The own-label manufacturer attributed its improved trading to new business won combined with strong new product development and “manufacturing excellence”. For the half year, revenues were up 4% to £821.4M. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) over the same period were up 2% at £55.1M.
Over the reporting period it completed a number of strategic objectives, which included refinancing, the sale of its French and Spanish businesses and the restructuring of certain low-margin businesses. The sales raised net proceeds of £26M and delivered a profit on disposal of £14.5M. The net proceeds were used to repay bank debt; £21M was paid to Bakkavör’s lenders under the legacy banking agreement in May 2013.
‘Good progress’
“We have continued to make good progress in the second quarter with strong revenue growth, increased profits and improved cash generation," said chief executive Agust Gudmundsson. “The recent completion of our refinancing demonstrates support from the financial markets and reinforces the underlying strength of the business.
“While we expect trading conditions to remain challenging due to inflationary headwinds, a competitive retail environment and ongoing pressures on household budgets, we remain confident in our strategy and our market- leading position in the chilled convenience market.”
Bakkavör's UK businesses generated revenues of £382.4M in the quarter, an increase of 6% on the previous year. Sales growth was driven by business wins in categories such as salads, soups, pizzas and desserts coupled with what it claimed was a strong seasonal launch programme.
‘Limited recovery’
As with other companies in the sector, Bakkavör witnessed a “limited recovery” in ready-meal sales following the horsemeat contamination incidents earlier this year. The company said it was continuing to work very closely with its customers to re-establish consumer confidence.
Bakkavör's UK adjusted EBITDA margin of 8.2% (£31.2M) in the quarter was in line with the previous year. It claimed it was able to maintain its margins through strong volume growth as well as cost savings from productivity investments, which together enabled it to offset pressure from higher raw material costs in categories such as fresh produce, dairy and meats.
Revenues in its International businesses were £46.3M in the quarter, representing a 3% increase on last year. Performance across different parts of the world, however, was mixed, as challenging trading conditions in Europe were offset by revenue growth in Asia.
In May 14 2013, the firm exited its loss-making Canadian operations. The closure in June 2013 led to an exceptional charge of £1.5M in the quarter, which included £300,000 of asset impairments.