Bakkavor Share News (BAKK)

(Sharecast News) - Food supplier Bakkavor Group reported a 4% rise in group revenue in its first half on Wednesday, to £915.7m, with like-for-like revenue rising 6.4% year-on-year to £924.9m, which was 1.2% ahead of the same part of 2019.
The London-listed firm said its profitability improved "significantly" in the 26 weeks ended 26 June, with operating profit rocketing 243.1% to £47.0m, while adjusted operating profit rose 63.8% year-on-year to £47m, or 10.8% up from the first half of 2019, pre-pandemic.

Cash generation was described as "strong", with free cash flow of £39.7m, up from an outflow of £3.3m in the prior period, which the board said enabled a further reduction in net debt, with the company's leverage close to its medium-term target of 1.5x to 2.0x, at 2.1x.

Basic earnings per share were up 3.3p over the first half of 2020 at 4.2p, with the board declaring an interim dividend of 2.64p per share, which it said reflected its confidence in the future.

On the operational front, the firm said its revenue momentum was underpinned by "exciting" new product launches aligned to consumer trends, as shopping visit frequency returned to pre-pandemic levels.

Good progress was reported in driving efficiency and productivity, which contributed to a "substantial increase" in the adjusted operating margin, up 180 basis points year-on-year.

Significant growth was reported in the United States, underpinned by unlocking capacity across the company's existing footprint, and a period of a steady recovery in China.

The board also said it continued to make good progress across its 'Trusted Partner' environmental, social and governance (ESG) strategy.

Looking ahead, Bakkavor said the strong first half performance and continued recovery in volumes at the start of the second half gave it confidence in delivering a full-year performance in line with the board's expectations.

Despite "unprecedented challenges" in labour availability and its impact on the supply chain, as well as raw material inflation, the group still expected to deliver a full-year operating profit margin in line with the first half.

The group said its financial position remained "strong", adding that it would continue to invest in capacity and productivity across the company to drive growth and enhance its return on invested capital.

"I am pleased with the overall performance in the period as like-for-like revenues exceed pre-pandemic levels and profitability improved considerably with all three regions delivering meaningful progress," said chief executive officer Agust Gudmundsson.

"The UK has shown a positive recovery, benefiting from a return of shopping habits to 2019 levels and a strong pipeline of innovation, as well as a meaningful pick up in operational gearing as volumes recover.

"In the US, we continue to deliver strong top line growth supported by strategic customer wins and unabated market demand, and we are building on our solid foundations for sustainable profitable growth."

Gudmundsson added that in China, the "steady top-line recovery" had continued, with the firm "well-placed" to take advantage of significant growth opportunities in the region following recent capacity investments.

"We, and the industry, face a unique set of challenges in labour availability and this is also impacting the entire supply chain, contributing to raw material price inflation and logistics disruption.

"We are continuing to mitigate the impact of these issues by working collaboratively with our customers and suppliers, accelerating operational efficiency initiatives, and taking measures to attract and retain colleagues effectively.

"Our performance in the period and the continuation of these mitigating actions, combined with our track record of delivery through previous challenging periods over our thirty-five year history, gives us confidence in our full year outlook."

At 1036 BST, shares in Bakkavor Group were up 6.92% at 118.68p.