------------
All of the Group's revenue is from the sale of goods.
4. Exceptional items
The Group's financial performance is analysed in two ways;
underlying performance (which does not include exceptional items)
and exceptional items that are not expected to reoccur. Underlying
performance is used by management to monitor financial performance
as it provides comparability of the financial performance of the
Group from year-to-year.
Exceptional items includes items that, in management's
judgement, should be disclosed by virtue of their nature or amount
and will typically include major restructuring programmes, legal
cases, corporate transaction costs, disruption costs,
pre-commissioning and start-up costs for new manufacturing
facilities and impairment of assets as follows:
26 weeks ended 26 weeks ended
29 June 30 June
GBP million 2019 2018
------------------------------ --------------- ---------------
New sites - 3.2
Disruption 2.9 -
Restructuring and impairment 10.2 -
------------------------------ --------------- ---------------
Total before tax 13.1 3.2
------------------------------ --------------- ---------------
Tax on exceptional items (2.9) (0.6)
------------------------------ --------------- ---------------
Total after tax 10.2 2.6
------------------------------ --------------- ---------------
H1 2019
The Group incurred GBP13.1 million of costs presented as
exceptional items in H1 2019 of which GBP2.9 million related to
disruption costs; GBP1.6 million as our existing factory in
California was repurposed for ready meal manufacturing and GBP1.3
million in the UK as the business prepared for the launch of
significant new products later in Q3 2019. In addition, the Group
incurred GBP10.2 million of restructuring and impairment costs in
the UK. Of this, GBP7.7 million related to the closure of a Meals
business in Lincolnshire comprising cash closure costs of GBP4.2
million and plant and equipment asset impairments of GBP3.5
million. The remaining GBP2.5 million is for redundancy costs
following changes to our commercial and marketing structure.
H1 2018
The Group incurred costs of GBP3.2 million in the prior period
relating to the initial start-up costs for the opening of new sites
in the US and China.
5. Finance costs
26 weeks ended 26 weeks ended
29 June 30 June
GBP million 2019 2018
------------------------------------------------------------------ --------------- ---------------
Interest on borrowings 7.3 6.2
Interest on lease liabilities (2018: Interest on finance leases) 1.5 0.1
Amortisation of refinancing costs 0.7 0.7
Unwind of discount on provisions 0.1 0.2
------------------------------------------------------------------ --------------- ---------------
9.6 7.2
------------------------------------------------------------------ --------------- ---------------
Less: amounts included in the cost of qualifying assets (0.5) (0.5)
------------------------------------------------------------------ --------------- ---------------
9.1 6.7
------------------------------------------------------------------ --------------- ---------------
Borrowing costs included in the cost of qualifying assets during
the year arose on the general borrowing pool and are calculated by
applying a capitalisation rate of 3.0% (2018: 2.7%) to expenditure
on such assets. Interest on lease liabilities for 26 weeks ended 29
June 2019 includes GBP1.4 million following the application of IFRS
16.
6. Other gains and (losses)
26 weeks ended 26 weeks ended
29 June 30 June
GBP million 2019 2018
---------------------------------------------------------- --------------- ---------------
Foreign exchange gains 0.2 -
Change in fair value of derivative financial instruments (0.9) (0.3)
(0.7) (0.3)
---------------------------------------------------------- --------------- ---------------
7. Earnings per share
The calculation of earnings per Ordinary share is based on
earnings after tax and the weighted average number of Ordinary
shares in issue during the period.
For diluted earnings per share, the weighted average number of
Ordinary shares in issue is adjusted to assume conversion of all
potentially dilutive Ordinary shares.
The calculation of the basic and diluted earnings per share is
based on the following data:
Earnings
26 weeks ended 26 weeks ended
29 June 30 June
GBP million 2019 2018
------------------------------------------------------------ --------------- ---------------
Profit attributable to equity shareholders of the Company 17.2 40.5
------------------------------------------------------------ --------------- ---------------
Number of shares
26 weeks ended 26 weeks ended
29 June 30 June
'000 2019 2018
--------------------------------------------------------------------------- --------------- ---------------
Weighted average number of Ordinary shares 579,426 579,426
Effect of potentially dilutive Ordinary shares 3,260 3,552
--------------------------------------------------------------------------- --------------- ---------------
Weighted average number of Ordinary shares for diluted earnings per share 582,686 582,978
--------------------------------------------------------------------------- --------------- ---------------
26 weeks ended 26 weeks ended
29 June 30 June
2019 2018
---------------------------- --------------- ---------------
Basic earnings per share 3.0p 7.0p
Diluted earnings per share 3.0p 6.9p
---------------------------- --------------- ---------------
8. Dividends
At the AGM on 23 May 2019 a final dividend of 4.0p per share to
each of the Ordinary shareholders for the period ended 29 December
2018 was approved. The total amount of GBP23,177,023 was paid on 29
May 2019.
An interim dividend of 2.0p per Ordinary share has been declared
and is payable on 11 October 2019.
9. Goodwill
GBP million
-------------------------------------------- ------
At 31 December 2017 647.2
Exchange rate difference during the period 1.1
-------------------------------------------- ------
At 30 June 2018 648.3
-------------------------------------------- ------
At 30 December 2018 650.2
Recognised on acquisition of a subsidiary 2.9
Exchange rate difference during the period (0.1)
At 29 June 2019 653.0
-------------------------------------------- ------
10. Property, plant and equipment
GBP million
----------------------------------------------------- -------
At 31 December 2017 337.5
Additions 52.2
Disposals (0.2)
Depreciation charge for the period (20.0)
Exchange rate difference during the period 1.4
----------------------------------------------------- -------
At 30 June 2018 370.9
----------------------------------------------------- -------
At 30 December 2018 426.9
Adjustment for change in accounting policy (Note 2) 80.2
----------------------------------------------------- -------
Restated opening balance 507.1
Additions 50.2
Acquisition of subsidiary (Note 17) 17.6
Disposals (0.6)
Depreciation charge for the period (28.8)
Impairment (3.5)
Exchange rate difference during the period -
At 29 June 2019 542.0
----------------------------------------------------- -------
Additions in the 26 weeks ended 29 June 2019 include GBP9.7
million (2018: GBP29.1 million) in respect of development
projects.
11. Inventories
29 June 29 December
GBP million 2019 2018
----------------------------- -------- ------------
Raw materials and packaging 49.2 54.6
Work-in-progress 2.2 1.8
Finished goods 7.1 6.4
----------------------------- -------- ------------
58.5 62.8
----------------------------- -------- ------------
12. Trade and other receivables
29 June 29 December
GBP million 2019 2018
------------------------------------------------- -------- ------------
Amounts receivable from trade customers 108.7 115.3
Expected credit loss (2.5) (2.0)
Net amounts receivable from trade customers 106.2 113.3
Other receivables 18.0 18.8
Prepayments 14.8 10.6
------------------------------------------------- -------- ------------
Trade and other receivables due within one year 139.0 142.7
------------------------------------------------- -------- ------------
During the period, the Group has continued to operate trade
receivable factoring arrangements. These are non-recourse
arrangements and therefore amounts are de-recognised from trade
receivables.
13. Trade and other payables
29 June 29 December
GBP million 2019 2018
---------------------------------------------- -------- ------------
Trade payables 229.0 232.6
Social security and other taxation 1.3 2.0
Other payables 19.1 23.5
Accruals and deferred income 136.6 136.2
---------------------------------------------- -------- ------------
386.0 394.3
Less amounts due after one year:
Other payables - (0.4)
Accruals and deferred income (1.1) (1.9)
---------------------------------------------- -------- ------------
(1.1) (2.3)
---------------------------------------------- -------- ------------
Trade and other payables due within one year 384.9 392.0
---------------------------------------------- -------- ------------
During the period, the Group entered into a supplier financing
arrangement. At 29 June 2019, GBP13.2 million of the amount
included within trade payables were subject to these arrangements.
These balances are classified as trade payables and the related
payments as cash flows from operating activities since the original
obligation to the supplier remains and has not been replaced with a
new obligation to the bank.
14. Net debt
29 June 29 December
GBP million 2019 2018
-------------------------------- -------- ------------
Cash and cash equivalents 28.4 12.4
-------------------------------- -------- ------------
Borrowings (2.4) (3.7)
Interest accrual (1.5) (1.3)
Lease liabilities (12.8) (1.6)
-------------------------------- -------- ------------
Total debt due within one year (16.7) (6.6)
Borrowings (377.5) (312.5)
Unamortised fees 3.4 4.0
Lease liabilities (76.3) (3.9)
-------------------------------- -------- ------------
Total debt due after one year (450.4) (312.4)
Statutory net debt (438.7) (306.6)
-------------------------------- -------- ------------
14. Net debt (continued)
Statutory net debt is the sum of cash and cash equivalents,
prepaid fees to be amortised over the term of outstanding
borrowings, outstanding borrowings, interest accrued on borrowings
and lease liabilities.
During the period, the Group entered into a new GBP20 million
short-term loan facility to further strengthen the liquidity base
of the Group.
15. Financial Instruments
The categories of financial instruments are as follows:
29 June 29 December
GBP million 2019 2018
------------------------------------------ -------- ------------
Financial assets
Fair value through profit and loss:
Derivative financial instruments 1.2 2.1
Loans and receivables at amortised cost:
Trade receivables 106.2 113.3
Other receivables 18.0 18.8
Cash and cash equivalents 28.4 12.4
------------------------------------------ -------- ------------
153.8 146.6
------------------------------------------ -------- ------------
29 June 29 December
GBP million 2019 2018
------------------------------------------------ -------- ------------
Financial liabilities
Other financial liabilities at amortised cost:
Trade payables 229.0 232.6
Other payables 19.1 23.5
Accruals 134.8 133.6
Borrowings 378.0 313.5
Lease liabilities 89.1 5.5
------------------------------------------------ -------- ------------
850.0 708.7
------------------------------------------------ -------- ------------
The fair value of loans and receivables approximates to their
carrying values due to the short-term nature of the receivables.
Fair values for the derivative financial instruments have been
determined as level 2 under IFRS 7 Financial Instruments:
Disclosures. Quoted prices are not available for the derivative
financial instruments and so valuation models are used to estimate
fair value. The models calculate the expected cash flows under the
terms of each specific contract and then discount these values back
to a present value. These models use as their basis independently
sourced market parameters including, for example, interest rate
yield curves and currency rates.
The fair value of other financial liabilities at amortised cost
approximates to their carrying value. The trade and other payables
approximate to their fair value due to the short-term nature of the
payables. The lease liabilities fair value approximates to the
carrying value based on discounted future cash flows.
16. Share capital and share premium
Issued share capital as at 29 June 2019 amounted to GBP11.6
million (579,425,585 Ordinary shares of GBP0.02 each) (29 December
2018: GBP11.6 million (579,425,585 Ordinary shares of GBP0.02
each)).
On 27 March 2018, Bakkavor Group plc cancelled its share premium
account of GBP366.1 million resulting in a corresponding increase
in retained earnings.
17. Acquisitions
On 12 June 2019, the Group completed the acquisition of 100% of
the issued share capital of Blueberry Foods from Samworth Brothers
Limited for initial consideration of GBP17.4 million. The
consideration comprised GBP3.6 million in cash and assumed
borrowings of GBP13.8 million that was immediately repaid.
The Group currently expects c.GBP0.5 million to be returned by
the seller after the completion accounts have been finalised and
therefore the total consideration is expected to be GBP16.9
million.
The provisional amounts recognised in respect of the fair value
of the identifiable assets and liabilities assumed are set out in
the table below:
GBP million
---------------------------------- ------
Other intangible assets 0.2
Property, plant and equipment 17.6
Inventories 0.9
Trade and other receivables 6.3
Trade and other payables (4.7)
Lease liabilities (6.3)
Net identifiable assets acquired 14.0
Goodwill 2.9
---------------------------------- ------
Total consideration 16.9
---------------------------------- ------
The net cash outflow arising on acquisition was:
GBP million
------------------------------------------------------- ------
Cash consideration for share capital 3.6
Immediate repayment of amounts owed to previous owner 13.8
Cash outflow on acquisition of business 17.4
Amounts owed to the Group by the seller (0.5)
Total consideration 16.9
------------------------------------------------------- ------
Acquisition related costs of GBP0.7 million were incurred and
are included in other administrative costs in the consolidated
income statement.
The results of Blueberry Foods have been consolidated in the
Group's consolidated income statement from 12 June 2019 and
contributed GBP2.1 million of revenue and a profit of GBPnil to the
Group's profit for the period. If the acquisition had been
completed on the first day of the financial period, Group revenues
and profit for the period would have been GBP945.8 million and
GBP17.1 million respectively.
At this stage the initial accounting is provisional because of
the proximity of the acquisition date to the date of these
statements.
The Trade and other receivables amount is net of GBP0.3 million
of expected credit losses.
The principal factors contributing to the recognition of
goodwill on the acquisition of Blueberry Foods is the expected
realisation of future growth potential with new and existing
customers, the synergies that can be achieved with the existing
Bakkavor Desserts business and the skilled workforce that is being
acquired. The goodwill is not deductible for tax purposes. The
Other intangible assets of GBP0.2 million are in respect of
customer relationships with two key customers.
There are no contingent liabilities to be disclosed.
18. Notes to the condensed consolidated statement of cash
flows
26 weeks ended 26 weeks ended
29 June 30 June
GBP million 2019 2018
------------------------------------------------------------ --------------- ---------------
Operating profit 29.3 54.1
Adjustments for:
Share of results of associates after tax (0.4) (0.3)
Depreciation of property, plant and equipment 28.8 20.0
Amortisation of intangible assets 0.2 0.2
(Profit)/loss on disposal of property, plant and equipment (0.6) 0.2
Impairment of assets 3.5 -
Share scheme charges 1.2 1.2
Net retirement benefits charge less contributions (1.4) (1.7)
------------------------------------------------------------ --------------- ---------------
Operating cash flows before movements in working capital 60.6 73.7
Decrease in inventories 4.7 2.7
Decrease/(increase) in receivables 9.2 (17.8)
(Decrease)/increase in payables (15.0) 2.5
Decrease in provisions (0.3) (1.0)
Cash generated by operations 59.2 60.1
Income taxes paid (8.0) (5.8)
Interest paid (8.7) (4.3)
------------------------------------------------------------ --------------- ---------------
Net cash generated from operating activities 42.5 50.0
------------------------------------------------------------ --------------- ---------------
19. Contingent liabilities
The Group is currently subject to a National Living Wage
enquiry, which has been ongoing since July 2017. Whilst the
Directors consider that there is a possible financial impact from
this enquiry, given the stage of the enquiry it is not possible to
quantify the potential financial impact and the outcome cannot at
present be foreseen.
20. Events after the statement of financial position date
There have been no significant events after the statement of
financial position date to report.
21. Alternative performance measures
The Group uses various non-IFRS financial measures to evaluate
growth trends, assess operational performance and monitor cash
performance. The Directors consider that these measures enable
investors to understand the ongoing operations of the business and
are used by management to monitor financial performance as it is
considered to aid comparability of the financial performance of the
Group from year to year.
Like-for-like (LFL) revenue
The Group defines LFL revenue as revenue from continuing
operations adjusted for the revenue generated from businesses
closed or sold in the current and prior year, revenue generated
from businesses acquired in the current and prior period and the
effect of foreign currency movements. The Directors believe LFL
revenue is a key metric of the Group's revenue growth trend as it
allows for a more meaningful comparison of trends from period to
period.
The following table provides the information used to calculate
LFL revenue for the Group.
26 weeks ended 26 weeks ended
29 June 30 June
GBP million 2019 2018 % change
-------------------------------- --------------- --------------- ---------
Statutory revenue as reported 923.0 910.4
Restatement (Note 2) - (0.5)
-------------------------------- --------------- --------------- ---------
Statutory revenue restated 923.0 909.9 1.4%
Revenue from acquisitions (20.0) -
Revenue from closed businesses (21.3) (49.0)
Effect of currency movements (3.8) -
-------------------------------- --------------- --------------- ---------
Like-for-like revenue 877.9 860.9 2.0%
-------------------------------- --------------- --------------- ---------
The following table provides the information used to calculate
LFL revenue for the UK segment.
26 weeks ended 26 weeks ended
29 June 30 June
GBP million 2019 2018 % change
-------------------------------- --------------- --------------- ---------
Statutory revenue as reported 813.5 816.6
Restatement (Note 2) - (0.5)
-------------------------------- --------------- --------------- ---------
Statutory revenue restated 813.5 816.1 (0.3%)
Revenue from acquisitions (20.0) -
Revenue from closed businesses (21.3) (49.0)
-------------------------------- --------------- --------------- ---------
Like-for-like revenue 772.2 767.1 0.7%
-------------------------------- --------------- --------------- ---------
The following table provides the information used to calculate
LFL revenue for the International segment.
26 weeks ended 26 weeks ended
29 June 30 June
GBP million 2019 2018 % change
------------------------------ --------------- --------------- ---------
Statutory revenue 109.5 93.8 16.7%
Effect of currency movements (3.8) -
------------------------------ --------------- --------------- ---------
Like-for-like revenue 105.7 93.8 12.7%
------------------------------ --------------- --------------- ---------
21. Alternative performance measures (continued)
Adjusted EBITDA and Adjusted Operating Profit
The Group manages the performance of its businesses through the
use of 'Adjusted EBITDA' and 'Adjusted Operating Profit' as these
measures exclude the impact of items that hinder comparison of
profitability year-on-year. EBITDA is generally defined as
operating profit/(loss) before depreciation and amortisation. In
calculating Adjusted EBITDA and Adjusted Operating Profit, we
exclude restructuring costs, asset impairments, and those
additional charges or credits that are considered significant or
one-off in nature. In addition, for Adjusted EBITDA we exclude the
share of results of associates after tax and share scheme charges
as this is a non-cash amount.
The following table provides a reconciliation from the Group's
Operating profit to Adjusted EBITDA.
26 weeks ended 26 weeks ended
29 June 30 June
GBP million 2019 2018
------------------------------------------------------------ --------------- ---------------
Operating profit 29.3 54.1
Depreciation 28.8 20.0
Amortisation 0.2 0.2
EBITDA 58.3 74.3
Exceptional items (Note 4) 13.1 3.2
Start-up losses for new sites 8.3 -
Share scheme charges 1.2 1.2
(Profit)/loss on disposal of property, plant and equipment (0.6) 0.2
Share of results of associates after tax (0.4) (0.3)
Adjusted EBITDA post IFRS 16 79.9 78.6
Less IFRS 16 impact (6.4) -
------------------------------------------------------------ --------------- ---------------
Adjusted EBITDA pre IFRS 16 73.5 78.6
------------------------------------------------------------ --------------- ---------------
Adjusted EBITDA by segment is reconciled to operating profit in
Note 3.
Operating profit
The following table provides a reconciliation from Operating
profit to Adjusted Operating profit.
26 weeks ended 26 weeks ended
29 June 30 June
GBP million 2019 2018
------------------------------- --------------- ---------------
Operating profit 29.3 54.1
Exceptional items (Note 4) 13.1 3.2
Start-up losses for new sites 8.3 -
Adjusted Operating profit 50.7 57.3
------------------------------- --------------- ---------------
21. Alternative performance measures (continued)
Operational net debt and leverage
Operational net debt excludes the impact of non-cash items and
those liabilities recognised under IFRS 16 on the Group's statutory
net debt and therefore the Directors use this measure as it
reflects actual net borrowings at the relevant reporting date and
is most comparable with the Group's free cash flow. The following
table provides a reconciliation from the Group's statutory net debt
to the Group's operational net debt.
29 June 29 December
GBP million 2019 2018
--------------------------------------------------------------- -------- ------------
Statutory net debt (438.7) (306.6)
Unamortised fees (3.4) (4.0)
Interest accrual 1.5 1.3
Lease liabilities recognised under IFRS 16 84.0 -
--------------------------------------------------------------- -------- ------------
Operational net debt (356.6) (309.3)
--------------------------------------------------------------- -------- ------------
Adjusted EBITDA (last 12 months and excluding IFRS 16 impact) 148.4 153.5
Leverage (Operational net debt/Adjusted EBITDA pre IFRS 16) 2.4 2.0
--------------------------------------------------------------- -------- ------------
Free cash flow
The Group defines free cash flow as the amount of cash generated
by the Group after meeting all of its obligations for interest, tax
and pensions and after purchases of property, plant and equipment
(excluding development projects), lease liability capital payments
under IFRS 16, but before payments of refinancing fees and other
exceptional or significant non-recurring cash flows. The Directors
view free cash flow as a key liquidity measure, and the purpose of
presenting free cash flow is to indicate the underlying cash
available to pay dividends, repay debt or make further investments
in the Group. The following table provides a reconciliation from
net cash generated from operating activities to free cash flow.
26 weeks ended 26 weeks ended
29 June 30 June
GBP million 2019 2018
------------------------------------------------------------------------------------ --------------- ---------------
Net cash generated from operating activities 42.5 50.0
Dividends received from associates - 0.6
Purchases of property, plant and equipment (44.4) (51.6)
Purchases of property, plant and equipment relating to development projects (Note
10) 9.7 29.1
Proceeds on disposal of property, plant and equipment 1.2 -
Cash impact of exceptional items 6.0 4.3
Cash impact of start-up losses for new sites 8.3 -
IFRS 16 capital element of lease liability payments (5.7) -
Free cash flow 17.6 32.4
------------------------------------------------------------------------------------ --------------- ---------------
21. Alternative performance measures (continued)
Adjusted basic earnings per share
The Group calculates Adjusted basic earnings per Ordinary share
by dividing Adjusted earnings by the weighted average number of
Ordinary shares in issue during the year. Adjusted Earnings is
calculated as profit attributable to equity holders of the Company
adjusted to exclude exceptional items as presented in the condensed
consolidated income statement and start-up losses for new sites.
The Directors use this measure as it tracks the underlying
profitability of the Group and enables comparison with the Group's
peer companies. The following table reconciles profit attributable
to equity shareholders of the Company to Adjusted earnings.
26 weeks ended 26 weeks ended
29 June 30 June
GBP million 2019 2018
--------------------------------------------------------------------------- --------------- ---------------
Profit attributable to equity shareholders of the Company 17.2 40.5
Exceptional items (Note 4) 13.1 3.2
Start-up losses for new sites 8.3 -
Tax on the above items (4.2) (0.6)
--------------------------------------------------------------------------- --------------- ---------------
Adjusted earnings 34.4 43.1
Add back: Tax on adjusted profit before tax 6.5 7.2
Adjusted profit before tax 40.9 50.3
--------------------------------------------------------------------------- --------------- ---------------
Effective tax rate on underlying activities
(Tax on adjusted profit before tax/Adjusted profit before tax) 15.9% 14.3%
--------------------------------------------------------------------------- --------------- ---------------
Number 000's
--------------------------------------------------------------------------- --------------- ---------------
Weighted average number of Ordinary shares 579,426 579,426
Effect of dilutive Ordinary shares 3,260 3,552
--------------------------------------------------------------------------- --------------- ---------------
Weighted average number of Ordinary shares for diluted earnings per share 582,686 582,978
Adjusted basic earnings per share 5.9p 7.4p
Adjusted diluted earnings per share 5.9p 7.4p
--------------------------------------------------------------------------- --------------- ---------------
Statement of Directors' responsibilities
The Directors confirm that to the best of their knowledge the
condensed set of financial statements has been prepared in
accordance with International Accounting Standard ("IAS") 34
Interim Financial Reporting and includes a fair review of the
information required by the Disclosure Guidance and Transparency
Rule ("DTR") 4.2.7R (an indication of important events during the
first six months and a description of the principal risks and
uncertainties for the remaining six months of the year) and by DTR
4.2.8R (a disclosure of related party transactions and changes
therein).
The Board of Directors that served during the six months ended
29 June 2019, and their respective responsibilities, can be found
on pages 50 and 51 of the 2018 Annual Report & Accounts.
This responsibility statement has been approved by the Directors
of the Company ("the Group Board") and signed on its behalf on 9
September 2019 by:
Agust Gudmundsson Peter Gates
CEO CFO
Independent review report to Bakkavor Group plc
Report on the Condensed set of financial statements in the
half-yearly financial report
Our conclusion
We have reviewed Bakkavor Group plc's Condensed set of financial
statements in the half-yearly financial report (the "interim
financial statements") in the half-yearly results of Bakkavor Group
plc for the 26-week period ended 29 June 2019. Based on our review,
nothing has come to our attention that causes us to believe that
the interim financial statements are not prepared, in all material
respects, in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and
the Disclosure Guidance and Transparency Rules sourcebook of the
United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the Condensed consolidated statement of financial position as at 29 June 2019;
-- the Condensed consolidated income statement and Condensed
consolidated statement of comprehensive income for the period then
ended;
-- the Condensed consolidated statement of cash flows for the period then ended;
-- the Condensed consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the half-yearly
results have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the Directors
The half-yearly results, including the interim financial
statements, is the responsibility of, and has been approved by, the
Directors. The Directors are responsible for preparing the
half-yearly results in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the half-yearly results based on our
review. This report, including the conclusion, has been prepared
for and only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the half-yearly
results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
9 September 2019
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LLFFDADIAIIA
(END) Dow Jones Newswires
September 10, 2019 02:01 ET (06:01 GMT)
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