RE: Fabulous Results!5 Mar 2024 09:59
Most welcome and just on the debt side of things, here is some greater context on the situation, lifted from results RNS:
"Group profit before tax was £70.3m (2022: £18.1m). This is after finance costs (net) of £26.8m (2022: £20.8m), which increased due to the impact of rising interest rates, although this was partly offset by the benefit from the significant reduction in debt levels during the year. To hedge against movements in base rates, the Group has £150m of fixed interest rate swaps in place until March 2024, at an average rate of 37 basis points. The Group has a total of £130m of fixed-rate interest swaps from March 2024 until March 2026 at an average rate of 373 basis points. We expect the increase in interest rate, driven by the change in our fixed-rate swaps and the full year impact of higher base rates, to be offset by our lower level of debt and therefore finance costs for 2024 will be similar to that incurred in 2023."
Bakkavor board got ahead of the curve on managing their debt situation in my opinion... by striking the right balance between clearing some debts down and by maintaining investment to support revenue growth and further debt reductions later on. They've avoided a trap which some businesses can accidently fall into, I.e. if the efforts to pay debts down are overly aggressive then it can cause a company to grow too slowly... such businesses taking the aggressive pay down approach can easily see their revenues/profits fall away dramatically because competition eats their lunch!